SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended: December 27, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____ To _____
--------------------------------------------
Commission File Number: 0-15590
QUALITY FOOD CENTERS, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1330075
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10112 N.E. 10th Street, Bellevue, Washington 98004
- --------------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (425) 455-3761
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Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Name of each Exchange on which Registered: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Quality Food Centers, Inc. meets the conditions set forth in General Instruction
I (1) (a) and (b) of Form 10-K and is therefore filing this Form 10-K with the
reduced disclosure format specified in General Instruction I (2) to such Form
10-K.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant, computed by reference to the price at which the stock was sold as of
the close of business on March 26, 1998: $ 0.
Number of shares of Registrant's common stock, $.01 par value, outstanding as of
March 26, 1998: 100.
<PAGE>
CONTENTS
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Page
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PART I
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 9
PART II
Item 5. Market for the Company's Common Stock and Related 9
Shareholder Matters
Item 7. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Price 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on Accounting and 12
Financial Disclosure
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 13
NOTE: Items 4, 6, 10, 11, 12 and 13 are omitted pursuant to General
Instruction I(2) of Form 10-K.
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PART I
ITEM 1 - BUSINESS
Special Note Regarding Forward-Looking Statements
The information contained herein contains forward-looking statements that
involve a number of risks and uncertainties. A number of factors could cause
results to differ materially from those anticipated by such forward-looking
statements. These factors include, but are not limited to, the competitive
environment in the supermarket industry in general and in the Company's specific
market areas, changes in prevailing interest rates and the availability of
financing, inflation, changes in costs of goods and services, economic
conditions in general and in the Company's specific market areas, labor
disturbances, demands placed on management by the substantial increase in the
size of the Company because of the acquisitions, and changes in the Company's
acquisition plans. In addition, such forward-looking statements are necessarily
dependent upon assumptions, estimates and data that may be incorrect or
imprecise. Accordingly, any forward-looking statements included herein do not
purport to be predictions of future events or circumstances and may not be
realized. Forward-looking statements can be identified by, among other things,
the use of forward-looking terminology such as "believes," "expects," "may,"
"will," "should," "seeks," "pro forma" or "anticipates," or the negative
thereof, or other variations thereon or comparable terminology, or by
discussions of strategy or intentions.
Overview / Recent Developments
Quality Food Centers, Inc. (the "Company" or "QFC") is an operator of 89 premium
supermarkets in the Seattle/Puget Sound region of Washington state and 56 stores
under the "Hughes Family Market" banner in Southern California. Since commencing
operations in 1954, QFC has developed a modern store base in many prime
locations, strong name recognition and a reputation for superior quality and
service.
On February 14, 1997, the principal operations of Keith Uddenberg, Inc. ("KUI"),
were merged into a subsidiary of QFC, including assets and liabilities related
to 22 stores under the "Stock Market" name and three under the "Thriftway" name
located in the Seattle/Puget Sound region of Washington. During 1997, the
Company sold two Stock Market stores. As consideration for the operations being
merged, QFC paid $34.5 million in cash, issued 904,646 shares of QFC's common
stock and assumed $23.8 million of KUI indebtedness. The KUI acquisition
provided QFC with desirable store locations primarily in the southern Puget
Sound region and the Olympic Peninsula of the State of Washington, areas in
which QFC previously had a limited presence. Prior to its acquisition by QFC,
KUI operated supermarkets in the Seattle/Puget Sound region for more than 40
years. The Stock Market stores are generally larger stores (averaging
approximately 46,000 square feet) and are price-oriented, with warehouse-type
dry grocery shelving and a full complement of service departments, including
delicatessens and seafood and bakery departments. The Thriftway stores are
generally smaller, conventional format stores (averaging approximately 22,000
square feet). Currently, twelve of the stores have been converted to the QFC
name, ten of which have been remodeled in order to implement QFC's merchandising
and operating practices. Management believes that the KUI acquisition provided
QFC with additional critical mass in the Seattle/Puget Sound region, which has
improved purchasing and distribution and helped to create economies of scale.
On March 19, 1997, QFC acquired Hughes Markets, Inc. ("Hughes"), a supermarket
operator in Southern California. Consideration for the merger consisted of
$360.5 million in cash, and the assumption of $33.2 million of indebtedness of
Hughes. Management believes that Hughes, which commenced operations in
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1952 with one store, has developed a strong reputation in Southern California
for providing high levels of customer service together with a broad selection of
high-quality meat, produce and other perishables. Hughes' stores average
approximately 37,000 square feet in size and are generally located near
residential areas. Hughes supplies the majority of its stores' inventory from
its own centrally located 600,000 square foot warehousing and distribution
facility built in 1993. Hughes also owns a 50% interest in Santee Dairies, Inc.
("Santee"), one of the largest dairy plants in California, which provides dairy
and other products to Hughes, as well as to certain other third parties, under
the well-known "Knudsen," "Foremost" and other labels. See "Hughes Markets,
Inc.," below.
On March 9, 1998, QFC was merged with a wholly owned subsidiary of Fred Meyer,
Inc. ("Fred Meyer"), thereby becoming a wholly owned subsidiary of Fred Meyer
(the "Fred Meyer Merger"). The Fred Meyer Merger, as contemplated by the
Agreement and Plan of Merger dated November 6, 1997, as amended on January 20,
1998, between Fred Meyer, QFC and a wholly owned subsidiary of Fred Meyer, was
approved by the shareholders of QFC at a shareholders meeting held on March 6,
1998. Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
On March 10, 1998, Food 4 Less Holdings, Inc. ("Food 4 Less") was merged with a
wholly owned subsidiary of Fred Meyer, thereby becoming a wholly owned
subsidiary of Fred Meyer (the "Food 4 Less Merger").
On February 10, 1998, Fred Meyer, QFC and Food 4 Less entered into a settlement
agreement (the "Settlement Agreement") with the State of California to settle
potential antitrust and unfair competition claims that the State of California
asserted against Fred Meyer, QFC and Food 4 Less relating to the effects of the
proposed Fred Meyer and Food 4 Less Mergers on supermarket competition in
Southern California (the "State Claims"). Without admitting any liability in
connection with the State Claims, Fred Meyer, QFC and Food 4 Less agreed in the
Settlement Agreement to divest 19 specific stores in Southern California,
including three Hughes stores. Under the Settlement Agreement, Fred Meyer must
divest 13 stores by September 10, 1998 and the balance of six stores by December
10, 1998. Fred Meyer also agreed not to acquire new stores from third parties in
the Southern California areas specified in the Settlement Agreement (covering
substantially all of the Los Angeles metropolitan area) for five years following
the date of the Settlement Agreement without providing prior notice to the State
of California. If Fred Meyer fails to divest the required stores by the two
dates set forth in the Settlement Agreement, Fred Meyer has agreed not to object
to the appointment of a trustee to effect the required sales.
On March 11, 1998, Fred Meyer completed the refinancing of the outstanding bank
and public indebtedness of QFC and Food 4 Less. Fred Meyer entered into senior
credit facilities in an aggregate principal amount of $3.5 billion, consisting
of a $1.875 billion five-year revolving credit facility and a $1.625 billion
five-year term loan facility. Fred Meyer also entered into a $500 million lease
facility. In addition, Fred Meyer sold (i) $250.0 million of 7.150% Notes due
March 1, 2003, (ii) $750.0 million of 7.375% Notes due March 1, 2005 and (iii)
$750.0 million of 7.450% Notes due March 1, 2008 in a registered offering. One
use of the proceeds generated by these transactions was to finance QFC's offer
to purchase $150.0 million of the principal amount of its outstanding senior
subordinated notes. Pursuant to this offer, $146.9 million principal amount of
the tendered notes were purchased and cancelled at a premium of $19.3 million.
$3.1 million of the notes remain outstanding. In addition, substantially all of
the restrictive covenants and certain other provisions contained in the
indenture were eliminated or modified by the vote of the noteholders. The
proceeds were also used to repay the $174.0 million outstanding under QFC's
revolving credit facility.
These mergers will result in two in-market consolidations. In Southern
California, Hughes will be converted to the format of the Food 4 Less' Ralphs
stores and will utilize the existing Food 4 Less administrative, distribution
and manufacturing infrastructure. In the Seattle/Puget Sound Region, the stores
will continue to operate under the QFC name and format but will convert from
third party
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distribution to utilize Fred Meyer's warehousing and distribution infrastructure
and will consolidate certain other support functions over time to reduce QFC's
general and administrative overhead. Further, management of the merged companies
has identified several areas of opportunity to enhance revenues and improve
profitability by applying merchandising "best practices" across store formats.
For example, management intends to apply Fred Meyer's experience and expertise
in general merchandising to Ralphs' store base, utilize Food 4 Less' and Fred
Meyer's private-label expertise in QFC's store base and apply QFC's successful
home meal replacement and prepared food concepts in Fred Meyer's, Smith's Food
and Drug Centers' and Ralphs' store bases. Further, the merged companies will
operate a number of complementary operating formats which will provide enhanced
opportunities for in-market new store growth. Management of the merged companies
believes that its experience in operating these multiple formats will allow the
companies to appeal to an expanded customer base among a wider range of income
brackets and increase its market share, thereby leveraging infrastructure and
reducing operating costs.
The disclosures in this Report relate only to QFC and its subsidiaries. For
information on Fred Meyer and any of its other subsidiaries, reference is made
to the periodic reports of Fred Meyer, Food 4 Less and Ralphs Grocery Company.
The Company has only one industry segment - the operation of retail
supermarkets.
QFC
Management believes that the Company's QFC stores offer customers superior value
by emphasizing an extensive selection of high quality perishable items,
excellent customer service, convenient store locations and hours, a variety of
specialty departments and competitive prices. The Company's merchandising goals
are to attract new customers, become the primary source for its customers'
weekly grocery needs and capture a greater portion of their supermarket
spending. In order to achieve these goals, QFC's merchandising strategy
emphasizes: (i) superior customer service, (ii) a wide variety of high quality
meat, seafood, produce and other perishables, (iii) high quality
convenience-oriented specialty departments and services and (iv) a broad
assortment of higher-margin proprietary brands. Management believes that QFC's
strengths in merchandising, combined with its competitive pricing, have earned
QFC stores a reputation for providing superior "value" to their customers and
have resulted in a loyal customer base. QFC stores, which average approximately
31,000 square feet in size, are open seven days a week, 24 hours a day, and
feature a number of specialty departments such as full service delicatessens,
seafood departments, bakery departments with coffee/espresso bars, and floral
departments. Many QFC stores also offer natural food sections, video rentals,
fresh juice bars and pharmacies. In addition, QFC leases space within its stores
to branded specialty food operators, including Starbucks Coffee, Cinnabon World
Famous Cinnamon Rolls and Noah's New York Bagels, as well as to full service
banks such as Seafirst Bank. The Company has significantly expanded its
selection of prepared foods and "home meal replacement" items, which management
believes appeal to the increasing convenience orientation of consumers. Examples
include complete hot meals which are ready to serve, pre-cooked dinners which
are ready to heat and eat, "Chef's Express" gourmet entrees which are specially
prepared and ready to cook, and "Northwest Sandwich Bars" which feature a
variety of pasta dishes, specialty and made-to-order hot and cold sandwiches,
pre-made salads and self-serve soup and salad bars.
Management believes that QFC has developed a modern and well-maintained base of
stores in many prime locations in the Seattle/Puget Sound area. The Company
currently operates 78 QFC supermarkets, ten Stock Markets and one Thriftway,
generally in or near residential areas.
5
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Of the 25 KUI stores acquired, twelve have been converted to the QFC name, ten
of which have been significantly remodeled as part of QFC's plan to implement
its merchandising and operating practices in its new stores. Two of the acquired
Stock Markets were sold during 1997.
During the fiscal year ended December 27, 1997, QFC invested approximately $42.0
million in capital expenditures, primarily allocated toward building new stores
and expanding and remodeling existing stores. During such period, QFC opened its
Harvard Market store located in Seattle, Washington in April of 1997 and
acquired a store in Port Hadlock Washington in June 1997, in addition to the
acquisitions of KUI and Hughes. Additionally, 20 existing stores were remodeled.
At the end of fiscal 1997, the total square footage of all 89 stores was
approximately 3,140,000 square feet with an average store size of approximately
35,276 square feet, and a range in size from 14,000 to 68,000 square feet. QFC
increased its total square footage by 46%, 6% and 54% in fiscal 1995, 1996, and
1997 respectively.
The following table sets forth certain information with respect to store
size:
Number of Stores at
December 27, 1997
-------------------
Store Size:
Less than 20,000 square feet.................................. 7
Between 20,000 and 30,000 square feet......................... 28
Between 30,000 and 40,000 square feet......................... 26
Between 40,000 and 50,000 square feet......................... 19
Over 50,000 square feet....................................... 9
--
89
==
The following table sets forth additional information concerning QFC, Stock
Market and Thriftway stores for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------------------------
Total Stores: December 25, December 31, December 30, December 28, December 27,
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Beginning of period 33 38 45 62 64
Newly Constructed 3 1 1 0 1
Acquired 2 6 16 2 26
Sold 0 0 0 0 (2)
----- ----- ----- ----- -----
End of period 38 45 62 64 89
===== ===== ===== ===== =====
Remodels................... 3 4 7 13 20
</TABLE>
Prior to the Fred Meyer Merger, QFC purchased the majority of its groceries,
meat and some seafood, deli and produce from wholesale suppliers. In connection
with the Fred Meyer Merger, QFC will convert the purchasing and distribution of
the majority of the items it primarily purchased from these wholesalers to
utilize Fred Meyer's warehousing and distribution infrastructure.
6
<PAGE>
Hughes Markets, Inc.
Hughes' merchandising strategy emphasizes: (i) superior customer service, (ii) a
wide selection of high quality products, (iii) competitive pricing and
promotions and (iv) the development of proprietary brands.
Hughes has invested approximately $18.6 million in capital expenditures during
the 41 weeks ended December 27, 1997, which have been primarily allocated toward
replacement stores and expanding or remodeling existing stores. At December 27,
1997, the total square footage of all 56 Hughes stores was approximately
2,099,000 square feet with an average store size of 37,000 square feet, and a
range in size of 22,000 to 55,000 square feet.
The following table sets forth certain information with respect to Hughes' store
size:
Number of Stores at
December 27, 1997
-------------------
Store size:
Between 20,000 and 30,000 square feet................. 5
Between 30,000 and 40,000 square feet................. 37
Between 40,000 and 50,000 square feet................. 12
Over 50,000 square feet............................... 2
--
56
==
The following table sets forth additional information concerning Hughes stores
for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------
March 4, March 21, 1997
through through
February 29, February 27, February 26, March 3, March 21, December 27,
1993 1994 1995 1996 1997 1997
----------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Total Stores
Beginning of period 52 51 51 53 54 57
Newly Constructed 0 0 2 1 4 0
Acquired 0 0 0 0 0 0
Closed (1) 0 0 0 (1) (1)
----- ----- ----- ----- ----- -----
End of period 51 51 53 54 57 56
===== ===== ===== ===== ===== =====
Remodels.................. 3 6 4 4 2 2
</TABLE>
Hughes owns a 600,000 square foot distribution facility in Irwindale, California
that is centrally located an average of 44 miles from each of Hughes' stores and
is serviced by a fleet of 36 tractors and approximately 70 trailers, including
approximately 60 refrigerated trailers, all of which are owned by Hughes. Hughes
purchases its merchandise directly from manufacturers as well as from
distributors. As a result of the Fred Meyer and the Food 4 Less Mergers, Hughes
will utilize Food 4 Less' administrative, distribution and
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manufacturing infrastructure. Accordingly, Hughes' distribution facility and
administrative offices will be closed, sold or otherwise disposed of.
Hughes owns a 50% interest in Santee, which operates one of the largest dairy
plants in California. Santee processes, packages and distributes fluid whole,
2%, 1% and skim milk, as well as orange juice, fruit drinks and certain cultured
products under the Knudsen, Foremost and certain store brand names. During 1997,
Santee sold approximately 40% of its fluid product volume to Hughes and Stater
Brothers, the other 50 % owner. During calendar 1996 and 1997, Stater Brothers
purchased more than twice as much fluid milk from Santee than Hughes. Santee
also sells to various non-owner grocery supermarkets, independent food
distributors, military bases and food service providers in Southern California
and surrounding areas. In 1997, Santee completed construction of a new dairy
plant in the City of Industry, California. Hughes' management believes that the
new facility will increase Santee's capacity to process milk from approximately
250,000 gallons per day to approximately 350,000 gallons per day, with the
ability to expand capacity to approximately 500,000 gallons per day. The new
plant began testing water through the system in November 1997 and by the end of
December 1997 processed over 20,000 gallons of salable milk. Santee is currently
processing and servicing Stater Brothers out of the new plant and management
expects the remaining production volume will be transferred to the new plant
soon. Construction costs of the new dairy were approximately $102.0 million,
including capitalized expenses of approximately $11.0 million and equipment
costs. To provide the funds necessary to finance the construction. Santee issued
$80.0 million of secured senior notes (the "Santee Notes") in a private
placement. In addition, Hughes and Stater Brothers agreed to purchase their
fluid milk requirements from Santee on terms that would require them to pay
increased milk prices in order for Santee to maintain a specified debt service
ratio. During 1997, Santee consummated a sale leaseback of equipment from its
old plant that would not be needed at the new facility. The lease at the old
plant expires April 30, 1998.
ITEM 2 - PROPERTIES
QFC
At December 27, 1997, QFC leased 80 of its 89 supermarkets and its
administrative facilities under non-cancelable operating leases with various
terms expiring through February 2055, including renewal periods. The average
remaining term of QFC's leases (including all renewal options) is approximately
31 years, with only three of these leases subject to expiration within five
years. All 89 stores are located in the Puget Sound region of Washington state.
QFC owns most of the equipment, furniture and fixtures at its retail and
administrative locations and has made leasehold improvements at most locations.
At December 27, 1997, QFC owned the real estate at nine of its store facilities
in operation, one of which is part of a small shopping center owned by QFC. In
March 1998, QFC sold the shopping center, but retained ownership of its store
building and pad. During 1995, 1996 and 1997, QFC sold three of the centers it
previously operated. QFC retained ownership of its store buildings and pads in
the centers that were sold. There are no mortgages on QFC's owned stores. QFC
has entered into option agreements for, and purchased, real estate within its
existing Seattle/Puget Sound market areas where it plans to locate stores in the
future. Certain of these store locations are in the entitlement process or
subject to other contingencies.
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Hughes
Hughes currently operates a total of 56 stores in Southern California. Thirty
stores are located in Los Angeles County, 13 in Orange County, six in San
Bernardino County, four in Ventura County and three in Riverside County. Of
these 56 stores, 53 stores are leased, including four stores that are leased to
partnerships in which ownership interests are held by various members of the
Hughes family. The Company believes that these leases are on terms not less
favorable to Hughes than could have been obtained had the properties been leased
from unrelated parties. Hughes' leases generally provide for a 25 year initial
term and for contingent rent based on sales. At December 27, 1997, the average
remaining term on Hughes' leases, including unexercised options to extend, was
approximately 25 years. Two of these leases are due to expire in the next five
years.
In addition, Hughes directly owns three of its stores. Hughes also owns its
600,000 square foot distribution facility and its headquarters, both of which
are located on a 38 acre parcel of land in Irwindale, California.
ITEM 3 - LEGAL PROCEEDINGS
The Company (including QFC and Hughes) is currently involved in a number of
legal proceedings which have arisen in the ordinary course of business.
Management believes these proceedings will not, in the aggregate, have a
material impact on the Company's operations or financial condition. However, the
Company is unable to predict whether the outcome of such actions may or may not
have a material adverse effect on the Company's results of operations in a
particular future period as the timing and amount of any resolution of such
actions and their relationship to future results of operations are not known.
PART II
ITEM 5 - MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
On March 9, 1998, QFC became a wholly owned subsidiary of Fred Meyer.
Accordingly, there is no longer a public market for the Company's common stock.
Prior to the Company's merger with Fred Meyer, the common stock of the Company
was traded on the New York Stock Exchange under the symbol "XQ". Prior to
February 20, 1997, the Company's stock was traded on the Nasdaq National Market,
under the symbol "QFCI".
Presented below are quarterly closing sale price ranges for the Company's common
stock. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily reflect actual transactions.
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
12/27/97 12/28/96
------------------- -------------------
High Low High Low
------- ------- ------- -------
<S> <C> <C> <C> <C>
First Quarter $42 1/2 $33 1/4 $23 1/4 $20 1/4
Second Quarter 43 1/2 30 3/4 29 1/4 22 1/4
Third Quarter 43 5/8 37 1/4 31 1/2 25 1/2
Fourth Quarter 68 1/2 38 1/16 39 1/2 30 1/16
</TABLE>
9
<PAGE>
In February 1995, QFC paid a cash dividend of $.05 per share, or an aggregate of
$1.0 million, to its shareholders, but subsequently discontinued the payment of
dividends as the result of prohibitions set forth in the Company's prior credit
facility.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS<F1>
Sales
- -----
Sales for the year ended December 27, 1997 increased approximately $1.1 billion,
or 133.2%, compared with the same period in 1996. The increase in total sales
reflects the inclusion of the 23 KUI stores for 45 weeks and 56 Hughes stores
for 41 weeks, sales from the 45,000 square-foot Harvard Market store which
opened April 30, 1997, sales from two Food Giant stores acquired in October
1996, sales from the Port Hadlock store acquired in June 1997, and an increase
in same store sales (which exclude sales in stores opened or acquired during the
previous 12 months) of approximately 2% for the year. The increase in same store
sales is due to improved merchandising and strong sales in remodeled and
replacement stores, despite a decrease of slightly more than 0.5% in retail food
prices.
Sales increases were offset in part by lower sales in certain existing stores
due to the opening and remodeling of competitors' stores located near QFC
stores. In addition, sales growth has been impacted by new and acquired stores,
which have lower sales volumes, becoming a more significant part of the
Company's sales, the maturing of older stores to a level where substantial sales
growth is more difficult, and the Company's strategy of opening and acquiring
stores in certain locations that enhance the Company's competitive position and
protect its market share but reduce sales in nearby existing stores.
Additionally, the supermarket industry continues to be highly competitive.
Operating Income
- ----------------
The Company's cost of sales and related occupancy expenses increased to 75.5% of
sales for the year ended December 27, 1997, from 75.0% in 1996 due to lower
margins in the stores acquired in the first quarter of 1997 offset, in part, by
improved buying and merchandising, a greater mix of sales in higher margin
service departments in the QFC stores and lower occupancy expenses as a
percentage of sales.
Marketing, general and administrative expenses increased to 19.6% of sales for
the year ended December 27, 1997, from 18.9% of sales in 1996. The increase was
attributable to additional expenses associated with the initial integration and
a higher operating expense ratio of the acquired stores, including an increase
in acquisition related amortization of $9.6 million for the year ended December
27, 1997, contractual rate increases from union contracts effective in May 1997
and August 1997 and a 10% increase in the union benefit contributions rate
effective in July 1996, and $1.0 million of expenses related to the Fred Meyer
Merger incurred in 1997.
As a result of the above factors, operating margins declined to 4.9% of sales
for the year ended December 27, 1997, compared to 6.1% of sales for 1996.
<F1> Pursuant to General Instruction I(1)(a) and (b) of Form 10-K, the Company
is substituting a management's narrative analysis of results of operations for
Item 7.
10
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Interest
- --------
Interest income increased to $2.6 million for the year ended December 27, 1997,
compared to $0.5 million in 1996, reflecting the increase in the Company's cash
balances and higher interest rates.
Interest expense increased to $29.2 million for the year ended December 27,
1997, as compared to $9.9 million in 1996, reflecting interest on the additional
debt incurred in connection with the acquisitions, offset by lower debt balances
than in the comparable year prior to such borrowings. Interest expense is net of
approximately $0.8 million of interest capitalized in connection with store
construction and remodeling costs incurred during the year ended December 27,
1997, and $1.3 million of interest capitalized during the year ended December
28, 1996.
Income Taxes
- ------------
The Company's effective federal income tax rate increased to 39.4% for the year
ended December 27, 1997, compared to 35.8% for 1996, due to an increase in
non-deductible goodwill resulting from the KUI and Hughes acquisitions and the
addition of state of California income taxes as a result of the Hughes
acquisition. The difference between the Company's effective income tax rate and
the federal and state statutory rates is primarily due to non-deductible
amortization of goodwill resulting from the various acquisitions by the Company
in 1997, principally the KUI and Hughes acquisitions, which resulted in $1.1
million and $3.6 million of goodwill expense, respectively.
Net Earnings
- ------------
The 88.9% increase in operating income for the year ended December 27, 1997,
offset by the $17.2 million increase in the net interest expense and the
increase in the effective tax rate, resulted in an increase in net earnings to
$40.0 million compared with $25.4 million for the year ended December 28, 1996.
The Company adopted Statement of Accounting Standard ("SFAS") No. 128, "Earnings
Per Share," for the year ended December 31, 1997. As required by this statement,
all prior periods presented have been restated in accordance with the provisions
of SFAS No. 128. Basic earnings per share for 1997 were $2.04 on 19.7 million
weighted average shares outstanding, compared with $1.75 on 14.5 million
weighted average shares outstanding in 1996. Diluted earnings per share for 1997
were $1.95 on 20.5 million weighted average shares outstanding, compared with
$1.71 on 14.9 million weighted average shares outstanding in 1996.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Financial Statements on page 15 of the
Company's financial statements and notes thereto. All other schedules have been
omitted as not required or not applicable or because the information required to
be presented is included in the financial statements and related notes.
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<PAGE>
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no change in independent auditors during the past two fiscal
years, and there has been no disagreement with the Company's independent
auditors on any matter of accounting principles or practices or financial
statement disclosure.
12
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
1. Financial Statements
Reference is made to the Index to Consolidated Financial Statements on
page 15.
2. Financial Statement Schedules
None required.
3. Exhibits
A list of the exhibits required to be filed as part of this report is
set forth in the Index to Exhibits following page F-17 hereof. The
Index to Exhibits indicates each management contract, compensatory
plan, or arrangement required to be filed as an exhibit to this
report.
(b) Reports on Form 8-K
The Company filed: (i) a report on Form 8-K dated November 6, 1997;
(ii) a report on Form 8-K dated February 4, 1998; and (iii) a report
on Form 8-K dated March 9, 1998.
13
<PAGE>
Signatures
- ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Quality Food Centers, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
QUALITY FOOD CENTERS, INC.
/s/ MARC W. EVANGER
-----------------------------------------
Marc W. Evanger, Senior Vice President,
Chief Financial Officer, and Assistant
Secretary
Date: March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 27, 1998.
Signature Capacity
--------- --------
/s/ DAN KOURKOUMELIS President and Chief Executive Officer
- ----------------------------- (Principal Executive Officer)
Dan Kourkoumelis
/s/ MARC W. EVANGER Senior Vice President, Chief Financial
- ----------------------------- Officer and Assistant Secretary
Marc W. Evanger (Principal Financial and Accounting Officer)
/s/ ROGER A. COOKE* Director
- -----------------------------
Roger A. Cooke
/s/ ROBERT G. MILLER* Director
- -----------------------------
Robert G. Miller
/s/ KENNETH THRASHER* Director
- -----------------------------
Kenneth Thrasher
*By: /s/ MARC W. EVANGER
-------------------------
Marc W. Evanger
Attorney-In-Fact
14
<PAGE>
QUALITY FOOD CENTERS, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements Filed
with the Annual Report
on Form 10-K for the
Fiscal Year Ended December 27, 1997
F - 1 Consolidated Statements of Earnings for the Fiscal Years ended
December 27, 1997, December 28, 1996 and December 30, 1995.
F - 2 Consolidated Statements of Shareholders' Equity for the Fiscal Years
ended December 27, 1997, December 28, 1996 and December 30, 1995.
F - 3 Consolidated Balance Sheets at December 27, 1997 and December 28,
1996.
F - 4 Consolidated Statements of Cash Flows for the Fiscal Years ended
December 27, 1997, December 28, 1996 and December 30, 1995.
F - 5 Notes to Consolidated Financial Statements.
F - 17 Independent Auditors' Report.
15
<PAGE>
<TABLE>
<CAPTION>
QUALITY FOOD CENTERS, INC. AND SUBSIDIARIES
Consolidated
Statements of
Earnings
- ----------------------------------------------------------------------------------------------------------------
Years Ended December 27, 1997,
December 28, 1996 and December 30, 1995
In thousands, except per share data 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $1,878,115 $805,281 $729,856
Cost of sales and related occupancy expenses 1,417,038 603,947 550,434
Marketing, general and administrative expenses 368,500 152,337 136,645
- ----------------------------------------------------------------------------------------------------------------
OPERATING INCOME 92,577 48,997 42,777
Interest income 2,591 467 501
Interest expense 29,181 9,890 9,639
Other expense - - 1,400
- ----------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 65,987 39,574 32,239
Taxes on income:
Current 25,180 12,790 10,087
Deferred 800 1,366 1,936
- ----------------------------------------------------------------------------------------------------------------
Total taxes on income 25,980 14,156 12,023
- ----------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 40,007 $ 25,418 $ 20,216
================================================================================================================
Basic earnings per common share:
Net Earnings $ 2.04 $ 1.75 $ 1.29
Weighted average shares outstanding 19,659 14,547 15,706
Diluted earnings per common share:
Net Earnings $ 1.95 $ 1.71 $ 1.28
Weighted average shares outstanding 20,517 14,888 15,830
Dividends per common share -- -- $ .05
- ----------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
F - 1
<PAGE>
<TABLE>
<CAPTION>
QUALITY FOOD CENTERS, INC. AND SUBSIDIARIES
Consolidated
Statements of
Shareholders' Equity
- ----------------------------------------------------------------------------------------------------------------
Common Stock
------------------------ Retained
In thousands, except per share data Shares Amount Earnings Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 19,481 $ 26,645 $ 131,533 $ 158,178
Net earnings - - 20,216 20,216
Common stock issued 1,951 45,130 - 45,130
Common stock repurchased
(including offering fees and
expenses aggregating $2,850) (7,000) (43,510) (134,340) (177,850)
Tax benefit related to stock options - 667 - 667
Cash dividend ($.05 per share) - - (974) (974)
- ----------------------------------------------------------------------------------------------------------------
Balance at December 30, 1995 14,432 28,932 16,435 45,367
Net earnings - - 25,418 25,418
Common stock issued 214 5,773 - 5,773
Tax benefit related to stock options - 240 - 240
- ----------------------------------------------------------------------------------------------------------------
Balance at December 28, 1996 14,646 34,945 41,853 76,798
Net earnings - - 40,007 40,007
Common stock issued 6,417 233,410 - 233,410
Tax benefit related to stock options - 1,570 - 1,570
- ----------------------------------------------------------------------------------------------------------------
Balance at December 27, 1997 21,063 $ 269,925 $ 81,860 $ 351,785
================================================================================================================
See notes to consolidated financial statements.
</TABLE>
F - 2
<PAGE>
<TABLE>
<CAPTION>
QUALITY FOOD CENTERS, INC. AND SUBSIDIARIES
Consolidated
Balance Sheets
- -----------------------------------------------------------------------------------------------------------------
In thousands December 27, 1997 December 28, 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 44,702 $ 14,571
Accounts receivable 24,478 10,754
Federal income taxes receivable 824 --
Inventories 122,877 36,954
Prepaid expenses 20,502 6,208
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 213,383 68,487
- -----------------------------------------------------------------------------------------------------------------
PROPERTIES
Land 43,705 15,025
Buildings, fixtures and equipment 298,537 155,038
Leasehold improvements 83,383 41,511
Property under capital leases 25,421 --
Construction in progress 15,863 9,910
- -----------------------------------------------------------------------------------------------------------------
466,909 221,484
Accumulated depreciation and amortization (93,095) (60,821)
- -----------------------------------------------------------------------------------------------------------------
373,814 160,663
Leasehold interest, net of accumulated amortization
of $15,082 and $11,257 100,754 27,585
Real estate held for investment 5,722 6,048
Goodwill, net of accumulated amortization of
$7,990 and $2,084 273,654 33,691
Other assets 24,803 7,543
- -----------------------------------------------------------------------------------------------------------------
$992,130 $304,017
=================================================================================================================
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable $ 85,662 $ 35,548
Accrued payroll and related benefits 41,680 15,884
Accrued business and sales taxes 8,630 5,413
Store closure reserve 11,988 --
Other accrued expenses 30,228 7,240
Federal income taxes payable -- 945
Current portion of long-term debt 14,667 --
Current portion of capital lease obligations 701 --
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 193,556 65,030
- -----------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 41,933 12,142
OTHER LIABILITIES 24,833 5,047
CAPITAL LEASE OBLIGATIONS 30,397 --
LONG-TERM DEBT 349,626 145,000
COMMITMENTS AND CONTINGENCIES (Note G)
SHAREHOLDERS' EQUITY
Common stock, at stated value -
authorized 60,000 shares
issued and outstanding 21,063 shares and 14,646 shares 269,925 34,945
Retained earnings 81,860 41,853
- -----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 351,785 76,798
- -----------------------------------------------------------------------------------------------------------------
$992,130 $304,017
=================================================================================================================
See notes to consolidated financial statements.
</TABLE>
F - 3
<PAGE>
<TABLE>
<CAPTION>
QUALITY FOOD CENTERS, INC. AND SUBSIDIARIES
Consolidated
Statements of
Cash Flows
- ----------------------------------------------------------------------------------------------------------------
In thousands
Years Ended December 27, 1997,
December 28, 1996, and December 30, 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $40,007 $25,418 $20,216
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of properties 32,410 15,823 12,892
Amortization of leasehold interest and other 10,666 3,654 3,278
Amortization of debt issuance costs 703 185 143
Deferred income taxes 786 1,366 1,936
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable (1,724) (2,207) (5,292)
Inventories (4,897) 514 (4,550)
Prepaid expenses (749) (870) (2,878)
Accounts payable (3,370) 1,374 297
Accrued payroll and related benefits 470 2,206 3,040
Accrued business and sales taxes (594) 377 1,121
Other accrued expenses 3,909 1,520 2,108
Federal income taxes payable (3,294) 1,564 1,385
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 74,323 50,924 33,696
- ----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures, net (60,524) (32,556) (28,639)
Acquisition of KUI (34,511) -- --
Acquisition of Hughes (346,732) -- --
Receivable from Santee 5,375 -- --
Proceeds from sale of fixed assets 11,256 2,650 1,340
Cash portion of Olson's merger -- - (18,000)
Real estate held for investment 326 (425) (407)
Other (135) (994) (531)
- ----------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (424,945) (31,325) (46,237)
- ----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuances of common stock 5,108 2,417 27,061
Common stock repurchased -- - (177,850)
Net proceeds from March 19, 1997 financings
Issuance of common stock 192,199 -- --
Issuance of senior subordinated notes 146,250 --
Proceeds under credit facility 248,001 -- --
Payment of outstanding credit facility (197,000) -- --
Proceeds from (repayment of) long-term debt (13,805) (19,500) 140,500
Cash dividends paid -- - (974)
- ----------------------------------------------------------------------------------------------------------------
Net Cash Provided (Used) by Financing Activities 380,753 (17,083) (11,263)
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 30,131 2,516 (23,804)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,571 12,055 35,859
- ----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $44,702 $14,571 $12,055
================================================================================================================
See notes to consolidated financial statements.
</TABLE>
F - 4
<PAGE>
QUALITY FOOD CENTERS, INC. AND SUBSIDIARIES
Notes to Consolidated
Financial Statements
- --------------------------------------------------------------------------------
Years Ended December 27, 1997, December 28, 1996 and December 30, 1995
- --------------------------------------------------------------------------------
A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Quality Food Centers, Inc. and subsidiaries (the "Company"
or "QFC") is a multi-regional operator of premium supermarkets, operating 145
stores and employing more than 11,000 people. The Company has been in operation
since 1954 and currently operates 89 stores in the Puget Sound region of
Washington state primarily under the names QFC and Stock Market and 56 stores in
Southern California under the Hughes Family Market name.
Basis of Presentation: The Company's consolidated financial statements are
prepared in conformity with generally accepted accounting principles which
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from the estimates. All significant intercompany transactions and account
balances with the Company's subsidiaries, Hughes Markets, Inc. ("Hughes") and KU
Acquisitions, Inc. ("KUA"), have been eliminated in consolidation.
Earnings Per Share: The Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 128, "Earnings Per Share," for the year ended December 31,
1997. As required by this statement, all prior periods presented have been
restated in accordance with the provisions of SFAS No. 128. Basic earnings per
share is calculated based upon the weighted average number of common shares,
excluding common share equivalents outstanding during the period. Diluted
earnings per share is calculated based upon the weighted average number of
shares plus common share equivalents outstanding during the period.
Fiscal Year: The Company's fiscal year ends on the last Saturday in December
(except for Hughes which ends on the last Sunday in December). The years ended
December 27, 1997, December 28, 1996 and December 30, 1995 represent 52-week
fiscal years.
Cash and Cash Equivalents: The Company considers all highly liquid investments
with a maturity of three months or less at the time of purchase to be cash
equivalents. The Company's investment portfolio is diversified and consists of
investment grade securities, recorded at cost which approximates market value.
The Company's cash management system provides for reimbursement of bank
disbursement accounts on a daily basis. Checks issued but not presented for
payment to the bank in the aggregate amount of $35.0 million and $4.0 million,
at December 27, 1997 and December 28, 1996, respectively, are included in
accounts payable.
Construction in Progress: Costs associated with acquiring land, buildings,
fixtures and equipment while a store is under construction are recorded as
construction in progress. Additionally, the Company capitalizes interest on debt
incurred during the construction of a new store. When a store opens, all costs
are then transferred to the appropriate property account.
Depreciation and Amortization: Depreciation is provided on the straight-line
method over the shorter of the estimated useful lives or 311/2 years for
buildings and three to ten years for fixtures and equipment. Amortization of
leasehold improvements is computed on the straight-line method over the term of
the lease or useful life of the assets, whichever is shorter.
Goodwill: Goodwill arises primarily from business acquisitions and represents
the cost of purchased businesses in excess of amounts assigned to tangible and
identified intangible assets. Goodwill is being amortized over estimated lives
of up to 40 years.
F - 5
<PAGE>
Start-up and Promotional Expenses: Costs incurred in connection with the
start-up and promotion of new store openings and major store remodels are
expensed as incurred.
Leasehold Interest: Leasehold interests from acquired operating lease rights are
amortized over the term of the respective leases, including renewal periods
exercisable at the option of the Company. Management believes that exercise of
renewal options is probable.
Real Estate Held for Investment: Real estate held for investment includes land
and buildings the Company has acquired where it plans to either operate a store
in the future or sell the real estate, and is recorded at the lower of cost or
market. Upon commencement of construction, costs are transferred to construction
in progress.
Long-lived Assets: The Company periodically reviews long-lived assets, including
identified intangible assets and goodwill, for impairment to determine whether
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. Such review includes estimating expected future
cash flows. No such events or circumstances have occurred through December 27,
1997.
Stock-Based Compensation: The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
SFAS No. 123, "Accounting for Stock-Based Compensation," has been adopted by the
Company for the disclosure of certain additional information related to its
stock options and employee stock purchase plan.
Fair Value of Financial Instruments: Financial instruments of the Company for
which the recorded amounts approximates the fair value include cash equivalents,
receivables, prepaid expenses, other long-term assets, accounts payable and
long-term debt from the Company's credit facility. The Company's $150 million
Senior Subordinated Notes had a fair value of approximately $163 million at
December 27, 1997.
Reclassifications: Certain prior years' balances have been reclassified to
conform to classifications used in the current year.
B.
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes and interest for the last three years was as follows:
<TABLE>
<CAPTION>
In thousands 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash payments made:
Income taxes $28,837 $11,226 $8,872
Interest (net of $783, $1,261 and $167 of interest capitalized) 24,764 8,996 9,328
Non-cash transactions:
Capital lease obligations incurred 4,230 -- --
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
On March 19, 1997, the Company completed (i) the sale of 5,175,000 shares on the
Company's common stock to the public for net proceeds of the $192.2 million,
(ii) the private placement of $150.0 million of 8.7% senior subordinated notes
for net proceeds of $146.3 million [which Notes were exchanged for the Exchange
Notes (as hereinafter defined)], and (iii) entered into an agreement to amend
and restate its existing credit facility resulting in net proceeds of $248.0
million. The Company utilized $360.5 million of the proceeds to finance the
acquisition of Hughes (see note N) and $197.0 million to refinance the Company's
bank indebtedness outstanding at the time of the financings [including $59.1
million incurred in connection with the acquisition of Keith Uddenberg, Inc.
("KUI"), (see note M)], leaving approximately $29.7 million of cash for general
corporate purposes.
During the year ended December 27, 1997, the Company also entered into two
separate capital leases in conjunction with the sale and leaseback of two of its
stores. No gain or loss was recorded as a result of these transactions.
In the fourth quarter of 1996, the Company issued shares of common stock to
finance the acquisition of two stores from an independent local retailer.
During the first quarter of 1995, the Company acquired all of the
outstanding shares of Olson's Food Stores, Inc. in a merger transaction for
$60.1 million (see note L). During the first quarter of 1995, the Company
recorded $4.0 million as an increase in goodwill and
F - 6
<PAGE>
deferred income tax liability to record deferred income taxes arising from the
Olson's merger. Further, as part of the merger agreement, the Company agreed to
remit certain of the benefits, if any, of Olson's net operating loss
carryforwards, totaling approximately $12.0 million, and certain other tax
credit carryforwards, totaling approximately $1.2 million, to the former
shareholders of Olson's when utilized.
The Company is entitled to keep the first $1.1 million of such benefits
utilized. Accordingly, a deferred tax asset of $5.4 million and corresponding
liability of $4.3 million were recorded to reflect amounts due the former
shareholders of Olson's when tax loss and tax credit carryforwards are utilized
by the Company. The Company utilized $0.9 million, $0.9 million and $0.7 million
of the tax asset during 1997, 1996, and 1995, respectively, to reduce current
taxes payable. The net operating loss and tax credit carryforwards expire
through the year 2009.
C.
INVENTORIES
Substantially all merchandise inventories are valued at the lower of last-in,
first-out (LIFO) cost or market. The LIFO method results in a better matching of
costs and revenues, as current merchandise cost is recognized in cost of
merchandise sold instead of in ending inventories as is the practice under the
first-in, first-out (FIFO) method. Information related to the FIFO method may be
useful in comparing operating results to those of companies not on LIFO.
On a supplemental basis, if inventories had been valued at the lower of
FIFO cost or market, inventories would have increased by $3.3 million and $2.7
million as of December 27, 1997 and December 28, 1996, respectively, and net
earnings would have increased $0.4 million in both 1997 and 1996.
D.
FEDERAL INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and result from
differences in the timing of recognition of revenue and expenses for tax and
financial statement reporting. The tax effects of significant items comprising
the Company's deferred tax liability as of December 27, 1997 and December 28,
1996 are as follows:
<TABLE>
<CAPTION>
In thousands 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Compensated absences $ 2,397 $ 884
Self insurance 7,171 233
Inventory -- 655
Other accrued expenses 8,060 365
Tax credits 2,957 3,963
Capital leases 1,833 --
State taxes 1,030 --
Other 3,637 --
- ---------------------------------------------------------------------------------------
Total deferred tax asset 27,085 6,100
- ---------------------------------------------------------------------------------------
Deferred tax liabilities:
Accelerated depreciation 22,473 15,762
Inventory 8,410 --
Multi-employer pension contribution 1,069 733
Leasehold interest 31,278 --
Other 1,181 1,747
- ---------------------------------------------------------------------------------------
Total deferred tax liability 64,411 18,242
- ---------------------------------------------------------------------------------------
Valuation Allowance 4,607 --
- ---------------------------------------------------------------------------------------
Net deferred tax liability $41,933 $12,142
=======================================================================================
</TABLE>
The Company has recorded a valuation allowance at December 27, 1997 related to
future capital losses associated with property acquired in the acquisition of
Hughes.
F - 7
<PAGE>
The differences between the Company's effective income tax rates and the
federal statutory rates are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
Nondeductible goodwill 3.0 0.9 0.9
Nondeductible recapitalization fees (Note K) -- -- 1.6
State income taxes, net of federal tax benefit 2.0 -- --
Other (primarily interest on tax-free municipal securities) (0.6) (0.1) (0.2)
- ------------------------------------------------------------------------------------------------------------
Effective tax rate 39.4% 35.8% 37.3%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
E.
LONG-TERM DEBT
On March 19, 1997, in connection with the Hughes merger, the Company
entered into a new credit facility which replaced the credit facility it entered
into in connection with its 1995 recapitalization. During 1997, the Company made
voluntary pre-payments on a portion of the loans under the facility and reduced
certain commitment levels. As of December 27, 1997, the new credit facility
consisted of (I) a $214 million term loan facility (the "Term Loan Facility"),
(ii) a $125 million revolving credit facility (the "Revolving Credit Facility")
and (iii) a $75 million reducing revolving credit facility (the "Acquisition
Facility").
On March 19, 1997, the Company also issued $150 million aggregate principal
amount of Senior Subordinated Notes in a private offering [which Notes were
exchanged for the Exchange Notes (as hereinafter defined)]. The Notes will
mature on March 15, 2007. The Notes bear interest at 8.70% per annum with
interest payable in cash semi-annually on March 15 and September 15 of each
year, commencing September 15, 1997. The Notes are redeemable, in whole or in
part, at the option of the Company beginning March 15, 2002, at redemption
prices declining over time from 104.35% of the principal amount in the year 2002
to 100% of the principal amount in the year 2005 and thereafter, in each case
plus accrued and unpaid interest to the redemption date. In addition, at any
time prior to March 15, 2000, the Company may redeem up to 20% of the aggregate
principal amount of the Notes originally issued at a redemption price of 108% of
the principal amount thereof, plus accrued and unpaid interest to the date of
redemption, with the net cash proceeds of one or more public offerings of common
stock of the Company, provided that at least 80% of the aggregate principal
amount of the Notes originally issued remains outstanding immediately after the
occurrence of such redemption. The obligations of the Company pursuant to the
Notes are fully and unconditionally guaranteed on a joint and several basis by
certain of QFC's existing subsidiaries (the "Guarantors"). The Notes are general
unsecured obligations of the Company and the Guarantors, respectively,
subordinated in right of payment to all existing and future senior debt of the
Company and the Guarantors, as applicable, including borrowings and guarantees
under the new credit facility. Upon a change of control, the Company will be
required to offer to repurchase all outstanding Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest to the date of repurchase. The
Company will also be obligated in certain circumstances to offer to repurchase
Notes at a purchase price of 100% of the principal amount thereof, plus accrued
interest, with the net cash proceeds of certain sales or other dispositions of
assets. The Indenture relating to the Notes contains certain covenants that
limit, subject to certain significant exceptions, the ability of the Company and
its subsidiaries to, among other things, incur additional indebtedness and issue
disqualified stock; pay dividends or make certain other distributions; cause or
permit to exist any consensual restriction on the ability of certain parties to
pay dividends or make certain other distributions; layer indebtedness; create
certain liens securing indebtedness other than senior debt; enter into certain
transactions with affiliates; enter into certain mergers and consolidations or
engage in new lines of business.
On May 20, 1997, the Company filed a Registration Statement for the purpose
of offering to exchange (the "Exchange Offer") up to $150 million aggregate
principal amount of 8.70% Series B Senior Subordinated Notes due 2007 (the
"Exchange Notes") for a like aggregate principal amount of the Notes (the
"Exchange Offer Registration Statement"). The terms of the Exchange Notes are
identical in all material respects (including principal amount, interest rate
and maturity) to the terms of the Notes for which they may be exchanged, except
that the Exchange Notes will be freely transferable by the
F - 8
<PAGE>
holders thereof. The Exchange Offer Registration Statement was declared
effective on July 23, 1997. The Exchange Offer was consummated on September 4,
1997, with all of the Notes being exchanged for the Exchange Notes.
On March 11, 1998, in connection with the Fred Meyer merger (As defined in
Note Q), all amounts outstanding under the March 19, 1997, credit facility were
repaid and the credit facility was terminated. On March 12, 1998, also in
connection with the Fred Meyer merger and under the terms of a tender offer
dated March 12, 1998, $146.9 million principal amount of the $150,000,000 8.70%
Series B Senior Subordinated Notes due 2007 (the "Exchange Notes") were tendered
and repaid at a premium of $19.3 million. The remaining $3.1 million in
Exchanged Notes are due and payable in 2007. In addition, substantially all of
the restrictive covenants and certain other provisions contained in the
indenture were eliminated or modified by the vote of the noteholders.
F.
LEASES
The Company leases its administrative offices and 133 of its 145 store
facilities in operation under noncancelable operating leases expiring through
2023. Certain of the leases include renewal provisions at the Company's option.
The Company has also capitalized certain leases in accordance with the
requirements of No. 13. Future minimum obligations on capital and operating
leases, which exclude stores to be added in 1998, as of December 27, 1997, are
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
In thousands Capital Operating
Leases Leases
--------- ---------
<S> <C> <C>
Due in fiscal year:
1998 $ 4,094 $ 32,485
1999 4,094 32,495
2000 4,094 32,165
2001 4,094 32,502
2002 4,013 31,935
Thereafter 52,183 355,813
--------- ---------
Minimum lease payments 72,572 $ 517,395
=========
Less - Amount representing interest 41,474
---------
Present value 31,098
Current portion (701)
---------
Long-term portion $ 30,397
=========
- -----------------------------------------------------------------------------------------------
</TABLE>
A majority of the store facility leases provide for contingent rentals
based upon specified percentages of sales, real estate tax escalation clauses
and executory costs. Space in several store facilities has been sublet.
A summary of rental expense under operating leases is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
In thousands 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rent $29,449 $14,462 $12,417
Contingent rentals 2,993 1,495 1,820
Real estate taxes and executory costs 8,329 3,532 3,566
Less sublease rentals (1,746) (806) (570)
- ----------------------------------------------------------------------------------------------------------------
$39,025 $18,683 $17,233
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
G.
COMMITMENTS AND CONTINGENCIES
Litigation: The Company is involved in various matters of litigation, all
arising in the ordinary course of business. In the opinion of management, the
ultimate outcome of such matters will not have a material adverse effect on the
financial position or results of operations of the Company.
Employment Agreements: During 1996, the Company entered into employment
agreements with certain
F - 9
<PAGE>
members of management (one of which was amended in 1997) which extend through
various dates in September 1999.
H.
RELATED PARTY TRANSACTIONS
During 1997, the Company paid monthly management fees which, in aggregate,
totaled $150,000 for management advisory services to its chairman, plus a bonus
payment of $0.5 million. For the period of December 31, 1995 through June 16,
1996, $0.7 million was paid to the Company's chairman pursuant to an agreement
to pay a management fee of up to 0.2% of sales as compensation for management
advisory services, which agreement expired on June 16, 1996. Upon expiration of
the agreement, the Company agreed to pay its chairman a monthly fee aggregating
$0.3 million, for June 17, 1996 through December 28, 1996, plus a bonus payment
of $0.2 million. For the fourth quarter of 1995, in lieu of the management fee,
which would have been approximately $0.5 million, the Company granted stock
options for 58,900 shares of its stock under the Company's 1993 Executive Stock
Option (Note J) to its chairman. Management fee expense for 1997, 1996 and 1995
was $0.7 million, $1.2 million and $1.0 million, respectively.
During 1997, the Company paid $4.2 million to Equity Group Investments,
Inc. ("EGI") and its affiliated companies for management services and insurance
premiums. A director of the Company is chairman of the board of EGI. Another
director of the Company is president and chief executive officer of EGI. During
1997, the Company paid $1.1 million in legal fees to Rosenberg & Liebentritt, PC
("R&L"), an affiliate of EGI. A director of the Company was a principal of R&L
from 1980 to September 1997.
A director of the Company is a member of the board of directors of the
Associated Grocers, Inc. ("A.G.") cooperative, which became one of the Company's
major suppliers in 1995. Amounts paid to A.G. for products and services totaled
$191.6 million, $57.7 million and $43.8 million for 1997, 1996 and 1995,
respectively. As a result of the KUI merger, the Company now owns approximately
20% of the non-voting equity of A.G.
During 1995, the Company assumed a lease for one of its stores included in
the Olson's merger (Note L) for which the landlord is an entity that is
controlled by a member of the Company's Board of Directors. Rental payments for
the store, which include reimbursements for common area maintenance and real
estate taxes, totaled $0.2 million, $0.2 million and $0.1 million during 1997,
1996 and 1995, respectively. The lease terminates in April 2001, with options to
renew through April 2035. In addition, during 1997, 1996 and 1995, the Company
purchased approximately $3.2 million, $1.8 million and $1.7 million,
respectively, of products from an entity owned by certain family members of the
same member of its Board of Directors.
In August 1993, two partnerships which include the Company's chairman
acquired the 24-acre University Village Shopping Center, (the "Center"), where
the Company was leasing space for one of its stores and owned an adjacent 8.8
acre parcel of land. The Company negotiated with the partnerships for certain
property rights and lease modifications, which included a 15-year lease term
extension, the right to be the exclusive grocery store in the Center and the
right to relocate its store to the adjacent site. The Company paid approximately
$5.0 million for these rights, which amount is included in Leasehold Interests
and is being amortized over a period of 29 years. In August, 1996, the Company
completed construction of its flagship store on the adjacent property, moved its
store and terminated the existing lease agreement, paying the partnerships a
$0.3 million lease termination fee. The Company retained all other property
rights. Rentals, common area maintenance and real estate tax reimbursements paid
to the partnerships were at the same rates paid to the previous owner of the
Center, and totaled approximately $16,000, $0.5 million and $0.7 million for
1997, 1996 and 1995, respectively.
I.
RETIREMENT PLANS
The Company participates in a union administered multi-employer defined benefit
pension plan for employees covered by collective bargaining agreements. The
contributions under this plan were $22.8 million, $3.2 million and $3.1 million
for 1997, 1996 and 1995, respectively.
The Company's defined contribution profit-sharing plan includes employees
not covered by collective bargaining agreements who meet certain service
requirements. Contributions to the plan are based on a percentage of gross wages
and are made at the discretion of the Company. The Company's profit-sharing
expense was $0.9 million, $0.6 million and $0.5 million for 1997, 1996 and 1995,
respectively.
F - 10
<PAGE>
The Company maintains a voluntary defined contribution retirement plan
qualified under Section 401(k) of the Internal Revenue Code of 1986, available
to all eligible employees not covered by collective bargaining agreements. The
Company does not currently match employee contributions to the plan.
J.
SHAREHOLDERS' EQUITY
In March 1987, the Company adopted an Incentive Stock Option Plan, as amended in
1996, under which options vest ratably over five years and expire after 10 years
from the date of grant. In December 1989, the Company adopted its Directors'
Nonqualified Stock Option Plan for non-employee (non-affiliated) directors of
the Company, under which nonqualified options vest ratably over three years and
expire, with certain exceptions, ten years after the date of grant. In 1993, the
Company's shareholders approved the 1993 Executive Stock Option Plan (the "Exec
Plan") as amended in 1997 to reserve an additional 1.0 million shares for
issuance under the plan, under which nonqualified options generally vest ratably
over five years and expire after 10 years. Options issued under the Exec Plan
automatically became fully vested and exercisable as a result of the Fred Meyer
Merger (defined in Note Q).In 1997, the Company's shareholders also approved the
1997 stock option plan under which incentive stock options vest ratably over
five years and expire after 10 years from the date of grant. For all the plans,
the exercise price must not be less than the fair market value of the common
stock at the date of grant.
During 1996, the Company granted its then Chief Executive Officer options
at fair market value which vested subject to continued employment and were 100%
exercisable at the earlier of seven years or at such time as the Company's
common stock traded at $40.00 per share for any consecutive 10 trading days.
Such options became exercisable in January 1997.
These plans provide for the grant of options to acquire up to 4.5 million
shares of common stock to officers, directors and employees. Options for 2.7
million shares granted to 1,057 employees and 6 directors were outstanding at
December 27, 1997. Stock option activity under these plans for the last three
years was as follows:
<TABLE>
<CAPTION>
Weighted
Number Average
of Shares Exercise Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, December 31, 1994
(487,393 exercisable at a weighted average price of $15.18) 985,453 $20.27
Granted (weighted average grant date fair value - $13.71) 514,950 20.64
Forfeited (20,730) 27.02
Exercised (113,895) 5.57
- ----------------------------------------------------------------------------------------------------------------
Outstanding, December 30, 1995
(582,089 exercisable at a weighted average price of $19.80) 1,365,778 21.51
Granted (weighted average grant date fair value - $18.17) 785,800 30.46
Forfeited (15,490) 24.34
Exercised (68,057) 10.99
- ----------------------------------------------------------------------------------------------------------------
Outstanding, December 28, 1996
(717,555 exercisable at a weighted average prices of $ 21.81) 2,068,031 25.25
Granted (weighted average grant date fair value - $24.38) 799,503 38.29
Forfeited (18,580) 24.45
Exercised (177,411) 19.70
- ----------------------------------------------------------------------------------------------------------------
Outstanding, December 27, 1997
(1,281,010 exercisable at a weighted average price of $26.47) 2,671,543 $29.51
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
In 1990, the Company adopted an Employee Stock Purchase Plan ("ESPP"), as
amended in 1996, under which 800,000 shares of the Company's common stock are
reserved for issuance to employees. Employees are eligible to participate
through payroll deductions in amounts related to their basic compensation. At
the end of each offering period, shares are purchased by the participants at 85%
of the lower of the fair market value at the beginning or the end of the
offering period. Under the plan, 79,669, 93,967 and 84,283 shares were issued to
1,240, 1,236 and 956 employees, in 1997, 1996 and 1995 respectively. As of
December 27, 1997, payroll deductions totaling $3.2 million on behalf of
F - 11
<PAGE>
approximately 4,600 employees were accrued for purchase of shares on March 5,
1998. Following such purchase of shares, the ESPP was terminated.
At December 27, 1997, the weighted average remaining contractual life of
options outstanding was 7 years, with an exercise price of $6.06 to $39.75. Of
the 2,671,543 options outstanding at December 27, 1997, no options have an
exercise price above the quoted market price of the Company's stock of $63.69 at
December 27, 1997.
The Company has applied APB No. 25. Accordingly, no compensation cost has
been recognized for its stock option grants. The fair value of each option
granted is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants in 1997,
1996 and 1995, respectively: one to ten year expected life from date of grant
for all years; stock volatility of 43.5%, 44.7% and 44.7%; risk free interest
rates from 5.28 to 5.72%, 3.91% to 6.32% and 3.91% to 6.29%; and no dividends
during the expected term for all years. Had compensation costs for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method prescribed
in SFAS No. 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
In thousands except per share data 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings as reported $40,007 $25,418 $20,216
Pro forma net earnings under SFAS No. 123 25,619 22,285 18,420
Earnings per share as reported
Basic 2.04 1.75 1.29
Diluted 1.95 1.71 1.28
Pro forma earnings per share under SFAS No. 123
Basic 1.30 1.53 1.17
Diluted 1.27 1.52 1.16
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
K.
RECAPITALIZATION
On March 29, 1995, the Company completed a recapitalization plan, including a
self-tender offer under which the Company purchased 7.0 million shares of its
common stock at a price of $25.00 per share payable in cash, and entered into a
$220.0 million credit facility to finance the tender offer, Olson's merger and
provide additional capital. Additionally, the Company sold 1.0 million newly
issued shares of its common stock to Zell/Chilmark Fund L.P. (Zell/Chilmark) at
$25.00 per share on March 29, 1995. Zell/Chilmark acquired an additional
approximately 3.0 million shares at $25.00 per share, plus an amount equal to a
5% annual return on such amount from March 17, 1995 through January 16, 1996,
directly from the Company's chairman in a separate transaction that closed on
January 16, 1996.
To reflect the net reduction in shareholders' equity resulting from the
recapitalization, the Company reduced retained earnings to zero at the beginning
of the second quarter of 1995 and allocated the remaining amount as a reduction
to common stock.
Fees paid in connection with the recapitalization aggregated approximately
$4.3 million. During the first quarter of 1995, $1.4 million of these fees were
recorded as a one-time expense, which was not deductible for federal income tax
purposes. The remaining costs of $2.9 million were recorded as a direct
reduction to shareholders' equity.
F - 12
<PAGE>
L.
OLSON'S FOOD STORES, INC. ACQUISITION
On March 2, 1995 the principal operations of Olson's acquisition were merged
into the Company, including assets and liabilities related to 12 of its grocery
stores and its interest in certain grocery stores in various stages of
development, and its rights to several other future sites. The merger was
effected through an acquisition of 100% of the outstanding voting securities of
Olson's for $18.0 million cash, 752,941 shares of the Company's common stock,
which as of March 2, 1995 had a value of $18.1 million, and the assumption by
the Company of approximately $24.0 million of indebtedness of Olson's. The
merger has been accounted for under the purchase method of accounting.
In connection with the Olson's merger, liabilities assumed were as follows
(in thousands):
Fair value of assets acquired $ 69,246
Cash paid (18,000)
Long-term debt assumed (24,000)
Common stock issued (18,070)
--------
Current liabilities assumed $ 9,176
========
M.
KEITH UDDENBERG, INC. ACQUISITION
On February 14, 1997, the principal operations of KUI, including assets and
liabilities related to 25 grocery stores in the western and southern Puget Sound
region of Washington, were merged into KUA. The merger, which has been accounted
for under the purchase method of accounting, was effected through the
acquisition of 100% of the outstanding voting securities of KUI for
consideration consisting of $34.5 million cash, 904,646 shares of the Company's
common stock, (which as of February 14, 1997 had a value of $36.0 million) and
the assumption by the Company of approximately $23.8 million of indebtedness of
KUI.
For financial reporting purposes, the consideration paid for the operations
of KUI has been allocated to the fair value of assets acquired and liabilities
assumed. Goodwill of $48.8 million has been recorded as a result of the merger
and is being amortized over 40 years. Because the transaction was a statutory
merger, the Company has a carryover tax basis and amortization of the excess of
the book value over the tax basis of the assets included in the merger is not
deductible for federal income tax purposes.
Following is a summary of the assets and liabilities recorded as a result
of the KUI merger (in thousands):
Cash $ 1,177
Inventories 15,985
Other current assets 5,699
--------
Total current assets 22,861
Property, plant and equipment 22,898
Leasehold interest 20,000
Goodwill 48,776
Other assets 12,429
Current liabilities (18,236)
Deferred income taxes (10,757)
Other liabilities (3,733)
Long-term debt (23,768)
--------
$ 70,470
========
Long-term debt of $23.8 million assumed in connection with the merger was
subsequently repaid.
F - 13
<PAGE>
N.
HUGHES MARKETS, INC. ACQUISITION
On March 19, 1997, the Company acquired the principal operations of Hughes,
including the assets and liabilities related to 57 grocery stores located in
Southern California and a 50% interest in Santee Dairies, Inc., one of the
largest dairy plants in California. The acquisition, which has been accounted
for under the purchase method of accounting, was effected through the
acquisition of 100% of the outstanding voting securities of Hughes, for cash
consideration of approximately $360.5 million, and the assumption by the Company
of approximately $33.2 million of indebtedness (including $6.1 million of
current indebtedness) of Hughes, consisting primarily of capitalized store
leases.
For financial reporting purposes, the consideration paid for Hughes has
been allocated to the fair value of assets acquired and liabilities assumed. The
final determination of such fair values was completed in the Company's fourth
quarter with resulting adjustments to certain assets and liabilities, including
goodwill. Goodwill of $191.9 million has been recorded as a result of the
acquisition and is being amortized over 40 years. Current liabilities assumed
include a reserve for store closures of $13.1 million. This reserve was
established in accordance with Emerging Issues Task Force Bulletin 95-3. Because
the transaction was a statutory merger, the Company has a carryover tax basis
and amortization of the excess of the book value over the tax basis of the
assets included in the merger is not deductible for federal income tax purposes.
Following is a summary of the assets and liabilities recorded as a result
of the Hughes merger (in thousands):
Cash $ 13,767
Inventories 65,042
Other current assets 20,782
-----------
Total current assets 99,591
Property, plant and equipment 148,997
Property under capital leases 21,191
Leasehold interest 56,950
Goodwill 191,922
Other assets 4,553
Current liabilities (106,546)
Deferred income taxes (14,027)
Other liabilities (15,080)
Long-term debt (278)
Capital lease obligation (26,774)
-----------
$ 360,499
===========
Hughes has a 50% interest in Santee Dairies, Inc. ("Santee"), one of the largest
dairy plants in California. During 1997, the Company purchased $13.2 million in
products from Santee Dairies, Inc.
O.
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following pro forma financial information assumes that the acquisitions of
KUI and Hughes and the related financings each occurred as of the beginning of
each period presented.
<TABLE>
<CAPTION>
In thousands, except per share data: 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Sales $2,159,535 $2,111,663
Net earnings 41,810 23,557
Earnings per share
Basic 2.00 1.14
Diluted 1.92 1.12
- ------------------------------------------------------------------------------------------
</TABLE>
F - 14
<PAGE>
P.
SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS
The $150.0 million aggregate principal amount of 8.70% Senior Subordinated
Notes, which are described in Note E, are fully and unconditionally guaranteed,
jointly and severally on a senior subordinated basis, by Hughes, KUA and Quality
Food Holdings, Inc. ("Holdings"), all of which are existing subsidiaries of the
Company. Summarized financial information for subsidiary guarantors of the Notes
is set forth below. Separate financial statements for the subsidiary guarantors
of the Notes are not presented because the Company has determined that such
financial statements would not be material to investors. The subsidiary
guarantors comprise all of the direct and indirect subsidiaries of the Company,
other than the non-guarantor subsidiaries which individually, and in the
aggregate, are inconsequential.
The following table presents combined summarized financial information for
subsidiary guarantors of the Notes. The statement of earnings data represent the
combined results of operations for the period from February 15, 1997 through
December 27, 1997 for KUA, from March 20, 1997 through December 28, 1997 for
Hughes, and from February 18, 1997 (date of inception) through December 27, 1997
for Holdings.
December 27, 1997
-----------------
Balance Sheet Data (in thousands):
Current assets $ 99,862
Noncurrent assets 537,052
Current liabilities 104,321
Noncurrent liabilities 327,068
Shareholders' equity 205,525
For the period
ended December 27, 1997
-----------------------
Statement of Earnings Data (in thousands):
Sales $ 1,021,844
Operating income 38,924
Earnings before income taxes 20,064
Net earnings 5,932
Q.
SUBSEQUENT EVENTS
On March 9, 1998, QFC was merged with a wholly owned subsidiary of Fred Meyer,
Inc. ("Fred Meyer"), thereby becoming a wholly owned subsidiary of Fred Meyer
(the "Fred Meyer Merger"). The Fred Meyer Merger, as contemplated by the
Agreement and Plan of Merger dated November 6, 1997, as amended on January 20,
1998, between Fred Meyer, QFC and a wholly owned subsidiary of Fred Meyer, was
approved by the shareholders of QFC at a shareholders meeting held on March 6,
1998. The terms of the Fred Meyer Merger provide for a tax-free stock-for-stock
transaction at an exchange ratio whereby each QFC shareholder received 1.9
shares of Fred Meyer common stock for each outstanding share of QFC common
stock.
On March 10, 1998, Food 4 Less Holdings, Inc. ("Food 4 Less") was merged with a
wholly owned subsidiary of Fred Meyer, thereby becoming a wholly owned
subsidiary of Fred Meyer (the "Food 4 Less Merger").
F - 15
<PAGE>
R.
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Following is a presentation of selected financial data for each of the four
quarters of 1997 and 1996.
<TABLE>
<CAPTION>
First Second Third Fourth
In thousands Quarter Quarter Quarter Quarter
Except earnings per share (12 weeks) (12 weeks) (12 weeks) (16 weeks)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
Sales $233,154 $501,128 $490,979 $652,854
Cost of sales and related
occupancy expenses 174,913 380,674 370,875 490,576
Gross margin 58,241 120,454 120,104 162,278
Operating income 12,867 24,006 23,861 31,843
Interest income 189 704 708 990
Interest expense 2,777 7,990 8,019 10,395
Net earnings 6,420 9,762 10,147 13,678
Earnings per share
Basic .42 .47 .48 .65
Diluted .40 .45 .47 .62
Weighted average shares outstanding
Basic 15,295 20,908 20,956 21,022
Diluted 16,017 21,633 21,701 22,169
- ----------------------------------------------------------------------------------------------------------------
1996
Sales $176,627 $184,397 $186,142 $258,115
Cost of sales and related
occupancy expenses 133,313 138,221 139,015 193,398
Gross margin 43,314 46,176 47,127 64,717
Operating income 9,828 11,654 11,285 16,230
Interest income 72 112 117 165
Interest expense 2,588 2,165 2,148 2,989
Net earnings 4,683 6,167 5,945 8,623
Earnings per share
Basic .32 .42 .41 .59
Diluted .32 .42 .40 .57
Weighted Average shares outstanding
Basic 14,436 14,543 14,576 14,614
Diluted 14,554 14,798 14,893 15,140
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
F - 16
<PAGE>
- --------------------------------------------------------------------------------
Independent
Auditors' Report
- --------------------------------------------------------------------------------
Board of Directors and Shareholders
Quality Food Centers, Inc.
Bellevue, Washington
We have audited the accompanying consolidated balance sheets of Quality Food
Centers, Inc. and subsidiaries (the "Company") as of December 27, 1997 and
December 28, 1996, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the three years in the period
ended December 27, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 27,
1997 and December 28, 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 27, 1997, in conformity
with generally accepted accounting principles.
As described in Note Q, the Company completed a merger with Fred Meyer,
Inc. on March 9, 1998.
/s / DELOITTE & TOUCHE LLP
Seattle, Washington
March 23, 1998
F - 17
<PAGE>
QUALITY FOOD CENTERS, INC.
Index to Exhibits Filed
with the Annual Report
on Form 10-K for the
Fiscal Year Ended December 27, 1997
Exhibit
Number Description
- ------- -----------
3.1 Amended and Restated Articles of Incorporation of the Company.
3.2 Restated Bylaws of the Company.
4.1a Guarantee, dated as of March 11, 1998, made by the Guarantors referred
to therein (including the Company) in favor of Bankers Trust Company,
as Administrative Agent and Collateral Agent, The Chase Manhattan
Bank, as Syndication Agent, The Various Financial Institutions
Identified as Lenders in the Participation Agreement, as Lenders, and
The Various Financial Institutions Identified as Investors in the
Participation Agreement, as Investors.
4.1b Participation Agreement among Fred Meyer, Inc., as Lessee and as
Construction Agent, FMS Trust 1997-1, a Delaware business trust, as
Lessor, Wilmington Trust Company, not in its individual capacity,
except as expressly specified therein, but solely as Owner Trustee
under the FMS Trust 1997-1, the Investors party to the Trust
Agreement, Bankers Trust Company, as Administrative Agent, The Chase
Manhattan Bank, as Syndication Agent, and the Lenders Parties thereto,
dated as of March 11, 1998; Chase Securities Inc. and BT Alex. Brown,
as Arrangers.
4.1c Lease, Security Agreement and Financing Statement between Wilmington
Trust Company, not in its individual capacity, but solely as Owner
Trustee under the FMS Trust 1997-1, as Lessor, and Fred Meyer, Inc.,
dated as of March 11, 1998.
4.1d Construction Agency Agreement, dated as of March 11, 1998, between FMS
Trust 1997-1, a Delaware business trust, and Fred Meyer, Inc., a
Delaware corporation.
4.1e Credit Agreement among FMS Trust 1997-1, as Borrower, The Several
Lenders from Time to Time Parties Thereto, Bankers Trust Company, as
Administrative Agent, and The Chase Manhattan Bank, as Syndication
Agent, dated as of March 11, 1998.
4.1f Lessee Guarantee, dated as of March 11, 1998, made by Fred Meyer,
Inc., as Lessee Guarantor, in favor of FMS Trust 1997-1, as Lessor,
Bankers Trust Company, as Administrative Agent, The Chase Manhattan
Bank, as Syndication Agent, The Various Financial Institutions
Identified as Lenders in the Participation Agreement, as Lenders, and
The Various Financial Institutions Identified as Investors in the
Participation Agreement Therein, as Investors.
4.1g Pledge Agreement, dated as of March 11, 1998, entered into by Fred
Meyer, Inc., a Delaware corporation, and each of the undersigned
subsidiaries of Fred Meyer, Inc. (including the Company) in favor of
Bankers Trust Company, as administrative agent and collateral agent,
for the Beneficiaries.
<PAGE>
Exhibit
Number Description
- ------- -----------
4.1h Intercreditor and Collateral Agency Agreement, dated as of March 11,
1998, among Bankers Trust Company, as Administrative Agent under the
Loan Agreement, as Administrative Agent under the Synthetic Lease
Facility, and as Collateral Agent, Fred Meyer, Inc. and the Subsidiary
Pledgors.
4.1i Subsidiary Guarantee, dated as of March 11, 1998, executed by each of
the Guarantors listed on the signature page thereof (including the
Company) for the benefit of Bankers Trust Company, as Administrative
Agent under the Loan Agreement, and each Lender named therein.
4.1j $3,500,000,000 Loan Agreement, dated as of March 11, 1998, among Fred
Meyer, Inc., as Borrower, and The Lenders Party Thereto; Bankers Trust
Company, as Administrative Agent, and The Chase Manhattan Bank, as
Syndication Agent; Chase Securities Inc. and BT Alex. Brown, as
Arrangers.
4.2a Notes Indenture, dated as of March 11, 1998, among Fred Meyer, Inc.,
the Guarantors named therein (including the Company) and First
National Bank of Chicago, Trustee (Incorporated by reference to
Exhibit 4 to Fred Meyer's Registration Statement on Form S-3, as
amended, No. 333-44537, filed January 20, 1998.
4.2b Notes First Supplemental Indenture, dated as of March 11, 1998, among
Fred Meyer, Inc., the Guarantors named therein (including the Company)
and First National Bank of Chicago, Trustee (Incorporated by reference
to Exhibit 4.2 to Fred Meyer's Current Report on Form 8-K, filed March
9, 1998).
10.1 Quality Food Centers, Inc. Amended and Restated 1987 Incentive Stock
Option Plan. (Incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Form S-8, No. 333-19913, filed
January 16, 1997.)*
10.2 Form of Stock Option Agreement under Quality Food Centers, Inc. 1987
Incentive Stock Option Plan. (Incorporated by reference to Exhibit
10.29 to the Company's Registration Statement on Form S-1, No.
33-12474, filed March 9, 1987.)*
10.3 Director's Nonqualified Stock Option Plan. (Incorporated by reference
to Exhibit 10.1 to the Company's Registration Statement on Form S-8,
No. 33-38736, filed January 25, 1991.)*
10.4 Quality Food Centers, Inc. 1993 Executive Stock Option Plan.
(Incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-8, No. 33-69514, filed September 28,
1993.)*
10.5a First Amendment to Shopping Center Lease, dated August 15, 1993,
between Quality Food Centers, Inc. and University Village, Inc.
(Incorporated by reference to Exhibit 10.15a to the Company's Form
10-K filed March 24, 1994.)
10.5b Declaration of Restrictions and Easements, dated August 15, 1993,
between Quality Food Centers, Inc. and University Village, Inc.
(Incorporated by reference to Exhibit 10.15b to the Company's Form
10-K filed March 24, 1994.)
<PAGE>
Exhibit
Number Description
- ------- -----------
10.5c Development Agreement, dated August 25, 1993, among Quality Food
Centers, Inc., U Village Land Limited Partnership and U Village Imp.
Limited Partnership. (Incorporated by reference to Exhibit 10.15c to
the Company's Form 10-K filed March 24, 1994.)
10.5d Franchise Agreement, dated August 25, 1993, between Quality Food
Centers, Inc., and University Village, Inc. (Incorporated by reference
to Exhibit 10.15d to the Company's Form 10-K filed March 24, 1994.)
10.5e Tenant Estoppel Certificate, dated as of August 9, 1993, from Quality
Food Centers, Inc. to Principal Mutual Life Insurance Company, U
Village Land Limited Partnership and U Village Imp. Limited
Partnership. (Incorporated by reference to Exhibit 10.15e to the
Company's Form 10-K filed March 24, 1994.)
10.5f Subordination, Forbearance and Attornment Agreement, dated as of
August 9, 1993, among Quality Food Centers, Inc., Principal Mutual
Life Insurance Company, U Village Land Limited Partnership and U
Village Imp. Limited Partnership. (Incorporated by reference to
Exhibit 10.15f to the Company's Form 10-K filed March 24, 1994.)
10.6 Right of First Refusal among the Company and Signature Bakery LLC,
North Snohomish Enterprises, Inc., and Olson's Management Group LLC,
dated as of March 1, 1995. (Incorporated by reference to Exhibit
10.15d to the Company's Form 10-K filed March 31, 1995.)
10.7 Employment Agreement, dated as of September 1, 1996, between Quality
Food Centers, Inc. and Marc Evanger (Incorporated by reference to
Exhibit 99.7 to the Company's Current Report on Form 8-K/A, filed on
February 18, 1997.)*
10.8 Employment Agreement, dated as of September 1, 1996, by and between
Quality Food Centers, Inc. and Dan Kourkoumelis (Incorporated by
reference to Exhibit 99.8 to the Company's Current Report on Form
8-K/A, filed on February 18, 1997.)*
10.8a Amended Exployment Agreement, dated as of October 15, 1997 , by an
between Quality Food Centers, Inc. and Dan Kourkoumelis.*
10.9 Agreement and Plan of Merger, dated as of November 6, 1997, as amended
as of January 20, 1998, among Quality Food Centers, Inc.,
Q-Acquisition Corp. and Fred Meyer, Inc. (Incorporated by reference to
Appendix A to the Joint Proxy and Consent Solicitation
Statement/Prospectus contained in Fred Meyer's Registration Statement
on Form S-4, No. 333-44871, filed on January 26, 1998.)
10.10 Quality Food Centers, Inc. 1997 Stock Option Plan*
11 Statement re computation of per share earnings. (Reference is made to
Note A to the Consolidated Financial Statements included in this
report.)
<PAGE>
Exhibit
Number Description
- ------- -----------
23 Independent Auditor's Consent to incorporation by reference of its
report on financial statements in Registration Statements on Form S-8
and Form S-3.
24 Powers of Attorney.
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule for fiscal years 1996 and 1995
27.3 Restated Financial Data Schedule for each fiscal quarter of 1996
27.4 Restated Financial Data Schedule for each fiscal quarter of 1997
- --------------------------------------------------------------------------------
* Management contract, compensatory plan or arrangement required to be
filed as an exhibit to this report.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
QUALITY FOOD CENTERS, INC.
ARTICLE I
Name
The name of the Corporation is QUALITY FOOD CENTERS, INC.
ARTICLE II
Purpose
The purpose of the Corporation shall be to transact any lawful business
permitted under Chapter 23B of the Revised Code of Washington.
ARTICLE III
Capital Stock
The total number of shares of stock that the Corporation shall have
authority to issue is one hundred (100) shares of Common Stock having a par
value of $.01 per share, which shall be the only class of shares of this
Corporation.
ARTICLE IV
No Preemptive Rights
Except as may otherwise be provided by the Board of Directors, no holder of
any shares of this Corporation shall have any preemptive right to purchase,
subscribe for or otherwise acquire any securities of this Corporation of any
class or kind now or hereafter authorized.
ARTICLE V
Cumulative Voting
There shall be no cumulative voting of shares in this Corporation.
<PAGE>
ARTICLE VI
Number of Directors
The number of directors constituting the entire Board of Directors of the
Corporation shall be not less than one nor more than five as fixed from time to
time by the Board of Directors, provided, however, that the number of directors
shall not be reduced so as to shorten the term of any director at the time in
office. The initial Board of Directors shall consist of two directors.
ARTICLE VII
Shareholder Voting on Significant Corporate Action
Any corporate action for which the Washington Business Corporation Act, as
then in effect, would otherwise require approval by either a two-thirds vote of
the shareholders of the Corporation or by a two-thirds vote of one or more
voting groups shall be deemed approved by the shareholders or the voting
group(s) if it is approved by the affirmative vote of the holders of a majority
of shares entitled to vote or, if approval by voting groups is required, by the
holders of a majority of shares within each voting group entitled to vote
separately. Notwithstanding this Article, effect shall be given to any other
provision of these Articles that specifically requires a greater vote for
approval of any particular corporate action.
ARTICLE VIII
Indemnification of Directors, Officers and Agents
The Corporation shall indemnify, to the fullest extent then permitted by
the Corporation's Bylaws and Washington law, any person who is made, or
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, investigative or
otherwise (including an action, suit or proceeding by or in the right of the
Corporation) by reason of the fact that the person is or was a director or
officer of the Corporation, or serves or served at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred in connection therewith. Expenses incurred by an officer or director in
defending a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Article. The indemnification provided hereby shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any statute,
bylaw, agreement, vote of shareholders or directors or otherwise, both as to
action in any official capacity and as to action in another capacity while
holding an office, and shall continue as to a person who has ceased
<PAGE>
to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person. The foregoing right to
indemnification shall not apply in respect of actions, suits or proceedings (or
parts thereof) against the Corporation unless such action, suit or proceeding
shall have been approved by the Board of Directors. Any amendment to or repeal
of this Article shall not adversely affect any right of an individual with
respect to any right to indemnification arising prior to such amendment or
repeal.
Any person other than a director or officer who is or was an employee or
agent of the Corporation, or fiduciary within the meaning of the Employee
Retirement Income Security Act of 1974 with respect to any employee benefit plan
of the Corporation, or is or was serving at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, may be indemnified to such extent as the Board of Directors in
its discretion at any time or from time to time may authorize.
ARTICLE IX
Limitation on Director Liability
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for his or her conduct as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under Washington law or the Corporation's Bylaws. Any
amendment, modification or repeal of this Article shall not adversely affect any
right or protection of a director of the Corporation hereunder in respect of any
act or omission occurring prior to the time of such amendment, modification or
repeal.
ARTICLE X
The name of the registered agent of this Corporation and the street address
of its registered office are as follows:
CT CORPORATION SYSTEM
520 Pike Street, 26th Floor
Seattle, Washington 98101
Effective as of the date of filing.
QUALITY FOOD CENTERS, INC.
By: DAN KOURKOUMELIS
-------------------------------------
Dan Kourkoumelis
Its President
RESTATED BYLAWS
OF
QUALITY FOOD CENTERS, INC.
SECTION 1.
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
1.1 Annual Meeting. The annual meeting of the shareholders of this
corporation (the "Corporation") for the election of directors and for the
transaction of such other business as may properly come before the meeting shall
be held each year at the principal office of the Corporation, or at some other
place either within or without the State of Washington as designated by the
Board of Directors, on the day and at the time as fixed by the Board of
Directors, which is attached hereto and incorporated herein by this reference,
or on such other day and time as may be set by the Board of Directors. If the
specified day is a Sunday or a legal holiday, then the meeting will take place
on the next business day at the same time or on such other day and time as may
be set by the Board of Directors.
1.2 Special Meetings. Special meetings of the shareholders for any purpose
or purposes may be called at any time by the Board of Directors, the Chairman of
the Board, the President, a majority of the Board of Directors, or any
shareholder or shareholders holding in the aggregate one-fourth of the voting
power of all shareholders. The meetings shall be held at such time and place as
the Board of Directors may prescribe, or, if not held upon the request of the
Board of Directors, at such time and place as may be established by the
President or by the Secretary in the President's absence. Only business within
the purpose or purposes described in the meeting notice may be conducted.
1.3 Notice of Meetings. Written notice of the place, date and time of the
annual shareholders' meeting and written notice of the place, date, time and
purpose or purposes of special shareholders' meetings shall be delivered not
less than 10 (or, if required by Washington law, 20) or more than 60 days before
the date of the meeting, either personally, by facsimile, or by mail, or in any
other manner approved by law, by or at the direction of the President or the
Secretary, to each shareholder of record entitled to notice of such meeting.
Mailed notices shall be deemed to be delivered when deposited in the mail,
first-class postage prepaid, correctly addressed to the shareholder's address
shown in the Corporation's current record of shareholders.
<PAGE>
1.4 Waiver of Notice. Except where expressly prohibited by law or the
Articles of Incorporation, notice of the place, date, time and purpose or
purposes of any shareholders' meeting may be waived in a signed writing
delivered to the Corporation by any shareholder at any time, either before or
after the meeting. Attendance at the meeting in person or by proxy waives
objection to lack of notice or defective notice of the meeting unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting. A shareholder waives objection to
consideration of a particular matter at a meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
1.5 Shareholders' Action Without a Meeting. The shareholders may take any
action without a meeting that they could properly take at a meeting, if one or
more written consents setting forth the action so taken are signed by all of the
shareholders entitled to vote with respect to the subject matter and are
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. If required by Washington law, all nonvoting shareholders
must be given written notice of the proposed action at least ten days before the
action is taken, unless such notice is waived in a manner consistent with these
Bylaws. Actions taken under this section are effective when all consents are in
the possession of the Corporation, unless otherwise specified in the consent. A
shareholder may withdraw consent only by delivering a written notice of
withdrawal to the Corporation prior to the time that all consents are in the
possession of the Corporation.
1.6 Telephone Meetings. Shareholders may participate in a meeting of
shareholders by means of a conference telephone or any similar communications
equipment that enables all persons participating in the meeting to hear each
other during the meeting. Participation by such means shall constitute presence
in person at a meeting.
1.7 List of Shareholders. At least ten days before any shareholders'
meeting, the Secretary of the Corporation or the agent having charge of the
stock transfer books of the Corporation shall have compiled a complete list of
the shareholders entitled to notice of a shareholders' meeting, arranged in
alphabetical order and by voting group, with the address of each shareholder and
the number, class, and series, if any, of shares owned by each.
1.8 Quorum and Voting. The presence in person or by proxy of the holders of
a majority of the votes entitled to be cast on a matter at a meeting shall
constitute a quorum of shareholders for that matter. If a quorum exists, action
on a matter shall be approved by a voting group if the votes cast within a
voting group favoring the action exceed the votes cast within the voting group
opposing the action, unless a greater number of affirmative votes is required by
the Articles of Incorporation or by law. If the Articles of Incorporation or
Washington law provide for voting by two or more voting groups on a matter,
action on
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<PAGE>
a matter is taken only when voted upon by each of those voting groups
counted separately. Action may be taken by one voting group on a matter even
though no action is taken by another voting group.
1.9 Adjourned Meetings. If a shareholders' meeting is adjourned to a
different place, date or time, whether for failure to achieve a quorum or
otherwise, notice need not be given of the new place, date or time if the new
place, date or time is announced at the
meeting before adjournment. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in these Bylaws,
that determination shall apply to any adjournment thereof, unless Washington law
requires fixing a new record date. If Washington law requires that a new record
date be set for the adjourned meeting, notice of the adjourned meeting must be
given to shareholders as of the new record date. Any business may be transacted
at an adjourned meeting that could have been transacted at the meeting as
originally called.
1.10 Proxies. A shareholder may appoint a proxy to vote or otherwise act
for the shareholder by signing an appointment form, either personally or by an
agent. No appointment shall be valid after 11 months from the date of its
execution unless the appointment form expressly so provides. An appointment of a
proxy is revocable unless the appointment is coupled with an interest. No
revocation shall be effective until written notice thereof has actually been
received by the Secretary of the Corporation or any other person authorized to
tabulate votes.
SECTION 2.
BOARD OF DIRECTORS
2.1 Number and Qualification. The business affairs and property of the
Corporation shall be managed under the direction of a Board of Directors, the
number of members of which shall be three unless and until changed by resolution
of the Board of Directors. The Board of Directors may increase or decrease this
number by resolution. A decrease in the number of directors shall not shorten
the term of an incumbent director.
2.2 Election - Term of Office. The directors shall be elected by the
shareholders at each annual shareholders' meeting or at a special shareholders'
meeting called for such purpose. Despite the expiration of a director's term,
the director continues to serve until his or her successor is elected and
qualified or until there is a decrease in the authorized number of directors.
2.3 Vacancies. Except as otherwise provided by law, vacancies in the Board
of Directors, whether caused by resignation, death, retirement,
disqualification, removal, increase in the number of directors, or otherwise,
may be filled for the remainder of the term by the Board of Directors, by the
shareholders, or, if the directors in office constitute less than a quorum of
the Board of Directors, by an affirmative vote of a majority of the
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<PAGE>
remaining directors. The term of a director elected to fill a vacancy
expires at the next shareholders' meeting at which directors are elected. A
vacancy that will occur at a specific later date may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
2.4 Quorum and Voting. At any meeting of the Board of Directors, the
presence in person (including presence by electronic means such as a telephone
conference call) of a
majority of the number of directors presently in office shall constitute a
quorum for the transaction of business. Notwithstanding the foregoing, in no
case shall a quorum be less than one-third of the authorized number of
directors. If a quorum is present at the time of a vote, the affirmative vote of
a majority of the directors present at the time of the vote shall be the act of
the Board of Directors and of the Corporation except as may be otherwise
specifically provided by the Articles of Incorporation, by these Bylaws, or by
law. A director who is present at a meeting of the Board of Directors when
action is taken is deemed to have assented to the action taken unless: (a) the
director objects at the beginning of the meeting, or promptly upon his or her
arrival, to holding it or to transacting business at the meeting; (b) the
director's dissent or abstention from the action taken is entered in the minutes
of the meeting; or (c) the director delivers written notice of his or her
dissent or abstention to the presiding officer of the meeting before its
adjournment or to the Corporation within a reasonable time after adjournment of
the meeting. The right of dissent or abstention is not available to a director
who votes in favor of the action taken.
2.5 Regular Meetings. Regular meetings of the Board of Directors shall be
held at such place, date and time as shall from time to time be fixed by
resolution of the Board.
2.6 Special Meetings. Special meetings of the Board of Directors may be
held at any place and at any time and may be called by the Chairman of the
Board, the President, Vice President, Secretary or Treasurer, or any two or more
directors.
2.7 Notice of Meetings. Unless the Articles of Incorporation provide
otherwise, any regular meeting of the Board of Directors may be held without
notice of the date, time, place, or purpose of the meeting. Any special meeting
of the Board of Directors must be preceded by at least two days' notice of the
date, time, and place of the meeting, but not of its purpose, unless the
Articles of Incorporation or these Bylaws require otherwise. Notice may be given
personally, by facsimile, by mail, or in any other manner allowed by law. Oral
notice shall be sufficient only if a written record of such notice is included
in the Corporation's minute book. Notice shall be deemed effective at the
earliest of: (a) receipt; (b) delivery to the proper address or telephone number
of the director as shown in the Corporation's records; or (c) five days after
its deposit in the United States mail, as evidenced by the postmark, if
correctly addressed and mailed with first-class postage prepaid. Notice of any
meeting of the Board of Directors may be waived by any director at any time, by
a signed writing, delivered to the Corporation for inclusion in the minutes,
either before or after the meeting. Attendance or participation by a director at
a meeting shall constitute a waiver of any required notice of the meeting unless
the director promptly objects to holding
4
<PAGE>
the meeting or to the transaction of any business on the grounds that the
meeting was not lawfully convened and the director does not thereafter vote for
or assent to action taken at the meeting.
2.8 Directors' Action Without A Meeting. The Board of Directors or a
committee thereof may take any action without a meeting that it could properly
take at a meeting if one or more written consents setting forth the action are
signed by all of the directors, or all of the members of the committee, as the
case may be, either before or after the action is taken, and if the consents are
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. Such action shall be effective upon the signing of a consent
by the last director to sign, unless the consent specifies a later effective
date.
2.9 Committees of the Board of Directors. The Board of Directors, by
resolutions adopted by a majority of the members of the Board of Directors in
office, may create from among its members one or more committees and shall
appoint the members thereof. Each such committee must have two or more members,
who shall be directors and who shall serve at the pleasure of the Board of
Directors. Each committee of the Board of Directors may exercise the authority
of the Board of Directors to the extent provided in its enabling resolution and
any pertinent subsequent resolutions adopted in like manner, provided that the
authority of each such committee shall be subject to applicable law. Each
committee of the Board of Directors shall keep regular minutes of its
proceedings and shall report to the Board of Directors when requested to do so.
2.10 Telephone Meetings. Members of the Board of Directors or of any
committee appointed by the Board of Directors may participate in a meeting of
the Board of Directors or committee by means of a conference telephone or
similar communications equipment that enables all persons participating in the
meeting to hear each other during the meeting. Participation by such means shall
constitute presence in person at a meeting.
2.11 Compensation of Directors. The Board of Directors may fix the
compensation of directors as such and may authorize the reimbursement of their
expenses.
SECTION 3.
OFFICERS
3.1 Officers Enumerated - Election. The officers of the Corporation shall
consist of such officers and assistant officers as may be designated by
resolution of the Board of Directors. The officers may include a Chairman of the
Board, a President, one or more Vice Presidents, a Secretary, a Treasurer, and
any assistant officers. The officers shall hold office at the pleasure of the
Board of Directors. Unless otherwise restricted by the Board of Directors, the
President may appoint any assistant officer, the Secretary may appoint one or
5
<PAGE>
more Assistant Secretaries, and the Treasurer may appoint one or more Assistant
Treasurers; provided that any such appointments shall be recorded in writing in
the corporate records.
3.2 Qualifications. None of the officers of the Corporation need be a
director. Any two or more corporate offices may be held by the same person.
3.3 Duties of the Officers. Unless otherwise prescribed by the Board of
Directors, the duties of the officers shall be as follows:
Chairman of the Board. The Chairman of the Board, if one is elected,
shall preside at meetings of the Board of Directors and of the shareholders,
shall be responsible for carrying out the plans and directives of the Board of
Directors, shall report to and consult with the Board of Directors and, if the
Board so resolves, shall be the Chief Executive Officer. The Chairman of the
Board shall have such other powers and duties as the Board of Directors may from
time to time prescribe.
President. The President shall exercise the usual executive powers
pertaining to the office of President. In the absence of a Chairman of the
Board, the President shall preside at meetings of the Board of Directors and of
the shareholders, perform the other duties of the Chairman of the Board
prescribed in this Section, and perform such other duties as the Board of
Directors may from time to time designate. In addition, if there is no Secretary
in office, the President shall perform the duties of the Secretary.
Vice President. Each Vice President shall perform such duties as the
Board of Directors may from time to time designate. In addition, the Vice
President, or if there is more than one, the most senior Vice President
available, shall act as President in the absence or disability of the President.
Secretary. The Secretary shall be responsible for and shall keep,
personally or with the assistance of others, records of the proceedings of the
directors and shareholders; authenticate records of the Corporation; attest all
certificates of stock in the name of the Corporation; keep the corporate seal,
if any, and affix the same to certificates of stock and other proper documents;
keep a record of the issuance of certificates of stock and the transfers of the
same; and perform such other duties as the Board of Directors may from time to
time designate.
Treasurer. The Treasurer shall have the care and custody of, and be
responsible for, all funds and securities of the Corporation and shall cause to
be kept regular books of account. The Treasurer shall cause to be deposited all
funds and other valuable effects in the name of the Corporation in such
depositories as may be designated by the Board of Directors. In general, the
Treasurer shall perform all of the duties incident to the office of Treasurer,
and such other duties as from time to time may be assigned by the Board of
Directors.
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Assistant Officers. Assistant officers may consist of one or more
Assistant Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers. Each assistant officer shall perform those duties assigned
to him or her from time to time by the Board of Directors, the President, or the
officer who appointed him or her.
3.4 Vacancies. Vacancies in any office arising from any cause may be filled
by the Board of Directors at any regular or special meeting.
3.5 Removal. Any officer or agent may be removed by action of the Board of
Directors with or without cause, but any removal shall be without prejudice to
the contract rights, if any, of the person removed. Election or appointment of
an officer or agent shall not of itself create any contract rights.
3.6 Compensation. The compensation of all officers of the Corporation shall
be fixed by the Board of Directors.
SECTION 4.
SHARES AND CERTIFICATES OF SHARES
4.1 Share Certificates. Share certificates shall be issued in numerical
order, and each shareholder shall be entitled to a certificate signed by the
President or a Vice President, and attested by the Secretary or an Assistant
Secretary. Share certificates may be sealed with the corporate seal, if any.
Facsimiles of the signatures and seal may be used as permitted by law. Every
share certificate shall state:
(a) the name of the Corporation;
(b) that the Corporation is organized under the laws of the State of
Washington;
(c) the name of the person to whom the share certificate is issued;
(d) the number, class and series (if any) of shares that the
certificate represents; and
(e) if the Corporation is authorized to issue shares of more than one
class or series, that upon written request and without charge,
the Corporation will furnish any shareholder with a full
statement of the designations, preferences, limitations and
relative rights of the shares of each class or series, and the
authority of the Board of Directors to determine variations for
future series.
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4.2 Consideration for Shares. Shares of the Corporation may be issued for
such consideration as shall be determined by the Board of Directors to be
adequate. The consideration for the issuance of shares may be paid in whole or
in part in cash, or in any tangible or intangible property or benefit to the
Corporation, including but not limited to promissory notes, services performed,
contracts for services to be performed, or other securities of the Corporation.
Establishment by the Board of Directors of the amount of consideration received
or to be received for shares of the Corporation shall be deemed to be a
determination that the consideration so established is adequate.
4.3 Transfers. Shares may be transferred by delivery of the certificate,
accompanied either by an assignment in writing on the back of the certificate,
or by a written power of attorney to sell, assign and transfer the same, signed
by the record holder of the certificate. Except as otherwise specifically
provided in these Bylaws, no shares of stock shall be transferred on the books
of the Corporation until the outstanding certificate therefor has been
surrendered to the Corporation.
4.4 Loss or Destruction of Certificates. In the event of the loss or
destruction of any certificate, a new certificate may be issued in lieu thereof
upon satisfactory proof of such loss or destruction, and upon the giving of
security against loss to the Corporation by bond, indemnity or otherwise, to the
extent deemed necessary by the Board of Directors, the Secretary, or the
Treasurer.
4.5 Fixing Record Date. The Board of Directors may fix in advance a date as
the record date for determining shareholders entitled: (i) to notice of or to
vote at any shareholders' meeting or any adjournment thereof; (ii) to receive
payment of any share dividend; or (iii) to receive payment of any distribution.
The Board of Directors may in addition fix record dates with respect to any
allotment of rights or conversion or exchange of any securities by their terms,
or for any other proper purpose, as determined by the Board of Directors and by
law. The record date shall be not more than 70 days and, in case of a meeting of
shareholders, not less than 10 days (or such longer period as may be required by
Washington law) prior to the date on which the particular action requiring
determination of shareholders is to be taken. If no record date is fixed for
determining the shareholders entitled to notice of or to vote at a meeting of
shareholders, the record date shall be the date before the day on which notice
of the meeting is mailed. If no record date is fixed for the determination of
shareholders entitled to a distribution (other than one involving a purchase,
redemption, or other acquisition of the Corporation's own shares), the record
date shall be the date on which the Board adopted the resolution declaring the
distribution. If no record date is fixed for determining shareholders entitled
to a share dividend, the record date shall be the date on which the Board of
Directors authorized the dividend.
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SECTION 5.
BOOKS, RECORDS AND REPORTS
5.1 Records of Corporate Meetings, Accounting Records and Share Registers.
The Corporation shall keep, as permanent records, minutes of all meetings of the
Board of Directors and shareholders, and all actions taken without a meeting,
and all actions taken by a committee exercising the authority of the Board of
Directors. The Corporation or its agent shall maintain, in a form that permits
preparation of a list, a list of the names and addresses of its shareholders, in
alphabetical order by class of shares, and the number, class, and series, if
any, of shares held by each. The Corporation shall also maintain appropriate
accounting records, and at its principal place of business shall keep copies of:
(a) its Articles of Incorporation or restated Articles of Incorporation and all
amendments in effect; (b) its Bylaws or restated Bylaws and all amendments in
effect; (c) minutes of all shareholders' meetings and records of all actions
taken without meetings for the past three years; (d) the year-end balance sheets
and income statements for the past three fiscal years, prepared as required by
Washington law; (e) all written communications to shareholders generally in the
past three years; (f) a list of the names and business addresses of its current
officers and directors; and (g) its most recent annual report to the Secretary
of State.
5.2 Copies of Corporate Records. Any person dealing with the Corporation
may rely upon a copy of any of the records of the proceedings, resolutions, or
votes of the Board of Directors or shareholders, when certified by the Chairman
of the Board, President, Vice President, Secretary or Assistant Secretary.
5.3 Examination of Records. A shareholder shall have the right to inspect
and copy, during regular business hours at the principal office of the
Corporation, in person or by his or her attorney or agent, the corporate records
referred to in the last sentence of Section 5.1 of these Bylaws if the
shareholder gives the Corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to make such
inspection. In addition, if a shareholder's demand is made in good faith and for
a proper purpose, a shareholder may inspect and copy, during regular business
hours at a reasonable location specified by the Corporation, excerpts from
minutes of any meeting of the Board of Directors, records of any action of a
committee of the Board of Directors, records of actions taken by the Board of
Directors without a meeting, minutes of shareholders' meetings held or records
of action taken by shareholders without a meeting not within the past three
years, accounting records of the Corporation, or the record of shareholders;
provided that the shareholder shall have made a demand describing with
reasonable particularity the shareholder's purpose and the records the
shareholder desires to inspect, and provided further that the records are
directly connected to the shareholder's purpose. This section shall not affect
any right of shareholders to inspect records of the Corporation that may be
otherwise granted to the shareholders by law.
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5.4 Financial Statements. Not later than four months after the end of each
fiscal year, or in any event prior to its annual meeting of shareholders, the
Corporation shall prepare a balance sheet and income statement in accordance
with Washington law. The Corporation shall furnish a copy of each to any
shareholder upon written request.
SECTION 6.
FISCAL YEAR
The fiscal year of the Corporation shall be the same as Fred Meyer, Inc.
SECTION 7.
MISCELLANEOUS PROCEDURAL PROVISIONS
The Board of Directors may adopt rules of procedure to govern any
meetings of shareholders or directors to the extent not inconsistent with law,
the Corporation's Articles of Incorporation, or these Bylaws, as they are in
effect from time to time. In the absence of any rules of procedure adopted by
the Board of Directors, the chairman of the meeting shall make all decisions
regarding the procedures for any meeting.
SECTION 8.
AMENDMENT OF BYLAWS
The Board of Directors is expressly authorized to make, alter and
repeal the Bylaws of the Corporation, subject to the power of the shareholders
of the Corporation to change or repeal the Bylaws.
SECTION 9.
INDEMNIFICATION OF DIRECTORS AND OTHERS
9.1 Definitions. For purposes of this Section:
(1) "Corporation" includes any domestic or foreign predecessor entity
of the Corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise. A director is
considered to be serving an employee benefit plan at
10
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the Corporation's request if the director's duties to the Corporation also
impose duties on, or otherwise involve services by, the director to the plan or
to participants in or beneficiaries of the plan. "Director" includes, unless the
context requires otherwise, the estate or personal representative of a director.
(3) "Expenses" include counsel fees.
(4) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including an excise tax assessed with respect to an employee
benefit plan, or reasonable expenses incurred with respect to a proceeding.
(5) "Official capacity" means: (i) When used with respect to a
director, the office of director in the Corporation; and (ii) when used with
respect to an individual other than a director, as contemplated in Section 9.8
of this Section 9, the office in the Corporation held by the officer or the
employment or agency relationship undertaken by the employee or agent on behalf
of the Corporation. "Official capacity" does not include service for any other
foreign or domestic corporation or any partnership, joint venture, trust,
employee benefit plan, or other enterprise.
(6) "Party" includes an individual who was, is, or is threatened to be
made or named a defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal.
9.2 Right of Indemnification.
(1) The Corporation shall indemnify any person (or the estate of any
person) who was or is a party to any proceeding, whether or not brought by or in
the right of the Corporation, by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise (all
such persons, hereinafter "Agent"), against reasonable expenses incurred by such
person in connection with the proceeding.
(2) Except as provided in subsection (5) of this Section 9.2, the
Corporation shall indemnify an individual made a party to a proceeding because
the individual is or was an Agent (as defined above) against liability incurred
in the proceeding if:
(i) The individual acted in good faith; and
(ii) The individual reasonably believed:
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(a) In the case of conduct in the individual's official
capacity with the Corporation, that the individual's conduct was in the
Corporation's best interests;
(b) In all other cases, the individual's conduct was at
least not opposed to the Corporation's best interests; and
(iii) In the case of any criminal proceeding, the individual had
no reasonable cause to believe the individual's conduct was unlawful.
(3) A director's conduct with respect to an employee benefit plan for
a purpose the director reasonably believed to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subsection (2)(ii) of this Section 9.
(4) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this Section.
(5) The Corporation shall not indemnify an Agent under this Section
9.2:
(i) In connection with a proceeding by or in the right of the
Corporation in which the Agent was adjudged liable to the Corporation; or
(ii) In connection with any other proceeding charging improper
personal benefit to the Agent, whether or not involving action in the Agent's
official capacity, in which the director was adjudged liable on the basis that
personal benefit was improperly received by the Agent.
(6) Indemnification under this Section 9.2 in connection with a
proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with the proceeding.
9.3 Advance for Expenses.
(1) The Corporation shall pay for or reimburse the reasonable expenses
incurred by an Agent who is a party to a proceeding in advance of final
disposition of the proceeding if:
(i) The Agent furnishes the Corporation a written affirmation of
the Agent's good faith belief that the director has met the standard of conduct
described in Section 9.2 herein; and
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(ii) The Agent furnishes the Corporation a written undertaking,
executed personally or on the Agent's behalf, to repay the advance if it is
ultimately determined that the Agent did not meet the standard of conduct.
(2) The undertaking required by subsection (1)(i) of this Section 9.3
must be an unlimited general obligation of the Agent but need not be secured and
may be accepted without reference to financial ability to make repayment.
9.4 Court-Ordered Indemnification. An Agent of the Corporation who is a
party to a proceeding may apply for indemnification or advance of expenses to
the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court after giving any notice
the court considers necessary, may order indemnification or advance of expenses
if it determines:
(1) The Agent is entitled to mandatory indemnification pursuant to RCW
23B.08.520, in which case the court shall also order the Corporation to pay
indemnification;
(2) The Agent is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether or not the director met the
standard of conduct set forth in section 9.2 herein, or was adjudged liable as
described in Section 9.2(5) herein, but if the Agent was adjudged so liable, the
Agent's indemnification is limited to reasonable expenses incurred; or
(3) In the case of an advance of expenses, the Agent is entitled
pursuant to the Articles of Incorporation, Bylaws, or any applicable resolution
or contract, to payment or reimbursement of the Agent's reasonable expenses
incurred as a party to the proceeding in advance of final disposition of the
proceeding.
9.5 Determination and Authorization of Indemnification.
(1) The Corporation shall not indemnify an Agent under this Section 9
unless authorized in the specific case after a determination has been made that
indemnification of the Agent is permissible in the circumstances because the
Agent has met the standard of conduct set forth in section 9.2(2) herein.
(2) The determination shall be made:
(i) By the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(ii) If a quorum cannot be obtained under (i) of this subsection,
by majority vote of a committee duly designated by the Board of Directors, in
which designation
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directors who are parties may participate, consisting solely of two or more
directors not at the time parties to the proceeding;
(iii) By special legal counsel:
(a) Selected by the Board of Directors or its committee in
the manner prescribed in (i) or (ii) of this subsection; or
(b) If a quorum of the Board of Directors cannot be obtained
under (i) of this subsection and a committee cannot be designated under (ii) of
this subsection, selected by majority vote of the full Board of Directors, in
which selection directors who are parties may participate; or
(iv) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not be
voted on the determination.
(3) Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
(2)(iii) of this Section to select counsel.
9.6 Insurance. The Corporation may purchase and maintain insurance on
behalf of an individual who is or was a director, officer, employee, or agent of
the Corporation, or who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against liability asserted against or incurred by the individual in
that capacity or arising from the individual's status as a director, officer,
employee, or agent, whether or not the Corporation would have power to indemnify
the individual against the same liability under this Section 9.
9.7 Indemnification as a Witness. This Section 9 does not limit a
Corporation's power to pay or reimburse expenses incurred by an Agent in
connection with the Agent's appearance as a witness in a proceeding at a time
when the Agent has not been made a named defendant or respondent to the
proceeding.
9.8 Report to Shareholders. If the Corporation indemnifies or advances
expenses to a director pursuant to this Section 9 in connection with a
proceeding by or in the right of the Corporation, the Corporation shall report
the indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders' meeting.
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9.9 Shareholder Authorized Indemnification.
(1) If authorized by a resolution adopted or ratified, before or after
the event, by the shareholders of the Corporation, the Corporation shall have
the power to indemnify or agree to indemnify a director made a party to a
proceeding, or obligate itself to advance or reimburse expenses incurred in a
proceeding, without regard to the limitations contained in this Section 9 (other
than this section 9.9); provided that no such indemnity shall indemnify any
director from or on account of:
(i) Acts or omissions of the director finally adjudged to be
intentional misconduct or a knowing violation of law;
(ii) Conduct of the director finally adjudged to be an unlawful
distribution under RCW 23B.08.310; or
(iii) Any transaction with respect to which it was finally
adjudged that such director personally received a benefit in money, property, or
services to which the director was not legally entitled.
(2) Unless a resolution adopted or ratified by the shareholders of the
Corporation provides otherwise, any determination as to any indemnity or advance
of expenses under subsection (1) of this Section 9.9 shall be made in accordance
with Section 9.5 herein.
9.10 Savings Clause. If this Section 9 or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, the
Corporation shall nevertheless indemnify each Agent as to expenses (including
attorneys' fees), judgements, fines and amounts paid in settlement with respect
to any proceeding whether or not brought by or in the right of the Corporation,
to the full extent permitted by any applicable portion of this Section 9 that
shall not have been invalidated, or by any other applicable law.
SECTION 10.
REPRESENTATION OF SHARES OF OTHER CORPORATIONS
Unless otherwise restricted by the Board of Directors, the Chairman,
President, and any Vice President of the Corporation are each authorized to
vote, represent and exercise on behalf of the Corporation all rights incident to
any and all shares of other corporations standing in the name of the
Corporation. This authority may be exercised by such officers either in person
or by a duly executed proxy or power of attorney.
15
GUARANTEE
dated as of March 11, 1998
made by
the GUARANTORS
referred to herein
in favor of
BANKERS TRUST COMPANY,
as Administrative Agent and Collateral Agent
THE CHASE MANHATTAN BANK,
as Syndication Agent
THE VARIOUS FINANCIAL INSTITUTIONS
IDENTIFIED AS LENDERS IN THE PARTICIPATION AGREEMENT,
as Lenders
and
THE VARIOUS FINANCIAL INSTITUTIONS
IDENTIFIED AS INVESTORS IN THE PARTICIPATION AGREEMENT,
as Investors
<PAGE>
GUARANTEE
THIS GUARANTEE (this "Guarantee"), dated as of March 11, 1998, is made by
each of the Guarantors listed on the signature pages hereof under the caption
"Guarantors" (collectively, the "Guarantors"), in favor of FMS TRUST 1997-1, as
Lessor; BANKERS TRUST COMPANY, as Administrative Agent and Collateral Agent (the
"Administrative Agent") under the Participation Agreement (as defined below);
THE CHASE MANHATTAN BANK, as Syndication Agent (the "Syndication Agent"); each
of the financial institutions as are or may from time to time become Lenders
pursuant to the terms of the Participation Agreement (the "Lenders"); and each
of the financial institutions as are or may from time to time become Investors
pursuant to the terms of the Participation Agreement, as Investors (the
"Investors") (each of the Lenders, the Lessor, the Investors, the Administrative
Agent and the Syndication Agent being referred to herein collec tively as the
"Guaranteed Parties").
W I T N E S S E T H:
WHEREAS, as a condition to the occurrence of the Initial Closing Date under
the Participation Agreement dated as of the date hereof (together with all
amendments, supplements, amendments and restatements and other modifications, if
any, from time to time thereafter made thereto, the "Participation Agreement"),
among the Lessee and Construction Agent, the Lessor, the Owner Trustee, the
Investors, the Administrative Agent, the Syndication Agent and the Lenders, the
Guarantors are required to execute and deliver this Guarantee in favor of the
Guaranteed Parties;
WHEREAS, each of the Guarantors has duly authorized the execution, delivery
and performance of this Guarantee; and
WHEREAS, it is in the best interests of the Guarantors to execute this
Guarantee inasmuch as the Guarantors will derive substantial benefits from the
transactions contemplated by the Participation Agreement and the other Operative
Agreements;
NOW, THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Guaranteed Parties to enter into
the Participation Agreement, each of the Guarantors agrees, for the benefit of
the Guaranteed Parties, as follows:
ARTICLE I
<PAGE>
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used but not otherwise defined
in this Guarantee have the respective meanings specified in Annex A to the
Participation Agreement (as such Annex A may be amended, supplemented, amended
and restated or otherwise modified from time to time, "Annex A"); and the rules
of interpretation set forth therein shall apply to this Guarantee.
SECTION 1.2. U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the Uniform
Commercial Code as in affect in the State of New York are used in this
Guarantee, including its preamble and recitals, with such meanings.
ARTICLE II
GUARANTEE PROVISIONS
SECTION 2.1. Guarantee. The Guarantors, as primary obligors and not as
sureties, hereby jointly, severally, absolutely, unconditionally and irrevocably
guarantee to each of the Guaranteed Parties the following obligations
(collectively, the "Guaranteed Obligations"):
(a) the due, punctual and full payment by each Loan Party, the Lessor
and the Owner Trustee (for purposes of this Guarantee, each an "Obligor"
and collectively the "Obligors"), whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise, of all
Obligations and amounts to be paid by such Obligor pursuant to any
Operative Agreement to which such Obligor (except to the extent such
payment is to be made by the Trust Company in its individual capacity) is
or is to be a party, whether for Investor Contributions, Investor Yield,
principal, interest, fees, expenses or otherwise (including all such
amounts which would become due but for the operation of the automatic stay
under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C.
ss.362(a), and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506 (b)); and
(b) the due, prompt and faithful performance of, and compliance with,
all other obligations, covenants, terms, conditions and undertakings of
each Obligor (except to the extent such performance and/or compliance is to
be made by the Trust Company in its individual capacity) contained in each
Operative Agreement to which such Obligor is or is to be a party in
accordance with the terms thereof.
2
<PAGE>
SUBSIDIARY GUARANTEE
Notwithstanding the foregoing, the Guarantors shall not be obligated to (i)
make any payment hereunder in respect of principal of any Tranche B Loans or
outstanding fundings of Investor Contribution unless at such time a Default or
Event of Default has occurred and is continuing or (ii) pay under this Guarantee
any amounts due under the Lease on behalf of any Lessee other than such amount
as such Lessee would be obligated to pay under the Lease assuming the Lease were
enforced in accordance with its terms (and without giving effect to any
discharge or limitation thereon resulting or arising by reason of the bankruptcy
or insolvency of such Lessee).
The Guarantors further agree that they shall jointly and severally
indemnify and hold harmless each Guaranteed Party for any and all costs and
expenses (including reasonable attorney's fees and expenses) incurred by such
Guaranteed Party in enforcing any rights under this Guarantee after the
occurrence of an Event of Default.
This Guarantee constitutes a guarantee of payment when due and not of
collection, and each of the Guarantors specifically agrees that it shall not be
necessary or required that any Guaranteed Party exercise any right, assert any
claim or demand or enforce any remedy whatsoever against any Loan Party (or any
other Person) before or as a condition to the enforcement of its obligations
hereunder.
SECTION 2.2. Guarantee Absolute, etc. This Guarantee shall in all respects
be a continuing, absolute, unconditional and irrevocable guarantee of payment,
and shall remain in full force and effect until all Guaranteed Obligations have
been paid in full and all obligations of each Guarantor hereunder shall have
been paid in full. Each of the Guarantors guarantees that the Guaranteed Obliga
tions will be paid strictly in accordance with the terms of the Lease and each
other Operative Agreement under which they arise, in each case regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Guaranteed Party. The liability
of the Guarantors under this Guarantee shall be joint, several, absolute,
unconditional and irrevoca ble irrespective of:
(a) any lack of validity, legality or enforceability of any Operative
Agreement;
(b) the failure of any Guaranteed Party:
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SUBSIDIARY GUARANTEE
(i) to assert any claim or demand or to enforce any right or
remedy against the Lessee or any other Person (including any other
Guarantor) under the provisions of any Operative Agreement or
otherwise, or
(ii) to exercise any right or remedy against any other guar antor
of, or collateral securing, any Guaranteed Obligations;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
extension, compromise or renewal of any of the Guaranteed Obligations;
(d) any reduction, limitation, impairment or termination of the
Guaranteed Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to
(and each Guarantor hereby waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, the Guaran
teed Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of any Operative Agreement;
(f) any addition, exchange, release, surrender or nonperfection of any
collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guarantee, held by any Guaranteed
Party securing any of the Guaranteed Obligations; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Loan Party, any
surety or any guarantor.
SECTION 2.3. Reinstatement, etc. (a) Each of the Guarantors agrees that
this Guarantee shall continue to be effective or be reinstated, as the case may
be, if at any time any payment (in whole or in part) of any of the Guaranteed
Obligations is rescinded or must otherwise be restored by any Guaranteed Party,
upon the insolvency, bankruptcy or reorganization of the Lessee or otherwise, as
though such payment had not been made.
4
<PAGE>
SUBSIDIARY GUARANTEE
(b) This Guarantee shall be automatically and unconditionally released
and discharged, without any further action required on the part of the
beneficiary hereof or any other party hereto, upon: (i) the release of the
Guarantors from their Subsidiary Guarantees dated as of March 11, 1998 to
Bankers Trust Company, as Administrative Agent in respect of the $3,750,000,000
Loan Agreement dated as of March 11, 1998 among FMI, the lenders set forth on
the signature pages thereof, Bankers Trust Company, as Administrative Agent,
and The Chase Manhattan Bank, as Syndication Agent (the "Loan Agreement"), as
such Loan Agreement may be hereafter amended and any successor facilities
thereto; or (ii) any sale or other disposition (by merger or otherwise) to any
Person which is not a subsidiary of FMI of all of the capital stock in, or all
or substantially all of the assets of, the Guarantors, provided that such sale
or disposition of such capital stock or assets is otherwise in compliance with
the terms of the Operative Agree ments. The parties hereto agree that the
foregoing is for the benefit of the lenders party to the Loan Agreement and may
not be amended, modified or waived (and no provision inconsistent therewith
adopted) without the consent of such lenders.
SECTION 2.4. Waiver, etc. Each of the Guarantors hereby waives (i)
promptness, diligence, notice of acceptance and any other notice (other than
those provided for in the Operative Agreements) with respect to any of the
Guaranteed Obligations and this Guarantee and (ii) any requirement that any
Guaranteed Party protect, secure, perfect or insure any security interest or
Lien, or any property subject thereto, or exhaust any right or take any action
against any Loan Party or any other Person (including any other guarantor or
entity or any collateral securing the Guaranteed Obligations).
SECTION 2.5. Waiver of Subrogation. So long as any of the Guaranteed
Obligations remain unpaid, each of the Guarantors hereby agrees that it will not
claim and hereby irrevocably waives for such period any claim or other rights
which it may now or hereafter acquire against any Loan Party that arise from the
existence, payment, performance or enforcement of the Guarantors' obligations
under this Guarantee or any other Operative Agreement, including any right of
subrogation, reimbursement, exoneration, or indemnification, any right to
partici pate in the claim or remedy of the Guaranteed Parties against any Lessee
or any collateral which the Administrative Agent or the Lessor now has or
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including the right to take or receive
from such Loan Party, directly or indirectly, in cash or other property or by
set-off or in any manner, payment or security on account of such claim or other
rights until all Guaranteed Obligations are satisfied. If any amount shall be
paid to any of the Guarantors in violation of the preceding sentence and the
Guaranteed Obligations
5
<PAGE>
SUBSIDIARY GUARANTEE
shall not have been paid in cash in full until all Guaranteed Obligations are
satisfied, such amount shall be deemed to have been paid to such Guarantor for
the benefit of, and held in trust for, the Guaranteed Parties, and shall
forthwith be paid to the Guaranteed Parties to be credited and applied upon the
Guaranteed Obliga tions, whether matured or unmatured. Each of the Guarantors
acknowledges that it will receive benefits from the financing and other
arrangements contemplated by the Operative Agreements and that the waiver set
forth in this Section is knowingly made in contemplation of such benefits.
SECTION 2.6. Subordination. Any rights of any Guarantor, whether now
existing or later arising, to receive payment on account of any indebtedness
(including interest) owed to it by FMI or to receive any payment from FMI shall
at all times be subordinate as to lien and time of payment and in all other
respects to the full and prior repayment of the Obligations and any obligations
under the Corporate Loan Documents. The Guarantors shall not be entitled to
enforce or receive payment of any sums hereby subordinated until the Obligations
have been paid and performed in full and any such sums received in violation of
this Guaran tee shall be received by the Guarantors in trust for the Guaranteed
Parties and immediately turned over to same.
SECTION 2.7. Consent to Jurisdiction; Waiver of Immunities. Each of the
Guarantors hereby acknowledges and agrees that:
(a) It irrevocably submits to the jurisdiction of any federal court
sitting in the Southern District of New York in any action or proceeding
arising out of or relating to this Guarantee, and each Guarantor hereby
irrevocably agrees that all claims in respect of such action or proceeding
may be heard and determined in such federal court. Each Guarantor hereby
irrevocably waives, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or
proceeding. Each Guarantor agrees that a final, unappealable judgment in
any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided
by law.
(b) Nothing in this Section shall affect the right of any Guaranteed
Party to serve legal process in any manner permitted by law or affect the
right of any Guaranteed Party to bring any action or proceeding against any
Guarantor or its property in the courts of any other jurisdictions.
6
<PAGE>
SUBSIDIARY GUARANTEE
SECTION 2.8. Obligations Independent. The obligations of each Guaran tor
hereunder are independent of the obligations of any other Guarantor, any other
guarantor or any other Loan Party, and a separate action or actions may be
brought and prosecuted against each Guarantor whether or not action is brought
against any other Guarantor, any other guarantor or any other Loan Party, and
whether or not any other Guarantor, any other guarantor or any other Loan Party
be joined in any such action or actions.
SECTION 2.9. Bankruptcy. In the event of a rejection of the Lease or any
Lease Supplement in a bankruptcy or insolvency proceeding of the Lessee, each
Guarantor agrees that it will pay forthwith all payments required to be made by
such Lessee under the Lease and Lease Supplements as though such rejection had
not occurred. Each Guarantor confirms that it is the intention of all of the
Partici pants that neither the guarantee by such Guarantor pursuant to this
Guarantee nor any liability or payment by it hereunder shall (i) render such
Guarantor "insol vent," or (ii) constitute a fraudulent transfer or conveyance,
or (iii) constitute a transaction at an undervalue or preference, or (iv) give
rise to any similar or analogous event, thing or circumstance, in each case, for
purposes of the Bank ruptcy Code, the Uniform Fraudulent Conveyances Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law. To
effectuate the foregoing intention, the Guaranteed Parties and each Guarantor
hereby irrevocably agrees that the Guaranteed Obligations of such Guarantor
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the Guaranteed Obligations of such other Guarantor under this
Guarantee, result in the Guaranteed Obligations of such Guarantor hereunder
neither rendering the Guarantor "insolvent" nor consti tuting such fraudulent
transfer or conveyance, such transaction at an undervalue or preference or such
other event, thing or circumstance, in each case, under any such law.
SECTION 2.10. Contribution. In order to provide for just and equitable
contribution among the Guarantors, the Guarantor agrees, that in the event any
payment or distribution is made by any other Guarantor (a "Funding Guarantor")
under its Guarantee, such Funding Guarantor shall be entitled to a contribution
from all other Guarantors, including the Guarantor, in a pro rata amount based
on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor)
for all payments, damages and expenses incurred by that Funding Guarantor in
discharging the Obligations of the Borrower, and the Guarantor agrees (i) to
cooperate with the other Guarantors to determine whether such contributions are
required and (ii) to make such contribution, if the Guarantors agree that such
7
<PAGE>
SUBSIDIARY GUARANTEE
contribution is required by the Guarantor. "Adjusted Net Assets" of such Guaran
tor at any date shall mean the lesser of (x) the amount by which the fair value
of the property of such Guarantor exceeds the total amount of liabilities,
including, without limitation, contingent liabilities (after giving effect to
all other fixed and contingent liabilities incurred or assumed on such date
(other than liabilities of such Guarantor subject to a Subordination
Agreement)), but excluding liabilities under the Guarantee, of such Guarantor at
such date and (y) the amount by which the present fair salable value of the
assets of such Guarantor at such date exceeds the amount that will be required
to pay the probable liabilities of such Guarantor on its debts, excluding debt
in respect of the Guaranty of such Guarantor, as they become absolute and
matured.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. Each of the Guarantors hereby
affirms the representations and warranties set forth in Section 7.3 of the
Participation Agreement, which representations and warranties are hereby incorpo
rated by reference.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1. Operative Agreement. This Guarantee is an Operative Agreement
executed pursuant to the Participation Agreement and shall (unless expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Participation Agreement, including, without
limitation, Section 13 thereof.
SECTION 4.2. Binding on Successors, Transferees and Assigns; Assign ment of
Guarantee. This Guarantee shall be binding upon each of the Guarantors and its
successors, transferees and assigns and shall inure to the benefit of and be
enforceable by each Guaranteed Party and their respective, permitted successors
and assigns; provided, however, that no Guarantor may assign any of its obliga
tions hereunder without the prior written consent of each Participant.
8
<PAGE>
SUBSIDIARY GUARANTEE
SECTION 4.3. Amendments, etc. No amendment to or waiver of any provision of
this Guarantee, nor consent to any departure by any of the Guarantors herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent and the Lessor, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 4.4. Addresses for Notices to the Guarantor. All notices, demands,
requests, consents, approvals and other communications hereunder shall be in
writing and directed to the address described in, and deemed received in
accordance with the provisions of, Section 13.2 of the Participation Agreement.
SECTION 4.5. No Waiver; Remedies. In addition to, and not in limita tion
of, Section 2.2 and Section 2.4, no failure on the part of any Guaranteed Party
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 4.6. Section Captions. Section captions used in this Guarantee are
for convenience of reference only, and shall not affect the construction of this
Guarantee.
SECTION 4.7. Setoff. In addition to, and not in limitation of, any rights
of any Guaranteed Party under applicable law, each Guaranteed Party shall, upon
the occurrence of any Lease Event of Default or any Construction Agency Agree
ment Event of Default, have the right to appropriate and apply to the payment of
the obligations of the Guarantors owing to it hereunder, to the extent then due,
and each of the Guarantors hereby grants to each Guaranteed Party a continuing
security interest in, any and all balances, credits, deposits, accounts or
moneys of such Guarantor then or thereafter maintained with such Guaranteed
Party; pro vided, however, that any such appropriation and application shall be
subject to the provisions of the Participation Agreement.
SECTION 4.8. Severability. Wherever possible each provision of this
Guarantee shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guarantee shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guarantee.
9
<PAGE>
SUBSIDIARY GUARANTEE
SECTION 4.9. Termination of Guarantee. The Guarantors' obligations under
this Guarantee shall terminate on the date upon which all Guaranteed Obligations
have been paid in full, and all other Obligations shall have been fully and
finally discharged.
SECTION 4.10. Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 4.11. Waiver of Jury Trial. EACH OF THE GUARANTORS HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RE SPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS GUARANTEE. EACH OF THE GUARANTORS
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCE MENT FOR THE
PARTICIPANTS ENTERING INTO THE PARTICIPATION AGREEMENT.
10
<PAGE>
SUBSIDIARY GUARANTEE
IN WITNESS WHEREOF, each Guarantor has caused this Guarantee to be
executed and delivered as of the date first above written.
Fred Meyer Stores, Inc.
Roundup Co.
Fred Meyer of Alaska, Inc.
Fred Meyer of California, Inc.
Distribution Trucking Company
B & B Stores, Inc.
B&B Pharmacy, Inc.
CB&S Advertising Agency, Inc.
FM Holding Corporation.
Grand Central, Inc.
F M Retail Services, Inc.
Fred Meyer Jewelers, Inc.
Merksamer Jewelers, Inc.
FM Inc.
J H Properties, Inc.
Compare, Inc.
Richie's, Inc.
Quality Food Centers, Inc.
Hughes Markets, Inc.
Hughes Realty, Inc.
KU Acquisition Corporation
Second Story, Inc.
Quality Food, Inc.
Quality Food Holdings, Inc.
QFC Sub, Inc.
Natur Glo, Inc.
Western Property Investment Group, Inc.
By: ROGER A. COOKE
---------------------------------
Name: Roger A. Cooke
Title: Vice President and Secretary
S-1
<PAGE>
SUBSIDIARY GUARANTEE
Smith's Food & Drug Centers, Inc.
Smith's Beverage of Wyoming
Smitty's Supermarkets, Inc.
Smitty's Super Valu, Inc.
Saint Lawrence Holding Company
Smitty's Equipment Leasing, Inc.
Food 4 Less Holdngs, Inc.
Ralphs Gorcery Company
Falley's, Inc.
Cala Co.
Bay Area Warehouse Stores, Inc.
Cala Foods, Inc.
Bell Markets, Inc.
Food 4 Less of Southern California, Inc.
Alpha Beta Company
Food 4 Less GM, Inc.
Food 4 Less Merchandising, Inc.
Food 4 Less of California, Inc.
Crawford Stores, Inc.
All By: ROGER A. COOKE
---------------------------------
Name: Roger A. Cooke
Title: Vice President and Secretary
S-2
<PAGE>
SUBSIDIARY GUARANTEE
Treasure Valley Land Company, L.C.
By Smith's Food and Drug Centers, Inc., member
By: ROGER A. COOKE
---------------------------------
Name: Roger A. Cooke
Title: Vice President and Secretary
S-3
PARTICIPATION AGREEMENT
among
FRED MEYER, INC.,
as Lessee and as Construction Agent,
FMS TRUST 1997-1,
a Delaware business trust,
as Lessor,
WILMINGTON TRUST COMPANY,
not in its individual capacity, except as expressly specified herein,
but solely as Owner Trustee under the FMS Trust 1997-1,
THE INVESTORS PARTY TO THE TRUST AGREEMENT,
BANKERS TRUST COMPANY,
as Administrative Agent,
THE CHASE MANHATTAN BANK,
as Syndication Agent
and
THE LENDERS PARTIES HERETO
Dated as of March 11, 1998
------------------------------
CHASE SECURITIES INC. and BT ALEX. BROWN,
as Arrangers
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. SUMMARY OF THE TRANSACTIONS..................................... 1
1.1. Operative Agreements............................................ 1
1.2. Property Purchase and Lease..................................... 1
1.3. Construction of Improvements; Lease
of Improvements................................................. 2
1.4. Aggregate Tranche A Percentage; Tranche
A Percentage.................................................... 3
1.5. Amounts Outstanding............................................. 3
SECTION 2. THE LOANS....................................................... 4
2.1. Making of Loans.......................................... 4
2.2. Timing of Loans................................................. 4
2.3. Security................................................. 4
2.4. Guarantees............................................... 5
SECTION 3. INVESTOR CONTRIBUTION........................................... 5
3.1. Investor Contribution........................................... 5
SECTION 4. THE CLOSINGS.................................................... 5
SECTION 5. FUNDING OF ADVANCES............................................. 5
5.1. General......................................................... 5
5.2. Procedures for Funding.......................................... 6
SECTION 6. CONDITIONS OF THE CLOSINGS AND ADVANCES......................... 6
6.1. General Conditions to Investors' and Lenders'
Obligations to make Advances.................................... 6
6.2. Conditions to the Investors' and the Lenders' Obligations
to Make Advances to pay Property Acquisition Costs..............11
6.3. Conditions to the Investors' and the Lenders' Obligations
to Make Advances to pay Project Costs for Construction
on any Property.................................................17
i
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SECTION 7. REPRESENTATIONS AND WARRANTIES..................................17
7.1. Representations and Warranties of the Investors on
the Initial Closing Date........................................17
7.2. Representations and Warranties of Lessor on the
Initial Closing Date............................................19
7.3. Representations and Warranties of the Loan Parties
on the Initial Closing Date.....................................21
7.4. Representations and Warranties of the Trust Company
on the Initial Closing Date.....................................29
7.5. Representations and Warranties of the Loan Parties
on Property Closing Dates.......................................31
7.6. Representations and Warranties of the Lessor on
Property Closing Dates..........................................34
7.7. Representations and Warranties of the Loan Parties
upon each Funding Date..........................................35
7.8. Representations and Warranties of the Lessor Upon
each Funding Date...............................................37
7.9. Representations and Warranties of the Investors Upon
Funding Dates...................................................38
SECTION 8. PAYMENT OF CERTAIN EXPENSES.....................................39
8.1. Transaction Expenses............................................39
8.2. Brokers' Fees and Stamp Taxes...................................39
8.3. Certain Fees and Expenses.......................................39
8.4. Credit Agreement and Related Obligations........................40
8.5. Trust Agreement and Related Obligations.........................40
8.6. Facility Fees...................................................40
8.7. Overdue Rate....................................................40
SECTION 9. OTHER COVENANTS AND AGREEMENTS..................................41
9.1. Covenants of the Owner Trustee and the Investors................41
9.2. Amendment of Certain Documents..................................43
9.3. Proceeds of Casualty............................................43
SECTION 10. CREDIT AGREEMENT AND TRUST AGREEMENT............................44
10.1. Lessee's Credit Agreement Rights................................44
10.2. Lessee's Trust Agreement Rights.................................45
10.3 Representative of Lessee........................................46
10.4 Financial Information...........................................46
SECTION 11. TRANSFER OF INTEREST............................................46
ii
<PAGE>
11.1. Restrictions on Transfer........................................46
11.2. Effect of Transfer..............................................47
SECTION 12. INDEMNIFICATION.................................................47
12.1. General Indemnity...............................................47
12.2. General Tax Indemnity...........................................48
SECTION 13. MISCELLANEOUS...................................................54
13.1. Survival of Agreements..........................................54
13.2. Notices.........................................................54
13.3. Counterparts....................................................56
13.4. Amendments and Termination......................................56
13.5. Headings, etc...................................................56
13.6. Parties in Interest.............................................56
13.7. GOVERNING LAW...................................................56
13.8. Jurisdiction; Consent to Service of Process.....................56
13.9. WAIVER OF JURY TRIAL............................................57
13.10. Severability....................................................58
13.11. Liability Limited...............................................58
13.12. Rights of Lessee................................................58
13.13. Further Assurances..............................................58
13.14. Successors and Assigns..........................................59
13.15. No Representation or Warranty...................................59
13.16. OREGON LEGAL NOTICE.............................................59
13.17. WASHINGTON STATUTORY NOTICE.....................................59
Appendix A Definitions
Schedule 1 Existing Properties
Schedule 7.3(h) Litigation
Schedule 7.3(n) Brokers' Fees
Schedule 7.3(o) Environmental
Schedule 7.3(v) Permits
Schedule 7.3(w) Subsidiaries
Schedule 9.5(a) Indebtedness
Schedule 9.5(b) Liens
Schedule 9.5(e) Investments
Exhibit A Form of Assignment of Leases and Consent to
Assignment
Exhibit B-1 Form of Mortgage (Fee Simple)
iii
<PAGE>
Exhibit B-2 Form of Mortgage (Ground Lease)
Exhibit C Form of Requisition
Exhibit D-1 Form of Lessee Guarantee
Exhibit D-2 Form of Subsidiary Guarantee
Exhibit E Guarantee Language
iv
<PAGE>
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT, dated as of March 11, 1998 (this
"Agreement"), among FRED MEYER, INC., a Delaware corporation ("FMI"; in its
capacity as lessee, the "Lessee"; and in its capacity as Construction Agent, the
"Construction Agent"); FMS TRUST 1997-1, a Delaware business trust (the "Trust"
or the "Lessor"); WILMINGTON TRUST COMPANY, not individually (in its individual
capacity, the "Trust Company"), except as expressly stated herein, but solely as
Owner Trustee under the FMS Trust 1997-1 (the "Owner Trustee"); BANKERS TRUST
COMPANY, a New York banking corporation, as administrative agent (in such
capacity, the "Administrative Agent") for the Lenders; THE CHASE MANHATTAN BANK,
a New York banking corporation, as syndication agent (in such capacity, the
"Syndication Agent"); NATIONSBANK OF TEXAS, N.A., a national banking
association, and SALOMON BROTHERS HOLDING CO INC. as co-documentation agents
(in such capacity, the "Co-Documentation Agents");each of the financial
institutions listed as an Investor on the signature pages of the Trust Agreement
(each an "Investor"; collectively, the "Investors"); and each of the financial
institutions listed as a Lender on the signature pages hereof (each, a "Lender";
collectively, the "Lenders"). Capitalized terms used but not otherwise defined
in this Agreement shall have the meanings set forth in Annex A hereto.
Preliminary Statement
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. SUMMARY OF THE TRANSACTIONS.
1.1. Operative Agreements. On the Initial Closing Date, each of the
respective parties thereto shall execute and deliver this Agreement, the Lease,
the Construction Agency Agreement, the Credit Agreement, any Notes, the
Guarantees, the Intercreditor Agreement, the Pledge Agreement, the Assignment of
Lease, the Contract Assignment, the Consent to Assignment, the Consent to
Contract Assignment and such other documents, instruments, certificates and
opinions of counsel as agreed to by the parties hereto.
<PAGE>
PARTICIPATION AGREEMENT
1.2. Property Purchase and Lease. (a) On the Initial Closing Date, the
Investors will make the Investor Contributions in accordance with Section 3
hereof.
(b) On each Property Closing Date and subject to the terms and
conditions of this Agreement, the Credit Agreement and the Trust Agreement, (i)
the Lenders will make loans in accordance with Section 2 hereof, (ii) the Lessor
will purchase all right, title and interest in and to (or lease under a Ground
Lease, as applicable) (A) on the Initial Closing Date, the Existing Properties,
and (B) on each Property Closing Date, each Property identified by the
Construction Agent pursuant to the Construction Agency Agreement (including
Lease-Purchased Properties) with respect to such Property Closing Date, and
(iii) the Lessor will simultaneously lease (or sublease, as the case may be) all
of its right, title and interest in the Property (and any Improvements to be
constructed thereon) to the Lessee by delivering a Lease Supplement.
(c) With respect to any Property which is not a Store Land
Property, on each Property Closing Date, the Lessee shall certify to the
Administrative Agent on the Property Closing Certificate, the Maximum Residual
Guarantee Amount for each Property being acquired on such Property Closing Date.
With respect to any Store Land Property, the Lessee shall certify to the
Administrative Agent, not less than thirty (30) days prior to the Construction
Commencement Date for such Property, the Maximum Residual Guarantee Amount for
such Property. The Maximum Residual Guarantee Amount so certified shall be the
Maximum Residual Guarantee Amount for such Property for the duration of the
Term.
1.3. Construction of Improvements; Lease of Improvements. (a) On each
Property Closing Date (provided such Property is not a Completed Property or a
Store Land Property), the Lessor and Lessee (i) will execute and deliver a
Construction Agency Agreement Supplement, dated as of such Property Closing
Date, pursuant to which FMI will agree to act as Construction Agent in
connection with the completion of the construction of the Improvements on the
Property described on the relevant Requisition and (ii) except in the case of a
Twenty-Five Percent Property, described below, will execute and deliver a
Memorandum of Lease which will be recorded in the real estate records in the
county where such Property is located.
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<PAGE>
PARTICIPATION AGREEMENT
(b) On each Property Closing Date or the Construction
Commencement Date, if later, provided that the applicable Appraisal indicates
that the value of the Land is greater than or equal to 25% of the Property Cost
for such Land and the Improvements to be constructed thereon (a "Twenty-Five
Percent Property"), it being understood and agreed that any Property which is a
Store Land Property shall be deemed to be a Twenty-Five Percent Property until
such time as the Lessee notifies the Lessor that it intends to commence construc
tion of Improvements on such Property, the Lessor and the Lessee shall execute
and deliver (i) a Lease Supplement pursuant to which the Lessor will lease (or
sublease, as the case may be) all of its right, title and interest in such Land
to the Lessee and (ii) an additional Lease Supplement pursuant to which the
Lessor will lease (or sublease, as the case may be) all of its right, title and
interest in such Improvements to the Lessee. Notwithstanding that the
Improvements on a Twenty-Five Percent Property (whether existing on the date of
acquisition of the Land or to be constructed pursuant to the Construction Agency
Agreement) may be leased by a separate Lease Supplement, the term "Property"
shall include the Land and the Improvements located thereon.
(c) On each Property Closing Date with regard to the acquisition
of a Twenty-Five Percent Property, the Lessor and Lessee will execute and
deliver (i) a Memorandum of Lease with respect to the relevant Land and (ii) an
additional Memorandum of Lease with respect to the relevant Improvements, each
of which will be recorded in the real estate records in the county where such
Property is located.
1.4. Aggregate Tranche A Percentage; Tranche A Percentage. (a)
Notwithstanding any other provision of this Agreement or the other Operative
Agreements, the Lessee agrees that in no event shall the Lessee specify a
Property for the Lessor to acquire and lease pursuant to the execution and
delivery of a Lease Supplement if the Aggregate Tranche A Percentage after
giving effect to the acquisition and lease of such Property pursuant to the
execu tion and delivery of a Lease Supplement, would be less than 87.6%.
(b) Notwithstanding any other provision of this Agreement or the
other Operative Agreements, the Lessee agrees that in no event shall the Lessee
specify a Property for the Lessor to acquire and lease pursuant to the
3
<PAGE>
PARTICIPATION AGREEMENT
execution and delivery of a Lease Supplement if the Tranche A Percentage with
respect to such Property would be less than 85%.
1.5. Amounts Outstanding. The parties hereto agree that there shall be
no limit on the number of Properties or the value or the cost of acquisition or
construction thereof; provided that (i) at no time shall the aggregate amount of
Advances outstanding with respect to Store Land Property exceed $50,000,000;
(ii) the aggregate Property Cost of all the Properties must at all times equal
(x) the aggregate principal amount of the Loans outstanding plus (y) the
aggregate Investor Contribution; (iii) at no time shall the aggregate principal
amount of the Loans outstanding exceed the aggregate Commitments; and (iv) at no
time shall the aggregate Investor Contributions outstanding exceed the aggre
gate Investor Commitments.
SECTION 2. THE LOANS.
2.1. Making of Loans. Subject to the terms and conditions of this
Agreement and the Credit Agreement, and in reliance on the representations and
warranties of each of the parties hereto contained herein or made pursuant
hereto, on each Funding Date, the Lenders shall make loans to the Lessor in an
aggregate principal amount at any time outstanding of up to $485,000,000 in
order for the Lessor to (i) acquire Existing Properties and Store Land
Properties, (ii) complete Improvements on Existing Properties which are not
Completed Properties as of the Initial Closing Date, (iii) acquire, develop,
construct and (as to leased properties acquired from third parties) refurbish
Properties in accor dance with the Construction Agency Agreement, (iv) pay
Transaction Expenses, and (v) pay other Project Costs.
2.2. Timing of Loans. The Loans shall be made pursuant to the Credit
Agreement. Pursuant to this Agreement and the Credit Agreement, the Loans will
be made to the Lessor from time to time from and after the Initial Closing Date
until the Construction Period Termination Date at the request of the
Construction Agent in consideration for the Construction Agent's agreeing for
the benefit of the Lessor, pursuant to the Construction Agency Agreement, to (i)
acquire parcels of Land or other Property (including the Existing Properties,
Lease-Purchased Properties and Store Land Properties) and, if such Property is
not a Completed Property, to construct Improvements in accordance with the Plans
and Specifications or (ii) to construct Improvements in accordance with the
Plans and
4
<PAGE>
PARTICIPATION AGREEMENT
Specifications on Properties which are not Completed Properties and which are
owned by the Lessor as of the Funding Date with respect to such Improvements.
2.3. Security. The Loans and the obligations of the Lessor under the
Credit Agreement shall be secured by, inter alia, (i) a first priority
assignment of the Lease, granted pursuant to the Assignment of Leases and
consented to by the Lessee pursuant to the Consent to Assignment (in each case
in the respective forms set forth on Exhibit A hereto); (ii) a first priority
assignment of the Construction Agency Agreement, granted pursuant to the
Contract Assignment and consented to by the Construction Agent pursuant to the
Consent to Contract Assignment; (iii) a first priority mortgage lien on each
Property pursuant to a Mortgage in the form set forth on Exhibit B-1 or Exhibit
B-2 hereto, as applicable; and (iv) a first priority pledge of the stock of
Subsid iaries of FMI and each of its Subsidiaries (other than Insignificant
Subsidiaries), granted pursuant to the Pledge Agreement in the form set forth on
Exhibit E hereto.
2.4. Guarantees. The obligations of the Lessor under the Credit
Agreement shall be guaranteed by the Guarantors to the extent provided in the
Guarantees.
SECTION 3. INVESTOR CONTRIBUTION.
3.1. Investor Contribution. Subject to the terms and conditions of
this Agreement and the Trust Agreement, and in reliance on the representations
and warranties of each of the parties hereto contained herein or made pursuant
hereto, on the Initial Closing Date, each Investor shall make an investment in
the Lessor (each, an "Investor Contribution") in an amount equal to the product
of (i) such Investor's Investor Commitment Percentage and (ii) $15,000,000. The
Lessor shall use the Investor Contributions to pay Project Costs. Such Investor
Contributions shall accrue yield ("Investor Yield") as set forth in the Trust
Agreement.
5
<PAGE>
PARTICIPATION AGREEMENT
SECTION 4. THE CLOSINGS.
All documents and instruments required to be delivered on each Closing
Date and each Funding Date shall be delivered at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los Angeles, California, or
at such other location as may be determined by the Administrative Agent and the
Lessee.
SECTION 5. FUNDING OF ADVANCES.
5.1. General. To the extent funds have been made available to the
Lessor as Loans and Investor Contributions, the Lessor will make advances of
such funds to the Construction Agent from time to time during the Construction
Period in accordance with the terms and conditions of this Agreement and the
other Operative Agreements.
5.2. Procedures for Funding. (a) In accordance with the provisions of
the Credit Agreement and the Trust Agreement, in order to request Advances, the
Construction Agent shall deliver to the Investors and the Administrative Agent a
requisition (each a "Requisition"), appropriately completed, in the form of
Exhibit C hereto.
(b) Each Requisition shall: (i) be irrevocable; (ii) request
funds in an amount of at least $1,000,000 (or such lesser amount as shall be
equal to the total aggregate of the Available Commitments at such time) for the
payment of Property Acquisition Costs or other Project Costs, including any of
the foregoing which have previously been incurred and were not the subject of
and funded pursuant to a prior Requisition, in each case as specified in the
Requisition; and (iii) comply with the terms and conditions of Section 2.3 of
the Credit Agreement and Section 3 of the Trust Agreement.
(c) So long as no Default or Event of Default has occurred and is
continuing and subject to the Lessor and the Administrative Agent having each
received the materials required by Section 6.1, 6.2 and/or 6.3, as applicable,
on each Funding Date (i) the Lenders shall make Loans to the Lessor in an
aggregate amount equal to (x) in the case of the Initial Closing Date, the
amount
6
<PAGE>
PARTICIPATION AGREEMENT
of funds specified in the Requisition therefor minus the Investor Contributions
contributed pursuant to Section 3.1, and (y) thereafter in an amount equal to
the amount specified in a Requisition, up to an aggregate principal amount equal
to the Available Commitments; (ii) in the case of the Initial Closing Date, the
Investors shall make Investor Contributions pursuant to Section 3.1; and (iii)
the total amount of such Loans and Investor Contributions, if any, made on such
date shall be paid to the Construction Agent to pay the Project Costs specified
in such Requisition.
SECTION 6. CONDITIONS OF THE CLOSINGS AND ADVANCES.
6.1. General Conditions to Investors' and Lenders' Obligations to make
Advances. The obligations of the Investors to make Investor Contributions, and
the Lenders to make Loans to the Lessor, are subject to the satisfaction or
waiver, immediately prior to or concurrently with the making of such Loans and
Investor Contributions, of the following conditions precedent:
(a) Operative Agreements. Each of the Operative Agreements
entered into on the Initial Closing Date shall have been duly authorized,
executed, acknowledged and delivered by the parties thereto and shall be in full
force and effect, and no Default or Event of Default shall exist thereun der
(both before and after giving effect to the transactions contemplated by the
Operative Agreements), and the Administrative Agent and the Investors shall have
received a fully executed copy of each of the Operative Agreements (other than
the Notes, of which the Administrative Agent shall have received the originals
in the event Notes are requested by any Lender);
(b) Taxes. All taxes, fees and other charges in connection with
the execution, delivery, and, where applicable, recording, filing and
registration of the Operative Agreements shall have been paid or provisions for
such payment shall have been made to the satisfaction of the Administrative
Agent and the Investors;
(c) Governmental Approvals. All necessary (or, in the reasonable
opinion of the Administrative Agent, the Investors and their respective counsel,
advisable) Governmental Actions, in each case required by any law or
7
<PAGE>
PARTICIPATION AGREEMENT
regulation enacted, imposed or adopted on or after the date hereof or by any
change in fact or circumstances since the date hereof, shall have been obtained
or made and be in full force and effect;
(d) Litigation. No action or proceeding shall have been
instituted before any Governmental Authority, nor shall any order, judgment or
decree have been issued or proposed to be issued by any Governmental Authority
(i) to set aside, restrain, enjoin or prevent the full performance of this
Agreement, any other Operative Agreement or any of the transactions contem
plated hereby or thereby or (ii) which is reasonably likely to have a Material
Adverse Effect;
(e) Legal Requirements. In the opinion of the Administrative
Agent, the Investors and their respective counsel, the transactions contemplated
by the Operative Agreements do not and will not violate in any respect any Legal
Requirements and do not and will not subject the Administrative Agent, the
Syndication Agent, any Lender or any Investor to any adverse regulatory
prohibitions or constraints;
(f) Corporate Proceedings of the Loan Parties. On the Initial
Closing Date, the Administrative Agent and the Investors shall have received a
copy of the resolutions or minutes, in form and substance satisfactory to the
Administrative Agent and the Investors, of the Board of Directors of each of the
Loan Parties authorizing the execution, delivery and performance of this
Agreement, the Guarantee (if applicable) and the other Operative Agreements to
which it is a party, certified by the Secretary or an Assistant Secretary of
each of the Loan Parties, as applicable, as of the Initial Closing Date, which
certificate shall be in form and substance satisfactory to the Administrative
Agent and the Investors and shall state that the resolutions or minutes thereby
certified have not been amended, modified, revoked or rescinded;
(g) Loan Parties Incumbency Certificate. On the Initial Closing
Date, the Administrative Agent and the Investors shall have received a
certificate of each of the Loan Parties, dated the Initial Closing Date, as to
the incumbency and signature of the officers of such Loan Party executing any
Operative Agreement satisfactory in form and substance to the Administrative
Agent and the Investors, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of such Loan Party;
8
<PAGE>
PARTICIPATION AGREEMENT
(h) Corporate Proceedings of the Trust Company. On the Initial
Closing Date, the Administrative Agent, the Investors and the Lessee shall have
received a copy of the resolutions, in form and substance satisfactory to the
Administrative Agent, the Investors and the Lessee, of the Board of Directors of
the Trust Company authorizing the execution, delivery and performance of the
Operative Agreements to which it is a party, certified by the Secretary or an
Assistant Secretary of the Trust Company as of the Initial Closing Date, which
certificate shall be in form and substance satisfactory to the Administrative
Agent, the Investors and the Lessee and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded;
(i) Trust Company Incumbency Certificates. On the Initial Closing
Date, the Administrative Agent, the Investors and the Lessee shall have received
a certificate of the Trust Company, dated the Initial Closing Date, as to the
incumbency and signature of the officers of the Trust Company executing any
Operative Agreement, satisfactory in form and substance to the Administrative
Agent, the Investors and the Lessee, executed by any Responsible Officer of the
Trust Company;
(j) Corporate Documents. (1) The Administrative Agent and the
Investors shall have received true and complete copies of the certificate or
articles of incorporation and by-laws of each of the Loan Parties, certified as
of the Initial Closing Date as complete and correct copies thereof by the
Secretary or an Assistant Secretary of such Loan Party;
(2) Consents, Licenses and Approvals. The Administrative
Agent and the Investors shall have received a certificate of the chief financial
officer of each of the Loan Parties (i) attaching copies of all consents,
authorizations and filings required to consummate the transaction contemplated
by this Agreement, and (ii) stating that such consents, licenses and filings are
in full force and effect, and each such consent, authorization and filing shall
be in form and substance satisfactory to the Administrative Agent and the
Investors;
(k) Fees. The Administrative Agent and the Arrangers shall have
received the fees to be paid on the Initial Closing Date pursuant to the Fee
Letter which fees shall not be paid using the proceeds of the Loans or Investor
Contributions;
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PARTICIPATION AGREEMENT
(l) Legal Opinions. (1) The Administrative Agent and the
Investors shall have received the executed legal opinion of Stoel Rives LLP,
counsel to the Loan Parties, in form and substance satisfactory to the
Administra tive Agent and the Investors;
(2) The Administrative Agent, the Lessee and the Investors
shall have received the executed legal opinion of Morris, James, Hitchens &
Williams, counsel to the Trust and the Trust Company, in form and substance
satisfactory to the Administrative Agent and the Investors;
(m) Actions to Perfect Liens. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all filings,
recordings, registrations and other actions, including the filing of duly
executed Lender Financing Statements and Lessor Financing Statements, the
Assignment of Lease, the Mortgages, and the Memoranda of Lease, necessary or, in
the opinion of the Administrative Agent, desirable to perfect the Liens created
by the Security Documents shall have been completed;
(n) Lien Searches. The Administrative Agent and the Investors
shall have received the results of a recent search by a Person reasonably
satisfactory to the Administrative Agent, of the Uniform Commercial Code,
judgement and tax lien filings which may have been filed in the States of
Alaska, Idaho, Washington, Oregon and Utah with respect to personal property of
the Lessee, and the results of such search shall be satisfactory to the
Administrative Agent and the Investors;
(o) Insurance. The Administrative Agent and the Investors shall
have received evidence in form and substance satisfactory to them that all of
the requirements of Section 14 of the Lease shall have been satisfied;
(p) Representations and Warranties. The representations and
warranties of the Lessor, the Investors and the Loan Parties contained herein
and in each of the other Operative Agreements shall be true and correct on and
as of each Funding Date as if made on and as of each Funding Date;
(q) Performance of Operative Agreements. The parties hereto
(other than the Investors or the Lenders) shall have performed their respec-
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PARTICIPATION AGREEMENT
tive agreements contained herein and in the other Operative Agreements on or
prior to each such Funding Date;
(r) Default. There shall not have occurred and be continuing any
Default or Event of Default under any of the Operative Agreements and no Default
or Event of Default under any of the Operative Agreements will have occurred
after giving effect to the Advance requested by such Requisition;
(s) Material Adverse Change. As of such Funding Date, there shall
not have occurred any event, act or condition with respect to the consolidated
assets, liabilities, operations, business or financial condition of any of the
Loan Parties which has had, or could have, a Material Adverse Effect;
(t) Mergers. Each of the Mergers shall have been consummated (or
in the case of the Initial Closing Date shall be consummated contemporaneously
therewith) in accordance with the relevant Merger Document, and no provision of
the Merger Documents shall have been amended, modified or otherwise supplemented
without the prior written consent of the Administrative Agent, the Lenders and
the Investors;
(u) Corporate Loan Documents. The transactions contemplated by
the Corporate Loan Documents shall have been consummated in accordance with the
terms of the Corporate Loan Documents, or the Administrative Agent shall have
received satisfactory evidence that such transactions will close on the Initial
Closing Date;
(v) Officer's Certificates. The Administrative Agent shall have
received Officer's Certificates as to the matters set forth in clauses (p) and
(r) of this Section 6.1 and such other documents as are reasonably requested by
the Administrative Agent;
(w) Financial Information. The Investors, the Administrative
Agent and the Lenders shall have received the following, in form and substance
satisfactory to each of them: (i) the financial statements required to be
delivered by the Loan Parties pursuant to Section 7.3(e); (ii) a pro forma
consolidated balance sheet of FMI and its Subsidiaries, giving effect to the
Mergers; and (iii) financial projections prepared by FMI demonstrating the
projected consoli-
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PARTICIPATION AGREEMENT
dated financial condition and results of operations of FMI and its Subsidiaries
after giving effect to the Mergers, for the period commencing on the Initial
Closing Date and ending on the Maturity Date, which projections shall be
accompanied by a written statement of the assumptions underlying the projec-
tions;
(x) Certain Payments. The Administrative Agent shall have
received evidence satisfactory to it of the prior or simultaneous (i) repay ment
or refinancing of the Indebtedness of FMI and its Subsidiaries set forth on
Schedule 6.1(x) hereto (except as otherwise agreed to the satisfaction of the
Administrative Agent); (ii) making of the Investor Contributions by the
Investors; and (iii) receipt of not less than $1,500,000,000 (net of
underwriting and other expenses in connection with such issuance) by FMI from
the issuance of senior unsecured bonds on terms satisfactory to the Lenders; and
(y) Pledged Stock. The Administrative Agent shall have received
the original stock certificates evidencing the stock pledged pursuant to the
Pledge Agreement, together with undated stock powers duly executed in blank in
connection therewith.
6.2. Conditions to the Investors' and the Lenders' Obligations to Make
Advances to pay Property Acquisition Costs. The obligations of the Investors to
make Investor Contributions, and of the Lenders to make Loans to the Lessor, on
a Property Closing Date (it being understood that the Investors shall not be
obligated to make Investor Contributions on any Property Closing Date other than
the Initial Closing Date) for the purpose of providing funds to the Lessor
necessary to acquire a Property are subject to the satisfaction or waiver of the
following additional conditions precedent (except that the conditions precedent
set forth in clause (e) (Construction Agency Agreement Supplement); clause (o)
(Construction Schedule); clause (p) (Budget); clause (q) (Budget in Balance);
and clause (r) (Plans and Specifications) shall not apply with respect to the
making of Advances in connection with a Store Land Property):
(a) Requisition. The Administrative Agent and the Investors shall
have received a fully executed counterpart of a Requisition dated as of the
Property Closing Date (but delivered at least three Business Days prior to the
Property Closing Date), appropriately completed;
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PARTICIPATION AGREEMENT
(b) Deed. There shall have been delivered to the Lessor a special
warranty deed (the "Deed") (or, with respect to Properties subject to a Ground
Lease, a good and sufficient assignment thereof), in form and substance
appropriate for recording with the applicable Governmental Authorities, with
respect to each Property (and all Improvements located thereon) being purchased
on such Property Closing Date, conveying fee simple title (or a leasehold
estate, with respect to Properties subject to a Ground Lease) to such Property
to the Lessor, subject only to the Permitted Exceptions;
(c) Title. Title to all of the Properties shall conform to the
representations and warranties set forth in Section 7.5(k);
(d) Lease Supplement and Memorandum of Lease. The Lessee shall
have delivered a Lease Supplement and a Memorandum of Lease executed by the
Lessee and the Lessor with respect to each Property being acquired on such
Property Closing Date to the Administrative Agent (and, with respect to a
Twenty-Five Percent Property, shall have delivered one Memorandum of Lease and
one Lease Supplement each in respect of the Land and the Improvements, as set
forth in Sections 1.3(b) and (c));
(e) Construction Agency Agreement Supplement. The Construction
Agent shall have delivered a Construction Agency Agreement Supplement executed
by the Construction Agent and the Lessor with respect to each Property being
acquired on such Property Closing Date to the Administrative Agent;
(f) Mortgage. The Lessee shall have recorded in the real estate
records of the county where the Property is located an original of the Mortgage
executed by the Lessor and Lessee with respect to each Property being acquired
on such Property Closing Date and the Lien of the Mortgage shall conform to the
representations and warranties set forth in Section 7.5(d);
(g) Assignment of Lease. The Lessee shall have recorded in the
real estate records of the county where the Property is located an original of
the Assignment of Lease executed by the Lessor with respect to each Property
being acquired on such Property Closing Date;
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PARTICIPATION AGREEMENT
(h) Consent to Assignment of Lease. The Lessee shall have
delivered to the Administrative Agent a consent to the Assignment of Lease
executed by the Lessee with respect to each Property being acquired on such
Property Closing Date;
(i) Environmental Audit. The Administrative Agent and the
Investors shall have received not less than 10 days prior to such Property
Closing Date an Environmental Audit with respect to each Property being acquired
on such Property Closing Date, and the results of the Environmental Audit shall
be in form and substance satisfactory to the Administrative Agent and the
Investors;
(j) Appraisal. The Administrative Agent and the Investors shall
have received not less than 10 days prior to such Property Closing Date an
Appraisal of each Property being acquired on such Property Closing Date and such
Appraisal shall be in form and substance acceptable to the Administrative Agent
and the Investors;
(k) Survey. (i) With respect to each Property previ ously owned
by the lessor under an Existing Synthetic Lease Facility, each of the
Administrative Agent and the Title Company shall have received on or prior to
such Property Closing Date, a certificate from a Responsible Officer of the
Lessee certifying that the survey delivered in connection with such Existing
Synthetic Lease Facility remains true and correct in all respects as of such
Property Closing Date.
(ii) With respect to each Property not owned by the lessor under
an Existing Synthetic Lease Facility, each of the Administrative Agent and the
Title Company shall have received, not less than 10 days prior to such Property
Closing Date, a survey of each Property being acquired (or leased under a under
a Ground Lease) on such Property Closing Date (each a "Survey"), complying with
the following requirements: a survey of such Property certified to the
Administrative Agent, the Investors, the Lessor and the Title Company in a
manner satisfactory to them, dated as of a date within ninety days of the
Property Closing Date, by an independent professionally licensed land surveyor
satisfactory to the Administrative Agent, which survey shall be made in
accordance with the Minimum Standard Detail Requirements for Land Title Surveys
jointly established and adopted by the American Land Title Association and the
American Congress
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PARTICIPATION AGREEMENT
on Surveying and Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such survey the following, all
in form and substance reasonably satisfactory to the Administrative Agent: (i)
the locations on such Property of all the buildings, structures and other
improvements, if any, and the established building setback lines; (ii) the lines
of streets abutting such Property; (iii) all access and other easements
appurtenant to such Property; (iv) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar encumbrances affecting
such Property, whether recorded, apparent from a physical inspection of such
Property or otherwise known to the surveyor; (v) any encroachments on any
adjoining property by the building, structures and improvements on such
Property; and (vi) if such Property is described as being on a filed map, a
legend relating the survey to said map;
(l) Mortgagee's Title Insurance Policy. With respect to each
Property being acquired (or leased under a Ground Lease) on such Property
Closing Date, the Administrative Agent shall have received, with respect to the
Mortgage, extended coverage mortgagees' title policies or marked up
unconditional binder for such insurance dated the Property Closing Date; such
policies shall (i) be in an amount equal to the aggregate amount shown on the
Budget for such Property (with a pending disbursements clause); (ii) insure that
the Mortgage insured thereby creates valid first Liens on such Property, free
and clear of all defects and encumbrances, except Permitted Exceptions; (iii)
name the Administrative Agent for the benefit of the Lenders as the insured
thereunder; (iv) be in the form of ALTA Loan Policy - 1970 (Amended 10/17/70),
if avail able, or if unavailable, such other form as may be reasonably
acceptable to the Administrative Agent; (v) contain such endorsements and
affirmative coverage as the Administrative Agent may reasonably request; (vi) be
issued without general exceptions; and (vii) be issued by the Title Company; the
Administrative Agent shall have received evidence reasonably satisfactory to it
that all premiums in respect of such policy, and all charges for mortgage
recording tax with respect to the Mortgage and/or the Deed of Trust have been
paid or provision made therefor;
(m) Owner's Title Insurance Policy. The Lessor shall have
received an extended coverage owner's title policy with general exceptions and
subject only to Permitted Encumbrances, in form and substance reasonably
satisfactory to the Lessor, or marked up unconditional binder for such
insurance, dated the Closing Date for each Property being acquired on such
Property Closing
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PARTICIPATION AGREEMENT
Date; and the Lessor shall have received evidence reasonably satisfactory to it
that all premiums in respect of such policy have been paid or provision made
therefor; such owner's title insurance policy will be in the same amount as the
Mortgagee's title insurance policy described in clause (l) above and will be
issued on a simultaneous issue basis;
(n) Recorded Documents. The Administrative Agent and the
Investors shall have received, not less than 10 days prior to such Property
Closing Date, a copy of all recorded documents referred to, or listed as
exceptions to title in, the title policy referred to above;
(o) Construction Schedule. The Administrative Agent shall have
received a copy of the schedule prepared by or at the direction of the
Construction Agent showing the estimated (i) timetable for completion of the
Improvements to be constructed on each Property being acquired on such Property
Closing Date, which timetable will project (A) commencement of construction of
such Improvements within nine months of the acquisition or leasing under a
Ground Lease, as the case may be, by the Lessor of such Prop erty and (B)
completion of such Improvements within 12 months of the Construction
Commencement Date for each such Property; and (ii) timetable for the making of
Loans and Investor Contributions in respect of such Property;
(p) Budget. The Administrative Agent and the Lessor shall have
received a copy of the Budget with respect to the construction of the
Improvements to be constructed on each Property, and such Budget shall be in
form and substance satisfactory to the Administrative Agent and the Lessor;
(q) Budget in Balance. Based upon the Budget, the Available
Commitments and the Available Investor Commitments will be sufficient to
complete the Improvements (if any) for which the Requisition relates on such
Properties;
(r) Plans and Specifications. The Administrative Agent and the
Lessor shall have received a copy of the Plans and Specifications with respect
to the Improvements to be constructed on each Property being acquired on such
Property Closing Date, if available (and to the extent such Plans and
Specifications are not available, the Lessee hereby covenants and agrees to
provide them
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PARTICIPATION AGREEMENT
to the Administrative Agent and the Lessor promptly after they become
available); and
(s) Additional Survey and Title Matters. In addition to the other
representations and warranties of the Loan Parties, the Loan Parties represent
and warrant as to such Property on the Property Closing Date that each Survey,
including, without limitation, the information, courses and distances shown
thereon, is accurate; the legal description of each Property "closes" by
mathematical calculation; the Property depicted on each Survey forms one
contiguous parcel, uninterrupted by any strips, gaps or gores; each Survey
correctly shows the size, location and type of all buildings, structures and
other improvements on the Property and all are within the boundary lines and
applicable setback lines (whether established by subdivision plat, recorded
restrictions or applicable zoning or building codes) affecting such Property;
municipal water, sanitary sewer, telephone, electric and gas services for the
operation of each Property are present on such Property or within adjacent
public rights-of-way or recorded easements in the locations shown on each
Survey; there are no party walls with or encroachments upon adjoining premises,
streets or alleys by any of the buildings, structures or other improvements
located or to be located on any Property, or encroachments upon or party walls
with any Property by any building, structure or other improvements situated upon
any adjoining premises; the buildings and other improvements on each Property do
not overhang or encroach upon any easements or rights-of-way of others; all
public streets necessary for access to each Property have been completed and
dedicated and there is direct access between such streets and such Property;
each Property complies with all applicable zoning requirements and regulations,
has a validly issued certificate of occupancy and contains sufficient number of
parking spaces as required by law or otherwise necessary for the proper use and
operation thereof; no Property lies within a flood hazard area designated as a
Flood Zone on any flood hazard map published by the Federal Emergency Management
Agency; each Property shown on a Survey is the same property described in the
corresponding owner's and lender's title insurance policy or commitment
delivered to the Administrative Agent; no Property serves any adjoining property
for drainage utilities, parking, ingress or egress; there are no unpaid bills
for work performed upon or materials delivered to any Property for the
construction or improvement of any Property (or any part thereof) during the
preceding 12 months; there are no unrecorded tenancies, leases or other
occupancies on any Property and no Person has any options to purchase, rights of
first
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PARTICIPATION AGREEMENT
refusal, rights of first offer or similar rights in connection with any
Property; no Person is in possession of any Property other than the Lessee; and
there are no unpaid charges for taxes, water and/or sewer services or other
utility charges or unpaid special assessments for items such as sidewalks,
curbs, gutters, sewers, storm water assessments affecting any Property.
6.3. Conditions to the Investors' and the Lenders' Obligations to Make
Advances to pay Project Costs for Construction on any Property. The obligations
of the Investors to make Investor Contributions, and of the Lenders to make
Loans to the Lessor, on a Funding Date (it being understood that the Investors
shall not be obligated to make Investor Contributions on any Funding Date other
than the Initial Closing Date) for the purpose of providing funds to the Lessor
necessary to pay for the construction of the Improvements or the payment of
Transaction Costs or other Project Costs (other than Property Acquisition Costs)
are subject to the satisfaction or waiver of the following additional conditions
precedent:
(a) Requisition. The Administrative Agent and the Investors shall
have received a fully executed counterpart of a Requisition, appropriately
completed;
(b) Title. Title to all of the Properties shall conform to the
representations set forth in Section 7.5(k); and
(c) Budget in Balance. Based upon the Budget, the Available
Commitments and the Available Investor Commitments will be sufficient to
complete the Improvements on such Properties for which the Requi sition relates.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
7.1. Representations and Warranties of the Investors on the Initial
Closing Date. Each of the Investors hereby represents and warrants on its own
behalf to each of the other parties hereto as of the Initial Closing Date as
follows:
(a) Due Organization, etc. It is a duly organized and validly
existing corporation in good standing under the laws of the State of its
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PARTICIPATION AGREEMENT
incorporation and has the power and authority to carry on its business as now
conducted and to enter into and perform its obligations under this Agreement,
each Operative Agreement to which it is a party and each other agreement,
instrument and document executed and delivered by it on the Closing Date in
connection with or as contemplated by each such Operative Agreement to which it
is or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
performance of each Operative Agreement to which it is a party has been duly
authorized by all necessary action on its part and neither the execution and
delivery thereof by such Investor, nor the consummation of the transactions
contemplated thereby by such Investor, nor compliance by it with any of the
terms and provisions thereof (i) requires or will require any approval of (which
approval has not been obtained) the shareholders of, or approval or consent of
any trustee or holders of any indebtedness or obligations of such Investor, (ii)
contravenes or will contravene any Legal Requirement applicable to or binding on
it as of the date hereof, (iii) does or will contravene or result in any breach
of or constitute any default under, or result in the creation of any Lessor Lien
upon any of the Properties or any of the Improvements, its articles of
incorporation or by-laws, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement or other
agreement or instrument to which it or its properties may be bound or (iv) does
or will require any Governmental Action by any Governmental Authority.
(c) Enforceability, etc. Each Operative Agreement to which it is
a party has been duly executed and delivered by it and constitutes, or upon
execution and delivery will constitute, a legal, valid and binding obligation
enforceable against it in accordance with the terms thereof.
(d) ERISA. Such Investor is making the Investor Contributions
contemplated to be made by it hereunder for its own account and with its general
corporate assets in the ordinary course of its business, and no part of such
amount constitutes the assets of any Employee Benefit Plan.
(e) Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or threatened by
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PARTICIPATION AGREEMENT
or against such Investor with respect to any of the Operative Agreements or any
of the transactions contemplated hereby or thereby.
7.2. Representations and Warranties of Lessor on the Initial Closing
Date. The Lessor represents and warrants to each of the other parties hereto as
of the Initial Closing Date as follows:
(a) Due Organization, etc. The Lessor is a duly organized and
validly existing business trust in good standing under the laws of the State of
Delaware and has the power and authority to carry on its business as now
conducted and to enter into and perform its obligations under this Agreement,
each Operative Agreement to which it is a party and each other agreement,
instrument and document executed and delivered by it on the Closing Date in
connection with or as contemplated by each such Operative Agreement.
(b) Authorization; No Conflict. The execution, delivery and
performance of each Operative Agreement to which it is a party has been duly
authorized by all necessary action on its part and neither the execution and
delivery thereof by the Lessor, nor the consummation of the transactions
contemplated thereby by the Lessor, nor compliance by it with any of the terms
and provisions thereof (i) requires or will require any approval (which approval
has not been obtained) of any party or approval or consent of any trustee or
holders of any indebtedness or obligations of the Lessor (ii) contravenes or
will contravene any Legal Requirement applicable to or binding on it as of the
date hereof, (iii) does or will contravene or result in any breach of or
constitute any default under, or result in the creation of any Lessor Lien upon
any of the Properties or any of the Improvements or the Trust Agreement, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement or other agreement or instrument to
which it or its properties may be bound or (iv) does or will require any
Governmental Action by any Governmental Authority.
(c) Enforceability, etc. Each Operative Agreement to which it is
a party has been duly executed and delivered by it and constitutes, or upon
execution and delivery will constitute, a legal, valid and binding obligation
enforceable against it in accordance with the terms thereof.
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PARTICIPATION AGREEMENT
(d) Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or threatened by or
against the Lessor (a) with respect to any of the Operative Agreements or any of
the transactions contemplated hereby or thereby, or (b) which could reasonably
be expected to have a material adverse effect on the assets, liabilities,
operations, business or financial condition of the Lessor.
(e) Assignment. The Lessor has not assigned or transferred any of
its right, title or interest in or under the Lease, any Operative Document or
any of the Properties, except in accordance with the Operative Agreements.
(f) No Default. The Lessor is not in default under or with
respect to any of its Contractual Obligations in any respect which could have a
material adverse effect on the assets, liabilities, operations, business or
financial condition of the Lessor. No Default or Event of Default attributable
to it has occurred and is continuing.
(g) Use of Proceeds. The proceeds of the Loans and the Investor
Contributions shall be applied by the Lessor solely in accordance with the
provisions of the Operative Agreements.
(h) Chief Place of Business. The Lessor's chief place of
business, chief executive office and office where the documents, accounts and
records relating to the transactions contemplated by this Agreement and each
other Operative Agreement are kept are located at Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware, 19890-
0001.
(i) Securities Act. Neither the Lessor nor any Person authorized
by the Lessor to act on its behalf has offered or sold any interest in the
Properties or the Notes, or in any similar security or interest relating to the
Properties, or in any security the offering of which for the purposes of the
Securities Act would be deemed to be part of the same offering as the offering
of the aforementioned securities to, or solicited any offer to acquire any of
the same from, any Person other than, in the case of the Notes, the
Administrative Agent, and neither the Lessor nor any Person authorized by the
Lessor to act on its behalf will take any action which would subject the
issuance or sale of any interest in any
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PARTICIPATION AGREEMENT
of the Properties or the Notes to the provisions of Section 5 of the Securities
Act or require the qualification of any Operative Agreement under the Trust
Indenture Act of 1939, as amended.
(j) Lessor Liens. Each of the Properties is free and clear of all
Lessor Liens attributable to the Lessor or the Owner Trustee.
7.3. Representations and Warranties of the Loan Parties on the Initial
Closing Date. Each Loan Party represents and warrants to each of the other
parties hereto as of the Initial Closing Date as follows:
(a) Organization; Powers. Each Loan Party (i) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has all requisite power and authority to own its property and
assets and to carry on its business as now conducted and as proposed to be
conducted, (iii) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to qualify would not
result in a Material Adverse Effect, and (iv) has the power and authority to
execute, deliver and perform its obligations under each of the Operative
Agreements and each other agreement or instrument contemplated thereby to which
it is or will be a party.
(b) Authorization. The execution, delivery and performance by
each Loan Party of the Operative Agreements to which it is a party (a) have been
duly authorized by all requisite corporate action on the part of such Loan Party
and (b) do not and will not (i) violate any Legal Requirements applicable to
such Loan Party, the certificate or articles of incorporation or bylaws of such
Loan Party or any order, judgment or decree of any court or other agency of
government binding on it, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of such Loan Party which could reasonably be expected to
result in a Material Adverse Effect, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of such Loan Party
(other than any Liens created under any of the Operative Agreements), or (iv)
require any approval of stockholders or any approval or consent of any Person
under any Contractual Obligation of such Loan Party, except for such approvals
or consents which will be obtained on or before the Initial Closing Date (or, in
the case of any Operative Agreement executed and delivered after the Initial
Closing Date, on or before such
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PARTICIPATION AGREEMENT
date of execution and delivery) and disclosed in writing to the Administrative
Agent and the Investors or such approvals or consents the failure to obtain
could not reasonably be expected to individually or in the aggregate result in a
Material Adverse Effect.
(c) Enforceability. This Agreement and each of the other
Operative Agreements to which each Loan Party is a party has been duly executed
and delivered by such Loan Party and constitutes a legal, valid and binding
obligation of such Loan Party enforceable against such Loan Party in accordance
with its terms except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
(d) Governmental Approvals. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required by any of the Loan Parties in connection with the sale,
leasing or financing of any of the Properties, except such as have been made or
obtained and are in full force and effect.
(e) Financial Condition. The Lessee has heretofore furnished to
the Investors, the Administrative Agent and the Lenders consolidated balance
sheet and statements of income, stockholders equity and cash flows for (i) FMI
and its Subsidiaries, as of and for the fiscal year ended Febru ary 1, 1997,
reported on by Deloitte & Touche, independent public accountants of FMI, and the
fiscal quarter and the portion of the fiscal year ended November 8, 1997,
certified by the chief financial officer of FMI; (ii) QFC and its Subsidiaries,
as of and for the fiscal year ended December 28, 1996, reported on by Deloitte &
Touche, independent public accountants of QFC, and the fiscal quarter and the
portion of the fiscal year ended September 6, 1997, certified by the chief
financial officer of QFC; and (iii) Food 4 Less and its Subsidiaries, as of and
for the fiscal year ended February 2, 1997, reported on by Arthur Ander son,
independent public accountants of Food 4 Less, and the fiscal quarter and the
portion of the fiscal year ended October 12, 1997, certified by the chief
financial officer of Food 4 Less. Such financial statements present fairly, in
all material respects, the financial position and results of operations and cash
flows of each of FMI, QFC, Food 4 Less and their respective Subsidiaries as of
such dates and for such periods in accordance
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PARTICIPATION AGREEMENT
with GAAP, subject to year-end audit adjustments and the absence of footnotes in
the case of the statements for the interim periods.
(f) No Material Adverse Change. There has been no material
adverse change in the business, assets, operations, prospects or condition,
financial or otherwise, of (i) FMI and its subsidiaries, taken as a whole, since
February 1, 1997; (ii) QFC and its subsidiaries, taken as a whole, since
December 28, 1996; or (iii) Food 4 Less and its subsidiaries, taken as a whole,
since February 2, 1997.
(g) Title to Properties; Liens Each Loan Party has (i) good,
sufficient and legal title to (in the case of fee interests in real property),
(ii) valid leasehold interests in (in the case of leasehold interests in real or
personal property), or (iii) good title to (in the case of all other personal
property) all of its properties and assets reflected in the financial statements
referred to in paragraph (e) above except for assets disposed of since the date
of such financial statements in the ordinary course of business. Except as
permitted by the Operative Agreements and the Corporate Loan Documents, all such
properties and assets are free and clear of Liens.
(h) Litigation; Adverse Facts. Except as described in Schedule
7.3(h) annexed hereto, there are no actions, suits, proceedings, arbitrations or
governmental investigations (whether or not purportedly on behalf of any of the
Loan Parties) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of any of the
Loan Parties, threatened against or affecting any of the Loan Parties or any of
their Subsidiaries or any property of any of the Loan Parties or any of their
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither any of the Loan Parties
nor any of their Subsidiaries is (i) in violation of any applicable laws that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect or (ii) subject to or in default with respect to any
final judgments, writs, injunctions, decrees, rules or regulations of any court
or any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
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PARTICIPATION AGREEMENT
(i) Payment of Taxes. All material tax returns and reports of
each of the Loan Parties required to be filed have been timely filed, and all
material taxes, assessments, fees and other governmental charges upon each of
the Loan Parties and upon their respective properties, assets, income,
businesses and franchises which are due and payable have been paid when due and
payable. No Loan Party knows of any material proposed tax assessment against any
of the Loan Parties which is not being actively contested by such Loan Party in
good faith and by appropriate proceedings; provided that such reserves or other
appropriate provisions, if any, as shall be required in conformity with GAAP
shall have been made or provided therefor.
(j) Performance of Agreements; Materially Adverse Agreements. (1)
No Loan Party is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any of its Contractual
Obligations, and no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any,
individually or in the aggregate, would not have a Material Adverse Effect.
(2) No Loan Party is a party to or is otherwise subject to
any agreements or instruments or any charter or other internal restrictions
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect.
(k) Governmental Regulation. Neither any Loan Party nor any of
their Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or under any other federal or state statute or
regulation which may limit its ability to incur Indebtedness or which may
otherwise render all or any portion of the Obligations unenforceable.
(l) Securities Activities. Neither any Loan Party nor any of
their Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any Margin Stock.
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PARTICIPATION AGREEMENT
(m) Employee Benefit Plans. (1) Each of the Loan Parties and each
of their respective ERISA Affiliates is in material compliance with all
applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan,
and has performed all its material obligations under each Employee Benefit Plan.
(2) No ERISA Events have occurred or are reasonably expected
to occur which individually or in the aggregate resulted in or might reasonably
be expected to result in a liability of any of the Loan Parties or any of their
respective ERISA Affiliates in excess of $10,000,000 during the term of this
Agreement.
(n) Certain Fees. Except as disclosed on Schedule 7.3(n) annexed
hereto, no broker's or finder's fee or commission will be payable with respect
to this Agreement or any of the transactions contemplated hereby.
(o) Environmental Protection. Except as set forth in Schedule
7.3(o) annexed hereto:
(1) the operations of each of the Loan Parties and each of
their Subsidiaries (including, without limitation, all operations and conditions
at or in the Facilities) comply in all material respects with all Environmental
Laws;
(2) each of the Loan Parties and each of their Subsidiaries
has obtained all Governmental Approvals under Environmental Laws necessary to
its respective operations, and all such Governmental Approvals are in good
standing, and each of the Loan Parties and each of their Subsidiaries is in
compliance with all material terms and conditions of such Governmental
Approvals;
(3) neither any Loan Party nor any of their Subsidiaries has
received (a) any notice or claim to the effect that it is or may be liable to
any Person as a result of or in connection with any Hazardous Materials except
as would not reasonably be expected to have a Material Adverse Effect or (b) any
letter or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9604) or
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PARTICIPATION AGREEMENT
comparable state laws regarding any matter which could reasonably be expected to
result in a Material Adverse Effect, and, to the best of each of the Loan
Parties' knowledge, none of the operations of any of the Loan Parties or any of
their Subsidiaries is the subject of any federal or state investigation relating
to or in connection with any Hazardous Materials at any Facility or at any other
location;
(4) none of the operations of any of the Loan Parties or any
of their Subsidiaries is subject to any judicial or administrative proceeding
alleging the violation of or liability under any Environmental Laws which if
adversely determined could reasonably be expected to have a Material Adverse
Effect;
(5) neither any Loan Party nor any of their Subsidiaries nor
any of their respective Facilities or operations is subject to any outstanding
written order or agreement with any Governmental Authority or private party
relating to (a) any Environmental Laws or (b) any Environmental Claims which
could reasonably be expected to result in a liability to either Lessee or any of
its Subsidiaries in excess of $10,000,000 individually or in the aggregate;
(6) neither any Loan Party nor any of their Subsidiaries has
any contingent liability in connection with any Release of any Hazardous
Materials by any of the Loan Parties or any of their Subsidiaries which could
reasonably be expected to result in Material Adverse Effect
(7) neither any Loan Party nor any of their Subsidiaries or,
to the best knowledge of any Loan Party, any predecessor of any of the Loan
Parties or any of their Subsidiaries has filed any notice under any
Environmental Law indicating past or present treatment or Release of Hazardous
Materials at any Facility except as would not reasonably be expected to have a
Material Adverse Effect, and none of the Loan Parties' or any of their Subsidiar
ies' operations involves the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any
state equivalent other than in compliance in all material respects with all
Environmental Laws;
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<PAGE>
PARTICIPATION AGREEMENT
(8) no Hazardous Materials exist on, under or about any
Facility in a manner that has a reasonably possibility of giving rise to an
Environmental Claim having a Material Adverse Effect, and neither any Loan Party
nor any of their Subsidiaries has filed any notice or report of a Release of any
Hazardous Materials that has a reasonable possibility of giving rise to an
Environmental Claim having a Material Adverse Effect;
(9) neither any Loan Party nor any of their Subsidiaries or,
to the best knowledge of any Loan Party, any of their respective predecessors
has disposed of any Hazardous Materials in a manner that has a reasonable
possibility of giving rise to an Environmental Claim having a Material Adverse
Effect;
(10) no unpermitted underground storage tanks or surface
impoundments are on or at any Facility; and
(11) no material Lien in favor of any Person relating to or
in connection with any Environmental Claim has been filed or has been attached
to any Facility.
Notwithstanding anything in this paragraph (o) to the contrary, no
event or condition has occurred with respect to any of the Loan Parties or any
of their Subsidiaries relating to any Environmental Laws or any Release of
Hazardous Materials at any Facility or any other location, including, without
limitation, any matter disclosed on Schedule 7.3(o) annexed hereto, which,
individually, or in the aggregate, has had a Material Adverse Effect.
(p) Employee Matters. There is no strike or work stoppage in
existence or threatened involving any of the Loan Parties or any of their
Subsidiaries that could reasonably be expected to have a Material Adverse
Effect.
(q) Solvency. Each of the Loan Parties is and, upon the
incurrence of any Obligations by the Lessee on any date on which this
representation is made, will be, Solvent.
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<PAGE>
PARTICIPATION AGREEMENT
(r) Disclosure. No representation or warranty of any of the Loan
Parties contained in any Operative Agreement, or in any other document,
certificate or written statement furnished to the Administrative Agent, the
Lenders or the Investors by or at the direction of any Loan Party for use in
connection with the transactions contemplated by the Operative Agreements
contains any untrue statement of a material fact or omits to state a material
fact (known to any of the Loan Parties, in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances in which the same were
made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by any of
the Loan Parties to be reasonable at the time made, it being recognized by the
Administrative Agent, the Lenders and the Investors that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results. There are no facts known (or which should upon the reasonable exercise
of diligence be known) to any Loan Party (other than matters of a general
economic nature) that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect and that have not been disclosed
herein or in such other documents, certificates and statements furnished to the
Administrative Agent, the Lenders and the Investors for use in connection with
the transactions contemplated hereby.
(s) Patents, Trademarks, etc. Each Loan Party and each of their
respective Subsidiaries has obtained and holds in full force and effect all
patents, trademarks, servicemarks, trade names, copyrights and other such
rights, free from burdensome restrictions, which are necessary for the operation
of its business as presently conducted, except to the extent that failure to
obtain and hold in full force and effect such patents, trademarks, servicemarks,
trade names, copyrights and other such rights, free from burdensome
restrictions, would not be reasonably likely to have a Material Adverse Effect.
No material product, process, method, substance, part of other material
presently sold by or employed by such Loan Party or any of its Subsidiaries in
connection with such business infringes any patent, trademark, service mark,
trade name, copyright, license or other right owned by any other Person.
(t) Merger Documents. The Lessee has delivered to the
Administrative Agent, the Lenders and the Investors complete and correct copies
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PARTICIPATION AGREEMENT
of the Merger Documents, in each case as in effect as of the Initial Closing
Date, and of all exhibits and schedules thereto. The Merger Documents have not
been amended, supplemented, restated or otherwise modified on or before the
Initial Closing Date since the date the Merger Documents were first entered
into.
(u) Worker's Compensation Claims. There are no worker's
compensation claims against or relating to any Loan Party that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect.
(v) Permits. Except as disclosed in Schedule 7.3(v) annexed
hereto, each of the Loan Parties, prior to and after giving effect to the
Mergers, has such certificates, permits, licenses, franchises, consents,
approvals, authorizations and clearances that are material to the condition
(financial or otherwise), business or operations of such Loan Party
(collectively the "Permits") and is (and will be immediately after the
consummation of the Transactions) in compliance in all material respects with
all applicable laws as are necessary to own, lease or operate its properties and
to conduct its businesses in the manner as presently conducted and to be
conducted immediately after the consummation of the Merger, and all such Permits
are valid and in full force and effect and will be valid and in full force and
effect immediately upon consummation of the Mergers except to the extent that
the failure of such Permits to be valid and in full force and effect would not
be reasonably likely to have a Material Adverse Effect. Each of the Loan
Parties, prior to and after giving effect to the Transactions, is and will be in
compliance in all material respects with its obligations under such Permits and
no event has occurred that allows, or after notice or lapse of time would allow,
revocation or termination of such Permits, except for any such revocation or
termination which could not reasonably be expected to individually or in the
aggregate have a Material Adverse Effect.
(w) Subsidiaries. All of the Subsidiaries of FMI as of the
Initial Closing Date (other than Insignificant Subsidiaries) are identified in
Schedule 7.3(w) annexed hereto. The capital stock of each of the Subsidiaries of
FMI identified in Schedule 7.3(w) annexed hereto is duly authorized, validly
issued, fully paid and nonassessable, and free and clear of all Liens (except
Permitted Liens) and none of such capital stock constitutes Margin Stock. Each
of the Subsidiaries of FMI identified in Schedule 7.3(w) annexed hereto is a
corporation
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<PAGE>
PARTICIPATION AGREEMENT
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation set forth therein, has all requisite
corporate power and authority to own and operate its properties and to carry on
its business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in each
case except where failure to be so qualified or in good standing or to have such
corporate power and authority has not had and will not have, either individually
or in the aggregate for all such failures, a Material Adverse Effect. Schedule
7.3(w) annexed hereto correctly sets forth for FMI and each of its Subsidiaries
(i) the ownership interest of FMI and each of its Subsidiaries in each of the
Subsid iaries of FMI identified therein, (ii) the jurisdiction of incorporation
of FMI and each such Subsidiary and (iii) whether any such Subsidiary is
inactive.
7.4. Representations and Warranties of the Trust Company on the
Initial Closing Date. The Trust Company represents and warrants to each of the
other parties hereto that:
(a) Due Organization, etc. It is a banking corporation duly
organized and 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 has the corporate power and authority
to act as the trustee under the Trust Agreement and to enter into and perform
the obligations under each of the other Operative Agreements to which Trust
Company or the Owner Trustee, as the case may be, is or will be a party and each
other agreement, instrument and document to be executed and delivered by it on
or before the Initial Closing Date in connection with or as contemplated by each
such Operative Agreement to which the Trust Company or the Owner Trustee, as the
case may be, is or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
performance of each Operative Agreement to which it is a party, either in its
individual capacity or (assuming due authorization, execution and delivery of
the Trust Agreement by the Investor) as the Owner Trustee, as the case may be,
has been duly authorized by all necessary action on its part and neither the
execution and delivery thereof, nor the consummation of the transactions
contemplated thereby, nor compliance by it with any of the terms and provisions
thereof (i) does or will require any approval or consent of any trustee or
holders of any of its
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PARTICIPATION AGREEMENT
indebtedness or obligations, (ii) does or will contravene
any current United States federal law, governmental rule or regulation relating
to its banking or trust powers, (iii) does or will contravene or result in any
breach of or constitute any default under, or result in the creation of any Lien
upon any of its property under, its charter or by-laws, or any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan
or credit agreement or other agreement or instrument to which it is a party or
by which it or its properties may be bound or affected or (iv) does or will
require any Governmental Action by any Governmental Authority of the United
States or the State of Delaware regulating its banking or trust powers.
(c) Trust Company Enforceability, etc. The Trust Agreement and
each other Operative Agreement to which Trust Company or the Owner Trustee, as
the case may be, is a party have been, or on or before the Initial Closing Date
will be, duly executed and delivered by Trust Company or the Owner Trustee, as
the case may be, and, assuming the Trust Agreement is the legal, valid and
binding obligation of the Investors, the Trust Agreement and each such other
Operative Agreement to the extent entered into by the Trust Company constitutes,
or upon execution and delivery will constitute, a legal, valid and binding
obligation enforceable against Trust Company in accordance with the terms
thereof.
(d) Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or threatened by or
against the Trust Company with respect to any of the Operative Agreements or any
of the transactions contemplated hereby or thereby.
7.5. Representations and Warranties of the Loan Parties on Property
Closing Dates. Each of the Loan Parties hereby represents and warrants as of
each Property Closing Date as follows:
(a) Representations and Warranties. The representations and
warranties of the Lessor and the Loan Parties set forth in Section 7.2 and 7.3,
respectively, and in each of the other Operative Agreements are true and correct
in all respects on and as of such Property Closing Date as if made on and as of
such Property Closing Date, except to the extent such representations or
warranties relate solely to an earlier date, in which case such representations
and warranties shall have been true and correct on and as of such earlier date.
Each of the Loan
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PARTICIPATION AGREEMENT
Parties is in compliance with its obligations under the Operative Agreements and
there exists no Default or Event of Default under any of the Operative
Agreements.
(b) No Default. No Default or Event of Default will occur under
any of the Operative Agreements as a result of, or after giving effect to, the
Advance requested by the Requisition on such Property Closing Date.
(c) Recording of Documents. Each of the Deed, the Lease
Supplement, the Memorandum of Lease, the Assignment of Lease, the Consent to the
Assignment of Lease and the Mortgage delivered on such Property Closing Date
will be recorded with the appropriate Governmental Authorities in the order set
forth in this paragraph, and the UCC Financing Statements with
respect to the Property being acquired will be filed with the appropriate Govern
mental Authorities.
(d) Priority of Liens. (i) Upon proper recordation, each
Mortgage, each Supplement to the Assignment of Lease and each Memorandum of
Lease delivered on such Property Closing Date, will constitute a valid and
perfected first lien on each applicable Property and the Improvements located
thereon in an amount not less than the Tranche A/B Property Cost with respect to
such Property, subject only to the Permitted Exceptions, and (ii) upon proper
filing, the Lessor Financing Statements will perfect the Lessor's interest under
the Lease to the extent the Lease is a security agreement governed by Article 9
of the Uniform Commercial Code.
(e) Flood Zone. No portion of any Property being acquired by the
Lessor on such Property Closing Date is located in an area identified as a
special flood hazard area by the Federal Emergency Management Agency or other
applicable agency, or if any such Property is located in an area identified as a
special flood hazard area by the Federal Emergency Management Agency or other
applicable agency, then flood insurance has been obtained for such Property in
accordance with Section 14.2(b) of the Lease and in accordance with the National
Flood Insurance Act of 1968, as amended.
(f) Insurance Coverage. The Lessee maintains insurance coverage
for each Property being acquired by the Lessor on such Property Closing
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PARTICIPATION AGREEMENT
Date which meets the requirements of Section 14.1 of the Lease and all of such
coverage is in full force and effect.
(g) Legal Requirements. Each Property being acquired by the
Lessor on such Property Closing Date complies in all material respects with all
Legal Requirements (including all zoning and land use laws and Environmental
Laws).
(h) Consents, etc. All consents, licenses and building permits
required by all Legal Requirements for construction, completion, occupancy and
operation of each Property being acquired on such Property Closing Date have
been obtained and are in full force and effect or, as to Proper ties being
constructed, will be obtained when required.
(i) Utilities. All utility services and facilities necessary for
the use of the Improvements existing, or to be constructed, on the Land
(including gas, electrical, water and sewage services and facilities) will be
available to each Property being acquired on such Property Closing Date on or
prior to the Outside Completion Date for such Property.
(j) Environmental Matters.
(1) No Property being acquired on such Property Closing Date
contains, or has previously contained, any Hazardous Materials in amounts or
concentrations which (i) constitute or constituted a material violation of, or
(ii) are reasonably likely to give rise to material liability under, any
Environmental Law.
(2) Each Property and all operations at such Property are in
compliance, and have in the last ten years been in compliance, in all material
respects with all applicable Environmental Laws, and there is no material
contamination at, on or under such Property or material violation of any
Environmental Law with respect to such Property or the business operated by FMI,
Smith's or any of their Subsidiaries at the Property.
(3) None of the Loan Parties or any of their Subsidiaries
has received any notice of any material violation, alleged material
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PARTICIPATION AGREEMENT
violation, material non-compliance, material liability or potential material
liability regarding compliance with Environmental Laws with regard to any of the
Properties, nor does any Loan Party have knowledge that any such notice will be
received or is being threatened.
(4) Hazardous Materials have not been transported or
disposed of from any of the Properties in material violation of any
Environmental Law, nor have any Hazardous Materials been generated, treated,
stored or disposed of at, on or under any of the Properties in material
violation of any applicable Environmental Law.
(5) No judicial proceeding or governmental or administrative
action is pending or, to the best knowledge of the Loan Parties, threatened,
under any Environmental Law to which any of the Loan Parties or any of their
respective Subsidiaries is or will be named as a party with respect to any of
the Properties, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
any of the Properties which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
(6) There has been no Release or threat of Release of
Hazardous Materials at or from any of the Properties, or arising from or related
to the operations of the Loan Parties or any of their Subsidiaries in connection
with any of the Properties, in violation of or in amounts or in a manner that
could reasonably be expected to give rise to any material liability under any
Environmental Laws.
(k) Title to the Properties. (1) Except with respect to
Properties subject to Ground Leases, upon the acquisition of each Property on
such Property Closing Date, the Lessor will have good and marketable title to
such Property in fee simple, subject only to the Permitted Exceptions. Upon the
acquisition of each Property on such Property Closing Date, the Lessor will have
the right to grant the Mortgage on such Property. The Lessor will at all times
have good and marketable title to the Improvements, subject only to Permitted
Exceptions.
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PARTICIPATION AGREEMENT
(2) With respect to Properties leased under a Ground Lease,
upon execution of such Ground Lease and other related documents on such Property
Closing Date, the Lessor will have an enforceable lessee's interest enforceable
against the Lessee, in accordance with the terms of such Ground Lease.
(l) Location of the Properties. Each Property being acquired on
such Property Closing Date is located in the continental United States.
(m) Conditions Precedent in Operative Agreements. All conditions
precedent contained in this Agreement and in the other Operative Agreements
relating to the acquisition of a Property by the Lessor have been satisfied in
full or waived.
7.6. Representations and Warranties of the Lessor on Property Closing
Dates. The Lessor hereby represents and warrants as of each Property Closing
Date as follows:
(a) Representations and Warranties; No Default. The
representations and warranties of the Lessor set forth in Section 7.2 and in
each of the other Operative Agreements are true and correct in all respects on
and as of such Property Closing Date as if made on and as of such Property
Closing Date, except to the extent such representations and warranties relate
solely to an earlier date, in which case such representations and warranties
shall have been true and correct as of such earlier date. The Lessor is in
compliance with its obligations under the Operative Agreements and there exists
no Default or Event of Default under any of the Operative Agreements. No Default
or Event of Default attributable to the Lessor will occur under any of the
Operative Agreements as a result of, or after giving effect to, the Advance
requested by the Requisition on such Property Closing Date.
(b) Conditions Precedent in Operative Agreements. All conditions
precedent contained in this Agreement and in the other Operative Agreements to
be satisfied by the Lessor relating to the acquisition of a Property by the
Lessor have been satisfied in full.
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PARTICIPATION AGREEMENT
7.7. Representations and Warranties of the Loan Parties upon each
Funding Date. Each Loan Party hereby represents and warrants as of each Funding
Date as follows:
(a) Representations and Warranties. The representations and
warranties of the Loan Parties set forth in Section 7.2 and 7.3, respectively,
and in each of the other Operative Agreements are true and correct in all
respects on and as of such Funding Date as if made on and as of such Funding
Date, except to the extent such representations or warranties relate solely to
an earlier date, in which case such representations and warranties shall have
been true and correct as of such earlier date. The Loan Parties are in
compliance with their respective obligations under the Operative Agreements and
there exists no Default or Event of Default under any of the Operative
Agreements. No Default or Event of Default will occur under any of the Operative
Agreements as a result of, or after giving effect to, the Advance requested by
the Requisition on such date.
(b) Title to Properties. The Lessor has good and marketable title
to each Property in fee simple (or, with respect to Lease-Purchased Properties,
has a first priority perfected leasehold interest), subject only to the
Permitted Exceptions.
(c) Priority of Liens. Each Mortgage, Supplement to the
Assignment of Lease and Memorandum of Lease constitutes a valid and perfected
first lien on each applicable Property and the Improvements located thereon in
an amount not less than the Tranche A/B Property Cost with respect to such
Property, subject only to Permitted Exceptions.
(d) Insurance. The Construction Agent has obtained insurance
coverage covering each Property which meets the requirements of the Construction
Agency Agreement and the other Operative Agreements before commencing
construction, repairs or Modifications, as the case may be, and such coverage is
in full force and effect.
(e) Property-Related Matters. Each Construction Period Property
will when improved in accordance with the Plans and Specifications, comply, and
each Completed Property complies in all material respects, with all Legal
Requirements (including all applicable zoning and land use laws and
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PARTICIPATION AGREEMENT
Environmental Laws) and Insurance Requirements. The Plans and Specifications
have been or will be prepared in accordance with all applicable Legal
Requirements (including all applicable Environmental Laws and building, plan
ning, zoning and fire codes) and upon completion of the applicable Improvements
in accordance with the Plans and Specifications, such Improvements on the
Construction Period Property will not encroach in any manner onto any adjoining
land (except as permitted by express written easements or variance) and such
Improvements and the use thereof by the Lessee and its agents, assignees,
employees, invitees, lessees, licensees and tenants will comply with all
applicable Legal Requirements (including all applicable Environmental Laws and
building, planning, zoning and fire codes). Upon completion of such Improvements
in accordance with the Plans and Specifications, (i) there will be material no
defects to such Improvements including the plumbing, heating, air conditioning
and electrical systems thereof and (ii) all water, sewer, electric, gas,
telephone and drainage facilities and all other utilities required to adequately
service such Improvements for their intended use will be available pursuant to
adequate permits (including any that may be required under applicable
Environmental Laws). There is no action, suit or proceeding (including any
proceeding in condemnation or eminent domain or under any applicable
Environmental Law) pending or threatened which materially adversely affects the
title to, or the use, operation or value of, the Properties. No fire or other
casualty with respect to the Properties has occurred which fire or other
casualty has had a material adverse effect on the Lessee's ability to perform
its obligations under the Construction Agency Agreement and the other Operative
Agreements. All utilities serving the Properties, or proposed to serve the
Properties in accordance with the Plans and Specifications, are located in, and
in the future will be located in, and vehicular access to the Improvements on
each of the Properties is provided by, either public rights-of-way abutting the
Properties or Appurtenant Rights. All applicable licenses, approvals,
authorizations, consents, permits (including, without limitation, building,
demolition and environmental permits, licenses, approvals, authorizations and
consents), easements and rights-of-way, including proof of dedication, required
for (i) the use, treatment, storage, transport, disposal or disposition of any
Hazardous Material on, at, under or from the Properties during the construction
of the Improvements thereon and the use and operation of the Improvements
following such construction, (ii) the construction of the Improvements in
accordance with the Plans and Specifications and the Construction Agency
Agreement and (iii) the use and operation of the Improvements following such
construction as permitted pursuant to the Lease have been obtained
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from the appropriate Governmental Authorities having jurisdiction or from
private parties.
(f) Lease Requirements. The Improvements when completed, will
comply with all requirements and conditions set forth in the Lease and all other
conditions and requirements of the Operative Documents.
(g) Conditions Precedent Contained in the Operative Agreements.
All conditions precedent contained in this Agreement and in the other Operative
Agreements relating to the relevant Advance have been satisfied in full.
(h) Projected Completion Value. The Property Cost of all
Improvements on each Property as established by the Construction Budget will not
exceed an amount equal to one hundred ten percent (110%) of the Projected
Completion Value.
7.8. Representations and Warranties of the Lessor Upon each Funding
Date. The Lessor hereby represents and warrants as of each Funding Date as
follows:
(a) Representations and Warranties. The representations and
warranties of the Lessor set forth in Section 7.2 and in each of the other
Operative Agreements are true and correct in all respects on and as of such
Funding Date as if made on and as of such Funding Date, except to the extent
such representations and warranties relate solely to an earlier date, in which
case such representations and warranties shall have been true and correct as of
such earlier date. The Lessor is in compliance with its respective obligations
under the Operative Agreements.
(b) Authority of the Lessor. The execution and delivery of each
Operative Agreement delivered by the Lessor on such date and the performance of
the obligations of the Lessor under each Operative Agreement has been duly
authorized by all requisite action of the Lessor.
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PARTICIPATION AGREEMENT
(c) Execution and Delivery by the Lessor. Each Operative
Agreement required to be delivered by the Lessor on such date has been duly
executed and delivered by the Lessor.
(d) Valid and Binding Obligations of the Lessor. Each Operative
Agreement delivered by the Lessor on such date is a legal, valid and binding
obligation of the Lessor, enforceable against the Lessor in accordance with its
terms.
(e) Conditions Precedent contained in the Operative Agreements.
All conditions precedent contained in this Agreement and in the other Operative
Agreements to be satisfied by the Lessor relating to the relevant Advance have
been satisfied in full.
7.9. Representations and Warranties of the Investors Upon Funding
Dates. Each Investor hereby represents and warrants on its own behalf as of each
Funding Date that: (a) the representations and warranties of such Investor set
forth herein and in each of the other Operative Agreements are true and correct
in all respects on and as of such Funding Date as if made on and as of such
Funding Date, except to the extent such representations and warranties
relate solely to an earlier date, in which case such representations and
warranties shall have been true and correct as of such earlier date and (b) such
Investor is in compliance with its obligations under the Operative Agreements.
SECTION 8. PAYMENT OF CERTAIN EXPENSES.
The Lessee agrees, for the benefit of the Investors, the Trust
Company, the Owner Trustee, the Administrative Agent and each of the Lenders,
to:
8.1. Transaction Expenses. On the Initial Closing Date, each Property
Closing Date and each Funding Date, pay, or cause to be paid, all (a) reasonable
fees, expenses and disbursements of each of the Lessor's, the Trust Company's,
the Administrative Agent's, and the Investors' counsel in connection with the
transactions contemplated by the Operative Agreements and incurred in
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PARTICIPATION AGREEMENT
connection with such Initial Closing Date and (b) all reasonable Transaction
Expenses.
8.2. Brokers' Fees and Stamp Taxes. Pay or cause to be paid brokers'
fees for brokers retained by the Loan Parties and any and all stamp, transfer
and other similar taxes, fees and excises, if any, including any interest and
penalties, which are payable in connection with the transactions contemplated by
this Agreement and the other Operative Agreements.
8.3. Certain Fees and Expenses. Pay or cause to be paid (i) the
initial and annual Trust Company's fee and all reasonable out-of-pocket expenses
of the Trust Company and any necessary co-trustees (including reasonable counsel
fees and expenses) or any successor owner trustee, for acting as trustee under
the Trust Agreement, (ii) all reasonable out-of-pocket costs and expenses
incurred by the Loan Parties, the Administrative Agent, the Lenders, the
Investors, the Trust Company or the Lessor (A) in entering into any future
amendments or supplements with respect to any of the Operative Agreements,
whether or not such amendments or supplements are ultimately entered into, (B)
the giving or withholding of waivers of consents hereto or thereto, which have
been requested by the Lessee or (C) in connection with the enforcement or
protection of its rights in connection with the Operative Agreements after the
occurrence of an Event of Default, and (iii) all reasonable out-of-pocket costs
and expenses incurred by the Lessor, the Loan Parties, the Lenders, the
Investors, the Trust Company or the Administrative Agent in connection with any
purchase of any Property by the Lessee pursuant to Section 20 of the Lease.
8.4. Credit Agreement and Related Obligations. (a) Pay, on or prior to
the due date thereof, all costs, fees, indemnities, expenses and other amounts
(other than principal and interest on the Loans, but including breakage costs
and interest on overdue amounts pursuant to Section 2.14 of the Credit Agreement
or otherwise) required to be paid by the Lessor under any Operative Agreement.
(b) Pay the Administrative Agent all fees specified in the Fee
Letter at the time and in the manner required by the Fee Letter, which fees may
not be paid by using the proceeds of the Loans or the Investor Contribution.
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PARTICIPATION AGREEMENT
(c) Pay the Lessor promptly after receipt of notice therefor any
additional amounts payable by the Lessor as Borrower under the Credit Agreement
in respect of Sections 2.13, 2.14 and 2.15 of the Credit Agreement (it being
agreed that the Lessor is, for purposes of this Agreement, a beneficiary of the
provisions of Sections 2.13, 2.14 and 2.15 of the Credit Agreement).
8.5. Trust Agreement and Related Obligations. (a) Pay, before the due
date thereof, all costs, fees, indemnities, expenses and other amounts (other
than principal and interest on the Investor Contributions, but including
breakage costs and interest on overdue amounts pursuant to Section 3.13 of the
Trust Agreement or otherwise) required to be paid by the Owner Trustee under any
Operative Agreement.
(b) Pay the Owner Trustee promptly after receipt of notice
therefor any additional amounts payable by the Owner Trustee in respect of
Sections 3.12, 3.13 and 3.14 of the Trust Agreement (it being agreed that the
Owner Trustee is, for purposes of this Agreement, a beneficiary of the
provisions of Sections 3.12, 3.13 and 3.14 of the Trust Agreement).
8.6. Commitment Fees. Pay to the Administrative Agent for the account
of each Lender the Commitment Fee on each Commitment Fee Payment Date.
8.7. Overdue Rate. If all or a portion of the Investor Yield or any
other amount owed to the Investors shall not be paid when due, such overdue
amount shall bear interest, payable on demand, at a rate per annum equal to the
applicable Overdue Rate, from the date of such non-payment until such amount is
paid in full (as well after as before judgment).
SECTION 9. CERTAIN COVENANTS AND AGREEMENTS.
9.1. Covenants of the Owner Trustee and the Investors. Each of the
Owner Trustee and the Investors hereby agrees that so long as this Agreement and
the other Operative Agreements are in effect:
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PARTICIPATION AGREEMENT
(a) Discharge of Liens. Each of the Investors, the Owner Trustee
and the Trust Company, in its individual capacity, will not create or permit to
exist at any time, and will, at its own cost and expense, promptly take such
action as may be necessary duly to discharge, or to cause to be discharged, all
Lessor Liens on the Properties granted or suffered by it or any of its
Affiliates; provided, however, that the Investors, the Owner Trustee and the
Trust Company shall not be required to so discharge any such Lessor Lien while
the same is being contested in good faith by appropriate proceedings diligently
prosecuted so long as such proceedings shall not involve any material danger of
impairment of the Liens of the Security Documents or of the sale, forfeiture or
loss of, and shall not interfere with the use or disposition of, any Property or
title thereto or any interest therein or the payment of Rent.
(b) Trust Agreement. Without prejudice to any right under the
Trust Agreement of the Trust Company to resign, or the Investors' right under
the Trust Agreement to remove the institution acting as owner trustee, each of
the Investors and the Trust Company hereby agrees with the Lessee and the
Administrative Agent (i) not to terminate or revoke the trust created by the
Trust Agreement except as permitted by the Trust Agreement, (ii) not to amend,
supplement, terminate or revoke or otherwise modify any provision of the Trust
Agreement without the prior written consent of any party adversely affected by
such amendment and (iii) to comply with all of the terms of the Trust Agreement,
the nonperformance of which would adversely affect such party.
(c) Successor Trust Company. The Trust Company or any successor
may resign or be removed by the Investors as owner trustee, a successor owner
trustee may be appointed, and a corporation may become the owner trustee under
the Trust Agreement, only in accordance with the provisions of Article 9 of the
Trust Agreement and with the consent of the Lessee, which consent shall not be
unreasonably withheld or delayed.
(d) Indebtedness; Other Business. The Lessor in its capacity as
the Owner Trustee shall not contract for, create, incur or assume any
indebtedness, or guarantee the indebtedness of any Person, or enter into any
business or other activity, other than pursuant to or under the Operative
Agreements.
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PARTICIPATION AGREEMENT
(e) No Violation. The Investors will not instruct the Owner
Trustee to take any action in violation of the terms of any Operative Agreement.
(f) No Voluntary Bankruptcy. Neither the Investors nor the Owner
Trustee shall (i) commence any case, proceeding or other action under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, arrangement, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or
(ii) seek appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial benefit of its creditors; and
neither the Investors nor the Owner Trustee shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in this paragraph.
(g) Change of Chief Place of Business. The Owner Trustee shall
give prompt notice to the Lessee and the Administrative Agent if the Owner
Trustee's chief place of business or chief executive office, or the office where
the records concerning the accounts or contract rights relating to the Property
are kept, shall cease to be located at the Trust Company's Corporate Trust
Administration office in Wilmington, Delaware or if it shall change its name.
(h) Loan Documents. Provided that no Event of Default is
continuing, none of the Lenders, the Owner Trustee, the Lessee, the
Administrative Agent nor the Investors shall consent to any amendment, supple
ment, waiver or other modification of the terms and provisions of the Credit
Agreement, the Notes or the Security Documents, in each case without the prior
written consent of the Lessee, which consent shall not be unreasonably withheld
or delayed; provided that no such amendment, supplement, waiver or other
modification shall increase the obligations of the Lessee under the Operative
Agreements without the prior written consent of the Lessee.
(i) Disposition of Assets. The Owner Trustee shall not convey,
sell, lease, assign, transfer or otherwise dispose of any of its property,
business or assets, whether now owned or hereafter acquired, except to the
extent expressly authorized by the Operative Agreements.
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PARTICIPATION AGREEMENT
(j) Compliance with Operative Agreements. The Owner Trustee shall
at all times observe and perform all of the covenants, conditions and
obligations required to be performed by it under each Operative Agreement to
which it is a party.
9.2. Amendment of Certain Documents. The Administrative Agent, for
itself on behalf of the Lenders, hereby agrees for the benefit of the Owner
Trustee and the Investors that it will not amend, alter or otherwise modify, or
consent to any amendment, alteration or modification of, the Lease or the Credit
Agreement (including the definitions of any terms used in such document) without
the prior written consent of the Owner Trustee and the Investors, as the case
may be, if such amendment, alteration or modification would adversely affect the
interests of the Owner Trustee or the Investors.
9.3. Proceeds of Casualty. The Lessor and the Investors agree, for the
benefit of the Administrative Agent and the Lenders, that if at any time either
the Lessor or the Investors receive any proceeds as a result, directly or
indirectly, of any Casualty with respect to the Properties which the Lessor is
entitled to retain and hold in accordance with the terms of the Lease, the
Lessor and the Investors agree that they will promptly deposit such amounts in
an account with the Administrative Agent. The Lessor and the Investors also
agree that they will execute and deliver such documents and instruments as the
Administrative Agent may request in order to grant the Administrative Agent, for
the benefit of the Lenders, a valid and perfected, first priority security
interest in such proceeds.
9.4. Affirmative Covenants of the Lessee. The Lessee covenants that:
(a) Financial Statements and Other Information. The Lessee will
furnish to the Administrative Agent and each Lender:
(i) within 100 days after the end of each fiscal year of the
Lessee, its audited consolidated balance sheet and related statements of opera
tions, stockholders' equity and cash flows as of the end of and for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on by Deloitte & Touche LLP or other independent
public accountants of recognized national standing (without a "going concern" or
like qualification or
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PARTICIPATION AGREEMENT
exception and without any qualification or exception as to the scope of such
audit) to the effect that such consolidated financial statements present fairly
in all material respects the financial condition and results of operations of
the Lessee and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP;
(ii) within 55 days after the end of each of the first three
fiscal quarters of each fiscal year of the Lessee, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash flows
as of the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Responsible
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Lessee and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP, subject to normal year-end audit
adjustments and the absence of footnotes;
(iii) concurrently with any delivery of financial statements
under clause (i) or (ii) above, a Compliance Certificate (i) certifying as to
whether a Default has occurred and, if a Default has occurred, specifying the
details thereof and any action taken or proposed to be taken with respect
thereto, (ii) setting forth reasonably detailed calculations (x) demonstrating
compliance with Section 9.5(j) and (y) establishing the Applicable Margin, and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 6.1(w) and, if any such change has occurred, specifying the effect of
such change on the financial statements accompanying such certificate;
(iv) concurrently with any delivery of financial statements under
clause (i) above, a certificate of the accounting firm that reported on such
financial statements stating whether they obtained knowledge during the course
of their examination of such financial statements of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);
(v) promptly after the same become publicly available, copies of
all periodic and other reports, proxy statements and other materials filed by
the Lessee or any Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commis-
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PARTICIPATION AGREEMENT
sion, or with any national securities exchange, or distributed by the Lessee to
its shareholders generally, as the case may be; and
(vi) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Lessee or any Subsidiary, or compliance with the terms of this Agreement,
as the Administrative Agent or any Lender or Investor may reasonably request.
(b) Notices of Material Events. The Lessee will furnish to the
Administrative Agent and each Lender and Investor prompt written notice of the
following:
(i) the occurrence of any Default upon actual knowledge of a
Responsible Officer of the Lessee;
(ii) the filing or commencement of any action, suit or proceeding
by or before any arbitrator or Governmental Authority against or affecting the
Lessee or any Affiliate thereof that, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect;
(iii) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be expected to
result in material liability of the Lessee and its Subsidiaries; and
(iv) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Responsible Officer of the Lessee setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
(c) Existence; Conduct of Business. The Lessee will, and will
cause each of its Subsidiaries to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business;
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PARTICIPATION AGREEMENT
provided that the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 9.5(d).
(d) Payment of Obligations. The Lessee will, and will cause each
of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if
not paid, could result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) the Lessee or such
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.
(e) Maintenance of Properties; Insurance. The Lessee will, and
will cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, and (b) maintain, with financially sound and
reputable insurance companies, insurance in such amounts and against such risks
(and having such deductibles and self-insurance) as are customarily maintained
by companies engaged in the same or similar businesses operating in the same or
similar locations.
(f) Books and Records; Inspection Rights. The Lessee will, and
will cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Lessee will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender or Investor, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested.
(g) Compliance with Laws. The Lessee will, and will cause each of
its Subsidiaries to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property, including without
limitation ERISA and all Environmental Laws, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
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PARTICIPATION AGREEMENT
(h) Use of Proceeds. The proceeds of the Loans will be used only
for the purposes set forth in Section 2.1. No part of the proceeds of any Loan
will be used, whether directly or indirectly, for any purpose that entails a
violation of any of the Regulations of the Federal Reserve Board, including
Regulations G, U and X.
(i) Subsidiary Guarantees; Pledge Agreement. The Lessee shall
cause each Person which becomes a Subsidiary (other than Insignificant
Subsidiaries) after the Initial Closing Date to execute and deliver to the
Administrative Agent a Subsidiary Guarantee and a Joinder Agreement with respect
to the Pledge Agreement and the Intercreditor Agreement together with such
officer's certificates, resolutions and other assurances related thereto as the
Administrative Agent shall reasonably request within 10 days of such Person
becoming a Subsidiary.
(j) Store Land Property. The Lessee shall deliver to each of the
Lessor and the Administrative Agent, not less than ten (10) days prior to the
Construction Commencement Date with respect to any Store Land Property, the
following:
(i) the construction schedule prepared by or at the direction of
the Construction Agent showing the estimated (i) timetable for completion of the
Improvements to be constructed on such Property, which timetable will project
(A) commencement of construction of such Improvements within twelve months of
the acquisition or leasing under a Ground Lease, as the case may be, by the
Lessor of such Property and (B) completion of such Improvements within 12 months
of the Construction Commencement Date for such Property; and (ii) timetable for
the making of Loans in respect of such Property;
(ii) a copy of the Budget with respect to the construction of the
Improvements to be constructed on such Property, in form and substance
satisfactory to the Administrative Agent and the Lessor, based upon which Budget
the Available Commitments will be sufficient to complete the Improvements
contemplated to be constructed on such Property; and
(iii) the Plans and Specifications with respect to the
Improvements to be constructed on such Property.
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PARTICIPATION AGREEMENT
9.5. Negative Covenants of the Lessee. The Lessee covenants that:
(a) Subsidiary Indebtedness. The Lessee will not permit any
Subsidiary to create, incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness owed to the Lessee or to another Subsidiary;
(ii) Indebtedness existing on the date hereof; provided that to
the extent any item of such Indebtedness exceeds $5,000,000, or the aggregate of
all such Indebtedness exceeds $25,000,000, such Indebtedness shall be identified
in Schedule 9.5(a);
(iii) Indebtedness secured by Permitted Liens;
(iv) Capitalized Lease Obligations not to exceed $100,000,000;
(v) Indebtedness outstanding when a Person becomes a Subsidiary
or is merged or consolidated with another Subsidiary, provided that such
Indebtedness exists at the time such Person becomes a Subsidiary and is not
created in contemplation of or in connection with such Person becoming a
Subsidiary;
(vi) Indebtedness in respect of letters of credit issued to
support the purchase of goods by the applicable Subsidiary in the ordinary
course of business;
(vii) Indebtedness in respect of commercial letters of credit
issued to support liabilities of a Subsidiary relating to worker's compensation,
judgments pending appeal (and as to which there is no Event of Default under any
Operative Agreement), construction or similar liabilities in the ordinary course
of business;
(viii) Suretyship Liabilities constituting guarantees of the
Lessee's unsecured Indebtedness, provided such Indebtedness is not senior to the
obligations of the Lessee under the Corporate Loan Documents and such guarantees
contain language in substantially the form attached as Exhibit E hereto; and
Suretyship Liabilities constituting guarantees of the Lessee's Synthetic Lease
Facilities,
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PARTICIPATION AGREEMENT
provided such guarantees contain language in substantially the form attached as
Exhibit E hereto; and
(ix) Indebtedness not otherwise permitted by the foregoing
clauses of this Section 9.5(a) so long as the sum, without duplication, of (x)
all such Indebtedness and (y) all Indebtedness secured by Liens permitted solely
by Section 9.5(b)(vi) does not exceed 5.0% of Tangible Net Assets.
(b) Liens. The Lessee will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(i) Permitted Liens;
(ii) any Lien on any property or asset of the Lessee or any
Subsidiary existing on the date hereof (including Liens created pursuant to the
Corporate Loan Documents and the Security Documents) and set forth in Schedule
9.5(b); provided that (i) such Lien shall not apply to any other property or
asset of the Lessee or any Subsidiary and (ii) such Lien shall secure only those
obligations which it secures on the date hereof;
(iii) any Lien existing on any property or asset prior to the
acquisition thereof by the Lessee or any Subsidiary or existing on any property
or asset of any Person that becomes a Subsidiary after the date hereof prior to
the time such Person becomes a Subsidiary; provided that (i) such Lien is not
created in contemplation of or in connection with such acquisition or such
Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply
to any other property or assets of the Lessee or any Subsidiary and (iii) such
Lien shall secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as the case may be;
(iv) Liens on fixed or capital assets acquired, constructed or
improved by the Lessee or any Subsidiary; provided that (i) such security
interests and the Indebtedness secured thereby are incurred prior to or within
180 days after such acquisition or the completion of such construction or
improvement, (ii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing or
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PARTICIPATION AGREEMENT
improving such fixed or capital assets and (iii) such security interests shall
not apply to any other property or assets of the Lessee or any Subsidiary;
(v) Liens on assets acquired after the date hereof under
Synthetic Lease Facilities; and
(vi) Liens not otherwise permitted by the foregoing clauses of
this Section 9.5(b), securing Indebtedness of the Lessee or its Subsidiaries, so
long as the sum, without duplication, of (i) all such Indebtedness and (ii) all
Indebtedness permitted solely by Section 9.5(a)(ix) does not exceed 5.0% of
Tangible Net Assets.
(c) Modifications of Merger Documents. The Lessee shall not, and
shall not permit any of its Subsidiaries to amend, modify or waive, or permit
the amendment, modification or waiver of, any provision of the Merger Documents.
(d) Fundamental Changes.
(i) The Lessee will not, and will not permit any Material
Subsidiary to, merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) all or
any substantial part of its assets, or all or substantially all of the stock of
any of its Material Subsidiaries (in each case, whether now owned or hereafter
acquired), or liquidate or dissolve, except that, if at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be
continuing (i) any Subsidiary may merge into the Lessee in a transaction in
which the Lessee is the surviving corporation, (ii) any Subsidiary may merge
into any Subsidiary in a transaction in which the surviving entity is a
Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose
of its assets to the Lessee or to another Subsidiary and (iv) any Subsidiary may
liquidate or dissolve if the Lessee determines in good faith that such
liquidation or dissolution is in the best interests of the Lessee and is not
materially disadvantageous to the Lenders and Investors.
(ii) The Lessee will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the
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type conducted by the Lessee and its Subsidiaries on the date of execution of
this Agreement and businesses reasonably related thereto.
(e) Investments, Loans, Advances, Suretyship Liabilities and
Acquisitions. The Lessee will not, and will not permit any of its Subsidiaries
to, purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, incur Suretyship Liabilities in respect of any obligations
of, or make or permit to exist any investment or any other interest in, any
other Person, or purchase or otherwise acquire (in one transaction or a series
of transactions) any assets of any other Person constituting a business unit,
except:
(i) Permitted Investments;
(ii) investments by the Lessee and its Subsidiaries in its
Subsidiaries including Persons which, as a result of such investment, become
Subsidiaries;
(iii) loans or advances made, or Suretyship Liabilities incurred,
by the Lessee to or in respect of any Subsidiary and made or incurred by any
Subsidiary to or in respect of the Lessee or any other Subsidiary;
(iv) Suretyship Liabilities with respect to Hedging Agreements
permitted by Section 9.5(f);
(v) Suretyship Liabilities constituting Debt permitted by Section
9.5(a) which are (i) in respect of commercial paper, or (ii) Suretyship
Liabilities other than in respect of commercial paper in aggregate amount not to
exceed $200,000,000 at any one time;
(vi) Suretyship Liabilities created under the Corporate Loan
Documents;
(vii) Suretyship Liabilities with respect to Surety Instruments
incurred in the ordinary course of business; and
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(viii) investments existing on the date hereof; provided that to
the extent any such investment exceeds $5,000,000, or the aggregate of all such
investments exceeds $25,000,000, such investments shall be identified in
Schedule 9.5(e);
(ix) investments by the Lessee and its Subsidiaries not otherwise
permitted by the foregoing clauses of this Section 9.5(e), so long as such
additional investments made in reliance on this clause (e) do not exceed
$200,000,000 in the aggregate at any time.
(f) Hedging Agreements. The Lessee will not, and will not permit
any of its Subsidiaries to, enter into any Hedging Agreement, other than Hedging
Agreements entered into in the ordinary course of business to hedge or mitigate
risks to which the Lessee or any Subsidiary is exposed in the conduct of its
business or the management of its liabilities.
(g) Restricted Payments. The Lessee will not, and will not permit
any of its Subsidiaries to, declare or make, or agree to pay or make, directly
or indirectly, any Restricted Payment, except that, so long as no Event of
Default has occurred and is continuing, (a) the Lessee may declare and pay
dividends with respect to its capital stock payable solely in additional shares
of its common stock, (b) the Lessee may make Restricted Payments pursuant to and
in accordance with stock option plans or other benefit plans for management or
employees of the Lessee and its Subsidiaries, (c) any Subsidiary may declare and
pay Restricted Payments to the Lessee or any other Subsidiary, and (d) the
Lessee and its Subsidiaries may pay cash dividends and repurchase their
respective stock from any Person which is not the Lessee or another Subsidiary
so long as on the date of payment or repurchase (i) such cash dividends and
stock repurchases do not exceed $150,000,000 in any single fiscal year, and (ii)
the total of such cash dividends and stock repurchases during the Term does not
exceed an aggregate amount of $200,000,000 plus 40% of the Lessee's and its
Subsidiaries' aggregate net income earned commencing with the fiscal year ending
January 31, 1999, and each fiscal year thereafter; provided that a payment in
connection with the repurchasing of certain warrants from the shareholders of
FFL in an amount not to exceed $20,000,000 shall not be counted against the
amounts set forth in clauses (i) and (ii) above.
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(h) Transactions with Affiliates. Except during the continuance
of an Event of Default, the Lessee will not, and will not permit any of its
Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except (a) at
prices and on terms and conditions not less favorable to the Lessee or such
Subsidiary than could be obtained on an arm's-length basis from unrelated third
parties, (b) transactions between or among the Lessee and its wholly owned
Subsidiaries not involving any other Affiliate and (c) any Restricted Payment
permitted by Section 9.5(g).
(i) Restrictive Agreements. The Lessee will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon the ability of any Subsidiary to pay dividends or
other distributions with respect to any shares of its capital stock or to make
or repay loans or advances to the Lessee or any other Subsidiary or to incur
Suretyship Liabilities in respect of Indebtedness of the Lessee or any other
Subsidiary; provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement and the other Operative
Agreements, (ii) the foregoing shall not apply to restrictions and conditions
(x) contained in the Other Corporate Loan Documents or (y) existing on the date
hereof and identified on Schedule 9.5(i) (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition) and (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder
and provided further that such restrictions and conditions cannot be imposed at
any time that a Default has occurred and is continuing.
(j) Financial Covenants.
(A) Leverage Ratio. The Lessee shall not permit its Leverage
Ratio to exceed, at the end of any fiscal quarter ending on or during any period
listed below, the ratio set forth opposite such period; provided that there
shall be added to Consolidated EBITDA for purposes of determining the Leverage
Ratio the following amounts: (i) with respect to the two fiscal quarters ended
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August 15, 1998, $25,000,000 and (ii) in addition to clause (i) above, with
respect to the fiscal quarter ended November 7, 1998, $12,500,000:
Period Ratio
------ -----
From and including August 15, 1998 5:00 to 1.00
to and including January 29, 1999
From and including January 30, 1999 4.50 to 1.00
to and including January 28, 2000
From and including January 29, 2000 4.00 to 1.00
and therafter
(B) Fixed Charge Coverage Ratio. The Lessee shall not permit
the Fixed Charge Coverage Ratio to be less than, at the end of any fiscal
quarter ending on or during any period listed below, the ratio set forth
opposite such period:
Period Ratio
------ -----
From and including August 15, 1998 1.75 to 1.00
to and including January 29, 1999
From and including January 30, 1999 2.00 to 1.00
to and including February 2, 2001
From and including February 3, 2001 2.25 to 1.00
and thereafter
(k) Unconditional Purchase Obligations. The Lessee shall not, and
shall not permit any Subsidiary to, enter into or be a party to any contract for
the purchase of materials, supplies or other property or services, if such
contract requires that payments be made by it regardless of whether or not
delivery is ever made of such materials, supplies or other property or services.
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(l) Fiscal Year; Fiscal Quarter. The Lessee shall not, and shall
not permit any of its Subsidiaries to, change its fiscal year or any of its
fiscal quarters.
SECTION 10. CREDIT AGREEMENT AND TRUST AGREEMENT.
10.1. Lessee's Credit Agreement Rights. Notwithstanding anything to
the contrary contained in the Credit Agreement, the Administrative Agent, the
Lessee, the Investors and the Owner Trustee hereby agree that:
(a) the Lessee shall have the right to give the notices referred
to in Section 2.3 of the Credit Agreement;
(b) the Lessee shall have the right to convert or continue Loans
in accordance with Section 2.6 of the Credit Agreement;
(c) the Lessee shall receive copies of all notices delivered to
the Lessor under the Credit Agreement and the other Operative Agreements and
such notices will be effective as set forth in Section 13.2;
(d) the Lessee shall have the right to select Interest Periods in
accordance with the terms of the Credit Agreement;
(e) the Lessee shall have the right to give notice of prepayment
of the Loans in accordance with the Credit Agreement;
(f) the Lessee shall have the right to cure, to the extent
susceptible to a cure under the terms of the applicable Operative Agreement, any
Default or Event of Default of the Lessor under the Credit Agreement;
(g) except during the continuance of an Event of Default, the
Lessee shall have the right to approve any successor Administrative Agent
pursuant to Section 7.9 of the Credit Agreement;
(h) except during the continuance of an Event of Default, the
Lessee shall have the right, on behalf of the Lessor, to select any person or
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persons (including the Lessee) to whom funds may be paid at the discretion of
the Lessor in accordance with Sections 8.1 and 8.2 of the Credit Agreement;
(i) the Lessee shall have the right to consent to any assignment
by a Lender, if required pursuant to Section 9.5 of the Credit Agreement;
(j) the Lessee shall have the right to designate the portion of
the Loans on which interest is due and payable for purposes of the definition of
"Allocated Interest";
(k) the Lessee shall have the right to request that another
lending office be designated pursuant to Section 2.16 of the Credit Agreement;
and
(l) without limiting the foregoing clauses (a) through (k), and
in addition thereto, (x) the Owner Trustee shall not exercise any right under
the Credit Agreement without giving the Lessee at least ten (10) Business Days'
prior written notice (or such shorter period as may be required but in no case
less than three (3) Business Days) and, following such notice, the Owner Trustee
shall take such action, or forbear from taking such action, as the Lessee shall
direct and (y) the Lessee shall have the right to exercise any other right of
the Owner Trustee under the Credit Agreement upon not less than two (2) Business
Days' prior written notice from the Lessee to the Owner Trustee. Notwithstanding
the foregoing, the Investors shall retain the exclusive right to direct the
Owner Trustee with respect to the exercise of the Excepted Rights.
10.2. Lessee's Trust Agreement Rights. Notwithstanding anything to the
contrary contained in the Trust Agreement, the Administrative Agent, the Lessee,
the Investors and the Owner Trustee hereby agree that:
(a) the Lessee shall have the right to give the notices referred
to in Section 3.3 of the Trust Agreement;
(b) the Lessee shall have the right to convert or continue
Investor Contributions in accordance with Section 3.6 of the Trust Agreement;
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(c) the Lessee shall receive copies of all notices delivered to
the Owner Trustee under the Trust Agreement and the other Operative Agreements
and such notices shall not be effective until received;
(d) the Lessee shall have the right to select Interest Periods in
accordance with the terms of the Trust Agreement;
(e) the Lessee shall have the right to approve any successor
Owner Trustee pursuant to Section 9.1 of the Trust Agreement;
(f) the Lessee shall have the right to request that another
contributing office be designated pursuant to Section 3.15 of the Trust
Agreement; and
(g) without limiting the foregoing clauses (a) through (f), and
in addition thereto, (x) the Owner Trustee shall not exercise any right under
the Credit Agreement without giving the Lessee at least ten (10) Business Days'
prior written notice (or such shorter period as may be required but in no case
less than three (3) Business Days) and, following such notice, the Owner Trustee
shall take such action, or forbear from taking such action, as the Lessee shall
direct and (y) the Lessee shall have the right to exercise any other right of
the Owner Trustee under the Credit Agreement upon not less than two (2) Business
Days' prior written notice from the Lessee to the Owner Trustee. Notwithstanding
the foregoing, the Investors shall retain the exclusive right to direct the
Owner Trustee with respect to the exercise of the Excepted Rights.
SECTION 11. TRANSFER OF INTEREST.
11.1. Restrictions on Transfer. The Investors may not, directly or
indirectly, assign, convey or otherwise transfer any of their respective right,
title or interest in or to the Trust Estate or the Trust Agreement without the
consent of the Administrative Agent and the Lessee, which consent shall not be
unreasonably withheld or delayed; provided that during the continuance of an
Event of Default no such consent of the Lessee shall be required. Any transfer
by the Investors as above provided, shall be effected pursuant to an agreement
in form and substance reasonably satisfactory to the Administrative Agent, the
Investors, the Trust
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Company, the Lessee and their respective counsel, and any transfer restrictions
set forth on the Investor Certificate.
11.2. Effect of Transfer. From and after any transfer effected in
accordance with this Section 11, the transferor shall be released, to the extent
of such transfer, from its liability hereunder and under the other documents to
which it is a party in respect of obligations to be performed on or after the
date of such transfer; provided, however, that any transferor Investor shall
remain liable under the Trust Agreement to the extent that the transferee
Investor shall not have assumed the obligations of the transferor Investor
thereunder. Upon any transfer by an Investor as above provided, any such
transferee shall assume the obligations of the transferring Investor, and shall
be deemed the "Investor" for all purposes of such documents and each reference
herein to the transferor shall thereafter be deemed a reference to such
transferee for all purposes, except as provided in the preceding sentence.
Notwithstanding any transfer of all or a portion of the transferor's interest as
provided in this Section 11, the transferor shall be entitled to all benefits
accrued and all rights vested prior to such transfer including rights to
indemnification under any such document.
SECTION 12. INDEMNIFICATION.
12.1. General Indemnity. The Lessee, whether or not any of the
transactions contemplated hereby shall be consummated, hereby assumes liability
for and agrees to defend, indemnify and hold harmless each Indemnified Person on
an After Tax Basis from and against any Claims which may be imposed on, incurred
by or asserted against an Indemnified Person in any way relating to or arising
or alleged to arise out of (a) the financing, refinancing, purchase, acceptance,
rejection, ownership, design, construction, delivery, acceptance, nondelivery,
leasing, subleasing, possession, use, operation, repair, modification,
transportation, condition, sale, return, repossession (whether by summary
proceedings or otherwise), or any other disposition of the Properties or any
part thereof; (b) any latent or other defects in any Property whether or not
discoverable by an Indemnified Person or the Lessee; (c) any violation of
Environmental Laws, Environmental Claims or other loss of or damage relating to
the Properties; (d) the Operative Agreements, or any transaction contemplated
thereby; (e) any breach by the Lessee of any of its representations or
warranties under the Operative Agree-
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PARTICIPATION AGREEMENT
ments or failure by the Lessee to perform or observe any covenant or agreement
to be performed by it under any of the Operative Agreements; and (f) personal
injury, death or property damage relating to any Property, including Claims
based on strict liability in tort; but in any event excluding (x) Claims to the
extent such Claims arise solely out of events occurring after the expiration of
the Term (and any hold over period pursuant to Section 22 of the Lease) and
after the Lessee's discharge of all obligations under the Lease or (y) any Taxes
including any Claim (or any portion of a Claim) made upon an Indemnified Person
by a third party that at its origin is based upon a Tax (other than amounts
necessary to make any payments hereunder on an After Tax Basis, where the Lessee
is otherwise specifically required to make such payments on an After Tax Basis).
The Lessee shall be entitled to control, and shall assume full responsibility
for the defense of, any Claim; provided, however, that any or all of the Owner
Trustee, the Trust Company, the Administrative Agent and the Investors named in
such Claim, may each retain separate counsel at the expense of the Lessee in the
event of and to the extent of a material conflict. The Lessee and each
Indemnified Person agree to give each other prompt written notice of any Claim
hereby indemnified against but the giving of any such notice by an Indemnified
Person shall not be a condition to the Lessee's obligations under this Section
12.1, except to the extent failure to give such notice materially prejudices the
Lessee's rights hereunder. After an Indemnified Person has been fully
indemnified for a Claim pursuant to this Section 12.1, and so long as no Event
of Default under the Lease shall have occurred and be continuing, the Lessee
shall be subrogated to any right of such Indemnified Person with respect to such
Claim. None of the Indemnified Persons shall settle a Claim without the consent
of the Lessee, which consent shall not be unreasonably withheld or delayed.
12.2. General Tax Indemnity. (a) The Lessee shall pay and assume
liability for, and hereby agrees to indemnify, protect and defend the applicable
Property and all Tax Indemnitees, and hold them harmless against, all
Impositions on an After Tax Basis.
(b) Provided that no Default or Event of Default has occurred and
is continuing, if any Tax Indemnitee obtains a refund or a reduction in a
liability (but only if such reduction relates to a Tax not otherwise
indemnifiable hereunder and has not been taken into account in determining the
amount of a payment on an After Tax Basis) as a result of any Imposition paid or
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reimbursed by the Lessee (in whole or in part), such Tax Indemnitee shall
promptly pay to the Lessee the lesser of (x) the amount of such refund or
reduction in liability and (y) the amount previously so paid or advanced by the
Lessees, in each case net of reasonable expenses not already paid or reimbursed
by the Lessees.
(c) (i) Subject to the terms of Section 12.2(g), the Lessee shall
pay or cause to be paid all Impositions directly to the taxing authorities where
feasible and otherwise to the Tax Indemnitee, as appropriate, and the Lessee
shall at its own expense, upon such Tax Indemnitee's reasonable request, furnish
to such Tax Indemnitee copies of official receipts or other satisfactory proof
evidencing such payment.
(ii) In the case of Impositions for which no contest is
conducted pursuant to Section 12.2(g) and which the Lessee pays directly to the
taxing authorities, the Lessee shall pay such Impositions on or prior to the
latest time permitted by the relevant taxing authority for timely payment. In
the case of Impositions for which the Lessee reimburses a Tax Indemnitee, the
Lessee shall do so within twenty (20) days after receipt by the Lessee of demand
by such Tax Indemnitee describing in reasonable detail the nature of the
Imposition and the basis for the demand (including the computation of the amount
payable), but in no event shall the Lessee be required to pay such reimbursement
prior to thirty (30) days before the latest time permitted by the relevant
taxing authority for timely payment. In the case of Impositions for which a
contest is conducted pursuant to Section 12.2(g), the Lessee shall pay such
Impositions or reimburse such Tax Indemnitee for such Impositions, to the extent
not previously paid or reimbursed pursuant to subsection (a), on or prior to the
latest time permitted by the relevant taxing authority for timely payment after
conclusion of all contests under Section 12.2(g).
(iii) Impositions imposed with respect to a Property for a
billing period during which the Lease expires or terminates with respect to such
Property (unless the Lessee has exercised the Purchase Option with respect to
the Property) shall be adjusted and prorated on a daily basis between the Lessee
and the Lessor, whether or not such Imposition is imposed before or after such
expiration or termination and each party shall pay or reimburse the other for
each party's pro rata share thereof.
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(iv) At the Lessee's request, the amount of any
indemnification payment by the Lessee pursuant to subsection (a) shall be
verified and certified by an independent public accounting firm mutually
acceptable to the Lessee and the Tax Indemnitee. The fees and expenses of such
independent public accounting firm shall be paid by the Lessee.
(d) The Lessee shall be responsible for preparing and filing any
real and personal property or ad valorem tax returns in respect of the
Properties. In case any other report or tax return shall be required to be made
with respect to any obligations of the Lessee under or arising out of subsection
(a) and of which the Lessee has knowledge, the Lessee, at its sole cost and
expense, shall notify the relevant Tax Indemnitee of such requirement and
(except if such Tax Indemnitee notifies the Lessee that such Person intends to
file such report or return) (A) to the extent required or permitted by and
consistent with Legal Requirements, make and file in its own name such return,
statement or report; and (B) in the case of any other such return, statement or
report required to be made in the name of such Tax Indemnitee, advise such Tax
Indemnitee of such fact and prepare such return, statement or report for filing
by such Tax Indemnitee or, where such return, statement or report shall be
required to reflect items in addition to any obligations of the Lessee under or
arising out of subsection (a), provide such Tax Indemnitee at the Lessee's
expense with information sufficient to permit such return, statement or report
to be properly made with respect to any obligations of the Lessee under or
arising out of subsection (a). Such Tax Indemnitee shall, upon the Lessee's
request and at the Lessee's expense, provide any data maintained by such Tax
Indemnitee (and not otherwise within the control of the Lessee) with respect to
the Properties which the Lessee may reasonably require to prepare any required
tax returns or reports.
(e) If as a result of the payment or reimbursement by the Lessee
of any expenses of the Lessor or the payment of any Transaction Expenses
incurred in connection with the transactions contemplated by the Operative
Agreements, the Lessor, the Investors or any of their Affiliates, shall suffer a
net increase in any federal, state or local income tax liability, the Lessee
shall indemnify the Lessor, the Investors or their respective Affiliates
(without duplication of any indemnification required by subsection (a)) on an
After Tax Basis for the amount of such increase. The calculation of any such net
increase shall take into account any current or future tax savings realized by
the Lessor, or the Investors
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PARTICIPATION AGREEMENT
or such Affiliate, in respect thereof, as well as any interest, penalties and
additions to tax payable by the Lessor, or the Investors or such Affiliate, in
respect thereof.
(f) As between the Lessee and the Lessor, the Lessee shall be
responsible for, and the Lessee shall indemnify and hold harmless the Trust
Company in its individual capacity and the Lessor (without duplication of any
indemnification required by subsection (a)) on an After Tax Basis against, any
obligation for United States withholding taxes imposed in respect of the
interest payable on the Loans to the extent, but only to the extent, Lessor has
actually paid funds to a taxing authority with respect to such withholding taxes
and only to the extent the Trust Company is not entitled to withhold such funds
from the payment on the Loans (and, if the Lessor receives a demand for such
payment from any taxing authority, the Lessee shall discharge such demand on
behalf of the Lessor);
(g) (i) If a written claim is made against any Tax Indemnitee or
if any proceeding shall be commenced against such Tax Indemnitee (including a
written notice of such proceeding), for any Impositions, such Tax Indemnitee
shall promptly notify the Lessee in writing and shall not take action with
respect to such claim or proceeding without the consent of Lessee for thirty
(30) days after the issuance of such notice by the Lessee; provided, that, in
the case of any such claim or proceeding, if action shall be required by law or
regulation to be taken prior to the end of such 30-day period, such Tax
Indemnitee shall, in such notice to the Lessee, inform the Lessee, and no action
shall be taken with respect to such claim or proceeding without the consent of
Lessee two days before the end of such shorter period; provided, further, that
the failure of such Tax Indemnitee to give the notices referred to in this
sentence shall not diminish the Lessee's obligation hereunder except to the
extent such failure precludes the Lessee from contesting all or part of such
claim.
(ii) If, within thirty (30) days of receipt of such notice
from the Tax Indemnitee (or such shorter period as the Tax Indemnitee has
notified Lessee is required by law or regulation for the Tax Indemnitee to
commence such contest), Lessee shall request in writing that such Tax Indemnitee
contest such Imposition, the Tax Indemnitee shall, at the expense of Lessee, in
good faith conduct and control such contest (including, without limitation, by
pursuit of appeals) relating to the validity, applicability or amount of such
impositions (provided, however, that the Tax Indemnitee may request Lessee to
conduct
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and control such contest if possible or permissible under applicable law or
regulation) by, in the sole discretion of the Person conducting and controlling
such contest, (1) resisting payment thereof, (2) not paying the same except
under protest, if protest is necessary and proper, (3) if the payment be made,
using reasonable efforts to obtain a refund thereof in appropriate
administrative and judicial proceedings, or (4) taking such other action as is
reasonably requested by Lessee from time to time. Notwithstanding the foregoing,
(A) if such contest involves a tax other than a tax on net income and can be
pursued independently from any other proceeding involving a tax liability of
such Tax Indemnitee, the Tax Indemnitee, at the Lessee's request, shall allow
the Lessee (and the Lessee shall be obligated) to conduct and control such
contest and (B) in the case of any contest, the Tax Indemnitee may request the
Lessee to conduct and control such contest (with Stoel Rives LLP, or other
counsel to be selected by the Lessee and consented to by such Tax Indemnitee,
such consent not to be unreasonably withheld; provided that any Tax Indemnitee
may retain separate counsel, the reasonable fees and expenses of which will be
the expense of the Lessee in the event of a material conflict) by, in the sole
discretion of the Person conducting and controlling such contest, (i) resisting
payment thereof, (ii) not paying the same except under protest, if protest is
necessary and proper, (iii) if the payment be made, using reasonable efforts to
obtain a refund thereof in appropriate administrative and judicial proceedings
and (iv) taking such other action as is reasonably requested by the Lessee from
time to time.
(iii) The party controlling any contest shall consult in
good faith with the non-controlling party and shall keep the non-controlling
party reasonably informed as to the conduct of such contest; provided that all
decisions ultimately shall be made in the sole discretion of the controlling
party. The parties agree that a Tax Indemnitee may at any time decline to take
further action with respect to the contest of any Imposition and may settle such
contest if such Tax Indemnitee shall waive its rights to any indemnity from
Lessee that otherwise would be payable in respect of such claim (and any future
claim by any taxing authority with respect to other taxable periods that are
based, in whole or in part, upon the resolution of such claim) and shall pay to
Lessee any amount previously paid or advanced by Lessee pursuant to this Section
12.2 by way of indemnification or advance for the payment of an Imposition, and
no other then future liability of the Lessee is likely with respect to such
Imposition, other than expenses of such contest.
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(iv) Notwithstanding the foregoing provisions of this
Section 12.2, a Tax Indemnitee shall not be required to take any action and
Lessee shall not be permitted to contest any Impositions in its own name or that
of the Tax Indemnitee unless (A) Lessee shall have agreed to pay and shall pay
to such Tax Indemnitee on demand and on an After Tax Basis all reasonable costs,
losses and expenses that such Tax Indemnitee may incur in connection with
contesting such Impositions, including, without limitation, all reasonable
legal, accounting and investigatory fees and disbursements, (B) the amount of
the potential indemnity (taking into account all similar or logically related
claims that have been or could be raised in any audit involving such Tax
Indemnitee for which Lessee may be liable to pay an indemnity under this Section
12.2) is more than $25,000, (C) the Tax Indemnitee shall have reasonably
determined that the action to be taken will not result in any material danger of
sale, forfeiture or loss of any Property, or any part thereof or interest
therein, and will not interfere with the payment of Rent, and will not result in
risk of criminal liability, (D) if such contest shall involve the payment of the
Imposition prior to the contest, Lessee shall provide to the Tax Indemnitee an
interest-free advance in an amount equal to the Imposition that the Tax
Indemnitee is required to pay (with no additional net after-tax cost to such Tax
Indemnitee), (E) Lessee shall have provided to such Tax Indemnitee an opinion of
independent tax counsel selected by the Lessee and reasonably satisfactory to
such Tax Indemnitee stating that a reasonable basis exists to contest such claim
(or, in the case of an appeal of an adverse determination, an opinion of such
counsel to the effect that there is substantial authority for that the position
asserted in such appeal), (F) no Event of Default shall have occurred and be
continuing, and (G) in the case of a claim that must be pursued in the name of a
Tax Indemnitee (or an Affiliate thereof), the Lessee must be financially able to
pay all of its outstanding obligations, including the amount of the indemnity
obligation to the Tax Indemnitee. In no event shall a Tax Indemnitee be required
to appeal an adverse judicial determination to the United States Supreme Court.
In addition, a Tax Indemnitee shall not be required to contest any claim in its
name (or that of an Affiliate) if the subject matter thereof shall be of a
continuing nature and shall have previously been decided adversely by a court of
competent jurisdiction pursuant to the contest provisions of this Section 12.2,
unless there shall have been a change in law (or interpretation thereof) and the
Tax Indemnitee shall have received, at the Lessee's expense, an opinion of
independent tax counsel selected by the Tax Indemnitee and reasonably acceptable
to the Lessee stating that as a
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result of such change in law (or interpretation thereof), it is more likely than
not that the Tax Indemnitee will prevail in such contest.
(v) Nothing contained in this Section 12.2 shall give any
Loan Party or any other Participant any right to inspect the books and records
of any Lender or Investor or shall require any Lender or any Investor to
disclose its books and records to any Loan Party or any other Participant.
SECTION 13. MISCELLANEOUS.
13.1. Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Agreements, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Agreement, the transfer of the
Properties to the Trust, the construction of any Improvements, any disposition
of any interest of the Trust in the Properties or the Improvements or any
interest of the Investors in the Trust, the payment of the Loans and any
disposition thereof and shall be and continue in effect notwithstanding any
investigation made by any party and the fact that any party may waive compliance
with any of the other terms, provisions or conditions of any of the Operative
Agreements. Except as otherwise expressly set forth herein or in other Operative
Agreements, the indemnities of the parties provided for in the Operative
Agreements shall survive the expiration or termination of any thereof.
13.2. Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person to be effective shall be in writing (including by facsimile transmission)
and shall be deemed to have been duly given or made (a) when delivered by hand,
(b) one Business Day after delivery to a nationally recognized courier service
specifying overnight delivery, (c) three Business Days after being deposited in
the mail, certified or registered postage prepaid or (d) in the case of
facsimile notice, when received addressed to such Person as indicated:
67
<PAGE>
PARTICIPATION AGREEMENT
If to any Loan Party, to its
representative at: Fred Meyer, Inc.
3800 SE 22nd Avenue
PO Box 42121
Portland, Oregon 97242
Attention: James C. Aalberg
Vice President and Corporate Treasurer
Telecopier No.: (503) 797-5299
With a copy of any default
notices to: Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, Oregon 97204
Attention: Gary R. Barnum, Esq.
Telecopier No.: (503) 220-2480
If to the Owner Trustee, to it at:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Telecopier No.: (302) 651-8882
If to the Administrative
Agent, to it at: Bankers Trust Company
130 Liberty Street
New York, New York 10006
Telecopy: (212) 250-7351
Attn: Deal Administrator
From time to time any party may designate a new address a facsimile number for
purposes of notice hereunder by notice to each of the other parties hereto. It
is understood and agreed that the delivery of copies of notices to counsel as
set forth
68
<PAGE>
PARTICIPATION AGREEMENT
above is for courtesy purposes only and any failure to deliver such copy shall
not constitute failure with respect to any obligation to provide notices
hereunder.
13.3. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
13.4. Amendments and Termination. Except as provided in the
Intercreditor Agreement, this Agreement may not be amended, terminated,
supplemented, waived or modified without the prior written consent of the
parties hereto, it being understood and agreed that (except as specified in the
Credit Agreement) the consent of the Required Lenders shall suffice to evidence
the consent of the Lenders to any such amendment, termination, supplement,
waiver or modification.
13.5. Headings, etc.. The Table of Contents and headings of the
various Sections and Subsections of this Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
13.6. Parties in Interest. Except as expressly provided herein, none
of the provisions of this Agreement are intended for the benefit of any Person
except the parties hereto.
13.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
13.8. Jurisdiction; Consent to Service of Process. (a) Each of the
Loan Parties hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action
69
<PAGE>
PARTICIPATION AGREEMENT
or proceeding may be heard and determined in such New York State or, to the
extent permitted by law, in such Federal court. Each of the Loan Parties agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that
the Administrative Agent, the Investors or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement against any of the
Loan Parties or their properties in the courts of any jurisdiction.
(b) Each of the Loan Parties hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any court referred to in paragraph (a) of this Section. Each of the Loan Parties
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each of the Loan Parties irrevocably consents to service of
process in the manner provided for notices in Section 13.2 hereof. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
13.9. WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOT
SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH A
JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 13.9 HAVE
BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NO
EXCEPTIONS. EACH LOAN PARTY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL
AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
70
<PAGE>
PARTICIPATION AGREEMENT
PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE LESSOR, THE ADMINISTRATIVE
AGENT, THE INVESTORS AND EACH OF THE LENDERS ENTERING INTO THIS PARTICIPATION
AGREEMENT AND EACH SUCH OTHER OPERATIVE AGREEMENT.
13.10. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13.11. Liability Limited. The Lessee and the Investors each
acknowledge and agree that the Trust Company is (except as otherwise expressly
provided herein or therein) entering into this Agreement and the other Operative
Agreements to which it is a party (other than the Trust Agreement), solely in
its capacity as trustee under the Trust Agreement and not in its individual
capacity and that the Trust Company shall not be liable or accountable under any
circumstances whatsoever in its individual capacity for or on account of any
statements, representations, warranties, covenants or obligations stated to be
those of the Owner Trustee, except for its own gross negligence or willful
misconduct and as otherwise expressly provided herein or in the other Operative
Agreements.
13.12. Rights of Lessee. Notwithstanding any provision of the
Operative Agreements, if at any time all obligations (i) of the Owner Trustee
under the Credit Agreement and the Security Documents and (ii) of the Lessee
under the Operative Agreements have in each case been satisfied or discharged in
full, then the Lessee shall be entitled to (a) terminate the Lease (to the
extent not previously terminated) and (b) receive all amounts then held under
the Operative Agreements and all proceeds with respect to any Property. Upon the
fulfillment of the obligations contained in clauses (i) and (ii) above, the
Lessor shall transfer to the Lessee all of its right, title and interest in and
to the Properties (to the extent not previously transferred to the Lessee in
accordance with the Lease) and any amounts or proceeds referred to in the
foregoing clause (b) shall be paid over to the Lessee.
13.13. Further Assurances. The parties hereto shall promptly cause to
be taken, executed, acknowledged or delivered, at the sole expense of the
71
<PAGE>
PARTICIPATION AGREEMENT
Lessee, all such further acts, conveyances, documents and assurances as the
other parties may from time to time reasonably request in order to carry out and
effectuate the intent and purposes of this Agreement, the other Operative
Agreements and the transactions contemplated hereby and thereby (including,
without limitation, the preparation, execution and filing of any and all Uniform
Commercial Code financing statements and other filings or registrations which
the parties hereto may from time to time request to be filed or effected). The
Lessee, at its own expense, shall take such action as may be reasonably
requested in order to maintain and protect all security interests provided for
hereunder or under any other Operative Agreement.
13.14. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
13.15. No Representation or Warranty. Nothing contained herein, in any
other Operative Agreement or in any other materials delivered to the Lessee in
connection with the transactions contemplated hereby or thereby shall be deemed
a representation or warranty by the Investors, the Administrative Agent, any
Lender or the Arrangers or any of their Affiliates as to the proper accounting
treatment, legal treatment or tax treatment that should be afforded to the Lease
and the Lessor's ownership of the Properties, and the Investors, the
Administrative Agent and the Arrangers expressly disclaim any representation or
warranty with respect to such matters.
13.16. OREGON LEGAL NOTICE. WITHOUT LIMITING THE VALIDITY OF THE
CHOICE OF NEW YORK LAW PROVIDED HEREIN, UNDER OREGON LAW, MOST AGREEMENTS,
PROMISES AND COMMITMENTS MADE BY THE LENDERS AFTER THE RESTATEMENT DATE OF THE
ACT SPECIFIED HEREIN CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDERS
TO BE ENFORCEABLE. THE ACT SPECIFIED HEREIN MEANS CHAPTER 967 OREGON LAWS 1989,
THE EFFECTIVE DATE OF WHICH WAS OCTOBER 3, 1989.
72
<PAGE>
PARTICIPATION AGREEMENT
13.17. WASHINGTON STATUTORY NOTICE. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
73
<PAGE>
PARTICIPATION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
FMS TRUST 1997-1, a Delaware Business
Trust, as Lessor
By WILMINGTON TRUST COMPANY, not
individually but solely as Owner Trustee
By: DAVID A. VANASKEY
-------------------------------------
Name: David A. Vanaskey
Title: Assistant Vice President
S-1
<PAGE>
PARTICIPATION AGREEMENT
WILMINGTON TRUST COMPANY, not in its
individual capacity, except to the extent
expressly set forth herein, but solely as
Owner Trustee
By: DAVID A. VANASKEY
-------------------------------------
Name: David A. Vanaskey
Title: Assistant Vice President
S-2
<PAGE>
PARTICIPATION AGREEMENT
FRED MEYER, INC., as Lessee and
Construction Agent
By: JAMES C. AALBERG
-------------------------------------
Name: James C. Aalberg
Title: Vice President, Treasurer
S-3
<PAGE>
PARTICIPATION AGREEMENT
SOCIETE GENERALE FINANCIAL CORPORATION,
as Investor
By: JOHN A. CASTELLANO
-------------------------------------
Name: John A. Castellano
Title: Vice President
S-4
<PAGE>
PARTICIPATION AGREEMENT
BANKERS TRUST COMPANY, as Administrative
Agent and as a Lender
By: GINA S. THOMPSON
-------------------------------------
Name: Gina S. Thompson
Title: Vice President
S-5
<PAGE>
PARTICIPATION AGREEMENT
THE CHASE MANHATTAN BANK, as Syndication
Agent and as a Lender
By: LAURIE B. PERPER
-------------------------------------
Name: Laurie B. Perper
Title: Vice President
S-6
<PAGE>
PARTICIPATION AGREEMENT
NATIONSBANK OF TEXAS, N.A., as Co-
Documentation Agent and as a Lender
By: CHARLES F. LILYGREN
-------------------------------------
Name: Charles F. Lilygren
Title: Senior Vice Pesident
S-7
<PAGE>
PARTICIPATION AGREEMENT
SALOMON BROTHERS HOLDING CO INC., as
Co-Documentation Agent and as a Lender
By: CHAD A. LEAT
-------------------------------------
Name: CHAD A. LEAT
Title: Managing Director
S-8
<PAGE>
PARTICIPATION AGREEMENT
ABN AMRO BANK N.V.
as a Lender
By: DAVID MCGINNIS
-------------------------------------
Name: David McGinnis
Title: Vice President
By: JAMES J. RICE
-------------------------------------
Name: James J. Rice
Title: Vice President
S-9
<PAGE>
PARTICIPATION AGREEMENT
MARINE MIDLAND BANK,
as a Lender
By: GINA SIDORSKY
-------------------------------------
Name: Gina Sidorsky
Title: Authorized Signatory
S-10
<PAGE>
PARTICIPATION AGREEMENT
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: TIMOTHY P. STREB
-------------------------------------
Name: Timothy P. Streb
Title: Vice President
S-11
<PAGE>
PARTICIPATION AGREEMENT
WACHOVIA BANK,N.A.,
as a Lender
By: JOHN A. WHITNER
-------------------------------------
Name: John A. Whitner
Title: Senior Vice President
S-12
<PAGE>
PARTICIPATION AGREEMENT
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Lender
By: STEPHEN J. MCGUINNESS
-------------------------------------
Name: Stephen J. McGuinness
Title: Authorized Signatory
S-13
<PAGE>
PARTICIPATION AGREEMENT
BANK OF MONTREAL,
as a Lender
By: /s/ R.W. CAMM
-------------------------------------
Name: R.W. Camm
Title: Managing Director
S-14
<PAGE>
PARTICIPATION AGREEMENT
DLJ CAPITAL FUNDING, INC.,
as a Lender
By: STEPHEN P. HICKEY
-------------------------------------
Name: Stephen P. Hickey
Title: Managing Director
S-15
<PAGE>
PARTICIPATION AGREEMENT
MORGAN STANLEY SENIOR FUNDING, INC.,
as a Lender
By: MICHAEL T. MCLAUGHLIN
-------------------------------------
Name: M. McLaughlin
Title: Principal
S-17
<PAGE>
PARTICIPATION AGREEMENT
WELLS FARGO BANK, N.A.,
as a Lender
By: ALFRED ARTIS
-------------------------------------
Name: Alfred Artis
Title: VP
By: DONALD A. HARTMANN, JR.
-------------------------------------
Name: Donald A. Hartmann, Jr.
Title: SVP
S-18
<PAGE>
PARTICIPATION AGREEMENT
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender
By: PAUL E. RIGBY
-------------------------------------
Name: Paul E. Rigby
Title: Managing Director
S-19
<PAGE>
PARTICIPATION AGREEMENT
TRANSAMERICA LIFE INSURANCE AND ANNUITY
COMPANY, as a Lender
By: JOHN M. CASPARIAN
-------------------------------------
Name: John M. Casparian
Title: Investment Officer
S-20
<PAGE>
PARTICIPATION AGREEMENT
THE MITSUBISHI TRUST AND BANKING
CORPORATION, as a Lender
By: T. HAYASHI
-------------------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
S-21
<PAGE>
PARTICIPATION AGREEMENT
ROYAL BANK OF CANADA,
as a Lender
By: J. BOTHAMLEY
-------------------------------------
Name: Julie Bothamley
Title: Senior Manager
S-22
<PAGE>
PARTICIPATION AGREEMENT
THE SUMITOMO TRUST AND BANKING CO. LTD.,
LOS ANGELES AGENCY, as a Lender
By: ELEANOR CHAN
-------------------------------------
Name: Eleanor Chan
Title: Manager & Vice President
S-23
<PAGE>
PARTICIPATION AGREEMENT
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE, as a Lender
By: ANTHONY ROCK
-------------------------------------
Name: Anthony Rock
Title: Vice President
By: BRIAN O'LEARY
-------------------------------------
Name: Brian O'Leary
Title: Vice President
S-24
<PAGE>
PARTICIPATION AGREEMENT
KEYBANK NATIONAL ASSOCIATION,
as a Lender
By: MARY K. YOUNG
-------------------------------------
Name: Mary K. Young
Title: Commercial Banking Officer
S-25
<PAGE>
PARTICIPATION AGREEMENT
FIRST SECURITY BANK, N.A.,
as a Lender
By: JUDY CALLISTER
-------------------------------------
Name: Judy Callister
Title: Vice President
S-26
<PAGE>
PARTICIPATION AGREEMENT
FIRSTRUST BANK,
as a Lender
By: EDWARD D'ANCONA
-------------------------------------
Name: Edward D'Ancona
Title: Chief Banking Officer
S-27
<PAGE>
PARTICIPATION AGREEMENT
US BANK OF OREGON,
as a Lender
By: GAYLE BURGESS
-------------------------------------
Name: Gayle Burgess
Title: Asst. Relationship Manager
S-28
<PAGE>
PARTICIPATION AGREEMENT
THE BANK OF NEW YORK,
as a Lender
By: CHARLOTTE SOHN
-------------------------------------
Name: Charlotte Sohn
Title: Vice President
S-29
<PAGE>
PARTICIPATION AGREEMENT
ZIONS FIRST NATIONAL BANK,
as a Lender
By: RICHARD P. JACKSON
-------------------------------------
Name: Richard P. Jackson
Title: V.P.
S-30
<PAGE>
PARTICIPATION AGREEMENT
FIRST UNION NATIONAL BANK,
as a Lender
By: ED ROSS
-------------------------------------
Name: Ed Ross
Title: Senior Vice President
S-31
<PAGE>
PARTICIPATION AGREEMENT
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Lender
By: MARIA VICKROY-PERALTA
-------------------------------------
Name: Maria Vickroy-Peralta
Title: Vice President
S-32
<PAGE>
PARTICIPATION AGREEMENT
BANQUE PARIBAS,
as a Lender
By: BRIAN A. STAPF
-------------------------------------
Name: Brian A. Stapf
Title: Vice President
By: LEE S. BUCKNER
-------------------------------------
Name: Lee S. Buckner
Title: Managing Director
S-33
<PAGE>
PARTICIPATION AGREEMENT
MERITA BANK,
as a Lender
By: ANDREW CARSTENSEN
-------------------------------------
Name: Andrew Carstensen
Title: VP
S-34
<PAGE>
PARTICIPATION AGREEMENT
BANK LEUMI U.S.A.,
as a Lender
By: JACQUES DELVOYE
-------------------------------------
Name: Jacques Delvoye
Title: Vice President
S-36
<PAGE>
Annex A
Rules of Usage and Definitions
Rules of Usage
--------------
The following rules of usage shall apply to this Annex A and the
Operative Agreements (and each appendix, schedule, exhibit and annex to the
foregoing) unless otherwise required by the context or unless otherwise defined
therein:
(a) Except as otherwise expressly provided, any definitions defined
herein or in any other document shall be equally applicable to the singular
and plural forms of the terms defined.
(b) Except as otherwise expressly provided, references in any document
to articles, sections, paragraphs, clauses, annexes, appendices, schedules
or exhibits are references to articles, sections, paragraphs, clauses,
annexes, appendices, schedules or exhibits in or to such document.
(c) The headings, subheadings and table of contents used in any
document are solely for convenience of reference and shall not constitute a
part of any such document nor shall they affect the meaning, construction
or effect of any provision thereof.
(d) References to any Person shall include such Person, its successors
and permitted assigns and transferees.
(e) Except as otherwise expressly provided, reference to any agreement
means such agreement as amended, modified, extended or supplemented from
time to time in accordance with the applicable provisions thereof.
(f) Except as otherwise expressly provided, references to any law
includes any amendment or modification to such law and any rules or
regulations issued thereunder or any law enacted in substitution or
replacement therefor.
(g) When used in any document, words such as "hereunder", "hereto",
"hereof" and "herein" and other words of like import shall, unless the
context clearly indicates to the contrary, refer to the whole of the
applicable document and not to any particular article, section, subsection,
paragraph or clause thereof.
<PAGE>
ANNEX A - RULES OF USAGE
(h) References to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof
the rule of ejusdem generis shall not be applicable to limit a general
statement, followed by or referable to an enumeration of specific matters,
to matters similar to those specifically mentioned.
(i) Each of the parties to the Operative Agreements and their counsel
have reviewed and revised, or requested revisions to, the Operative
Agreements, and the usual rule of construction that any ambiguities are to
be resolved against the drafting party shall be inapplicable in the
construing and interpretation of the Operative Agreements and any
amendments or exhibits thereto.
Definitions
-----------
"ABR" means, for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime
Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" means
the rate of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its principal office in
New York City (the Prime Rate not being intended to be the lowest rate of
interest charged by the Administrative Agent in connection with extensions
of credit to debtors); each change in the Prime Rate shall be effective on
the date such change is publicly announced as effective. "Federal Funds
Effective Rate" means, for any day, the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions received by the
Administrative Agent from three Federal funds brokers of recognized
national standing selected by it. If for any reason the Administrative
Agent shall have determined that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of
the Administrative Agent to obtain sufficient quotations in accordance with
the terms thereof, the ABR shall be determined without regard to clause (b)
of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in
the ABR due to a change in the Prime Rate or the Federal Funds Effective
Rate shall be effective on the effective date of such change in the Prime
Rate or the Federal Funds Effective Rate, respectively.
A-2
<PAGE>
ANNEX A - RULES OF USAGE
"ABR Contributions" means Investor Contributions the rate of interest
applicable to which is based upon the ABR.
"ABR Loans" means Loans the rate of interest applicable to which is
based upon the ABR.
"Acceleration" has the meaning set forth in Section 6.1 of the Credit
Agreement.
"Account" has the meaning set forth in Section 8.1(a) of the Credit
Agreement.
"Administrative Agent" means Bankers Trust Company, a New York banking
corporation, in its capacity as administrative and collateral agent for the
Lenders under the Operative Agreements, or any successor administrative and
collateral agent appointed in accordance with the terms of the Credit
Agreement.
"Advance" means an advance of Loans by the Lenders and an advance of
the Investor Contribution by the Investors, in each case pursuant to the
Participation Agreement, to pay Project Costs.
"Affiliate" means, when used with respect to a specified person,
another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control
with the person specified; provided that, in any event, any Person that
owns, directly or indirectly, 10% or more of the securities having ordinary
voting power for the election of directors or other governing body of a
corporation that has more than 100 record holders of such securities, or
10% or more of the partnership or other ownership interests of any other
Person that has more than 100 record holders of such interests, will be
deemed to be an Affiliate of such corporation, partnership or other Person;
provided further that the Trust Company shall not be considered to be an
Affiliate of any of the Investors, the Trust or the Owner Trustee and none
of the Investors, the Trust nor the Owner Trustee shall be considered to be
an Affiliate of the Trust Company.
"After Tax Basis" means, with respect to any payment to be received,
the amount of such payment increased so that, after deduction of the amount
of all taxes required to be paid by the recipient (less any tax savings
realized and the present value of any tax savings projected to be realized
by the recipient as a result of the payment of the indemnified amount) with
respect to the receipt by the recipient of such amounts, such increased
payment (as so reduced) is equal to the payment otherwise required to be
made.
A-3
<PAGE>
ANNEX A - RULES OF USAGE
"Agents" means the Syndication Agent and the Administrative Agent.
"Aggregate Tranche A Percentage" means, as of any date of
determination, a fraction, expressed as a percentage, equal to the sum of
the aggregate of the Maximum Residual Guarantee Amounts with respect to
each of the Properties as of such date divided by the aggregate of the
Tranche A/B Property Cost of each of the Properties as of such date.
"Allocated Interest" means, with respect to any Construction Period
Property, as of any Scheduled Interest Payment Date, the amount of interest
due and payable on such date with respect to a portion of the Loans (which
portion shall be designated by the Borrower by written notice to the
Administrative Agent (an "Allocation Notice")) having an aggregate
principal amount equal to the Tranche A/B Construction Property Cost of
such Property as of such date.
"Allocation Notice" has the meaning defined in the definition of
"Allocated Interest" above.
"Applicable Level" means the level determined with reference to the
following chart:
Level Leverage Ratio Rating
---- -------------- -------
I less than or equal to 3.0x greater than or equal to BBB+
or Baa1
II greater than 3.0x BBB or Baa2
III greater than 3.5x BBB- or Baa3
IV greater than 4.0x BB+ or Ba1
V greater than 4.5x less than or equal to BB or Ba2
For purposes of the foregoing, (i) prior to the Compliance Certificate
Date, the Applicable Level shall be Level IV; (ii) from and after the
Compliance Certificate Date, the Applicable Level shall be the Level
corresponding to the Leverage Ratio set forth in the Compliance Certificate
then delivered; (iii) except as provided in (i) above, at any time of
determination, the Applicable Level shall be the Level corresponding to the
Leverage Ratio as set forth in the most recently delivered Compliance
Certificate (it being understood and agreed that if the Lessee shall not
have delivered the most recently due Compliance Certificate within the time
period specified in Section 9.4(a)(iii), the Applicable Level shall be
Level V until such Compliance Certificate is delivered) and the senior
unsecured long term debt rating of the Lessee from S&P and Moody's (for
purposes of this definition, the "Rating"); (iv) in the event the Leverage
Ratio and the Rating do not fall within the same Level, the Applicable
Level shall be
A-4
<PAGE>
ANNEX A - RULES OF USAGE
the higher (Level I being the highest) of the two Levels; and (v) in
the event the rating from S&P and the rating from Moody's do not fall
within the same Level, the applicable Rating will be based upon the higher
(Level I being the highest) of the two ratings, except that, in the event
one of the two ratings is two or more Levels higher than the other, the
applicable Rating shall be determined by reference to the Level next lower
than the higher of the two ratings. If any rating established or deemed to
be established by Moody's or S&P shall be changed (other than as a result
of a change in the rating system of Moody's or S&P), such change shall be
effective as of the date on which such change is first announced by the
rating agency making such change. Each such change shall take effect on the
effective date of such change and shall end on the date immediately
preceding the effective date of the next such change. If the rating system
of S&P or Moody's shall change prior to the Maturity Date, the Lessee and
the Lenders shall negotiate in good faith to amend the references to
specific ratings in this definition to reflect such changed rating system,
and pending agreement on another Applicable Level the Rating shall be
determined by reference to the rating provided by the non-changing rating
agency. If the Lessee does not have a senior long term unsecured debt
rating or implied rating from either Moody's or S&P, the Applicable Level
shall be determined by reference to the Leverage Ratio only.
"Applicable Margin" means, with respect to any Commitment Fee or
Eurodollar Loan, the applicable number of basis points per annum as set
forth below based on the Applicable Level:
Applicable Margin
Applicable Level Commitment Fee for Eurodollar Loans
---------------- -------------- --------------------
I 20.0 62.5
II 25.0 75.0
III 25.0 87.5
IV 30.0 100.0
V 37.5 125.0
The Applicable Margin for the ABR shall be 0 at any time during which
the Applicable Level is Level IV or above. At any time during which the
Applicable Level of the Borrower is Level V, the Applicable Margin for the
ABR shall be 25 basis points.
"Appraisal" means, with respect to each Property, an appraisal,
prepared by a reputable independent appraiser reasonably acceptable to the
Administrative Agent, of such Property both (i) as-is and (ii) as if
improved in accordance with the Plans and Specifications for such Property,
which in the judgment of counsel to the Agents, as of the applicable
Property Closing Date, complies with all of the provisions of the
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ANNEX A - RULES OF USAGE
Financial Institutions Reform, Recovery and Enforcement Act of 1989,
as amended, the rules and regulations adopted pursuant thereto, and all
other legal requirements applicable to the Lenders. The appraisal shall
state the amount of the Projected Completion Value of such improvements
located on such Property and an estimate of the value thereof at the end of
the Term of the Lease, and the value of the Land (if any) expressed in
dollars as well as a percentage of the Property Cost for such Property.
"Appraisal Procedure" has the meaning given such term in Section 21.4
of the Lease.
"Appurtenant Rights" means, with respect to each Property, (i) all
agreements, easements, rights of way or use, rights of ingress or egress,
privileges, appurtenances, tenements, hereditaments and other rights and
benefits at any time belonging or pertaining to the Land or the
Improvements, including, without limitation, the use of any streets, ways,
alleys, vaults or strips of land adjoining, abutting, adjacent or
contiguous to the Land and (ii) all permits, licenses and rights, whether
or not of record, appurtenant to the Land.
"Arrangers" means CSI and BTAB.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.5 of the Credit Agreement), and accepted
by the Administrative Agent, in the form of Exhibit B to the Credit
Agreement.
"Assignment of Lease" means the Assignment of Leases and Rents dated
as of the Initial Closing Date from the Lessor in favor of the
Administrative Agent for the benefit of the Lenders, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof or of any other Operative Agreement.
"Available Commitment" means, as to any Lender at any time, an amount
equal to the excess, if any, of (a) the amount of such Lender's Commitment
over (b) the aggregate principal amount of all Loans made by such Lender
and unpaid as of such date.
"Basic Rent" means, the sum of (i) the Tranche A Basic Rent, (ii) the
Tranche B Basic Rent and (iii) the Investor Yield, calculated as of the
applicable date on which Basic Rent is due.
"Benefitted Lender" has the meaning set forth in Section 9.7 of the
Credit Agreement.
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ANNEX A - RULES OF USAGE
"Board" means the Board of Governors of the Federal Reserve System of
the United States (or any successor).
"Borrower" means Lessor, in its capacity of borrower under the Credit
Agreement.
"BTAB" means BT Alex. Brown, a Delaware corporation.
"Budget" means with respect to each Property, the estimated Project
Cost to be incurred in connection therewith, attached as Schedule I to the
Construction Agency Agreement, as modified from time to time in accordance
with the terms of the Construction Agency Agreement.
"Budgeted Total Property Cost" means, at any date of determination,
with respect to any Construction Period Property, an amount equal to the
aggregate amount which the Construction Agent in good faith expects to be
expended in order to achieve Completion with respect to such Construction
Period Property (including amounts expected to be expended to pay Allocated
Interest with respect to such Construction Period Property).
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City or Wilmington, Delaware are
authorized or required by law to close, and in the case of a Eurodollar
Loan, any day on which banks are open for dealings in dollar deposits in
the New York interbank market.
"Capital Expenditures" means amounts paid or Debt incurred by the
Borrower or any of its Subsidiaries in connection with its purchase or
lease of assets that would be required to be capitalized and shown on its
balance sheet in accordance with GAAP.
"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is, or is required to be, accounted for as a
capital lease on the balance sheet of that Person.
"Capitalized Lease Obligations" means all obligations under Capital
Leases of any Person, in each case taken at the amount thereof accounted
for as liabilities in accordance with GAAP.
"Casualty" means any damage or destruction of all or any portion of a
Property as a result of fire or other casualty.
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ANNEX A - RULES OF USAGE
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of-1980, 42 U.S.C. ss.ss. 9601 et seq., as amended by the
Superfund Amendments and Reauthorization Act of 1986, and all rules and
regulations thereunder.
"Change of Control" means (a) the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person or group (within
the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date
hereof), of shares representing more than 331/3% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of the
Lessee; or (b) occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Lessee by Persons who were neither
(i) nominated by the board of directors of the Lessee nor (ii) appointed by
directors so nominated.
"Claims" means any and all actions, suits, penalties, claims and
demands and reasonable out-of-pocket liabilities, losses, costs and
expenses (including, without limitation, reasonable attorney's fees and
expenses) of any nature whatsoever arising therefrom.
"Closing Date" means the Initial Closing Date and each Property
Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute thereto.
"Co-Documentation Agents" means Nationsbank of Texas, N.A., and
Salomon Brothers Holding Co Inc.
"Collateral" means all assets of the Lessor, now owned or hereafter
acquired, upon which a Lien is purported to be created by the Security
Documents.
"Commitment" means, as to any Lender, the obligation of such Lender to
make Loans to the Borrower under the Credit Agreement in an aggregate
principal amount at any one time outstanding not to exceed the amount set
forth opposite such Lender's name on Schedule 1.1 of the Credit Agreement.
"Commitment Fee" means (i) prior to the Compliance Certificate Date,
an amount equal to 0.30% per annum, and (ii) from and after the Compliance
Certificate Date, a percentage per annum determined in accordance with the
definition of "Applicable Margin," in either case payable quarterly in
arrears on each Commitment Fee Payment Date and calculated based on a year
of 360 days by the Lessee to the
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ANNEX A - RULES OF USAGE
Administrative Agent on the average daily unused portion of the
aggregate Commitments from and including the Initial Closing Date to but
excluding the Maturity Date.
"Commitment Fee Payment Date" means the last Business Day of each of
March, June, September and December and the Maturity Date or such earlier
date as the Commitments shall terminate as provided in the Credit
Agreement.
"Commitment Percentage" means, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments has expired or
terminated, the percentage which the aggregate principal amount of such
Lender's Loans then outstanding constitutes of the aggregate principal
amount of the Loans then outstanding).
"Commitment Period" means the period from and including the Closing
Date to but not including the earliest of (i) the Completion Date for all
of the Properties, (ii) the Outside Completion Date for all of the
Properties and (iii) the date on which an Acceleration occurs.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Lessee within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Lessee and which is treated as a single employer under Section 414(b) or
(c) of the Code or, solely for purposes of determining liability under
Section 412 of the Code, which is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code.
"Completed Property" means a Property acquired by the Lessor which
contains Improvements that are suitable as of the Property Closing Date for
occupancy by the Lessee and the operation by such Lessee of its business
thereon.
"Completion" means, with respect to any Improvements, (x) the earlier
of (i) the date on which substantial completion of the Improvements shall
have been achieved in accordance with the Plans and Specifications for such
Improvements and in compliance with all material Legal Requirements and
Insurance Requirements and (ii) the date on which the respective Property
is first opened for business; provided that the Construction Agent shall
have delivered an Officer's Certificate to the Administrative Agent
certifying to such Completion.
"Completion Date" means, with respect to a Property, the date on which
Completion has occurred.
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ANNEX A - RULES OF USAGE
"Compliance Certificate" means a certificate signed by a Responsible
Officer of the Borrower setting forth a reasonably detailed calculation of
the Applicable Margin.
"Compliance Certificate Date" means the date upon which the
Administrative Agent receives the Compliance Certificate for the second
full fiscal quarter following the Initial Closing Date.
"Condemnation" means any taking or sale of the use, access, occupancy,
easement rights or title to any Property or any part thereof, wholly or
partially (temporarily or permanently), by or on account of any actual
eminent domain proceeding or other taking of action by any Person having
the power of eminent domain, including an action by a Governmental
Authority to change the grade of, or widen the streets adjacent to, any
Property, or alter the pedestrian or vehicular traffic flow to any Property
so as to result in a change in access to such Property, or by or on account
of an eviction by paramount title or any transfer made in lieu of any such
proceeding or action.
"Consent to Assignment" means the Lessee's Consent to Assignment dated
as of the Initial Closing Date from the Lessee to the Administrative Agent,
as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof or of any other Operative Agreement.
"Consent to Contract Assignment" means the Consent to Contract
Assignment dated as of the Initial Closing Date from the Construction Agent
to the Administrative Agent, as amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof or of any other
Operative Agreement.
"Consolidated EBITDA" of the Lessee and its Subsidiaries means "A"
minus "B"; where:
"A" equals the sum of consolidated net income plus, to the extent
deducted in determining consolidated net income, without
duplication, (i) extraordinary losses, (ii) interest expenses,
including the interest component of rent expense under all
Synthetic Lease Facilities for which the Lessee or any of its
Subsidiaries has Suretyship Liability, (iii) amortization, (iv)
depreciation, (v) income taxes, (vi) non-cash LIFO reserve
charges and (vii) expenses incurred in connection with the
Mergers, including costs relating to the sale of facilities to be
disposed of in connection with the Mergers, name change costs
attributable to Hughes Markets, and severance costs ; and
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ANNEX A - RULES OF USAGE
"B" equals, to the extent included in determining consolidated
pre-tax income, extraordinary gains.
"Consolidated EBITDAR" of the Lessee and its Subsidiaries means "A"
minus "B"; where:
"A" equals the sum of consolidated net income plus, to the extent
deducted in determining consolidated net income, without
duplication, (i) extraordinary losses, (ii) interest expense,
(iii) amortization, (iv) depreciation, (v) income taxes, (vi)
non-cash LIFO reserve charges, (vii) consolidated rental expense
on operating leases (including rent paid pursuant to any
Synthetic Lease Facility) and (viii) expenses incurred in
connection with the Mergers, including costs relating to the sale
of facilities to be disposed of in connection with the Mergers,
name change costs attributable to Hughes Markets, and severance
costs; and
"B" equals, to the extent included in determining consolidated
pre-tax income, extraordinary gains.
"Consolidated Interest Expense" means the consolidated interest
expense of the Lessee, including the interest component of rent expense
under all Synthetic Lease Facilities for which the Lessee or any of its
Subsidiaries has Suretyship Liability.
"Construction Agency Agreement" means the Construction Agency
Agreement dated as of the Initial Closing Date between the Construction
Agent and the Lessor, as amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof or of any other Operative
Agreement.
"Construction Agency Agreement Event of Default" has the meaning set
forth in Section 5.1 of the Construction Agency Agreement.
"Construction Agency Agreement Supplement" means a supplement to the
Construction Agency Agreement executed by the Construction Agent and the
Trust on each Property Closing Date.
"Construction Agent" means the Lessee, as construction agent under the
Construction Agency Agreement.
"Construction Commencement Date" means, with respect to any
Construction Period Property, the date on which construction, refurbishment
and/or renovation of the Improvements thereon commences.
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ANNEX A - RULES OF USAGE
"Construction Period" means, with respect to a Construction Period
Property other than a Completed Property, the period commencing on the
Property Closing Date for such Property and ending on the earlier to occur
of (i) the Completion Date and (ii) the Outside Completion Date.
"Construction Period Property" means, at any date of determination,
any Property (excluding any Store Land Property) as to which the
Construction Period has begun but not ended.
"Construction Period Termination Date" means the second anniversary of
the Initial Closing Date.
"Contract Assignment" means the Assignment of Contracts dated as of
the Initial Closing Date from the Lessor to the Administrative Agent for
the benefit of the Lenders, as amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof or of any other
Operative Agreement.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative
thereto.
"Corporate Loan Documents" means the Loan Agreement and all other
documents related to the transactions contemplated thereby.
"Credit Agreement" means the Credit Agreement dated as of the Initial
Closing Date among the Lessor, the Agents and the Lenders, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof or of any other Operative Agreement.
"Credit Agreement Default" means any event or condition which, with
the lapse of time or the giving of notice, or both, would constitute a
Credit Agreement Event of Default.
"Credit Agreement Event of Default" means any event or condition
defined as an "Event of Default" in Section 6.1 of the Credit Agreement.
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ANNEX A - RULES OF USAGE
"Credit Documents" means the Credit Agreement, the Guarantees, the
Lease and the Security Documents.
"CSI" means Chase Securities Inc., a Delaware corporation.
"Current Synthetic Lease Facility" means the transactions contemplated
by the Participation Agreement.
"Deed" has the meaning set forth in Section 6.2(b) of the
Participation Agreement.
"Default" means any event or condition which, with the lapse of time
or the giving of notice, or both, would constitute an Event of Default.
"Defaulting Lender" has the meaning set forth in Section 2.11(b) of
the Credit Agreement.
"Dollars" and "$" means dollars in lawful currency of the United
States of America.
"Employee Benefit Plan" means an employee benefit plan (within the
meaning of Section 3(3) of ERISA, including any multiemployer plan (within
the meaning of Section 3(37)(A) of ERISA)), or any "plan" as defined in
Section 4975(e)(1) of the Code and as interpreted by the Internal Revenue
Service and the Department of Labor in rules, regulations, releases or
bulletins in effect on the Initial Closing Date.
"Environmental Audit" means a Phase I environmental audit of a
Property and such additional environmental studies or audits recommended by
such Phase I audit, prepared by an independent environmental consultant
acceptable to the Agents and the Lenders.
"Environmental Claim" means any claim, notice of claim, complaint,
notice of violation, letter, or other assertion or inquiry of any kind
concerning any asserted or actual violation of or liability under any
Environmental Law or any asserted or actual violation or liability relating
to any Hazardous Material.
"Environmental Law" means, whenever enacted or promulgated, any
federal, state, county or local law, statute, ordinance, code, rule,
regulation, license, permit, authorization, approval, covenant,
administrative or court order, judgment, decree, injunction, code or
requirement of or any agreement with, any Governmental Authority, in any
case applicable to the Properties:
A-13
<PAGE>
ANNEX A - RULES OF USAGE
(x) relating to pollution (or the cleanup, removal, or remediation
thereof, or any other response thereto), or the regulation or protection of
human health, safety or the environment, including ambient or indoor air,
water vapor, surface water, groundwater, drinking water, land (including
surface or subsurface), plant, aquatic and animal life, or
(y) concerning exposure to, or the use, containment, storage,
recycling, treatment, generation, discharge, emission, Release or
threatened Release, transportation, processing, handling, labeling,
containment, production, disposal or remediation of any Hazardous Material,
Hazardous Condition or Hazardous Activity,
in each case as amended and as now or hereafter in effect, and any common
law or equitable doctrine (including, without limitation, injunctive relief
and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries (whether
personal or property) or damages due to or threatened as a result of the
presence of, exposure to, or ingestion of, any Hazardous Material, whether
such common law or equitable doctrine is now or hereafter recognized or
developed. Applicable laws include, but are not limited to, CERCLA; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss.ss. 6901 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. ss.ss. 1251 et
seq.; the Clean Air Act, 42 U.S.C ss.ss. 7401 et seq.; the National
Environmental Policy Act, 42 U.S.C. ss. 4321; the Refuse Act, 33 U.S.C.
ss.ss. 401 et seq.; the Hazardous Materials Transportation Act of 1975, 49
U.S.C. ss.ss. 1801-1812; the Toxic Substances Control Act, 15 U.S.C. ss.ss.
2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. ss.ss. 136 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.ss.
300 f et seq.; and the Occupational Safety and Health Act of 1970, and any
similar state or local laws.
"Environmental Violation" means any activity, occurrence or condition
that violates or results in non-compliance with any applicable
Environmental Law or results in a written complaint or other written claim
from a Governmental Authority with respect to any Environmental Law.
"Equipment" means movable equipment and movable personal property of
every kind and nature whatsoever used or usable in any way in connection
with any operation or letting of the Property, excluding any Fixtures.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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ANNEX A - RULES OF USAGE
"ERISA Affiliate" means each entity required to be aggregated with the
Lessee pursuant to the requirements of Section 414(b) or (c) of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan
(other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or
not waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the incurrence by the Lessee
or any of its ERISA Affiliates of any liability under Title IV of ERISA
with respect to the termination of any Plan; (e) the receipt by the Lessee
or any ERISA Affiliate from the PBGC or a plan administrator of any notice
relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (f) the incurrence by the Lessee or any of
its ERISA Affiliates of any liability with respect to the withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt
by the Lessee or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Lessee or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
"Eurocurrency Reserve Requirements" means for any day as applied to a
Eurodollar Loan or Eurodollar Contribution, the aggregate (without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board or other Governmental Authority having jurisdiction with respect
thereto) dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation
D of the Board) maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate" means, with respect to any Eurodollar Loan or
Eurodollar Contribution for any Interest Period, the offered quotation to
first-class banks in the New York interbank eurodollar market by the
Administrative Agent for dollar deposits of amounts in immediately
available funds comparable to the outstanding principal amount of the
applicable Eurodollar Loan or Eurodollar Contribution, with maturities
comparable to the Interest Period applicable to such Eurodollar Loan or
Eurodollar Contribution commencing two Business Days prior to the
commencement of such Interest Period.
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ANNEX A - RULES OF USAGE
"Eurodollar Contributions" means Investor Contributions the rate of
interest applicable to which is based on the Eurodollar Rate.
"Eurodollar Loans" means Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate" means with respect to each day during each Interest
Period pertaining to a Eurodollar Loan or Eurodollar Contribution, a rate
per annum determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
--------------------
1.00 - Eurocurrency Reserve Requirements.
"Eurodollar Tranche" means the collective reference to Eurodollar
Loans or Eurodollar Contributions the then current Interest Periods with
respect to all of which begin on the same date and end on the same later
date (whether or not such Loans shall originally have been made on the same
day).
"Event of Default" means a Lease Event of Default or a Construction
Agency Event of Default.
"Excepted Payments" means:
(a) all indemnity payments (including indemnity payments made pursuant
to Section 12 of the Participation Agreement), to which any Indemnified
Person is entitled;
(b) any amounts (other than Basic Rent, Termination Value, or Purchase
Option Price) payable under any Operative Agreement to reimburse the Trust
Company, the Investors, or any of their respective Affiliates (including
the reasonable expenses of the Trust Company and the Investors incurred in
connection with any such payment) for performing or complying with any of
the obligations of the Lessee under and as permitted by any Operative
Agreement;
(c) any amount payable to the Investors by any transferee of the
interest of the Investors as the purchase price of the Investors' interest
in the Trust Estate (or a portion thereof);
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ANNEX A - RULES OF USAGE
(d) any insurance proceeds (or payments with respect to risks
self-insured or policy deductibles) under liability and title policies
other than such proceeds or payments payable to the Lessee or the Agents;
(e) any insurance proceeds under policies maintained by the Trust
Company or any Investor;
(f) Transaction Expenses or other amounts or expenses paid or payable
to or for the benefit of the Trust Company or any Investor;
(g) all right, title and interest of the Investors or the Trust
Company to any of the Properties, any portion thereof or any other property
to the extent any of the foregoing has been released from the Liens of the
Mortgage and the Assignment of Lease pursuant to the terms thereof and not
otherwise purchased by the Lessee or a third party pursuant to the terms of
the Lease;
(h) any payments in respect of interest to the extent attributable to
payments referred to in clauses (a) through (g) above; and
(i) any rights of the Investors or the Trust Company to demand,
collect, sue for or otherwise receive and enforce payment of any of the
foregoing amounts.
"Excepted Rights" means the rights retained by the Trust Company
pursuant to Section 8.3(a)(i) of the Credit Agreement and all right, title
and interest of the Lessor in the Shared Rights.
"Excluded Taxes" has the meaning set forth in the definition of
"Impositions."
"Exculpated Persons" has the meaning set forth in Section 9.14 of the
Credit Agreement.
"Existing Properties" means the Properties (including Properties under
construction) described on Schedule 1 to the Participation Agreement.
"Extended Remarketing Date" has the meaning set forth in Section
22.1(a) of the Lease.
"Facility" means a facility used for the treatment, storage or
disposal of Hazardous Materials.
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ANNEX A - RULES OF USAGE
"Fair Market Sales Value" means the amount, which in any event shall
not be less than zero, that would be paid in cash in an arm's-length
transaction between an informed and willing purchaser and an informed and
willing seller, neither of whom is under any compulsion to purchase or
sell, respectively, for the ownership of the Properties. Fair Market Sales
Value shall be determined based on the assumption that, except for purposes
of Section 21.3 of the Lease, the Properties are in the condition and state
of repair required under Section 10.1 of the Lease and that the Lessee is
in compliance with the other requirements of the Operative Agreements.
"FFL" means Food 4 Less Holdings, Inc., a Delaware corporation.
"FFL Merger" means the merger of FFLAC with FFL in accordance with the
FFL Merger Document.
"FFL Merger Document" means that certain Agreement and Plan of Merger,
dated as of November 6, 1997, among FFL, FFLAC and the Lessee.
"FFLAC" means FFL Acquisition Corp., a wholly-owned Subsidiary of the
Lessee.
"Fixed Charge Coverage Ratio" means the ratio of (a) Consolidated
EBITDAR to (b) the sum of (i) Consolidated Interest Expense for such period
plus (ii) except as included in Consolidated Interest Expense, the Lessee's
consolidated rental expense on operating leases, computed as of the last
day of a fiscal quarter for the period consisting of such fiscal quarter
and the immediately preceding three fiscal quarters (or such lesser number
of preceding full fiscal quarters as shall have ended following the Closing
Date).
"Fixtures" means all fixtures relating to the structures on a Property
or the other Improvements, including all components thereof, located in or
on such structures or the other Improvements, together with all
replacements, modifications, alterations and additions thereto.
"FMI" means Fred Meyer, Inc., a Delaware corporation.
"Force Majeure Event" means any event beyond the control of the
Construction Agent, other than a Casualty or Condemnation, including
strikes, lockouts, acts of God, adverse weather conditions, inability to
obtain labor or materials, governmental activities, civil commotion and
enemy action; but excluding any event, cause or condition that results from
the Construction Agent's financial condition.
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ANNEX A - RULES OF USAGE
"Foreign Lender" has the meaning set forth in Section 2.15(e) of the
Credit Agreement.
"Funding Date" means a Business Day on which the Construction Agent,
on behalf of the Lessor requests the Lenders to make Loans and, with
respect to the Initial Closing Date only, the Investors to make Investor
Contributions, in each case, to the Lessor in accordance with the
Participation Agreement and the Credit Agreement in order to fund Project
Costs.
"GAAP" means United States generally accepted accounting principles
(including principles of consolidation), in effect from time to time,
consistently applied.
"Governmental Action" means all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, written interpretations, decrees, licenses, exemptions,
publications, filings, notices to and declarations of or with, or required
by, any Governmental Authority, or required by any Legal Requirement, and
shall include, without limitation, all environmental and operating permits
and licenses that are required for the full use, occupancy, zoning and
operation of the Properties.
"Governmental Authority" means any Federal, state, county, municipal
or other local governmental authority or judicial or regulatory agency,
board, body, commission, instrumentality, court or quasi-governmental
authority.
"Ground Lease" means a ground lease between the Lessor, as ground
lessee, or assignee of a ground lessee, and the owner of the fee interest
in the applicable parcel of Land (which may be a Subsidiary Guarantor or
the Lessee), as ground lessor, as such Land is described on Schedule 1 of
the Lease Supplement for each Property that is subject to a Ground Lease,
which is in form and substance reasonably acceptable to the Administrative
Agent, the Lessor and their respective counsel.
"Guarantee" means any of the Lessee Guarantee and Subsidiary
Guarantees.
"Guarantor" means any of the Lessee Guarantor and Subsidiary
Guarantors.
"Hazardous Activity" means any activity, process, procedure or
undertaking that directly or indirectly (i) produces, generates or creates
any Hazardous Material, (ii) causes or results in the Release of any
Hazardous Material into the environment (including ambient or indoor air,
water vapor, surface water, groundwater, drinking water, land (including
surface or subsurface), plant, aquatic and animal life); (iii) involves the
containment or storage of any Hazardous Material, or (iv) would be
A-19
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ANNEX A - RULES OF USAGE
regulated as hazardous waste treatment, storage or disposal within the
meaning of any Environmental Law.
"Hazardous Condition" means any condition that violates or that
results in non compliance with any Environmental Law.
"Hazardous Material" means any of the following: (i) any petroleum or
petroleum product, explosives, radioactive materials, asbestos,
formaldehyde, polychlorinated biphenyls, lead or radon gas; or (ii) any
substance, material, product, derivative, compound or mixture, mineral,
chemical, waste, gas, medical waste or pollutant that would support the
assertion of any claim under any Environmental Law, whether or not defined
as hazardous under any Environmental Law; in any of such cases, in
concentrations that require remediation under applicable Environmental
Laws.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement
or other interest or currency exchange rate or commodity price hedging
arrangement.
"Impositions" means, except to the extent described in the following
sentence, any and all liabilities, losses, expenses and costs of any kind
whatsoever for fees, taxes, levies, imposts, duties, charges, assessments
or withholdings ("Taxes") (including (i) real and personal property taxes,
including personal property taxes on any property covered by the Lease that
is classified by Governmental Authorities as personal property, and real
estate or ad valorem taxes in the nature of property taxes; (ii) sales
taxes, use taxes and other similar taxes (including rent taxes and
intangibles taxes); (iii) any excise taxes; (iv) real estate transfer
taxes, conveyance taxes, stamp taxes and documentary recording taxes and
fees; (v) taxes that are or are in the nature of franchise, income, value
added, privilege and doing business taxes, license and registration fees;
(vi) assessments on the Property, including all assessments for public
improvements or benefits, whether or not such improvements are commenced or
completed within the Term); and (vii) any tax, Lien, assessment or charge
imposed or asserted by the PBGC or any Governmental Authority succeeding or
performing the functions of the PBGC, and in each case all interest,
additions to tax and penalties thereon, which at any time prior to, during
or with respect to the Term or in respect of any period for which the
Lessee shall be obligated to pay Supplemental Rent, may be levied, assessed
or imposed by any Federal, state, city, county or local authority upon or
with respect to (a) the Properties or any part thereof or interest therein;
(b) the leasing, financing, refinancing, demolition, construction,
renovation, substitution, subleasing, assignment, control, condition,
occupancy, servicing, maintenance, repair, ownership, possession, activity
conducted on, delivery, insuring, use, operation, improvement, transfer of
title, return or other disposition of the Properties or any part
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ANNEX A - RULES OF USAGE
thereof or interest therein; (c) the Loans or other indebtedness with
respect to the Properties or any part thereof or interest therein; (d) the
rentals, receipts or earnings arising from the Properties or any part
thereof or interest therein; (e) the Operative Agreements or any payment
made or accrued pursuant thereto; (f) the income or other proceeds received
with respect to the Properties or any part thereof or interest therein upon
the sale or disposition thereof; (g) the making of the Loans or issuance of
any Notes; (h) any contract (including the Construction Agency Agreement)
relating to the construction, acquisition or delivery of the Improvements
or any part thereof or any interest therein; or (i) otherwise in connection
with the transactions contemplated by the Operative Agreements.
The term "Imposition" shall not mean or include:
(i Taxes and impositions (other than Taxes that are, or are in
the nature of, sales, use, rental, value added, transfer or property taxes)
that are imposed on a Tax Indemnitee by the United States federal
government that are based on or measured by the gross or net income
(including taxes based on capital gains and minimum taxes) of such Person;
provided that this clause (i) shall not be interpreted to prevent a payment
from being made on an After Tax Basis if such payment is otherwise required
to be so made;
(ii Taxes and impositions (other than Taxes that are, or are in
the nature of, sales, use, rental, value added, transfer or property taxes)
that are imposed by any state or local jurisdiction or taxing authority
within any state or local jurisdiction and that are based upon or measured
by the gross or net income or gross or net receipts from rental (including
any minimum taxes, withholding taxes or taxes on or measured by capital,
net worth, excess profits or items of tax preference or taxes that are
capital stock, franchise or doing business taxes); provided that this
clause (ii) shall not be interpreted to prevent a payment from being made
on an After Tax Basis if such payment is otherwise required to be so made;
(iii any interest or penalties imposed on a Tax Indemnitee as a
result of the failure of such Tax Indemnitee to file any return or report
timely and in the form prescribed by law or to pay any Tax or imposition;
provided that this clause (iii) shall not apply (x) if such interest or
penalties arise as a result of a position taken (or requested to be taken)
by the Lessee in a contest controlled by the Lessee under Section 12.2(g)
of the Participation Agreement or (y) to any such interest or penalties
that result from such Tax Indemnitee's complying with the reporting
procedures set forth in Section 12.2(d) of the Participation Agreement
(collectively with the Taxes excluded from the definition of "Impositions"
in the immediately preceding clauses (i) and (ii), "Excluded Taxes");
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ANNEX A - RULES OF USAGE
(iv any Taxes or impositions imposed on the Lessor that are a
result of the Lessor not being considered a "United States person" as
defined in Section 7701(a) (30) of the Code;
(v any Taxes which are imposed on a Tax Indemnitee solely as a
result of the gross negligence or willful misconduct of such Tax Indemnitee
itself (as opposed to gross negligence or willful misconduct imputed to
such Tax Indemnitee), but not Taxes imposed as a result of ordinary
negligence of such Tax Indemnitee;
(vi any Taxes or impositions imposed upon the Lessor with respect
to any voluntary transfer, sale, financing or other voluntary disposition
by the Lessor (other than a transfer contemplated and permitted by the
Operative Agreements, including any transfer in connection with (1) the
exercise by the Lessee of its Purchase Option, (2) the occurrence of a
Lease Event of Default or a Credit Agreement Event of Default, or (3) a
Casualty or Condemnation affecting the Properties) of any interest in the
Properties (or any interest in, or created pursuant to, the Operative
Agreements) or any voluntary transfer of any interest in the Lessor (other
than in connection with the existence of a Lease Event of Default or a
Credit Agreement Event of Default) or any involuntary transfer of any of
the foregoing interests resulting from the bankruptcy or insolvency of the
Lessor (other than in connection with the existence of a Lease Event of
Default or a Credit Agreement Event of Default); or
(vii any gift, or inheritance, taxes.
Any Tax or imposition excluded from the defined term "Imposition"
in any one of the foregoing clauses (i) through (vii) shall not be
construed as constituting an Imposition by any provision of any other of
the aforementioned clauses.
"Improvements" means, with respect to each Property, all buildings,
structures, Fixtures and other improvements of every kind existing at any
time and from time to time on or under the Land, together with any and all
appurtenances to such buildings, structures or improvements, including
sidewalks, utility pipes, conduits and lines, parking areas and roadways,
and including all additions to or changes in the Improvements at any time,
and also including any refurbishments with respect to Lease-Purchased
Properties, but excluding all Equipment.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money, whether or not evidenced by
bonds, debentures, notes or similar instruments, (b) all obligations of
such Person as lessee under capital leases which have been recorded as
liabilities on a balance sheet of such Person, (c) all obligations of such
Person to pay the deferred purchase price of property or services
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ANNEX A - RULES OF USAGE
(other than current accounts payable in the ordinary course of
business), (d) all indebtedness secured by a Lien on the property of such
Person, whether or not such indebtedness shall have been assumed by such
Person (it being understood that if such Person has not assumed or
otherwise become personally liable for any such indebtedness, the amount of
the Indebtedness of such Person in connection therewith shall be limited to
the lesser of the face amount of such indebtedness or the fair market value
of all property of such Person securing such indebtedness), (e) all
obligations, contingent or otherwise, with respect to the face amount of
all letters of credit (whether or not drawn) and banker's acceptances
issued for the account of such Person, (f) all obligations of such Person
in respect of Hedging Agreements, (g) all Suretyship Liabilities of such
Person, (h) all other obligations of such Person upon which interest
charges are customarily paid (other than current accounts payable in the
ordinary course of business), (i) all obligations of such Person under
conditional sale or other title retention agreements relating to property
acquired by such Person and (j) all Indebtedness (as defined above) of any
partnership in which such Person is a general partner (except to the extent
such Indebtedness is not recourse to such Person). The amount of the
Indebtedness of any Person in respect of Hedging Agreements shall be deemed
to be the unrealized net loss position of such Person thereunder
(determined for each counterparty individually, but netted for all Hedging
Agreements maintained with such counterparty).
"Indebtedness for Borrowed Money" of any Person means all Indebtedness
of such Person described in (without duplication) clauses (a), (b), (c),
(d), (h) and, to the extent constituting a Suretyship Liability in respect
of Indebtedness for Borrowed Money of another Person, (g), of the
definition of Indebtedness. A Suretyship Liability arising under a
Synthetic Lease Facility shall be deemed to be a Indebtedness for Borrowed
Money.
"Indemnified Person" means the Trust Company, in its individual and
its trust capacity, the Agents, the Lessor, the Investors, the Lenders and
their respective successors, assigns, directors, shareholders, partners,
officers, employees, agents and Affiliates.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Initial Closing Advance" means the Advance Loans made by the Lenders
on the Initial Closing Date to fund the purchase by the Lessor of the
Existing Properties.
"Initial Closing Date" means March 11, 1998.
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ANNEX A - RULES OF USAGE
"Insignificant Subsidiary" means any inactive or otherwise immaterial
direct or indirect Subsidiaries of the Borrower; provided that the assets
and pre-tax income of, and the Borrower's net investment in, such
Insignificant Subsidiaries on an individual and a combined basis will not
exceed three percent (3%) of the Borrower's consolidated pre-tax income or
assets, as applicable; and provided further that any Subsidiary which owns
the stock of another Subsidiary (other than an Insignificant Subsidiary)
shall not be deemed to be an "Insignificant Subsidiary."
"Insurance Requirements" means all terms and conditions of any
insurance policy required by the Lease or any other Operative Agreement to
be maintained by the Lessee and all requirements of the issuer of any such
policy.
"Insolvent" means, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Intercreditor Agreement" means the Intercreditor Agreement, dated as
of the Initial Closing Date, among FMI, the Subsidiaries signatory thereto,
the Collateral Agent, the Administrative Agent, on behalf of the Lenders,
and Bankers Trust Company, as Administrative Agent under the Corporate Loan
Documents, on behalf of the lenders signatory thereto, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof or of any other Operative Agreement.
"Interest Period" means, with respect to any Eurodollar Loan or
Eurodollar Contribution:
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan or Eurodollar Contribution and ending one, two, three or six
months thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given with
respect thereto; and
(b) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Eurodollar
Loan or Eurodollar Contribution and ending one, two, three or six
months thereafter, as selected by the Borrower by irrevocable notice
to the Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect thereto;
provided that, the foregoing provisions relating to Interest Periods are
subject to the following:
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ANNEX A - RULES OF USAGE
(i) if any Interest Period pertaining to a Eurodollar Loan or
Eurodollar Contribution would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(ii) any Interest Period that would otherwise extend beyond the
Maturity Date shall end on the Maturity Date; and
(iii) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, together with the rules and regulations promulgated thereunder.
"Investor" means each of the financial institutions (other than the
Trust Company) from time to time party to the Trust Agreement.
"Investor Certificate" means a certificate issued pursuant to the
Trust Agreement to evidence an investment in the beneficial ownership of
the Trust Estate, and shall include any certificate issued in exchange
therefor or replacement thereof.
"Investor Commitment" means as to any Investor, the obligation of such
Investor to make Investor Contributions under the Trust Agreement in an
aggregate amount at any one time outstanding not to exceed the amount set
forth opposite such Investor's name on Schedule 1 to the Trust Agreement.
"Investor Commitment Percentage" means, as to any Investor at any
time, the percentage which such Investor's Investor Commitment then
constitutes of the aggregate Investor Commitments (or, at any time after
the Investor Commitments shall have terminated or expired, the percentage
which the aggregate principal amount of such Investor's Investor
Contribution then outstanding constitutes of the aggregate principal amount
of the Investor Contributions then outstanding).
"Investor Contribution" has the meaning specified in Section 3.1 of
the Participation Agreement.
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ANNEX A - RULES OF USAGE
"Investor Margin" means (i) with respect to any ABR Contribution,
1.00% and (ii) with respect to any Eurodollar Contribution, 2.75%.
"Investor Property Cost" means with respect to a Property an amount
equal to the product of (i) the aggregate Investor Contribution outstanding
and (ii) the ratio of the Tranche A/B Property Cost for such Property over
the aggregate Tranche A/B Property Costs for all Properties.
"Investor Yield" has the meaning specified in Section 3.1 of the
Participation Agreement.
"Joinder Agreement" means a Joinder Agreement substantially in the
form of Exhibit F to the Participation Agreement.
"Land" means a parcel of real property described on Schedule 1 of the
Lease Supplement for such Land and all Appurtenant Rights attached thereto.
"Lease" means the Lease, Security Agreement and Financing Statement
dated as of the Initial Closing Date between the Lessor and the Lessee,
together with any Lease Supplements thereto and Memoranda of Lease, as
amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof or of any other Operative Agreement.
"Lease-Purchased Property" means any Property which is subject to a
Ground Lease at the time of its lease by the Lessor.
"Lease Balance" means, as of any date of determination, an amount
equal to the sum of the Loans, Investor Contributions and all other amounts
owing by any Lessee under the Operative Documents (including without
limitation, accrued and unpaid Rent and Supplemental Rent, if any).
"Lease Default" means any event or condition which, with the lapse of
time or the giving of notice, or both, would constitute a Lease Event of
Default.
"Lease Event of Default" has the meaning given to such term in Section
17.1 of the Lease.
"Lease Supplement" means each Lease Supplement substantially in the
form of Exhibit A to the Lease together with all attachments and schedules
thereto, as such Lease Supplement may be supplemented, amended or modified
from time to time.
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ANNEX A - RULES OF USAGE
"Legal Requirements" means all Federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Properties or the
demolition, construction, renovation, use or alteration thereof, whether
now or hereafter enacted and in force, including any that require repairs,
modifications or alterations in or to the Properties or in any way limit
the use and enjoyment thereof (including all building, zoning and fire
codes and the Americans with Disabilities Act of 1990, 42 U.S.C. ss. 12101
et. seq. and any other similar Federal, state or local laws or ordinances
and the regulations promulgated thereunder) and any that may relate to
environmental requirements (including all Environmental Laws), and all
permits, certificates of occupancy, licenses, authorizations and
regulations relating thereto, and all covenants, agreements, restrictions
and encumbrances contained in any instruments which are either of record or
known to the Lessee affecting the Properties, the Appurtenant Rights and
any easements, licenses or other agreements entered into pursuant to
Section 12.2 of the Lease.
"Lender Financing Statements" means UCC financing statements
appropriately completed and executed for filing in the appropriate state
and county offices in Alaska, Utah, Washington, Oregon and Idaho in order
to perfect a security interest in favor of the Administrative Agent in the
Improvements located on the Properties and the Contract Rights (as defined
in the UCC) related thereto, as the same may be supplemented, amended or
modified from time to time.
"Lenders" means the several banks and other financial institutions
from time to time party to the Credit Agreement.
"Lending Participant" has the meaning set forth in Section 9.5(d) of
the Credit Agreement.
"Lessee" means FMI.
"Lessee Guarantor" means the Lessee, in its capacity as Lessee
Guarantor.
"Lessee Guarantee" means the Guarantee, substantially in the form of
Exhibit E-1 to the Participation Agreement executed and delivered by the
Lessee Guarantor to the Administrative Agent for the benefit of the Owner
Trustee, the Lessor, the Investors and the Lenders, as the same may be
amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof or of any other Operative Agreement.
"Lessor" means FMS Trust 1997-1, a Delaware business trust.
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ANNEX A - RULES OF USAGE
"Lessor Financing Statements" means UCC financing statements
appropriately completed and executed for filing in the appropriate state
and county offices in Alaska, Utah, Washington, Idaho and Oregon in order
to protect the Lessor's interest under the Lease to the extent the Lease is
a security agreement, as the same may be supplemented, amended or modified
from time to time.
"Lessor Lien" means any Lien, true lease or sublease or disposition of
title arising as a result of (a) any claim against the Lessor or the Trust
Company, not resulting from the transactions contemplated by the Operative
Agreements, (b) any act or omission of the Lessor or the Trust Company,
which is not required by the Operative Agreements or is in violation of any
of the terms of the Operative Agreements, (c) any claim against the Lessor
or the Trust Company, with respect to Taxes or Transaction Expenses against
which the Lessee is not required to indemnify the Lessor or the Trust
Company, pursuant to the Participation Agreement or (d) any claim against
the Lessor arising out of any transfer by the Lessor of all or any portion
of the interest of the Lessor in the Properties, the Trust Estate or the
Operative Agreements other than the transfer of title to or possession of
the Properties by the Lessor pursuant to and in accordance with the Lease,
the Credit Agreement or the Participation Agreement or pursuant to the
exercise of the remedies set forth in Section 17 of the Lease.
"Leverage Ratio" means the ratio of Indebtedness for Borrowed Money of
the Lessee and its Subsidiaries determined on a consolidated basis to
Consolidated EBITDA (for the most recent four consecutive fiscal quarters;
provided that for the periods ended on the Compliance Certificate Date and
the last day of the next succeeding fiscal quarter, the Leverage Ratio
shall be calculated by reference to pro forma financial information
satisfactory to the Administrative Agent with respect to the fiscal
quarters ended prior to the Initial Closing Date).
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such
asset and (c) in the case of securities, any purchase option, call or
similar right of a third party (excluding rights of first refusal) with
respect to such securities.
"Limited Deficiency Amount" means, with respect to each Property, the
amount equal to the sum of the Termination Value with respect to such
Property on each Payment Date less the Maximum Residual Guarantee Amount as
of such date with respect to such Property.
A-28
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ANNEX A - RULES OF USAGE
"Loan Agreement" means the $3,500,000,000 Loan Agreement, dated as of
March 11, 1998, among the Lessee, as borrower, the lenders identified
therein, Bankers Trust Company, as administrative agent and The Chase
Manhattan Bank, as syndication agent.
"Loan Parties" means the Lessee and Construction Agent and each of the
Guarantors.
"Loans" has the meaning set forth in Section 2.1(a) of the Credit
Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or
prospects of the Lessee and its Subsidiaries, taken as a whole or (b) the
validity or enforceability of any of the Operative Agreements or the rights
or remedies of the Agents, the Investors or the Lenders thereunder.
"Material Environmental Violation" means any Environmental Violation
that could reasonably be expected to have a Material Adverse Effect with
respect to any Loan Party.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $10,000,000.
"Material Subsidiary" means each Subsidiary of the Lessee which either
(a) has assets which constitute 5% or more of the consolidated assets of
the Lessee and its Subsidiaries or (b) has revenues during its most
recently-ended fiscal year which constitute more than 5% of the
consolidated revenues of the Lessee and its Subsidiaries during the most
recently ended fiscal year.
"Maturity Date" means February 28, 2003.
"Maturity Date Election Notice" has the meaning set forth in Section
20.2 of the Lease.
"Maturity Date Purchase Option" means the Lessee's Purchase Option to
purchase all of the Properties on the Maturity Date in accordance with
Section 20.2 of the Lease.
"Maximum Purchase Option Amount" means, as of any date, 75% of the
highest Termination Value of all Properties held by the Lessor at any one
time prior to such date.
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ANNEX A - RULES OF USAGE
"Maximum Residual Guarantee Amount" means (i) with respect to each
Property which is not a Twenty Five Percent Property, an amount equal to
the maximum amount of the Tranche A/B Property Cost in respect of such
Property which may be paid pursuant to Section 21.1(c) of the Lease and
allocated to Tranche A Loans without causing the Lease for such Property to
be treated as a Capital Lease for the purposes of Statement of Financial
Accounting Standards (SFAS) No. 13, as determined in good faith by the
Lessee, and certified to the Administrative Agent in accordance with
Section 1.2(b) of the Participation Agreement; provided that in no event
shall such amount be less than 85% of the Property Cost in respect of such
Property; and (ii) with respect to each Twenty Five Percent Property, 100%
of the Property Cost of such Property minus the sum of (a) the aggregate
amount of prepayments of the Loans allocated to reduce the Tranche A/B
Property Cost pursuant to Section 2.5 of the Credit Agreement and (b) the
aggregate amount of prepayments of the Investor Contributions allocated to
reduce the Investor Property Cost pursuant to Section 3.5 of the Trust
Agreement.
"Memorandum of Lease" has the meaning set forth in Section 30.8 of the
Lease.
"Mergers" means each of the FFL Merger and the QFC Merger.
"Merger Documents" means each of the FFL Merger Documents and the QFC
Merger Documents.
"Modifications" has the meaning set forth in Section 11.1(a) of the
Lease.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means each (i) Mortgage and Security Agreement from the
Lessor and the Lessee to the Administrative Agent, substantially in the
form of Exhibit D-1 to the Participation Agreement and (ii) Deed of Trust
and Security Agreement from the Lessor and the Lessee in favor of the
Administrative Agent, substantially in the form of Exhibit D-2 to the
Participation Agreement (in form and substance appropriate for recording),
as the same may be supplemented, amended or modified from time to time. The
decision to use the "Mortgage" form or the "Deed of Trust" form shall be
made by the Administrative Agent with respect to each Property, and each
such form shall be modified as necessary or desirable in the Administrative
Agent's opinion to comply with all applicable laws and to set forth the
provisions and remedies customarily used by secured lenders with respect to
the applicable jurisdiction in which such instrument is to be recorded.
A-30
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ANNEX A - RULES OF USAGE
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Proceeds" means all amounts paid in connection with any Casualty
or Condemnation, and all interest earned thereon, less the expense of
claiming and collecting such amounts, including all reasonable costs and
expenses in connection therewith for which the Administrative Agent or
Lessor are entitled to be reimbursed pursuant to the Lease.
"Net Sale Proceeds Shortfall" means the amount by which the proceeds
of a sale of a Property described in Section 21.1 of the Lease (net of all
expenses of sale) are less than the Limited Deficiency Amount for such
Property.
"Non-Defaulting Lender" has the meaning set forth in Section 2.11(b)
of the Credit Agreement.
"Non-Excluded Taxes" has the meaning set forth in Section 2.14(a) of
the Credit Agreement.
"Notes" means the collective reference to the Tranche A Notes and the
Tranche B Notes.
"Obligations" means the collective reference to (i) the unpaid
principal of and interest on the Loans and all other obligations and
liabilities of the Borrower to the Agents or the Lenders (including
interest accruing at the then applicable rate provided in the Credit
Agreement after the maturity of the Loans and interest accruing at the then
applicable rate provided in the Credit Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not
a claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, any Notes, the other
Credit Documents or any other document made, delivered or given in
connection therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including all reasonable fees and disbursements of counsel to the Agents
or to the Lenders that are required to be paid by the Borrower pursuant to
the terms of the Credit Agreement or any other Credit Document), (ii) the
unpaid principal of and Investor Yield on the Investor Contributions and
all other obligations and liabilities of the Owner Trustee to the Agents or
the Investors (including Investor Yield accruing at the then applicable
rate provided in the Trust Agreement after the maturity of the Investor
Contributions and
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ANNEX A - RULES OF USAGE
interest accruing at the then applicable rate provided in the Trust
Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to the Owner Trustee, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Trust Agreement or any other document made, delivered or given in
connection therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including all reasonable fees and disbursements of counsel to the Agents
or to the Investors that are required to be paid by the Owner Trustee
pursuant to the terms of the Trust Agreement) and (iii) all amounts payable
by the Lessee under any of the Operative Agreements (including indemnities
and Commitment Fees) to the Administrative Agent and/or the Lenders and the
Lessor.
"Officer's Certificate" means a certificate signed by any individual
holding the office of vice president or higher, which certificate shall
certify as true and correct the subject matter being certified to in such
certificate.
"Operative Agreements" means the following:
(a) the Participation Agreement;
(b) the Lease, each Memorandum of Lease and each Lease Supplement;
(c) the Assignment of Lease and each supplemental assignment;
(d) the Consent to Assignment;
(e) the Credit Agreement;
(f) the Intercreditor Agreement;
(g) the Mortgages;
(h) the UCC Financing Statements;
(i) the Contract Assignment;
(j) the Consent to Contract Assignment;
(k) the Construction Agency Agreement and each Construction Agency
Agreement Supplement;
(l) the Guarantees;
(m) the Requisitions;
(n) the Trust Agreement;
(o) the Pledge Agreement; and
(p) any Notes.
"Other Plan" means an employee pension benefit plan (other than a Plan
or a Multiemployer Plan) which is covered by Title IV of ERISA or subject
to the minimum funding standards under Section 412 of the Code.
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"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
arising from any payment made hereunder or from the execution, delivery or
enforcement of, or otherwise with respect to, any Operative Agreement.
"Outside Completion Date" with respect to each Property means the date
that is 12 months from the Construction Commencement Date for such
Property, as such date may be extended by up to a total of 180 days due to
the occurrence of one or more Force Majeure Events; provided that in no
event shall such date be any later than the Construction Period Termination
Date.
"Overdue Interest" means any interest payable pursuant to Section
2.8(c) of the Credit Agreement.
"Overdue Rate" means (i) with respect to Tranche A Basic Rent, Tranche
B Basic Rent and any other amount owed under or with respect to the Credit
Agreement or the Security Documents, the rate set forth in Section 2.8(c)
of the Credit Agreement, (ii) with respect to Investor Yield and the
Investor Contribution, 2% in excess of the Investor Yield then in effect
and (iii) with respect to any other amount owing under any Operative
Agreement, the rate referred to in clause (B) of Section 2.8(c)(ii) of the
Credit Agreement.
"Owner Trustee" means Wilmington Trust Company, not individually, but
solely as Owner Trustee under the FMS Trust 1997-1.
"Participants" means each of the Agents, the Lenders, the Lessor, the
Investors and the Trust Company.
"Participation Agreement" means the Participation Agreement dated as
of the Initial Closing Date among the Lessee and Construction Agent, the
Lessor, the Owner Trustee, the Investors, the Agents and the Lenders, as it
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof or of any other Operative Agreement.
"Payment Date" means each Specified Interest Payment Date and any
other date on which a payment is otherwise due under the terms of the
Credit Agreement or the Trust Agreement or, if all amounts due under the
Credit Agreement or the Trust Agreement have been paid in full and the
Credit Agreement or the Trust Agreement has been terminated, the first
Business Day of each calendar month during the Term.
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ANNEX A - RULES OF USAGE
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permits" has the meaning set forth in Section 7.3(v) of the
Participation Agreement.
"Permitted Exceptions" means: (i) Liens of the types described in
clauses (i), (ii), (v) and (viii) of the definition of Permitted Liens;
(ii) Liens for Taxes not yet due; and (iii) all non-monetary encumbrances,
exceptions, restrictions, easements, rights of way, servitudes,
encroachments and irregularities in title, other than Liens which, in the
reasonable assessment of the Administrative Agent, materially impair the
use of any Property for its intended purpose.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
two highest credit ratings obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$500,000,000; and
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in clause
(c) above.
"Permitted Liens" means: (i) the respective rights and interests of
the parties to the Operative Agreements as provided in the Operative
Agreements; (ii) the rights of any sublessee or assignee under a sublease
or an assignment expressly permitted by the terms of the Lease; (iii) Liens
for Taxes that either are not yet due or are being contested in accordance
with the provisions of Section 12.2 of the Participation
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ANNEX A - RULES OF USAGE
Agreement; (iv) Liens arising by operation of law, materialmen's,
mechanics', workmen's, repairmen's, employees', carriers', warehousemen's
and other like Liens in connection with any Modifications or Liens arising
in the ordinary course of business for amounts that either are not more
than 30 days past due or are being diligently contested in good faith by
appropriate proceedings, so long as such proceedings satisfy the conditions
for the continuation of proceedings to contest Taxes set forth in Section
12.2(g) of the Participation Agreement; (v) Liens of any of the types
referred to in clause (iv) above that have been bonded for not less than
the full amount in dispute (or as to which other security arrangements
satisfactory to the Lessor have been made), which bonding (or arrangements)
shall comply with applicable Legal Requirements, and has effectively stayed
any execution or enforcement of such Liens; (vi) Liens arising out of
judgments or awards with respect to which appeals or other proceedings for
review are being prosecuted in good faith and for the payment of which
adequate reserves have been provided as required by GAAP or other
appropriate provisions have been made, so long as such proceedings have the
effect of staying the execution of such judgments or awards and satisfy the
conditions for the continuation of proceedings to contest Taxes set forth
in Section 12.2 of the Participation Agreement; (vii) Permitted Exceptions;
and (viii) easements, rights of way and other encumbrances on title to real
property pursuant to Section 12.2 of the Lease.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company,
trust, unincorporated organization, governmental authority or any other
entity.
"Plan" means an Employee Benefit Plan.
"Plans and Specifications" means the plans and specifications for the
Improvements to be constructed on any Property, as such Plans and
Specifications may be amended, modified or supplemented from time to time
in accordance with the terms of the Operative Agreements.
"Pledge Agreement" means the Pledge Agreement, dated as of the Closing
Date, by the Lessee and its Subsidiaries in favor of the Lenders and the
lenders under the Corporate Loan Documents, as amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof or
of any other Operative Agreement.
"Project Costs" means, with respect to a Property, all costs and
expenses incurred by the Construction Agent or otherwise expended in
connection with the acquisition of Land and the design and construction of
the Improvements thereon, including Property Acquisition Costs, all
professional fees and other soft costs incurred in connection therewith,
Transaction Expenses and other pre-closing and closing costs
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ANNEX A - RULES OF USAGE
incurred by the Lessee in connection with the transactions
contemplated by the Operative Agreements and payment of the interest on the
Tranche A Loans and the Tranche B Loans and payment of the Investor Yield
during the Construction Period, as the same are reflected in the Budget
prepared in accordance with the Construction Agency Agreement.
"Projected Completion Value" means the estimated value of any Land and
Improvements, assuming the Improvements are completed in accordance with
the Plans and Specifications, as established by an Appraisal.
"Property" means (i) Lessor's interest in any Land, as lessee or as
owner in fee simple thereof and (ii) all of the Improvements at any time
located on or under such Land.
"Property Acquisition Cost" means the cost to the Lessor to purchase a
Property on a Property Closing Date including, without limitation, all
professional fees and permitting, survey, title, freight and installation
costs and other similar costs.
"Property Closing Date" means each date on which the Lessor purchases
any Property.
"Property Cost" means with respect to a Property the aggregate amount
of the Tranche A/B Property Cost allocated to such Property pursuant to the
Credit Agreement, plus the Investor Property Cost for such Property, plus
any interest on the Loans capitalized during the Construction Period.
"Public Notes" means senior unsecured notes of the Borrower, described
in the Preliminary Prospectus Supplement dated February 17, 1998, and the
Prospectus, dated February 4, 1998.
"Purchase Decision Date" means the day twelve months prior to the
Maturity Date.
"Purchase Notice" shall have the meaning set forth in Section 20.1 of
the Lease.
"Purchase Option" has the meaning set forth in Section 20.1 of the
Lease.
"Purchase Option Price" has the meaning set forth in Section 20.1 of
the Lease.
"QAC" means Q-Acquisition Corp., a wholly-owned Subsidiary of the
Lessee.
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"QFC" means Quality Food Centers, Inc., a Washington corporation.
"QFC Merger" means the merger of QFC and QAC in accordance with the
QFC Merger Document.
"QFC Merger Document" means that certain Agreement and Plan of Merger,
dated as of November 6, 1997, among FMI, QFC and QAC.
"Register" has the meaning set forth in Section 9.6 of the Credit
Agreement.
"Release" means any release, pumping, pouring, emptying, injecting,
escaping, leaching, dumping, seepage, spill, leak, flow, discharge,
disposal or emission of a Hazardous Material.
"Remarketing Option" has the meaning set forth in Section 21.1(a) of
the Lease.
"Remarketing Period" means, if the Lessee has elected the Remarketing
Option in accordance with Section 21.1 of the Lease, the period commencing
on the Purchase Decision Date and ending on the later of (i) the Maturity
Date and (ii) the Extended Remarketing Date, if applicable.
"Rent" means, collectively, the Basic Rent and the Supplemental Rent,
in each case payable under the Lease.
"Reorganization" means, with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC
Reg. ss. 2615.
"Required Lenders" means, at any time, Non-Defaulting Lenders the
Commitment Percentages of which aggregate more than 50%.
"Required Modification" has the meaning set forth in Section 11.1 of
the Lease.
"Requisition" has the meaning set forth in Section 5.2 of the
Participation Agreement.
"Responsible Officer" means the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the Executive Committee of
the Board of
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ANNEX A - RULES OF USAGE
Directors, the President, any Senior Vice President or Executive Vice
President, the Chief Financial Officer, the Chief Operating Officers, the
Chief Accounting Officer, the Vice President/Treasurer or any Assistant
Treasurer responsible for compliance with any of the Operative Agreements;
except that when used with respect to the Trust Company or the Owner
Trustee, "Responsible Officer" shall also include the Cashier, any
Assistant Cashier, any Trust Officer or Assistant Trust Officer, the
Controller and any Assistant Controller or any other officer of the Trust
Company or the Owner Trustee customarily performing functions similar to
those performed by any of the above designated officers and shall also
mean, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his or her knowledge of
and familiarity with the particular subject.
"Restricted Payment" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any shares of any
class of capital stock of the Lessee or any Subsidiary, or any payment
(whether in cash, securities or other property), including any sinking fund
or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares of capital
stock of the Lessee or any option, warrant or other right to acquire any
such shares of capital stock of the Lessee.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-
Hill Companies, Inc.
"Scheduled Interest Payment Date" means (a) as to any ABR Loan or ABR
Contribution, the last day of each March, June, September and December to
occur while such Loan or Investor Contribution is outstanding and the
Maturity Date, (b) as to any Eurodollar Loan or Eurodollar Contribution
having an Interest Period of three months or less, the last day of such
Interest Period and (c) as to any Eurodollar Loan or Eurodollar
Contribution having an Interest Period longer than three months, each day
which is three months after the first day of such Interest Period and the
last day of such Interest Period and, in addition, in each case the date of
any refinancing or conversion of such Loan or Investor Contribution with or
to a Loan or Investor Contribution of a different Type.
"Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security Documents" means the collective reference to the Mortgage,
the Deed of Trust, the Lease, the Pledge Agreement, the Intercreditor
Agreement, the Memorandum of Lease, the Assignment of Lease and the
Contract Assignment, and all other security documents hereafter delivered
to the Administrative Agent granting a
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ANNEX A - RULES OF USAGE
Lien on any asset or assets of any Person to secure the obligations
and liabilities of the Lessor under the Credit Agreement and/or under any
of the other Credit Documents or to secure any guarantee of any such
obligations and liabilities.
"Shared Rights" means the rights retained by the Lessor, but not to
the exclusion of the Agents, pursuant to Section 8.3(a)(ii) of the Credit
Agreement.
"Single Employer Plan" means any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Significant Casualty" means a Casualty that in the reasonable, good
faith judgment of the relevant Lessee (as evidenced by an Officer's
Certificate) either (a) renders the applicable Property unsuitable for
continued use as commercial or retail property of the type of such Property
immediately prior to such Casualty or (b) is so substantial in nature that
restoration of such Property to substantially its condition as existed
immediately prior to such Casualty would be impracticable or impossible.
"Significant Condemnation" means a Condemnation that in the
reasonable, good faith judgment of the relevant Lessee (as evidenced by an
Officer's Certificate) either (a) renders the applicable Property
unsuitable for continued use as commercial or retail property of the type
of such Property immediately prior to such Condemnation or (b) is such that
restoration of such Property to substantially its condition as existed
immediately prior to such Condemnation would be impracticable or
impossible.
"Significant Entity" means any of the Lessee and its Material
Subsidiaries.
"Solvent" as to any Person means (i) the sum of the assets of such
Person, both at a fair valuation and at present fair salable value, will
exceed its liabilities, including contingent liabilities, (ii) such Person
will have sufficient capital with which to conduct its business as
presently conducted and (iii) such Person has not incurred debts, and does
not intend to incur debts, beyond its ability to pay such debts as they
mature. For purposes of this definition, "debt" means any liability on a
claim, and "claim" means (x) a right to payment, whether or not such right
is reduced to judgment, liquidated , unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured, or (y) a right to an equitable remedy for breach of performance
if such breach gives rise to a payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured, or unsecured. With respect to any
contingent liabilities, such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represents the amount which can reasonably be expected to become an actual
or matured liability.
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ANNEX A - RULES OF USAGE
"Specified Interest Payment Date" means (a) any Scheduled Interest
Payment Date and (b) any date on which interest is payable pursuant to
Section 2.7(d)(ii) of the Credit Agreement in connection with any
prepayment of the Loans.
"Statutory Reserves" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Board to which the Administrative
Agent is subject for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to
be subject to such reserve requirements without benefit of or credit for
proration, exemptions or offsets that may be available from time to time to
any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"Store Land Property" means any Property designated by the
Construction Agent as a "Store Land Property" in the Requisition in respect
of such Property.
"Subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association
or other entity the accounts of which are required to be consolidated with
those of the parent in the parent's consolidated financial statements if
such financial statements were prepared in accordance with GAAP as of such
date, as well as, with respect to any Person, any Person of which such
Person and/or its subsidiaries own, directly or indirectly, such number of
outstanding shares (or similar equity interest) as have more than 50% of
the ordinary voting power for the election of directors.
"Subsidiary Guarantor" means each Subsidiary which has executed a
Subsidiary Guarantee.
"Subsidiary Guarantee" means the Guarantee, substantially in the form
of Exhibit E-2 to the Participation Agreement executed and delivered by
each Subsidiary Guarantor to the Administrative Agent for the benefit of
the Lessor and the Lenders, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof
or of any other Operative Agreement.
"Supplemented Amounts" has the meaning set forth in Section 9.14 of
the Credit Agreement.
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"Supplemental Rent" means all amounts, liabilities and obligations
(other than Basic Rent) which the Lessee assumes or agrees to pay to Lessor
or any other Person under the Lease or under any of the other Operative
Agreements (other than the Guarantees made by the Guarantors).
"Surety Instruments" means all letters of credit (including standby
and commercial), banker's acceptances, guaranties, shipside bonds, surety
bonds and similar instruments under which Suretyship Liabilities arise.
"Suretyship Liability" means any agreement, undertaking or other
contractual arrangement by which any Person guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to or otherwise to invest in a debtor, or otherwise to assure a
creditor against loss) any indebtedness, obligation or other liability
(including accounts payable) of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. Suretyship Liability shall include any liability or contingent
liability of a Person under or in connection with a Synthetic Lease
Facility. The amount of any Person's obligation under any Suretyship
Liability shall (subject to any limitation set forth therein) be deemed to
be the principal amount of the indebtedness, obligation or other liability
guaranteed thereby. As of any date, the amount of any Person's obligations
under any Synthetic Lease Facility shall be equal to the amount which such
Person would be obligated to pay if such Synthetic Lease Facility was
accelerated on such date (disregarding accrued scheduled lease payments
which would be characterized as interest if such Synthetic Lease Facility
were treated as a capital lease under GAAP).
"Survey" has the meaning set forth in Section 6.2(k) of the
Participation Agreement.
"Syndication Agent" means The Chase Manhattan Bank.
"Synthetic Lease Facility" means any synthetic lease, tax ownership
operating lease, tax retention operating lease, off balance sheet lease or
similar lease transaction where the lessee is treated as owner of the
leased property for U.S. federal income tax purposes while the lease is
accounted for on the financial statements of the lessee, prepared in
accordance with GAAP, as an operating lease, including the Current
Synthetic Lease Facility.
"Tangible Net Assets" means the total consolidated assets of the
Lessee and its Subsidiaries minus any amount included therein in respect of
goodwill, as shown on the
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ANNEX A - RULES OF USAGE
most recent consolidated balance sheet of the Lessee and its
Subsidiaries referred to in Section 6.1(w) or delivered to the
Administrative Agent, each Lender and each Investor pursuant to Section
9.4(a).
"Tax Indemnitee" means the Lessor, the Investors, the Trust Company,
the Agents, each Lender and their Affiliates, successors, assignees and
assigns.
"Taxes" has the meaning set forth in the definition of Impositions.
"Term" means for each Property, the period commencing on the Property
Closing Date for such Property and ending on the date immediately prior to
the Maturity Date.
"Termination Date" has the meaning set forth in Section 16.2(a) of the
Lease.
"Termination Notice" has the meaning set forth in Section 16.1(a) of
the Lease.
"Termination Value" means with respect to all Properties, as of any
determination date, an amount equal to the sum of (i) the aggregate
outstanding principal of the Loans, accrued and unpaid interest on the
Loans and any other amounts due under the Credit Agreement, plus (ii) the
aggregate outstanding amount of the Investor Contributions, all accrued
amounts due on account of the Investor Yield and all other amounts owing to
the Investors under the Operative Agreements, plus (iii) all other amounts
due to the Agents, the Lenders, the Investors or the Lessor under the
Operative Agreements. "Termination Value" with respect to a particular
Property means an amount equal to the product of the Termination Value of
all the Properties times a fraction, the numerator of which is the Property
Cost allocable to the particular Property in question and the denominator
of which is the aggregate Property Cost for all the Properties.
"Title Company" means First American Title Company, or such other
title insurance company reasonably acceptable to the Administrative Agent
and the Investors.
"Total Condemnation" means a Condemnation that involves a taking of
Lessor's entire title to a Property.
"Tranche A Basic Rent" means the interest due on the Tranche A Loans
on any Specified Interest Payment Date pursuant to the Credit Agreement
(but not including interest on overdue amounts under Section 2.8(c) of the
Credit Agreement or otherwise).
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ANNEX A - RULES OF USAGE
"Tranche A Loan" has the meaning set forth in Section 2.3(c) of the
Credit Agreement.
"Tranche A Note" has the meaning set forth in Section 2.2 of the
Credit Agreement.
"Tranche A Percentage" means, with respect to a Property, a fraction,
expressed as a percentage, equal to (a) the Maximum Residual Guarantee
Amount of such Property divided by (b) the Property Cost of such Property.
"Tranche A/B Construction Property Cost" means with respect to each
Construction Period Property, at any date of determination, an amount equal
to (a) the aggregate principal amount of Loans made on or prior to such
date with respect to such Property minus (b) the aggregate principal amount
of prepayments of the Loans allocated to reduce the Tranche A/B
Construction Property Cost of such Property pursuant to Section 2.5(d) of
the Credit Agreement.
"Tranche A/B Property Cost" means, with respect to each Property, at
any date of determination, an amount equal to (a) the aggregate principal
amount of Loans made on or prior to such date with respect to such Property
minus (b) the aggregate amount of prepayments of the Loans allocated to
reduce the Tranche A/B Property Cost of such Property pursuant to Section
2.5(d) of the Credit Agreement.
"Tranche B Basic Rent" means the interest due on the Tranche B Loans
on any Specified Payment Date pursuant to the Credit Agreement (but not
including interest on overdue amounts under Section 2.8(c) of the Credit
Agreement or otherwise).
"Tranche B Loan" has the meaning set forth in Section 2.3(c) of the
Credit Agreement.
"Tranche B Note" has the meaning set forth in Section 2.2 of the
Credit Agreement.
"Tranche B Percentage" means 100% minus the Tranche A Percentage.
"Transaction Expenses" means:
(a) the reasonable out-of-pocket expenses, disbursement or cost
of Agents and Arrangers incurred in connection with the consummation
of the transactions contemplated by the Operative Agreements;
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ANNEX A - RULES OF USAGE
(b) the reasonable fees and reasonable out-of-pocket expenses of
the Trust Company in connection with the transactions contemplated by
the Operative Agreements, including, without limitation, the initial
and annual Trust Company's fee and all reasonable fees and reasonable
out-of pocket expenses of the Trust Company and any necessary
co-trustees (including reasonable counsel fees and expenses) or any
successor owner trustee, for acting as owner trustee under the Trust
Agreement;
(c) the fee payable to Arrangers in connection with the
transactions contemplated by the Operative Agreements;
(d) any and all Taxes (to the extent provided in Section 11.2 of
the Participation Agreement) and fees incurred in recording or filing
any Operative Agreement or any other transaction document, any deed,
declaration, deed of trust, security agreement, notice or financing
statement with any public office, registry or governmental agency in
connection with the transactions contemplated by the Operative
Agreements;
(e) any real estate brokers' fees, consultants' fees (including,
without limitation, fees incurred in connection with Appraisals,
Environmental Audits and surveys performed under the Operative
Agreements) and any and all stamp, transfer and other similar taxes,
fees and excises, if any, including any interest and penalties, which
are payable in connection with the acquisition of any Property;
(f) all reasonable out-of-pocket costs and expenses incurred in
connection with the enforcement or preservation of any rights under
the Operative Agreements after the occurrence of an Event of Default,
including, without limitation, the fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to the
Agents, each Lender and the Investors;
(g) all reasonable out-of-pocket costs and expenses incurred in
connection with any amendment, supplement or modification to the
Operative Agreements requested by the Lessee or the Guarantors and any
other documents prepared in connection therewith, and the consummation
and administration of the transactions contemplated thereby,
including, without limitation, the reasonable fees and disbursements
of counsel to the Agents and the Investors; and
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ANNEX A - RULES OF USAGE
(h) all reasonable out-of-pocket costs and expenses incurred by
the Lessor, the Lessee, the Investors or the Agents in connection with
any purchase of the Property by the Lessee pursuant to the Lease.
"Trust" means the Lessor.
"Trust Agreement" means the Trust Agreement dated as of the Initial
Closing Date among the Investors and the Trust Company as amended,
supplemented and otherwise modified from time to time in accordance with
the terms thereof and of any other Operative Agreement.
"Trust Company" means Wilmington Trust Company, in its individual
capacity, and any successor owner trustee under the Trust Agreement in its
individual capacity.
"Trust Estate" has the meaning set forth in Section 2.2 of the Trust
Agreement.
"Twenty Five Percent Property" has the meaning specified in Section
1.3(b) of the Participation Agreement.
"Type" means, as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan, and as to any Investor Contribution, its nature as an ABR
Contribution or a Eurodollar Contribution.
"UCC Financing Statements" means collectively the Lender Financing
Statements and the Lessor Financing Statements.
"Undeveloped Land" means any portion of any Property consisting of
Land free of any Improvements (other than de minimus site improvements) .
"Unfunded Amount" has the meaning specified in Section 3.2 of the
Construction Agency Agreement.
"Unfunded Liabilities" of any Plan means the amount, if any, by which
the actuarial present value of the accumulated plan benefits under the Plan
as of the close of its most recent plan year exceeds the fair market value
of the assets allocable thereto, each determined in accordance with
Statement and Financial Accounting Standards No. 87, based upon the
actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan.
"Uniform Commercial Code" and "UCC" means the Uniform Commercial Code
as in effect in any applicable jurisdiction.
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ANNEX A - RULES OF USAGE
"Wear and Tear Payment" has the meaning set forth in Section 2.5(b) of
the Credit Agreement.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
A-46
<PAGE>
PARTICIPATION AGREEMENT
SCHEDULE 1 TO
PARTICIPATION AGREEMENT
-----------------------
EXISTING PROPERTIES
-------------------
- -------------------------------------------------------------------------------
STORE NAME STORE ADDRESS STORE COUNTY
- -------------------------------------------------------------------------------
Burlingame 7555 S.W. Barbur Blvd. County of Multnomah
Portland, OR 97129
- -------------------------------------------------------------------------------
Covington 16735 S.E. 272nd County of King
Kent, WA 98042
- -------------------------------------------------------------------------------
Glisan 6615 N.E. Glisan County of Multnomah
Portland, OR 97213
- -------------------------------------------------------------------------------
Hawthorne 3805 S.E. Hawthorne Blvd. County of Multnomah
Portland, OR 97214
- -------------------------------------------------------------------------------
Hazel Dell 7700 Highway 99 County of Clark
Vancouver, WA 98665
- -------------------------------------------------------------------------------
Hillsboro 23105 S.W. Tualatin Valley Hwy. County of Washington
Hillsboro, OR 97123
- -------------------------------------------------------------------------------
Meridian 1850 East Fairview Ave. County of Ada
Meridian, ID 83642
- -------------------------------------------------------------------------------
Puyallup 17404 Meridian East County of Pierce
Puyallup, WA 98373
- -------------------------------------------------------------------------------
Raleigh Hills 7700 SW Beaverton-Hillsdale Hwy. County of Washington
Portland, OR 97225
- -------------------------------------------------------------------------------
Scappoose 51500 S. Columbia River Why. County of Columbia
Scappoose, OR 97056
- -------------------------------------------------------------------------------
Twin Falls 705 Blue Lakes Blvd. County of Twin Falls
Twin Falls, ID 83301
- -------------------------------------------------------------------------------
Coeur d'Alene 560 W. Kathleen Ave. County of Kootenai
Coeur d'Alene, ID 83814
- -------------------------------------------------------------------------------
Gresham 2497 S.E. Burnside County of Multnomah
Gresham, OR 97080-1299
- -------------------------------------------------------------------------------
<PAGE>
PARTICIPATION AGREEMENT
- -------------------------------------------------------------------------------
Idaho Falls 1555 Northgate Mile County of Bonneville
Idaho Falls, ID 83405
- -------------------------------------------------------------------------------
Orem 1275 South 800 East County of Utah
Orem, UT
- -------------------------------------------------------------------------------
Tigard 11565 SW Pacific Why. County of Washington
Tigard, OR 97223
- -------------------------------------------------------------------------------
Clackamas Distri- 11500 S.E. Highway 212 County of Clackamas
bution Center Clackamas, OR 97015-9002
- -------------------------------------------------------------------------------
Spokane Division Southeast Corner of Highway 395 County of Spokane
and Hastings Rd.
Spokane, WA
- -------------------------------------------------------------------------------
Murphy's Corner Northwest Corner of State Highway County of Snohomish
(Mill Creek) 527 and 132nd St. S.E.
Everett, WA
- -------------------------------------------------------------------------------
Thrasher's Corner S.E. Corner of State Highway 527 County of Snohomish
(Bothell) and Maltby
Bothell, WA
- -------------------------------------------------------------------------------
Bellevue 2041 148th NE County of King
Bellevue, WA 98168
- -------------------------------------------------------------------------------
Burien 14300 First Avenue S. County of King
Seattle, WA 98168
- -------------------------------------------------------------------------------
Clackamas 16301 SE 82nd Dr. County of Clackamas
Clackamas, OR 97015
- -------------------------------------------------------------------------------
Anchorage 1000 East Northern Lights Blvd Borough of Anchorage
Anchorage, AK 99508
- -------------------------------------------------------------------------------
Midway 25250 Pacific Hwy S. County of King
Kent, WA 98031
- -------------------------------------------------------------------------------
<PAGE>
SCHEDULE 7.3(h) TO
PARTICIPATION AGREEMENT
-----------------------
DISCLOSED MATTERS
[See Schedules to $3,500,000,000 Loan Agreement.]
2
<PAGE>
SCHEDULE 7.3(n) TO
PARTICIPATION AGREEMENT
-----------------------
BROKERS / FEES
As disclosed in the Merger Documents.
3
<PAGE>
SCHEDULE 7.3(o) TO
PARTICIPATION AGREEMENT
-----------------------
ENVIRONMENTAL
None.
4
<PAGE>
SCHEDULE 7.3(v) TO
PARTICIPATION AGREEMENT
-----------------------
PERMITS
None.
5
<PAGE>
SCHEDULE 7.3(w) TO
PARTICIPATION AGREEMENT
-----------------------
SUBSIDIARIES
[See Schedules to $3,500,000,000 Loan Agreement.]
6
<PAGE>
SCHEDULE 9.5(a) TO
-----------------------
PARTICIPATION AGREEMENT
INDEBTEDNESS
[See Schedules to $3,500,000,000 Loan Agreement.]
7
<PAGE>
SCHEDULE 9.5(b) TO
PARTICIPATION AGREEMENT
-----------------------
LIENS
[See Schedules to $3,500,000,000 Loan Agreement.]
8
<PAGE>
SCHEDULE 9.5(e) TO
PARTICIPATION AGREEMENT
-----------------------
INVESTMENTS
[See Schedules to $3,500,000,000 Loan Agreement.]
9
<PAGE>
PARTICIPATION AGREEMENT
EXHIBIT A TO
PARTICIPATION AGREEMENT
-----------------------
FORM OF ASSIGNMENT OF LEASES AND CONSENT TO ASSIGNMENT
------------------------------------------------------
<PAGE>
ASSIGNMENT OF LEASE AND RENTS
from
FMS TRUST 1997-1, as Assignor
to
BANKERS TRUST COMPANY, as Assignee
March __, 1998
This Instrument should be recorded and then
returned to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
ATTN: John E. Mendez, Esq.
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
------------------------------
THIS ASSIGNMENT OF LEASES AND RENTS dated as of March __, 1998 (this
"Assignment"), made by FMS TRUST 1997-1, a Delaware business trust (the
"Assignor"), to BANKERS TRUST COMPANY, a New York banking corporation, in its
capacity as administrative agent and collateral agent (in such capacity, the
"Assignee"), under the Credit Agreement dated as of March __, 1998 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among the Assignor, the Assignee and the financial institutions from time to
time parties thereto (the "Lenders").
Preliminary Statement
---------------------
A. On March __, 1998, the Assignor and Fred Meyer, Inc. (the "Lessee")
entered into a Lease whereby the Assignor agreed to lease certain Properties to
the Lessee. Pursuant to the Lease, on the date that each Property is acquired by
the Assignor, the Assignor and the Lessee shall execute and deliver a Lease
Supplement to subject such Property to the Lease. On the date hereof, the
Assignor and the Lessee have executed a Lease Supplement for the lease of the
Properties (as defined below) by the Assignor to the Lessee.
B. Pursuant to the Credit Agreement, the Lenders have severally agreed
to make Loans to the Assignor in an aggregate amount not to exceed the aggregate
Commitments of the Lenders upon the terms and subject to the conditions set
forth therein, to be evidenced by the Notes issued by the Assignor under the
Credit Agreement.
C. It is a condition, among others, to the obligation of the Lenders
to make their respective Loans to the Assignor under the Credit Agreement that
the Assignor shall have executed and delivered, and the Lessee shall have
consented to, this Assignment to the Assignee for the ratable benefit of the
Lenders.
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
D. In order to further secure payment of the all amounts advanced
under the Credit Agreement and the Notes, the Assignor has agreed to execute and
deliver this Assignment.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. Defined Terms. Capitalized terms used but not otherwise defined in
this Assignment shall have the respective meanings specified in Annex A to the
Participation Agreement dated as of the date hereof among the Lessee, the Owner
Trustee, the Lessor, the Investors, the Administrative Agent, the Syndication
Agent and the Lenders named therein, as such Participation Agreement may be
amended, supplemented or otherwise modified from time to time. The rules of
usage set forth in Annex A to the Participation Agreement shall apply to this
Assignment.
2. Assignment. The Assignor hereby irrevocably assigns, transfers,
sets over and conveys to the Assignee, all the following-described property
relating to or arising in connection with the Properties (including, without
limitation, each Property described in a Supplement to this Assignment, as
delivered from time to time in the form attached hereto as Exhibit A), whether
now owned or held or hereafter acquired, exclusively and without any reservation
thereof unto the Assignor:
(a) All of the estate, right, title, interest, benefits, powers and
privileges of the Assignor, as lessor, under the Lease and all Lease
Supplements (hereinafter referred to collectively as the "Assigned Lease")
including, without limitation, (i) the immediate and continuing right to
make claim for, receive, collect and receipt for all rents, income,
revenues, issues, profits, insurance proceeds, condemnation awards, sales
proceeds and other sums payable to or receivable by the Assignor under the
Assigned Lease, or pursuant to any provisions thereof, whether as rent or
as the purchase price or termination payment for any interest in the
Properties or otherwise (including, without limitation, the Maximum
Residual Guarantee Amount, the Purchase Option Price, Termination Value,
Basic Rent, Supplemental Rent, Investor Yield and any sales proceeds
payable to the Assignor pursuant to the Assigned Lease) (collectively, the
"Lease Rents"),
2
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
including all cash, securities or letters of credit delivered or deposited
pursuant thereto to secure performance by the Lessee of its obligations
thereunder, (ii) the right and power (which right and power are coupled
with an interest) upon the purchase by the Lessee of the interest of the
Assignor in the Properties in accordance with the Assigned Lease to execute
and deliver as irrevocable agent and attorney-in-fact of the Assignor an
appropriate instrument necessary to convey the interest of the Assignor
therein, or to pay over or assign to the Assignee those sums to which it is
entitled if the Lessee becomes obligated to purchase the interest of the
Assignor in the Properties and to perform all other necessary or
appropriate acts as said agent and attorney-in-fact with respect to any
such purchase and conveyance, (iii) the right to perform all other
necessary or appropriate acts as said agent and attorney-in-fact with
respect to any purchase or conveyance referred to in clause (ii) above,
(iv) the right to declare the Lease and any Lease Supplement to be in
default under Section 17.1 thereof, (v) the right to exercise remedies
under or with respect to the Assigned Lease, (vi) the right to make all
waivers and agreements on behalf of the Assignor under the Assigned Lease
provided for or permitted under the Assigned Lease, (vii) the right to give
all notices, consents, releases and other instruments provided under the
Assigned Lease, (viii) the right to give all notices of default and to take
all action upon the happening of a Lease Default or a Lease Event of
Default, including the commencement, conduct and consummation of
proceedings as shall be permitted under any provision of the Assigned
Lease, or by law or in equity, (ix) the right to receive all notices sent
to the Assignor under the Assigned Lease, (x) the Assignor's interest under
the Assigned Lease in the Lessee's tangible and intangible property used or
arising in connection with the Properties, including, but not limited to,
permits, licenses, contract rights and prepaid expenses, and (xi) the right
to do any and all other things whatsoever which the Assignor is or any
lessor is, or may be entitled to do under the Assigned Lease; provided,
that the Assignor shall retain, and the Lease Rents shall not include, the
Excepted Payments and the Lessor shall retain and the rights and powers
assigned herein shall in no event include the Excepted Rights and shall be
subject to the Shared Rights. The Assignor hereby agrees that any action
taken by Assignee (or its designee) pursuant to this Assignment shall be
exclusive, and no party relying on such action of the Assignee (or such
designee) pursuant hereto shall be required to
3
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
obtain the concurrence or consent of the Assignor to such action or to a
request for such action.
(b) All of the estate, right, title, interest, benefits, powers and
privileges of the Assignor, to and under all other leases, subleases or
licenses of the Properties, any license, concession, management or other
agreements of a similar kind that permits the use or occupancy of the
Properties or any part thereof for any purpose in return for any payment,
now or hereafter entered into by the Assignor (collectively, the "Other
Leases" and, together with the Assigned Lease, the "Leases"), together with
all estate, rights, title, interest, benefits, powers and privileges of the
Assignor, as lessor, under the Other Leases including the immediate and
continuing right to make claim for, receive, collect and receipt for all
charges, fees, income, issues, profits, receipts, rents, revenues or
royalties payable under any of the Other Leases (collectively, the "Other
Lease Rents") and all estate, right, title and interest of the Assignor
thereunder, including all cash, securities or letters of credit delivered
or deposited thereunder to secure performance by the Lessee under Other
Leases of its obligations thereunder; provided, that the Assignor shall
retain, and the Lease Rents shall not include, the Excepted Payments and
the Lessor shall retain and the rights and powers assigned herein shall in
no event include the Excepted Rights and shall be subject to the Shared
Rights.
(c) All of the estate, right, title, interest, benefits, powers and
privileges of the Assignor, to and under all agreements or contracts for
the sale or other disposition of all or any part of the Properties, now or
hereafter entered into by the Assignor (collectively, the "Contracts"),
together with all estate, rights, title, interest, benefits, powers and
privileges of the Assignor under the Contracts including, without
limitation, the immediate and continuing right to make claim for, receive,
collect and receipt for all charges, fees, income, issues, profits,
receipts, rents, revenues or royalties payable under any of the Contracts
(collectively, the "Contract Rents" and, together with the Lease Rents and
the Other Lease Rents, the "Rents") and all right, title and interest of
the Assignor thereunder, including all cash, securities or letters of
credit deposited thereunder to secure performance by the obligors of their
obligations thereunder; provided, that the Assignor shall retain, and the
Lease Rents
4
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
shall not include, the Excepted Payments and the Lessor shall retain
and the rights and powers assigned herein shall in no event include the
Excepted Rights and shall be subject to the Shared Rights.
(d) All of the right, title and interest of the Assignor in and to all
claims and rights to the payment of money at any time arising in connection
with any repudiation, rejection or breach of the Assigned Lease by the
Lessee or a trustee or receiver of the Lessee (or any Other Lease by any
lessee thereunder, trustee or receiver of any such lessee) under any
insolvency statute, law or regulation, including all rights to recover
damages arising out of such breach or rejection, all rights to charges
payable by the Lessee or such trustee or receiver (or by such lessee,
trustee or receiver) in respect of the Properties or any portions thereof
following rejection, repudiation or disaffirmance of the Assigned Lease or
following the entry of an order for relief under any insolvency statute,
law or regulation in respect of the Lessee (or such lessee) and all rentals
and other charges outstanding under the Assigned Lease (or Other Lease) as
of the date of entry of such order for relief; provided, that the Assignor
shall retain and the Lease Rents shall not include, the Excepted Payments
and the Lessor shall retain and the rights and powers assigned herein shall
in no event include, the Excepted Rights and shall be subject to the Shared
Rights.
3. Receipt of Rents. The Assignor hereby irrevocably designates the
Assignee (or its designee) to receive all payments of the Lease Rents, the Other
Lease Rents and the Contract Rents and any other sums payable to the Assignor
under the Assigned Lease, any Other Lease or any Contract. The Assignor agrees
to direct (and hereby directs) the Lessee, any other lessee and any contracting
parties to deliver to the Assignee (or its designee), at its address set forth
herein or at such other address or to such other Person as the Assignee shall
designate, all such payments and sums on account of the Rents, and no delivery
thereof by the Lessee, such other lessee or such contracting party shall be of
any force or effect unless made to the Assignee (or its designee), as herein
provided. The Rents shall for all purposes be considered the property of the
Assignee and not of the Assignor, whether before or after the occurrence of an
Event of Default.
5
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
4. Receipt of Notices. The Assignor hereby designates the Assignee (or
its designee) to receive (in addition to, and not to the exclusion of, the
Assignor) duplicate originals or copies of all notices, undertakings, demands,
statements, documents, financial statements and other communications which the
Lessee, any other lessee or any contracting party is required or permitted to
give, make, deliver to or serve pursuant to the Assigned Lease, any Other Lease
or any Contract. The Assignor agrees to direct (and hereby directs) the Lessee
and such other lessee and contracting parties to deliver to the Assignee (or its
designee), at its address set forth herein or at such other address or to such
other Person as the Assignee shall designate, duplicate originals or copies of
all such notices, undertakings, demands, statements, documents, financial
statements and other communications, and no delivery thereof by the Lessee, such
other lessee or such contracting party shall be of any force or effect unless
made to the Assignor and also made to the Assignee (or its designee), as herein
provided. The Assignor further agrees that upon receipt by the Assignor of any
such notices, undertakings, demands, statements, documents, financial statements
and other communications, the Assignor shall promptly deliver copies thereof to
the Assignee unless the Assignor shall reasonably believe that the Assignee has
already received such copies.
5. Irrevocability; Supplemental Instruments. The Assignor agrees that
this Assignment and the designation and direction to the Lessee set forth in
Sections 3 and 4 of this Assignment are irrevocable and that it will not take
any action as lessor under the Assigned Lease or otherwise which is inconsistent
with this Assignment and that any action, assignment, designation or direction
inconsistent herewith shall be void. The Assignor will from time to time execute
and deliver all instruments of further assurance and do such further acts as may
be necessary or proper to carry out more effectively the purpose of this
Assignment.
6. Validity. The Assignor represents and warrants (on a continuing
basis) and covenants to the Assignee that (i) the Assignor has not assigned or
executed any assignment of, and will not assign or execute any assignment of its
interest in the Assigned Lease, of any Other Lease, of any Contract or of any
Rents or of any other subject matter of this Assignment to anyone other than the
Assignee and any assignment, designation or direction by the Assignor
inconsistent herewith shall be void, (ii) no Lease Event of Default has
6
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
occurred and is continuing and (iii) the Assignor has not done any act or
executed any document that impairs the rights of the Assignee to the Assigned
Lease or the Lease Rents under this Assignment.
7. The Assignor Remains Liable. While the assignment made hereby is
present, direct, absolute and continuing, it has been made for the purpose of
providing the Assignee with security for the performance of the Assignor's
obligations under the Credit Agreement and the Notes and the execution and
delivery hereof shall not impair or diminish in any way the obligations of the
Assignor under the Assigned Lease or impose any of such obligations on the
Assignee. This Assignment shall not operate to cause the Assignee (or its
designee) to be regarded as a mortgagee in possession. Neither the Assignee nor
its designee shall be responsible or liable for performing any of the
obligations of the Assignor under the Assigned Lease, any Other Lease or any
Contract, for any waste by the Lessee or others, for any dangerous or defective
conditions of the Properties, for negligence in the management, upkeep, repair
or control of the Properties or any other act or omission by any other Person.
Nothing contained herein shall operate or be construed to (i) obligate the
Assignee (or its designee) to assume the obligations of the Assignor under the
Assigned Lease, any Other Lease or any Contract, to perform any of the terms and
conditions contained in the Assigned Lease, any Other Lease or any Contract or
otherwise to impose any obligation upon the Assignee with respect to the
Assigned Lease, any Other Lease or any Contract or (ii) place upon the Assignee
(or its designee) any responsibility for the operation, control, care,
management or repair of any of the Properties or any part thereof. Subject at
all times to the terms and conditions of this Assignment, the Assignor will at
all times promptly and faithfully perform in all respects, or cause to be
performed in all respects, all of its covenants, conditions and agreements
contained in the Assigned Lease, any Other Lease or any Contract now or
hereafter existing on the part of the Assignor to be kept and performed.
8. Amendments; Lessee's Consent. The Assignor will not enter into any
agreement subordinating, amending, extending or terminating the Assigned Lease
without the prior written consent thereto of the Assignee (the applicable
standard for the giving or withholding of any such consent remaining subject to
the terms of the Lease), and any such attempted subordination, amendment,
modification, extension or termination without such consent shall be void. If
the Assigned Lease, any Other Lease or any Contract shall be amended, it
7
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
shall continue to be subject to the provisions hereof without the necessity of
any further act by any of the parties hereto. The Assignor and the Assignee
hereby consent to the provisions of Lessee's Consent attached to this Assignment
and agree to be bound thereby.
9. Absolute Assignment. The Assignor has, subject to and in accordance
with the terms and conditions of this Assignment, assigned and transferred unto
the Assignee all of the Assignor's right, title and interest in and to Rents now
or hereafter arising from the Assigned Lease, any Other Lease or any Contract
heretofore or hereafter made or agreed to by the Assignor, it being intended to
establish an absolute transfer and assignment, subject to and in accordance with
the terms and conditions of this Assignment, of all such Rents, the Assigned
Lease, the Other Leases and the Contracts to the Assignee and not merely to
grant a security interest therein. Subject to the terms of the Assigned Lease,
the Assignee (or its designee) may in the Assignor's name and stead operate the
Properties and rent, lease or let all or any portion of the Properties to any
party or parties at such rental and upon such terms as the Assignee (or its
designee) shall, in its discretion, determine.
10. Ongoing Right to Collect Rents; Receivers. If notwithstanding the
terms of this Assignment, a petition or order for sequestration of rents, or the
appointment of a receiver or some similar judicial action or order is deemed
required under applicable state law to allow the Assignee to continue to collect
the moneys described in paragraphs 2 (a), (b), (c) and (d) of this Assignment,
then it is agreed by the Assignor that any proof of claim or similar document
filed by the Assignee in connection with the breach or rejection of the Assigned
Lease by the Lessee thereunder or the trustee of any lessee under any federal or
state insolvency statute shall for the purpose of perfecting the Assignee's
rights conferred in said paragraph 2(d) be deemed to constitute action required
under such state law. Upon the occurrence and during the continuance of an Event
of Default, the Assignor hereby consents to the appointment of a receiver for
any or all of the Properties as a matter of right and without any requirement
for notice to the Assignor and without regard to the solvency of the Assignor or
to the collateral that may be available for the satisfaction of the Notes and
all other obligations under the Credit Agreement and the other Operative
Agreements.
8
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
11. Amendment. This Assignment may not be amended or otherwise
modified except by a writing signed by the Assignor and the Assignee in
accordance with the terms of the Credit Agreement.
12. Notices. All notices, demands, requests, consents, approvals and
other instruments under this Assignment shall be made in accordance with the
notice provisions of the Participation Agreement.
13. Successors and Assigns. All covenants, agreements, representations
and warranties in this Assignment by the Assignor and the Assignee shall bind,
and shall inure to the benefit of and be enforceable by, their respective
successors and assigns.
14. Severability. If any provision or provisions, or if any portion of
any provision or provisions, in this Assignment is found by a court of law of
competent jurisdiction to be in violation of any local, state or Federal
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions to be
illegal, invalid, unlawful, void or unenforceable as written, then it is the
intent of the parties hereto that such portion, provision or provisions shall be
given force to the fullest possible extent that they are legal, valid and
enforceable, that the remainder of this Assignment shall be construed as if such
illegal, invalid, unlawful, void or unenforceable portion, provision or
provisions were not contained therein, and that the obligations of the Assignor
under the remainder of this Assignment shall continue in full force and effect.
15. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS TO
MATTERS RELATING TO THE CREATION OF LIENS AND THE EXERCISE OF REMEDIES WITH
RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE IN WHICH THE APPLICABLE PROPERTIES ARE LOCATED.
9
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
16. Obligations Are Without Recourse. Anything to the contrary herein
notwithstanding, the Assignor's liability for any sums due hereunder shall be
limited in accordance with Section 9.14 of the Credit Agreement.
17. Counterparts. This Assignment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
18. Liens and Security Interests. The Lessor further intends and
agrees that, for the purpose of securing the payment of all the amounts owing to
the Lenders under the Operative Agreements, (i) this Assignment shall also be
deemed to be a security agreement and financing statement within the meaning of
Article 9 of the Uniform Commercial Code; (ii) the assignment provided for in
Section 2 shall be deemed to be a grant by the Lessor to the Administrative
Agent for the benefit of the Lenders. Lessor does hereby grant to the
Administrative Agent for the benefit of the Lenders, a security interest in all
of the right, title and interest of the Lessor in and to the items described in
Section 2 to the Adminis trative Agent for the benefit of the Lenders to secure
all Loans advanced by the Lenders, together with interest thereon, and all other
amounts payable under the Operative Agreements in connection therewith; (iii)
the possession by the Administrative Agent or any of its agents of notes and
such other items of property as constitute instruments, money, negotiable
documents or chattel paper shall be deemed to be "possession by the secured
party" for purposes of perfecting the security interest pursuant to Section
9-305 of the Uniform Commercial Code; and (iv) notifications to Persons holding
such property, and acknowledgements, receipts or confirmations from financial
intermediaries, bankers or agents (as applicable) of the Lessor shall be deemed
to have been given for the purpose of perfecting such security interest under
any Legal Requirement. The Lessor, the Lessee and Holdings shall, to the extent
consistent with the Operative Agreements, take such actions and execute,
deliver, file and record such other documents, financing statements, mortgages
and deeds of trust as may be necessary to ensure that, if this Assignment was
deemed to create a security interest in the items described in Section 2 in
accordance with this Section, such security interest would be deemed to be a
perfected security interest and will be maintained as such throughout the Term.
10
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
IN WITNESS WHEREOF, the Assignor and Assignee have caused this
Assignment to be duly executed as of the day and year first above written.
FMS TRUST 1997-1, as Assignor
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By:
-----------------------------------------
Name:
Title:
S-1
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
BANKERS TRUST COMPANY,
as Assignee
By:
----------------------------------------------
Name:
Title:
S-2
<PAGE>
EXHIBIT A
---------
EXHIBIT A 1/
TO ASSIGNMENT OF LEASE AND RENT
[FORM OF]
SUPPLEMENT NO. __ TO
ASSIGNMENT OF LEASE AND RENT
([City], [State])
THIS SUPPLEMENT NO. __ (this "Supplement") , dated as of ____________ 19__,
to the ASSIGNMENT OF LEASE AND RENT, dated as of March __, 1998 (the
"Assignment"), made by FMS TRUST 1997-1, a Delaware business trust, as Lessor
under the Lease dated as of March __, 1998 (as amended, modified, restated or
supplemented from time to time, the "Lease"), among Fred Meyer, Inc., a Delaware
corporation, and the Lessor, in favor of BANKERS TRUST COMPANY, as
Administrative Agent (in such capacity, the "Administrative Agent") for the
Lenders. Capitalized terms used herein but not otherwise defined have the
meanings specified in the Assignment.
The parties hereto agree as follows:
1. The Property. In accordance with the Assignment, the Lessor has executed
this Supplement to subject the Lease, as supplemented by the Lease Supplement
attached as Schedule 1 hereto, to the Assignment. The description of the
Property is attached hereto as Schedule 2.
2. Integrated Assignment. Following the execution and delivery of this
Supplement, this Supplement, and all supplements previously delivered under the
Assignment, shall constitute a part of the Assignment, and the Lease, as
supplemented by the Lease Supplement attached as Schedule 1 hereto, is hereby
assigned to the Administrative Agent for the ratable benefit of the Lenders
pursuant to the provisions of Section 2 of the Assignment.
3. Confirmation. Except as expressly supplemented hereby, the provisions of
the Assignment are and shall remain in full force and effect. Further, the
Lessor hereby reaffirms its obligations under the Assignment.
- ------------
1/ Note that the Supplement must be tailored to meet the requirements of the
laws of the state or states in which the Properties are located.
A-1
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
IN WITNESS WHEREOF, the Lessor has caused this Supplement to be duly
executed as of the day and year first above written.
FMS TRUST 1997-1
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
By ____________________________________________
Name:
Witness Title:
[ ],
as Lessor
- --------------------------
print name:_______________
__________________________ By ____________________________________________
print name:_______________ Name:
Title:
Acknowledged and accepted this
__ day of _______, 1998
S-1
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
BANKERS TRUST COMPANY
Witness:
--------------------------
print name:_______________
By _______________________________
Name: ________________________________________
Title: print name: ____________________________
S-2
<PAGE>
STATE OF __________ )
) ss.:
COUNTY OF _________ )
The foregoing Supplement No. ___ to the Assignment of Lease and Rent was
acknowl edged before me, the undersigned Notary Public, in the County of
__________, State of __________, this ____ day of __________, 199_, by
__________, as ____________ of [ ] a _________________, as Lessor.
[Notarial Seal) _____________________________
Notary Public
My commission expires: _______________
S-3
<PAGE>
Schedule 1
[Lease Supplement]
1
<PAGE>
Schedule 2
[Description of Property]
2
<PAGE>
Consent of the Lessee to Supplement to Assignment of Lease and Rent
CONSENT AND ACKNOWLEDGMENT BY THE LESSEE
----------------------------------------
The undersigned hereby acknowledges receipt of a counterpart original of,
and consents to, the foregoing Supplement No. __ dated as of ____________ ___,
19__ to the Assignment of Lease and Rent.
The foregoing is furnished for good and valuable consideration the receipt
and sufficiency of which are hereby acknowledged by the undersigned, and the
undersigned understands and intends that the Administrative Agent and the
Lenders will rely on the foregoing and that the undersigned will be legally
bound by the foregoing. This Consent and Acknowledgment shall inure to the
benefit of the Administrative Agent, the Lenders and their respective successors
and assigns.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Consent
and Acknowledgment as of ____________ ___ 19__, pursuant to proper authority
duly granted.
FRED MEYER, INC.
By _______________________________________
Name:
Title:
S-1
<PAGE>
LESSEE'S CONSENT
----------------
Fred Meyer, Inc., a Delaware corporation (the "Lessee") hereby
consents and agrees to all of the terms of the Assignment of Leases and Rents
dated as of March __, 1998 (the "Assignment") made by FMS TRUST 1997-1 (the
"Assignor") in favor of Bankers Trust Company, as administrative and collateral
agent (the "Assignee") and further agrees as follows:
1. Definitions. Each capitalized term used herein and not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Assignment, as such Assignment may be amended, supplemented or otherwise
modified from time to time.
2. Acknowledgments, Confirmations and Agreements. The Lessee
acknowledges, confirms and agrees that: (a) the Lessee has the right, power and
authority to enter into this consent (this "Consent"); (b) the Lease is in full
force and effect and enforceable in accordance with its terms; (c) neither the
Lessee nor, to the Lessee's knowledge, the Assignor is in default in the
observance or performance of any condition or agreement to be observed or
performed by the Lessee or the Assignor, respectively, thereunder; (d) no Lease
Rents have been paid by the Lessee in advance except as provided in the Lease;
(e) no Rent has been waived, released, reduced, discounted or otherwise
discharged or compromised by the Assignor; and (f) the Lessee has not received
notice of any other assignment of the Lessor's interest in the Lease.
3. Consent. (a) The Lessee, as lessee under the Lease, consents to the
Assignment and each of the terms thereof, and agrees to pay and deliver to the
Assignee (or its designee) all Lease Rents and other sums payable under the
Lease without any offset, deduction, defense, abatement, deferment, diminution
or counterclaim, and the Lessee will not assert any offset, deduction, defense
(other than the defense of payment to the Assignee (or its designee)),
abatement, deferment, diminution or counterclaim in any proceeding brought under
the Assignment or with respect to the transactions contemplated therein or
herein. The Lessee will not, for any reason whatsoever, seek to recover from the
Assignee (or its designee) any moneys paid to the Assignee (or its designee) by
virtue of the Assignment. The Lessee agrees (i) to deliver to the Assignee (or
its designee) and the Assignor, at their addresses set forth in the
Participation Agreement or at such other addresses as the Assignee or the
Assignor, as the case may be, may designate, duplicate original or copies of all
notices, undertakings, demands, statements, documents and other communications
which the Lessee is required or permitted to deliver pursuant to the Lease or
the Assignment; (ii) that, subject to the Excepted Rights, any notice delivered
or declaration made to the Lessee by the Assignee (or its designee) pursuant to
the Lease shall be effective as a notice given or declaration made to the Lessee
by the Assignor as lessor under the Lease; (iii) that the Assignee (and its
designee) shall not by reason of the Assignment be subject to any liability or
obligation under the Lease;
1
<PAGE>
and (iv) that, subject to the Excepted Rights, any waiver, consent or approval
by the Assignor under the Lease shall not be valid unless approved in writing by
the Assignee (or its designee).
(b) The Lessee shall cause the Lease Rents and other sums payable to
the Assignor under the Lease to be delivered to the Assignee (or its designee),
as agent under the Credit Agreement, as an absolute net sum (except for any
Excluded Taxes required to be withheld by applicable law), in such manner that
the Assignee (or its designee) shall have "collected funds" on the date and at
the time payments are due under the Lease.
(c) The Lessee hereby agrees to remain obligated under the Lease and
this Consent in accordance with their respective terms, and to take no action to
terminate (except in accordance with the express terms of the Lease), annul,
rescind or avoid the Lease or this Consent or to abate, reduce, offset, suspend
or defer or make any counterclaim or raise any defense (other than the defense
of payment to the Assignee (or its designee)) with respect to the Lease Rents
payable thereunder or to cease paying such Lease Rents to the Assignee (or its
designee) as provided herein.
(d) The Lessee hereby agrees that upon the occurrence of a Lease
Default or a Lease Event of Default, the Assignee (or its designee) shall have
the right to deliver a notice of default under the Lease, which shall be
effective for all purposes under the Lease as if sent by the Assignor.
(e) The Lessee shall notify the Assignee (or its designee) at its
address specified in the Participation Agreement, or such other address as the
Assignee may designate, of any Lease Event of Default and agrees that no such
default shall entitle the Lessee to terminate, annul, rescind or avoid the Lease
or reduce or abate the Lease Rents or other sums payable thereunder.
4. Amendment or Termination of the Lease or the Assignment; Assignee's
Designation. The Lessee agrees that it will not, unilaterally or by agreement,
subordinate, amend, supplement, modify, extend (except in accordance with the
express terms of the Lease), discharge, waive or terminate (except in accordance
with the express terms of the Lease) the Lease or this Consent or any provision
of any thereof without the Assignee's prior written consent (the applicable
standard for the giving or withholding of any such consent remaining subject to
the terms of the Lease), and that any attempted subordination, amendment,
supplement, modification, extension, discharge, waiver or termination without
such consent shall be null and void. In the event that the Lease shall be
amended or supplemented as herein permitted, the Lease, as so amended or
supplemented, shall continue to be subject to the provisions of the Assignment
and this Consent without the necessity of any
2
<PAGE>
further act by any of the parties hereto. Nothing in this Section 4 shall be
construed as limiting or otherwise affecting in any way the Assignor's Excepted
Rights or Shared Rights.
5. Continuing Obligations of the Assignor and the Lessee. Neither the
execution and delivery of the Assignment, nor any action or inaction on the part
of the Assignee shall impair or diminish any obligations of the Assignor or the
Lessee under the Lease, and shall not impose on the Assignee (or its designee)
any such obligations, nor shall it impose on the Assignee (or its designee) a
duty to produce Rents or cause the Assignee to be a mortgagee in possession for
any purpose.
6. Severability. If any provision or provisions, or if any portion of
any provision or provisions, in this Consent is found by a court of law of
competent jurisdiction to be in violation of any local, state or Federal
ordinance, statute, law, administrative or judicial decision, or public policy,
and if such court should declare such portion, provision or provisions to be
illegal, invalid, unlawful, void or unenforceable as written, then it is the
intent of the Lessee that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid and enforceable,
that the remainder of this Consent shall be construed as if such illegal,
invalid, unlawful, void or unenforceable portion, provision or provisions were
not contained herein, and that the obligations of the Lessee under the remainder
of this Consent shall continue in full force and effect.
3
<PAGE>
IN WITNESS WHEREOF, the Lessee has caused this Consent to be duly
executed as of this __ day of March, 1998.
FRED MEYER, INC.
By: _____________________________________
Name:
Title:
S-1
<PAGE>
PARTICIPATION AGREEMENT
EXHIBIT B-1 TO
PARTICIPATION AGREEMENT
-----------------------
FORM OF MORTGAGE (FEE SIMPLE)
-----------------------------
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
300 South Grand Avenue
Los Angeles, California 90071
Attention: John E. Mendez, Esq.
Space above for Recorder's use
___________ County,
DEED OF TRUST, ASSIGNMENT
OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
----------------------------
This DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT
AND FIXTURE FILING, is made as of March 11, 1998 (the "Deed of Trust"), by
WILMINGTON TRUST COMPANY, a Delaware corporation, not in its individual
capacity, but solely as Owner Trustee under the FMS TRUST 1997-1, a Delaware
business trust, as trustor ("Trustor"), having its principal address at
Wilmington Trust Compa ny, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890 Attention: Corporate Trust Administration, FIRST
AMERICAN TITLE INSURANCE COMPANY, as trustee ("Trustee"), in trust and with
power of sale, for the benefit of BANKERS TRUST COMPANY, having its principal
address at 130 Liberty Street, New York, New York, 10006, Attention: Deal
Administrator, as Administrative Agent and secured party ("Secured Party") for
the benefit of the Lenders under, and any other lenders from time to time party
to, the Credit Agreement hereinafter referred to (such Lenders and the Secured
Party and other lenders, if any, are hereinafter called the "Creditors").
Capitalized terms used but not other wise defined herein shall have the meanings
provided for such terms in that certain Credit Agreement, dated as of march 11,
1997, among Trustor, as the Borrower, the Lenders named therein, Secured Party,
as Administrative Agent and The Chase Manhattan Bank, as Syndica tion Agent (as
amended, modified or supplemented from time to time, the "Credit Agree ment").
W I T N E S S E T H :
- - - - - - - - - -
THIS DEED OF TRUST is executed, acknowledged and delivered by Trustor
to secure and enforce the following obligations (herein called the
"Obligations"):
(A) the payment and/or performance when due of (i) principal of and
interest on the Notes issued, and Loans made, under the Credit Agreement,
(ii) the Commit ment Fees and (iii) all other obligations and indebtedness
(including, without limitation,
<PAGE>
indemnities, fees and interest thereon) of the Trustor to the Creditors now
existing or hereafter incurred under, arising out of, or in connection with
the Credit Agreement and the other Operative Agreements and the due
performance and compliance by the Trustor with all of the terms, conditions
and agreements contained in the Credit Agree ment and the other Operative
Agreements (all such principal, interest, obligations and liabilities being
herein collectively called the "Credit Agreement Obligations");
(B) the payment when due of any and all sums advanced by the Secured
Party in order to preserve the Property or preserve its security interest
in the Property;
(C) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities of the Trustor referred to
in clause (A), after an Event of Default shall have occurred and be
continuing, reimbursement of the reason able expenses of foreclosing,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Property (as defined below), or of any exercise by the
Secured Party or any Creditor of its rights hereunder, together with
reasonable attorneys' fees and court costs;
(D) all renewals, extensions, amendments and (v) all amounts paid by
any Creditor as to which such Creditor has the right to reimbursement under
this Deed of Trust; and
(E) all renewals, extensions, amendments and changes of, or
substitutions or replacements for, all or any part of the items described
above;
NOW, THEREFORE, with reference to the foregoing recitals, in reliance
thereon and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged:
GRANTING CLAUSES
TRUSTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
GRANTS, CONVEYS, ASSIGNS AND TRANSFERS:
(A) To Trustee, IN TRUST, WITH POWER OF SALE AND RIGHT OF ENTRY AND
POSSESSION, all of its present and future right, title and interest in and
to that certain real property more particularly described in Exhibit A
attached hereto and made a part hereof (the "Land"), together with all
right, title and interest that Trustor now has or may hereafter acquire in:
(1) all fixtures now or hereafter affixed to the Land, including any
and all buildings, constructions and improvements now or hereafter erected
upon the Land (the "Improvements", the Land and the Improvements being
2
<PAGE>
hereinafter collectively called the "Premises"), together with all
machinery, apparatus, equipment, fittings, fixtures, materials and supplies
and all other property of every kind and nature whatsoever owned by
Trustor, or in which Trustor has or shall have an interest, now or
hereafter located, placed, attached, affixed or installed upon or in the
Premises, or appurtenances thereto, and used or usable in connection with
the present or future construction, operation or occupancy of the Premises
(collectively, "Equipment"); all of the property de scribed in this
subparagraph (1) whether now or hereafter placed thereon being hereby
defined to be real property;
(2) all deposits made with or other security given to utility compa
nies by Trustor with respect to the Premises, and all advance payments of
insurance premiums made by Trustor with respect thereto and all claims or
demands relating to such deposits, other security and/or such insurance;
(3) all leases, subleases and other agreements affecting the use or
occupancy of the Premises or any portion thereof now or hereafter existing
or entered into by Trustor (individually a "Lease", and collectively, the
"Leases"), and all rents, additional rents, issues, profits, royalties,
revenue, income, proceeds and other benefits presently or in the future
derived therefrom or otherwise from the Premises (collectively, the
"Rents"); subject, however, to the right, power and authority hereinafter
conferred upon Secured Party or reserved to Trustor to collect or apply
such rents, additional rents, issues, profits, royalties, revenue, income,
proceeds and other benefits;
(4) all operating, management, franchise and use agreements, licenses
or contracts relating to the development, operation or use of the Premises
or any portion thereof, together with all permits, authorizations or
certificates required or used in connection with the ownership of, or the
opera tion or maintenance of the Premises to the fullest extent Trustor can
grant, convey, assign and transfer such agreements, licenses or contracts;
(5) all easements, estates, rights, titles, interests, privileges,
liber ties, tenements, hereditaments and appurtenances of any nature
whatsoever, in any way belonging, relating or pertaining to the Premises or
any portion thereof, including, without limitation, all minerals, oil, gas,
other hydrocarbons and associated substances, sulphur, nitrogen, carbon
dioxide, helium and other commercially valuable substances which may be in,
under or produced from any part of the Premises, all development rights and
credits, air rights, water, water rights and water stock, and any land
lying in the streets, roads or avenues, open or proposed, in front of or
adjoining the Premises;)
(6) all estate, interest, right, title, claim or demand, including
claims or demands with respect to the proceeds of and any unearned premiums
on any
3
<PAGE>
insurance policies covering the Premises or the Equipment, which
Trustor now has or may hereafter acquire to the extent granted to Secured
Party in Section 1.9, and to the extent granted in Section 1.15 herein, any
and all awards made for the taking by eminent domain or condemnation, or by
any proceeding or purchase in lieu thereof, of the whole or any part of the
Property, including without limitation, any awards resulting from a change
of grade of streets or for severance damages;
(7) all governmental permits relating to construction, all names under
or by which the Premises may at any time be operated or known (registered
or unregistered, and without representation or warranty) for use, however,
solely in connection with the Premises to the fullest extent Trustor can
grant, convey, assign and transfer the same; and all rights to carry on
business under any such names or any variant thereof, and, all trademarks,
names, patents pending and goodwill to the fullest extent Trustor can
grant, convey, assign and transfer the same;
(8) all estate, right, title, claim or demand whatsoever of Trustor,
either in law or in equity, in possession, reversion, remainder or
expectancy, in and to the Premises or any other property described in the
other paragraphs of these Granting Clauses;
(9) all proceeds and avails of the conversion, voluntarily or involun
tarily, of any of the foregoing into cash or liquidated claims, including,
but not limited to, condemnation awards (subject to provisions of Section
1.15 herein) and proceeds of insurance (subject to the provisions of
Section 1.9 herein), of any causes of action (whether arising in tort,
contract, fraud or concealment of a material fact) for any damage or injury
to any of the foregoing, or of any conveyance of the Premises or any part
thereof; and
(10) the right, in the name and on behalf of Trustor to appear in and
defend any action or proceeding with respect to the Premises or any other
property described in the other paragraphs of these Granting Clauses, and
to commence any action or proceeding to protect the interests of Secured
Party therein.
All of the property conveyed or intended to be conveyed to Trustee in
Paragraph (A), and (1) through (11) above, is hereinafter referred to as the
"Real Property."
(B) To Secured Party, as secured party, to the extent of Trustor's
interest therein, a security interest in any portion of the Real Property which
may be construed to be personal property and, to the extent of Trustor's right,
title and interest therein, in all other personal property of every kind and
description, whether now
4
<PAGE>
existing or hereafter acquired, now or at any time hereafter attached to,
erected upon, situated in or upon, forming a part of, appurtenant to, used or
useful in the construc tion or operation of or in connection with, or arising
from the use or enjoyment of all or any portion of, or from any lease or
agreement pertaining to, the Real Property, including Trustor's right, title and
interest in and to the following:
(1) all water rights appurtenant to such Real Property together
with all pumping plants, pipes, flumes and ditches, all rights to the
use of water as well as all rights in ditches for irrigation of the
Real Property, all water stock relating to the Real Property, shares
of stock or other evidence of ownership of any part of the Real
Property that is owned by Trustor in common with others, and all
documents of membership in any owners' or members' association or
similar group having responsibility for managing or operating any part
of the Real Property;
(2) all plans and specifications prepared for construction of the
Improvements and all studies, data and drawings related thereto; and
also all contracts and agreements of Trustor relating to the aforesaid
plans and specifi cations or to the aforesaid studies, data and
drawings, or to the construction of the Improvements;
(3) all equipment, machinery, fixtures, goods, accounts, general
intangibles, documents, instruments and chattel paper, and all other
personal property of every kind and description;
(4) all substitutions and replacements of, and accessions and
addi tions to, any of the foregoing;
(5) all sales agreements, deposit receipts, escrow agreements and
other ancillary documents and agreements entered into with respect to
the sale to any purchasers of any part of the Real Property or any
buildings or structures on the Real Property, together with all
deposits and other proceeds of the sale thereof; and
(6) all proceeds of any of the foregoing, including, without
limita tion, proceeds of any voluntary or involuntary disposition or
claim respecting any part thereof (pursuant to judgment, condemnation
award or otherwise) and all goods, documents, general intangibles,
chattel paper and accounts, wherever located, acquired with cash
proceeds of any of the foregoing or proceeds thereof.
All of the property conveyed or intended to be conveyed to
Secured Party in Paragraph (B), and (1) through (6) above, is hereinafter
referred to as the "Personal Property."
5
<PAGE>
All of the Real Property and the Personal Property is referred to
herein collectively as the "Property."
AND TRUSTOR COVENANTS AND AGREES WITH SECURED PARTY AS FOLLOWS:
ARTICLE 1.
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE TRUSTOR
1.1 Title to the Property. Trustor represents and warrants that
it holds good, marketable and insurable fee title to the Property, free and
clear of any Liens and encumbrances (except for Permitted Encumbrances);
(ii) that this Deed of Trust is a valid first Lien upon the Property, and
that it has not created any other Lien or encumbrance upon the Property
which will remain undischarged after recording of this Deed of Trust
(except Permitted Encumbrances); (iii) that Trustor has full power and
lawful authority to encumber the Property in the manner set forth herein;
and (iv) that there are no defenses or offsets to this Deed of Trust or to
the Obligations which it secures. Trustor shall not, directly or
indirectly, create or suffer to be created any Lien upon any portion of the
Property (except for Permitted Encumbrances). Trustor shall, subject to
Permitted Encumbrances, preserve such title and the validity and priority
of the Lien hereof and shall forever warrant and defend the same to Secured
Party against the claims of all Persons and parties whatsoever.
1.2 Deed of Trust Authorized. The execution and delivery of this
Deed of Trust has been duly authorized by Trustor, and there is no
provision in the charter or bylaws of Trustor requiring further consent for
such action by any other Person. Trustor is duly organized and validly
existing under the laws of the State of Delaware, and has all necessary
material licenses, authorizations, registrations, permits and/or approvals
and full power and authority to own its properties and carry on its
business as presently conducted, and the execution and delivery by it of,
and perfor mance by it of its obligations under this Deed of Trust will not
result in Trustor being in default under any provision of its charter or
bylaws or of any other material agree ment to which Trustor is a party or
which materially affects the Property or any material part thereof or any
other property of Trustor.
1.3 Operation of the Property. Trustor has, and with respect to
the construction of any new buildings or structures upon the Premises
during the term hereof will obtain, all necessary certificates, licenses,
authorizations, registrations, permits and/or approvals necessary for the
ownership, operation and management of the Property, including, without
limitation, all required environmental permits, all of which, with respect
to Improvements existing as of the date hereof, are, to the best of
Trustor's knowledge, in full force and effect and not subject to any
revocation, undis closed amendment, release, suspension, forfeiture or the
like. The present and
6
<PAGE>
contemplated use and occupancy of the Property does not conflict with or
violate any such material certificate, license, authorization,
registration, permit or approval. Trustor will promptly deliver to Secured
Party, at its reasonable request, true copies of all such material
certificates, licenses, authorizations, registrations, permits and
approvals.
1.4 Agreements. Except as permitted hereunder and under the
Credit Agreement, and except for any prior encumbrance which has been or
will be dis charged upon recordation of this Deed of Trust, Trustor has not
entered into any contract or other agreement providing for the transfer,
conveyance or encumbrance of the Property or any part thereof or interest
therein.
1.5 Payment and Performance of Obligations. Trustor shall pay all
of the Obligations when due and without offset or counterclaim. Trustor
shall observe and comply in all material respects with all of the terms,
provisions, conditions, covenants and agreements to be observed and
performed by it under this Deed of Trust.
1.6 Maintenance, Repair, Alterations, Etc. Trustor shall: (a)
keep and maintain the Property in good condition and repair (subject to
ordinary wear and tear); make or cause to be made, as and when necessary,
all repairs, renewals and replacements, structural and nonstructural,
exterior and interior, ordinary and extraor dinary, foreseen and
unforeseen; (b) not construct any new Improvements or remove, demolish,
change or alter any of the existing Improvements if such construction,
removal, demolition, change or alteration would materially adversely affect
Secured Party's Lien or security interest hereunder; (c) subject to
Sections 1.9 and 1.15, promptly restore any Improvement which may be
materially damaged or destroyed so that the same shall be at least equal to
its value, condition, character, bulk, floor area and height immediately
prior to the damage or destruction, and promptly pay when due all claims
for labor performed and materials furnished therefor; (d) comply in all
material respects with all laws, ordinances, regulations, covenants,
conditions and restrictions now or hereafter affecting the Property or any
part thereof or the use thereof or requiring any alterations or
improvements; (e) not commit or permit any waste or deterioration (usual
wear and tear excepted) of the Property; (f) keep and maintain the grounds,
sidewalks, parking and landscape areas which are part of the Premises in
good and neat order and repair; (g) comply in all material respects with
the provisions of any Lease, easement or other agreement affecting all or
any part of the Property; (h) not commit, suffer or permit any act to be
done in or upon the Property in material violation of any law, ordinance,
regulation, covenant, condition or restric tion now or hereafter affecting
the Property or any parts thereof or the use thereof; and (i) not permit
the Improvements or any part thereof to become deserted or unguarded.
1.7 Required Insurance.
7
<PAGE>
Trustor shall at its expense, at all times, maintain and keep in
full force and effect policies of insurance to the extent required by the
terms of Section 5.3 of the Credit Agreement and the other Operative
Agreements.
1.8 Policy Provisions, Etc.
(a) Each policy of insurance maintained by Trustor pursuant to
Section 1.7 shall (1) provide for the benefit of the Creditors that 30
days' prior written notice of suspension, cancellation, termination,
modification, non-renewal or lapse or material change of coverage shall be
given to the Secured Party; (2) name the Secured Party for the benefit of
the Creditors as the loss payee (except for (i) instances where a landlord
under a lease.has required that it be named a loss payee and (ii) errors
and omissions insurance and other third party liability insurance); and (3)
to the extent that neither the Secured Party nor the Creditors shall be
liable for premiums or calls, name the Secured Party for the benefit of the
Lenders as an additional insured.
(b) Trustor shall pay as and when the same become due and payable
the premiums for all insurance policies that Trustor is required to
maintain hereunder, and all such policies shall be non-assessable. Trustor
will deliver to Secured Party concurrently herewith certificates setting
forth in reasonable detail the terms (including, without limitation, any
applicable notice requirements) of all insurance policies that Trustor is
required to maintain hereunder together with true and complete copies of
such policies. Trustor shall also provide to Secured Party copies of such
policies certified by the insurance companies issuing them promptly after
Secured Party's request therefor; provided, however, that Secured Party may
not request copies of such insurance policies more than once each calendar
year unless an Event of Default has occurred and is continuing. Trustor
will deliver to Secured Party, concurrently with each change in any such
insurance policy relating to Trustor, a certificate with respect to such
changed insurance policy certified by Trustor, in the same form and
containing the same information as the certificates required to be
delivered by Trustor pursuant to the first sentence of this subparagraph
and with each renewal a certificate of Trustor certifying that all premiums
then due thereon have been paid to the applicable insurers and that the
same are in full force and effect.
(c) Not later than thirty (30) days prior to the expiration,
termination or cancellation of any insurance policy which Trustor is
required to maintain hereun der, Trustor shall obtain a replacement policy
or policies (or a binding commitment for such replacement policy or
policies), which shall be effective no later than the date of the
expiration, termination or cancellation of the previous policy, and shall
deliver to Secured Party a certificate and a true and complete copy of such
policy or policies which comply with the requirements of Sections 1.7 and
1.8(a), or a copy of the binding commitment for such policy or policies.
Trustor shall also provide to Secured Party originals of such policies or
copies thereof certified by the insurance companies issuing them as soon as
reasonably possible after Secured Party's request therefor.
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(d) Within thirty (30) days following the end of each policy
period, and concurrently with the delivery of each replacement policy
pursuant to Section 1.8(c), Trustor will deliver to Secured Party a report
or reports by Trustor setting forth the particulars as to all insurance
obtained by Trustor pursuant to Section 1.7 or Section 1.8 then in effect
and stating that all premiums then due thereon have been paid to the
applicable insurers, and that the same are in full force and effect.
(e) From time to time, upon the occurrence of any material change
in the use or operation of the Property, or in the availability of
insurance required hereunder in the area in which the Property is located,
Trustor will give Secured Party prompt notice of such change. Trustor will
not take out separate or additional insur ance concurrent in form or
contributing in the event of loss with that required to be maintained
pursuant to this Deed of Trust unless such insurance complies with this
Section 1.8.
1.9 Insurance Proceeds.
(a) Trustor shall give prompt written notice to Secured Party of
the occurrence of any damage to or destruction of the Property in an amount
exceeding $500,000 to repair or replace, whether or not covered by
insurance.
(b) In the event of any damage to or destruction of the Property
or any part thereof, all proceeds of insurance shall be payable to Secured
Party, and Trustor hereby authorizes and empowers Secured Party, at Secured
Party's option and in Secured Party's sole discretion as attorney-in-fact
for Trustor, to make proof of loss, adjust and compromise any claim in
excess of $500,000 under any policy of insurance in effect with respect to
the Property, appear in and prosecute any action arising from such
insurance policies, collect and receive insurance proceeds and deduct
therefrom Secured Party's expenses incurred in the collection of such
proceeds.
(c) In the event of any damage to or destruction of the Premises
or any part thereof, Secured Party shall hold the balance of all insurance
proceeds received (after deducting expenses) pursuant to Section 1.9(b)
above, to be used to pay or reimburse Trustor in accordance with normal
construction loan funding procedures for the costs of reconstructing of the
Premises if the following conditions are satisfied within sixty (60) days
from the date of the damage or destruction:
(i) Trustor satisfies Secured Party that after such
reconstruc tion is completed, the value of the Premises, as determined by
Secured Party in its sole discretion, will not be less than the appraised
value of the same immediately prior to the damage or destruction;
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(ii) in Secured Party's opinion, the amount of such proceeds
is sufficient to pay all costs of such reconstruction or Trustor deposits
additional funds with Secured Party sufficient to pay the additional costs;
(iii) Trustor has delivered to Secured Party (A) a
construction contract for the work of reconstruction in form and content
acceptable to Secured Party with a contractor reasonably acceptable to
Secured Party, (B) a copy of each permit and approval required by law in
connection with the reconstruction, and (C) a surety bond for or guaranty
to Secured Party of payment for and completion of the reconstruction, in
form and substance reasonably satisfactory to Secured Party, in an amount
no less than the estimated costs of the reconstruction under the
construction contract; and
(iv) no Default or Event of Default has occurred and is
continuing hereunder, under the Credit Agreement or under any of the other
Operative Agreements.
If the insurance proceeds are held by Secured Party to be used to pay or
reimburse Trustor for the cost of reconstruction of the Premises, the Premises
shall be promptly and diligently restored by Trustor to the equivalent of their
condition immediately prior to the casualty in accordance with plans and
specifications approved by Secured Party or to such other condition as Secured
Party may approve in writing, and disbursements of such proceeds shall be in
accordance with disbursement procedures acceptable to Secured Party.
(d) Any insurance proceeds not required to reconstruct the
Premises or to satisfy the conditions set forth in clauses (i) through (v)
of Section 1.9(c) above shall be applied in the manner set forth in Section
3.3 hereof as if the same were proceeds of sale; provided, however, that if
after applying the insurance proceeds as set forth above Secured Party
determines that the remaining security is inadequate to secure the
remaining Obligations, Trustor shall, immediately upon demand from Secured
Party, repay the principal of the Notes and Loans by an amount that will
reduce the Obligations to a balance for which the Secured Party's Lien and
security interest herein is adequate.
(e) Provided that no Default or Event of Default has occurred
(whether or not continuing), in the event that the damage to or destruction
of the Property is an amount less than $500,000 to repair or replace,
Trustor shall be entitled to receive all such proceeds and to apply such
proceeds to the payment of the costs and expenses of repairing, restoring
and operating the Property.
(f) In the event of the foreclosure of this Deed of Trust
pursuant to Section 4.1 or other transfer of the title to the Property in
extinguishment, in whole or in part, of the Obligations secured hereby, all
right, title and interest of Trustor in and to any insurance policy then in
force or any proceeds thereof or any rights thereunder,
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shall pass to the purchaser or grantee at any foreclosure sale
notwithstanding the amount of any bid at such foreclosure sale.
1.10 Indemnification; Subrogation; Waivers.
(a) The Trustor agrees to indemnify, reimburse and hold the
Secured Party, and each of the other Creditors and their respective
successors, assigns, employees, agents and servants (hereinafter in this
Section 1.10 referred to individually as "Indemnitee" and collectively as
"Indemnitees") harmless from any and all liabili ties, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses or
disbursements (including reasonable attorneys' fees and expenses) (for the
purposes of this Section 1.10 the foregoing are collectively called
"expenses") of whatsoever kind or nature which may be imposed on, asserted
against or incurred by any of the Indemnitees in any way relating to or
arising out of this Deed of Trust, any other Operative Agreement or the
documents executed in connection herewith and therewith or in any other way
connected with the administration of the transactions contemplated hereby
and thereby or the enforcement of any of the terms of or the preservation
of any rights under any thereof, or in any way relating to or arising out
of the manufacture, ownership, ordering, purchase, delivery, control,
acceptance, lease, financing, possession, operation, condition, sale,
return or other disposition or use of the Property (including, without
limitation, latent or other defects, whether or not discoverable), the
violation of the laws of any country, state or other governmental body or
unit, any tort (including, without limitation, claims arising or imposed
under the doctrine of strict liability, or for or on account of injury to
or the death of any Person (including any Indemnitee), or for property
damage) or any contract claim; provided, however, that Trustor shall not be
required to indemnify any Indemnitee for any expenses caused by the gross
negligence or willful misconduct of such Indemnitee. Trustor agrees that
upon written notice by any Indemnitee of any assertion that could give rise
to an expense, Trustor shall assume full responsibility for the defense
thereof.
(b) Without limiting the application of Section 1.10(a), Trustor
agrees to pay, indemnify and hold each Indemnitee harmless from and against
any expenses which such Indemnitee may suffer, expend or incur in
consequence of or growing out of any misrepresentation by Trustor in this
Deed of Trust or any of the other Operative Agreements or in any statement
or writing contemplated by or made or delivered pursuant to or in
connection with this Deed of Trust or any of the other Operative
Agreements.
(c) If and to the extent that the obligations of Trustor under
this Section 1.10 are unenforceable for any reason, Trustor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations (other than any such obligations caused by the gross negligence
or willful misconduct of any Indemnitee) which is permissible under
applicable law.
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(d) Any amounts paid by any Indemnitee as to which such Indemni
tee has the right to reimbursement shall constitute Obligations secured
under this Deed of Trust. The indemnity obligations of Trustor contained in
this Section 1.10 shall continue in full force and effect notwithstanding
the full payment of all Obligations and notwithstanding the discharge
thereof.
(e) Trustor waives any and all right to claim or recover against
Indemnitees for loss or damage to Trustor, the Property, Trustor's property
or the property of others under Trustor's control from any cause insured
against or required to be insured against by the provisions of this Deed of
Trust, except any such loss or damage caused by the gross negligence of
willful misconduct of any such Indemnitee.
(f) All sums payable by Trustor under this Deed of Trust shall be
paid without counterclaim, setoff, or deduction and without abatement,
suspension, deferment, diminution or reduction, and the obligations and
liabilities of Trustor hereunder shall in no way be released, discharged or
otherwise affected (except as expressly provided herein) by reason of: (i)
any damage to or destruction of or any condemnation or similar taking of
the Property or any part thereof; (ii) any restriction or prevention of or
interference with any use of the Property or any part thereof; (iii) any
title defect or encumbrance or any eviction from the Property or any part
thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other
like proceeding relating to Secured Party, any of the Creditors or Trustor,
or any action taken with respect to this Deed of Trust by any trustee or
receiver of Secured Party, any of the Creditors or Trustor; (v) any claim
which Trustor has or might have against Secured Party, or any of the
Creditors; (vi) any default or failure on the part of Secured Party to
perform or comply with any of the terms hereof; or (vii) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Trustor shall have notice or knowledge of any of the
foregoing. Trustor waives to the extent permissible by law all rights now
or hereafter conferred by statute or otherwise to any abatement, suspen
sion, deferment, diminution or reduction of any of the Obligations.
1.11 Impositions.
(a) Trustor will pay when due all real property taxes and assess
ments, general and special, and all other taxes and assessments of any kind
or nature whatsoever, including, without limitation, public, governmental
or nongovernmental levies, assessments or charges, such as assessments on
appurtenant water stock, maintenance charges, owner association dues or
charges and fees, levies or charges resulting from covenants, conditions
and restrictions affecting the Property, which are assessed or imposed upon
any of the Property, or arising in respect of the operation, occupancy, use
or possession thereof (all of which taxes, assessments and other public,
governmental or nongovernmental charges of like or different nature are
hereinafter referred to as "Impositions"); provided, however, that if, by
law, any such Imposition
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is payable, or may at the option of the payer be paid, in installments,
Trustor may pay the same together with any accrued interest on the unpaid
balance of such Imposition in installments as the same may become due.
(b) If under the provisions of any law or ordinance now or
hereafter in effect there shall be assessed or imposed: (i) a tax or
assessment on the Property in lieu of or in addition to the Impositions
payable by Trustor pursuant to subparagraph (a) hereof, or (ii) a license
fee, tax or assessment imposed on Secured Party and measured by or based in
whole or in part upon the amount of the outstanding Obliga tions, then all
such taxes, assessments or fees shall be deemed to be included within the
term "Impositions" as defined in subparagraph (a) hereof, and Trustor shall
pay and discharge or cause to be paid and discharged the same as herein
provided or shall reimburse or otherwise compensate Secured Party for the
payment thereof. In the event any such law or ordinance specifically
provides that Trustor may not pay, reimburse or otherwise compensate
Secured Party for the payment of such tax, assessment or fee, then, at the
option of Secured Party, Secured Party may declare all of the Obligations
to be due and payable within sixty (60) days and the failure of Trustor to
pay the Obligations within such period shall be an Event of Default
entitling Secured Party to exercise any of the remedies set forth in this
Deed of Trust.
(c) Subject to the provisions of subparagraph (d) hereof, Trustor
covenants to furnish to Secured Party, within thirty (30) days after the
date when any interest or penalty shall accrue for nonpayment of
Impositions, official receipts of the appropriate taxing or other
authority, or other proof reasonably satisfactory to Secured Party,
evidencing the payment thereof.
(d) If an Event of Default shall occur and be continuing, at the
request of Secured Party, Trustor shall pay to Secured Party on the first
Business Day of each month an amount equal to one-twelfth of the annual
total of Impositions estimated by Secured Party to be assessed against the
Property in order to pay the installment of Impositions next due on the
Property. In such event, Trustor further agrees to cause all bills,
statements or other documents relating to Impositions to be sent or mailed
directly to Secured Party. Provided Trustor has deposited sufficient funds
with Secured Party pursuant to this Section 1.11, Secured Party shall pay
on or prior to the due date thereof, such amounts as may be due thereunder
out of the funds so deposited. Notwithstanding the foregoing, nothing
contained herein shall cause Secured Party to be deemed a trustee of said
funds or obligate Secured Party to pay any amount in excess of the amount
deposited pursuant to this Section 1.11. If at any time and for any reason
the funds deposited with Secured Party are or will be insufficient to pay
such amounts as may then be due, Secured Party shall notify Trustor and
Trustor shall immediately deposit an amount equal to such deficiency with
Secured Party. Should Trustor fail to deposit with Secured Party sums
sufficient to fully pay such Impositions when due, Secured Party may, at
Secured Party's election, but without any obligation to do so, advance any
amounts required to make up the deficiency. Trustor
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shall, on demand, reimburse Secured Party for said amount. Should an Event
of Default occur and be continuing hereunder, Secured Party may, at any
time at Secured Party's option, apply any sums or amounts then held by it
pursuant hereto (including, without limitation, any income earned thereon)
to the payment or discharge of the Obligations in the manner set forth in
Section 3.3 hereof as if the same were proceeds of sale. The receipt, use
or application of any such sums paid by Trustor to Secured Party hereunder
shall not be construed to affect the maturity of any of the Obligations or
to otherwise affect any of the rights or powers of Secured Party hereunder
or any of the obligations of Trustor hereunder.
(e) Trustor will pay all taxes, charges, filing, registration and
recording fees, excises and levies imposed in connection with the recording
of this Deed of Trust or imposed upon Secured Party by reason of its
ownership of this Deed of Trust or any mortgage supplemental hereto, and
shall pay any and all Internal Revenue stamp taxes and other taxes required
to be paid on any of the Obligations (other than taxes required to be paid
by the Lenders pursuant to Section 2.15 of the Credit Agreement). In the
event Trustor fails to make any such payment within five (5) Business Days
after written notice thereof from Secured Party, then Secured Party shall
have the right, but shall not be obligated to, pay the amount due and
Trustor shall, on demand, reimburse Secured Party for said amount.
1.12 Utilities. Trustor will pay when due all utility charges
which are incurred by Trustor for the benefit of the Property or which may
become a charge or Lien against the Property for gas, electricity, steam,
water or sewer services furnished to the Property and all other assessments
or charges of a similar nature, whether public or private, affecting the
Property whether or not such taxes, assessments or charges are Liens
thereon.
1.13 Actions Affecting Property. Trustor will appear in and
contest any action or proceeding purporting to affect the security hereof
or the rights or powers of Secured Party hereunder; and Trustor will pay
all reasonable costs and expenses incurred by Trustor, including cost of
evidence of title and reasonable attorneys' fees, in any such action or
proceeding.
1.14 Actions by Secured Party to Preserve Property. Should
Trustor fail to pay or perform any of the Obligations, after expiration of
any applicable notice and cure period, Secured Party may pay or perform the
same in such manner and to such extent as it may deem necessary in its sole
discretion. In connection therewith, without limiting its general powers,
Secured Party shall have and is hereby given the right, but not the
obligation: (a) to enter upon and take possession of the Premises; (b) to
make additions, alterations, repairs and improvements to the Property which
are reasonably necessary or proper to keep the Property in good condition
and repair; (c) to appear and participate in any action or proceeding
affecting or which may affect the security hereof or the rights or powers
of Secured Party; (d) to pay, purchase, contest
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or compromise any encumbrance, claim, charge, Lien or debt which may affect
the security of this Deed of Trust or be prior or superior hereto; and (e)
in exercising such powers, to pay all necessary expenses, including the
reasonable fees and expenses of counsel or other necessary or desirable
consultants. Trustor shall, on demand therefor by Secured Party, pay or
reimburse Secured Party for all reasonable costs and expenses incurred by
Secured Party in connection with the exercise by Secured Party of the
foregoing rights, including, without limitation, cost of evidence of title,
court costs, appraisal costs, surveys and reasonable attorneys' fees. In
the event this Deed of Trust is placed in the hands of an attorney for the
collection of any sum secured hereby, Trustor agrees to pay on demand all
reasonable costs of collection, including reason able attorneys' fees,
incurred by Secured Party, either with or without the institution of any
action or proceeding, and in addition to all costs, disbursements and
allowances provided by law.
1.15 Eminent Domain.
(a) Should the Property or any part thereof or interest therein,
be taken or damaged by reason of any public improvements or condemnation
proceeding or in any other similar manner ("Condemnation"), or should
Trustor receive any notice or other information thereof, Trustor shall give
prompt written notice thereof to Secured Party.
(b) If requested by Secured Party, Trustor shall file or
otherwise defend its rights under the condemnation proceeding and prosecute
the same with due diligence to its final disposition and shall cause any
awards or settlements to be paid over to Secured Party for disposition
pursuant to the terms of this Deed of Trust. Trustor may be the nominal
party in such proceeding, but Secured Party shall be entitled to
participate in and to control the same and to be represented therein by
counsel of its choice, and Trustor will deliver or cause to be delivered to
Secured Party such instruments as may be requested by it from time to time
to permit such participa tion. If the Property or any part thereof is taken
or diminished in value, or if the consent settlement is entered, by or
under threat of such proceeding, the award or settlement payable to Trustor
by virtue of its interest in the Property shall be and hereby is assigned,
transferred and set over unto Secured Party to be held by it, in trust,
subject to the Lien and security interest of this Deed of Trust. Any such
award or settlement shall be first applied to reimburse Trustor and Secured
Party for all costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred in connection with the collection of such award
or settlement. The balance of such award or settlement shall be, at Secured
Party's option:
(i) applied in the manner set forth in Section 3.3 hereof as
if the same were proceeds of sale; or
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(ii) held by Secured Party to be used in accordance with the
provisions of Section 1.10(c) above to pay or reimburse Trustor for the
costs of rebuilding, reconstruction or repair of the Premises if the
conditions set forth in such section are satisfied within thirty (30) days
from the date of such award or settlement;
provided, however, that if after applying the award or settlement as set
forth above Secured Party determines that the remaining security is
inadequate to secure the remaining Obligations, Trustor shall, immediately
upon demand from Secured Party, repay the principal of the Notes and Loans
by an amount that will reduce the Obliga tions to a balance for which the
Secured Party's Lien and security interest herein is adequate.
1.16 Successors and Assigns. This Deed of Trust applies to,
inures to the benefit of and binds the parties hereto and their respective
successors and assigns. In the event the ownership of the Property becomes
vested in a Person other than Trustor, Secured Party may, without notice to
Trustor, deal with such successor or successors in interest with reference
to this Deed of Trust and the Obligations in the same manner as with
Trustor, and may alter the interest rate and/or alter or extend the terms
of payment of any of the Obligations without notice to Trustor and such
action shall not in any way affect the liability of Trustor here-under or
the Lien or priority of this Deed of Trust with respect to any part of the
Property covered hereby.
1.17 Liens. Trustor will pay or procure the discharge of, at
Trustor's cost and expense, all Liens (other than Permitted Lien) upon the
Property or any part thereof or interest therein within ten (10) Business
Days after Trustor learns of the filing thereof. If Trustor shall fail to
discharge any such Lien within such ten (10) Business Day period, then, in
addition to any other right or remedy of Secured Party, Secured Party may,
but shall not be obligated to, discharge the same, either by paying the
amount claimed to be due, or by procuring the discharge of such Lien by
depositing in court a bond for the amount claimed or otherwise giving
security for such claim, or in such manner as is or may be prescribed by
law; and all funds advanced by Secured Party to pay such obligations,
liabilities, costs and expenses (together with interest thereon at the
Default Rate from the date of demand until paid) shall be reimbursed by
Trustor upon demand by Secured Party; and all such advances with interest
thereon as aforesaid shall be secured hereby.
1.18 Secured Party's Powers. Without affecting the liability of
any other Person liable for the payment of any obligation herein mentioned,
and without affecting the Lien or charge of this Deed of Trust upon any
portion of the Property not then or theretofore released as security for
the Obligations, Secured Party may, from time to time and without notice,
but subject to Section 9.1 of the Credit Agreement: (a) release any Person
so liable; (b) extend the maturity or alter any of the terms of any such
obligation; (c) grant other indulgences; (d) release or cause to be
released at any time at Secured Party's option any parcel, portion or all
of the Property; (e) take or
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release any other or additional security for any obligation herein
mentioned; (f) while an Event of Default is continuing, make compositions
or other arrangements with debtors or other mortgagors in relation to this
Deed of Trust; (g) advance additional funds to protect the security hereof;
(h) while an Event of Default is continuing, pay or discharge any or all of
the Obligations; (i) consent in writing to the making of any map or plat
thereof; (j) join in granting any easement thereon; or (k) join in any
extension agreement or any agreement subordinating the Lien or charge
hereof; and, in any case referred to in clauses (g) or (h), all amounts so
advanced, with interest thereon at the Default Rate from the date of demand
until paid, shall be secured hereby.
1.19 Permitted Contests. Notwithstanding anything to the contrary
contained in this Deed of Trust, Trustor at its expense may contest (after
prior written notice to Secured Party), by appropriate legal,
administrative or other proceedings conducted in good faith and with due
diligence, the amount or validity or application, in whole or in part, of
any Imposition or Lien therefor or any law, ordinance, regula tion,
covenant, condition or restriction or the application of any instrument of
record affecting the Property or any part thereof or any claims of
mechanics, materialmen, suppliers or vendors and Lien therefor; provided
that (a) in the case of any Impositions or Lien therefor or any claims of
mechanics, materialmen, suppliers or vendors and Lien therefor, such
proceedings shall suspend the collection thereof from Secured Party and the
Property, (b) neither the Property nor any part thereof or interest therein
will be sold, forfeited or lost if Trustor pays the amount or satisfies the
condition being contested, and Trustor would have the opportunity to do so
in the event of Trustor's failure to prevail in the contest, (c) Secured
Party and the Creditors shall not, by virtue of such permitted contest, be
in any danger of any criminal liability, or any civil liability, and
neither the Property nor any interest therein would be subject to the
imposition of any Lien which would have priority over the Lien of this Deed
of Trust, and (d) Trustor shall have furnished to Secured Party a good and
sufficient bond or surety as reasonably requested by and reasonably
satisfactory to Secured Party if the failure to comply with such
Imposition, law, ordinance, regulation, covenant, condition or restriction
will result in a Lien or charge against the Property in excess of $500,000.
1.20 Continued Occupancy. If at any time the then existing use or
occupancy of any part of the Property shall, pursuant to any zoning or
other law, ordinance or regulation, be permitted only so long as such use
or occupancy shall continue, Trustor shall not cause or permit such use or
occupancy to be discontinued without the prior written consent of Secured
Party.
1.21 Inspections. Subject to the provisions of any Lease or any
applicable law, Trustor hereby authorizes Secured Party, its agents,
representatives or workmen, to enter at any reasonable time during normal
business hours after at least twenty-four (24) hours advance notice to
Trustor (except that with respect to any emergency, Secured Party, its
agents, representatives or workers may enter during such time of emergency)
upon or in the Premises for the purpose of inspecting the
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same, and for the purpose of performing any of the acts which Secured Party
is authorized to perform under the terms of this Deed of Trust.
1.22 Actions by Trustee. At any time, or from time to time,
without liability therefor and without notice, upon written request of
Secured Party and presentation of this Deed of Trust, and without affecting
the personal liability of any Person for payment of the Obligations secured
hereby or the effect of this Deed of Trust upon the remainder of the
Property, Trustee may (i) reconvey any part of the Property; (ii) consent
in writing to the making of any map or plat thereof; (iii) join in granting
any easement thereon; or (iv) join in any extension agreement or any agree
ment subordinating the Lien or charge hereof.
1.23 Hypothecation, Transfers. Trustor shall not, except as
expressly permitted by the Credit Agreement, hypothecate, convey, sell,
lease or otherwise dispose of (or agree to do any of the foregoing at any
future time) all or any part of the Property.
ARTICLE 2.
SECURITY AGREEMENT
2.1 Creation of Security Interest. This Deed of Trust creates a
Lien on the Property, and to the extent the Property is not real property
under applicable law (such Property hereinafter referred to as the "Secured
Property"), this Deed of Trust constitutes a security agreement under the
Uniform Commercial Code and any other applicable law.
The grant of a security interest to Secured Party in the granting
clauses of this Deed of Trust shall not be construed to derogate from or
impair the Lien or provisions of or the rights of Secured Party under this
Deed of Trust with respect to any property described herein which is real
property or which the parties have agreed to treat as real property. The
hereby stated intention of Trustor and Secured Party is that everything
used in connection with the production of income from such real property or
adopted for use thereon is, and at all times and for all purposes and in
all proceedings, both legal and equitable, shall be regarded as real
property, irrespective of whether or not the same is physically attached to
the land or the improvements thereon. If required by Secured Party, at any
time during the term of this Deed of Trust, Trustor will execute and
deliver to Secured Party, in form satisfactory to Secured Party, additional
security agreements, financing statements and/or other instruments covering
all Personal Property or fixtures of Trustor which may at any time be
furnished, placed on, or annexed or made appurtenant to the Real Property
or used, useful or held for use, in the operation of the Improvements.
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Trustor hereby irrevocably constitutes and appoints Secured Party
the attorney-in-fact of Trustor, to execute, deliver and file with the
appropriate filing officer or office such security agreements, financing
statements and/or other instru ments as Secured Party may reasonably
request or reasonably require in order to impose and perfect the Lien and
security interest hereof more specifically on the Personal Property or any
fixtures.
If Trustor enters into a separate security agreement with Secured
Party relating to any of the Personal Property or fixtures, the terms of
such security agree ment shall govern the rights and remedies of Secured
Party in the event of a default thereunder.
It is understood and agreed that, in order to protect Secured
Party from the effect of Uniform Commercial Code Section 9313, as amended
from time to time, in the event that (i) Trustor intends to purchase any
goods which may become fixtures attached to the Premises, or any part
thereof, and (ii) such goods will be subject to a purchase money security
interest held by a seller or any other party:
(a) Except as provided in Section 7 of the Credit Agreement,
Trustor shall, before executing any security agreement or other document
evidencing such security interest, obtain the prior written approval of
Secured Party, and all requests for such written approval shall be in
writing and contain the following information:
(i) a description of the fixtures to be replaced, added to,
installed or substituted;
(ii) the address at which the fixtures will be replaced,
added to, installed or substituted: and
(iii) the name and address of the proposed holder and pro
posed amount of the security interest.
Trustor's execution of any such security agreement or other document
evidencing such security interests in contravention of this subparagraph
(a) shall be a material breach of Trustor's covenants under this Deed of
Trust, and shall, at the option of Secured Party, entitle Secured Party to
all rights and remedies provided for herein upon the occurrence and
continuance of an Event of Default. No consent by Secured Party pursuant to
this subparagraph shall be deemed to constitute an agreement to subordinate
any right of Secured Party in fixtures or other property covered by this
Deed of Trust.
(b) If at any time Trustor fails to make any payment when due and
payable on an obligation secured by a purchase money security interest in
any fixture, Secured Party, at its option, may at any time pay the amount
secured by such security
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interest and the amount so paid shall be payable on demand by Trustor to
Secured Party.
(c) Secured Party shall have the right to acquire by assignment
from the holder of such security interest any and all contract rights,
accounts receivable, negotiable or nonnegotiable instruments, or other
evidence of Trustor's indebtedness for such Personal Property or fixtures,
and, upon acquiring such interest by assign ment, shall have the right to
enforce the security interest as assignee thereof, in accor dance with the
terms and provisions of the Uniform Commercial Code then in effect, and in
accordance with any other provisions of law.
(d) Whether or not Secured Party has paid the indebtedness
secured by or taken an assignment of such security interest, Trustor
covenants to pay all sums when due and payable and perform all obligations
secured thereby, and if Trustor at any time shall be in default under such
security agreement after the exhaustion of all applicable notice and cure
periods provided for herein, or such greater time as provided for in an
applicable Operative Agreement, it shall be a material breach of Trustor's
covenants under this Deed of Trust.
2.2 Representations, Warranties and Covenants of Trustor. Trustor
hereby represents, warrants and covenants as follows:
(a) Trustor is, and as to all Secured Property acquired after the
date hereof will be, the sole owner of the Secured Property, free from any
Lien, security interest, encumbrance or claim thereon of any kind
whatsoever (other than Permitted Liens). Trustor will notify Secured Party
of, and will defend the Secured Property against, all claims and demands of
all Persons at any time claiming the Secured Property or any interest
therein other than such interests as are permitted herein.
(b) Except as otherwise provided in clauses (a) or (d) of this
Section 2.2, or in the Credit Agreement, or in connection with conveyance
of the Property, or a portion thereof permitted elsewhere in this Deed of
Trust, Trustor will not assign, pledge, encumber, lease, sell, convey or in
any manner transfer any item of the Secured Property, without the prior
written consent of Secured Party.
(c) The Secured Property is not used or bought for personal,
family or household purposes.
(d) Except as otherwise provided in clauses (a) or (b) of this
Section 2.2, the Secured Property will be kept on or at the Premises or at
such other location as Secured Party may approve, and Trustor will not
remove any portion or item of Secured Property affixed or attached to the
Premises without the prior written consent of Secured Party which consent
shall not be unreasonably withheld, except such portions or items of
Secured Property which are consumed or worn out in ordinary
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usage or removed in the ordinary course of business and promptly replaced
by Trustor with new items of equal or greater quality or utility.
(e) Trustor maintains its principal place of business at
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890. Trustor will immediately notify Secured Party
in writing of any change in its principal place of business.
(f) Trustor shall cause all financing and continuation statements
and other instruments with respect to the Secured Property at all times to
be kept recorded, filed or registered in such manner and in such places as
may be required by law to fully evidence, perfect and secure the interests
of Secured Party in the Secured Property, and shall pay all filing fees in
connection therewith. At the request of Secured Party, Trustor will join
Secured Party in executing one or more financing statements with respect to
the Secured Property, and renewals, continuation statements and amendments
thereof, pursuant to the Uniform Commercial Code in customary form, and
will pay the cost of filing the same in all public offices wherever filing
is necessary to the effectiveness thereof. Without limiting the foregoing,
Trustor hereby irrevocably appoints Secured Party its attorney-in-fact to
execute, deliver and file such instruments for or on behalf of Trustor upon
Trustor's failure to do so within a reasonable time after demand, and
Trustor will pay the cost of any such filing.
2.3 Survival of Security Agreement. Notwithstanding any release
of any or all of the property included in the Property which is deemed
"real property", any proceedings to foreclose this Deed of Trust or its
satisfaction of record, the terms hereof shall survive as a security
agreement with respect to the security interest created hereby and referred
to above until the repayment or satisfaction in full of the Obliga tions.
ARTICLE 3.
EVENTS OF DEFAULT AND REMEDIES
3.1 Events of Default.
(a) The occurrence of any of the following events shall be deemed
an Event of Default hereunder (an "Event of Default"):
(i) the occurrence of an Event of Default under the Credit
Agreement or other Operative Agreement after the expiration of any
applicable cure period;
(ii) the occurrence of an Event of Default under the Lease;
or
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(iii) a default in the performance of any other covenant
herein and not in the Credit Agreement.
(b) Upon the occurrence of an Event of Default, Secured Party may
in accordance with Section 6 of the Credit Agreement declare all sums
secured hereby immediately due and payable, commence an action to foreclose
this Deed of Trust as a mortgage, and/or deliver to Trustee a written
declaration of default and demand for sale and of written notice of default
and of election to cause to be sold the Property, which notice Trustee
shall cause to be duly filed for record in case of foreclosure by exercise
of the power of sale herein. Should Secured Party elect to foreclose by
exercise of the power of sale herein, Secured Party shall also deposit with
Trustee this Deed of Trust and such receipts and evidence of expenditures
made and secured hereby as Trustee may require, and notice of sale having
been given as then required by law and after lapse of such time as may then
be required by law after recordation of such notice of default, Trustee,
without demand on Trustor, shall sell the Property at the time and place of
sale fixed by it in such notice of sale as Secured Party may direct, either
as a whole or in separate parcels, as Secured Party may determine, at
public auction to the highest bidder for cash (or by credit bid) in lawful
money of the United States, payable at time of sale. Secured Party shall
have the right to direct the order in which separate parcels shall be sold
and Trustor shall have no right to direct the order in which separate
parcels are sold. Trustee may postpone sale of all or any portion of the
Property by public announcement at such time and place of sale, and from
time to time thereafter may postpone such sale by public announcement at
the time fixed by the preceding postponement. Trustee shall deliver to such
purchaser its deed conveying the Property, or any portion thereof, so sold
but without any covenant or warranty, express or implied. The recitals in
such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any Person, including Trustor, Trustee or Secured
Party, may purchase at such sale by credit bid or otherwise.
Secured Party may proceed as to the Personal Property in
accordance with Secured Party's rights and remedies with respect to the
Property or sell the Personal Property separately and without regard to the
remainder of the Property in accordance with Secured Party's rights and
remedies provided by the Uniform Com mercial Code as well as other rights
and remedies available at law or in equity.
Trustor waives all rights, legal and equitable, it may now or
hereafter have to require marshalling of assets or to require upon
foreclosure sales of assets in a particular order. Each successor and
assign of Trustor, including without limitation, a holder of a Lien
subordinate to the Lien-created hereby (without implying that Trustor has,
except as expressly provided herein, a right to grant an interest in, or a
subordi nate Lien on, the Property), by acceptance of its interest or Lien
agrees that it shall be bound by the above waiver, as if it gave the waiver
itself.
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3.2 Discontinuance of Proceedings. Secured Party, from time to
time before the Trustee's sale pursuant to Section 3.1, may rescind any
notice of breach or default and of election to cause to be sold the
Property by executing and delivering to Trustee a written notice of such
rescission, which notice, when recorded, shall also constitute a
cancellation of any prior declaration of default and demand for sale. The
exercise by Secured Party of such right of rescission shall not constitute
a waiver of any breach or default then existing or subsequently occurring
or impair the right of Secured Party to execute and deliver to Trustee, as
above provided, other declarations of default and demand for sale, and
notices of breach or default, and of election to cause to be sold the
Property to satisfy the obligations hereof, nor otherwise affect any
provision, covenant or condition of this Deed of Trust or any of the
rights, obligations or remedies of the parties thereunder or hereunder.
3.3 Application of Proceeds of Sale.
(a) Upon a sale of all or part of the Property pursuant to
Section 3.1, after deducting all reasonable costs, fees and expenses of
Trustee and of this Deed of Trust, including reasonable attorneys' fees,
expenses and costs of investigation, all as actually incurred and
including, without limitation, reasonable attorneys' fees, costs and
expenses of investigation incurred in appellate proceedings or in any
action or participation in, or in connection with, any case or proceeding
under Chapters 7, 11 or 13 of the Bankruptcy Code or any successor thereto,
Trustee shall deliver the proceeds of sale to Secured Party for
application, as follows:
(i) First, to (A) any and all sums advanced by the Secured
Party to preserve the Property or preserve its Lien and security interest
therein, and (B) in the event of any proceeding for the collection or
enforcement of any of the Obliga tions, after an Event of Default shall
have occurred and be continuing, the expenses of retaking, holding,
operating, managing, preparing for sale or lease, selling or other wise
disposing of or realizing on the Property, or of any exercise by the
Secured Party of its rights hereunder, together with reasonable attorneys'
fees and court costs;
(ii) Second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to the
outstanding Primary Obligations shall be paid to the Creditors, with each
Creditor receiving an amount equal to such outstanding Primary Obligations
or, if the proceeds are insufficient to pay in full all such Primary
Obligations, its Pro Rata Share of the amount remaining to be distributed;
(iii) Third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an amount equal
to the outstanding Secondary Obligations shall be paid to the Creditors,
with each Creditor receiving an amount equal to its outstanding Secondary
Obligations or, if the proceeds are insuffi-
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cient to pay in full all such Secondary Obligations, its Pro Rata Share of
the amount remaining to be distributed; and
(iv) Fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii), inclusive,
and following the recon veyance of this Deed of Trust, to the Trustor or to
whomever may be lawfully entitled to receive such surplus.
(b) For purposes of this Deed of Trust (i) "Pro Rata Share" shall
mean, when calculating a Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator
of which is the then unpaid amount of such Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which
is the then outstanding amount of all Primary Obligations or Secondary
Obligations, as the case may be, (ii) "Primary Obligations" shall mean (A)
in the case of the Credit Agreement Obligations, all principal of, and
interest on, all Loans (together with all interest accrued thereon), and
all Commitment Fees and (iii) "Secondary Obligations" shall mean all
Obligations other than Primary Obligations.
(c) When payments to Creditors are based upon their respective
Pro Rata Shares, the amounts received by such Creditors hereunder shall be
applied (for purposes of making determinations under this Section 3.3 only)
(i) first, to their Primary Obligations and (ii) second, to their Secondary
Obligations. If any payment to any Creditor of its Pro Rata Share of any
distribution would result in overpayment to such Creditor, such excess
amount shall instead be distributed in respect of the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of the other
Creditors, with each Creditor whose Primary Obligations or Secondary
Obligations, as the case may be, have not been paid in full to receive an
amount equal to such excess amount multiplied by a fraction the numerator
of which is the unpaid Primary Obliga tions or Secondary Obligations, as
the case may be, of such Creditor and the denomi nator of which is the
unpaid Primary Obligations or Secondary Obligations, as the case may be, of
all Creditors entitled to such distribution.
(d) All payments required to be made hereunder shall be made to
the Secured Party as Administrative Agent under the Credit Agreement for
the account of the Creditors.
(e) Unless it has actual knowledge (including by way of written
notice from a Creditor) to the contrary, the Secured Party, in acting
hereunder, shall be entitled to assume that no Secondary Obligations are
outstanding.
3.4 Secured Party Statement. Trustee, upon presentation to it of
an affidavit signed by or on behalf of Secured Party, setting forth any
fact or facts showing a default by Trustor under any of the terms or
conditions of this Deed of
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Trust, is authorized to accept as true and conclusive all facts and
statements in such affidavit and to act hereunder in complete reliance
thereon.
3.5 Remedies Upon Default. Trustor covenants and agrees that
should an Event of Default occur, then Secured Party, or Trustee upon
written instructions from Secured Party (the legality thereof to be
determined solely by Secured Party), may, without notice to or demand upon
Trustor, without releasing Trustor from any obligation here-under and
without waiving its right to declare an Event of Default or impairing any
declaration of default or election to cause the Property to be sold or any
sale proceeding predicated thereon:
(a) make or do the same in such manner and to such extent as
either Secured Party or Trustee may deem reasonably necessary to protect
the security hereof, Secured Party and Trustee being authorized to enter
upon and take possession of the Premises for such purposes, and any sums
reasonably expended for such purposes shall become part of the Obligations
secured hereby;
(b) commence, appear in and/or defend any action or proceedings
purporting to affect the security hereof, and/or any additional or other
security therefor, the interests, rights, powers and/or duties of Trustee
and/or Secured Party hereunder, whether brought by or against Trustor,
Trustee or Secured Party;
(c) pay, purchase, contest or compromise any claim, debt, Lien,
charge or encumbrance which in the judgment of either may affect or appear
to affect the security of this Deed of Trust, the interests of Secured
Party or the rights, powers and/or duties of Trustee and/or Secured Party
hereunder and any sums reasonably expended for such purposes shall become
part of the Obligations secured hereby; and
(d) Secured Party is authorized either by itself or by its agent
to be appointed by it for that purpose or by a receiver appointed by a
court of competent jurisdiction, to enter into and upon and take and hold
possession of any portion or all of the Property, both real and personal,
and exclude Trustor and all other Persons therefrom; and to operate and
manage the Property and rent and lease the same, perform such reasonable
acts of repair or protection as may be reasonably necessary or proper to
conserve the value thereof, and collect any and all income, rents, issues,
profits and proceeds therefrom, the same being hereby assigned and
transferred to Secured Party, for the benefit and protection of Secured
Party, and from time to time apply and/or accumulate such income, rents,
issues, profits and proceeds in the manner set forth in Section 3.3 hereof
as if the same were proceeds of sale. The collection and/or receipt of
income, rents, issues, profits and/or proceeds from the Property by Secured
Party, its agent or receiver, after declaration of default and election to
cause the Property to be sold under and pursuant to the terms of this Deed
of Trust shall not affect or impair such default or declaration of default
or election to cause the Property to be sold or any sale proceedings
predicated thereon, but such proceedings may be
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conducted and sale effected notwithstanding the receipt and/or collection
of any such income, rents, issues, profits and/or proceeds.
Neither Trustee nor Secured Party shall be under any obligation
to make any of the payments or do any of the acts referred to in this
Section 3.5 and any of the actions referred to in this Section 3.5 may be
taken by Secured Party irrespective of whether any notice of default or
election to sell has been given hereunder and without regard to the
adequacy of the security for the Obligations.
ARTICLE 4.
FIXTURE FILING
4.1 Fixture Filing. This Deed of Trust shall be effective as a
financing statement filed as a fixture filing with respect to all fixtures
included in the Property and is to be filed and recorded in, among other
places, the real estate records of the county where the Real Property is
located as set forth on Exhibit A.
ARTICLE 5.
MISCELLANEOUS
5.1 Choice of Law. SECURED PARTY, TRUSTEE AND TRUS TOR AGREE THAT
THE RIGHTS AND OBLIGATIONS UNDER THIS DEED OF TRUST SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NEW YORK.
5.2 Amendments. etc. This Deed of Trust cannot be waived,
changed, discharged or terminated orally, but only by an instrument in
writing signed in accordance with Section 9.1 of the Credit Agreement.
5.3 Limitation of Interest. It is the intent of Trustor and
Secured Party in the execution of this Deed of Trust and all other
instruments evidencing or securing the Obligations to contract in strict
compliance with the relevant usury laws. In furtherance thereof, Secured
Party and Trustor stipulate and agree that none of the terms and provisions
contained herein shall ever be construed to create a contract for the use,
forbearance or detention of money requiring payment of interest at a rate
in excess of the maximum interest rate permitted to be charged by relevant
law. Trustor or any guarantor, endorser or other party now or hereafter
becoming liable for the payment of any of the Obligations shall never be
required to pay interest at a rate in excess of the maximum interest that
may be lawfully charged under relevant law and the provisions of this
Section 5.3 shall control over all other provisions of any instru-
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ment executed in connection herewith which may be in apparent conflict
herewith. In the event it is determined that any holder of any of the
Obligations has collected monies which are deemed to constitute interest
and are deemed to increase the effective interest rate on the Obligations
to a rate in excess of that permitted to be charged by relevant law, all
such sums deemed to constitute interest in excess of such legal rate shall
be applied by such holder to payment of such Obligations, as such
Obligations mature, or refunded to Trustor.
5.4 Notices. Except as otherwise expressly provided herein, all
notices and communications shall be telecopied or delivered by messenger or
overnight courier service and all such notices and communications shall,
when mailed, tele graphed, telexed, telecopied, or cabled or sent by
overnight courier, be effective when delivered to the telegraph company,
cable company or overnight courier, as the case may be, or sent by telex or
telecopier and when mailed shall be effective three (3) Business Days
following deposit in the mail with proper postage, except that notices and
communications to the Secured Party shall not be effective until received
by the Secured Party. All notices, requests, demands or other
communications shall be in writing and addressed as follows:
(a) if to the Trustor, at:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware, 19890
Attention: Corporate Trust Administration
(b) if to the Secured Party:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Deal Administrator
(c) if to any Creditor, either (i) to the Secured Party, at the
address specified above or (ii) at such address as such Creditor shall have
specified in the Credit Agreement;
or at such other address as shall have been furnished in writing by any
Person de scribed above to the party required to give notice hereunder;
except that in each case notices and communications to Secured Party shall
not be effective until actually received by such party.
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5.5 Captions. The captions or headings at the beginning of each
Article and Section hereof are for the convenience of the parties and are
not a part of this Deed of Trust.
5.6 Subrogation. To the extent that the proceeds of the Loans are
used, or Secured Party advances any funds under this Deed of Trust (which
advances are hereby deemed to have been advanced by Trustor's request), to
pay any outstanding Lien, charge or encumbrance against the Property,
Secured Party shall be subrogated to any and all rights and Liens held by
any owner or holder of such outstanding Liens, charges and encumbrances,
irrespective of whether said Liens, charges or encum brances are released.
5.7 No Merger. Upon the foreclosure of the Lien created by this
Deed of Trust on the Property, any Leases then existing shall not be
destroyed or terminated by application of the law of merger or as a matter
of law or as a result of such foreclosure unless Secured Party or any
purchaser at any such foreclosure sale shall so elect.
5.8 Non-Waiver. Except as expressly provided to the contrary
herein, acceptance by Secured Party of any sum after the same is due shall
not consti tute a waiver of the right either to require prompt payment,
when due, of all other sums hereby secured or to declare an Event of
Default. The acceptance by Secured Party of any sum in an amount less than
the sum then due shall be deemed an accep tance on account only and upon
condition that it shall not constitute a waiver of the obligation of
Trustor to pay the entire sum then due, and Trustor's failure to pay said
entire sum then due shall be and continue to be in default notwithstanding
such acceptance of such amount on account, as aforesaid, and Secured Party
shall be at all times thereafter and until the entire sum then due shall
have been paid, and notwith standing the acceptance by Secured Party
thereafter of further sums on account, or otherwise, entitled to exercise
all rights in this Deed of Trust conferred upon it, upon the occurrence of
an Event of Default. Consent by Secured Party to any transaction or action
of Trustor which is subject to consent or approval of Secured Party
hereunder shall not be deemed a waiver of the right to require such consent
or approval to future or successive transactions or actions. No failure by
Secured Party to insist upon the strict performance of any term hereof or
to exercise any right, power or remedy consequent upon a breach thereof
shall constitute a waiver of any such term or of any such breach. No waiver
of any breach shall affect or alter this Deed of Trust, which shall
continue in full force and effect, or the rights of Secured Party with
respect to any other then existing or subsequent breach.
5.9 Further Assurances. Trustor at its own expense, will execute,
acknowledge and deliver all such instruments and take all such action as
may be reasonably necessary to assure to Secured Party the Lien hereof
against the properties herein described and the rights intended to be
provided to Secured Party herein.
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5.10 Additional Security. Without notice to or consent of Trustor
and without impairment of the Lien and rights created by this Deed of
Trust, Secured Party may accept from Trustor or from any other Person,
additional security for the Obliga tions. Neither the giving of this Deed
of Trust nor the acceptance of any such addi tional security shall prevent
Secured Party from resorting, first, to such additional security, and,
second, to the security created by this Deed of Trust without affecting
Secured Party's Lien and rights under this Deed of Trust.
5.11 Books and Records. Trustor shall make available to Secured
Party for copying and inspection at all reasonable times during normal
business hours and during the term of this Deed of Trust at Trustor's
principal place of business upon receipt of one Business Day's prior
written notice from Secured Party, all books and records relating to the
business and operation of the Property.
5.12 Waiver of Statute of Limitations. The right to plead any and
all statutes of limitation as a defense to any demand secured by or made
pursuant to this Deed of Trust is hereby waived to the full extent
permitted by law.
5.13 Remedies Cumulative. No remedy herein conferred upon or
reserved to Trustee or Secured Party is intended to be exclusive of-any
other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder
or now or hereafter existing at law or in equity or by statute. Every power
or remedy given by this instrument to Trustee or Secured Party or to which
either of them may be otherwise entitled may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Trustee or Secured Party, and either of them may pursue inconsistent
remedies.
5.14 Recordation. Trustee accepts this Deed of Trust when this
Deed of Trust, duly executed and acknowledged, is made a public record as
provided by law.
5.15 Substitution of Trustee. Secured Party may, from time to
time, by a written instrument executed and acknowledged by Secured Party
and recorded in the county or counties where the Property is located, and
by otherwise complying with applicable statutory provisions, substitute a
successor or successors for the Trustee named herein or acting hereunder.
5.16 Reconveyance; Releases. (a) After the Termination Date,
Secured Party, at the expense of the Trustor, shall promptly request
Trustee in writing to reconvey the Property, or any remaining portion
thereof, and shall surrender to Trustee this Deed of Trust for cancellation
and retention. Upon its receipt of the written request of Secured Party,
the surrender of this Deed of Trust, and the payment of its fees, Trustee
shall promptly reconvey, without warranty, the Property then held
hereunder. The recitals in such reconveyance of any matters or facts shall
be conclu-
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sive proof of the truthfulness thereof. The grantee in such reconveyance
may be described as "the person or persons legally entitled thereto."
Neither Secured Party nor Trustee shall have any obligation or duty to
determine the rights of Persons claiming to be rightful grantees of any
reconveyance. As used in this Deed of Trust, "Termination Date" shall mean
the date upon which the Commitments have been terminated, no Note under the
Credit Agreement is outstanding (and all Loans have been repaid in full),
and all Obligations then owing have been paid in full.
(b) In the event that any part of the Property is sold in
connection with a sale permitted by the Lease or otherwise released at the
direction of the Re quired Lenders and the proceeds of such sale or sales
or from such release are applied in accordance with the provisions of
Section 8.2 of the Credit Agreement, to the extent required to be so
applied, such Property will be sold free and clear of the Liens created by
this Deed of Trust and the Secured Party, at the request and expense of the
Trustor, will duly assign, transfer and deliver to the Trustor (without
recourse and without any representation or warranty) such of the Property
as is then being (or has been) so sold or released and has not theretofore
been released pursuant to this Deed of Trust.
(c) At any time that the Trustor desires that the Secured Party
take any action to acknowledge or give effect to any release of Property
pursuant to clause (a) above, it shall deliver to the Secured Party a
certificate signed by its chief financial officer stating that the release
of the respective Property is permitted pursuant to clauses (a) or (b)
above.
(d) The Secured Party and the Trustee shall have no liability
whatsoever to any Creditor as a result of any release of Property by it in
accordance with this Section 5.16.
5.17 Time of the Essence. Time is of the essence of this Deed of
Trust, and the performance of all provisions hereof.
5.18 Partial Invalidity. If any of the provisions of this Deed of
Trust or the application thereof to any Person, party or circumstances
shall to any extent be invalid or unenforceable, the remainder of this Deed
of Trust, or the application of such provision or provisions to Persons,
parties or circumstances other than those as to whom or which it is held
invalid or unenforceable, shall not be affected thereby, and every
provision of this Deed of Trust shall be valid and enforceable to the
fullest extent permitted by law.
5.19 Request For Notice. Trustor requests that a copy of any
notice of default and a copy of any notice of sale hereunder be mailed to
Trustor at the address of Trustor given above.
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5.20 Irrevocable Trust. The trust created hereby is irrevocable
by Trustor unless and until the Property is reconveyed to Trustor as
provided in Section 5.16 hereof.
5.21 Security Agreement and Financing Statement. The mailing
address of debtor (Trustor herein) and of the Secured Party from which
information concerning security interests hereunder may be obtained is as
set forth on page one hereof. A carbon, photographic or other reproduction
of this Agreement or of any financing statement related to this Agreement
shall be sufficient as a financing state ment for any of the purposes
referenced herein.
5.22 State Law Recitals and Provisions.
(a) Non-Residential Trust Deed; Business Purpose. Trustor
warrants that this instrument, as a deed of trust or trust deed under laws
of the state in which the Property is located, is not and will not at any
time constitute a resid0ential trust deed, as that term is defined in ORS
86.705 or its successor statutes (if the Property is in Oregon). Trustor
warrants that it is engaging in this transaction exclusively for business,
commercial or investment purposes. Trustor warrants that the Property is
not used principally for agricultural or farming purposes (if the Property
is in Washington). Trustor warrants that the Property falls within the
provisions of Idaho Code 45-1502(5) or its successor statutes (if the
Property is in Idaho).
(b) Statutory Notice Concerning Insurance. Effective January 1,
1996, Chapter 313 of Oregon Laws 1994 amends ORS 746.201 to require that in
loans in which the lender has the right to purchase insurance in the event
the borrower fails to carry insurance, the loan document must contain a
warning in substantially the following form in 10-point type:
"WARNING
"Unless you provide us with evidence of the insurance coverage as
required by our contract or loan agreement, we may purchase insurance at
your expense to protect our interest. This insurance may, but need not,
also protect your interest. If the collateral becomes damaged, the coverage
we purchase may not pay any claim you make or any claim made against you.
You may later cancel this coverage by providing evidence that you have
obtained property coverage elsewhere.
"You are responsible for the cost of any insurance purchased by us.
The cost of this insurance may be added to your contract or loan balance.
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<PAGE>
If the cost is added to your contract or loan balance, the interest rate on
the underlying contract or loan will apply to this added amount. The
effective date of coverage may be the date your prior coverage lapsed or
the date you failed to provide proof of coverage.
"The coverage we purchase may be considerably more expensive than
insurance you can obtain on your own and may not satisfy any need for
property damage coverage or any mandatory liability insurance require ments
imposed by applicable law."
(c) Statutory Notice Concerning Written Agreements. UNDER OREGON
LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDERS AFTER
OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE
SIGNED BY LENDERS TO BE ENFORCEABLE.
(d) Washington Statutory Notice. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOR BEAR FROM ENFORCING
REPAYMENT OF DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
5.23 Concerning the Trustor. Each party hereto acknowledges that
Wilmington Trust Company is entering into this agreement solely as Owner
Trustee of the FMS Trust 1997-1 and not in its individual capacity and in
no case shall Wilmington Trust Company be personally liable for or on
account of any of the statements, representations, warranties, covenants or
obligations of the Trustor hereunder.
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<PAGE>
IN WITNESS WHEREOF, Trustor has caused this instrument to be duly
executed as of the day and year first above written.
WILMINGTON TRUST COMPANY, not in its
individu al capacity but only as Owner
Trustee under the FMS TRUST 1997-1, a
Delaware business trust
By: _____________________________________
Title: __________________________________
33
<PAGE>
FORM OF ACKNOWLEDGMENT
----------------------
STATE OF )
) ss.
County of )
The foregoing instrument was acknowledged before me, the undersigned
notary public, on this __ day of March 11, 1998, by _____________________, the
_____________________ of WILMINGTON TRUST COMPANY, a Delaware corporation, on
behalf of such corporation, not in its individual capacity, but solely as Owner
Trustee under the FMS TRUST 1997-1, a Delaware business trust, on behalf of such
business trust.
(NOTARIAL SEAL) _________________________________________
Notary Public for the State of __________
Residing at:_____________________________
34
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EXHIBIT A
---------
LEGAL DESCRIPTION OF LAND
-------------------------
35
<PAGE>
PARTICIPATION AGREEMENT
EXHIBIT B-2 TO
PARTICIPATION AGREEMENT
-----------------------
FORM OF MORTGAGE (GROUND LEASE)
-------------------------------
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
300 South Grand Avenue
Los Angeles, California 90071
Attention: John E. Mendez, Esq.
Space above for Recorder's use
___________ County, __________
LEASEHOLD DEED OF TRUST, ASSIGNMENT
OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
----------------------------
This LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING, is made as of March 11, 1998 (the "Deed of
Trust"), by WILMINGTON TRUST COMPANY, a Delaware corporation, not in its
individual capacity, but solely as Owner Trustee under the FMS TRUST 1997-1, a
Delaware business trust, as trustor ("Trustor"), having its principal address at
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890 Attention: Corporate Trust Administration, FIRST
AMERICAN TITLE INSURANCE COMPANY, as trustee ("Trustee"), for the benefit of
BANKERS TRUST COMPANY, having its principal address at 130 Liberty Street, New
York, New York, 10006, Attention: Deal Administrator, as Administrative Agent
and secured party ("Secured Party") for the benefit of the Lenders under, and
any other lenders from time to time party to, the Credit Agreement hereinafter
referred to (such Lenders and the Secured Party and other lenders, if any, are
hereinafter called the "Creditors"). Capitalized terms used but not otherwise
defined herein shall have the meanings provided for such terms in that certain
Credit Agreement, dated as of March 11, 1998, among Trustor, as the Borrower,
the Lenders named therein, Secured Party, as Administrative Agent and The Chase
Manhattan Bank, as Syndication Agent (as amended, modified or supplemented from
time to time, the "Credit Agreement").
W I T N E S S E T H :
- - - - - - - - - -
THIS DEED OF TRUST is executed, acknowledged and delivered by Trustor
to secure and enforce the following obligations (herein called the
"Obligations"):
(A) the payment and/or performance when due of (i) principal of and
interest on the Notes issued, and Loans made, under the Credit Agreement,
(ii) the Commit ment Fees and (iii) all other obligations and indebtedness
(including, without limitation, indemnities, fees and interest thereon) of
the Trustor to the Creditors now existing or hereafter incurred under,
arising out of, or in connection with the Credit Agreement
<PAGE>
and the other Operative Agreements and the due performance and compliance
by the Trustor with all of the terms, conditions and agreements contained
in the Credit Agree ment and the other Operative Agreements (all such
principal, interest, obligations and liabilities being herein collectively
called the "Credit Agreement Obligations");
(B) the payment when due of any and all sums advanced by the Secured
Party in order to preserve the Property or preserve its security interest
in the Property;
(C) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities of the Trustor referred to
in clause (A), after an Event of Default shall have occurred and be
continuing, reimbursement of the reason able expenses of foreclosing,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Property (as defined below), or of any exercise by the
Secured Party or any Creditor of its rights hereunder, together with
reasonable attorneys' fees and court costs;
(D) all renewals, extensions, amendments and (v) all amounts paid by
any Creditor as to which such Creditor has the right to reimbursement under
this Deed of Trust; and
(E) all renewals, extensions, amendments and changes of, or
substitutions or replacements for, all or any part of the items described
above;
NOW, THEREFORE, with reference to the foregoing recitals, in reliance
thereon and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged:
GRANTING CLAUSES
----------------
TRUSTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY GRANTS, CONVEYS,
ASSIGNS AND TRANSFERS:
(A) To Trustee, IN TRUST, WITH POWER OF SALE AND RIGHT OF ENTRY AND
POSSESSION, all of its present and future right, title and interest in and
to that certain leasehold estate (the "Leasehold") created pursuant to that
certain lease (or Sublease, if applicable), dated ____________, between
Fred Meyer, Inc., as land lord, and the Trustor, as tenant (such lease
together with any amendments, modifica tions, extensions, renewals or
substitutions therefor is referred to herein as the "Facil ity Lease"), and
affecting all or the portions of that certain real property more particu
larly described in Exhibit A attached hereto and made a part hereof (the
"Land"), together with all right, title and interest that Trustor now has
or may hereafter acquire in:
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<PAGE>
(1) all fixtures now or hereafter affixed to the Land, including
any and all buildings, constructions and improvements now or hereafter
erected upon the Land (the "Improvements", the Land and the
Improvements being hereinafter collectively called the "Premises"),
together with all machinery, apparatus, equipment, fittings, fixtures,
materials and supplies and all other property of every kind and nature
whatsoever owned by Trustor, or in which Trustor has or shall have an
interest, now or hereafter located, placed, attached, affixed or
installed upon or in the Premises, or appurtenances thereto, and used
or usable in connection with the present or future construction,
operation or occupancy of the Premises (collectively, "Equipment");
all of the property de scribed in this subparagraph (1) whether now or
hereafter placed thereon being hereby defined to be real property;
(2) all deposits made with or other security given to utility
compa nies by Trustor with respect to the Premises, and all advance
payments of insurance premiums made by Trustor with respect thereto
and all claims or demands relating to such deposits, other security
and/or such insurance;
(3) all present and future options of any kind, rights of first
refusal, privileges and other benefits of Trustor under the Facility
Lease.
(4) all leases, subleases and other agreements affecting the use
or occupancy of the Premises or any portion thereof now or hereafter
existing or entered into by Trustor (individually a "Lease", and
collectively, the "Leases"), and all rents, additional rents, issues,
profits, royalties, revenue, income, proceeds and other benefits
presently or in the future derived therefrom or otherwise from the
Premises (collectively, the "Rents"); subject, however, to the right,
power and authority hereinafter conferred upon Secured Party or
reserved to Trustor to collect or apply such rents, additional rents,
issues, profits, royalties, revenue, income, proceeds and other
benefits;
(5) all operating, management, franchise and use agreements,
licenses or contracts relating to the development, operation or use of
the Premises or any portion thereof, together with all permits,
authorizations or certificates required or used in connection with the
ownership of, or the opera tion or maintenance of the Premises to the
fullest extent Trustor can grant, convey, assign and transfer such
agreements, licenses or contracts;
(6) all easements, estates, rights, titles, interests,
privileges, liber ties, tenements, hereditaments and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining to
the Premises or any portion thereof;
3
<PAGE>
(7) all estate, interest, right, title, claim or demand,
including claims or demands with respect to the proceeds of and any
unearned premiums on any insurance policies covering the Premises or
the Equipment, which Trustor now has or may hereafter acquire to the
extent granted to Secured Party in Section 1.10, and to the extent
granted in Section 1.16 herein, any and all awards made for the taking
by eminent domain or condemnation, or by any proceeding or purchase in
lieu thereof, of the whole or any part of the Property, including
without limitation, any awards resulting from a change of grade of
streets or for severance damages;
(8) all governmental permits relating to construction, all names
under or by which the Premises may at any time be operated or known
(registered or unregistered, and without representation or warranty)
for use, however, solely in connection with the Premises to the
fullest extent Trustor can grant, convey, assign and transfer the
same; and all rights to carry on business under any such names or any
variant thereof, and, all trademarks, names, patents pending and
goodwill to the fullest extent Trustor can grant, convey, assign and
transfer the same;
(9) all estate, right, title, claim or demand whatsoever of
Trustor, either in law or in equity, in possession, reversion,
remainder or expectancy, in and to the Premises or any other property
described in the other paragraphs of these Granting Clauses;
(10) all proceeds and avails of the conversion, voluntarily or
involun tarily, of any of the foregoing into cash or liquidated
claims, including, but not limited to, condemnation awards (subject to
provisions of Section 1.16 herein) and proceeds of insurance (subject
to the provisions of Section 1.10 herein), of any causes of action
(whether arising in tort, contract, fraud or concealment of a material
fact) for any damage or injury to any of the foregoing, or of any
conveyance of the Premises or any part thereof; and
(11) the right, in the name and on behalf of Trustor to appear in
and defend any action or proceeding with respect to the Premises or
any other property described in the other paragraphs of these Granting
Clauses, and to commence any action or proceeding to protect the
interests of Secured Party therein.
All of the property conveyed or intended to be conveyed to
Trustee in Paragraph (A), and (1) through (11) above, is hereinafter
referred to as the "Real Property."
(B) To Secured Party, as secured party, to the extent of
Trustor's interest therein, a security interest in any portion of the Real
Property which may be
4
<PAGE>
construed to be personal property and, to the extent of Trustor's right,
title and interest therein, in all other personal property of every kind
and description, whether now existing or hereafter acquired, now or at any
time hereafter attached to, erected upon, situated in or upon, forming a
part of, appurtenant to, used or useful in the construc tion or operation
of or in connection with, or arising from the use or enjoyment of all or
any portion of, or from any lease or agreement pertaining to, the Real
Property.
All of the property conveyed or intended to be conveyed to
Secured Party in Paragraph (B) is hereinafter referred to as the "Personal
Property."
All of the Real Property and the Personal Property is referred to
herein collectively as the "Property."
AND TRUSTOR COVENANTS AND AGREES WITH SECURED PARTY AS FOLLOWS:
ARTICLE 1.
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE TRUSTOR
1.1 Title to the Property. Trustor represents and warrants that
it holds good, marketable and insurable leasehold interest in the Lease
Premises and good and valid right, title and interest, as tenant, in and to
the Facility Lease, free and clear of any Liens and encumbrances (except
for Permitted Encumbrances); (ii) that this Deed of Trust is a valid first
Lien upon the Property, and that it has not created any other Lien or
encumbrance upon the Property which will remain undischarged after
recording of this Deed of Trust (except Permitted Encumbrances); (iii) that
Trustor has full power and lawful authority to encumber the Property in the
manner set forth herein; and (iv) that there are no defenses or offsets to
this Deed of Trust or to the Obligations which it secures. Trustor shall
not, directly or indirectly, create or suffer to be created any Lien upon
any portion of the Property (except for Permitted Encum brances). Trustor
shall, subject to Permitted Encumbrances, preserve such title and the
validity and priority of the Lien hereof and shall forever warrant and
defend the same to Secured Party against the claims of all Persons and
parties whatsoever.
1.2 Leasehold.
(a) The provisions contained in this Deed of Trust shall be
deemed to be obligations of Trustor in addition to Trustor's obligations as
tenant with respect to similar matters under which Trustor is obligated
under the Facility Lease and shall not restrict or limit Trustor's duties
and obligations to keep and perform promptly all of its covenants,
agreements and obligations as tenant under such Facility Lease.
5
<PAGE>
(b) Trustor shall at all times fully perform and comply with all
the agreements, covenants, terms and conditions imposed upon the tenant
under the Facility Lease, and if Trustor shall fail so to do, and if
Secured Party's Lien on Trustor's leasehold interest under the Facility
Lease shall be materially adversely affected, Secured Party may (but shall
not be obligated to), and is hereby appointed by Trustor as Trustor's true
and lawful attorney in fact, which appointment is coupled with an interest,
to take any action Secured Party reasonably deems necessary or desirable to
prevent or cure any default thereunder including, without limitation,
performance of any of the tenant's covenants or obligations under such
Facility Lease. Upon Secured Party's request, Trustor will submit
satisfactory evidence of payment of all of its monetary obligations under
the Facility Lease (including but not limited to rents, taxes, assessments,
insurance premiums and operating expenses), and a statement of any such
payments which Trustor is contesting or arbitrating pursuant to the terms
of the Facility Lease.
(c) Trustor shall promptly (i) notify Secured Party in writing of
the receipt by it of any notice of default from the landlord under the
Facility Lease; (ii) notify Secured Party in writing of the receipt by it
of any notice under the Facility Lease of the termination of the Facility
Lease ; (iii) cause a copy of each such notice received by Trustor from the
landlord under the Facility Lease to be delivered to Secured Party; and
(iv) cause a copy of any notice of election or the exercise of any rights
of option, purchase or renewal under the Facility Lease sent by Trustor to
the landlord under the Facility Lease, to be delivered to Secured Party.
Upon receipt by Secured Party from the landlord under the Facility Lease of
any written notice of default by Trustor or any other party as tenant
thereunder, Secured Party may rely thereon and take such action as
aforesaid to cure such default even though the existence of such default or
the nature thereof be questioned or denied by Trustor or by any party on
behalf of Trustor or the tenant under the Facility Lease. Secured Party may
pay and expend such sums of money as Secured Party in its reasonable
discretion deems necessary for any such purpose, and Trustor hereby agrees
to pay to Secured Party, on demand, all such sums so paid and expended by
Secured Party, and any failure by Trustor to so reimburse Secured Party
within five (5) days after receipt of written demand shall constitute an
Event of Default hereunder. All sums so paid and expended by Secured Party,
and the interest thereon, shall be added to and be secured by the Lien of
this Deed of Trust.
(d) Without obtaining the prior written consent of the Secured
Party, Trustor shall not surrender its leasehold estate and its interest
created under the Facility Lease, nor modify, terminate or cancel the
Facility Lease. Any attempted surrender, modification, termination or
cancellation of the Facility Lease by Trustor without Secured Party's prior
written consent shall be null and void.
(e) If the Facility Lease is cancelled or terminated, and Secured
Party or its nominee shall acquire an interest in any new lease of the
property demised
6
<PAGE>
thereby, Trustor shall have no right, title or interest in or to the new
lease or to the leasehold estate created by such new lease.
(f) Without obtaining the prior written consent of the Secured
Party (which consent shall not be unreasonably withheld), Trustor shall not
enter into any sublease under the Facility Lease or assign any interest in
the Facility Lease.
(g) Without obtaining the prior written consent of the Secured
Party, Trustor shall not consent to the subordination of the Facility Lease
to any lien on the fee estate of the landlord under the Facility Lease.
(h) No release or forbearance of any of Trustor's obligations
under the Facility Lease, pursuant to such Facility Lease or otherwise,
including without limitation Trustor's obligations with respect to the
payment of rent as provided for in the Facility Lease and the performance
of all the terms, provisions, covenants, conditions and agreements
contained in such Facility Lease to be kept, performed or complied with by
tenant therein, shall release Trustor from any of Trustor's obligations
under this Deed of Trust. The Lien of this Deed of Trust attaches to all of
Trustor's rights and remedies at any time arising under or pursuant to
Subsection 365(h) of the Bankruptcy Code, including, without limitation,
all of Trustor's rights to remain in possession of the Property.
(i) Trustor hereby unconditionally assigns, transfers and sets
over to Secured Party all of Trustor's claims and rights to the payment of
damages arising from any rejection by the landlord of the Facility Lease
under the Bankruptcy Code. Secured Party shall have the right to proceed in
its own name or in the name of Trustor with respect to any claim, suit,
action or proceeding relating to the rejection of the Facility Lease,
including, without limitation, the right to file and prosecute, to the
exclusion of Trustor, any proofs of claim, complaints, motions,
applications, notices and other documents, in any case in which landlord is
debtor under the Bankruptcy Code. This assignment constitutes a present,
irrevocable and unconditional assignment of the foregoing claims, rights
and remedies, and shall continue in effect until all of the Obligations
secured by this Deed of Trust shall have been satisfied and discharged in
full. Any amounts received by Secured Party as damages arising out of the
rejection of the Facility Lease as aforesaid shall be applied first to all
reasonable costs and expenses of Secured Party (including, without
limitation, reasonable attorneys' fees) incurred in connection with the
exercise of any of its rights or remedies hereunder and then to reduce the
unpaid Obligations secured by this Deed of Trust in such order as Secured
Party may determine.
(j) Without obtaining the prior written consent of the Secured
Party, the fee title to the Property demised by the Facility Lease and the
leasehold estate therein contained shall not merge but shall always remain
separate and distinct, notwithstanding the union of the fee title and the
leasehold estate by purchase or
7
<PAGE>
otherwise, in landlord or tenant thereunder, or in any other party. In the
event Trustor acquires the fee title or any other estate, title or interest
in the property demised under the Facility Lease or any part thereof, the
Lien of this Deed of Trust, without further act, deed, conveyance or deed
of trust on behalf of Trustor shall attach to, cover and be a Lien upon
such acquired estate, title or interest and such interest shall thereupon
be and become a part of the security encumbered by this Deed of Trust with
the same force and effect as if specifically encumbered in this Deed of
Trust and in the event thereof, upon request of Secured Party without cost
or expense to Secured Party, Trustor will execute, acknowledge and deliver
all such further acts, conveyances, deeds, deeds of trust, and assurances
as Secured Party shall reasonably require to ratify and confirm Secured
Party's Lien on the acquired estate, title or interest.
(k) If there shall be filed by or against Trustor a petition
under the Bankruptcy Code, Trustor, as tenant under the Facility Lease, or
any trustee appointed by the Bankruptcy Court in such proceedings, shall
immediately (but in no event later than three (3) weeks after the filing of
such petition) notify Secured Party in writing of Trustor's or the
trustee's intent, as the case may be, to assume or reject the Facility
Lease pursuant to Section 365(a) of the Bankruptcy Code. If the intent of
Trustor or such trustee is to reject the Facility Lease or if such notice
is for any reason not so given to Secured Party or if it reasonably appears
to Secured Party that Trustor or the trustee does not intend to assume the
Facility Lease, then at any time thereafter Secured Party shall have the
right, but not the obligation, to serve upon Trustor or such trustee a
notice stating that (i) Secured Party demands that Trustor or trustee
assume and assign such Facility Lease to Secured Party or Secured Party's
nominee pursuant to Section 365 of the Bankruptcy Code and (ii) Secured
Party covenants to cure or provide adequate assurance of prompt cure of all
defaults and provide directly or through its nominee adequate assurance of
future performance under such Facility Lease. If Secured Party serves upon
Trustor or such trustee the notice described in the preceding sentence,
Trustor or such trustee shall not seek to reject such Facility Lease but
shall forthwith (and in all events before the expiration of all applicable
time periods for such assumption and assignment) seek authorization from
the Bankruptcy Court to assume and assign such Facility Lease to Secured
Party (subject to any higher or better offer therefor, as approved by the
Bankruptcy Court) subject to the performance by Secured Party of the
covenant provided for in clause (ii) of the preceding sentence. Trustor
agrees that Secured Party may at any time apply to the Bankruptcy Court for
a reasonable extension of any time period for the assumption of such
Facility Lease by Trustor and that the protection of Secured Party's Lien
in such Facility Lease shall be deemed sufficient cause for such extension
and Trustor shall not oppose any application by Secured Party for such
reasonable extension. If any petition, action, proceeding, motion or notice
shall be commenced or filed in respect of the landlord of the leasehold
estate under the Facility Lease in connection with any case (including a
case com menced or filed under the Bankruptcy Code), Secured Party shall
have the option, to the exclusion of Trustor, exercisable upon notice from
Secured Party to Trustor, to conduct and control any such litigation with
counsel of Secured Party's choice. Secured
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<PAGE>
Party may proceed in its own name or in the name of Trustor in connection
with any such litigation, and Trustor agrees to execute any and all powers,
authorizations, consents or other documents reasonably required by Secured
Party in connection therewith. Trustor shall, upon demand, pay to Secured
Party all reasonable costs and expenses (including reasonable attorneys'
fees) paid or incurred by Secured Party in connection with the prosecution
or conduct of any such proceedings. Any such reasonable costs or expenses
not paid by Trustor as aforesaid shall be secured by the lien of this Deed
of Trust and shall be added to the principal amount of the Obligations
secured hereby. Trustor shall not commence any action, suit, proceeding or
case, or file any application or make any motion, in respect of the
Facility Lease in any such case without the prior written consent of
Secured Party.
(l) Trustor will use its best efforts to obtain and deliver to
Secured Party within thirty (30) Business Days after written request by
Secured Party, an estoppel certificate from any landlord under the Facility
Lease setting forth (i) the name of the tenant thereunder, (ii) that such
Facility Lease has not been modified or, if either has been modified, the
date of each modification (together with copies of each such modification),
(iii) the rent payable under such Facility Lease, (iv) the date to which
all rental charges have been paid by tenant under such Facility Lease, (v)
whether there are any alleged defaults by tenant under such Facility Lease
and, if so, setting forth the nature thereof in reasonable detail, and (vi)
as to such other matters as Secured Party may reasonably request.
(m) Trustor represents and warrants to Secured Party that as of
the date hereof, no default by Trustor under the Facility Lease has
occurred and is continuing, and such Facility Lease is valid and subsisting
for the term set forth therein.
1.3 Deed of Trust Authorized. The execution and delivery of this
Deed of Trust has been duly authorized by Trustor, and there is no
provision in the charter or bylaws of Trustor requiring further consent for
such action by any other Person. Trustor is duly organized and validly
existing under the laws of the State of Delaware, and has all necessary
material licenses, authorizations, registrations, permits and/or approvals
and full power and authority to own its properties and carry on its
business as presently conducted, and the execution and delivery by it of,
and perfor mance by it of its obligations under this Deed of Trust will not
result in Trustor being in default under any provision of its charter or
bylaws or of any other material agree ment to which Trustor is a party or
which materially affects the Property or any material part thereof or any
other property of Trustor.
1.4 Operation of the Property. Trustor has, and with respect to
the construction of any new buildings or structures upon the Premises
during the term hereof will obtain, all necessary certificates, licenses,
authorizations, registrations, permits and/or approvals necessary for the
ownership, operation and management of
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<PAGE>
the Property, including, without limitation, all required environmental
permits, all of which, with respect to Improvements existing as of the date
hereof, are, to the best of Trustor's knowledge, in full force and effect
and not subject to any revocation, undis closed amendment, release,
suspension, forfeiture or the like. The present and contemplated use and
occupancy of the Property does not conflict with or violate any such
material certificate, license, authorization, registration, permit or
approval. Trustor will promptly deliver to Secured Party, at its reasonable
request, true copies of all such material certificates, licenses,
authorizations, registrations, permits and approvals.
1.5 Agreements. Except as permitted hereunder and under the
Credit Agreement, and except for any prior encumbrance which has been or
will be dis charged upon recordation of this Deed of Trust, Trustor has not
entered into any contract or other agreement providing for the transfer,
conveyance or encumbrance of the Property or any part thereof or interest
therein.
1.6 Payment and Performance of Obligations. Trustor shall pay all
of the Obligations when due and without offset or counterclaim. Trustor
shall observe and comply in all material respects with all of the terms,
provisions, conditions, covenants and agreements to be observed and
performed by it under this Deed of Trust.
1.7 Maintenance, Repair, Alterations, Etc. Trustor shall: (a) to
the extent the Trustor is obligated to do so under the Facility Lease keep
and maintain the Property in good condition and repair (subject to ordinary
wear and tear); make or cause to be made, as and when necessary, all
repairs, renewals and replacements, structural and nonstructural, exterior
and interior, ordinary and extraordinary, foreseen and unforeseen; (b) not
construct any new Improvements or remove, demolish, change or alter any of
the existing Improvements if such construction, removal, demolition, change
or alteration would materially adversely affect Secured Party's Lien or
security interest hereunder; (c) subject to Sections 1.10 and 1.16,
promptly restore any Im provement which may be materially damaged or
destroyed so that the same shall be at least equal to its value, condition,
character, bulk, floor area and height immediately prior to the damage or
destruction, and promptly pay when due all claims for labor per formed and
materials furnished therefor; (d) to the extent the Trustor is obligated to
do so under the Facility Lease comply in all material respects with all
laws, ordinances, regulations, covenants, conditions and restrictions now
or hereafter affecting the Property or any part thereof or the use thereof
or requiring any alterations or improve ments; (e) not commit or permit any
waste or deterioration (usual wear and tear excepted) of the Property; (f)
to the extent the Trustor is obligated to do so under the Facility Lease,
keep and maintain the grounds, sidewalks, parking and landscape areas which
are part of the Premises in good and neat order and repair; (g) comply in
all material respects with the provisions of any Lease, easement or other
agreement affecting all or any part of the Property; (h) not commit, suffer
or permit any act to be done in or upon the Property in material violation
of any law, ordinance, regulation,
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covenant, condition or restriction now or hereafter affecting the Property
or any parts thereof or the use thereof; and (i) not permit the
Improvements or any part thereof to become deserted or unguarded.
1.8 Required Insurance.
Trustor shall at its expense, at all times, maintain and keep in
full force and effect policies of insurance to the extent required by the
terms of Section 5.3 of the Credit Agreement and the other Operative
Agreements.
1.9 Policy Provisions, Etc.
(a) Each policy of insurance maintained by Trustor pursuant to
Section 1.8 shall (1) provide for the benefit of the Creditors that 30
days' prior written notice of suspension, cancellation, termination,
modification, non-renewal or lapse or material change of coverage shall be
given to the Secured Party; (2) name the Secured Party for the benefit of
the Creditors as the loss payee (except for (i) instances where a landlord
under a lease.has required that it be named a loss payee and (ii) errors
and omissions insurance and other third party liability insurance); and (3)
to the extent that neither the Secured Party nor the Creditors shall be
liable for premiums or calls, name the Secured Party for the benefit of the
Lenders as an additional insured.
(b) Trustor shall pay as and when the same become due and payable
the premiums for all insurance policies that Trustor is required to
maintain hereunder, and all such policies shall be non-assessable. Trustor
will deliver to Secured Party concurrently herewith certificates setting
forth in reasonable detail the terms (including, without limitation, any
applicable notice requirements) of all insurance policies that Trustor is
required to maintain hereunder together with true and complete copies of
such policies. Trustor shall also provide to Secured Party copies of such
policies certified by the insurance companies issuing them promptly after
Secured Party's request therefor; provided, however, that Secured Party may
not request copies of such insurance policies more than once each calendar
year unless an Event of Default has occurred and is continuing. Trustor
will deliver to Secured Party, concurrently with each change in any such
insurance policy relating to Trustor, a certificate with respect to such
changed insurance policy certified by Trustor, in the same form and
containing the same information as the certificates required to be
delivered by Trustor pursuant to the first sentence of this subparagraph
and with each renewal a certificate of Trustor certifying that all premiums
then due thereon have been paid to the applicable insurers and that the
same are in full force and effect.
(c) Not later than thirty (30) days prior to the expiration,
termination or cancellation of any insurance policy which Trustor is
required to maintain hereun der, Trustor shall obtain a replacement policy
or policies (or a binding commitment for such replacement policy or
policies), which shall be effective no later than the date of
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the expiration, termination or cancellation of the previous policy, and
shall deliver to Secured Party a certificate and a true and complete copy
of such policy or policies which comply with the requirements of Sections
1.8 and 1.9(a), or a copy of the binding commitment for such policy or
policies. Trustor shall also provide to Secured Party originals of such
policies or copies thereof certified by the insurance companies issuing
them as soon as reasonably possible after Secured Party's request therefor.
(d) Within thirty (30) days following the end of each policy
period, and concurrently with the delivery of each replacement policy
pursuant to Section 1.9(c), Trustor will deliver to Secured Party a report
or reports by Trustor setting forth the particulars as to all insurance
obtained by Trustor pursuant to Section 1.8 or Section 1.9 then in effect
and stating that all premiums then due thereon have been paid to the
applicable insurers, and that the same are in full force and effect.
(e) From time to time, upon the occurrence of any material change
in the use or operation of the Property, or in the availability of
insurance required hereunder in the area in which the Property is located,
Trustor will give Secured Party prompt notice of such change. Trustor will
not take out separate or additional insur ance concurrent in form or
contributing in the event of loss with that required to be maintained
pursuant to this Deed of Trust unless such insurance complies with this
Section 1.9.
1.10 Insurance Proceeds.
(a) Trustor shall give prompt written notice to Secured Party of
the occurrence of any damage to or destruction of the Property in an amount
exceeding $500,000 to repair or replace, whether or not covered by
insurance.
(b) In the event of any damage to or destruction of the Property
or any part thereof, all proceeds of insurance shall be payable to Secured
Party, and Trustor hereby authorizes and empowers Secured Party, at Secured
Party's option and in Secured Party's sole discretion as attorney-in-fact
for Trustor, to make proof of loss, adjust and compromise any claim in
excess of $500,000 under any policy of insurance in effect with respect to
the Property, appear in and prosecute any action arising from such
insurance policies, collect and receive insurance proceeds and deduct
therefrom Secured Party's expenses incurred in the collection of such
proceeds.
(c) In the event of any damage to or destruction of the Premises
or any part thereof, Secured Party shall hold the balance of all insurance
proceeds received (after deducting expenses) pursuant to Section 1.10(b)
above, to be used to pay or reimburse Trustor in accordance with normal
construction loan funding proce dures for the costs of reconstructing of
the Premises if the following conditions are satisfied within sixty (60)
days from the date of the damage or destruction:
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(i) Trustor satisfies Secured Party that after such
reconstruction is completed, the value of the Premises, as determined by
Secured Party in its sole discretion, will not be less than the appraised
value of the same immediately prior to the damage or destruction;
(ii) in Secured Party's opinion, the amount of such proceeds
is sufficient to pay all costs of such reconstruction or Trustor deposits
additional funds with Secured Party sufficient to pay the additional costs;
(iii) Trustor has delivered to Secured Party (A) a
construction contract for the work of reconstruction in form and content
acceptable to Secured Party with a contractor reasonably acceptable to
Secured Party, (B) a copy of each permit and approval required by law in
connection with the reconstruction, and (C) a surety bond for or guaranty
to Secured Party of payment for and completion of the reconstruction, in
form and substance reasonably satisfactory to Secured Party, in an amount
no less than the estimated costs of the reconstruction under the
construction contract; and
(iv) no Default or Event of Default has occurred and is
continuing hereunder, under the Credit Agreement or under any of the other
Operative Agreements.
If the insurance proceeds are held by Secured Party to be used to pay or
reimburse Trustor for the cost of reconstruction of the Premises, the Premises
shall be promptly and diligently restored by Trustor to the equivalent of their
condition immediately prior to the casualty in accordance with plans and
specifications approved by Secured Party or to such other condition as Secured
Party may approve in writing, and disbursements of such proceeds shall be in
accordance with disbursement procedures acceptable to Secured Party.
(d) Any insurance proceeds not required to reconstruct the
Premises or to satisfy the conditions set forth in clauses (i) through (v)
of Section 1.10(c) above shall be applied in the manner set forth in
Section 3.3 hereof as if the same were proceeds of sale; provided, however,
that if after applying the insurance proceeds as set forth above Secured
Party determines that the remaining security is inadequate to secure the
remaining Obligations, Trustor shall, immediately upon demand from Secured
Party, repay the principal of the Notes and Loans by an amount that will
reduce the Obligations to a balance for which the Secured Party's Lien and
security interest herein is adequate.
(e) Provided that no Default or Event of Default has occurred
(whether or not continuing), in the event that the damage to or destruction
of the Property is an amount less than $500,000 to repair or replace,
Trustor shall be entitled to receive all such proceeds and to apply such
proceeds to the payment of the costs and expenses of repairing, restoring
and operating the Property.
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(f) In the event of the foreclosure of this Deed of Trust
pursuant to Section 4.1 or other transfer of the title to the Property in
extinguishment, in whole or in part, of the Obligations secured hereby, all
right, title and interest of Trustor in and to any insurance policy then in
force or any proceeds thereof or any rights thereunder, shall pass to the
purchaser or grantee at any foreclosure sale notwithstanding the amount of
any bid at such foreclosure sale.
1.11 Indemnification; Subrogation; Waivers.
(a) The Trustor agrees to indemnify, reimburse and hold the
Secured Party, and each of the other Creditors and their respective
successors, assigns, employees, agents and servants (hereinafter in this
Section 1.11 referred to individually as "Indemnitee" and collectively as
"Indemnitees") harmless from any and all liabili ties, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses or
disbursements (including reasonable attorneys' fees and expenses) (for the
purposes of this Section 1.11 the foregoing are collectively called
"expenses") of whatsoever kind or nature which may be imposed on, asserted
against or incurred by any of the Indemnitees in any way relating to or
arising out of this Deed of Trust, any other Operative Agreement or the
documents executed in connection herewith and therewith or in any other way
connected with the administration of the transactions contemplated hereby
and thereby or the enforcement of any of the terms of or the preservation
of any rights under any thereof, or in any way relating to or arising out
of the manufacture, ownership, ordering, purchase, delivery, control,
acceptance, lease, financing, possession, operation, condition, sale,
return or other disposition or use of the Property (including, without
limitation, latent or other defects, whether or not discoverable), the
violation of the laws of any country, state or other governmental body or
unit, any tort (including, without limitation, claims arising or imposed
under the doctrine of strict liability, or for or on account of injury to
or the death of any Person (including any Indemnitee), or for property
damage) or any contract claim; provided, however, that Trustor shall not be
required to indemnify any Indemnitee for any expenses caused by the gross
negligence or willful misconduct of such Indemnitee. Trustor agrees that
upon written notice by any Indemnitee of any assertion that could give rise
to an expense, Trustor shall assume full responsibility for the defense
thereof.
(b) Without limiting the application of Section 1.11(a), Trustor
agrees to pay, indemnify and hold each Indemnitee harmless from and against
any expenses which such Indemnitee may suffer, expend or incur in
consequence of or growing out of any misrepresentation by Trustor in this
Deed of Trust or any of the other Operative Agreements or in any statement
or writing contemplated by or made or delivered pursuant to or in
connection with this Deed of Trust or any of the other Operative
Agreements.
(c) If and to the extent that the obligations of Trustor under
this Section 1.11 are unenforceable for any reason, Trustor hereby agrees
to make the
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maximum contribution to the payment and satisfaction of such obligations
(other than any such obligations caused by the gross negligence or willful
misconduct of any Indemnitee) which is permissible under applicable law.
(d) Any amounts paid by any Indemnitee as to which such Indemni
tee has the right to reimbursement shall constitute Obligations secured
under this Deed of Trust. The indemnity obligations of Trustor contained in
this Section 1.11 shall continue in full force and effect notwithstanding
the full payment of all Obligations and notwithstanding the discharge
thereof.
(e) Trustor waives any and all right to claim or recover against
Indemnitees for loss or damage to Trustor, the Property, Trustor's property
or the property of others under Trustor's control from any cause insured
against or required to be insured against by the provisions of this Deed of
Trust, except any such loss or damage caused by the gross negligence of
willful misconduct of any such Indemnitee.
(f) All sums payable by Trustor under this Deed of Trust shall be
paid without counterclaim, setoff, or deduction and without abatement,
suspension, deferment, diminution or reduction, and the obligations and
liabilities of Trustor hereunder shall in no way be released, discharged or
otherwise affected (except as expressly provided herein) by reason of: (i)
any damage to or destruction of or any condemnation or similar taking of
the Property or any part thereof; (ii) any restriction or prevention of or
interference with any use of the Property or any part thereof; (iii) any
title defect or encumbrance or any eviction from the Property or any part
thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other
like proceeding relating to Secured Party, any of the Creditors or Trustor,
or any action taken with respect to this Deed of Trust by any trustee or
receiver of Secured Party, any of the Creditors or Trustor; (v) any claim
which Trustor has or might have against Secured Party, or any of the
Creditors; (vi) any default or failure on the part of Secured Party to
perform or comply with any of the terms hereof; or (vii) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Trustor shall have notice or knowledge of any of the
foregoing. Trustor waives to the extent permissible by law all rights now
or hereafter conferred by statute or otherwise to any abatement, suspen
sion, deferment, diminution or reduction of any of the Obligations.
1.12 Impositions.
(a) To the extent the Trustor is obligated to do so under the
Facility Lease Trustor will pay when due all real property taxes and
assessments, general and special, and all other taxes and assessments of
any kind or nature whatsoever, includ ing, without limitation, public,
governmental or nongovernmental levies, assessments or charges, such as
assessments on appurtenant water stock, maintenance charges, owner
association dues or charges and fees, levies or charges resulting from
covenants,
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conditions and restrictions affecting the Property, which are assessed or
imposed upon any of the Property, or arising in respect of the operation,
occupancy, use or posses sion thereof (all of which taxes, assessments and
other public, governmental or nongovernmental charges of like or different
nature are hereinafter referred to as "Impositions"); provided, however,
that if, by law, any such Imposition is payable, or may at the option of
the payer be paid, in installments, Trustor may pay the same together with
any accrued interest on the unpaid balance of such Imposition in install
ments as the same may become due.
(b) If under the provisions of any law or ordinance now or
hereafter in effect there shall be assessed or imposed: (i) a tax or
assessment on the Property in lieu of or in addition to the Impositions
payable by Trustor pursuant to subparagraph (a) hereof, or (ii) a license
fee, tax or assessment imposed on Secured Party and measured by or based in
whole or in part upon the amount of the outstanding Obliga tions, then all
such taxes, assessments or fees shall be deemed to be included within the
term "Impositions" as defined in subparagraph (a) hereof, and Trustor shall
pay and discharge or cause to be paid and discharged the same as herein
provided or shall reimburse or otherwise compensate Secured Party for the
payment thereof. In the event any such law or ordinance specifically
provides that Trustor may not pay, reimburse or otherwise compensate
Secured Party for the payment of such tax, assessment or fee, then, at the
option of Secured Party, Secured Party may declare all of the Obligations
to be due and payable within sixty (60) days and the failure of Trustor to
pay the Obligations within such period shall be an Event of Default
entitling Secured Party to exercise any of the remedies set forth in this
Deed of Trust.
(c) Subject to the provisions of subparagraph (d) hereof, Trustor
covenants to furnish to Secured Party, within thirty (30) days after the
date when any interest or penalty shall accrue for nonpayment of
Impositions, official receipts of the appropriate taxing or other
authority, or other proof reasonably satisfactory to Secured Party,
evidencing the payment thereof.
(d) If an Event of Default shall occur and be continuing, at the
request of Secured Party, Trustor shall pay to Secured Party on the first
Business Day of each month an amount equal to one-twelfth of the annual
total of Impositions estimated by Secured Party to be assessed against the
Property in order to pay the installment of Impositions next due on the
Property. In such event, Trustor further agrees to cause all bills,
statements or other documents relating to Impositions to be sent or mailed
directly to Secured Party. Provided Trustor has deposited sufficient funds
with Secured Party pursuant to this Section 1.12, Secured Party shall pay
on or prior to the due date thereof, such amounts as may be due thereunder
out of the funds so deposited. Notwithstanding the foregoing, nothing
contained herein shall cause Secured Party to be deemed a trustee of said
funds or obligate Secured Party to pay any amount in excess of the amount
deposited pursuant to this Section 1.12. If at any time and for any reason
the funds deposited with Secured Party are or will be insufficient to
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pay such amounts as may then be due, Secured Party shall notify Trustor and
Trustor shall immediately deposit an amount equal to such deficiency with
Secured Party. Should Trustor fail to deposit with Secured Party sums
sufficient to fully pay such Impositions when due, Secured Party may, at
Secured Party's election, but without any obligation to do so, advance any
amounts required to make up the deficiency. Trustor shall, on demand,
reimburse Secured Party for said amount. Should an Event of Default occur
and be continuing hereunder, Secured Party may, at any time at Secured
Party's option, apply any sums or amounts then held by it pursuant hereto
(including, without limitation, any income earned thereon) to the payment
or discharge of the Obligations in the manner set forth in Section 3.3
hereof as if the same were proceeds of sale. The receipt, use or
application of any such sums paid by Trustor to Secured Party hereunder
shall not be construed to affect the maturity of any of the Obligations or
to otherwise affect any of the rights or powers of Secured Party hereunder
or any of the obligations of Trustor hereunder.
(e) Trustor will pay all taxes, charges, filing, registration and
recording fees, excises and levies imposed in connection with the recording
of this Deed of Trust or imposed upon Secured Party by reason of its
ownership of this Deed of Trust or any mortgage supplemental hereto, and
shall pay any and all Internal Revenue stamp taxes and other taxes required
to be paid on any of the Obligations (other than taxes required to be paid
by the Lenders pursuant to Section 2.15 of the Credit Agreement). In the
event Trustor fails to make any such payment within five (5) Business Days
after written notice thereof from Secured Party, then Secured Party shall
have the right, but shall not be obligated to, pay the amount due and
Trustor shall, on demand, reimburse Secured Party for said amount.
1.13 Utilities. To the extent the Trustor is obligated to do so
under the Facility Lease Trustor will pay when due all utility charges
which are incurred by Trustor for the benefit of the Property or which may
become a charge or Lien against the Property for gas, electricity, steam,
water or sewer services furnished to the Property and all other assessments
or charges of a similar nature, whether public or private, affecting the
Property whether or not such taxes, assessments or charges are Liens
thereon.
1.14 Actions Affecting Property. Trustor will appear in and
contest any action or proceeding purporting to affect the security hereof
or the rights or powers of Secured Party hereunder; and Trustor will pay
all reasonable costs and expenses incurred by Trustor, including cost of
evidence of title and reasonable attorneys' fees, in any such action or
proceeding.
1.15 Actions by Secured Party to Preserve Property. Should
Trustor fail to pay or perform any of the Obligations, after expiration of
any applicable notice and cure period, Secured Party may pay or perform the
same in such manner and to such extent as it may deem necessary in its sole
discretion. In connection therewith,
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without limiting its general powers, Secured Party shall have and is hereby
given the right, but not the obligation: (a) to enter upon and take
possession of the Premises; (b) to make additions, alterations, repairs and
improvements to the Property which are reasonably necessary or proper to
keep the Property in good condition and repair; (c) to appear and
participate in any action or proceeding affecting or which may affect the
security hereof or the rights or powers of Secured Party; (d) to pay,
purchase, contest or compromise any encumbrance, claim, charge, Lien or
debt which may affect the security of this Deed of Trust or be prior or
superior hereto; and (e) in exercising such powers, to pay all necessary
expenses, including the reasonable fees and expenses of counsel or other
necessary or desirable consultants. Trustor shall, on demand therefor by
Secured Party, pay or reimburse Secured Party for all reasonable costs and
expenses incurred by Secured Party in connection with the exercise by
Secured Party of the foregoing rights, including, without limitation, cost
of evidence of title, court costs, appraisal costs, surveys and reasonable
attorneys' fees. In the event this Deed of Trust is placed in the hands of
an attorney for the collection of any sum secured hereby, Trustor agrees to
pay on demand all reasonable costs of collection, including reason able
attorneys' fees, incurred by Secured Party, either with or without the
institution of any action or proceeding, and in addition to all costs,
disbursements and allowances provided by law.
1.16 Eminent Domain.
(a) Should the Property or any part thereof or interest therein,
be taken or damaged by reason of any public improvements or condemnation
proceeding or in any other similar manner ("Condemnation"), or should
Trustor receive any notice or other information thereof, Trustor shall give
prompt written notice thereof to Secured Party.
(b) If requested by Secured Party, Trustor shall file or
otherwise defend its rights under the condemnation proceeding and prosecute
the same with due diligence to its final disposition and shall cause any
awards or settlements to be paid over to Secured Party for disposition
pursuant to the terms of this Deed of Trust. Trustor may be the nominal
party in such proceeding, but Secured Party shall be entitled to
participate in and to control the same and to be represented therein by
counsel of its choice, and Trustor will deliver or cause to be delivered to
Secured Party such instruments as may be requested by it from time to time
to permit such participa tion. If the Property or any part thereof is taken
or diminished in value, or if the consent settlement is entered, by or
under threat of such proceeding, the award or settlement payable to Trustor
by virtue of its interest in the Property shall be and hereby is assigned,
transferred and set over unto Secured Party to be held by it, in trust,
subject to the Lien and security interest of this Deed of Trust. Any such
award or settlement shall be first applied to reimburse Trustor and Secured
Party for all costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred in
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connection with the collection of such award or settlement. The balance of
such award or settlement shall be, at Secured Party's option:
(i) applied in the manner set forth in Section 3.3 hereof as
if the same were proceeds of sale; or
(ii) held by Secured Party to be used in accordance with the
provisions of Section 1.10(c) above to pay or reimburse Trustor for the
costs of rebuilding, reconstruction or repair of the Premises if the
conditions set forth in such section are satisfied within thirty (30) days
from the date of such award or settlement;
provided, however, that if after applying the award or settlement as set
forth above Secured Party determines that the remaining security is
inadequate to secure the remaining Obligations, Trustor shall, immediately
upon demand from Secured Party, repay the principal of the Notes and Loans
by an amount that will reduce the Obliga tions to a balance for which the
Secured Party's Lien and security interest herein is adequate.
1.17 Successors and Assigns. This Deed of Trust applies to,
inures to the benefit of and binds the parties hereto and their respective
successors and assigns. In the event the ownership of the Property becomes
vested in a Person other than Trustor, Secured Party may, without notice to
Trustor, deal with such successor or successors in interest with reference
to this Deed of Trust and the Obligations in the same manner as with
Trustor, and may alter the interest rate and/or alter or extend the terms
of payment of any of the Obligations without notice to Trustor and such
action shall not in any way affect the liability of Trustor here-under or
the Lien or priority of this Deed of Trust with respect to any part of the
Property covered hereby.
1.18 Liens. Trustor will pay or procure the discharge of, at
Trustor's cost and expense, all Liens (other than Permitted Lien) upon the
Property or any part thereof or interest therein within ten (10) Business
Days after Trustor learns of the filing thereof. If Trustor shall fail to
discharge any such Lien within such ten (10) Business Day period, then, in
addition to any other right or remedy of Secured Party, Secured Party may,
but shall not be obligated to, discharge the same, either by paying the
amount claimed to be due, or by procuring the discharge of such Lien by
depositing in court a bond for the amount claimed or otherwise giving
security for such claim, or in such manner as is or may be prescribed by
law; and all funds advanced by Secured Party to pay such obligations,
liabilities, costs and expenses (together with interest thereon at the
Default Rate from the date of demand until paid) shall be reimbursed by
Trustor upon demand by Secured Party; and all such advances with interest
thereon as aforesaid shall be secured hereby.
1.19 Secured Party's Powers. Without affecting the liability of
any other Person liable for the payment of any obligation herein mentioned,
and without
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affecting the Lien or charge of this Deed of Trust upon any portion of the
Property not then or theretofore released as security for the Obligations,
Secured Party may, from time to time and without notice, but subject to
Section 9.1 of the Credit Agreement: (a) release any Person so liable; (b)
extend the maturity or alter any of the terms of any such obligation; (c)
grant other indulgences; (d) release or cause to be released at any time at
Secured Party's option any parcel, portion or all of the Property; (e) take
or release any other or additional security for any obligation herein
mentioned; (f) while an Event of Default is continuing, make compositions
or other arrangements with debtors or other mortgagors in relation to this
Deed of Trust; (g) advance additional funds to protect the security hereof;
(h) while an Event of Default is continuing, pay or discharge any or all of
the Obligations; (i) consent in writing to the making of any map or plat
thereof; (j) join in granting any easement thereon; or (k) join in any
extension agreement or any agreement subordinating the Lien or charge
hereof; and, in any case referred to in clauses (g) or (h), all amounts so
advanced, with interest thereon at the Default Rate from the date of demand
until paid, shall be secured hereby.
1.20 Permitted Contests. Notwithstanding anything to the contrary
contained in this Deed of Trust, Trustor at its expense may contest (after
prior written notice to Secured Party), by appropriate legal,
administrative or other proceedings conducted in good faith and with due
diligence, the amount or validity or application, in whole or in part, of
any Imposition or Lien therefor or any law, ordinance, regula tion,
covenant, condition or restriction or the application of any instrument of
record affecting the Property or any part thereof or any claims of
mechanics, materialmen, suppliers or vendors and Lien therefor; provided
that (a) in the case of any Impositions or Lien therefor or any claims of
mechanics, materialmen, suppliers or vendors and Lien therefor, such
proceedings shall suspend the collection thereof from Secured Party and the
Property, (b) neither the Property nor any part thereof or interest therein
will be sold, forfeited or lost if Trustor pays the amount or satisfies the
condition being contested, and Trustor would have the opportunity to do so
in the event of Trustor's failure to prevail in the contest, (c) Secured
Party and the Creditors shall not, by virtue of such permitted contest, be
in any danger of any criminal liability, or any civil liability, and
neither the Property nor any interest therein would be subject to the
imposition of any Lien which would have priority over the Lien of this Deed
of Trust, and (d) Trustor shall have furnished to Secured Party a good and
sufficient bond or surety as reasonably requested by and reasonably
satisfactory to Secured Party if the failure to comply with such
Imposition, law, ordinance, regulation, covenant, condition or restriction
will result in a Lien or charge against the Property in excess of $500,000.
1.21 Continued Occupancy. If at any time the then existing use or
occupancy of any part of the Property shall, pursuant to any zoning or
other law, ordinance or regulation, be permitted only so long as such use
or occupancy shall continue, Trustor shall not cause or permit such use or
occupancy to be discontinued without the prior written consent of Secured
Party.
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1.22 Inspections. Subject to the provisions of any Lease or any
applicable law, Trustor hereby authorizes Secured Party, its agents,
representatives or workmen, to enter at any reasonable time during normal
business hours after at least twenty-four (24) hours advance notice to
Trustor (except that with respect to any emergency, Secured Party, its
agents, representatives or workers may enter during such time of emergency)
upon or in the Premises for the purpose of inspecting the same, and for the
purpose of performing any of the acts which Secured Party is authorized to
perform under the terms of this Deed of Trust.
1.23 Actions by Trustee. At any time, or from time to time,
without liability therefor and without notice, upon written request of
Secured Party and presentation of this Deed of Trust, and without affecting
the personal liability of any Person for payment of the Obligations secured
hereby or the effect of this Deed of Trust upon the remainder of the
Property, Trustee may (i) reconvey any part of the Property; (ii) consent
in writing to the making of any map or plat thereof; (iii) join in granting
any easement thereon; or (iv) join in any extension agreement or any agree
ment subordinating the Lien or charge hereof.
1.24 Hypothecation, Transfers. Trustor shall not, except as
expressly permitted by the Credit Agreement, hypothecate, convey, sell,
lease or otherwise dispose of (or agree to do any of the foregoing at any
future time) all or any part of the Property.
ARTICLE 2.
SECURITY AGREEMENT
2.1 Creation of Security Interest. This Deed of Trust creates a
Lien on the Property, and to the extent the Property is not real property
under applicable law (such Property hereinafter referred to as the "Secured
Property"), this Deed of Trust constitutes a security agreement under the
Uniform Commercial Code and any other applicable law.
The grant of a security interest to Secured Party in the granting
clauses of this Deed of Trust shall not be construed to derogate from or
impair the Lien or provisions of or the rights of Secured Party under this
Deed of Trust with respect to any property described herein which is real
property or which the parties have agreed to treat as real property. The
hereby stated intention of Trustor and Secured Party is that everything
used in connection with the production of income from such real property or
adopted for use thereon is, and at all times and for all purposes and in
all proceedings, both legal and equitable, shall be regarded as real
property, irrespective of whether or not the same is physically attached to
the land or the improvements thereon. If required by Secured Party, at any
time during the term of this Deed of Trust, Trustor will execute and
deliver to Secured Party, in form satisfactory to
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Secured Party, additional security agreements, financing statements and/or
other instruments covering all Personal Property or fixtures of Trustor
which may at any time be furnished, placed on, or annexed or made
appurtenant to the Real Property or used, useful or held for use, in the
operation of the Improvements.
Trustor hereby irrevocably constitutes and appoints Secured Party
the attorney-in-fact of Trustor, to execute, deliver and file with the
appropriate filing officer or office such security agreements, financing
statements and/or other instru ments as Secured Party may reasonably
request or reasonably require in order to impose and perfect the Lien and
security interest hereof more specifically on the Personal Property or any
fixtures.
If Trustor enters into a separate security agreement with Secured
Party relating to any of the Personal Property or fixtures, the terms of
such security agree ment shall govern the rights and remedies of Secured
Party in the event of a default thereunder.
It is understood and agreed that, in order to protect Secured
Party from the effect of Uniform Commercial Code Section 9313, as amended
from time to time, in the event that (i) Trustor intends to purchase any
goods which may become fixtures attached to the Premises, or any part
thereof, and (ii) such goods will be subject to a purchase money security
interest held by a seller or any other party:
(a) Except as provided in Section 7 of the Credit Agreement,
Trustor shall, before executing any security agreement or other document
evidencing such security interest, obtain the prior written approval of
Secured Party, and all requests for such written approval shall be in
writing and contain the following information:
(i) a description of the fixtures to be replaced, added to,
installed or substituted;
(ii) the address at which the fixtures will be replaced,
added to, installed or substituted: and
(iii) the name and address of the proposed holder and pro
posed amount of the security interest.
Trustor's execution of any such security agreement or other document
evidencing such security interests in contravention of this subparagraph
(a) shall be a material breach of Trustor's covenants under this Deed of
Trust, and shall, at the option of Secured Party, entitle Secured Party to
all rights and remedies provided for herein upon the occurrence and
continuance of an Event of Default. No consent by Secured Party pursuant to
this subparagraph shall be deemed to constitute an agreement to subordinate
any right of Secured Party in fixtures or other property covered by this
Deed of Trust.
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(b) If at any time Trustor fails to make any payment when due and
payable on an obligation secured by a purchase money security interest in
any fixture, Secured Party, at its option, may at any time pay the amount
secured by such security interest and the amount so paid shall be payable
on demand by Trustor to Secured Party.
(c) Secured Party shall have the right to acquire by assignment
from the holder of such security interest any and all contract rights,
accounts receivable, negotiable or nonnegotiable instruments, or other
evidence of Trustor's indebtedness for such Personal Property or fixtures,
and, upon acquiring such interest by assign ment, shall have the right to
enforce the security interest as assignee thereof, in accor dance with the
terms and provisions of the Uniform Commercial Code then in effect, and in
accordance with any other provisions of law.
(d) Whether or not Secured Party has paid the indebtedness
secured by or taken an assignment of such security interest, Trustor
covenants to pay all sums when due and payable and perform all obligations
secured thereby, and if Trustor at any time shall be in default under such
security agreement after the exhaustion of all applicable notice and cure
periods provided for herein, or such greater time as provided for in an
applicable Operative Agreement, it shall be a material breach of Trustor's
covenants under this Deed of Trust.
2.2 Representations, Warranties and Covenants of Trustor. Trustor
hereby represents, warrants and covenants as follows:
(a) Trustor is, and as to all Secured Property acquired after the
date hereof will be, the sole owner of the Secured Property, free from any
Lien, security interest, encumbrance or claim thereon of any kind
whatsoever (other than Permitted Liens). Trustor will notify Secured Party
of, and will defend the Secured Property against, all claims and demands of
all Persons at any time claiming the Secured Property or any interest
therein other than such interests as are permitted herein.
(b) Except as otherwise provided in clauses (a) or (d) of this
Section 2.2, or in the Credit Agreement, or in connection with conveyance
of the Property, or a portion thereof permitted elsewhere in this Deed of
Trust, Trustor will not assign, pledge, encumber, lease, sell, convey or in
any manner transfer any item of the Secured Property, without the prior
written consent of Secured Party.
(c) The Secured Property is not used or bought for personal,
family or household purposes.
(d) Except as otherwise provided in clauses (a) or (b) of this
Section 2.2, the Secured Property will be kept on or at the Premises or at
such other location as Secured Party may approve, and Trustor will not
remove any portion or item of
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Secured Property affixed or attached to the Premises without the prior
written consent of Secured Party which consent shall not be unreasonably
withheld, except such portions or items of Secured Property which are
consumed or worn out in ordinary usage or removed in the ordinary course of
business and promptly replaced by Trustor with new items of equal or
greater quality or utility.
(e) Trustor maintains its principal place of business at
Wilmington Trust Company, Rodney Square North, 1100 Market Street,
Wilmington, Delaware, 19890. Trustor will immediately notify Secured Party
in writing of any change in its principal place of business.
(f) Trustor shall cause all financing and continuation statements
and other instruments with respect to the Secured Property at all times to
be kept recorded, filed or registered in such manner and in such places as
may be required by law to fully evidence, perfect and secure the interests
of Secured Party in the Secured Property, and shall pay all filing fees in
connection therewith. At the request of Secured Party, Trustor will join
Secured Party in executing one or more financing statements with respect to
the Secured Property, and renewals, continuation statements and amendments
thereof, pursuant to the Uniform Commercial Code in customary form, and
will pay the cost of filing the same in all public offices wherever filing
is necessary to the effectiveness thereof. Without limiting the foregoing,
Trustor hereby irrevocably appoints Secured Party its attorney-in-fact to
execute, deliver and file such instruments for or on behalf of Trustor upon
Trustor's failure to do so within a reasonable time after demand, and
Trustor will pay the cost of any such filing.
2.3 Survival of Security Agreement. Notwithstanding any release
of any or all of the property included in the Property which is deemed
"real property", any proceedings to foreclose this Deed of Trust or its
satisfaction of record, the terms hereof shall survive as a security
agreement with respect to the security interest created hereby and referred
to above until the repayment or satisfaction in full of the Obliga tions.
ARTICLE 3.
EVENTS OF DEFAULT AND REMEDIES
3.1 Events of Default.
(a) The occurrence of any of the following events shall be deemed
an Event of Default hereunder (an "Event of Default"):
(i) the occurrence of an Event of Default under the Credit
Agreement or other Operative Agreement after the expiration of any
applicable cure period;
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(ii) the occurrence of an Event of Default under the Lease;
or
(iii) a default in the performance of any other covenant
herein and not in the Credit Agreement.
(b) Upon the occurrence of an Event of Default, Secured Party may
in accordance with Section 6 of the Credit Agreement declare all sums
secured hereby immediately due and payable, commence an action to foreclose
this Deed of Trust as a mortgage, and/or deliver to Trustee a written
declaration of default and demand for sale and of written notice of default
and of election to cause to be sold the Property, which notice Trustee
shall cause to be duly filed for record in case of foreclosure by exercise
of the power of sale herein. Should Secured Party elect to foreclose by
exercise of the power of sale herein, Secured Party shall also deposit with
Trustee this Deed of Trust and such receipts and evidence of expenditures
made and secured hereby as Trustee may require, and notice of sale having
been given as then required by law and after lapse of such time as may then
be required by law after recordation of such notice of default, Trustee,
without demand on Trustor, shall sell the Property at the time and place of
sale fixed by it in such notice of sale as Secured Party may direct, either
as a whole or in separate parcels, as Secured Party may determine, at
public auction to the highest bidder for cash (or by credit bid) in lawful
money of the United States, payable at time of sale. Secured Party shall
have the right to direct the order in which separate parcels shall be sold
and Trustor shall have no right to direct the order in which separate
parcels are sold. Trustee may postpone sale of all or any portion of the
Property by public announcement at such time and place of sale, and from
time to time thereafter may postpone such sale by public announcement at
the time fixed by the preceding postponement. Trustee shall deliver to such
purchaser its deed conveying the Property, or any portion thereof, so sold
but without any covenant or warranty, express or implied. The recitals in
such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any Person, including Trustor, Trustee or Secured
Party, may purchase at such sale by credit bid or otherwise.
Secured Party may proceed as to the Personal Property in
accordance with Secured Party's rights and remedies with respect to the
Property or sell the Personal Property separately and without regard to the
remainder of the Property in accordance with Secured Party's rights and
remedies provided by the Uniform Com mercial Code as well as other rights
and remedies available at law or in equity.
Trustor waives all rights, legal and equitable, it may now or
hereafter have to require marshalling of assets or to require upon
foreclosure sales of assets in a particular order. Each successor and
assign of Trustor, including without limitation, a holder of a Lien
subordinate to the Lien-created hereby (without implying that Trustor has,
except as expressly provided herein, a right to grant an interest in, or a
subordi nate Lien on, the Property), by acceptance of its interest or Lien
agrees that it shall be bound by the above waiver, as if it gave the waiver
itself.
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3.2 Discontinuance of Proceedings. Secured Party, from time to
time before the Trustee's sale pursuant to Section 3.1, may rescind any
notice of breach or default and of election to cause to be sold the
Property by executing and delivering to Trustee a written notice of such
rescission, which notice, when recorded, shall also constitute a
cancellation of any prior declaration of default and demand for sale. The
exercise by Secured Party of such right of rescission shall not constitute
a waiver of any breach or default then existing or subsequently occurring
or impair the right of Secured Party to execute and deliver to Trustee, as
above provided, other declarations of default and demand for sale, and
notices of breach or default, and of election to cause to be sold the
Property to satisfy the obligations hereof, nor otherwise affect any
provision, covenant or condition of this Deed of Trust or any of the
rights, obligations or remedies of the parties thereunder or hereunder.
3.3 Application of Proceeds of Sale.
(a) Upon a sale of all or part of the Property pursuant to
Section 3.1, after deducting all reasonable costs, fees and expenses of
Trustee and of this Deed of Trust, including reasonable attorneys' fees,
expenses and costs of investigation, all as actually incurred and
including, without limitation, reasonable attorneys' fees, costs and
expenses of investigation incurred in appellate proceedings or in any
action or participation in, or in connection with, any case or proceeding
under Chapters 7, 11 or 13 of the Bankruptcy Code or any successor thereto,
Trustee shall deliver the proceeds of sale to Secured Party for
application, as follows:
(i) First, to (A) any and all sums advanced by the Secured
Party to preserve the Property or preserve its Lien and security interest
therein, and (B) in the event of any proceeding for the collection or
enforcement of any of the Obliga tions, after an Event of Default shall
have occurred and be continuing, the expenses of retaking, holding,
operating, managing, preparing for sale or lease, selling or other wise
disposing of or realizing on the Property, or of any exercise by the
Secured Party of its rights hereunder, together with reasonable attorneys'
fees and court costs;
(ii) Second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to the
outstanding Primary Obligations shall be paid to the Creditors, with each
Creditor receiving an amount equal to such outstanding Primary Obligations
or, if the proceeds are insufficient to pay in full all such Primary
Obligations, its Pro Rata Share of the amount remaining to be distributed;
(iii) Third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an amount equal
to the outstanding Secondary Obligations shall be paid to the Creditors,
with each Creditor receiving an amount equal to its outstanding Secondary
Obligations or, if the proceeds are insuffi-
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cient to pay in full all such Secondary Obligations, its Pro Rata Share of
the amount remaining to be distributed; and
(iv) Fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii), inclusive,
and following the recon veyance of this Deed of Trust, to the Trustor or to
whomever may be lawfully entitled to receive such surplus.
(b) For purposes of this Deed of Trust (i) "Pro Rata Share" shall
mean, when calculating a Creditor's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator
of which is the then unpaid amount of such Creditor's Primary Obligations
or Secondary Obligations, as the case may be, and the denominator of which
is the then outstanding amount of all Primary Obligations or Secondary
Obligations, as the case may be, (ii) "Primary Obligations" shall mean (A)
in the case of the Credit Agreement Obligations, all principal of, and
interest on, all Loans (together with all interest accrued thereon), and
all Commitment Fees and (iii) "Secondary Obligations" shall mean all
Obligations other than Primary Obligations.
(c) When payments to Creditors are based upon their respective
Pro Rata Shares, the amounts received by such Creditors hereunder shall be
applied (for purposes of making determinations under this Section 3.3 only)
(i) first, to their Primary Obligations and (ii) second, to their Secondary
Obligations. If any payment to any Creditor of its Pro Rata Share of any
distribution would result in overpayment to such Creditor, such excess
amount shall instead be distributed in respect of the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of the other
Creditors, with each Creditor whose Primary Obligations or Secondary
Obligations, as the case may be, have not been paid in full to receive an
amount equal to such excess amount multiplied by a fraction the numerator
of which is the unpaid Primary Obliga tions or Secondary Obligations, as
the case may be, of such Creditor and the denomi nator of which is the
unpaid Primary Obligations or Secondary Obligations, as the case may be, of
all Creditors entitled to such distribution.
(d) All payments required to be made hereunder shall be made to
the Secured Party as Administrative Agent under the Credit Agreement for
the account of the Creditors.
(e) Unless it has actual knowledge (including by way of written
notice from a Creditor) to the contrary, the Secured Party, in acting
hereunder, shall be entitled to assume that no Secondary Obligations are
outstanding.
3.4 Secured Party Statement. Trustee, upon presentation to it of
an affidavit signed by or on behalf of Secured Party, setting forth any
fact or facts showing a default by Trustor under any of the terms or
conditions of this Deed of
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Trust, is authorized to accept as true and conclusive all facts and
statements in such affidavit and to act hereunder in complete reliance
thereon.
3.5 Remedies Upon Default. Trustor covenants and agrees that
should an Event of Default occur, then Secured Party, or Trustee upon
written instructions from Secured Party (the legality thereof to be
determined solely by Secured Party), may, without notice to or demand upon
Trustor, without releasing Trustor from any obligation here-under and
without waiving its right to declare an Event of Default or impairing any
declaration of default or election to cause the Property to be sold or any
sale proceeding predicated thereon:
(a) make or do the same in such manner and to such extent as
either Secured Party or Trustee may deem reasonably necessary to protect
the security hereof, Secured Party and Trustee being authorized to enter
upon and take possession of the Premises for such purposes, and any sums
reasonably expended for such purposes shall become part of the Obligations
secured hereby;
(b) commence, appear in and/or defend any action or proceedings
purporting to affect the security hereof, and/or any additional or other
security therefor, the interests, rights, powers and/or duties of Trustee
and/or Secured Party hereunder, whether brought by or against Trustor,
Trustee or Secured Party;
(c) pay, purchase, contest or compromise any claim, debt, Lien,
charge or encumbrance which in the judgment of either may affect or appear
to affect the security of this Deed of Trust, the interests of Secured
Party or the rights, powers and/or duties of Trustee and/or Secured Party
hereunder and any sums reasonably expended for such purposes shall become
part of the Obligations secured hereby; and
(d) Secured Party is authorized either by itself or by its agent
to be appointed by it for that purpose or by a receiver appointed by a
court of competent jurisdiction, to enter into and upon and take and hold
possession of any portion or all of the Property, both real and personal,
and exclude Trustor and all other Persons therefrom; and to operate and
manage the Property and rent and lease the same, perform such reasonable
acts of repair or protection as may be reasonably necessary or proper to
conserve the value thereof, and collect any and all income, rents, issues,
profits and proceeds therefrom, the same being hereby assigned and
transferred to Secured Party, for the benefit and protection of Secured
Party, and from time to time apply and/or accumulate such income, rents,
issues, profits and proceeds in the manner set forth in Section 3.3 hereof
as if the same were proceeds of sale. The collection and/or receipt of
income, rents, issues, profits and/or proceeds from the Property by Secured
Party, its agent or receiver, after declaration of default and election to
cause the Property to be sold under and pursuant to the terms of this Deed
of Trust shall not affect or impair such default or declaration of default
or election to cause the Property to be sold or any sale proceedings
predicated thereon, but such proceedings may be
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conducted and sale effected notwithstanding the receipt and/or collection
of any such income, rents, issues, profits and/or proceeds.
Neither Trustee nor Secured Party shall be under any obligation
to make any of the payments or do any of the acts referred to in this
Section 3.5 and any of the actions referred to in this Section 3.5 may be
taken by Secured Party irrespective of whether any notice of default or
election to sell has been given hereunder and without regard to the
adequacy of the security for the Obligations.
ARTICLE 4.
FIXTURE FILING
4.1 Fixture Filing. This Deed of Trust shall be effective as a
financing statement filed as a fixture filing with respect to all fixtures
included in the Property and is to be filed and recorded in, among other
places, the real estate records of the county where the Real Property is
located as set forth on Exhibit A. The record owner of the Property is Fred
Meyer, Inc.
ARTICLE 5.
MISCELLANEOUS
5.1 Choice of Law. SECURED PARTY, TRUSTEE AND TRUS TOR AGREE THAT
THE RIGHTS AND OBLIGATIONS UNDER THIS DEED OF TRUST SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NEW YORK.
5.2 Amendments. etc. This Deed of Trust cannot be waived,
changed, discharged or terminated orally, but only by an instrument in
writing signed in accordance with Section 9.1 of the Credit Agreement.
5.3 Limitation of Interest. It is the intent of Trustor and
Secured Party in the execution of this Deed of Trust and all other
instruments evidencing or securing the Obligations to contract in strict
compliance with the relevant usury laws. In furtherance thereof, Secured
Party and Trustor stipulate and agree that none of the terms and provisions
contained herein shall ever be construed to create a contract for the use,
forbearance or detention of money requiring payment of interest at a rate
in excess of the maximum interest rate permitted to be charged by relevant
law. Trustor or any guarantor, endorser or other party now or hereafter
becoming liable for the payment of any of the Obligations shall never be
required to pay interest at a rate in excess of the maximum interest that
may be lawfully charged under relevant law and the provisions of this
Section 5.3 shall control over all other provisions of any instru ment
executed in connection herewith which may be in apparent conflict herewith.
In
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the event it is determined that any holder of any of the Obligations has
collected monies which are deemed to constitute interest and are deemed to
increase the effective interest rate on the Obligations to a rate in excess
of that permitted to be charged by relevant law, all such sums deemed to
constitute interest in excess of such legal rate shall be applied by such
holder to payment of such Obligations, as such Obligations mature, or
refunded to Trustor.
5.4 Notices. Except as otherwise expressly provided herein, all
notices and communications shall be telecopied or delivered by messenger or
overnight courier service and all such notices and communications shall,
when mailed, tele graphed, telexed, telecopied, or cabled or sent by
overnight courier, be effective when delivered to the telegraph company,
cable company or overnight courier, as the case may be, or sent by telex or
telecopier and when mailed shall be effective three (3) Business Days
following deposit in the mail with proper postage, except that notices and
communications to the Secured Party shall not be effective until received
by the Secured Party. All notices, requests, demands or other
communications shall be in writing and addressed as follows:
(a) if to the Trustor, at:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware, 19890
Attention: Corporate Trust Administration
(b) if to the Secured Party:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Deal Administrator
(c) if to any Creditor, either (i) to the Secured Party, at the
address specified above or (ii) at such address as such Creditor shall have
specified in the Credit Agreement;
or at such other address as shall have been furnished in writing by any
Person de scribed above to the party required to give notice hereunder;
except that in each case notices and communications to Secured Party shall
not be effective until actually received by such party.
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5.5 Captions. The captions or headings at the beginning of each
Article and Section hereof are for the convenience of the parties and are
not a part of this Deed of Trust.
5.6 Subrogation. To the extent that the proceeds of the Loans are
used, or Secured Party advances any funds under this Deed of Trust (which
advances are hereby deemed to have been advanced by Trustor's request), to
pay any outstanding Lien, charge or encumbrance against the Property,
Secured Party shall be subrogated to any and all rights and Liens held by
any owner or holder of such outstanding Liens, charges and encumbrances,
irrespective of whether said Liens, charges or encum brances are released.
5.7 No Merger. Upon the foreclosure of the Lien created by this
Deed of Trust on the Property, any Leases then existing shall not be
destroyed or terminated by application of the law of merger or as a matter
of law or as a result of such foreclosure unless Secured Party or any
purchaser at any such foreclosure sale shall so elect.
5.8 Non-Waiver. Except as expressly provided to the contrary
herein, acceptance by Secured Party of any sum after the same is due shall
not consti tute a waiver of the right either to require prompt payment,
when due, of all other sums hereby secured or to declare an Event of
Default. The acceptance by Secured Party of any sum in an amount less than
the sum then due shall be deemed an accep tance on account only and upon
condition that it shall not constitute a waiver of the obligation of
Trustor to pay the entire sum then due, and Trustor's failure to pay said
entire sum then due shall be and continue to be in default notwithstanding
such acceptance of such amount on account, as aforesaid, and Secured Party
shall be at all times thereafter and until the entire sum then due shall
have been paid, and notwith standing the acceptance by Secured Party
thereafter of further sums on account, or otherwise, entitled to exercise
all rights in this Deed of Trust conferred upon it, upon the occurrence of
an Event of Default. Consent by Secured Party to any transaction or action
of Trustor which is subject to consent or approval of Secured Party
hereunder shall not be deemed a waiver of the right to require such consent
or approval to future or successive transactions or actions. No failure by
Secured Party to insist upon the strict performance of any term hereof or
to exercise any right, power or remedy consequent upon a breach thereof
shall constitute a waiver of any such term or of any such breach. No waiver
of any breach shall affect or alter this Deed of Trust, which shall
continue in full force and effect, or the rights of Secured Party with
respect to any other then existing or subsequent breach.
5.9 Further Assurances. Trustor at its own expense, will execute,
acknowledge and deliver all such instruments and take all such action as
may be reasonably necessary to assure to Secured Party the Lien hereof
against the properties herein described and the rights intended to be
provided to Secured Party herein.
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5.10 Additional Security. Without notice to or consent of Trustor
and without impairment of the Lien and rights created by this Deed of
Trust, Secured Party may accept from Trustor or from any other Person,
additional security for the Obliga tions. Neither the giving of this Deed
of Trust nor the acceptance of any such addi tional security shall prevent
Secured Party from resorting, first, to such additional security, and,
second, to the security created by this Deed of Trust without affecting
Secured Party's Lien and rights under this Deed of Trust.
5.11 Books and Records. Trustor shall make available to Secured
Party for copying and inspection at all reasonable times during normal
business hours and during the term of this Deed of Trust at Trustor's
principal place of business upon receipt of one Business Day's prior
written notice from Secured Party, all books and records relating to the
business and operation of the Property.
5.12 Waiver of Statute of Limitations. The right to plead any and
all statutes of limitation as a defense to any demand secured by or made
pursuant to this Deed of Trust is hereby waived to the full extent
permitted by law.
5.13 Remedies Cumulative. No remedy herein conferred upon or
reserved to Trustee or Secured Party is intended to be exclusive of-any
other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder
or now or hereafter existing at law or in equity or by statute. Every power
or remedy given by this instrument to Trustee or Secured Party or to which
either of them may be otherwise entitled may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Trustee or Secured Party, and either of them may pursue inconsistent
remedies.
5.14 Recordation. Trustee accepts this Deed of Trust when this
Deed of Trust, duly executed and acknowledged, is made a public record as
provided by law.
5.15 Substitution of Trustee. Secured Party may, from time to
time, by a written instrument executed and acknowledged by Secured Party
and recorded in the county or counties where the Property is located, and
by otherwise complying with applicable statutory provisions, substitute a
successor or successors for the Trustee named herein or acting hereunder.
5.16 Reconveyance; Releases. (a) After the Termination Date,
Secured Party, at the expense of the Trustor, shall promptly request
Trustee in writing to reconvey the Property, or any remaining portion
thereof, and shall surrender to Trustee this Deed of Trust for cancellation
and retention. Upon its receipt of the written request of Secured Party,
the surrender of this Deed of Trust, and the payment of its fees, Trustee
shall promptly reconvey, without warranty, the Property then held
hereunder. The recitals in such reconveyance of any matters or facts shall
be conclu-
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sive proof of the truthfulness thereof. The grantee in such reconveyance
may be described as "the person or persons legally entitled thereto."
Neither Secured Party nor Trustee shall have any obligation or duty to
determine the rights of Persons claiming to be rightful grantees of any
reconveyance. As used in this Deed of Trust, "Termination Date" shall mean
the date upon which the Commitments have been terminated, no Note under the
Credit Agreement is outstanding (and all Loans have been repaid in full),
and all Obligations then owing have been paid in full.
(b) In the event that any part of the Property is sold in
connection with a sale permitted by the Lease or otherwise released at the
direction of the Re quired Lenders and the proceeds of such sale or sales
or from such release are applied in accordance with the provisions of
Section 8.2 of the Credit Agreement, to the extent required to be so
applied, such Property will be sold free and clear of the Liens created by
this Deed of Trust and the Secured Party, at the request and expense of the
Trustor, will duly assign, transfer and deliver to the Trustor (without
recourse and without any representation or warranty) such of the Property
as is then being (or has been) so sold or released and has not theretofore
been released pursuant to this Deed of Trust.
(c) At any time that the Trustor desires that the Secured Party
take any action to acknowledge or give effect to any release of Property
pursuant to clause (a) above, it shall deliver to the Secured Party a
certificate signed by its chief financial officer stating that the release
of the respective Property is permitted pursuant to clauses (a) or (b)
above.
(d) The Secured Party and the Trustee shall have no liability
whatsoever to any Creditor as a result of any release of Property by it in
accordance with this Section 5.16.
5.17 Time of the Essence. Time is of the essence of this Deed of
Trust, and the performance of all provisions hereof.
5.18 Partial Invalidity. If any of the provisions of this Deed of
Trust or the application thereof to any Person, party or circumstances
shall to any extent be invalid or unenforceable, the remainder of this Deed
of Trust, or the application of such provision or provisions to Persons,
parties or circumstances other than those as to whom or which it is held
invalid or unenforceable, shall not be affected thereby, and every
provision of this Deed of Trust shall be valid and enforceable to the
fullest extent permitted by law.
5.19 Request For Notice. Trustor requests that a copy of any
notice of default and a copy of any notice of sale hereunder be mailed to
Trustor at the address of Trustor given above.
33
<PAGE>
5.20 Irrevocable Trust. The trust created hereby is irrevocable
by Trustor unless and until the Property is reconveyed to Trustor as
provided in Section 5.16 hereof.
5.21 Security Agreement and Financing Statement. The mailing
address of debtor (Trustor herein) and of the Secured Party from which
information concerning security interests hereunder may be obtained is as
set forth on page one hereof. A carbon, photographic or other reproduction
of this Agreement or of any financing statement related to this Agreement
shall be sufficient as a financing state ment for any of the purposes
referenced herein.
5.22 State Law Recitals and Provisions.
(a) Non-Residential Trust Deed; Business Purpose. Trustor
warrants that this instrument, as a deed of trust or trust deed under laws
of the state in which the Property is located, is not and will not at any
time constitute a residential trust deed, as that term is defined in ORS
86.705 or its successor statutes (if the Property is in Oregon). Trustor
warrants that it is engaging in this transaction exclusively for business,
commercial or investment purposes. Trustor warrants that the Property is
not used principally for agricultural or farming purposes (if the Property
is in Washington). Trustor warrants that the Property falls within the
provisions of Idaho Code 45-1502(5) or its successor statutes (if the
Property is in Idaho).
(b) Statutory Notice Concerning Insurance. Effective January 1,
1996, Chapter 313 of Oregon Laws 1994 amends ORS 746.201 to require that in
loans in which the lender has the right to purchase insurance in the event
the borrower fails to carry insurance, the loan document must contain a
warning in substantially the following form in 10-point type:
"WARNING
"Unless you provide us with evidence of the insurance coverage as
required by our contract or loan agreement, we may purchase insurance at
your expense to protect our interest. This insurance may, but need not,
also protect your interest. If the collateral becomes damaged, the coverage
we purchase may not pay any claim you make or any claim made against you.
You may later cancel this coverage by providing evidence that you have
obtained property coverage elsewhere.
"You are responsible for the cost of any insurance purchased by us.
The cost of this insurance may be added to your contract or loan balance.
34
<PAGE>
If the cost is added to your contract or loan balance, the interest rate on
the underlying contract or loan will apply to this added amount. The
effective date of coverage may be the date your prior coverage lapsed or
the date you failed to provide proof of coverage.
"The coverage we purchase may be considerably more expensive than
insurance you can obtain on your own and may not satisfy any need for
property damage coverage or any mandatory liability insurance require ments
imposed by applicable law."
(c) Statutory Notice Concerning Written Agreements. UNDER OREGON
LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDERS AFTER
OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE
SIGNED BY LENDERS TO BE ENFORCEABLE.
(d) Washington Statutory Notice. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOR BEAR FROM ENFORCING
REPAYMENT OF DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
35
<PAGE>
IN WITNESS WHEREOF, Trustor has caused this instrument to be duly
executed as of the day and year first above written.
WILMINGTON TRUST COMPANY, not in its
individu al capacity but only as Owner
Trustee under the FMS TRUST 1997-1, a
Delaware business trust
By: _____________________________________
Title: __________________________________
36
<PAGE>
FORM OF ACKNOWLEDGMENT
----------------------
STATE OF )
) ss.
County of )
The foregoing instrument was acknowledged before me, the undersigned
notary public, on this __ day of March, 1998, by _____________________, the
_____________________ of WILMINGTON TRUST COMPANY, a Delaware corporation, on
behalf of such corporation, not in its individual capacity, but solely as Owner
Trustee under the FMS TRUST 1997-1, a Delaware business trust, on behalf of such
business trust.
(NOTARIAL SEAL) _________________________________________
Notary Public for the State of _________________
Residing at:________________________________
37
<PAGE>
EXHIBIT A
---------
LEGAL DESCRIPTION OF LAND
-------------------------
38
<PAGE>
EXHIBIT B
---------
FACILITY LEASE
--------------
39
<PAGE>
EXHIBIT C
TO PARTICIPATION AGREEMENT
--------------------------
FORM OF REQUISITION
(Date)
TO: The Investors and the Administrative Agent, pursuant to the Participation
Agreement (the "Participation Agreement") dated as of March 11, 1998 among
the Lessee, the Construction Agent, the Owner Trustee, the Lessor, the
Investors, the Administrative Agent, the Syndication Agent and the Lenders
as the same may be amended, supplemented, amended and restated or otherwise
modified from time to time (capitalized terms used herein shall have the
meanings ascribed thereto in the Participation Agreement).
FROM: Fred Meyer, Inc., as Construction Agent
RE: [Funding Date][Property Closing Date]
-------------------------------------
1. This irrevocable Requisition is hereby delivered by Construction Agent
pursuant to Section 5.2 of the Participation Agreement.
2. The Funding Date is scheduled for _______________, 199_.
3. The aggregate amount of the Advance is $__________________.
4. The Loans and Investor Contributions comprising such Advance will be
[ABR Loans/Contributions][Eurodollar Loans/Contributions]. [The initial Interest
Period for such Eurodollar Loans will be ____________].
5. The Advance will be allocated among each of the Properties listed in
Schedule I attached hereto. With respect to each acquisition of Property,
Schedule II specifies (i) a description of the Property, (ii) the seller or
lessor of the Prop erty, (iii) the portion of the Property Costs attributable to
Land and (iv) the esti mated cost for Improvements, except that only clauses (i)
and (ii) hereof shall apply to Store Land Property.
<PAGE>
6. After giving effect to the Advance requested hereby, the Property Cost
for each Property in respect of which the Advance is being drawn is set forth on
Schedule A hereto and such amount does not exceed the Fair Market Sales Value
for such Property as set forth in the Appraisal therefor.
7. Funds shall be sent by wire transfer as follows:
a. Each Lender shall transfer its Commitment Percentage
of $______________, and each Investor shall transfer
its Inves tor Commitment Percentage of $____1 to the
following ac count of Lessor:
Bank:
ABA Number:
Account Name:
Account Number:
Ref:
Further Credit to:
b. Construction Agent hereby instructs Lessor to
distribute the funds as follows:
[information to be provided by Construction Agent]
8. All of the costs being funded pursuant to this Requisition relate to the
acquisition of Land and all Improvements thereon, to the construction of such
other Improvements subject to the Lease and/or to the payment of other Project
Costs and all moneys advanced to Construction Agent pursuant to this Requisition
will be applied solely to the payment (or reimbursement) of such costs.
In connection with such requested Advance, the Construction Agent hereby
represents and warrants to you as follows:
a. On the proposed Funding Date, both immediately before and after giving
effect to the making of the requested Advance and the appli-
- --------
1 For the Initial Closing Date the Investor Contribution will be $15,000,000.
Thereafter only loans may be requested.
C-2
<PAGE>
cation of the proceeds thereof, the statements made by each Loan
Party in Section 7.3 of the Participation Agreement are true and
correct in all material respects.
b. After giving effect to the Advance requested hereby, the aggregate
outstanding amounts of each of the Loans and the Investor Contribu
tions does not exceed the Commitments of the Lenders or the Inves tor
Commitments of the Investors, respectively.
c. All of the conditions precedent set forth in Section 6 of the Partici
pation Agreement applicable to the Advance requested hereby have been
satisfied or waived.
[9. The Property in respect of which the Advance is being drawn is hereby
designated as a Store Land Property.]2
- -------------------------
2 Add if appropriate.
C-3
<PAGE>
IN WITNESS WHEREOF, I have signed my name this ______ day of _______,
199_.
MEYER-SMITH HOLDCO, INC.
as Construction Agent
By:________________________
Name:______________________
Title:_____________________
S-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A TO REQUISITION
ALLOCATION OF ADVANCES
----------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Aggregate Property Appraisal for Prop- Cost of Land and
Cost (all Advances erty as of Comple- stimated cost of
Property Descrip- Cost of Land (cur- Improvement costs to date, including tion Date Improvements
tion (City, State) Lease Supp. rent Advance only) (current Advance current Advance)
No. only)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1._______ No. __ $________ $________ $________ $________ $________
- ------------------------------------------------------------------------------------------------------------------------------------
2._______ No. __ $________ $________ $________ $________ $________
- ------------------------------------------------------------------------------------------------------------------------------------
3._______ No. __ $________ $________ $________ $________ $________
- ------------------------------------------------------------------------------------------------------------------------------------
4._______ No. __ $________ $________ $________ $________ $________
- ------------------------------------------------------------------------------------------------------------------------------------
5._______ No. __ $________ $________ $________ $________ $________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
SCHEDULE B TO REQUISITION
INFORMATION REQUIRED
FOR FUNDING ACQUISITION OF LAND
1. Description of the subject Property:__________.
2. The subject Property consists of [Land only] [Land and Improve ments].
3. The Land comprising part of the subject Property is to be [ground leased
by the Lessors] [acquired by the Lessors in fee simple].
4. [Name of Seller/Ground lessor] is the [Seller] [Ground lessor] of the
Land comprising part of the subject Property.
5. *Cost of Land for the subject Property: Indicated on Schedule A.
6. Estimated Costs of Improvements for the subject Property in the
aggregate are $_____________.
Title:_____________________
- ------------------
*/ Insert in the case of an acquisition of a fee simple interest in the
applicable Land.
B-1
================================================================================
LEASE, SECURITY AGREEMENT
AND FINANCING STATEMENT
between
WILMINGTON TRUST COMPANY,
not in its individual capacity, but solely
as Owner Trustee under the
FMS TRUST 1997-1,
as Lessor,
and
FRED MEYER, INC.
---------------------------
Dated as of March 11, 1998
---------------------------
================================================================================
This Lease is subject to a security interest in favor of Bankers Trust Company,
a New York banking corporation, as administrative agent (the "Administrative
Agent"), under a Credit Agreement, dated as of March 11, 1998, among Lessor, the
Lenders and the Administrative Agent, as amended or supplemented. This Lease has
been executed in several counterparts. To the extent, if any, that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in this
Lease may be created through the transfer or possession of any counterpart other
than the original counterpart containing the receipt therefor executed by the
Administrative Agent on the signature page hereof.
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS....................................................... 1
1.1 Defined Terms................................................. 1
SECTION 2. PROPERTY AND TERM................................................. 1
2.1 Property...................................................... 1
2.2 Lease Term.................................................... 1
2.3 Title......................................................... 2
2.4 Lease Supplements............................................. 2
SECTION 3. RENT.............................................................. 2
3.1 Rent.......................................................... 2
3.2 Supplemental Rent............................................. 2
3.3 Performance on a Non-Business Day............................. 3
3.4 Method of Payment............................................. 3
SECTION 4. UTILITY CHARGES................................................... 3
4.1 Utility Charges............................................... 3
SECTION 5. QUIET ENJOYMENT................................................... 4
5.1 Quiet Enjoyment............................................... 4
SECTION 6. NET LEASE......................................................... 4
6.1 Net Lease; No Setoff; Etc..................................... 4
6.2 No Termination or Abatement................................... 5
SECTION 7. OWNERSHIP OF PROPERTY............................................. 5
7.1 Ownership of the Property..................................... 5
SECTION 8. CONDITION OF PROPERTY............................................. 7
8.1 Condition of the Property..................................... 7
8.2 Possession and Use of the Property............................ 7
8.3 Risk of Loss.................................................. 7
SECTION 9. COMPLIANCE........................................................ 8
9.1 Compliance with Legal Requirements and Insurance Requirements. 8
9.2 Environmental Matters......................................... 8
SECTION 10. MAINTENANCE AND REPAIR; RETURN................................... 9
10.1 Maintenance and Repair; Return................................ 9
10.2 Right of Inspection........................................... 9
10.3 Environmental Inspection......................................10
i-
<PAGE>
Page
SECTION 11. MODIFICATIONS....................................................10
11.1 Modifications, Substitutions and Replacements.................10
SECTION 12. TITLE............................................................11
12.1 Liens.........................................................11
12.2 Grants and Releases of Easements..............................12
SECTION 13. PERMITTED CONTESTS...............................................12
13.1 Permitted Contests Other Than in Respect of Impositions.......12
SECTION 14. INSURANCE........................................................13
14.1 Public Liability and Workers' Compensation Insurance..........13
14.2 Hazard and Other Insurance....................................13
14.3 Coverage......................................................14
SECTION 15. CONDEMNATION AND CASUALTY........................................15
15.1 Condemnation..................................................15
SECTION 16. LEASE TERMINATION................................................17
16.1 Termination upon Certain Events...............................17
16.2 Procedures....................................................17
SECTION 17. DEFAULT..........................................................17
17.1 Lease Events of Default.......................................17
17.2 Final Liquidated Damages......................................20
17.3 Lease Remedies................................................20
17.4 Waiver of Certain Rights......................................22
17.5 Delivery of Contracts.........................................22
17.6 Remedies Cumulative...........................................22
SECTION 18. LESSOR'S RIGHT TO CURE...........................................22
18.1 Lessor's Right to Cure Lessee's Lease Defaults................22
SECTION 19. LEASE TERMINATION; SALE OF UNDEVELOPED LAND......................23
19.1 Provisions Relating to Lessee's Termination of
this Lease or Exercise of Purchase Option.....................23
19.2 Aggregate Tranche A Percentage................................23
19.3 Sale of Undeveloped Land......................................23
SECTION 20. PURCHASE OPTION..................................................24
20.1 Purchase Option...............................................24
20.2 Maturity Date Purchase Option.................................24
20.3 Obligation to Purchase All Properties.........................24
ii-
<PAGE>
Page
SECTION 21. SALE OF PROPERTY.................................................24
21.1 Sale Procedure................................................24
21.2 Application of Proceeds of Sale...............................26
21.3 Indemnity for Excessive Wear..................................26
21.4 Appraisal Procedure...........................................27
21.5 Certain Obligations Continue..................................27
SECTION 22. HOLD OVER........................................................27
22.1 Hold Over.....................................................27
SECTION 23. RISK OF LOSS.....................................................28
23.1 Risk of Loss..................................................28
SECTION 24. SUBLETTING AND ASSIGNMENT........................................29
24.1 Subletting and Assignment.....................................29
24.2 Subleases.....................................................29
SECTION 25. ESTOPPEL CERTIFICATES............................................29
25.1 Estoppel Certificates.........................................29
SECTION 26. NO WAIVER........................................................30
26.1 No Waiver.....................................................30
SECTION 27. ACCEPTANCE OF SURRENDER..........................................30
27.1 Acceptance of Surrender.......................................30
SECTION 28. NO MERGER OF TITLE...............................................30
28.1 No Merger of Title............................................30
SECTION 29. NOTICES..........................................................30
29.1 Notices.......................................................30
SECTION 30. MISCELLANEOUS....................................................32
30.1 Miscellaneous.................................................32
30.2 Amendments and Modifications..................................32
30.3 Successors and Assigns........................................32
30.4 Headings and Table of Contents................................32
30.5 Counterparts..................................................32
30.6 GOVERNING LAW.................................................32
30.7 Limitations on Recourse.......................................32
30.8 Memorandum of Lease...........................................33
30.9 Ground Lease..................................................33
30.10 Security Agreement and Financial Statement....................33
30.11 State Law Recitals and Provisions.............................33
30.12 Limited Power of Attorney.....................................34
iii-
<PAGE>
Page
30.13 Estoppel Certificate..........................................35
Schedule 24.1 Existing Subleases
Exhibit A Form of Lease Supplement
Exhibit B Form of Memorandum of Lease
iv-
<PAGE>
LEASE, Security Agreement and Financing Agreement (this "Lease"),
dated as of March 11, 1998, among WILMINGTON TRUST COMPANY, a Delaware
corporation, not in its individual capacity, but solely as Owner Trustee under
the FMS TRUST 1997-1, a Delaware business trust, having its principal office at
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware, 19890-0001, as lessor (the "Lessor"), and FRED MEYER,
INC., a Delaware corporation, as a lessee and whose principal offices are
located at 3800 SE 22nd Avenue, P.O. Box 4212, Portland, Oregon 97242
("Lessee").
For purposes of provisions of Section 7.1(b) of this Lease related to
the creation and enforcement of this Agreement as a Deed of Trust, LESSEE, as
grantor, hereby conveys the property to FIRST AMERICAN TITLE INSURANCE COMPANY,
a corporation, as trustee, in trust and with power of sale, for the benefit of
Lenders as beneficiary and senior lenders, and for the benefit of LESSOR, as
beneficiary (in trust), as subordinated lender.
For purposes of Section 7.1(b) of this Lease related to the creation
and enforcement of this Lease as a security agreement and a fixture filing,
Lessee is the debtor and Lessor is the secured party, acting for the benefit of
the Lenders and the Investors.
In consideration of the mutual agreements herein contained, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used herein but not otherwise
defined in this Lease shall have the respective meanings specified in Annex A to
the Participation Agreement, dated as of the date hereof (the "Participation
Agreement"), among Lessee and Construction Agent, Lessor, the Owner Trustee, the
Investors, the Administrative Agent, the Syndication Agent and the Lenders named
therein, as such Participation Agreement may be amended, supplemented or
otherwise modified from time to time. The rules of usage set forth in Annex A to
the Participation Agreement shall apply to this Lease. Unless otherwise
indicated, references in this Lease to articles, sections, paragraphs, clauses,
appendices, schedules and exhibits are to the same contained in this Lease.
SECTION 2. PROPERTY AND TERM
2.1 Property. Subject to the terms and conditions hereinafter set
forth and contained in the respective Lease Supplement relating to each
Property, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
the Property specified in each Lease Supplement.
2.2 Lease Term. Each Property is leased for the Term, unless extended
or earlier terminated in accordance with the provisions of this Lease or any of
the other Operative
<PAGE>
LEASE
Agreements (including, but not limited to, any termination in connection with
the Acceleration of the Loans pursuant to Section 6.1 of the Credit Agreement).
2.3 Title. Each Property is leased to Lessee without any
representation or warranty, express or implied, by Lessor and subject to the
rights of parties in possession, the existing state of title (including, without
limitation, the Permitted Exceptions) and all applicable Legal Requirements.
Lessee shall not in any event have any recourse against Lessor for any defect in
or exception to title to any Property.
2.4 Lease Supplements. On each Property Closing Date, or on such other
date as may be required pursuant to Section 1.3 of the Participation Agreement,
Lessor and Lessee shall each execute and deliver a Lease Supplement for the
Property to be leased on such date in substantially the form of Exhibit A hereto
and thereafter such Property shall be subject to the terms of this Lease. Lessee
hereby agrees that the execution and delivery by it of a Lease Supplement shall,
without further act, constitute the irrevocable acceptance by Lessee of all of
the Property which is the subject of such Lease Supplement for all purposes of
this Lease and the other Operative Agreements on the terms set forth therein and
herein, and that such Property, together with any Improvements constructed on
such Property pursuant to the Construction Agency Agreement and this Lease,
shall be deemed to be included in the leasehold estate of this Lease and shall
be subject to the terms and conditions of this Lease as of such Property Closing
Date.
SECTION 3. RENT
3.1 Rent. On each applicable Payment Date occurring (i) after (x) the
termination of the Construction Period, with respect to any Property that is not
a Completed Property on the Initial Closing Date and (y) the Initial Closing
Date, with respect to each Existing Property which is a Completed Property on
the Initial Closing Date, (ii) on the date required under Section 21.1(c) in
connection with Lessee's exercise of the Remarketing Option, and (iii) on any
date when this Lease shall terminate with respect to a Property, Lessee shall
pay the Basic Rent attributable to such Property.
3.2 Supplemental Rent. (a) Lessee shall pay to Lessor or the Person
entitled thereto any and all Supplemental Rent promptly as the same shall become
due and payable, and if Lessee fails to pay any Supplemental Rent, Lessor shall
have all rights, powers and remedies provided for herein or by law or equity or
otherwise in the case of nonpayment of Basic Rent. Lessee shall pay to Lessor as
Supplemental Rent, among other things, on demand, to the extent permitted by
applicable Legal Requirements, interest at the applicable Overdue Rate on any
installment of Basic Rent not paid when due for the period for which the same
shall be overdue and on any payment of Supplemental Rent not paid when due or
demanded by Lessor for the period from the due date or the date of any such
demand, as the case may be, until the same shall be paid. The expiration or
other termination of Lessee's obligations to pay Basic Rent hereunder shall not
limit or modify the obligations of Lessee with respect to Supplemental Rent.
Unless expressly provided otherwise in this Lease or any other Operative
Agreement, in the event of any failure on the part of Lessee to pay and
2
<PAGE>
LEASE
discharge any Supplemental Rent as and when due, Lessee shall also promptly pay
and discharge any fine, penalty, interest or cost which may be assessed or added
for nonpayment or late payment of such Supplemental Rent, all of which shall
also constitute Supplemental Rent.
(b) Lessee shall make a payment of Supplemental Rent equal to the
Maximum Residual Guarantee Amount in accordance with Section 21.1(c).
3.3 Performance on a Non-Business Day. If any payment is required
hereunder on a day that is not a Business Day, then such payment shall be due on
the next succeeding Business Day, unless, in the case of payments based on the
Eurodollar Rate, the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.
3.4 Method of Payment. (a) Each payment of Rent payable by Lessee to
Lessor under this Lease or any other Operative Agreement shall be made by Lessee
to the Administrative Agent as assignee of Lessor under the Assignment of Lease
(or, if all Loans and all other amounts owing to the Lenders under the Credit
Agreement and the other Operative Agreements have been paid in full and all
Commitments of the Lenders have been permanently terminated, to Lessor) in
immediately available funds consisting of Dollars on the date when such payment
shall be due by wire transfer to such account or accounts at such bank or banks
or to such other Person or in such other manner as Lessor shall from time to
time direct.
(b) Neither Lessee's inability or failure to take possession of all,
or any portion, of any Property when delivered by Lessor, nor Lessor's inability
or failure to deliver all or any portion of any Property to Lessee, whether or
not attributable to any act or omission of Lessee or any act or omission of
Lessor, or for any other reason whatsoever, shall delay or otherwise affect
Lessee's obligation to pay Rent in accordance with the terms of this Lease.
(c) Rent shall be paid absolutely net to each Person entitled thereto,
so that this Lease shall yield to such Person the full amount thereof, without
setoff, deduction or reduction.
SECTION 4. UTILITY CHARGES
4.1 Utility Charges. Lessee shall pay, or cause to be paid, all
charges for electricity, power, gas, oil, water, telephone, sanitary sewer
service and all other rents and utilities used in or on each Property during the
Term. Lessee shall be entitled to receive any credit or refund with respect to
any utility charge paid by Lessee and the amount of any credit or refund
received by Lessor on account of any utility charges paid by Lessee, net of the
costs and expenses incurred by Lessor in obtaining such credit or refund, shall
be promptly paid over to Lessee. All charges for utilities imposed with respect
to any Property for a billing period during which this Lease expires or
terminates shall be adjusted and prorated on a daily
3
<PAGE>
LEASE
basis between Lessor and Lessee, and each party shall pay or reimburse the other
for each party's pro rata share thereof.
SECTION 5. QUIET ENJOYMENT
5.1 Quiet Enjoyment. So long as no Lease Event of Default shall have
occurred and be continuing, Lessee shall peaceably and quietly have, hold and
enjoy the Properties for the Term, free of any claim or other action by Lessor
or anyone rightfully claiming by, through or under Lessor. Such right of quiet
enjoyment is independent of, and shall not affect the rights of Lessor (or
anyone claiming by, through or under Lessor) otherwise to initiate legal action
to enforce, the obligations of Lessee under this Lease.
SECTION 6. NET LEASE
6.1 Net Lease; No Setoff; Etc. This Lease shall constitute a net lease
and, notwithstanding any other provision of this Lease, it is intended that
Basic Rent and Supplemental Rent shall be paid without counterclaim, setoff,
deduction or defense of any kind and without abatement, suspension, deferment,
diminution or reduction of any kind, and Lessee's obligation to pay all such
amounts is absolute and unconditional. The obligations and liabilities of Lessee
hereunder shall in no way be released, discharged or otherwise affected for any
reason, including, without limitation, to the maximum extent permitted by law:
(a) any defect in the condition, merchantability, design, construction, quality
or fitness for use of any Property or any portion thereof, or any failure of any
Property to comply with all Legal Requirements, including any inability to
occupy or use any Property by reason of such non-compliance; (b) any damage to,
removal, abandonment, salvage, loss, contamination of or Release from, scrapping
or destruction of or any requisition or taking of any Property or any part
thereof, including eviction; (c) any restriction, prevention or curtailment of
or interference with any use of any Property or any part thereof, including
eviction; (d) any defect in title to or rights to any Property or any Lien on
such title or rights or on any Property; (e) any change, waiver, extension,
indulgence or other action or omission or breach in respect of any obligation or
liability of or by any Participant; (f) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceedings relating to any Participant, any Loan Party or any other Person, or
any action taken with respect to this Lease by any trustee or receiver of any
Participant, any Loan Party or any other Person, or by any court, in any such
proceeding; (g) any claim that any Loan Party has or might have against any
Person, including, without limitation, any Participant or any vendor,
manufacturer, contractor of or for any Property; (h) any failure on the part of
Lessor to perform or comply with any of the terms of this Lease, any other
Operative Agreement or of any other agreement; (i) any invalidity or
unenforceability or disaffirmance against or by any Loan Party of this Lease or
any provision hereof or any of the other Operative Agreements or any provision
of any thereof; (j) the impossibility of performance by any Participant or any
Loan Party, or all of them; (k) any action by any court, administrative agency
or other Governmental Authority; any restriction, prevention or curtailment of
or any interference with the construction on or any use of any Property or any
part thereof; or (m) any other occurrence whatsoever, whether
4
<PAGE>
LEASE
similar or dissimilar to the foregoing, whether or not Lessee shall have notice
or knowledge of any of the foregoing. The parties intend that the obligations of
Lessee hereunder shall be covenants and agreements that are separate and
independent from any obligations of Lessor hereunder or under any other
Operative Agreements, and the obligations of Lessee shall continue unaffected
unless such obligations shall have been modified or terminated in accordance
with an express provision of this Lease. This Lease shall be noncancellable by
Lessee for any reason whatsoever except as expressly provided herein, and
Lessee, to the extent permitted by Legal Requirements, waives all rights now or
hereafter conferred by statute or otherwise to quit, terminate or surrender this
Lease, or to any diminution, abatement or reduction of Rent payable by Lessee
hereunder. If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law or otherwise, except as otherwise expressly
provided herein, Lessee shall, unless prohibited by Legal Requirements,
nonetheless pay to Lessor (or, in the case of Supplemental Rent, to whomever
shall be entitled thereto) an amount equal to each Rent payment at the time and
in the manner that such payment would have become due and payable under the
terms of this Lease if it had not been terminated in whole or in part, and in
such case, so long as such payments are made and no Lease Event of Default shall
have occurred and be continuing, Lessor will deem this Lease to have remained in
effect. Each payment of Rent made by Lessee hereunder shall be final and, absent
manifest error in the computation of the amount thereof, Lessee shall not seek
or have any right to recover all or any part of such payment from any
Participant or any party to any agreements related thereto for any reason
whatsoever. Lessee assumes the sole responsibility for the condition, use,
operation, maintenance, and management of the Properties and Lessor shall have
no responsibility in respect thereof and shall have no liability for damage to
the property of Lessee or any subtenant of Lessee on any account or for any
reason whatsoever.
6.2 No Termination or Abatement. Lessee shall remain obligated under
this Lease in accordance with its terms and shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding any action for
bankruptcy, insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting Lessor or any Lender, or any action with respect to this
Lease which may be taken by any trustee, receiver or liquidator of Lessor or any
Lender or by any court with respect to Lessor or any Lender, except as otherwise
expressly provided herein. Lessee hereby waives all right (i) to terminate or
surrender this Lease, except as otherwise expressly provided herein, or (ii) to
avail itself of any abatement, suspension, deferment, reduction, setoff,
counterclaim or defense with respect to any Rent. Lessee shall remain obligated
under this Lease in accordance with its terms and Lessee hereby waives any and
all rights now or hereafter conferred by statute or otherwise to modify or to
avoid strict compliance with its obligations under this Lease. Notwithstanding
any such statute or otherwise, Lessee shall be bound by all of the terms and
conditions contained in this Lease and any Lease Supplements.
SECTION 7. OWNERSHIP OF PROPERTY
7.1 Ownership of the Property. (a) Lessor and Lessee intend that (i)
for financial accounting purposes with respect to Lessee (A) this Lease will be
treated as an "operating lease" pursuant to Statement of Financial Accounting
Standards (SFAS) No. 13, as
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amended, (B) Lessor will be treated as the owner and lessor of the Properties
and (C) Lessee will be treated as the lessee of the Properties, but (ii) for
federal, state and local income tax and all other purposes (A) this Lease will
be treated as a financing arrangement, (B) the Lenders will be treated as senior
lenders making loans to Lessee in an amount equal to the Loans, which Loans will
be secured by the Properties, (C) Lessor will be treated as a subordinated
lender making a loan to Lessee in an amount equal to the Investor Contribution,
which loan is secured by the Properties, and (D) Lessee will be treated as the
owner of the Properties and will be entitled to all tax benefits ordinarily
available to an owner of property like such Property for such tax purposes.
Nevertheless, Lessee acknowledges and agrees that none of the Participants has
made any representations or warranties to Lessee concerning the tax, accounting
or legal characteristics of the Operative Agreements and that Lessee has
obtained and relied upon such tax, accounting and legal advice concerning the
Operative Agreements as it deems appropriate. The parties hereto will not take
any position inconsistent with the intentions expressed herein.
(b) Lessor and Lessee further intend and agree that, for the purpose
of securing Lessee's obligations for the repayment of the above-described loans,
(i) this Lease shall also be deemed to be a security agreement and financing
statement within the meaning of Article 9 of the Uniform Commercial Code and a
real property mortgage or deed of trust, as applicable; (ii) the conveyance
provided for in Section 2 shall be deemed a grant of a security interest in and
a mortgage lien on Lessee's right, title and interest in the Properties
(including the right to exercise all remedies as are contained in the applicable
Lease Supplement and Memorandum of Lease upon the occurrence of a Lease Event of
Default) and all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, investments, securities or other property, whether in the
form of cash, investments, securities or other property, for the benefit of
Lessor to secure Lessee's payment of all amounts owed by Lessee under this Lease
and the other Operative Agreements and Lessor holds title to the Properties so
as to create and grant a first lien and prior security interest in each Property
pursuant to this Lease for the benefit of the Administrative Agent under the
Assignment of Lease, to secure to the Administrative Agent the obligations of
Lessee under the Lease; (iii) the possession by Lessor or any of its agents of
notes and such other items of property as constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession by the
secured party" for purposes of perfecting the security interest pursuant to
Section 9-305 of the Uniform Commercial Code; and (iv) notifications to Persons
holding such property, and acknowledgments, receipts or confirmations from
financial intermediaries, bankers or agents (as applicable) of Lessee shall be
deemed to have been given for the purpose of perfecting such security interest
under applicable law. Lessor and Lessee shall, to the extent consistent with
this Lease, take such actions as may be necessary to ensure that, if this Lease
were deemed to create a security interest in the Properties in accordance with
this Section, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as such
throughout the Term. Nevertheless, Lessee acknowledges and agrees that no
Participant has provided or will provide tax, accounting or legal advice to
Lessee regarding this Lease, the Operative Agreements or the transactions
contemplated hereby and thereby, or made any representations or warranties
concerning the tax, accounting or legal characteristics of the Operative
Agreements, and that Lessee has obtained and relied
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upon such tax, accounting and legal advice concerning the Operative Agreements
as it deems appropriate.
(c) Lessor and Lessee further intend and agree that in the event of
any insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any State or Commonwealth thereof affecting Lessee or
Lessor, the transactions evidenced by this Lease shall be regarded as loans made
by an unrelated third party lender to Lessee.
SECTION 8. CONDITION OF PROPERTY
8.1 Condition of the Property. LESSEE ACKNOWLEDGES AND AGREES THAT
ALTHOUGH LESSOR WILL OWN AND HOLD TITLE TO THE IMPROVEMENTS RELATING TO ITS
PROPERTY, THE CONSTRUCTION AGENT IS SOLELY RESPONSIBLE UNDER THE TERMS OF THE
CONSTRUCTION AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND
CONSTRUCTION OF THE IMPROVEMENTS AND ANY REFURBISHMENTS, ALTERATIONS OR
MODIFICATIONS. LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS RENTING EACH
PROPERTY "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) BY ANY PARTICIPANT 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 AND (D) VIOLATIONS OF LEGAL
REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF OR ON THE PROPERTY CLOSING DATE
FOR SUCH PROPERTY. NO PARTICIPANT HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY
REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED, INCLUDING THE
CONDITION OF ANY IMPROVEMENTS THEREON, THE SOIL CONDITION, OR ANY ENVIRONMENTAL
OR HAZARDOUS MATERIAL CONDITION) OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER AS TO THE TITLE, VALUE, SUITABILITY, HABITABILITY, USE, CONDITION,
DESIGN, OPERATION, OR FITNESS FOR USE OF THE PROPERTY (OR ANY PART THEREOF), OR
ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF) AND NO PARTICIPANT SHALL BE
LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY
PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT.
8.2 Possession and Use of the Property. Each Property shall be used in
a manner consistent with the Construction Agency Agreement and, after the
Completion Date for the Property, as (i) a retail grocery store or supermarket
or (ii) a distribution facility or office building used in connection with the
foregoing, or (iii) for any other legal use consistent with Lessee's operations,
and applying standards of use no lower than the standards applied by Lessee for
other comparable properties owned or leased by Lessee. Lessee shall pay, or
cause
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to be paid, all charges and costs required in connection with the use of the
Properties. Lessee shall not commit or permit any waste of any Property or any
part thereof.
8.3 Risk of Loss. During the Term the risk of loss of or decrease in
the enjoyment and beneficial use of the Properties as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, wars or otherwise
is assumed by Lessee, and Lessor shall not in any event be answerable or
accountable therefor.
SECTION 9. COMPLIANCE
9.1 Compliance with Legal Requirements and Insurance Requirements.
Subject to the terms of Section 13 relating to permitted contests, the Lessee,
at its sole cost and expense, shall (a) comply with all Legal Requirements
(including all Environmental Laws) and Insurance Requirements relating to each
Property, including the use, construction, operation, maintenance, repair and
restoration thereof, and the remarketing thereof pursuant to Section 21, whether
or not compliance therewith shall require structural or extraordinary changes in
the Improvements or interfere with the use and enjoyment of each Property, and
(b) procure, maintain and comply with all licenses, permits, orders, approvals,
consents and other authorizations required for the construction, renovation,
use, maintenance and operation of each Property and for the use, operation,
maintenance, repair and restoration of the Improvements.
9.2 Environmental Matters. (a) Promptly upon Lessee's actual knowledge
of the presence of Hazardous Materials in any portion of a Property in
concentrations and conditions that constitute an Environmental Violation, Lessee
shall notify Lessor and the Administrative Agent in writing of such condition.
In the event of such Environmental Violation, Lessee shall, not later than
thirty (30) days after Lessee has actual knowledge of such Environmental
Violation, either deliver to Lessor and the Administrative Agent an Officer's
Certificate and a Termination Notice with respect to such Property pursuant to
Section 16.1, if applicable, or, at Lessee's sole cost and expense, promptly and
diligently undertake any response, clean up, remedial or other action (or to
cause third parties to do the same) necessary to remove, clean up or remediate
the Environmental Violation in accordance with the terms of Section 9.1. If
Lessee does not deliver a Termination Notice with respect to such Property
pursuant to Section 16.1, Lessee shall, upon completion of remedial action,
cause to be prepared by an environmental consultant reasonably acceptable to
Lessor a report describing the Environmental Violation and the actions taken in
response to such Environmental Violation, and a statement by the consultant that
the Environmental Violation has been remedied in full compliance with applicable
Environmental Laws.
(b) In addition, Lessee shall provide to Lessor and the Administrative
Agent, within five (5) Business Days of receipt, copies of all written
communications with any Governmental Authority relating to any Environmental Law
in connection with any Property. Lessee shall also promptly provide such
detailed reports of any such environmental claims as reasonably may be requested
by Lessor and the Administrative Agent.
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SECTION 10. MAINTENANCE AND REPAIR; RETURN
10.1 Maintenance and Repair; Return. (a) Lessee, at its sole cost and
expense, shall maintain each Property in good condition (ordinary wear and tear
excepted) and make all necessary repairs thereto, of every kind and nature
whatsoever, whether interior or exterior, ordinary or extraordinary, structural
or nonstructural or foreseen or unforeseen, in each case as required by all
Legal Requirements and Insurance Requirements and on a basis reasonably
consistent with the operation and maintenance of retail and commercial
properties comparable in type and location to the applicable Property subject,
however, to the provisions of Section 15 with respect to Condemnation and
Casualty.
(b) Lessor shall under no circumstances be required to build any
Improvements on any Property, make any repairs, replacements, alterations or
renewals of any nature or description to any Property, make any expenditure
whatsoever in connection with this Lease or maintain any Property in any way.
Lessor shall not be required to maintain, repair or rebuild all or any part of
any Property, and Lessee waives the right to (i) require Lessor to maintain,
repair, or rebuild all or any part of any Property, or (ii) make repairs at the
expense of Lessor pursuant to any Legal Requirement, Insurance Requirement,
contract, agreement, covenants, condition or restriction at any time in effect.
(c) Lessee shall, upon the expiration or earlier termination of the
Term with respect to a Property and solely in accordance with the terms hereof
(other than as a result of Lessee's purchase of such property from Lessor as
provided herein), vacate, surrender and transfer such Property to Lessor or a
purchaser, at Lessee's own expense, free and clear of all Liens other than
Permitted Liens and Lessor Liens, in as good condition as they were on its
Completion Date, or the date same became subject to this Lease, whichever is
applicable, ordinary wear and tear excepted, and in compliance with all Legal
Requirements, Insurance Requirements and the other requirements of this Lease
(and in any event without (x) any asbestos installed or maintained in any part
of such Property, (y) any polychlorinated byphenyls (PCBs) in, on or used,
stored or located at such Property, and (z) any other Hazardous Materials).
Lessee shall cooperate with any independent purchaser of such Property in order
to facilitate the ownership and operation by such purchaser of such Property
after such expiration or earlier termination of the Term, including providing
all books, reports and records regarding the maintenance, repair and ownership
of such Property and all data and technical information relating thereto,
granting or assigning all licenses necessary for the operation and maintenance
of such Property and cooperating in seeking and obtaining all necessary
licenses, permits and approvals of Governmental Authorities. Lessee shall have
also paid the total cost for the completion of all Modifications commenced prior
to such expiration or earlier termination of the Term. The obligation of Lessee
under this Section 10.1(c) shall survive the expiration or termination of this
Lease. Nothing herein shall be construed to authorize the return of any Property
unless expressly provided herein.
10.2 Right of Inspection. Each of the Administrative Agent and Lessor
may, at reasonable times and with reasonable prior notice (except that no notice
shall be required if a Lease Event of Default has occurred and is continuing),
enter upon, inspect and examine at its own cost and expense (unless a Lease
Event of Default exists, in which case the out-of-
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pocket costs and expenses of Lessor shall be paid by Lessee), any Property.
Lessee shall furnish to the Administrative Agent and Lessor statements, no more
than once per year, accurate in all material respects, regarding the condition
and state of repair of each Property. Neither the Administrative Agent nor
Lessor shall have any duty to make any such inspection or inquiry and shall not
incur any liability or obligation by reason of not making any such inspection or
inquiry.
10.3 Environmental Inspection. Not less than 12 months prior to the
Maturity Date (unless Lessee have previously irrevocably exercised the Purchase
Option, Maturity Date Purchase Option or paid Termination Value with respect to
each Property), and not more than thirty Business Days prior to surrender of
possession of a Property, Lessor shall, at Lessee's sole cost and expense,
obtain a report by an environmental consultant selected by Lessor certifying
that each Property or any portion thereof (i) does not contain Hazardous
Materials under circumstances or in concentrations that could result in a
violation of or liability under any Environmental Law and (ii) is in compliance
with all Environmental Laws. If such is not the case on either such date, then
Lessee shall be deemed to have irrevocably exercised the Maturity Date Purchase
Option pursuant to Section 20.2.
SECTION 11. MODIFICATIONS
11.1 Modifications, Substitutions and Replacements. (a) So long as no
Lease Event of Default has occurred and is continuing, Lessee, at its sole cost
and expense, may at any time and from time to time make alterations,
renovations, repairs, improvements and modifications to a Property or any part
thereof and will also have the right to reconstruct or improve such Property
(collectively, "Modifications"); provided, that: (i) except for any Modification
required to be made pursuant to a Legal Requirement or an Insurance Requirement,
no Modification, individually, or when aggregated with any (A) other
Modification or (B) grant, dedication, transfer or release pursuant to Section
12.2, shall be made if it would impair the value of such Property or the utility
or useful life of such Property from that which existed immediately prior to
such Modification; (ii) the Modification shall be performed expeditiously and in
a good and workmanlike manner; (iii) Lessee shall comply with all Legal
Requirements (including all Environmental Laws) and Insurance Requirements
applicable to the Modification, including the obtaining of all permits and
certificates of occupancy, and the structural integrity of such Property shall
not be adversely affected; (iv) Lessee shall maintain or cause to be maintained
builders' risk insurance at all times when a Modification is in progress; (v)
subject to the terms of Section 13 relating to permitted contests, Lessee shall
pay all costs and expenses and discharge any Liens arising with respect to the
Modification; (vi) such Modifications shall comply with Sections 8.2 and 10.1
and shall not change the primary character of such Property; and (vii) no
Improvements shall be demolished, except to the extent such demolition does not
impair the value, utility or useful life of such Property. All Modifications
(other than those that may be readily removed without impairing the value,
utility or remaining useful life of such Property) shall remain part of the
realty and shall be subject to this Lease and Lessee's Lease Supplement and
title thereto shall immediately vest in Lessor. So long as no Lease Event of
Default has occurred and is continuing, Lessee may place upon a Property any
inventory, trade fixtures, machinery,
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equipment or other property belonging to Lessee or third parties and may remove
the same at any time during the term of this Lease subject to the terms of
Section 10.1; provided that such inventory, trade fixtures, machinery, equipment
or other property, or their respective operations, do not impair the value,
utility or remaining useful life of such Property.
(b) Following the Completion Date with respect to any Property, Lessee
shall notify Lessor of the undertaking of any Modification to the Property the
cost of which is anticipated to exceed $500,000. Prior to undertaking any such
Modification, Lessee shall deliver to Lessor (i) a brief narrative of the work
to be done and a copy of the plans and specifications relating to such work; and
(ii) an Officer's Certificate stating that such work when completed will not
impair the value, utility or remaining life of such Property. Each of the
Administrative Agent and Lessor, by itself or its agents, shall have the right,
but not the obligation, from time to time to inspect such construction to ensure
that the same is completed consistent with the plans and specifications.
(c) Following the Completion Date with respect to any Property, Lessee
shall not without the consent of Lessor undertake any Modification to such
Property if such construction or alterations cannot, in the reasonable judgement
of the Administrative Agent, be completed on or prior to the date that is
eighteen months prior to the Maturity Date.
(d) Lessee shall make any Modification required to be made pursuant to
any Legal Requirement or any Insurance Requirement (such Modification, a
"Required Modification").
SECTION 12. TITLE
12.1 Liens.(a) Lessee agrees that, except as otherwise provided herein
and subject to the terms of Section 13 relating to permitted contests, Lessee
shall not directly or indirectly create or allow to remain, and shall promptly
discharge at its sole cost and expense, any Lien, defect, attachment, levy,
title retention agreement or claim upon any Property or any Modifications or any
Lien, attachment, levy or claim with respect to the Rent or with respect to any
amounts held by the Administrative Agent pursuant to the Credit Agreement or the
other Operative Agreements, other than Permitted Liens. Lessee shall promptly
notify Lessor in the event it receives knowledge that a Lien (other than a
Permitted Lien) exists with respect to any Property.
(b) Nothing contained in this Lease shall be construed as constituting
the consent or request of any Participant, expressed or implied, to or for the
performance by any contractor, mechanic, laborer, materialman, supplier or
vendor of any labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to any Property
or any part thereof. NOTICE IS HEREBY GIVEN THAT NO PARTICIPANT IS OR SHALL BE
LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO
LESSEE, OR TO ANYONE HOLDING ANY PROPERTY OR ANY PART THEREOF THROUGH OR UNDER
LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR,
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SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO
ANY PROPERTY.
12.2 Grants and Releases of Easements. Provided that no Lease Event of
Default shall have occurred and be continuing and subject to the provisions of
Sections 8, 9, 10 and 11, Lessor hereby consents to the following actions by
Lessee, in the name and stead of Lessor, but at Lessee's sole cost and expense:
(a) the granting (prior to the Lien of the Lease Supplement) of easements,
licenses, rights-of-way and other rights and privileges in the nature of
easements reasonably necessary or desirable for the construction, use, repair,
renovation or maintenance of any Property as herein provided; (b) the release
(free and clear of the Lien of the Lease Supplement) of existing easements or
other rights in the nature of easements which are for the benefit of any
Property; (c) if required by applicable Governmental Authority in connection
with the construction, the dedication or transfer (prior to the Lien of the
Lease Supplement) of unimproved portions of any Property for road, highway or
other public purposes; (d) the execution of petitions to have any Property
annexed to any municipal corporation or utility district; and (e) the execution
of amendments to any covenants and restrictions affecting any Property;
provided, that in each case Lessee shall have delivered to Lessor an Officer's
Certificate stating that: (i) such grant, release, dedication or transfer does
not impair the value or utility or remaining useful life of the applicable
Property, (ii) such grant, release, dedication or transfer is reasonably
necessary in connection with the construction, use, maintenance, alteration,
renovation or improvement of the applicable Property, (iii) such grant, release,
dedication, transfer or amendment will not cause the applicable Property or any
portion thereof to fail to comply with the provisions of this Lease or any other
Operative Agreements and all Requirements of Law (including, without limitation,
all applicable zoning, planning building and subdivision ordinances, all
applicable restrictive covenants and all applicable architectural approval
requirements); (iv) all governmental consents or approvals required prior to
such grant, release, dedication, transfer, annexation or amendment have been
obtained, and all filings required prior to such action have been made; (v)
Lessee shall remain obligated under this Lease, its Lease Supplements, and under
any instrument executed by Lessee consenting to the assignment of Lessor's
interest in this Lease as security for indebtedness, in each such case in
accordance with their terms, as though such grant, release, dedication or
transfer, had not been effected and (vi) Lessee shall pay and perform any
obligations of Lessor under such grant, release, dedication or transfer. Without
limiting the effectiveness of the foregoing, provided that no Lease Event of
Default shall have occurred and be continuing, Lessor shall, upon the request of
Lessee, and at Lessee's sole cost and expense, execute and deliver any
instruments necessary or appropriate to confirm any such grant, release,
dedication or transfer to any Person permitted under this Section.
SECTION 13. PERMITTED CONTESTS
13.1 Permitted Contests Other Than in Respect of Impositions. Except
to the extent otherwise provided for in Section 12.2 of the Participation
Agreement, Lessee, on its own or on Lessor's behalf but at Lessee's sole cost
and expense, may contest, by appropriate administrative or judicial proceedings
conducted in good faith and with due diligence, the
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amount, validity or application, in whole or in part, of any Legal Requirement,
or utility charges payable pursuant to Section 4.1 or any Lien, attachment,
levy, encumbrance or encroachment, and Lessor agrees not to pay, settle or
otherwise compromise any such item, provided that (a) the commencement and
continuation of such proceedings shall suspend the collection thereof from, and
suspend the enforcement thereof against, the applicable Properties and
Participants; (b) no part of any Property nor any Rent would be in any danger of
being sold, forfeited, lost or deferred; (c) at no time during the permitted
contest shall there be a risk of the imposition of criminal liability or civil
liability on any Participant for failure to comply therewith; (d) there shall be
no risk of enjoinment of or interference with, the use, possession or
disposition of such Property in any material respect; and (e) in the event that,
at any time, there shall be a material risk of extending the application of such
item beyond the Maturity Date for the applicable Property, then Lessee shall
deliver to Lessor an Officer's Certificate certifying as to the matters set
forth in clauses (a), (b), (c) and (d) of this Section 13.1. Lessor, at Lessee's
sole cost and expense, shall execute and deliver to Lessee such authorizations
and other documents as may reasonably be required in connection with any such
contest. Lessor will not be required to join in any proceedings pursuant to this
Section 13.1 unless a provision of any Requirement of Law requires that such
proceedings be brought by or in the name of such party; and in that event such
party will join in the proceedings or permit them or any part thereof to be
brought in its name if and so long as (i) Lessee has not elected the Remarketing
Option, and (ii) Lessee pays all related expenses and indemnities of such party
with respect to such proceedings.
SECTION 14. INSURANCE
14.1 Public Liability and Workers' Compensation Insurance. During the
Term, Lessee shall procure and carry, at Lessee's sole cost and expense,
commercial general liability insurance for claims for injuries or death
sustained by persons or damage to property while on each Property and such other
public liability coverages are ordinarily procured by Lessee or its Affiliates
who own or operate similar properties and but in any case shall provide
liability coverage of at least $3,000,000 per occurrence. Such insurance shall
be on terms and in amounts that are no less favorable than insurance maintained
by owners of similar properties and that are in accordance with normal industry
practice. The policy shall be endorsed to name each Participant as an additional
insured. The policy shall also specifically provide that the policy shall be
considered primary insurance which shall apply to any loss or claim before any
contribution by any insurance which any Participant may have in force. Lessee
shall, in the operation of the Property, comply with the applicable workers'
compensation laws and protect Lessor against any liability under such laws.
14.2 Hazard and Other Insurance. (a) During the Term, Lessee shall
keep, or cause to be kept, each Property insured against loss or damage by fire,
earthquake (unless such Property is located in the State of California),
windstorm, flood (if required under Section 14.2(b) hereof) and other risks on
terms and in amounts that are no less favorable than insurance maintained by
owners of similar properties, that are in accordance with normal industry
practice, and are in amounts equal to the actual replacement cost of the
Improvements. During the construction of any Improvements Lessee shall also
maintain or
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cause to be maintained builders' risk insurance. All insurance proceeds in
respect of any loss or occurrence for which the proceeds related thereto are (i)
less than or equal to $1,000,000, in the absence of the occurrence and
continuance of an Lease Event of Default, shall be adjusted by and paid to
Lessee for application toward the reconstruction, repair or refurbishment of the
applicable Property, and (ii) greater than $1,000,000 shall be adjusted jointly
by Lessee and Lessor (unless an Lease Event of Default has occurred and is
continuing, in which case such proceeds shall be adjusted solely by Lessor) and
held by Lessor for application in accordance with Section 15. In addition,
Lessee shall at all times during the Term maintain business interruption
insurance covering, for a period of no less than thirty (30) days (after the
waiting period provided herein), actual losses for any period during which the
earnings of Lessee are impaired as a result of any property damage or other
casualty.
(b) If at any time during the Term the area in which any Property is
located is designated a "flood-prone" area pursuant to the Flood Disaster
Protection Act of 1973 or any amendments or supplements thereto, then Lessee
shall comply with the National Flood Insurance Program as set forth in the Flood
Disaster Protection Act of 1973, as may be amended. In addition, Lessee will
fully comply with the requirements of the National Flood Insurance Act of 1968
and the Flood Disaster Protection Act of 1973, as each may be amended from time
to time, and with any other Legal Requirement, concerning flood insurance to the
extent that it applies to any Property.
14.3 Coverage. (a) Lessee shall furnish Lessor with certificates
showing the insurance required under Sections 14.1 and 14.2 to be in effect and
naming each of the Participants as an additional insured with respect to
liability insurance, naming each of the Participants and Lessee as their
interests may appear with respect to casualty coverage and showing the mortgagee
endorsement required by Section 14.3(c). All such insurance shall be at the cost
and expense of Lessee. Such certificates shall include a provision in which the
insurer agrees to provide thirty (30) days' advance written notice by the
insurer to Lessor and the Administrative Agent in the event of cancellation or
modification of such insurance. Promptly upon request, Lessee shall deliver to
Lessor, at Lessor's expense, copies of all insurance policies required by this
Lease.
(b) Lessee agrees that the insurance policy or policies required by
this Lease shall include an appropriate clause pursuant to which such policy
shall provide that it will not be invalidated should Lessee waive, in writing,
prior to a loss, any or all rights of recovery against any party for losses
covered by such policy, and that the insurance in favor of the Participants and
their respective rights under and interests in such policies shall not be
invalidated or reduced by any act or omission (including breach of warranty) or
negligence of Lessee or any other Person having any interest in any Property
other than Lessor and the Lenders. Lessee hereby waives any and all such rights
against the Participants to the extent of payments made under such policies.
(c) All insurance policies required by Section 14.2 shall include a
"New York" or standard form mortgagee endorsement in favor of the Administrative
Agent.
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(d) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this Lease except that Lessor may carry separate
liability insurance so long as (i) Lessee's insurance is designated as primary
and in no event excess or contributory to any insurance Lessor may have in force
which would apply to a loss covered under Lessee's policy and (ii) each such
insurance policy will not cause Lessee's insurance required under this Lease to
be subject to a coinsurance exception of any kind.
(e) Lessee shall pay as they become due all premiums for the insurance
required by this Lease, shall renew or replace each policy prior to the
expiration date thereof and shall promptly deliver to Lessor and the
Administrative Agent certificates for renewal and replacement policies.
(f) All such insurance shall be written by reputable insurance
companies that are financially sound and solvent and otherwise reasonably
appropriate considering the amount and type of insurance being provided by such
companies. Any insurance company selected by Lessee which is rated in Best's
Insurance Guide or any successor thereto (or if there be none, an organization
having a similar national reputation) shall have a general policyholder rating
of "A-" and a financial size rating of at least "VIII" or (if not) be otherwise
acceptable to the Administrative Agent.
(g) Notwithstanding anything to the contrary in this Lease, Lessee
shall have the right to maintain reasonable deductibles and self-insured
retention levels, that are reasonable in light of Lessee's net worth. The
insurance program described in this Lease may be maintained by Lessee for the
benefit of the parties.
SECTION 15. CONDEMNATION AND CASUALTY
15.1 Condemnation and Casualty. (a) Subject to the provisions of this
Section 15 and Section 16 (in the event Lessee delivers, or is obligated to
deliver, a Termination Notice), and prior to the occurrence and continuation of
a Lease Default, Lessee shall be entitled to receive any award, compensation or
insurance proceeds to which Lessee or Lessor may become entitled by reason of
their respective interests in a Property (i) if all or a portion of such
Property is damaged or destroyed in whole or in part by a Casualty or (ii) if
the use, access, occupancy, easement rights or title to such Property or any
part thereof is the subject of a Condemnation; provided, however, if a Lease
Default shall have occurred and be continuing such award, compensation or
insurance proceeds shall be paid directly to Lessor or, if received by Lessee,
shall be held in trust for Lessor, and shall be paid over by Lessee to Lessor,
and provided further that in the event of any Casualty or Condemnation, the
estimated cost of restoration of which is in excess of $1,000,000, any such
award, compensation or insurance proceeds shall be paid directly to Lessor, or
if received by Lessee, shall be held in trust for Lessor and shall be paid over
by Lessee to Lessor.
(b) So long as no Lease Event of Default has occurred and is
continuing, Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any
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claim for any award, compensation or insurance payment on account of any such
Casualty or Condemnation and shall pay all expenses thereof; provided that if
the estimated cost of restoration of the Property or the payment on account of
such Casualty or Condemnation is in excess of $1,000,000, then Lessor shall, at
Lessee's sole cost and expense, be entitled to participate in any such
proceeding or action. At Lessee's reasonable request, and at Lessee's sole cost
and expense, Lessor and the Administrative Agent shall participate in any such
proceeding, action, negotiation, prosecution or adjustment. Lessor and Lessee
agree that this Lease shall control the rights of Lessor and Lessee in and to
any award, compensation or insurance payment.
(c) If Lessor or Lessee shall receive notice of a Casualty or a
possible Condemnation of a Property or any interest therein, Lessor or Lessee,
as the case may be, shall give notice thereof to the other and to the
Administrative Agent promptly after the receipt of such notice.
(d) In the event of a Casualty or receipt of notice by Lessee or
Lessor of a Condemnation, Lessee shall, not later than thirty (30) days after
such occurrence, deliver to Lessor and the Administrative Agent an Officer's
Certificate stating that either (i) (x) such Casualty is not a Significant
Casualty or (y) such Condemnation is neither a Total Condemnation nor a
Significant Condemnation and that this Lease shall remain in full force and
effect with respect to the applicable Property and, at Lessee's sole cost and
expense, Lessee shall promptly and diligently restore the applicable Property in
accordance with the terms of Section 15.1(e) or (ii) this Lease shall terminate
with respect to the applicable Property in accordance with Section 16.1.
(e) If pursuant to this Section 15.1, this Lease shall continue in
full force and effect following a Casualty or Condemnation with respect to the
affected Property, Lessee shall, at its sole cost and expense, promptly and
diligently repair any damage to the applicable Property caused by such Casualty
or Condemnation in conformity with the requirements of Sections 10.1 and 11.1
using the as-built plans and specifications for the applicable Property (as
modified to give effect to any subsequent Modifications, any Condemnation
affecting the Property and all applicable Legal Requirements) so as to restore
the applicable Property to at least the same condition, operation, function,
useful life and value as existed immediately prior to such Casualty or
Condemnation. In such event, title to the applicable Property shall remain with
Lessor. Upon completion of such restoration, Lessee shall furnish to Lessor and
the Administrative Agent an architect's certificate of completion and an
Officer's Certificate confirming that such restoration has been completed
pursuant to this Lease.
(f) In no event shall a Casualty or Condemnation affect Lessee's
obligations to pay Rent pursuant to Section 3.1 or to perform its obligations
and pay any amounts due on the Maturity Date or pursuant to Sections 20 or 21.
(g) Notwithstanding anything to the contrary set forth in Section
15.1(a) or Section 15.1(e), if during the Term a Casualty occurs with respect to
a Property or Lessee receives notice of a Condemnation with respect to a
Property, and following such Casualty or Condemnation, such Property cannot
reasonably be restored on or before the Purchase
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Decision Date to substantially the same condition as existed immediately prior
to such Casualty or Condemnation or before such day such Property is not in fact
so restored, then Lessee shall exercise its Purchase Option with respect to such
Property on the next Payment Date, and in such event such remaining Casualty or
Condemnation proceeds shall be paid to the Administrative Agent, which shall pay
such funds to Lessee upon the closing of the purchase of such Property.
SECTION 16. LEASE TERMINATION
16.1 Termination upon Certain Events. (a) Lessee shall be obligated to
deliver a written notice in the form described in Section 16.2(a) (a
"Termination Notice") of the termination of this Lease with respect to any
Property (i) within thirty (30) days after Lessee receives notice of a Total
Condemnation with respect to any such Property or (ii) promptly after the
occurrence of a material Environmental Violation with respect to any such
Property.
(b) If either: (i) Lessee or Lessor shall have received notice of a
Condemnation, and Lessee shall have delivered to Lessor an Officer's Certificate
that such Condemnation is a Significant Condemnation; or (ii) a Casualty occurs,
and Lessee shall have delivered to Lessor an Officer's Certificate that such
Casualty is a Significant Casualty; or (iii) a material Environmental Violation
occurs with respect to any Property, and Lessee shall have delivered to Lessor
an Officer's Certificate that this Lease shall terminate with respect to such
Property, then Lessee shall, simultaneously with the delivery of the Officer's
Certificate pursuant to the preceding clause (i), (ii) or (iii), deliver a
Termination Notice with respect to the affected Property.
16.2 Procedures. (a) A Termination Notice shall contain: (i) notice of
termination of this Lease with respect to the affected Property on a date not
more than thirty (30) days after Lessor's receipt of such Termination Notice
(the "Termination Date"); (ii) a binding and irrevocable agreement of Lessee to
pay the Termination Value and purchase such Property on such Termination Date
and (iii) the Officer's Certificate described in Section 16.1(b).
(b) On the Termination Date, Lessee shall pay to Lessor as
Supplemental Rent the Termination Value for the applicable Property, plus all
other amounts owing in respect of such Property (including Supplemental Rent)
theretofore accruing and Lessor shall convey such Property to Lessee (or
Lessee's designee) all in accordance with Section 19.1.
SECTION 17. DEFAULT
17.1 Lease Events of Default. If any one or more of the following
events (whether such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) (each a "Lease Event of Default") shall
occur:
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(a) Lessee shall fail to make payment of (i) any Basic Rent or any
Supplemental Rent representing amounts with respect to interest owed under
the Credit Agreement or the other Credit Documents within three (3)
Business Days after the same has become due and payable or (ii) any Maximum
Residual Guarantee Amount, any proceeds from the sale of any Property
during the Remarketing Period, Purchase Option Price or Termination Value
or any Rent representing principal owed under the Credit Agreement after
the same has become due and payable; or
(b) Lessee shall fail to make payment of any other Supplemental Rent
due and payable within three (3) Business Days after receipt of written
notice thereof from Lessor; or
(c) Lessee shall fail in any material respect to maintain insurance as
required by Section 14; or
(d) Lessee shall fail to observe or perform any covenant, condition or
agreement contained in Sections 9.4(b)(i), 9.4(c) (with respect to the
existence of Lessee) or Sections 9.5(a), (b), (d), (e), (f), (g), (i), (j),
(k), or (l), in each case of the Participation Agreement; or
(e) any Loan Party shall fail to observe or perform any term, covenant
or condition of such Loan Party under this Lease, the Participation
Agreement, any Guarantee or any other Operative Agreement to which it is a
party (other than those set forth in Section 17.1(a), (b), (c) or (d)
hereof) and such failure shall continue for thirty (30) days after written
notice thereof from Lessor; or any representation or warranty by such Loan
Party set forth in this Lease or in any other Operative Agreement or in any
document entered into in connection herewith or therewith or in any
document, certificate or financial or other statement delivered in
connection herewith or therewith shall be false or inaccurate in any
material respect; or
(f) a Construction Agency Agreement Event of Default shall have
occurred and be continuing; or
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of any Significant Entity or their respective debts, or
of a substantial part of their respective assets, under any Federal, state
or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any
Significant Entity or for a substantial part of their respective assets,
and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of
the foregoing shall be entered; or
(h) any Significant Entity shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or
other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in
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effect, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or petition described in clause (g)
of this Section, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for any Significant Entity or for a substantial part of their respective
assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the fore going; or
(i) an event of default under the Corporate Loan Documents shall have
occurred and be continuing;
(j) any Operative Agreement or any Lien granted under any Operative
Agreement shall, in whole or in part, terminate, cease to be effective in
any material respect against, or (other than as expressly provided therein)
cease to be the legal, valid, binding and enforceable obligation of any
Loan Party thereto; or
(k) any Loan Party shall repudiate or disavow the effectiveness,
validity, binding nature or enforceability of any Operative Agreement or
any Lien granted under any Operative Agreement; or any Guarantor shall
repudiate, or purport to discontinue or terminate, its Guarantee; or
(l) any event or condition occurs that results in any Indebtedness of
any Loan Party of $10,000,000 or more in the aggregate becoming due prior
to its scheduled maturity or that enables or permits (with or without the
giving of notice, the lapse of time or both) the holder or holders of any
Indebtedness of any Loan Party of $10,000,000 or more in the aggregate or
any trustee or agent on its or their behalf to cause any such Indebtedness
of any Loan Party to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; provided
that this clause (l) shall not apply to secured Indebtedness that becomes
due as a result of the voluntary sale or transfer of the property or assets
securing such Indebtedness; or
(m) an ERISA Event shall have occurred that, in the opinion of Lessor
and the Administrative Agent, when taken together with all other ERISA
Events that have occurred, could reasonably be expected to result in
liability of the Loan Parties in an aggregate amount exceeding $10,000,000;
(n) one or more judgments for the payment of money in an aggregate
amount in excess of $10,000,000 shall be rendered against any Significant
Entity or any combination thereof and the same shall remain undischarged
for a period of 30 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of any Loan Party to enforce any
such judgment; or
(o) a Change in Control shall occur;
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then, in any such event, Lessor may, in addition to the other rights and
remedies provided for in this Section 17 and in Section 18.1, terminate this
Lease by giving Lessee five (5) Business Days notice of such termination, and
this Lease shall terminate. Lessee shall, to the fullest extent permitted by
law, pay as Supplemental Rent all costs and expenses incurred by or on behalf of
Lessor, including fees and expenses of counsel, as a result of any Lease Event
of Default hereunder; provided that Lessee may cure a default under Section
17.1(c) or 17.1(f) in the event such default relates to a specific Property by
(i) purchasing such Property for its Termination Value and (ii) terminating this
Lease with respect to such Property in accordance with Section 19.1 within 5
Business Days of such Lease Event of Default.
17.2 Final Liquidated Damages. If a Lease Event of Default shall have
occurred and be continuing, Lessor shall have the right to recover, by demand to
Lessee and at Lessor's election, and Lessee shall pay to Lessor, as and for
final liquidated damages, but exclusive of the indemnities payable under Section
12 of the Participation Agreement, and in lieu of all damages beyond the date of
such demand the sum of (a) the Termination Value, plus (b) all other amounts
owing in respect of Rent theretofore accruing under this Lease. Upon payment of
the amount specified pursuant to the first sentence of this Section 17.2, Lessor
shall, at Lessee's cost, assign all of Lessor's right, title and interest in the
Properties, in each case in recordable form and otherwise in conformity with
local custom and free and clear of the Lien of the Lease Supplement. Lessee (or
Lessee's designee) shall execute and deliver to Lessor an assumption of all of
Lessor's obligations under the Ground Leases, if any. The Properties shall be
transferred to Lessee (or Lessee's designee) "AS IS" and in their then present
physical condition. If any statute or rule of law shall limit the amount of such
final liquidated damages to less than the amount agreed upon, Lessor shall be
entitled to the maximum amount allowable under such statute or rule of law;
provided, that Lessee shall not be entitled to receive an assignment of Lessor's
interest under the Ground Leases, if any, or in the Properties unless (a) Lessee
shall have paid in full the Termination Value of each of Properties or (b)
Lessor otherwise elects to make such assignment.
17.3 Lease Remedies. Lessor and Lessee intend that for commercial law
and bankruptcy law purposes, this Lease will be treated as a financing
arrangement, as set forth in Section 7. Lessor shall be entitled to all rights
and remedies accorded a secured party or mortgagee (as appropriate) under
applicable Law. If, as a result of any applicable state law that cannot be
waived, this Lease is deemed to be a lease of the Properties, rather than a
financing arrangement, and Lessor is unable to enforce the remedies set forth in
Section 17.2, the following remedies shall be available to Lessor:
(a) Surrender of Possession. If a Lease Event of Default shall have
occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to Section 17.1, Lessee shall, upon Lessor's written demand,
surrender to Lessor possession of its Properties and Lessee shall quit the same.
Lessor may enter upon and repossess the Properties by such means as are
available at law or in equity, and may remove Lessee and all other Persons and
any and all personal property and Lessee's equipment and personalty and
severable Modifications from the Properties. Lessor shall have no liability by
reason of any such entry, repossession or removal performed in accordance with
applicable law.
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(b) Reletting. If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant to
Section 17.1, Lessor may, but shall be under no obligation to, relet all, or any
portion, of any Property, for the account of the relevant Lessee or otherwise,
for such term or terms (which may be greater or less than the period which would
otherwise have constituted the balance of the Term) and on such conditions
(which may include concessions or free rent) and for such purposes as Lessor may
determine, and Lessor may collect, receive and retain the rents resulting from
such reletting. Lessor shall not be liable to the relevant Lessee for any
failure to relet the Properties or for any failure to collect any rent due upon
such reletting.
(c) Damages. None of (i) the termination of this Lease pursuant to
Section 17.1; (ii) the repossession of the Property; or (iii) except to the
extent required by applicable law, the failure of Lessor to relet all, or any
portion, of the Properties, the reletting of all or any portion thereof, nor the
failure of Lessor to collect or receive any rentals due upon any such reletting
shall relieve Lessee of its liability and obligations hereunder, all of which
shall survive any such termination, repossession or reletting. If any Lease
Event of Default shall have occurred and be continuing and notwithstanding any
termination of this Lease pursuant to Section 17.1, Lessee shall forthwith pay
to Lessor all Rent and other sums due and payable hereunder to and including the
date of such termination. Thereafter, on the days on which the Basic Rent or
Supplemental Rent, as applicable, are payable under this Lease or would have
been payable under this Lease if the same had not been terminated pursuant to
Section 17.1 and until the end of the Term or what would have been the Term in
the absence of such termination, Lessee shall pay Lessor, as current liquidated
damages (it being agreed that it would be impossible accurately to determine
actual damages) an amount equal to the Basic Rent and Supplemental Rent that are
payable under this Lease or would have been payable by Lessee hereunder if this
Lease had not been terminated pursuant to Section 17.1, less the net proceeds,
if any, which are actually received by Lessor with respect to the period in
question of any reletting of the Property or any portion thereof; provided that
Lessee's obligation to make payments of Basic Rent and Supplemental Rent under
this Section 17.3 shall continue only so long as Lessor shall not have received
the amounts specified in Section 17.2. In calculating the amount of such net
proceeds from reletting, there shall be deducted all of the Participants'
expenses in connection therewith, including repossession costs, brokerage
commissions, fees and expenses for counsel and any necessary repair or
alteration costs and expenses incurred in preparation for such reletting. To the
extent Lessor receives any damages pursuant to this Section 17.3, such amounts
shall be regarded as amounts paid on account of Rent. Any action to collect rent
or damages in one action will not bar or affect Lessor's right to recover any
subsequently accruing rent or other damages for any subsequent or other damages.
(d) Acceleration of Rent. If a Lease Event of Default shall have
occurred and be continuing, and this Lease shall not have been terminated
pursuant to Section 17.1, and whether or not Lessor shall have collected any
current liquidated damages pursuant to Section 17.3(c), Lessor may upon written
notice to Lessee accelerate all payments of Basic Rent due hereunder and, upon
such acceleration, Lessee shall immediately pay Lessor, as and for final
liquidated damages and in lieu of all current liquidated damages on account of
such Lease Event of Default beyond the date of such acceleration (it being
agreed that it would be
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impossible accurately to determine actual damages) an amount equal to the sum of
(a) all Basic Rent (assuming interest at a rate per annum equal to the Overdue
Rate), as applicable, due from the date of such acceleration until the end of
the Term, plus (b) the Maximum Residual Guarantee Amount that would be payable
under Section 21.1(c) assuming the proceeds of the sale pursuant to such Section
21.1(c) are equal to zero, which sum is then discounted to present value at a
rate equal to the rate then being paid on United States treasury securities with
maturities corresponding to the then remaining Term. Following payment of such
amount by Lessee, Lessee will be permitted to stay in possession of its Property
for the remainder of the Term, subject to the terms and conditions of this
Lease, including the obligation to pay Supplemental Rent, provided that no
further Lease Event of Default shall occur and be continuing, following which
Lessor shall have all the rights and remedies set forth in this Section 17 (but
not including those set forth in this Section 17.3). If any statute or rule of
law shall limit the amount of such final liquidated damages to less than the
amount agreed upon, Lessor shall be entitled to the maximum amount allowable
under such statute or rule of law.
17.4 Waiver of Certain Rights. If this Lease shall be terminated
pursuant to Section 17.1, Lessee waives, to the fullest extent permitted by law,
(a) any notice of re-entry or the institution of legal proceedings to obtain
re-entry or possession; (b) any right of redemption, re-entry or repossession;
(c) the benefit of any laws now or hereafter in force exempting property from
liability for rent or for debt; and (d) any other rights which might otherwise
limit or modify any of Lessor's rights or remedies under this Section 17.
17.5 Delivery of Contracts. If a Lease Event of Default shall have
occurred and be continuing, and whether or not this Lease shall have been
terminated pursuant to Section 17.1, Lessee shall upon Lessor's demand
immediately deliver to Lessor all of Lessee's agreements executed by Lessee in
connection with the construction, renovation, development, use or operation of
the Property, as and to the extent that the same relate to the construction
renovation, and operation of the Property.
17.6 Remedies Cumulative. The remedies herein provided shall be
cumulative and in addition to (and not in limitation of) any other remedies
available at law, equity or otherwise including, without limitation, any
mortgage foreclosure remedies contained in the Memorandum of Lease.
SECTION 18. LESSOR'S RIGHT TO CURE
18.1 Lessor's Right to Cure Lessee's Lease Defaults. Lessor, without
waiving or releasing any obligation or Lease Event of Default, may (but shall be
under no obligation to) remedy any Lease Event of Default for the account and at
the sole cost and expense of Lessee, including the failure by Lessee to maintain
any insurance required by Section 14, and may, to the fullest extent permitted
by law, and notwithstanding any right of quiet enjoyment in favor of Lessee,
enter upon any Property for such purpose and take all such action thereon as may
be necessary or appropriate therefor, after reasonable advance notice (except in
cases of emergency in which persons or property may be injured) that Lessor
intends to take such
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actions as are reasonable under the circumstances. No such entry shall be deemed
an eviction of Lessee. All out-of-pocket costs and expenses so incurred
(including the fees and expenses of counsel), together with interest thereon at
the Overdue Rate from the date on which such sums or expenses are paid by
Lessor, shall be paid by Lessee to Lessor on demand as Supplemental Rent.
SECTION 19. LEASE TERMINATION; SALE OF UNDEVELOPED LAND
19.1 Provisions Relating to Lessee's Termination of this Lease or
Exercise of Purchase Option. In connection with any termination of this Lease
with respect to any Property pursuant to the terms of Section 16.2 or 17.1, or
in connection with Lessee's exercise of the Purchase Option or Maturity Date
Purchase Option, upon the date on which this Lease is to terminate with respect
to the applicable Property or upon the Maturity Date with respect to the
applicable Property, and upon tender by Lessee of the amounts set forth in
Sections 16.2(b) or 20, as applicable:
(a) Lessor shall execute and deliver to Lessee (or to Lessee's
designee) at Lessee's cost and expense an assignment of Lessor's entire
interest in the applicable Properties (by a special or limited warranty
deed in the case of real property), in each case in recordable form and
otherwise in conformity with local custom and free and clear of the Lien of
the applicable Lease Supplement and/or Deed of Trust and any Lessor Liens;
(b) Lessor shall execute and deliver to Lessee any real estate tax
affidavit, a FIRPTA affidavit and any other similar document required to be
executed and delivered by law; and
(c) The applicable Property shall be conveyed to Lessee "AS IS" and in
then present physical condition.
19.2 Aggregate Tranche A Percentage. Notwithstanding any other
provision of this Lease or the other Operative Agreements, Lessee shall not be
permitted to terminate this Lease with respect to a Property pursuant to Section
16 or exercise its Purchase Option with respect to a Property pursuant to
Section 20.1 if the Aggregate Tranche A Percentage, after giving effect to the
termination of this Lease with respect to such Property, would be less than
87.6%.
19.3 Sale of Undeveloped Land. Lessee shall have the right to sell any
portion of the Properties consisting of Undeveloped Land; provided that (i) such
sale shall be for the Fair Market Sales Value for such Undeveloped Land, (ii)
the purchaser shall be a Person that is not an Affiliate of Lessee and (iii) no
Lease Event of Default shall have occurred and be continuing or result from such
sale.
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SECTION 20. PURCHASE OPTION
20.1 Purchase Option. Provided that no Lease Default or Lease Event of
Default shall have occurred and be continuing, Lessee shall have the option to
purchase one or more of the Properties as set forth below (the "Purchase
Option"). To exercise the Purchase Option, Lessee shall provide Lessor
irrevocable written notice (the "Purchase Notice") of Lessee's election to
purchase one or more of the Properties on the date specified in such Purchase
Notice at least ten (10) days prior to such proposed date of purchase. Such
purchase must occur prior to the Purchase Decision Date, at a price equal to the
Termination Value (the "Purchase Option Price") (which the parties do not intend
to be a "bargain" purchase price) of such Property. If Lessee exercises its
Purchase Option to purchase one or more of the Properties pursuant to this
Section 20.1, Lessor shall transfer to Lessee or Lessee's designee all of
Lessor's right, title and interest in and to such Property as of the date
specified in the Purchase Notice upon receipt of the Purchase Option Price and
all Rent and other amounts then due and payable under this Lease and any other
Operative Agreement, in accordance with Section 19.1.
20.2 Maturity Date Purchase Option. On or before the Purchase Decision
Date, Lessee may give Lessor and the Administrative Agent irrevocable written
notice (the "Maturity Date Election Notice") that Lessee is electing to exercise
the Maturity Date Purchase Option. If Lessee does not elect the Remarketing
Option or the Maturity Date Purchase Option on or before the Purchase Decision
Date, Lessee shall be deemed to have elected to exercise the Maturity Date
Purchase Option. If Lessee has elected (or is deemed to have elected) to
exercise the Maturity Date Purchase Option, then on the Maturity Date Lessee
shall pay to Lessor an amount equal to the Termination Value for each of the
Properties (which the parties do not intend to be a "bargain" purchase price)
and, upon receipt of such amount plus all Rent and other amounts then due and
payable under this Lease and any other Operative Agreement, Lessor shall
transfer to Lessee or Lessee's designees all of Lessor's right, title and
interest in and to the Properties in accordance with Section 19.1.
20.3 Obligation to Purchase All Properties. If on the Purchase
Decision Date the then Termination Value of all the Properties is less than the
Maximum Purchase Option Amount, then on the Maturity Date Lessee shall be
required to exercise its Purchase Option on the Maturity Date with respect to
all remaining Properties.
SECTION 21. SALE OF PROPERTY
21.1 Sale Procedure. (a) With respect to the Properties, on the
Maturity Date, so long as Lessee has properly elected the Remarketing Option
pursuant to Section 20.2, Lessee shall have the option (the "Remarketing
Option") to (i) pay to Lessor the Maximum Residual Guarantee Amount for the
Properties as provided under Section 21.1(c), and (ii) sell the Properties to
one or more third parties for cash in accordance with Section 21.1(b).
(b) During the Remarketing Period, Lessee, as a nonexclusive broker
for Lessor, shall use its best efforts to obtain bids for the cash purchase of
each Property being
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sold for the highest price available in the relevant market, shall notify Lessor
promptly of the name and address of each prospective purchaser and the cash
price which each prospective purchaser shall have offered to pay for such
Property and shall provide Lessor with such additional information about the
bids and the bid solicitation procedure as Lessor may request from time to time.
Lessor may reject any and all bids and may assume sole responsibility for
obtaining bids by giving Lessee written notice to that effect; provided,
however, that notwithstanding the foregoing, Lessor may not reject a bid if such
bid, together with any amounts to be paid pursuant to Section 21.3, is greater
than or equal to the sum of the Limited Deficiency Amount and all costs and
expenses referred to in Section 21.2(i) and is a bona fide offer by a third
party purchaser who is not an Affiliate of Lessee. If the price which a
prospective purchaser shall have offered to pay for all or any of the Properties
is less than the sum of the Limited Deficiency Amount and all costs and expenses
referred to in Section 21.2(i), Lessor may elect to retain the Properties by
giving Lessee at least two Business Days' prior written notice of Lessor's
election to retain the Properties, and upon receipt of such notice, Lessee shall
surrender the Properties to Lessor pursuant to Section 10.1(c). Unless Lessor
shall have elected to retain the Properties pursuant to the preceding sentence,
Lessor shall sell the Properties on the Maturity Date free of any Lessor Liens
attributable to it, without recourse or warranty, for cash to the purchaser or
purchasers identified by Lessee or Lessor, as the case may be. Lessee shall
surrender its Properties so sold to each purchaser in the condition specified in
Section 10.1.
(c) On the Maturity Date with respect to all Properties subject to the
Remarketing Option, Lessee shall pay to the Administrative Agent (as assignee of
Lessor), in addition to any Rent outstanding, the Maximum Residual Guarantee
Amount for each Property.
(d) Lessee's effective exercise and consummation of the Remarketing
Option shall be subject to the due and timely fulfillment of each of the
following provisions as to each of the Properties as of the dates set forth
below. Failure by Lessee to timely satisfy any of the following provisions of
this Section 21.1(d), shall be deemed to be an election by Lessee, without
further act thereby, of its Purchase Option for all of the Properties and any
previous election of the Remarketing Option shall automatically terminate.
(i) On the Purchase Decision Date, Lessee shall give to Lessor
and the Administrative Agent written notice of Lessee's exercise of the
Remarketing Option, which exercise shall be irrevocable by Lessee.
(ii) Not later than one hundred and twenty (120) days prior to
the Maturity Date, Lessee shall deliver to Lessor an Environmental Audit
for each of the Properties. Such Environmental Audit shall be prepared by
an environmental consultant selected by Lessor in Lessor's discretion and
shall contain conclusions satisfactory to Lessor as to the environmental
status of the Properties. If any such Environmental Audit indicates any
exceptions calling for a Phase Two environmental assessment, Lessee shall
have also delivered prior to the Maturity Date a Phase Two environmental
assessment by such environmental consultant and a written statement by
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such environmental consultant indicating that all such exceptions have been
remedied in compliance with Applicable Law.
(iii) On the date of Lessee's notice to Lessor of Lessee's
exercise of the Remarketing Option, no Lease Event of Default or Lease
Default shall exist, and thereafter, no Lease Event of Default or Lease
Default shall occur.
(iv) The Completion Date shall have occurred with respect to each
Property on or before the Construction Period Termination Date.
(v) Lessee shall have completed all Modifications, restoration
and rebuilding of the affected Properties pursuant to Sections 10, 11 and
15 (as the case may be) and shall have fulfilled all of the conditions and
requirements in connection therewith pursuant to such Sections, in each
case prior to the date on which Lessor receives Lessee's notice of Lessee's
intention to exercise the Remarketing Option (time being of the essence),
regardless of whether the same shall be within the Lessee's control. Lessee
shall have also paid the cost of all Modifications commenced prior to the
Maturity Date. Lessee shall not have been excused from complying with any
Applicable Law that involved the extension of the ultimate imposition of
such Applicable Law beyond the Maturity Date. Any Permitted Liens on any
Property that were contested by Lessee shall have been removed and Lessor
shall have received evidence satisfactory to it that all Liens uncontested
have been removed. Each of the Properties shall be in at least as good
operating condition as when possession of such Property was first delivered
to Lessee (in the case of Properties subject to a Construction Period, such
Properties shall be in at least as good operating condition as on such
Property's Completion Date).
(vi) On the date of Lessee's notice to Lessor of Lessee's
exercise of the Remarketing Option, Lessee shall have executed and
delivered to Lessor and Lessor's title insurance company an affidavit as to
the absence of any Liens (with search results provided by Lessee verifying
the same) except for Permitted Liens.
21.2 Application of Proceeds of Sale. Lessor shall apply the proceeds
of sale of each Property in the following order of priority:
(i) FIRST, to pay or to reimburse Lessor for the payment of all
reasonable costs and expenses incurred by Lessor in connection with the
sale; and
(ii) SECOND, the balance shall be paid to the Administrative
Agent to be applied pursuant to the provisions of the Credit Agreement.
21.3 Indemnity for Excessive Wear. If the proceeds of the sale
described in Section 21.1(b) with respect to any Property, less all expenses
incurred by Lessor in connection with such sale, shall be less than the Limited
Deficiency Amount for such Property at the time of such sale and if it shall
have been determined (pursuant to the Appraisal Procedure) that the Fair Market
Sales Value of such Property shall have been impaired by
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greater than expected wear and tear during the Term, Lessee shall pay to Lessor
within ten (10) days after receipt of Lessor's written statement (i) the amount
of such excess wear and tear determined by the Appraisal Procedure or (ii) the
amount of the Net Sale Proceeds Shortfall, whichever amount is less.
21.4 Appraisal Procedure. For determining the Fair Market Sales Value
of a Property or any other amount which may, pursuant to any provision of any
Operative Agreement, be determined by an appraisal procedure, Lessor shall use
the following procedure (the "Appraisal Procedure"). Lessor and Lessee shall
endeavor to reach a mutual agreement as to such amount for a period of ten (10)
days from commencement of the Appraisal Procedure, and if they cannot agree
within ten (10) days, then two qualified appraisers, one chosen by Lessee and
one chosen by Lessor, shall mutually agree thereupon, but if either party shall
fail to choose an appraiser within twenty (20) days after notice from the other
party of the selection of its appraiser, then the appraisal by such appointed
appraiser shall be binding on Lessee and Lessor. If the two appraisers cannot
agree within twenty (20) days after both shall have been appointed, then a third
appraiser shall be selected by the two appraisers or, failing agreement as to
such third appraiser within thirty (30) days after both shall have been
appointed, by the American Arbitration Association. The decisions of the three
appraisers shall be given within twenty (20) days of the appointment of the
third appraiser and the decision of the appraiser most different from the
average of the other two shall be discarded and such average shall be binding on
Lessor and Lessee; provided that if the highest appraisal and the lowest
appraisal are equidistant from the third appraisal, the third appraisal shall be
binding on Lessor and Lessee. The fees and expenses of all of the appraisers
shall be paid by Lessee.
21.5 Certain Obligations Continue. During the Remarketing Period, the
obligation of Lessee to pay Rent with respect to each Property (including the
installment of Basic Rent due on the Maturity Date) shall continue undiminished
until payment in full to Lessor of the sale proceeds, the Maximum Residual
Guarantee Amount, if any, the amount due under Section 21.3, if any, and all
other amounts due to Lessor with respect to the Property. Lessor shall have the
right, but shall be under no duty, to solicit bids, to inquire into the efforts
of Lessee to obtain bids or otherwise to take action in connection with any such
sale, other than as expressly provided in this Section 21.
SECTION 22. HOLD OVER
22.1 Hold Over. If Lessee effectively elects the Remarketing Option
and each of the conditions and requirements in Section 21 shall have been
satisfied, but nevertheless Lessee is unable to obtain bids satisfactory to
Lessor, and the sale of any of its Properties is not consummated on the Maturity
Date, Lessor shall by written notice to Lessee choose one or both of the
following remedies (which election may be changed at any time):
(a) Continue Remarketing Efforts. At the request of Lessor, Lessee
shall continue to market the Properties on behalf of Lessor for up to an
additional six (6) months and at the sole cost and expense of Lessee, and during
such extended marketing period
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continue to comply with the requirements of this Lease at Lessee's sole cost and
expense. Lessor shall by written notice to Lessee indicate the duration of such
extended marketing period (the last day of such period, the "Extended
Remarketing Date"), and Lessor shall have the option to accelerate or shorten
such Extended Remarketing Date at any time. During such extended marketing
period, Lessee's possession shall be as a tenancy at sufferance during which
time Lessee shall continue to pay Supplemental Rent that would be payable by
Lessee hereunder were the Lease then in full force and effect with respect to
such Property and Lessee shall continue to pay Basic Rent at an annual rate
equal to one hundred ten percent (110%) of the rate payable hereunder
immediately preceding such expiration or earlier termination. Such Basic Rent
shall be payable from time to time upon demand by Lessor. During any period of
tenancy at sufferance, Lessee shall, subject to the second preceding sentence,
be obligated to perform and observe all of the terms, covenants and conditions
of this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenants at sufferance, to continue its occupancy and use
of the Property; or
(b) Return of Properties. Such Property shall be returned to Lessor,
whereupon Lessee shall do each of the following at its own cost and expense:
(i) execute and deliver to Lessor and Lessor's title insurance
company an affidavit as to the absence of any Liens (with search results
provided by Lessee verifying the same) and shall execute and deliver to
Lessor a statement of termi nation of this Lease to the extent relating to
such Property;
(ii) transfer possession of the Properties to Lessor or any
Person designated by Lessor, by surrendering the same into the possession
of Lessor or such Person, as the case may be, in the condition required by
Section 21.1(d)(v) and in compliance with Applicable Law;
(iii) cooperate fully with Lessor and/or any Person designated by
Lessor to receive the Properties, which cooperation shall include: if
requested by the Lessor, Lessee hereby agrees to enter into an operating
agreement and in connection therewith to serve as the operator of the
relevant Properties; such agreement to be on market terms established in
good faith and reasonably acceptable to the Lessor; providing copies of all
books and records regarding the maintenance and ownership of the Properties
and all know how, data and technical information relating thereto;
providing a current copy of the applicable Plans and Specifications; to the
extent permitted by any Requirement of Law, granting or assigning all
assignable licenses necessary for the operation and maintenance of the
Properties; and cooperating reasonably in seeking and obtaining all
necessary Governmental Action. The obligations of the Lessee under this
paragraph shall survive the expiration or termination of this Lease.
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SECTION 23. RISK OF LOSS
23.1 Risk of Loss. The risk of loss of or decrease in the enjoyment
and beneficial use of any Property as a result of the damage or destruction
thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is
assumed by Lessee, and Lessor shall in no event be answerable or accountable
therefor.
SECTION 24. SUBLETTING AND ASSIGNMENT
24.1 Subletting and Assignment. Lessee may not assign this Lease or
any of its rights or obligations hereunder in whole or in part. Lessee may
sublease (i) any Property or any portion thereof to a wholly-owned Subsidiary of
Lessee or (ii) up to 25% of the Fair Market Sales Value of the Properties or any
portion thereof to any Person that is not an Affiliate of Lessee. Any such
sublease under clause (ii) must be in the normal course of Lessee's business, on
commercially reasonable terms and at market rates. Each sublease to any Person
not an Affiliate of Lessee may terminate after the Maturity Date. No sublease or
other relinquishment of possession of a Property shall in any way discharge or
diminish any of Lessee's obligations to Lessor hereunder and Lessee shall remain
directly and primarily liable under this Lease as to a Property, or any portion
thereof, so sublet. Except for existing subleases set forth on Schedule 24.1,
any sublease of a Property shall be subject to and subordinate to this Lease and
to the rights of Lessor hereunder, and shall expressly provide for the surrender
of the Property after a Lease Event of Default hereunder.
24.2 Subleases. Lessor acknowledges that the Property may be subject
to existing leases or subleases (the "Existing Leases"), which will continue
during the term of this Lease. Lessee will be solely responsible, during the
term of this Lease, for the performance of the landlord's obligations under such
Existing Leases, and, so long as no Lease Event of Default shall have occurred
and be continuing, Lessee shall have the unrestricted right to collect and
retain all rental and other income thereunder. So long as no Lease Event of
Default shall have occurred and be continuing, no consent, joinder or approval
will be required of Lessor in connection with the enforcement, modification,
extension, termination or other action that Lessee may elect to take in
connection with such Existing Leases.
SECTION 25. ESTOPPEL CERTIFICATES
25.1 Estoppel Certificates. At any time and from time to time upon not
less than twenty (20) days' prior request by Lessor, Lessee shall furnish to
Lessor a certificate signed by an individual having the office of vice president
or higher in the certifying Person certifying that this Lease is in full force
and effect (or that this Lease is in full force and effect as modified and
setting forth the modifications); the dates to which the Basic Rent and
Supplemental Rent have been paid; to the best knowledge of the signer of such
certificate, whether or not Lessor is in default under any of its obligations
hereunder (and, if so, the nature of such alleged default); and such other
matters under this Lease as Lessor may
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reasonably request. Any such certificate furnished pursuant to this Section 25
may be relied upon by Lessor, and any existing or prospective mortgagee,
purchaser or lender, and any accountant or auditor, of, from or to Lessor (or
any Affiliate thereof).
SECTION 26. NO WAIVER
26.1 No Waiver. No failure by Lessor or Lessee to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
upon a default hereunder, and no acceptance of full or partial payment of Rent
during the continuance of any such default, shall constitute a waiver of any
such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.
SECTION 27. ACCEPTANCE OF SURRENDER
27.1 Acceptance of Surrender. Except as otherwise expressly provided
in this Lease, no surrender to Lessor of this Lease or of all or any portion of
any Property or of any interest therein shall be valid or effective unless
agreed to and accepted in writing by Lessor and, prior to the payment or
performance of all obligations under the Credit Documents, the Administrative
Agent, and no act by Lessor or the Administrative Agent or any representative or
agent of Lessor or the Administrative Agent, other than a written acceptance,
shall constitute an acceptance of any such surrender.
SECTION 28. NO MERGER OF TITLE
28.1 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
may acquire, own or hold, directly or indirectly, in whole or in part, (a) this
Lease or the leasehold estate created hereby or any interest in this Lease or
such leasehold estate, (b) the fee estate in any Property, except as may
expressly be stated in a written instrument duly executed and delivered by the
appropriate Person, or (c) a beneficial interest in Lessor.
SECTION 29. NOTICES
29.1 Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person to be effective shall be in writing (including by facsimile transmission)
and shall be deemed to have been duly given or made (a) when delivered by hand,
(b) one Business Day after delivery to such nationally recognized courier
service specifying overnight delivery, (c) three Business Days after being
deposited in
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the mail, certified or registered, postage prepaid or (d) in the case of
facsimile notice, when received, addressed to such Person as indicated:
If to Lessee:
Fred Meyer, Inc.
3800 SE 22nd Avenue
P.O. Box 42121
Portland, Oregon 97242
Attn: James C. Aalberg
Vice President and Corporate Treasurer
Telecopier No.: (503) 797-5299
With a copy of any default notices to:
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, Oregon 97204
Attn: Gary R. Barnum, Esq.
Telecopier No.: (503) 220-2480
If to Lessor:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Telecopier No.: (302) 651-8882
with a copy
to the Administrative Agent:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attn: Deal Administrator
Telecopier No.: (212) 250-7351
From time to time any party may designate a new address or facsimile number for
purposes of notice hereunder by notice to each of the other parties hereto. It
is understood and agreed that the delivery of copies of notices to counsel as
set forth above is for courtesy purposes only and any failure to deliver such
copies shall not constitute failure with respect to any obligation to provide
notices hereunder.
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SECTION 30. MISCELLANEOUS
30.1 Miscellaneous. Anything contained in this Lease to the contrary
notwithstanding, all claims against and liabilities of Lessee or Lessor arising
from events commencing prior to the expiration or earlier termination of this
Lease shall survive such expiration or earlier termination. If any term or
provision of this Lease or any application thereof shall be declared invalid or
unenforceable, the remainder of this Lease and any other application of such
term or provision shall not be affected thereby. If any right or option of
Lessee provided in this Lease, including any right or option described in
Sections 15, 16, 20 or 21, 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
twenty-one (21) years after the date of death of the last survivor of the
descendants of Franklin D. Roosevelt, the former President of the United States,
Henry Ford, the deceased automobile manufacturer, and John D. Rockefeller, the
deceased founder of the Standard Oil Company, known to be alive on the date of
the execution and delivery of this Lease.
30.2 Amendments and Modifications. Neither this Lease nor any
provision hereof may be amended, waived, discharged or terminated except by an
instrument in writing signed by Lessor and Lessee.
30.3 Successors and Assigns. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
30.4 Headings and Table of Contents. The headings and table of
contents in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.
30.5 Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.
30.6 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS TO
MATTERS RELATING TO THE PERFECTION AND ENFORCEMENT OF LIENS AND SECURITY
INTERESTS AND THE EXERCISE OF REMEDIES WITH RESPECT THERETO, WHICH SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH
THE APPLICABLE PROPERTY IS LOCATED.
30.7 Limitations on Recourse. Except as expressly set forth in the
Operative Agreements, Lessee agrees to look solely to Lessor's estate and
interest in the Property, the proceeds of sale thereof, any insurance proceeds
or any other award or any third party proceeds received by Lessor in connection
with the Property for the collection of any judgment
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requiring the payment of money by Lessor in the event of liability by Lessor,
and no other property or assets of Lessor, the Trust Company, partner or other
owner of an interest, direct or indirect, in Lessor, or any director, officer,
shareholder, employee, beneficiary or Affiliate of any of the foregoing shall be
subject to levy, execution or other enforcement procedure for the satisfaction
of Lessee's remedies under or with respect to this Lease, the relationship of
Lessor and Lessee hereunder or Lessee's use of the Property or any other
liability of Lessor to Lessee; provided that nothing in this Section shall be
construed to impair or limit the rights of Lessee against the Investors under
the Operative Agreements. Nothing in this Section shall be interpreted so as to
limit the terms of Section 6.1 or 6.2.
30.8 Memorandum of Lease. This Lease shall not be recorded, but Lessor
and Lessee shall, upon the execution and delivery of each Lease Supplement,
execute and deliver a memorandum of this Lease (a "Memorandum of Lease")
substantially in the form of Exhibit B and otherwise in form suitable for
recording under the laws of the jurisdiction in which the Property covered by
such Memorandum of Lease is located, which memorandum shall be recorded at
Lessee's sole cost and expense.
30.9 Ground Lease. During the Term, Lessee shall observe and perform
all of the obligations of Lessor under any Ground Lease (including the payment
of all rent and other amounts thereunder) and, in connection therewith, shall,
prior to the occurrence and continuation of a Lease Event of Default, have the
benefit of all of Lessor's rights as lessee under any Ground Lease.
30.10 Security Agreement and Financing Statement. The mailing address
of debtor (Lessee herein) and of the secured party (Lessor herein) from which
information concerning security interests hereunder may be obtained is as set
forth on the signature pages of this Agreement. A carbon, photographic or other
reproduction of this Agreement or of any financing statement related to this
Agreement shall be sufficient as a financing statement for any of the purposes
referenced herein.
30.11 State Law Recitals and Provisions.
(a) Non-Residential Trust Deed: Business Purpose. Lessee as
grantor warrants that this Agreement, as a deed of trust or trust deed under
laws of the state in which the Property is located, is not and will not at
anytime constitute a residential trust deed, as that term is defined in ORS
86.705 or its successor statutes (if the Property is in Oregon). Lessee warrants
that it is engaging in this transaction exclusively for business, commercial or
investment purposes. Lessee warrants that the Property is not used principally
for agricultural or farming purposes (if the Property is in Washington). Lessee
warrants that the Property falls within the provisions of Idaho Code 45-1502(5)
or its successor statutes (if the Property is in Idaho)
(b) Statutory Notice Concerning Insurance. Effective January 1,
1996, Chapter 313 of Oregon Laws 1995 amends ORS 746.201 to require that in
loans in which the lender has the right to purchase insurance in the event the
borrower fails to carry
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insurance, the loan document must contain a warning in substantially the
following form in 10- point type:
"WARNING"
"Unless you provide us with evidence of the insurance
coverage as required by our contract or loan agreement, we may
purchase insurance at your expense to protect our interest. This
insurance may, but need not, also protect your interest. If the
collateral becomes damaged, the coverage we purchase may not pay
any claim you make or any claim made against you. You may later
cancel this coverage by providing evidence that you have obtained
property coverage elsewhere.
"You are responsible for the cost of any insurance purchased
by us. The cost of this insurance may be added to your contract
or loan balance. If the cost is added to your contract or loan
balance, the interest rate on the underlying contract or loan
will apply to this added amount. The effective date of coverage
may be the date your prior coverage lapsed or the date you failed
to provide proof of coverage.
"The coverage we purchase may be considerably more expensive
than insurance you can obtain on your own and may not satisfy any
need for property damage coverage or any mandatory liability
insurance requirements imposed by applicable law.
(c) Statutory Notice Concerning Written Agreements. UNDER OREGON
LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDERS AFTER OCTOBER 3,
1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL,
FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST
BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LENDERS TO BE ENFORCEABLE.
(d) Washington Statutory Notice. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
30.12 Limited Power of Attorney. To the extent required by Lessee,
Lessor hereby agrees to provide Lessee with a Limited Power of Attorney
permitting Lessee to act on
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behalf of Lessor in connection with (i) consenting to all subleases referenced
in this Lease; (ii) executing all easements, use, restrictive covenant,
assessment or bonding agreements; and (iii) selling undeveloped Land as is more
specifically described in Section 19.3 of this Lease (provided, all such sales
shall be conducted in compliance with the terms of such Section 19.3, without
modification of such provisions pursuant to the utilization of the Limited Power
of Attorney by Lessee); provided, however, the Limited Power of Attorney may be
utilized only to the extent (x) no Default of Event or Default shall have
occurred or be continuing at the time of the contemplated exercise of the
Limited Power of Attorney and (y) such sublease, easement, use, restrictive
covenant, assessment or bonding agreement or document of sale shall be made in
the normal course of Lessee's business.
To the extent any Default or Event of Default has occurred and is
continuing or Lessee has received written notice of the occurrence of any
Default, the Limited Power of Attorney shall immediately terminate and be void
and not further force or effect unless reinstated in writing by Lessor and
acknowledged and agreed to by the Agent. Each action taken by Lessee under the
Limited Power of Attorney shall automatically, without further action, be deemed
to be a representation and warranty as of such date that the conditions set
forth in the first sentence of this Section 30.12 are satisfied in full as of
such date.
30.13 Estoppel Certificates. Upon twenty (20) days' prior notice of
the request, either party will execute, acknowledge and deliver to the other
party a certificate stating (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 setting forth such modifications), (b) the
dates to which Rent and other sums payable hereunder have been paid, and (c)
either that to the knowledge of such party no Lease Event of Default exists or
specifying each such default of which such party has knowledge. A party shall
not be obligated, except as provided herein, to update any certificate once
delivered.
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IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.
FRED MEYER, INC.
By: JAMES C. AALBERG
-------------------------------------
Name: James C. Aalberg
Title: Vice President, Treasurer
S-1
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FMS TRUST 1997-1
By: WILMINGTON TRUST COMPANY, not
individually but solely as Owner
Trustee
By: PATRICIA A. EVANS
-------------------------------------
Name: Patricia A. Evans
Title: Financial Services Officer
For purposes of this Agreement as a fixture filing, the following is applicable:
Address of Lessee/debtor:
Fred Meyer, Inc.
3800 SE 22nd Avenue
P.O. Box 42121
Portland, Oregon 97242
Address of Lessor/secured party:
FMS Trust 1997-1
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Telecopier No.: (302) 651-8882
S-2
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Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged on this 11th day of March, 1998.
BANKERS TRUST COMPANY, as the
Administrative Agent for the Lenders
By: GINA S. THOMPSON
-------------------------------------
Name: Gina S. Thompson
Title: Vice President
S-3
<PAGE>
SCHEDULE 24.1 TO
LEASE
EXISTING SUBLEASES
None.
<PAGE>
Exhibit A
LEASE SUPPLEMENT NO. __
DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT
THIS LEASE SUPPLEMENT NO. __ (this "Lease Supplement") dated as of
_______________, between WILMINGTON TRUST COMPANY, a Delaware corporation, not
in its individual capacity, but solely as Owner Trustee under the FMS Trust
1997-1, a Delaware business trust, as lessor (the "Lessor"), and Fred Meyer,
Inc., a Delaware corporation, as lessee (the "Lessee").
For purposes of provisions of this Lease Supplement related to the
creation and enforcement as Deed of Trust, LESSEE, as grantor, hereby conveys
the Leased Property (as defined below) to FIRST AMERICAN TITLE COMPANY, a
corporation, as owner trustee ("Trustee"), in trust and with power of sale, for
the benefit of Lenders (as defined in the Participating Agreement) as
Beneficiary and senior lenders, and for the benefit of LESSOR, as beneficiary
(in trust), as subordinated lender. The maturity date of the secured obligations
shall be March __, 2003, unless extended pursuant to the terms of the Lease and
the Participation Agreement.
For purposes of provisions of this Lease Supplement related to the
creation and enforcement of this Agreement as a security agreement and a fixture
filing, Lessee is the debtor and Lessor is the secured party.
WHEREAS, Lessor [is the record owner of] [has a leasehold interest in]
the land described on Schedule I hereto (the "Leased Land") together with all
Improvements which now exist or hereafter may be constructed on the Leased
Property (the "Leased Improvements and, together with the Leased Land, the
"Leased Property")and wishes to lease the same to Lessee;
NOW, THEREFORE, in consideration of the premises and 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. Definitions; Rules of Usage. For purposes of this Lease Supplement,
capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to them in Annex A to the Participation Agreement, dated as of
March __, 1998, among the Lessee and Construction Agent, Lessor, the Owner
Trustee, the Investors, the Administrative Agent, the Syndication Agent and the
Lenders, as it may be amended, supplemented or otherwise modified from time to
time.
2. The Properties. Attached hereto as Schedule I is the description of
the Leased Property. Effective upon the execution and delivery of this Lease
Supplement by Lessor and Lessee, the Leased Property shall be subject to the
terms and provisions of the Lease.
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3. Ratification. Except as specifically modified hereby, the terms and
provisions of the Lease are hereby ratified and confirmed and remain in full
force and effect.
4. Original Lease Supplement. The single executed original of this
Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART"
on the signature page thereof and containing the receipt of the Administrative
Agent therefor on or following the signature page thereof shall be the Original
Executed Counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
5. Power of Sale. Without limiting any other remedies set forth herein
or in the Lease, in the event that a court of competent jurisdiction rules that
each of the Lease and this Lease Supplement constitutes a mortgage, deed of
trust or other secured financing with respect to the Leased Property as is the
intent of the parties pursuant to the Lease, then Lessor and Lessee agree that
(i) Lessee hereby grants to Lessor for the benefit of Lessor and the Lenders a
Lien against the Leased Property (including the fee simple estate therein) and
conveys the Leased Property to Trustee, WITH POWER OF SALE to the extent
permitted by law, and that, upon the occurrence and during the continuance of
any Lease Event of Default, Lessor shall have the power and authority, to the
extent provided by law, after proper notice and lapse of such time as may be
required by law, to sell the Leased Property (including the fee simple estate
therein) at the time and place of sale fixed by Lessor in such notice of sale,
either as a whole, or in separate lots or parcels or items and in such order as
Lessor may elect, at auction to the highest bidder for cash in lawful money of
the United States payable at the time of sale; accordingly, it is acknowledged
that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY
ALLOW LESSOR TO TAKE THE LEASED PROPERTY AND SELL THE LEASED PROPERTY (INCLUDING
THE FEE SIMPLE ESTATE THEREIN) WITHOUT GOING TO COURT IN A FORE CLOSURE ACTION
UPON THE OCCURRENCE AND CONTINUANCE OF A LEASE EVENT OF DEFAULT UNDER THE LEASE,
and (ii) upon the occurrence and during the continuance of a Lease Event of
Default, Lessor, in lieu of or in addition to exercising any power of sale
hereinabove given, may proceed by a suit or suits in equity or at law, whether
for a foreclosure hereunder, or for the sale of the Properties (including
without limitation the Leased Property), or against Lessee on a recourse basis
for the Lease Balance, or for the spe cific performance of any covenant or
agreement contained herein or in the Lease or any other lease or in aid of the
execution of any power granted herein or in the Lease or in any other lease, or
for the appointment of a receiver pending any foreclosure hereunder or the sale
of the Properties (including without limitation, the Leased Property), or for
the enforcement of any other appropriate legal or equitable remedy. Lessee shall
have all rights available to a mortgagor under the laws of the jurisdiction in
which the respective Properties are located.
6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND
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TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT AS TO MATTERS RELATING TO THE
PERFECTION AND ENFORCEMENT OF LIENS AND SECURITY INTERESTS AND THE EXERCISE OF
REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE APPLICABLE PROPERTY IS
LOCATED.
7. Counterpart Execution. This Lease Supplement may be executed in any
number of counterparts and by each of the parties hereto in separate
counterparts, all such counterparts together constituting but one and the same
instrument.
8. Recordation. Lessor and Lessee agree that a memorandum of this
Lease Supplement No. __ shall be recorded at Lessee's sole cost and expense as
required by the Lease.
9. Security Agreement and Financing Statement. The mailing address of
debtor (Lessee herein) and of the secured party (Lessor herein) from which
information concerning security interests hereunder may be obtained is as set
forth on the signature pages of this Agreement. A carbon, photographic or other
reproduction of this Agreement or of any financing statement related to this
Agreement shall be sufficient as a financing statement for any of the purposes
referenced herein.
10. State Law Recitals and Provisions.
(a) Non-Residential Trust Deed; Business Purpose. Lessee as
grantor warrants that this Agreement, as a deed of trust or trust deed under
laws of the state in which the Property is located, is not and will not at any
time constitute a residential trust deed, as that term is defined in ORS 86.705
or its successor statutes (if the Property is in Oregon). Lessee warrants that
it is engaging in this transaction exclusively for business, commercial or
investment purposes. Lessee warrants that the Property is not used principally
for agricultural or farming purposes (if the Property is in Washington). Lessee
warrants that the Property falls within the provisions of Idaho Code 45-1502(5)
or its successor statutes (if the Property is in Idaho).
(b) Statutory Notice Concerning Insurance. Effective January 1,
1996, Chapter 313 of Oregon Laws 1994 amends ORS 746.201 to require that in
loans in which the lender has the right to purchase insurance in the event the
borrower fails to carry insurance, the loan document must contain a warning in
substantially the following form in 10- point type:
"WARNING
"Unless you provide us with evidence of the insurance coverage as
required by our contract or loan agreement, we may purchase insurance at
your expense to protect our interest. This insurance may, but need not,
also protect your interest. If the collateral becomes damaged, the coverage
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we purchase may not pay any claim you make or any claim made against you.
You may later cancel this coverage by providing evidence that you have
obtained property coverage elsewhere.
"You are responsible for the cost of any insurance purchased by us.
The cost of this insurance may be added to your contract or loan balance.
If the cost is added to your contract or loan balance, the interest rate on
the underlying contract or loan will apply to this added amount. The
effective date of coverage may be the date your prior coverage lapsed or
the date you failed to provide proof of coverage.
"The coverage we purchase may be considerably more expensive than
insurance you can obtain on your own and may not satisfy any need for
property damage coverage or any mandatory liability insurance requirements
imposed by applicable law."
(c) Statutory Notice Concerning Written Agreements. UNDER OREGON
LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY LENDERS AFTER OCTOBER 3,
1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL,
FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST
BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY LENDERS TO BE ENFORCEABLE.
(d) Washington Statutory Notice. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
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IN WITNESS WHEREOF, the parties have caused this Lease Supplement No.
__ to be duly executed and delivered as of the date first above written.
FRED MEYER, INC.
By:
-------------------------------------
Name:
Title:
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FMS TRUST 1997-1
By: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as
Owner Trustee
By:
------------------------------
Name:
Title:
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Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged on this ___ day of ______, ____.
BANKERS TRUST COMPANY, as the
Administrative Agent for the Lenders
By:
-------------------------------------
Name:
Title:
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CONSTRUCTION AGENCY AGREEMENT
-----------------------------
CONSTRUCTION AGENCY AGREEMENT, dated as of March 11, 1998 (this
"Agreement"), between FMS TRUST 1997-1, a Delaware business trust (the
"Lessor"), and FRED MEYER, INC., a Delaware corporation (the "Construction
Agent").
PRELIMINARY STATEMENT
A. The Lessor and the Construction Agent, in its capacity as lessee (the
"Lessee") are parties to that certain Lease Agreement, dated as of even date
herewith (as amended, supplemented or otherwise modified, the "Lease"), pursuant
to which the Lessee has agreed to lease certain Land and Improvements from the
Lessor (collectively, the "Properties").
B. In connection with the execution and delivery of the Participation
Agreement, dated as of the date hereof, among the Lessee, the Lessor, the Owner
Trustee, the Investors, the Agents and the Lenders (the "Participation
Agreement"), the Lease and the other Operative Agreements, and subject to the
terms and conditions hereof, (i) the Lessor desires to appoint the Construction
Agent as its sole and exclusive agent in connection with the identification and
acquisition of the Properties (provided title to the Properties shall be held in
the name of the Lessor (except in the case of Ground Leases)) and construction
of such Improvements in accordance with the Plans and Specifications and (ii)
the Construction Agent desires, for the benefit of the Lessor, to identify and
acquire the Properties and to cause the construction of such Improvements in
accordance with the Plans and Specifications and to undertake such other
liabilities and obligations as are herein set forth.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used but not otherwise defined in
this Agreement shall have the meanings set forth in Annex A to the Participation
Agreement. The rules of usage set forth in Annex A to the Participation
Agreement shall apply to this Agreement.
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CONSTRUCTION AGENCY AGREEMENT
SECTION 2. APPOINTMENT OF CONSTRUCTION AGENT
2.1 Appointment. Subject to the terms and conditions hereof, the
Lessor hereby irrevocably designates and appoints the Construction Agent as its
exclusive agent, and the Construction Agent accepts such appointment, in
connection with the identification and acquisition from time to time of the
Properties (provided title to the Properties shall be held in the name of the
Lessor or, solely in the case of Land subject to a ground lease, the Land shall
be leased to the Lessor pursuant to a Ground Lease) and construction of
Improvements on the Land, all in accordance with the terms of this Agreement,
the Participation Agreement and the other Operative Agreements. Notwithstanding
any provisions hereof or in any other Operative Agreement to the contrary, the
Construction Agent acknowledges and agrees that the Lessor shall advance no more
than $500,000,000 in the aggregate in regard to the Properties (including
without limitation any and all Advances in the aggregate from the Lenders under
the Credit Agreement and from the Investors under the Trust Agreement).
2.2 Acceptance and Undertaking. The Construction Agent hereby
unconditionally accepts the agency appointment and undertakes, for the benefit
of the Lessor, to identify and acquire certain Properties (provided title to the
Properties shall be held in the name of the Lessor or, solely in the case of
Land subject to a ground lease, the Land shall be leased to the Lessor pursuant
to a Ground Lease) and to cause the construction of the Improvements in
accordance with the Plans and Specifications and the Operative Agreements.
2.3 Supplements to this Agreement. On the Property Closing Date of
each Property on which Improvements are to be constructed, the Lessor and the
Construction Agent shall each execute and deliver a supplement to this Agreement
in the form of Exhibit A to this Agreement, appropriately completed, pursuant to
which the Lessor and the Construction Agent shall, among other things, each
acknowledge and agree that the construction and development of such Property
will be governed by the terms of this Agreement. Following the execution and
delivery of a supplement to this Agreement as provided above, such supplement
and all supplements previously delivered under this Agreement shall constitute a
part of this Agreement.
2.4 Term. (a) This Agreement shall commence on the date hereof and
shall terminate with respect to any given Property upon the earlier to occur of:
(i) payment by the Lessee of the Termination Value and
termination of the Lease with respect to such Property in accordance with
Section 16 of the Lease;
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CONSTRUCTION AGENCY AGREEMENT
(ii) payment by the Lessee of the Purchase Option Price and
termination of the Lease with respect to such Property in accordance with
Section 20 of the Lease;
(iii) the expiration of the Lease with respect to such Property
or earlier termination of the Lease upon a sale of such Property pursuant
to Section 21.1 of the Lease or otherwise; and
(iv) the Completion Date with respect to such Property;
provided, however, that any termination of this Agreement shall not relieve the
Construction Agent of any liability for breach hereof.
2.5 Scope of Authority.
(a) The Lessor hereby expressly authorizes the Construction Agent, or
any agent or contractor of the Construction Agent, and the Construction Agent
unconditionally agrees, for the benefit of the Lessor, to take all action
necessary or desirable for the performance and satisfaction of any and all of
Lessor's obligations under any construction agreement and to fulfill all of the
obligations of the Construction Agent including, without limitation:
(i) the identification and assistance with the acquisition of
Properties in accordance with the terms and conditions of the Participation
Agreement;
(ii) all design and supervisory functions relating to the
construction of the Improvements and performing all engineering work
related to the construction, installation and testing of the Improvements;
(iii) negotiating and entering into all contracts necessary to
construct the Improvements, on such terms and conditions as are customary
and reasonable in light of local standards and practices and the businesses
in which the Lessee is engaged;
(iv) obtaining all necessary permits, licenses, consents,
approvals and other authorizations, including without limitation those
required under applicable Environmental Laws, from all Governmental
Authorities in connection with the development and construction of the
Improvements on the Land in accordance with the Plans and Specifications;
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CONSTRUCTION AGENCY AGREEMENT
(v) maintaining all books and records with respect to the
construction, operation and management of the Properties, including the
allocation of the Advances among the Properties so as to maintain an
accurate record of each Project Cost; and
(vi) performing any other acts necessary in connection with the
identification and acquisition of the Properties and construction and
development of the Improvements in accordance with the Plans and
Specifications.
(b) Neither the Construction Agent nor any of its Affiliates or agents
shall enter into any contract which would, directly or indirectly, impose any
liability or obligation on the Lessor and for which liability or obligation the
Lessor is not indemnified.
(c) Subject to the terms and conditions of this Agreement, the
Construction Agent shall have sole management and control over the construction
means, methods, sequences and procedures with respect to the construction of the
Improvements.
2.6 Delegation of Duties. The Construction Agent may execute any of
its duties under this Agreement by or through agents, contractors, employees or
attorneys-in-fact; provided that no such delegation shall limit or reduce in any
way the Construction Agent's duties and obligations under this Agreement.
2.7 Covenants of the Construction Agent. The Construction Agent hereby
covenants and agrees that it will:
(a) cause construction of the Improvements on each Property to be
prosecuted diligently and continuously in accordance with the Plans and
Specifications for such Property and in compliance with all Legal
Requirements and Insurance Requirements;
(b) cause the Completion Date for each Property to occur on or prior
to the earlier to occur of (i) the twelve month anniversary of the
Construction Commencement Date (which period may be extended for up to six
(6) additional months to the extent that a delay in construction is caused
by a Force Majeure Event) and (ii) the Construction Period Termination
Date, in all cases free and clear (by removal or bonding) of Liens or
claims for materials supplied or labor or services performed in connection
with the construction of the Improvements;
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CONSTRUCTION AGENCY AGREEMENT
(c) following the Completion Date for each Property, cause all
outstanding punch list items with respect to the Improvements on such
Property to be completed in a timely manner;
(d) cause the Improvements on each Property to be constructed for an
amount which when added to the Project Cost of the Land will be equal to or
less than 110% of the Projected Completion Value with respect to such
Properly;
(e) upon Completion of the Improvements for a particular Property,
promptly (and in any event within five (5) Business Days) deliver an
Officer's Certificate to the Lessor and the Administrative Agent (i)
certifying the Completion Date of such Property and (ii) certifying the
aggregate Property Cost of such Property;
(f) cause the sum of (i) the aggregate Property Cost for all
Construction Period Properties, plus (ii) to the extent not included in
Property Cost, the cost to complete the construction and development of
Improvements on Construction Period Properties, plus (iii) the Property
Cost for all Existing Properties to be in an amount that is not in excess
of $500,000,000; and
(g) procure insurance for the Properties during the Construction
Period in accordance with the provisions of Article XIV of the Lease.
SECTION 3. THE IMPROVEMENTS
3.1 Construction. The Construction Agent shall cause the Improvements
to be constructed, equipped, maintained and used in full compliance with the
Plans and Specifications therefor and all Legal Requirements and Insurance
Requirements.
3.2 Amendments; Modifications. (a) The Construction Agent may at any
time revise, amend or modify (i) the Plans and Specifications without the
consent of the Lessor; provided that any such amendment to the Plans and
Specifications does not (x) result in the Completion Date of the Improvements
occurring after the earlier of the Outside Completion Date and the Construction
Period Termination Date, and/or (y) result in the Project Costs of any
Improvements subject to such amendment exceeding either (1) the sum of the then
Available Commitments and the then Available Investor Commitments (reduced by
the amount, if any, necessary to pay for the cost of construction and
development of Improvements on other Properties which are currently under
construction but have not yet
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CONSTRUCTION AGENCY AGREEMENT
been completed (such amount, the "Unfunded Amount")) or (2) 110% of the
Projected Completion Value with respect to such Improvements, and (ii) the
Budget; provided that such revisions, amendments or modifications to the Budget
do not result in any increase in the Project Costs greater than either (A) the
sum of the then Available Commitments and the then Available Investor
Commitments (reduced by the unfunded amount) or (B) 110% of the Projected
Completion Value with respect to such Property.
(b) The Construction Agent agrees that it will not implement any
revision, amendment or modification to the Plans and Specifications for any
Property if the aggregate effect of such revision, amendment or modification
would be to reduce the fair market value of the Property when completed, unless
such revision, amendment or modification is required by Legal Requirements or
Insurance Requirements or unless required to prevent the Improvements from being
constructed in violation of Section 8.2 of the Lease.
3.3 Failure to Complete Construction Period Properties and Purchase
Obligation.
If at any time prior to the Completion Date with respect to any
Construction Period Property there occurs a Casualty, an Environmental
Violation, the commencement of a Condemnation or a Force Majeure Event, the
Construction Agent shall either (a) pay to Lessor, on a date designated by
Construction Agent (which date shall be not more than thirty (30) days after a
Responsible Officer of the Construction Agent gains knowledge of the occurrence
of the applicable event), an aggregate amount equal to the liquidated damages
amount referenced in Section 5.3(a) of this Agreement regarding such
Construction Period Property and on such date Lessor shall transfer and convey
to the Construction Agent all right, title and interest of Lessor in and to such
Construction Property or (b) other than in the event of an Environmental
Violation, notify Lessor in writing it intends to proceed with construction of
the Improvements with respect to such Construction Period Property (including
within such notice, if a Force Majeure Event is involved, an estimate as to the
delay caused by such Force Majeure Event), in which case the Construction Agent
shall promptly and diligently complete the construction of such Improvements in
accordance with the Plans and Specifications and with the terms hereof and cause
the Completion Date with respect to such Construction Period Property to occur
on or prior to the earlier of the Outside Completion Date and the Construction
Period Termination Date.
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CONSTRUCTION AGENCY AGREEMENT
SECTION 4. PAYMENT OF FUNDS
4.1 Right to Receive Construction Cost.
(a) In connection with the acquisition of any Property and during the
course of the construction of the Improvements on any Property, the Construction
Agent may request that the Lessor advance funds for the payment of Property
Acquisition Costs or Property Costs, and the Lessor will comply with such
request to the extent provided for under the Participation Agreement. The
Construction Agent and the Lessor acknowledge and agree that the Construction
Agent's right to request funds and the Lessor's obligation to advance such funds
for the payment of Property Acquisition Costs or Property Costs is subject in
all respects to the terms and conditions of the Participation Agreement and each
of the other Operative Agreements. Without limiting the generality of the
foregoing, it is specifically understood and agreed that in no event shall the
aggregate amounts advanced by the Lenders or the Investors for Property
Acquisition Costs or Property Costs and any other amounts due and owing
hereunder or under any of the other Operative Agreements exceed $500,000,000,
including without limitation such amounts owing for (a) the acquisition and
development of the Properties, (b) additional amounts which accrue or become due
and owing under the Credit Agreement or Trust Agreement as obligations of the
Lessor prior to any Completion Date (for interest payments on the Loans or
payments of the Investor Yield on the Investor Advances) or (c) any other
purpose.
(b) The proceeds of any funds made available to the Lessor to pay
Project Costs shall be made available to the Construction Agent or its designee
in accordance with the Requisition relating thereto and the terms of the
Participation Agreement. The Construction Agent will use such proceeds only to
pay the Project Costs set forth in the Requisition relating to such funds.
SECTION 5. CONSTRUCTION AGENCY AGREEMENT EVENTS OF DEFAULT
5.1 Events of Default. If any one or more of the following events
(each an "Construction Agency Agreement Event of Default") shall occur:
(a) the Construction Agent fails to apply any funds paid by the Lessor
to the Construction Agent for the acquisition of the Properties and the
construction of the Improvements to the payment of Property Acquisition
Costs or Project Costs;
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CONSTRUCTION AGENCY AGREEMENT
(b) the Construction Commencement Date with respect to any
Improvements does not occur within 12 months of the Property Closing Date
for the Land on which such Improvements are to be located if such Land is
Store Land Property, or within 9 months of the Property Closing Date for
the Land on which such Improvements are to be located, if such Land is not
Store Land Property;
(c) the Completion Date with respect to any Property (other than a
Store Land Property) shall fail to occur for any reason on or prior to the
earlier of the Outside Completion Date or the Construction Period
Termination Date;
(d) a Significant Casualty or a Significant Condemnation shall occur
during the Construction Period;
(e) any Lease Event of Default shall have occurred and not been cured
within any cure period expressly permitted under the terms of the Lease; or
(f) the Construction Agent shall breach any of its representations or
warranties under any Operative Agreement or shall fail to observe or
perform any term, covenant or condition of this Agreement or any other
Operative Agreement other than as set forth in paragraphs (a), (b), (c),
(d) or (e) of this Section 5.1, and such misrepresentation, breach of
warranty or failure remains uncured for a period of thirty (30) days after
receipt of written notice to the Construction Agent by the Lessor;
then, in any such event, and subject to Section 5.3(a), the Lessor may, in
addition to the other rights and remedies provided for in this Article,
terminate the Construction Agent's rights under this Agreement by giving notice
of such termination, and the Construction Agent's rights under this Agreement
shall terminate and all rights and obligations of the Construction Agent under
this Agreement shall cease. The Construction Agent shall pay all costs and
expenses incurred by or on behalf of the Lessor, including reasonable fees and
expenses of counsel, as a result of any Construction Agency Agreement Event of
Default.
5.2 Damages. Any termination pursuant to Section 5.1 shall in no event
relieve the Construction Agent of its liability and obligations hereunder, all
of which shall survive any such termination.
5.3 Remedies; Remedies Cumulative. (a) If a Construction Agency
Agreement Event of Default shall have occurred and be continuing, the Lessor
shall have all rights available at law, equity or otherwise. Notwithstanding the
foregoing, the Construction
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CONSTRUCTION AGENCY AGREEMENT
Agent shall have the right to cure a Construction Agency Agreement Event of
Default hereunder with respect to any given Property by purchasing such Property
from the Lessor for Termination Value for such Property.
(b) No failure to exercise and no delay in exercising, on the part of
the Lessor, any right, remedy, power or privilege under this Agreement or under
any other Operative Agreement shall operate as a waiver thereof nor shall any
single or partial exercise of any right, remedy, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in this Agreement are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
SECTION 6. INSURANCE
The Construction Agent shall procure insurance for the Improvements
during the Construction Period in accordance with the following provisions
(provided that to the extent such requirements are satisfied by Lessee in
accordance with Article XIV of the Lease, it shall be sufficient if Lessee's
insurance provides coverage for both Construction Agent and Lessee):
6.1 Public Liability and Workers' Compensation Insurance. The
Construction Agent shall procure and carry, at the Construction Agent's sole
cost and expense, commercial general liability insurance for claims for injuries
or death sustained by persons or damage to property while on the Properties.
Such general liability insurance shall be on terms and in amounts that are no
less favorable than insurance maintained by the Construction Agent with respect
to similar properties that it constructs. The commercial general liability
insurance policy shall be endorsed to name each Participant as additional
insureds. Each policy shall also specifically provide that the policy shall be
considered primary insurance which shall apply to any loss or claim before any
contribution by any insurance which such parties may have in force. The
Construction Agent shall, in the operation of the Properties, comply with the
applicable workers' compensation laws and protect the Lessor against any
liability under such laws.
6.2 Hazard and Other Insurance. The Construction Agent shall keep, or
cause to be kept, the Improvements and building materials insured against loss
or damage by fire and other risks on terms and in amounts that are no less
favorable than insurance covering other similar properties constructed and
developed by the Construction Agent and that are in
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CONSTRUCTION AGENCY AGREEMENT
accordance with normal industry practice, and are in amounts equal to the actual
replacement cost of the Improvements. During the construction of any
Improvements each Lessee shall also maintain or cause to be maintained builders'
risk insurance. So long as no Construction Agency Agreement Event of Default has
occurred and is continuing, any loss payable under the insurance policy required
by this Section will be paid to and adjusted solely by the Construction Agent.
6.3 Coverage. The Construction Agent agrees that it shall furnish the
Lessor with certificates or, if requested by the Lessor, copies of policies
showing the insurance required to be in effect under Sections 6.1 and 6.2 and
naming the Participants as additional insureds and showing the mortgagee
endorsement in favor of the Administrative Agent required below. All such
insurance shall be at the cost and expense of the Construction Agent. Such
certificates shall include a provision for 30 days' advance written notice by
the insurer to the Lessor in the event of a cancellation of such insurance. The
Construction Agent agrees that the insurance policy or policies required by
Sections 6.1 and 6.2 shall include an appropriate clause pursuant to which such
policy shall provide that it will not be invalidated should the Construction
Agent waive, in writing, prior to a loss, any or all rights of recovery against
any party for losses covered by such policy. The Construction Agent hereby
waives any and all such rights against the Participants to the extent of
payments made under such policies. All property insurance policies required by
Section 6.2 shall include a "New York" or standard form mortgagee endorsement in
favor of the Administrative Agent. The Lessor may carry separate liability
insurance, at its own expense, so long as (i) the Construction Agent's insurance
is designated as primary and in no event excess or contributory to any insurance
the Lessor may have in force which would apply to a loss covered under the
Construction Agent's policy and (ii) each such insurance policy will not cause
the Construction Agent's insurance required under Section 6 to be subject to a
co-insurance exception of any kind. The Construction Agent shall pay as they
become due all premiums for the insurance required by Sections 6.1 and 6.2,
shall renew or replace each policy prior to the expiration date thereof and
shall promptly deliver to the Lessor and the Administrative Agent certificates
for renewal and replacement policies. Notwithstanding anything in this Section
6.3 to the contrary, any insurance which the Construction Agent is required to
obtain and maintain pursuant to Sections 6.1 and 6.2 may be carried under
"blanket" and umbrella covering other properties and liabilities of the
Construction Agent.
SECTION 7. LESSOR'S RIGHTS; CONSTRUCTION AGENT'S RIGHTS
10
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
7.1 Exercise of the Lessor's Rights. Subject to the terms of the
Contract Assignment, the Construction Agent hereby acknowledges and agrees that
the rights and powers of the Lessor under this Agreement have been assigned to
the Administrative Agent.
7.2 Lessor's Right to Cure Construction Agent's Defaults. Upon written
notice to the Construction Agent, except in emergencies, the Lessor, without
waiving or releasing any obligation or Construction Agency Agreement Event of
Default, may (but shall be under no obligation to) remedy any Construction
Agency Agreement Event of Default hereunder for the account of and at the sole
cost and expense of the Construction Agent. All out of pocket costs and expenses
so incurred (including reasonable fees and expenses of counsel), together with
interest thereon at the Overdue Rate from the date on which such sums or
expenses are paid by the Lessor, shall be paid by the Construction Agent to the
Lessor on demand.
SECTION 8. GUARANTEE OF COMPLETION
8.1 Guarantee of Completion. The Construction Agent unconditionally
and irrevocably guaranties that:
(a) it shall complete, on or before the Outside Completion Date, the
construction, equipping and furnishing of each of the Properties
substantially in accordance with (i) the Plans and Specifications (ii) all
Legal Requirements (iii) all Insurance Requirements and (iv) the terms and
conditions of the Construction Contract and this Agreement;
(b) it shall fully and punctually pay and discharge any and all
Project Costs in connection with the Properties, including, without
limitation, the costs of constructing, equipping and furnishing each of the
Properties and payment of all real estate taxes, insurance premiums and
other items payable prior to Completion of a Property, as the same become
due and payable;
(c) each Property shall be, and remain, free and clear of all Liens of
any and all Persons furnishing materials, labor or services in
constructing, completing, equipping or furnishing the Properties, except to
the extent that such Liens are (i) being contested in good-faith if
permitted in accordance with the terms of the Participation Agreement, the
Lease and the other Operative Agreements or (ii) Lessor Liens; and
11
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
(d) it shall comply fully and punctually with all of the terms,
covenants and conditions on its part to be complied with under the
Construction Contract and this Agreement.
The matters described in paragraphs (a) through (d) above are sometimes
collectively referred to as the "Guaranteed Obligations".
8.2 Failure to Complete the Improvements. In the event that Completion
with respect to any Property has not occurred on or prior to the Outside
Completion Date, (a) the Construction Agent shall indemnify the Lessor against,
and save the Lessor harmless from all damages, liabilities, costs and expenses
that Lessor, or anyone claiming through or on behalf of the Lessor, may suffer
by reason of the Construction Agent's failure to achieve Completion of such
Improvements on or prior to the Outside Completion Date; (b) in the event that
the Lessor, or anyone claiming through or on behalf of the Lessor, shall pay any
costs in connection with (i) completing the construction of any Improvements
pursuant to the Participation Agreement or any other Operative Agreement, or
(ii) removing any Liens not permitted by the terms of the Participation
Agreement, the Lease and the other Operative Agreements, the Construction Agent
shall reimburse the Lessor, or such Person so claiming through or on behalf of
the Lessor, for all sums so paid by such Person; and (c) the Construction Agent
shall pay any and all expenses (including, without limitation, all reasonable
fees and disbursements of counsel) incurred by the Lessor, or anyone claiming
through or on behalf of the Lessor, in (i) enforcing, or obtaining advice of
counsel in respect of the enforcement of, any rights under this Article or (ii)
collecting, or obtaining advice of counsel in respect of the collection of, the
Guaranteed Obligations.
8.3 Specific Enforcement. The Construction Agent acknowledges and
agrees that it will be impossible to measure accurately the damages to the
Lessor, or anyone claiming through or on behalf of the Lessor, resulting from a
breach of the covenants of the Construction Agent to complete (or to cause the
completion of) the construction, equipping and furnishing of the Improvements in
accordance with the Plans and Specifications, in compliance with all Legal
Requirements and all Insurance Requirements and in accordance with the terms and
conditions of the Construction Contract and this Agreement; that such a breach
will cause irreparable injury to the Lessor and that the Lessor has no adequate
remedy at law in respect of such breach and, as a consequence, agrees that such
covenant shall be specifically enforceable against the Construction Agent, and
the Construction Agent hereby waives and agrees not to assert any defense based
on the denial of any of the foregoing in an action for specific performance of
such covenant.
12
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
8.4 Right of Set-Off. Upon the occurrence and during the continuance
of a Construction Agency Agreement Event of Default or a Lease Event of Default,
the Construction Agent irrevocably authorizes the Lessor, or anyone claiming
through or on behalf of the Lessor, at any time without notice to the
Construction Agent to set-off and apply any and all deposits and any other
credits or claims held or owing by the Lessor, or anyone acting through or on
behalf of the Lessor, to or for the credit or the account of the Construction
Agent, in such amounts as the Lessor, or anyone claiming through or on behalf of
the Lessor, may elect, against and on account of the obligations and liabilities
of the Construction Agent to the Lessor under this Article, whether or not the
Lessor has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured.
8.5 Amendments to Operative Agreements; Demands. The Construction
Agent shall remain obligated under this Agreement notwithstanding that, without
any reservation of rights against the Construction Agent and without notice to
or further consent by the Construction Agent, the obligations or the liability
of any other party upon or for any part of the obligations under the Operative
Agreements, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, waived, surrendered or released by the Lessor, or anyone
acting through or on behalf of the Lessor, and any of the other Operative
Agreements may be amended, modified, supplemented or terminated, in whole or in
part. For the purposes of this Agreement, any reference to the Operative
Agreements shall mean such documents as they now exist and as they may be
modified, amended, supplemented, renewed or extended from time to time.
8.6 Guarantee Absolute and Unconditional; Waivers. The Construction
Agent waives any and all notice of the creation, renewal, extension or accrual
of any of the obligations under this Agreement and notice of or proof of
reliance by the Lessor, or anyone acting through or on behalf of the Lessor,
upon this Agreement or acceptance of this Agreement. The obligations or
liabilities under this Agreement shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon the guarantee contained in this Article. The Construction Agent
understands and agrees that the guarantee contained in this Article shall be
construed as a continuing, absolute and unconditional guarantee without regard
to (a) the validity, regularity or enforceability of this Agreement or any of
the other Operative Agreements, (b) any defense, set-off or counterclaim which
at any time may be available to or be asserted by the Construction Agent against
the Lessor, or anyone acting through or on behalf of the Lessor, or (c) any
other circumstance (with or without notice to or knowledge of the Lessor or the
Construction Agent) whatsoever which constitutes, or might be construed to
constitute, an equitable or legal
13
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
discharge of the Construction Agent for the obligations under this Agreement in
bankruptcy or in any other instance, except for performance of such obligations
under this Agreement. The Construction Agent waives any right to require the
Lessor, or anyone acting through or on behalf of the Lessor, to proceed against
any collateral security in any manner which would preserve any right of
subrogation which the Construction Agent might have against the Lessor and also
waives any defense arising from any action by the Lessor which may limit or
affect adversely any such right of subrogation. When pursuing its rights and
remedies against the Construction Agent, the Lessor, or anyone acting through or
on behalf of the Lessor, may, but shall be under no obligation to, pursue such
rights and remedies as it may have against the Construction Agent or any other
Person or against any collateral security or guarantee for the obligations under
this Agreement, and any failure by the Lessor, or anyone acting through or on
behalf of the Lessor, to pursue such other rights or remedies against the
Construction Agent or any such other Person or to realize upon any such
collateral security or guarantee, or any release of the Construction Agent or
any such other Person or any such collateral security or guarantee, shall not
relieve the Construction Agent of any liability, and shall not impair or affect
the rights and remedies of the Lessor, or anyone acting through or on behalf of
the Lessor, against the Construction Agent. The guarantee of completion
contained in this Article shall remain in full force and effect and be binding
in accordance with and to the extent of its terms upon the Construction Agent
until all the obligations under this Agreement shall have been satisfied by
performance in full.
8.7 Reinstatement. The guarantee contained in this Article shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the obligations of the Construction
Agent under this Agreement is rescinded or otherwise must be restored or
returned by the Lessor, or anyone acting through or on behalf of the Lessor,
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Construction Agent, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, the
Construction Agent or any substantial part of its property, or otherwise, all as
though such payments had not been made.
8.8 Subordination. (a) All liabilities and obligations of the Lessor
to the Construction Agent, whether secured or unsecured and whether or not
evidenced by any instrument, now existing or subsequently created or incurred,
are and shall be subordinate and junior in right of payment to the Obligations.
(b) The Construction Agent shall not sell, assign or otherwise
transfer, in whole or in part, or create, incur or suffer to exist any security
interest, Lien, charge or other encumbrance with respect to any indebtedness,
liabilities or obligations of the Lessor to the
14
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
Construction Agent or any instrument or document evidencing or securing the same
unless, in any such case, the person or entity to whom such sale, assignment or
transfer is made or the beneficiary of such security interest, Lien, charge or
encumbrance acknowledges the foregoing subordination and agrees to be bound
thereby.
(c) Should any payment or distribution or security, or any proceeds
thereof, be collected or received by the Construction Agent in respect of any
indebtedness, liabilities or obligations of the Lessor to the Construction
Agent, and such collection or receipt is not permitted under these subordination
provisions of this Agreement, the Construction Agent shall immediately turn over
such payment, distribution or security or proceeds to the Administrative Agent,
in the form received, and, until so turned over, the same shall be held in trust
by the Construction Agent as the property of the Lenders.
(d) For purposes of this Agreement "subordinate and junior in right of
payment" shall mean no part of any subordinated indebtedness, liabilities or
obligations shall have any claim to the assets of the Lessor on a parity with or
prior to the claim of the Obligations or the principal amount of the Loans and
other amounts due to the Administrative Agent, the Lenders and the Investor.
Unless and until the Obligations shall have been fully paid and satisfied, the
Construction Agent will not take, demand or receive, directly or indirectly, by
set-off, redemption, purchase or in any manner, any payment or security for the
whole or any part of any subordinated indebtedness, liabilities or obligations,
and the Construction Agent will not accelerate the scheduled maturities of any
amounts owing on account of such indebtedness, liabilities or obligations or
demand payment thereof or enforce or take any action to enforce or collect any
subordinated indebtedness, liabilities or obligations or any part thereof or to
enforce any Lien or security interest securing payment or performance of
subordinated indebtedness, liabilities or obligations or exercise any claims,
rights, remedies or powers in connection with such indebtedness, liabilities or
obligations; provided that so long as no Default or Event of Default under the
Credit Agreement, the Notes or any other Operative Agreement exists or would be
in existence immediately after giving effect to such payment, the Construction
Agent may receive currently scheduled payments on account of such indebtedness,
liabilities and obligations.
8.9 Payments. The Construction Agent hereby agrees that payments under
or with respect to the guarantee contained in this Article will be paid to the
Lessor, without set-off or counterclaim in U.S. Dollars, except that so long as
this Agreement is subject to the Contract Assignment payments will be paid to
the Administrative Agent at the office of the Administrative Agent located at
130 Liberty Street, New York, New York 10006.
15
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CONSTRUCTION AGENCY AGREEMENT
SECTION 9. MISCELLANEOUS
9.1 Notices. Unless otherwise specifically provided herein, all
notices, consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof to be given to any
Person shall be given in writing by United States mail, by nationally recognized
courier service or by hand and any such notice shall become effective five
Business Days after being deposited in the mails, certified or registered with
appropriate postage prepaid or one Business Day after delivery to a nationally
recognized courier service specifying overnight delivery or, if delivered by
hand, when received, and shall be directed to the address of such Person as
indicated:
If to the Lessor, to it at:
FMS TRUST 1997-1
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration
Telecopier No.: (302) 651-1576
If to the Construction Agent, to it at:
Fred Meyer, Inc.
3800 SE 22nd Avenue
PO Box 42121
Portland, Oregon 97242
Attn: James C. Aalberg
Vice President and Corporate Treasurer
Telecopier No.: (503) 797-5299
With a copy of any default notices to:
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, Oregon 97204
Attn: Gary R. Barnum, Esq.
Telecopier No.: (503) 220-2480
16
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
With copies of any notices to the Administrative Agent at:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attn: Deal Administrator
Telecopier No.: (212) 250-7351
From time to time any party may designate a new address for purposes
of notice hereunder by notice to each of the other parties hereto. It is
understood and agreed that the delivery of copies of notices to counsel as set
forth above is for courtesy purposes only and any failure to deliver such copy
shall not constitute failure with respect to any obligation to provide notices
hereunder.
9.2 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Lessor, the Construction Agent and their respective
successors and assigns. The Construction Agent may not assign this Agreement or
any of its rights or obligations hereunder in whole or in part to any Person
without the prior written consent of the Lessor.
9.3 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.4 Amendments and Waivers. Subject to the provisions of Section 13.4
of the Participation Agreement, the Lessor and the Construction Agent may from
time to time, enter into written amendments, supplements or modifications
hereto.
9.5 Counterparts. This Agreement may be executed on any number of
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
9.6 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and
17
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CONSTRUCTION AGENCY AGREEMENT
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
9.7 Headings and Table of Contents. The headings and table of contents
contained in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
18
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CONSTRUCTION AGENCY AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
FRED MEYER, INC.
JAMES C. AALBERG
------------------------
By: Name: James C. Aalberg
Title: Vice President, Treasurer
S-1
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
FMS TRUST 1997-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
PATRICIA A. EVANS
---------------------------
By: Name: Patricia A. Evans
Title: Financial Services Officer
S-2
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
Exhibit A
----------
Supplement to Construction Agency Agreement
-------------------------------------------
SUPPLEMENT to Construction Agency Agreement, dated as of _____________
__, 199__ (the "Supplement"), between FMS TRUST 1997-1, a Delaware business
trust (the "Lessor"), and FRED MEYER, INC., a Delaware corporation (the
"Construction Agent"). Capitalized terms used but not otherwise defined herein
shall have the meanings given them in the Construction Agency Agreement.
The Lessor and the Construction Agent are also parties to that certain
Construction Agency Agreement dated as of March __, 1998 (as amended,
supplemented or otherwise modified, the "Construction Agency Agreement"),
pursuant to which the Lessor has appointed the Construction Agent as its sole
and exclusive agent in connection with the acquisition of the Properties and
construction of the Improvements in accordance with the Plans and
Specifications.
Subject to the terms and conditions of the Construction Agency
Agreement, the Lessor and the Construction Agent desire that the terms of the
Construction Agency Agreement apply to the Property described in Schedule 1 and
wish to execute this Supplement to provide therefore.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:
1. The Construction Agent agrees to act as Construction Agent and to
perform the obligations assumed under the Construction Agency Agreement in
connection with the completion of construction of the Improvements on the
Property in accordance with the Plans and Specifications set forth in Schedule
2, except that, if the Property described in Schedule 1 is a Store Land
Property, then in accordance with the Plans and Specifications to be delivered
pursuant to Section 9.4 of the Participation Agreement.
2. Each of the Lessor and the Construction Agent acknowledges and
agrees that the construction and development of the Property shall be governed
by the terms of the Construction Agency Agreement.
A-1
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
3. The Budget relating to the construction and development of the
Improvements on the Property is $[ ], except that, if the Property described in
Schedule 1 is a Store Land Property, the Budget will be as provided in
accordance with Section 9.4 of the Participation Agreement.
4. This Supplement shall, upon its execution and delivery, constitute
a part of the Construction Agency Agreement.
A-2
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
FRED MEYER, INC.
By: ____________________________________
Name:
Title:
S-1
<PAGE>
CONSTRUCTION AGENCY AGREEMENT
FMS TRUST 1997-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By: ______________________________
Name:
Title:
S-2
<PAGE>
Schedule 1 to Supplement
CONSTRUCTION AGENCY AGREEMENT
Description of Property
-----------------------
<PAGE>
Schedule 2 to Supplement
Plans and Specifications
------------------------
===============================================================================
CREDIT AGREEMENT
among
FMS TRUST 1997-1,
as Borrower
The Several Lenders
from Time to Time Parties Hereto,
BANKERS TRUST COMPANY,
as Administrative Agent
and
THE CHASE MANHATTAN BANK,
as Syndication Agent
Dated as of March 11, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS........................................ 1
1.1 Defined Terms.............................................................1
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.................... 1
2.1 Commitments............................................................. 1
2.2 Notes................................................................... 1
2.3 Procedure for Borrowing................................................. 2
2.4 Commitment Fees......................................................... 3
2.5 Prepayments............................................................. 3
2.6 Conversion and Continuation Options..................................... 4
2.7 Minimum Amounts of Tranches............................................. 4
2.8 Interest Rates and Payment Dates........................................ 5
2.9 Computation of Interest................................................. 5
2.10 Inability to Determine Interest Rate.................................... 5
2.11 Pro Rata Treatment and Payments......................................... 6
2.12 Illegality.............................................................. 7
2.13 Legal Requirements...................................................... 7
2.14 Indemnity............................................................... 8
2.15 Taxes................................................................... 9
2.16 Change of Lending Office................................................10
2.17 Mitigation Obligations; Replacement of Lenders..........................10
SECTION 3. REPRESENTATIONS AND WARRANTIES................... 11
SECTION 4. CONDITIONS PRECEDENT............................. 11
4.1 Conditions to Effectiveness............................................ 11
4.2 Conditions to Each Loan................................................ 12
SECTION 5. COVENANTS......................................... 12
5.1 Other Activities....................................................... 12
5.2 Ownership of Property, Indebtedness.................................... 12
5.3 Disposition of Assets.................................................. 12
5.4 Compliance with Operative Agreements................................... 12
5.5 Further Assurances..................................................... 12
i
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Page
----
5.6 Notices................................................................ 13
5.7 Discharge of Liens..................................................... 13
SECTION 6. REMEDIAL PROVISIONS............................... 13
6.1 Events of Default...................................................... 13
6.2 Certain Defaults....................................................... 16
SECTION 7. THE ADMINISTRATIVE AGENT ........................ 16
7.1 Appointment............................................................ 16
7.2 Delegation of Duties................................................... 16
7.3 Exculpatory Provisions................................................. 16
7.4 Reliance by Administrative Agent....................................... 17
7.5 Notice of Default...................................................... 17
7.6 Non-Reliance on Administrative Agent and Other Lenders................. 17
7.7 Indemnification........................................................ 18
7.8 Administrative Agent in Its Individual Capacity........................ 18
7.9 Successor Administrative Agent......................................... 18
7.10 Syndication Agent...................................................... 19
SECTION 8. MATTERS RELATING TO PAYMENTS AND COLLATERAL...... 19
8.1 The Account............................................................ 19
8.2 Proceeds of Collateral; Proceeds Remaining in Account.................. 21
8.3 Certain Remedial Matters............................................... 22
8.4 Release of the Property, etc........................................... 22
SECTION 9. MISCELLANEOUS.................................... 23
9.1 Amendments and Waivers................................................. 23
9.2 Notices................................................................ 24
9.3 No Waiver; Cumulative Remedies......................................... 24
9.4 Survival of Representations and Warranties............................. 24
9.5 Successors and Assigns................................................. 24
9.6 The Register; Disclosure............................................... 26
9.7 Adjustments; Set-Off................................................... 26
9.8 Counterparts........................................................... 27
9.9 Severability........................................................... 27
ii
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Page
----
9.10 Integration............................................................ 27
9.11 Governing Law; Jurisdiction; Consent of Service of Process............. 28
9.12 Acknowledgements....................................................... 28
9.13 WAIVERS OF JURY TRIAL.................................................. 29
9.14 Nonrecourse............................................................ 29
9.15 OREGON LEGAL NOTICE.................................................... 30
9.16 WASHINGTON STATUTORY NOTICE............................................ 30
EXHIBITS
Exhibit A-1 Form of Tranche A Note
Exhibit A-2 Form of Tranche B Note
Exhibit B Form of Assignment and Acceptance
SCHEDULES
Schedule 2.1 Lenders and Commitments
iii
<PAGE>
Schedule 1.1
Lenders and Commitments
Name and Address of Lender Amount of Commitment
- -------------------------- --------------------
1
<PAGE>
CREDIT AGREEMENT, dated as of March 11, 1998 among FMS TRUST 1997-1, a
Delaware business trust (the "Borrower"), the several banks and other financial
institutions from time to time parties to this Agreement (the "Lenders"),
BANKERS TRUST COMPANY, a New York banking corporation, as administrative agent
for the Lenders hereunder (in such capacity, the "Administrative Agent"); THE
CHASE MANHATTAN BANK, a New York banking corporation, as syndication agent (the
"Syndication Agent"); and NATIONSBANK OF TEXAS, N.A., a national banking
association, and SALOMON BROTHERS HOLDING CO INC. as co-documentation agents
(the "Co-Documentation Agents").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used herein but not otherwise
defined in this Agreement shall have the respective meanings set forth in Annex
A attached to the Participation Agreement dated as of the date hereof (the
"Participation Agreement"), among Lessee and Construction Agent, the Borrower,
the Owner Trustee, the Investors, the Administrative Agent, the Syndication
Agent and the Lenders. The rules of usage set forth in Annex A to the
Participation Agreement shall apply to this Credit Agreement. Unless otherwise
indicated, references in this Credit Agreement to articles, sections,
paragraphs, clauses, appendices, schedules and exhibits are to the same
contained in this Credit Agreement.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments. (a) Subject to the terms and conditions hereof, each
Lender severally agrees to make revolving credit loans (the "Loans") to the
Borrower from time to time during the Commitment Period for the purpose of
enabling the Borrower to acquire the Properties and to pay Project Costs, in an
aggregate principal amount at any one time outstanding not to exceed the amount
of such Lender's Commitment. During the Commitment Period the Borrower may use
the Commitments by borrowing, prepaying the Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof.
(b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans, or (iii) a combination thereof, as determined by the Borrower and
notified to the Administrative Agent in accordance with Sections 2.3 and 2.6.
2.2 Notes. Any Lender may request that the Loans made by it be
evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A-1, in the case of Tranche A Loans (each, a "Tranche A Note"), or
Exhibit A-2, in the case of Tranche B Loans (each, a "Tranche B Note"). In such
event the Borrower shall prepare, execute and deliver to such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) a
1
<PAGE>
CREDIT AGREEMENT
Tranche A Note and a Tranche B Note. Thereafter, the Loans evidenced by such
Notes and interest thereon shall at all times (including after assignment
pursuant to Section 9.5) be represented by Notes payable to the order of the
payee named therein (or, if such Notes are registered Notes, to such payee and
its registered assigns). Each Note shall (i) be dated the Effective Date (as
defined in the Assignment and Acceptance), (ii) be stated to mature on the
Maturity Date and (iii) provide for the payment of interest in accordance with
Section 2.8.
2.3 Procedure for Borrowing. (a) The Borrower may borrow under the
Commitments during the Commitment Period on any Business Day, provided that the
Borrower shall deliver to the Administrative Agent an irrevocable Requisition
(which Requisition must be received by the Administrative Agent prior to 12:00
p.m. (noon), New York City time, (a) three Business Days prior to the requested
Borrowing Date, if all or any part of the requested Loans are to be initially
Eurodollar Loans, or (b) on the requested Borrowing Date, otherwise),
specifying, among other things, (i) the amount to be borrowed, (ii) the
requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar
Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be
entirely or partly of Eurodollar Loans, the respective amounts of each such Type
of Loan and the respective lengths of the initial Interest Periods therefor.
Each Borrowing (other than Borrowings pursuant to Section 2.3(b)) shall be in an
amount equal to (x) in the case of ABR Loans, at least $1,000,000 or a whole
multiple of $500,000 in excess thereof (or, if the then Available Commitments
are less than $1,000,000, such lesser amount) and (y) in the case of Eurodollar
Loans, at least $1,000,000 or a whole multiple of $500,000 in excess thereof.
Upon receipt of any such Requisition from the Borrower, the Administrative Agent
shall promptly notify each Lender thereof. Each Lender will make the amount of
its pro rata share of each borrowing available to the Administrative Agent for
the account of the Borrower at the office of the Administrative Agent specified
in Section 9.2 prior to 2:00 P.M., New York City time, on the Funding Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent crediting an account designated by the Borrower on the
books of such office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
(b) Notwithstanding anything in the foregoing paragraph 2.3(a) to the
contrary, on each date during the Commitment Period with respect to any
Construction Period Property which is one Business Day prior to any Scheduled
Interest Payment Date, unless otherwise requested by the Borrower at least three
Business Days prior to such Scheduled Interest Payment Date by written notice to
the Administrative Agent, the Borrower shall be deemed to have requested a
Borrowing pursuant to Section 2.3(a) of ABR Loans in an amount equal to the
aggregate amount of Allocated Interest on the Loans due and payable on such date
with respect to the Construction Period Properties; except that, to the extent
such amount of Allocated Interest would cause any Lender's aggregate Loans to
exceed such Lender's Commitment, such amount shall be immediately due and
payable as Supplemental Rent and shall not be included in Allocated Interest.
The Funding Date with respect to any such borrowing shall be the relevant
Scheduled Interest Payment Date (provided, that the making of the Loans pursuant
to such borrowing shall be subject to satisfaction of the applicable conditions
precedent set forth in Section 4.2) and the proceeds of such borrowing shall be
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CREDIT AGREEMENT
applied to pay such interest. On each such Borrowing Date, the Tranche A/B
Property Cost and the Tranche A/B Construction Property Cost of each
Construction Period Property shall be increased by an amount equal to the
Allocated Interest paid on such date with respect to such Property.
(c) A portion of the principal amount of each Loan made by each Lender
equal to the Aggregate Tranche A Percentage of the principal amount of such Loan
shall be deemed to be a "Tranche A Loan" for the purposes of the Operative
Agreements and the remaining portion of the principal amount of such Loan, if
any, shall be deemed to be a "Tranche B Loan" for the purposes of the Operative
Agreements, provided that payments in respect of the Loans shall be allocated to
reduce the aggregate outstanding principal amount of Tranche A Loans and Tranche
B Loans of each Lender in the manner specified in Section 2.11(a).
2.4 Commitment Fees. Promptly after receipt from the Lessee of payment
of any Commitment Fees payable pursuant to the Participation Agreement, the
Administrative Agent shall distribute such payment to the Lenders pro rata
according to their respective Commitment Percentages.
2.5 Prepayments. (a) The Borrower may at any time and from time to
time prepay the Loans, in whole or in part, without premium or penalty (other
than breakage costs if due under Section 2.14), upon at least three Business
Days' irrevocable notice to the Administrative Agent, specifying the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR
Loans or a combination thereof, and, if of a combination thereof, the amount
allocable to each. Upon receipt of any such notice the Administrative Agent
shall promptly notify each Lender thereof. If any notice of prepayment is given,
the amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to the payment date on the
amount prepaid and amounts, if any, required to be paid pursuant to Section
2.14. Partial prepayments pursuant to this Section 2.5(a) shall be in an
aggregate principal amount of $1,000,000 or a whole multiple of $1,000,000 in
excess thereof.
(b) If on any date the Administrative Agent or the Borrower shall
receive, with respect to any Property, any payment in respect of excess wear and
tear pursuant to Section 21.3 of the Lease (a "Wear and Tear Payment") or any
Net Sales Proceeds Shortfall pursuant to Section 21.3 of the Lease, such payment
shall be applied to prepay the Loans on such date in accordance with Section
8.1(b)(vi).
(c)(i) On any date on which the Lessee is obligated to pay the Lessor
an amount equal to (x) the Termination Value of any Property in connection with
the delivery of a Termination Notice or (y) the Termination Value of any
Property in connection with the exercise of a Purchase Option (including in
respect of a Casualty or Condemnation as set forth in Section 15.1(g) of the
Lease) or the Termination Value for all Properties in connection with the
exercise of the Maturity Date Purchase Option, such amount shall be applied to
prepay the Loans on such date in accordance with Section 8.1(b)(ii), and (ii) on
any date on which any Property shall have been sold pursuant to Section 21 of
the Lease, the Borrower shall prepay
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the Loans on such date in an amount equal to the proceeds of such sale (net of
costs and expenses described in Section 21.2(i) of the Lease) in accordance with
Section 8.1(b)(iii).
(d) Each prepayment of the Loans pursuant to Section 2.5(b) or 2.5(c)
shall be allocated to reduce the Tranche A/B Property Cost of the affected
Property. Each prepayment of the Loans pursuant to Section 2.5(a) shall be
allocated to reduce the respective Tranche A/B Property Costs of all Properties,
pro rata according to the Tranche A/B Property Costs of such Properties
immediately before giving effect to such prepayment. Any amounts applied to
reduce the Tranche A/B Property Cost of any Construction Period Property
pursuant to this paragraph (d) shall also be applied to reduce the Tranche A/B
Construction Property Cost of such Property until such Tranche A/B Construction
Property Cost has been reduced to zero.
(e) In connection with each prepayment of the Loans, the Borrower
shall pay amounts, if any, required to be paid pursuant to Section 2.14.
2.6 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least one Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans or ABR
Loans may be converted as provided herein, provided that no ABR Loan may be
converted into a Eurodollar Loan when any Default has occurred and is
continuing, or after the date that is one month prior to the Maturity Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
notice to the Administrative Agent, in accordance with the applicable provisions
of the term "Interest Period" set forth in Annex A, of the length of the next
Interest Period to be applicable to such Loans, provided that no Eurodollar Loan
may be continued as such when any Default has occurred and is continuing, or
after the date that is one month prior to the Maturity Date and provided,
further, that if the Borrower shall fail to give any required notice as
described above in this paragraph or if such continuation is not permitted
pursuant to the preceding proviso such Loans shall be automatically converted to
ABR Loans on the last day of such then expiring Interest Period.
2.7 Minimum Amounts of Tranches. Notwithstanding anything to the
contrary in this Agreement, all borrowings, conversions, continuations and
prepayments of Eurodollar Loans and all selections of Interest Periods shall be
in such amounts and be made pursuant to such elections so that, after giving
effect thereto, (a) the aggregate principal amount of the Eurodollar Loans
comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole
multiple of $1,000,000 in excess thereof and (b) no more than three Eurodollar
Tranches shall be outstanding at any one time.
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CREDIT AGREEMENT
2.8 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the
ABR plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any other amount payable hereunder shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum which is
equal to the ABR plus 2%, from the date of such non-payment until such amount is
paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Scheduled Interest
Payment Date, provided that (i) interest accruing pursuant to paragraph (c) of
this Section 2.8 shall be payable from time to time on demand and (ii) each
prepayment of the Loans shall be accompanied by accrued interest to the date of
such prepayment on the amount prepaid and breakage costs, if any.
2.9 Computation of Interest. (a) Interest on the Loans shall be
calculated on the basis of a year of 360 days, except that interest computed by
reference to the ABR at times when the ABR is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of the
Eurodollar Base Rate in respect of any Eurodollar Tranche. Any change in the
interest rate on a Loan resulting from a change in the ABR shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error.
2.10 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the eurodollar market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Base Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Base Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect
the cost to such Lenders (as conclusively
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CREDIT AGREEMENT
certified by such Lenders) of making or maintaining their affected
Eurodollar Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as ABR Loans and (y) any Loans that, on the first
day of such Interest Period, were to be converted to or continued as Eurodollar
Loans shall be converted to or continued as ABR Loans. Until such notice has
been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall the Borrower have the right to convert ABR
Loans to Eurodollar Loans.
2.11 Pro Rata Treatment and Payments. (a) Each borrowing by the
Borrower from the Lenders hereunder and any reduction of the Commitments of the
Lenders shall be made pro rata according to the respective Commitment
Percentages of the Lenders. Except as otherwise provided in Section 2.5, Section
8 or Section 9.1(b), each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Loans shall be made pro rata
according to the respective outstanding principal amounts of the Loans then held
by the Lenders (it being understood that, except as otherwise provided in
Section 8, any payment so made in respect of principal of any Lender's Loans
shall be deemed to ratably reduce the outstanding amount of Tranche A Loans and
Tranche B Loans of such Lender). All payments (including prepayments) to be made
by the Borrower hereunder and under the Notes, whether on account of principal,
interest or otherwise, shall be made without setoff or counterclaim and shall be
made prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the Lenders, at the Administrative
Agent's office specified in Section 9.2, in Dollars and in immediately available
funds. The Administrative Agent shall distribute such payments to the Lenders
promptly upon receipt in like funds as received. If any payment hereunder (other
than payments on the Eurodollar Loans) becomes due and payable on a day other
than a Business Day, such payment shall be extended to the next succeeding
Business Day. If any payment on a Eurodollar Loan becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day unless the result of such extension would be to
extend such payment into another calendar month, in which event such payment
shall be made on the immediately preceding Business Day. In the case of any
extension of any payment of principal pursuant to the preceding two sentences,
interest thereon shall be payable at the then applicable rate during such
extension.
(b) The failure of any Lender (such Lender, a "Defaulting Lender") to
make any Loan to be made by it on the date specified therefor shall not relieve
any other Lender (each such other Lender, a "Non-Defaulting Lender") of its
obligation to make its Loans on such date, but neither any Non-Defaulting Lender
nor the Administrative Agent shall be responsible for the failure of any
Defaulting Lender to make a Loan to be made by such Defaulting Lender, and no
Defaulting Lender shall have any obligation to the Administrative Agent or any
Non-Defaulting Lender (without prejudicing the rights of the Borrower against
such Defaulting Lender). Notwithstanding anything set forth herein to the
contrary, so long as a Lender remains a Defaulting Lender, such Lender shall not
have any voting or consent rights
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CREDIT AGREEMENT
under or with respect to this Agreement or constitute a "Lender" (or be included
in the calculation of "Required Lenders" hereunder) for any voting or consent
rights under or with respect to this Agreement.
(c) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed Funding Date that such Lender will not make
available to the Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such Funding Date in accordance with paragraph (a) of this Section and may,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender is a Defaulting Lender, then such Defaulting
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Defaulting Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Defaulting Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender's Loan included in such Borrowing and such Lender shall cease to be a
Defaulting Lender.
2.12 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Legal Requirement or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 2.14.
2.13 Legal Requirements. (a) If the adoption of or any change in any
Legal Requirement or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made by it,
or change the basis of taxation of payments to such Lender in respect
thereof;
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate; or
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CREDIT AGREEMENT
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that any change in any Legal
Requirement regarding capital adequacy or in the interpretation or application
thereof or compliance by such Lender or any corporation controlling such Lender
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any Governmental Authority, in each case made subsequent
to the date hereof, has the effect of reducing the rate of return on such
Lender's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which such Lender or such corporation could have
achieved but for such change or compliance (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, the
Borrower shall promptly pay to such Lender such additional amount or amounts as
will compensate such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this Section 2.13, it shall promptly notify the Borrower (with a
copy to the Administrative Agent) of the event by reason of which it has become
so entitled. A certificate setting forth the basis of the calculation and
amounts payable pursuant to this Section 2.13 submitted by such Lender to the
Borrower (with a copy to the Administrative Agent) shall be conclusive in the
absence of manifest error. The agreements in this Section 2.13 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
(d) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such compensation; provided that the Borrower shall not be required to
compensate a Lender pursuant to this Section for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender
notifies the Borrower of the change in Legal Requirements giving rise to such
increased costs or reductions and of such Lender's intention to claim
compensation therefor; provided further that, if the change in Legal
Requirements giving rise to such increased costs or reductions is retroactive,
then the 180-day period referred to above shall be extended to include the
period of retroactive effect thereof.
2.14 Indemnity. The Borrower shall indemnify each Lender against any
loss or expense which such Lender may sustain or incur as a consequence of (a)
any default by the Borrower in making a borrowing of, conversion into or
continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by the Borrower in making any prepayment after the Borrower has given a
notice thereof in accordance with the provisions of this Agreement or (c) the
making
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CREDIT AGREEMENT
of a prepayment of Eurodollar Loans on a day which is not the last day of an
Interest Period with respect thereto. Such indemnification may include an amount
equal to the excess, if any, of (i) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of such Interest Period (or, in the case of
a failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Loans provided for herein (excluding, however, the Applicable
Margin included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. A certificate of any Lender setting
forth any amount or amounts which such Lender is entitled to receive pursuant to
this Section and evidencing a loss suffered by such Lender of such amount or
amounts shall be delivered to the Borrower. The provisions of this Section 2.14
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
2.15 Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section), the Administrative Agent or any
Lender, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent and each
Lender, within 10 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent or such
Lender, as the case may be, on or with respect to any payment by or on account
of any obligation of the Borrower hereunder (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under this
Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. The Borrower shall also indemnify the Administrative Agent and each
Lender, within 10 days after written demand therefor, for the full amount of
Excluded Taxes as the Administrative Agent or such Lender, as the case may be,
shall determine are payable in respect of amounts paid to or on behalf of the
Administrative Agent or such Lender, as the case may be, pursuant to this
Section 2.15. A certificate as to the amount of such payment or liability
delivered to the Borrower by a Lender or the Administrative Agent on its own
behalf or on behalf of a Lender or the Administrative Agent shall be conclusive
absent manifest error.
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CREDIT AGREEMENT
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Lender that is not incorporated under the United States of
America or a state thereof (each a "Foreign Lender") shall:
(i) on the date it becomes a Lender, deliver to the Administrative
Agent (A) two completed copies of United States Internal Revenue Service
Form 1001 or 4224, or successor applicable form, as the case may be, and
shall certify that it is entitled to receive payments under this Agreement
without deduction or withholding (or at a reduced rate of deduction or
withholding) of any United States Federal income taxes and (B) an Internal
Revenue Services Form W-8 or W-9, or successor applicable form, as the case
may be and shall certify that it is entitled to an exemption from United
States backup withholding tax;
(ii) deliver to the Administrative Agent two further copies of any
such form or certification on or before the date that any such
certification described above expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered to it; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the
Administrative Agent;
except that the forms and certificates described in clauses (ii) and (iii) above
shall not be required if any Change in Law has occurred prior to the date on
which any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Administrative Agent.
2.16 Change of Lending Office. Each Lender agrees that if it makes any
demand for payment under Section 2.13 or 2.15(a), or if any adoption or change
of the type described in subsection 2.12 shall occur with respect to it, it will
use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions and so long as such efforts would not be disadvantageous
to it, as determined in its sole discretion) to designate a different lending
office if the making of such a designation would reduce or obviate the need for
the Borrower to make payments under Section 2.13 or 2.15(a), or would eliminate
or reduce the effect of any adoption or change described in subsection 2.12.
2.17 Mitigation Obligations; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.15, or if the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.13, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations
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CREDIT AGREEMENT
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If (i) any Lender requests compensation under Section 2.15, or
(ii) the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.13,
or (iii) any Lender defaults in its obligation to fund Loans hereunder, or (iv)
any Lender refuses to consent to certain proposed changes, waivers, discharges
or termination with respect to this Agreement which require the consent of all
Lenders and have been approved by the Required Lenders as (and to the extent)
provided in Section 9.1(b), then the Borrower may, at its sole expense and
effort, if no Default or Event of Default then exists (or, in the case of
preceding clause (iv), no Default or Event of Default will exist immediately
upon giving effect to such replacement), upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.5), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment) (such Assignee a "Replacement
Lender"); provided that (x) the Borrower shall have received the prior written
consent of the Administrative Agent, which consent shall not unreasonably be
withheld, (y) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the Replacement Lender (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts) and (z) in the case of any such
assignment resulting from a claim for compensation under Section 2.15 or
payments required to be made pursuant to Section 2.13, such assignment will
result in a reduction in such compensation or payments. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans, the Borrower hereby represents and warrants to
the Administrative Agent and each Lender that the applicable representations and
warranties of the Lessor set forth in Section 7 of the Participation Agreement
are true and correct.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Effectiveness. The effectiveness of this Agreement
is subject to the satisfaction of all conditions precedent set forth in Section
6.1 of the
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CREDIT AGREEMENT
Participation Agreement required by said Section to be satisfied on or prior to
the Initial Closing Date.
4.2 Conditions to Each Loan. The agreement of each Lender to make any
Loan requested to be made by it on any date is subject to the satisfaction of
the conditions precedent specified in Section 6 of the Participation Agreement.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower or the Lessee, as the case may be, as of the date of
such Loan that the conditions contained in this Section 4.2 have been satisfied.
SECTION 5. COVENANTS
So long as the Commitments remain in effect, any Note remains
outstanding and unpaid or any other amount is owing to any Lender or the
Administrative Agent hereunder:
5.1 Other Activities. The Borrower shall not conduct, transact or
otherwise engage in, or commit to transact, conduct or otherwise engage in, any
business or operations other than the entry into, and exercise of rights and
performance of obligations in respect of, the Operative Agreements and other
activities incidental or related to the foregoing.
5.2 Ownership of Property, Indebtedness. The Borrower shall not own,
lease, manage or otherwise operate any properties or assets other than in
connection with the activities described in Section 5.1, or incur, create,
assume or suffer to exist any Indebtedness or other consensual liabilities or
financial obligations other than as may be incurred, created or assumed or as
may exist in connection with the activities described in Section 5.1 (including
the Loans and other obligations incurred by the Borrower hereunder).
5.3 Disposition of Assets. The Borrower shall not convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or
assets, whether now owned or hereafter acquired, except to the extent expressly
authorized by the Operative Agreements.
5.4 Compliance with Operative Agreements. The Borrower shall at all
times (a) observe and perform all of the covenants, conditions and obligations
required to be performed by it under each Operative Agreement to which it is a
party and (b) observe and perform, or cause to be observed and performed, (i)
all of the covenants, conditions and obligations of the Lessee under the Lease,
even in the event the Lease is terminated at its stated expiration, following a
Lease Event of Default or otherwise and (ii) all of the covenants, conditions
and obligations of the Construction Agent relating to the construction of the
Improvements under the Construction Agency Agreement.
5.5 Further Assurances. At any time and from time to time, upon the
written request of the Administrative Agent, the Borrower will, at its own sole
expense, promptly and duly execute and deliver such further instruments and
documents and take such further action as the Administrative Agent or the
Required Lenders may reasonably request for the purpose
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CREDIT AGREEMENT
of obtaining or preserving the full benefits of this Agreement and the other
Operative Agreements and of the rights and powers herein or therein granted.
5.6 Notices. If on any date the Borrower shall obtain actual knowledge
of the occurrence of a Default or Event of Default, the Borrower will give
prompt written notice thereof to the Administrative Agent.
5.7 Discharge of Liens. The Borrower will not create or permit to
exist at any time, and will, at its own expense, promptly take such action as
may be necessary duly to discharge, or cause to be discharged, all Lessor Liens
attributable to it, provided, that the Borrower shall not be required to
discharge any Lessor Lien while the same is being contested in good faith by
appropriate proceedings diligently prosecuted so long as such proceedings shall
not involve any material danger of impairment of any of the Liens contemplated
by the Security Documents or of the sale, forfeiture or loss of, and shall not
materially interfere with the construction, use, operation or disposition of
(including, as a result of the exercise of the Purchase Option), the Properties
or title thereto or any interest therein or the payment of Rent.
SECTION 6. REMEDIAL PROVISIONS
6.1 Events of Default. Upon the occurrence of any of the following
specified events (each an "Event of Default"):
(a) The Borrower shall (i) default in the payment when due of any
principal of the Loans or (ii) default, and such default shall continue for
three or more Business Days, in the payment when due of any interest on the
Loans, any Commitment Fee or any other amounts owing hereunder or under any
other Credit Document to which it is a party; or
(b) The Borrower shall fail to observe or perform any covenant,
condition or agreement contained in any Credit Document to which it is a
party (other than the terms, covenants or agreements referred to in
paragraph (a) above) and such default shall have continued unremedied for a
period of thirty days after written notice thereof to the Borrower by the
Administrative Agent or the Required Lenders; or
(c) Any representation, warranty or statement made or deemed made by
the Borrower or any Loan Party in the Participation Agreement or in any
Credit Document, or in any statement or certificate delivered or required
to be delivered pursuant hereto or thereto, shall prove to be incorrect in
any material respect on the date as of which made or deemed made; or
(d)(i) Any Lease Event of Default or Construction Agency Agreement
Event of Default shall have occurred and be continuing or (ii) the Borrower
shall default in the due performance or observance by it of any term,
covenant or agreement contained in the Participation Agreement or the Owner
Trustee shall default in the due performance or observance by it of any
term, covenant or agreement contained in the Trust
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CREDIT AGREEMENT
Agreement, and in each case under this clause (ii), such default shall have
continued unremedied for a period of at least thirty (30) days after
written notice to the Borrower by the Administrative Agent or the Required
Lenders; or
(e) Any Guarantor or any Material Subsidiary of any Guarantor shall
(i) default in making any payment of (A) any principal of or interest on
any one or more items of Indebtedness in an aggregate principal amount of
$10,000,000 or more or (B) any one or more items of Suretyship Liability in
with an aggregate principal amount of $10,000,000 or more (but excluding
the Loans) beyond the period of grace, if any, provided therefor; or (ii)
default in the observance or performance of any other material agreement or
condition relating to any Indebtedness or any Suretyship Liability that
results in an amount of $10,000,000 or more in the aggregate becoming due
prior to its scheduled maturity or that enables or permits (with or without
the giving of notice, the lapse of time or both) the holder or holders of
any Debt of $10,000,000 or more in the aggregate or any trustee or agent on
its or their behalf to cause any such Debt to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its
scheduled maturity; or
(f)(i) Any Significant Entity or any Investor shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or any Significant Entity or Investor shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any Significant Entity or Investor any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be commenced against any
Significant Entity or Investor any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in
the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (iv) any Significant Entity or Investor shall take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) any Significant Entity or Investor shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(g) Any Security Document shall cease to be in full force and effect,
or shall cease to give the Administrative Agent the Liens, rights, powers
and privileges purported to be created thereby, in favor of the
Administrative Agent on behalf of the Lenders, superior to and prior to the
rights of all third Persons and subject to no other
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CREDIT AGREEMENT
Liens (except in each case to the extent expressly permitted herein or in
the other Operative Agreements); or
(h) Any Guarantor shall default in the due performance or observance
by it of any term, covenant or agreement contained in any Credit Document
to which it is a party (including any term, covenant or agreement
incorporated by reference in any Credit Document), or any Guarantee or any
material provision thereof shall cease to be in full force and effect or
any Guarantor or any Person acting by or on behalf of any Guarantor shall
deny or disaffirm such Guarantor's obligations under the Guarantee to which
it is a party; or
(i) One or more judgments or judicial decrees shall be entered against
the Borrower involving a liability of $100,000 or more in the case of any
one such judgment or $250,000 or more in the aggregate for all such
judgments and decrees for the Borrower (to the extent not paid or fully
covered by insurance, provided by a carrier that has acknowledged coverage)
and any such judgments or decrees shall not have been vacated, discharged
or stayed or bonded pending appeal within 90 days from the entry thereof;
or
(j) One or more judgments or decrees shall be entered against any
Guarantor which is a Material Subsidiary involving in the aggregate at any
time an amount in excess of $10,000,000 (in either case not adequately
covered by insurance as to which a solvent and unaffiliated insurance
company has acknowledged coverage) and all such judgments or decrees shall
not have been vacated, discharged, stayed or bonded pending appeal within
30 days from the entry thereof; or
(k) There shall occur one or more ERISA Events which individually or
in the aggregate results in or could reasonably be expected to result in
liability of any of the Loan Parties or any of their respective ERISA
Affiliates in excess of $10,000,000 during the term of this Agreement; or
there shall exist an amount of Unfunded Liabilities of the Loan Parties,
individually or in the aggregate for all Pension Plans (excluding for
purposes of such computation any Pension Plans which have a negative amount
of Unfunded Liabilities of the Loan Parties), which exceeds $10,000,000.
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (f) (except as provided in Section 6.2 hereof), automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i) with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the Notes to be due and payable
forthwith,
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CREDIT AGREEMENT
whereupon the same shall immediately become due and payable (any of the
foregoing occurrences or actions referred to in clause (A) or (B) above, an
"Acceleration"). Except as expressly provided above in this Section 6,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
6.2 Certain Defaults. Notwithstanding anything to the contrary
contained in Section 6.1(f), no Event of Default shall occur under 6.1(f) with
respect to any Investor so long as (i) such Event of Default does not, in the
reasonable judgment of the Required Lenders, threaten to interrupt the Lenders'
timely receipt of all amounts due under this Agreement and each of the other
Operative Agreements whether pursuant to the Assignment of Lease or otherwise
and (ii) no other Event of Default has occurred and is continuing.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 Appointment. Each Lender hereby irrevocably designates and
appoints Bankers Trust Company as the Administrative Agent of such Lender under
this Agreement, and each such Lender irrevocably authorizes Bankers Trust
Company as the Administrative Agent for such Lender, to take such action on its
behalf under the provisions of this Agree ment and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent by
the terms of this Agreement, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Administrative Agent shall be read into this Agreement or otherwise exist
against the Administrative Agent. The provisions of this Section 7 are solely
for the benefit of the Administrative Agent and the Lenders and the Borrower
shall have no rights as a third party beneficiary or otherwise under any of the
provisions hereof. In performing its functions and duties hereunder, the
Administrative Agent shall act solely as the agent of the Lenders and does not
assume nor shall be deemed to have assumed any obligation or relationship of
trust or agency with or for the Borrower or any of its successors and assigns.
7.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Administrative Agent shall not be responsible for the negligence or
misconduct or any agents or attorneys-in-fact selected by it with reasonable
care.
7.3 Exculpatory Provisions. The Administrative Agent shall not be (i)
liable for any action lawfully taken or omitted to be taken by it or any Person
described in Section 7.2 under or in connection with this Agreement (except for
its or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower contained in this Agreement
or in any certificate, report, statement or other document referred to or
provided for in, or received under or in connection with, this Agreement or for
the value, validity,
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CREDIT AGREEMENT
effectiveness, genuineness, enforceability or sufficiency of this Agreement, or
for any failure of the Borrower to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrower. This Section is intended solely to
govern the relationship between the Administrative Agent, on the one hand, and
the Lenders, on the other.
7.4 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in act ing, or in refraining from acting, under
this Agreement in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders.
7.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default and stating that such notice is a
"notice of default". In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall promptly give notice thereof to the
Lenders. The Administrative Agent shall take such action with respect to such
Default as shall be directed by the Required Lenders.
7.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent, nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including, without limitation, any review
of the affairs of the Borrower, shall be deemed to constitute any representation
or warranty by the Administrative Agent. Each Lender represents and warrants to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, opera tions, property, prospects, financial and
other conditions and creditworthiness of the Borrower and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in
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CREDIT AGREEMENT
taking or not taking action under this Agreement, and to make such investigation
as it deems necessary to inform itself as to the business, operations, property,
prospects, financial and other condition and creditworthiness of the Borrower.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Administrative Agent, the Administrative Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, operations, property, prospects,
financial and other condition or creditworthiness of the Borrower which may come
into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
7.7 Indemnification. The Lenders agree to indemnify the Administrative
Agent and its officers, directors, employees, representatives and agents (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their Applicable Percentage, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disburse ments of any kind or
nature whatsoever (including, without limitation, the fees and disbursements of
counsel for the Administrative Agent or such Person in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not the Administrative Agent or such Person shall be designated a
party thereto) that may at any time (including, without limitation, at any time
following the payment of the Obligations) be imposed on, incurred by or asserted
against the Administrative Agent or such Person as a result of, or arising out
of, or in any way related to or by reason of, any of the Transactions or the
execution, delivery or performance of this Agreement (but excluding any such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Administrative Agent or such Person as finally
determined by a court of competent jurisdic tion).
7.8 Administrative Agent in its Individual Capacity. The
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not the Administrative Agent hereunder. With respect
to Loans made or renewed by it, the Administrative Agent shall have the same
rights and powers under this Agreement as any Lender and may exercise the same
as though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
7.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Borrower and the
Lenders. If the Administrative Agent shall resign as Administrative Agent under
this Agreement, then the Required Lenders during such 30-day period shall
appoint from among the Lenders a successor agent, whereupon such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent and
the term "Administrative Agent" shall mean such successor agent, effective upon
its appointment, and the former Administrative Agent's rights, powers and duties
as Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this
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CREDIT AGREEMENT
Agreement. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 7 and Section 9.3 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement.
7.10 Syndication Agent. Without limiting any provision contained in
this Section 7, the Syndication Agent shall not have, except as to and to the
limited extent expressly provided herein, any obligation, responsibility or duty
under this Agreement other than those applicable to all Lenders as such. Each
Lender acknowledges that it has not relied, and will not rely, on the
Syndication Agent in deciding to enter into this Agreement or in taking or not
taking action hereunder.
7.11 Co-Documentation Agents. Without limiting any provision contained
in this Section 7, the Co-Documentation Agents shall not have, except as to and
to the limited extent expressly provided herein, any obligation, responsibility
or duty under this Agreement other than those applicable to all Lenders as such.
Each Lender acknowledges that it has not relied, and will not rely, on the
Co-Documentation Agents in deciding to enter into this Agreement or in taking or
not taking action hereunder.
SECTION 8. MATTERS RELATING TO PAYMENTS AND COLLATERAL
8.1 The Account. (a) The Administrative Agent shall establish an
account (the "Account") into which the Administrative Agent shall deposit all
payments, receipts and other consideration of any kind whatsoever (other than
upon any sale or disposition of the Collateral following an Event of Default)
paid under the Lease and received by the Administrative Agent pursuant to the
Assignment of Lease.
(b) Except as otherwise provided in Section 8.2, payments deposited
from time to time in the Account shall be paid out as follows:
(i) Any such payment identified by the Lessee as Basic Rent shall
be paid out of the Account by the Administrative Agent on the relevant
Specified Interest Payment Date, and shall be applied, first, ratably to
the payment of interest then due and payable on the Loans until such
amounts are paid in full, second, to the payment to the Borrower of an
amount equal to the Investor Yield then due and payable under the Operative
Agreements until such amount is paid in full, and, third, the remainder of
such amount shall be paid out of the Account by the Administrative Agent to
such Person or Persons as the Borrower may designate.
(ii) Any payment identified by the Lessee as a payment in respect
of the Termination Value of any Property pursuant to Section 15 or Section
20 of the Lease shall be paid out of the Account by the Administrative
Agent promptly after receipt, and shall be applied, first, ratably to the
payment of the principal of Tranche B Loans then outstanding in an amount
not to exceed the product of (x) the Tranche A/B Property Cost in respect
of such Property and (y) the Tranche B Percentage in respect
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CREDIT AGREEMENT
of such Property and all interest due and payable on such amount, second,
to the payment to the Borrower of an amount not to exceed the outstanding
Investor Property Cost in respect of such Property and the Investor Yield
due and payable on such amount, third, ratably to the payment of the
principal of Tranche A Loans then outstanding in an amount not to exceed
the product of (x) the Tranche A/B Property Cost in respect of such
Property and (y) the Tranche A Percentage in respect of such Property and
all interest due and payable on such amount, and fourth, the remainder of
such amount shall be paid out of the Account by the Administrative Agent to
the Lessee. Notwithstanding the foregoing, the Investors shall not be
entitled to any payment described in this clause (ii) prior to the
Construction Period Termination Date unless the event causing such
prepayment results in the payment of all amounts due hereunder and under
the other Operative Agreements.
(iii) Any payment identified by the Lessee as proceeds of the
sale of any Property pursuant to Section 21 of the Lease (but in any event
excluding costs and expenses described in Section 21.2(i) of the Lease)
("Net Sale Proceeds") shall be paid out of the Account by the
Administrative Agent promptly after receipt, and shall be applied, first,
ratably to the payment of the principal of Tranche B Loans then outstanding
in an amount not to exceed the product of (x) the Tranche A/B Property Cost
in respect of such Property and (y) the Tranche B Percentage in respect of
such Property and all interest then due and payable on such amount, second,
to the payment to the Borrower of an amount not to exceed the outstanding
Investor Property Cost in respect of such Property and the Investor Yield
then due and payable on such amount, third, ratably to the payment of the
principal of Tranche A Loans then outstanding in an amount not to exceed
the product of (x) the Tranche A/B Property Cost in respect of such
Property and (y) the Tranche A Percentage in respect of such Property and
all interest due and payable on such amount, and fourth, the remainder of
such amount shall be paid out of the Account by the Administrative Agent to
the Lessee.
(iv) Any payment identified by the Lessee as the Maximum Residual
Guarantee Amount in respect of any Property shall be paid out of the
Account by the Administrative Agent promptly after receipt and shall be
applied ratably to the payment of the principal of Tranche A Loans then
outstanding in respect of such Property.
(v) Any payment identified by the Lessee as a Wear and Tear
Payment or any Net Sale Proceeds Shortfall pursuant to Section 21.3 of the
Lease shall be paid out of the Account by the Administrative Agent promptly
after receipt, and shall be applied, first, ratably to the payment of the
principal of Tranche B Loans then outstanding in an amount equal to the
product of the Tranche B Percentage with respect to such Property and the
Tranche A/B Property Cost with respect to such Property (in each case
determined as of the date of sale of such Property pursuant to Section 22
of the Lease immediately prior to giving effect thereto) and all interest
due and payable on such amount, and second, the remainder of such amount
shall be paid out of the Account by the Administrative Agent to the
Borrower.
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CREDIT AGREEMENT
(vi) Any payment identified by the Lessee as Supplemental Rent
(other than any Maximum Residual Guarantee Amount or Excepted Payment)
shall be paid out of the Account by the Administrative Agent promptly after
receipt, and shall be applied to the payment of any amounts then owing to
the Administrative Agent, the Lenders, the Investors and the other parties
to the Operative Agreements (or any of them) (other than any such amounts
payable pursuant to the preceding provisions of this Section 8.1(b)) as
shall be designated by the Lessee (or, in the absence of such designation,
ratably according to the respective amounts so owing of which the
Administrative Agent has received written notice).
In the event that the Lessee shall fail to identify the nature of any payment
deposited by them in the Account, or the Administrative Agent in its reasonable
judgment shall determine that the identification made by the Lessee is incorrect
or inappropriate, the nature of such payment shall instead be identified by the
Administrative Agent in its reasonable judgment and applied in the manner
specified above; provided, that in the event that the Administrative Agent
identifies such payment as an Excepted Payment, such payment shall be paid out
of the Account by the Administrative Agent to such Person or Persons entitled to
receive such Excepted Payments.
(c) Upon the termination of the Commitments and the payment in full of
the Loans and all other amounts owing by the Borrower hereunder or under any
other Credit Document, any moneys remaining in the Account shall be paid to the
Borrower or such other Person or Persons as the Borrower may designate.
8.2 Proceeds of Collateral; Proceeds Remaining in Account. (a) All
moneys collected by the Administrative Agent upon any sale or other disposition
of the Collateral pursuant to any Security Document, together with all other
moneys received by the Administrative Agent thereunder and (b) all moneys
contained in the Account on the date of an Acceleration or on the Maturity Date,
or deposited in the Account thereafter, shall be applied as follows:
First, to the payment of (x) any and all sums advanced by the
Administrative Agent in order to preserve the Collateral or preserve its
security interest therein and (y) the expenses of retaking, holding,
preparing for sale or lease, selling or otherwise disposing or realizing on
the Collateral, or of any exercise by the Administrative Agent of its
rights under the Security Documents, together with reasonable attorneys'
fees and court costs;
Second, to the payment of the amounts then due and unpaid for
principal of the Tranche B Loans, according to the amounts due and payable
on the Tranche B Loans in respect of principal;
Third, to the payment of the amounts then due and unpaid for principal
of the Tranche A Loans according to the amounts due and payable on the
Tranche A Loans in respect of principal;
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CREDIT AGREEMENT
Fourth, to the payment of the amounts then due and unpaid for interest
accrued on the Tranche B Loans and the Tranche A Loans, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Tranche B Loans and the Tranche A Loans in respect of
principal;
Fifth, to the payment of all amounts then due and payable on account
of the Investor Yield;
Sixth, to the payment of an amount equal to the aggregate outstanding
Investor Contributions; and
Seventh, to the extent moneys remain after application pursuant to
clauses First through Sixth above, to the Lessee or to whomever may be
lawfully entitled to receive such surplus.
8.3 Certain Remedial Matters. (a) Notwithstanding any other provision
of this Agreement or any other Credit Document:
(i) the Borrower shall at all times to the exclusion of the
Administrative Agent retain (A) all rights to Excepted Payments and to
demand, collect or commence an action at law to obtain such payments and to
enforce any judgment with respect thereto and (B) all of its rights under
the Participation Agreement; and
(ii) the Borrower shall at all times retain the right, but not to
the exclusion of the Administrative Agent, (A) to receive from the Lessee
all notices, certificates and other documents and all information that the
Lessee is permitted or required to give or furnish to the "Borrower" or the
"Lessor" pursuant to the Lease, the Participation Agreement or any other
Operative Agreement, (B) to inspect the Properties and otherwise exercise
rights of the "Lessor" under Section 10.2 of the Lease, (C) to retain all
rights with respect to insurance that Section 14 of the Lease specifically
confers upon the "Lessor", (D) to provide such insurance as the Lessee
shall have failed to maintain or as the Borrower may desire, (E) to enforce
compliance by the Lessee with the provisions of Sections 8, 9, 10, 11, 14
and 21 of the Lease, and (F) subject to the other applicable provisions of
this Agreement, including, without limitation, Section 8.3(c) hereof, to
perform for the Lessee under Section 17 of the Lease.
8.4 Release of the Property, etc. (a) If the Lessee shall at any time
purchase any Property pursuant to Section 15.1 of the Lease or exercise its
Purchase Option with respect to the Properties under Section 20 of the Lease, or
if the Properties shall be sold in accordance with Section 21 of the Lease,
then, upon satisfaction by the Borrower of its obligation to prepay the Loans
pursuant to Section 2.5(c) and to pay accrued interest on the Loans so prepaid
pursuant to Section 2.8, the Administrative Agent shall release the relevant
Properties from the Liens created by the Security Documents. In addition, upon
the termination of the Commitments and the payment in full of the Loans and all
other amounts owing by the Borrower or the Guarantors hereunder or under any
other Operative Agreement, the Administrative Agent shall release all of the
Properties from the Liens created by the
22
<PAGE>
CREDIT AGREEMENT
Security Documents. Upon request of the Borrower following any such release, the
Administrative Agent shall, at the sole cost and expense of the Borrower,
execute and deliver to the Borrower or the Lessee such documents as the Borrower
shall reasonably request to evidence such release.
(b) Notwithstanding anything to the contrary herein, upon the
termination of the Commitments and the payment in full of (i) the Loans and all
other amounts owing by the Borrower or any Guarantor hereunder or under any
other Operative Agreement and (ii) all amounts owing by the Lessee to the Lessor
or to any other Person under the Operative Agreements, all remaining moneys in
the Account shall be paid out to the Lessee.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. (a) Except as provided in the
Intercreditor Agreement, no Operative Agreement nor any terms hereof or thereof
may be changed, waived, discharged or terminated, nor any Collateral released,
unless such change, waiver, discharge, termination or release is in writing
signed by the Required Lenders, provided that no such change, waiver, discharge,
termination or release shall, without the consent of each Lender (other than a
Defaulting Lender), (i) extend the final scheduled maturity of any Loan beyond
the Maturity Date, or reduce the rate or extend the time of payment of interest
or fees hereunder, or reduce the principal amount thereof (except to the extent
repaid in cash), (ii) amend, modify or waive any provision of this Section 9.1,
(iii) reduce the percentage specified in the definition of Required Lenders,
(iv) consent to the assignment or transfer by the Borrower of any of its rights
and obligations under this Agreement, (v) release any Guarantor from its
obligations under any Guarantee to which it is a party or amend any Guarantee to
materially reduce any Guarantor's obligations thereunder or (vi) release all or
a substantial portion of the Collateral; provided further that no such change,
waiver, discharge, termination or release shall (x) increase the Commitment of
any Lender without the consent of such Lender (it being understood that waivers
or modifications of conditions precedent, covenants, Defaults or Events of
Default or of a mandatory reduction in the aggregate Commitments shall not
constitute an increase of the Commitment of any Lender, and that an increase in
the available portion of any Commitment of any Lender shall not constitute an
increase of the Commitment of such Lender) or (y) without the consent of the
Administrative Agent, amend, modify or waive any provision of Section 7 or any
other provision as the same relates to the Administrative Agent. No failure or
delay by the Administrative Agent or any Lender in exercising any right or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Administrative Agent and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not
be construed as a waiver of any
23
<PAGE>
CREDIT AGREEMENT
Default or Event of Default, regardless of whether the Administrative Agent or
any Lender may have had notice or knowledge of such Default or Event of Default
at the time.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement contemplated by clauses
(i) through (iv), inclusive, of the first proviso of Section 9.1(a), the consent
of the Required Lenders is obtained but the consent of one or more of such other
Lenders whose consent is required is not obtained, then the Borrower shall have
the right, so long as all non-consenting Lenders whose individual consent is
required are treated as described in either clauses (A) or (B) below, to either
(A) replace each such non-consenting Lender or Lenders with one or more
Replacement Lenders pursuant to Section 2.17(b) so long as at the time of such
replacement, each such Replacement Lender consents to the proposed change,
waiver, discharge or termination or (B) terminate such non-consenting Lender's
Commitment and/or repay the outstanding Loans of such Lender, provided that,
unless the Commitment that is terminated and Loans repaid pursuant to preceding
clause (B) are immediately replaced in full at such time through the addition of
new Lenders or the increase of the Commitments and/or outstanding Loans of
existing Lenders (who in each case must specifically consent thereto), then in
the case of any action pursuant to preceding clause (B) the Required Lenders
(determined after giving effect to the proposed action) shall specifically
consent thereto, provided further, that in any event the Borrower shall not have
the right to replace a Lender, terminate its Commitment or repay its Loans
solely as a result of the exercise of such Lender's rights (and the withholding
of any required consent by such Lender) pursuant to the second proviso to
Section 9.1(a).
9.2 Notices. Unless otherwise expressly specified or permitted by the
terms hereof, all notices hereunder shall be given as provided in the
Participation Agreement; provided that any notice, request or demand to or upon
the Administrative Agent or the Lenders pursuant to Section 2.3, 2.5, 2.6, 2.7
or 2.11(b) shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Operative
Agreements shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Operative Agreements and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Notes and the making of the Loans hereunder.
9.5 Successors and Assigns. (a) The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that the Borrower may
not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any
24
<PAGE>
CREDIT AGREEMENT
attempted assignment or transfer by the Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of
its rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it); provided that (i) except
in the case of an assignment to a Lender or an Affiliate of a Lender, each of
the Lessee and the Administrative Agent must give its prior written consent to
such assignment (which consent shall not be unreasonably withheld), (ii) except
in the case of an assignment to a Lender or an Affiliate of a Lender or an
assignment of the entire remaining amount of the assigning Lender's Commitment,
the amount of the Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $5,000,000 unless each of the Lessee and the Administrative Agent otherwise
consent, (iii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations under
this Agreement, (iv) the parties to each assignment shall execute and deliver to
the Administrative Agent an Assignment and Acceptance, together with a
processing and recordation fee of $3,500; and provided further that any consent
of the Lessee otherwise required under this paragraph shall not be required if a
Default or Event of Default has occurred and is continuing. Subject to
acceptance and recording thereof pursuant to paragraph (d) of this Section, from
and after the effective date specified in each Assignment and Acceptance the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.14 and 2.15). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this paragraph shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with paragraph (e) of this Section.
(c) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the processing and recordation
fee referred to in paragraph (b) of this Section and any written consent to such
assignment required by paragraph (b) of this Section, the Administrative Agent
shall accept such Assignment and Acceptance and record the information contained
therein in the Register. No assignment shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in this
paragraph.
(d) Any Lender may, without the consent of the Borrower or the
Administrative Agent, sell participations to one or more banks or other entities
(a "Lending Participant") in all or a portion of such Lender's rights and
obligations under this Agreement
25
<PAGE>
CREDIT AGREEMENT
(including all or a portion of its Commitment and the Loans owing to it);
provided that (i) such Lender's obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; and provided further
that no Lender shall transfer or grant any participation under which the Lending
Participants shall have rights to approve any amendment to or waiver of this
Agreement except to the extent that such amendment or waiver would (i) extend
the final scheduled maturity of any Revolving Loan or Note in which the Lending
Participant is participating, or reduce the rate or extend the time of payment
of interest or fees thereon (except in connection with a waiver of applicability
of any post-default increase in interest rates) or reduce the principal amount
thereof, or increase the amount of the participant's participation over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of a mandatory reduction in the aggregate Commitments
shall not constitute a change in the terms of such participation and that an
increase in any Commitment or Loan shall be permitted without the consent of any
Lending Participant if the Lending Participant's participation is not increased
as a result thereof, or (ii) consent to the assignment by the Borrower of any of
its rights and obligations under this Agreement.
(e) A Lending Participant shall not be entitled to receive any greater
payment under Section 2.14 or 2.15 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Lending
Participant, unless the sale of the participation to such Lending Participant is
made with the Borrower's prior written consent. A Lending Participant that would
be a Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 2.15 unless the Borrower is notified of the participation sold to such
Lending Participant and such Lending Participant agrees, for the benefit of the
Borrower, to comply with Section 2.15(e) as though it were a Lender.
(f) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
9.6 The Register; Disclosure. The Administrative Agent shall maintain
at its address referred to in Section 9.2 a copy of each Assignment and
Acceptance delivered to it and a register (the "Register") for the recordation
of the names and addresses of the Lenders, the Commitments of the Lenders, and
the principal amount of the Loans owing to each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of clearly
demonstrable error, and the Borrower, the Administrative Agent and the Lenders
may treat each Person whose name is recorded in the Register as the owner of the
Loan recorded therein
26
<PAGE>
CREDIT AGREEMENT
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
9.7 Adjustments; Set-Off. (a) Except as provided in Sections 2.5, 8
and 9.1(b), if any Lender (a "Benefitted Lender") shall at any time receive any
payment of all or part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 6.1(i) or
6.1(j), or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Loans, or interest thereon, such Benefitted Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Loan, or shall provide such other Lenders with the benefits
of any such collateral, or the proceeds thereof, as shall be necessary to cause
such Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such Benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.
(b) In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence of an Event of Default, the Administrative Agent and each
Lender is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by the Administrative Agent or such
Lender (including, without limitation, by branches and agencies of the
Administrative Agent or such Lender wherever located) to or for the credit or
the account of the Borrower against and on account of the obligations and
liabilities of the Borrower to the Administrative Agent or such Lender under
this Agreement or under any of the other Operative Agreements, including,
without limitation, all interests in obligations of the Borrower purchased by
any such Lender pursuant to Section 9.7(a), and all other claims of any nature
or description arising out of or connected with this Agreement or any other
Operative Agreement, irrespective of whether or not the Administrative Agent or
such Lender shall have made any demand hereunder and although said obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
9.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy transmission of signature pages hereto), and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
the Borrower and the Administrative Agent.
9.9 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and
27
<PAGE>
CREDIT AGREEMENT
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement and the other Operative Agreements
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Operative Agreements.
9.11 Governing Law; Jurisdiction; Consent to Service of Process. (a)
This Agreement shall be construed in accordance with and governed by the law of
the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement against the
Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) The Borrower hereby irrevocably designates, appoints and empowers
the Process Agent, as its designee, and on its behalf, and in respect of its
properties, service of any and all legal process, summons, notices and documents
which may be served in any such action or proceeding. If for any reason the
Process Agent shall cease to be available to act as such, the Borrower agrees to
designate a new Process Agent in New York City on the terms and for the purposes
of this provision satisfactory to the Administrative Agent. Each party to this
Agreement irrevocably consents to service of process in the manner provided for
notices in the Participation Agreement. Nothing in this Agreement will affect
the right of any party to this Agreement to serve process in any other manner
permitted by law.
9.12 Acknowledgements. The Borrower hereby acknowledges that:
28
<PAGE>
CREDIT AGREEMENT
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the Notes and the other Operative
Agreements;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Operative Agreements,
and the relationship between Administrative Agent and Lenders, on one hand,
and the Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Operative
Agreements or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrower and the Lenders.
9.13 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND
THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.14 Nonrecourse. Anything to the contrary contained in this Agreement
or in any other Operative Agreement notwithstanding, other than in the case of
fraudulent conduct or wilful misconduct by such Person, except for the
obligations of the Trust Company under the Trust Agreement, Section 5 of the
Lease and the representations and warranties of the Trust Company in Section 7.4
of the Participation Agreement, neither the Borrower nor any officer, director
or shareholder thereof, nor any of the Borrower's successors or assigns (all
such Persons being hereinafter referred to collectively as the "Exculpated
Persons"), shall be personally liable in any respect for any liability or
obligation hereunder or under any other Operative Agreement including the
payment of the principal of, or interest on, the Notes, or for monetary damages
for the breach of performance of any of the covenants contained in this
Agreement, the Notes or any of the other Operative Agreements. The
Administrative Agent and the Lenders agree that, in the event any of them
pursues any remedies available to them under this Agreement, the Notes or any
other Operative Agreement, neither the Administrative Agent nor the Lenders
shall have any recourse against the Borrower, nor any other Exculpated Person,
for any deficiency, loss or claim for monetary damages or otherwise resulting
therefrom and recourse shall be had solely and exclusively against the
Collateral and the Guarantors; but nothing contained herein shall be taken to
prevent recourse against or the enforcement of remedies against the Properties
or any other Collateral in respect of any and all liabilities, obligations and
undertakings contained in this Agreement, the Notes or any other Operative
Agreement. The Administrative Agent and the Lenders further agree that the
Borrower shall not be responsible for the payment of any amounts owing hereunder
(excluding principal and interest (other than Overdue Interest) in respect of
the Loans) (such non-excluded amounts, "Supplemental Amounts") except to the
extent that payments of Supplemental Rent applicable to such Supplemental
Amounts have been made by the Lessee for application to such Supplemental
Amounts (it being understood that the failure by the Lessee for any reason to
pay any Supplemental Rent in respect of such Supplemental Amounts shall
nevertheless be deemed to constitute a default by the Borrower for the purposes
of Section 6.1(a)(ii)).
29
<PAGE>
CREDIT AGREEMENT
Notwithstanding the foregoing provisions of this Section 9.14, nothing in this
Agreement or any other Operative Agreement shall (a) constitute a waiver,
release or discharge of any obligation evidenced or secured by this Agreement or
any other Credit Document, (b) limit the right of the Administrative Agent or
any Lender to name the Borrower as a party defendant in any action or suit for
judicial foreclosure and sale under any Security Document, or (c) affect in any
way the validity or enforceability of the Guarantees or any other guarantee
(whether of payment and/or performance) given to the Administrative Agent or the
Lenders, or of any indemnity agreement given by the Borrower, in connection with
the Loans made hereunder.
9.15 OREGON LEGAL NOTICE. WITHOUT LIMITING THE VALIDITY OF THE CHOICE
OF NEW YORK LAW PROVIDED HEREIN, UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY THE LENDERS AFTER THE RESTATEMENT DATE OF THE ACT SPECIFIED
HEREIN CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL
FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST
BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDERS TO BE
ENFORCEABLE. THE ACT SPECIFIED HEREIN MEANS CHAPTER 967 OREGON LAWS 1989, THE
EFFECTIVE DATE OF WHICH WAS OCTOBER 3, 1989.
9.16 WASHINGTON STATUTORY NOTICE . ORAL AGREEMENTS OR ORAL COMMITMENTS
TO LOAN MONEY, EXTEND CREDIT OR FORBEAR FROM ENFORCING REPAYMENT OF DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
30
<PAGE>
CREDIT AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
FMS TRUST 1997-1,
as Borrower
By WILMINGTON TRUST COMPANY, not in
its individual capacity but solely as Owner Trustee
NORMA P. CLOSS
By: ---------------------
Name: Norma P. Closs
Title: Vice President
S-1
<PAGE>
CREDIT AGREEMENT
BANKERS TRUST COMPANY,
as Administrative Agent and a Lender
GINA S. THOMPSON
By: -----------------------
Name: Gina S. Thompson
Title: Vice President
S-2
<PAGE>
CREDIT AGREEMENT
THE CHASE MANHATTAN BANK,
as Syndication Agent and as a Lender
LAURIE B. PERPER
By: --------------------------
Name: Laurie B. Perper
Title: Vice President
S-3
<PAGE>
CREDIT AGREEMENT
NATIONSBANK OF TEXAS, N.A.,
as Co-Documentation Agent and as a Lender
CHARLES F. LILYGREN
By: ------------------------
Name: Charles F. Lilygren
Title: Senior Vice President
S-4
<PAGE>
CREDIT AGREEMENT
SALOMON BROTHERS HOLDING CO INC.,
as Co-Documentation Agent and as a Lender
CHAD A. LEAT
By: -----------------------
Name: Chad A. Leat
Title: Managing Director
S-5
<PAGE>
CREDIT AGREEMENT
ABN ARMO BANK N.V.
as a Lender
DAVID MCGINNIS
By: -----------------------
Name: David McGinnis
Title: Vice President
JAMES J. RICE
By: -----------------------
Name: James J. Rice
Title: Vice President
S-6
<PAGE>
CREDIT AGREEMENT
MARINE MIDLAND BANK,
as a Lender
GINA SIDORSKY
By: -----------------------
Name: Gina Sidorsky
Title: Authorized Signatory
S-7
<PAGE>
CREDIT AGREEMENT
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
TIMOTHY P. STREB
By: -----------------------
Name: Timothy P. Streb
Title: Vice President
S-8
<PAGE>
CREDIT AGREEMENT
WACHOVIA BANK, N.A.,
as a Lender
JOHN A. WHITNER
By: -----------------------
Name: John A. Whitner
Title: Senior Vice President
S-9
<PAGE>
CREDIT AGREEMENT
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Lender
STEPHEN J. MCGUINNESS
By: -----------------------
Name: Stephen J. McGuinness
Title: Authorized Signatory
S-10
<PAGE>
CREDIT AGREEMENT
BANK OF MONTREAL,
as a Lender
R.W. CAMM
By: -----------------------
Name: R.W. Camm
Title: Managing Director
S-11
<PAGE>
CREDIT AGREEMENT
DLJ CAPITAL FUNDING, INC.,
as a Lender
STEPHEN P. HICKEY
By: -----------------------
Name: Stephen P. Hickey
Title: Managing Director
S-12
<PAGE>
CREDIT AGREEMENT
SOCIETE GENERALE FINANCIAL CORPORATION,
as a Lender
JOHN A. CASTELLANO
By: -----------------------
Name: John A. Castellano
Title: Vice President
S-13
<PAGE>
CREDIT AGREEMENT
MORGAN STANLEY SENIOR FUNDING, INC.,
as a Lender
MICHAEL T. MCLAUGHLIN
By: -----------------------
Name: M. McLaughlin
Title: Principal
S-14
<PAGE>
CREDIT AGREEMENT
WELLS FARGO BANK, N.A.,
as a Lender
ALFRED ARTIS
By: -----------------------
Name: Alfred Artis
Title: Vice President
DONALD A. HARTMANN, JR.
By: -----------------------
Name: Donald A. Hartmann, Jr.
Title: Senior Vice President
S-15
<PAGE>
CREDIT AGREEMENT
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender
PAUL E. RIGBY
By: -----------------------
Name: Paul E. Rigby
Title: Managing Director
S-16
<PAGE>
CREDIT AGREEMENT
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY,
as a Lender
JOHN M. CASPARIAN
By: -----------------------
Name: John M. Casparian
Title: Investment Officer
S-17
<PAGE>
CREDIT AGREEMENT
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
as a Lender
TOSHIHIRO HAYASHI
By: -----------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
S-18
<PAGE>
CREDIT AGREEMENT
ROYAL BANK OF CANADA,
as a Lender
JULIE BOTHAMLEY
By: -----------------------
Name: Julie Bothamley
Title: Senior Manager
S-19
<PAGE>
CREDIT AGREEMENT
THE SUMITOMO TRUST AND
BANKING CO. LTD., LOS ANGELES AGENCY,
as a Lender
ELEANOR CHAN
By: -----------------------
Name: Eleanor Chan
Title: Manager & Vice President
S-20
<PAGE>
CREDIT AGREEMENT
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
as a Lender
ANTHONY ROCK
By: -----------------------
Name: Anthony Rock
Title: Vice President
BRIAN O'LEARY
By: -----------------------
Name: Brian O'Leary
Title: Vice President
S-21
<PAGE>
CREDIT AGREEMENT
KEYBANK NATIONAL ASSOCIATION,
as a Lender
MARY K. YOUNG
By: -----------------------
Name: Mary K. Young
Title: Commercial Banking Officer
S-22
<PAGE>
CREDIT AGREEMENT
FIRST SECURITY BANK, N.A.,
as a Lender
JUDY CALLISTER
By: -----------------------
Name: Judy Callister
Title: Vice President
S-23
<PAGE>
CREDIT AGREEMENT
FIRSTRUST BANK,
as a Lender
EDWARD D'ANCONA
By: -----------------------
Name: Edward D'Ancona
Title: Chief Banking Officer
S-24
<PAGE>
CREDIT AGREEMENT
US BANK OF OREGON,
as a Lender
GAYLE BURGESS
By: -----------------------
Name: Gayle Burgess
Title: Asst. Relationship Manager
S-25
<PAGE>
CREDIT AGREEMENT
FIRST UNION NATIONAL BANK,
as a Lender
ED ROSS
By: -----------------------
Name: Ed Ross
Title: Senior Vice President
S-26
<PAGE>
CREDIT AGREEMENT
THE BANK OF NEW YORK,
as a Lender
CHARLOTTE SOHN
By: -----------------------
Name: Charlotte Sohn
Title: Vice President
S-27
<PAGE>
CREDIT AGREEMENT
ZIONS FIRST NATIONAL BANK,
as a Lender
RICHARD P. JACKSON
By: -----------------------
Name: Richard P. Jackson
Title: Vice President
S-28
<PAGE>
CREDIT AGREEMENT
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Lender
MARIA VICKROY-PERALTA
By: ----------------------------
Name: Maria Vickroy-Peralta
Title: Vice President
S-29
<PAGE>
CREDIT AGREEMENT
BANQUE PARIBAS,
as a Lender
BRIAN A. STAPF
By: -----------------------
Name: Brian A. Stapf
Title: Vice President
LEE S. BUCKNER
By: -----------------------
Name: Lee S. Buckner
Title: Managing Director
S-30
<PAGE>
CREDIT AGREEMENT
MERITA BANK,
as a Lender
ANDREW CARSTENSEN
By: ------------------------
Name: Andrew Carstensen
Title: Vice President
S-31
<PAGE>
CREDIT AGREEMENT
BANK LEUMI U.S.A.,
as a Lender
JACQUES DELVOYE
By: -----------------------
Name: Jacques Delvoye
Title: Vice President
S-33
<PAGE>
CREDIT AGREEMENT
EXHIBIT A-1
TO CREDIT AGREEMENT
--------------------
TRANCHE A NOTE
$[ ] New York, New York
March --, 1998
FOR VALUE RECEIVED, the undersigned, FMS TRUST 1997- 1 (the
"Borrower"), hereby unconditionally promises to pay to the order of [LENDER]
(the "Lender") at the office of Bankers Trust Company, located at 130 Liberty
Street, New York, New York 10006, in lawful money of the United States of
America and in immediately available funds, on the Maturity Date, the principal
amount of (a) [ ] DOLLARS [$ ], or, if less, (b) the aggregate unpaid principal
amount of all Tranche A Loans made by the Lender to the Borrower pursuant to
Section 2.1 of the Credit Agreement (as defined below). The Borrower further
agrees to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in Section 2.8 of such Credit Agreement.
The holder of this Note is authorized to endorse on the
schedules annexed hereto and made a part hereof, or on a continuation thereof
which shall be attached hereto and made a part hereof, the date, Type and amount
of each Tranche A Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurodollar Loans, the length of each Interest Period with respect
thereto.
This Note (a) is one of the Tranche A Notes referred to in
the Credit Agreement dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the Lender, the other lenders from time to time parties thereto and
Bankers Trust Company, as administrative agent, (b) is subject to the provisions
of the Credit Agreement and (c) is subject to optional and mandatory prepayment
in whole or in part as provided in the Credit Agreement. This Note is secured
and guaranteed as provided in the Credit Documents. Reference is hereby made to
the Credit Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantee, the terms and conditions upon which the security interests and
the guarantee were granted and the rights of the holder of this Note in respect
thereof.
A-1-1
<PAGE>
CREDIT AGREEMENT
Upon the occurrence of any one or more of the Events of
Default, all amounts then remaining unpaid on this Note shall become, or may be
declared to be, immediately due and payable, all as provided in the Credit
Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
FMS TRUST 1997-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By: ---------------------------------
Name:
Title:
A-1-2
<PAGE>
CREDIT AGREEMENT
Schedule A
to Tranche A Note
-----------------
<TABLE>
<CAPTION>
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amount Amount of ABR Loans
Converted to Amount of Principal Converted to Unpaid Principal Balance
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Notation Made By
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
A-1-3
</TABLE>
<PAGE>
CREDIT AGREEMENT
Schedule B
to Tranche A Note
-----------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
- -------------------------------------------------------------------------------
Interest Period and
Amount of Amount Converted Eurodollar Rate with
Date Eurodollar Loans to Eurodollar Loans Respect Thereto
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Amount of Principal of Amount of Eurodollar Unpaid Principal
Eurodollar Loans Loans Converted to Balance of Eurodollar Notation
Repaid ABR Loans Loans Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CREDIT AGREEMENT
EXHIBIT A-2
TO CREDIT AGREEMENT
-------------------
TRANCHE B NOTE
$[ ] New York, New York
March --, 1998
FOR VALUE RECEIVED, the undersigned, FMS TRUST 1997-1 (the
"Borrower"), hereby unconditionally promises to pay to the order of [LENDER]
(the "Lender") at the office of Bankers Trust Company, located at 130 Liberty
Street, New York, New York 10006, in lawful money of the United States of
America and in immediately available funds, on the Maturity Date, the principal
amount of (a) [ ] DOLLARS [$ ], or, if less, (b) the aggregate unpaid principal
amount of all Tranche B Loans made by the Lender to the Borrower pursuant to
Section 2.1 of the Credit Agreement (as defined below). The Borrower further
agrees to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in Section 2.8 of such Credit Agreement.
The holder of this Note is authorized to endorse on the
schedules annexed hereto and made a part hereof, or on a continuation thereof
which shall be attached hereto and made a part hereof, the date, Type and amount
of each Tranche B Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurodollar Loans, the length of each Interest Period with respect
thereto.
This Note (a) is one of the Tranche B Notes referred to in
the Credit Agreement dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Borrower, the Lender, the other lenders from time to time parties thereto and
Bankers Trust Company, as administrative agent, (b) is subject to the provisions
of the Credit Agreement and (c) is subject to optional and mandatory prepayment
in whole or in part as provided in the Credit Agreement. This Note is secured
and guaranteed as provided in the Credit Documents. Reference is hereby made to
the Credit Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantee, the terms and conditions upon which the security interests and
the guarantee were granted and the rights of the holder of this Note in respect
thereof.
Upon the occurrence of any one or more of the Events of
Default, all amounts then remaining unpaid on this Note shall become, or may be
declared to be, immediately due and payable, all as provided in the Credit
Agreement.
A-2-2
<PAGE>
CREDIT AGREEMENT
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
FMS TRUST 1997-1
By: WILMINGTON TRUST COMPANY, not
in its individual capacity but
solely as Owner Trustee
By:----------------------------------------
Name:
Title:
A-2-3
<PAGE>
Schedule A
to Tranche B Note
-----------------
<TABLE>
<CAPTION>
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amount Amount of ABR Loans
Converted to Amount of Principal Converted to Unpaid Principal Balance
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Notation Made By
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-2-4
<PAGE>
Schedule B
to Tranche B Note
-----------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
- -------------------------------------------------------------------------------
Interest Period and
Amount of Amount Converted Eurodollar Rate with
Date Eurodollar Loans to Eurodollar Loans Respect Thereto
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Amount of Principal of Amount of Eurodollar Unpaid Principal
Eurodollar Loans Loans Converted to Balance of Eurodollar Notation
Repaid ABR Loans Loans Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A-2-1
<PAGE>
EXHIBIT B TO
CREDIT AGREEMENT
----------------
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of March 11,1997
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among FMS Trust 1997-1 (the "Borrower") the Lenders named therein
(the "Lenders"), Bankers Trust Company, as administrative agent for the Lenders
(in such capacity, the Administrative Agent") and The Chase Manhattan Bank, as
syndication agent. Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
------------------- (the "Assignor") and ------------------- (the
"Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the As signee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Closing Date (as defined below), an interest (the "Assigned Inter
est"), as specified on SCHEDULE 1, in and to the Assignor's rights and
obligations under the Credit Agreement with respect to those credit facilities
contained in the Credit Agreement as are set forth on SCHEDULE 1 (individually,
an "Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
amount for each Assigned Facility as set forth on SCHEDULE 1.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or represen tations
made in or in connection with the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto, other than that the Assignor has not created any adverse claim upon the
interest being assigned by it hereunder and that such interest is free and clear
of any such adverse claim; and (b) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Borrower or
any of its
<PAGE>
Subsidiaries or any other obligor or the performance or observance by Borrower
or any of its Subsidiaries or any other obligor of any of their respective
obligations under the Credit Agreement or any other instrument or document
furnished pursuant hereto or thereto.
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to the Credit Agreement and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon the Assignor, the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement or
any other instrument or document furnished pursuant hereto or thereto; (d)
appoints and authorizes the Administra tive Agent to take such action as agent
on its behalf and to exercise such powers and discretion under the Credit
Agreement or any other instrument or document furnished pursuant hereto or
thereto as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are incidental thereto; and (e) agrees that it will
be bound by the provisions of the Credit Agreement and will perform in
accordance with its terms all the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender including, if it is
organized under the laws of a jurisdiction outside the United States, its
obligation pursuant to Section 2.15(e) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be the
date set forth on Schedule 1, (the "Effective Date"). Following the execution of
this Assignment and Acceptance, it will be delivered to the Administrative Agent
for acceptance by it and recording by the Administrative Agent pursuant to the
Credit Agreement, effective as of the Effective Date (which shall not, unless
other wise agreed to by the Administrative Agent, be earlier than five Business
Days after the date of such acceptance and recording by the Administrative
Agent).
5. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignee whether such amounts have accrued prior to the
Effective Date or accrue subsequent to the Effective Date. The Assignor and the
Assignee shall make all
A-2
<PAGE>
appropriate adjustments in payments by the Administrative Agent for periods
prior to the Effective Date or with respect to the making of this assignment
directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and shall be
bound by the provisions thereof and (b) the Assignor shall, to the extent
provided in this Assignment and Acceptance and the Credit Agreement, relinquish
its rights and be released from its obligations under the Credit Agreement.
7. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
8. This Assignment and Acceptance may be executed by one or more of
the parties to this Assignment and Acceptance on any number of separate
counterparts (including by facsimile transmission), and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
A-3
<PAGE>
Schedule A
to Tranche B Note
-----------------
<TABLE>
<CAPTION>
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amount Amount of ABR Loans
Converted to Amount of Principal Converted to Unpaid Principal Balance
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Notation Made By
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-2-4
<PAGE>
Schedule B
to Tranche B Note
-----------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
- -------------------------------------------------------------------------------
Interest Period and
Amount of Amount Converted Eurodollar Rate with
Date Eurodollar Loans to Eurodollar Loans Respect Thereto
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Amount of Principal of Amount of Eurodollar Unpaid Principal
Eurodollar Loans Loans Converted to Balance of Eurodollar Notation
Repaid ABR Loans Loans Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A-2-4
<PAGE>
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE CREDIT AGREEMENT, DATED AS OF MARCH 11, 1998,
AMONG
FMS TRUST 1997-1,
THE LENDERS NAMED THEREIN,
BANKERS TRUST COMPANY, AS ADMINISTRATIVE AGENT FOR THE LENDERS (IN SUCH
CAPACITY, THE "ADMINISTRATIVE AGENT")
AND
THE CHASE MANHATTAN BANK, AS SYNDICATION AGENT
- -------------------------------------------------------------------------------
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Credit Commitment/Term Loan
Facility Assigned Amount Assigned Commitment Percentage Assigned1/
- ----------------- -------------------- --------------------------------
$______________ __._______%
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By -------------------- By --------------------
Name: Name:
Title: Title:
- ---------------------
/1 Calculate the Commitment Percentage that is assigned to at least 15 decimal
places and show as a percentage of the aggregate commitments of all Lenders
S-1
<PAGE>
Accepted for Recordation in Consented To:*/
the Register:
Bankers Trust Company, FMS TRUST 1997-1,
as Administrative Agent
By -------------------------
By-------------------------- Name:
Name: Title:
Title:
Bankers Trust Company
as Administrative Agent
By -------------------------
Name:
Title:
- --------------------
*/ If required.
S-2
<PAGE>
Schedule 2.1
Lenders and Commitments
Name and Address of Lender Commitment
- -------------------------- ----------
Bankers Trust Company $38,218,946.05
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Telecopier No.: (212) 250-7351
Attn: Deal Administrator
The Chase Manhattan Bank $36,393,350.06
270 Park Avenue
New York, New York 10017
Telecopier No.: (212)
Attn:
NationsBank of Texas, N.A. $34,607,277.29
444 South Flower, Suite 4100
Los Angeles, California 90071
Telecopier No.: (213)
Attn:
Salomon Brothers Holding Co Inc. $34,607,277.29
7 World Trade Center
New York, New York 10048
Telecopier No.: (212)
Attn:
Wells Fargo Bank $30,426,599.75
420 Montgomery Street, 9th Floor
San Francisco, California 94163
Telecopier No.:
Attn:
DLJ Capital Funding, Inc. $24,341,279.80
277 Park Avenue
New York, New York 10172
Telecopier No.:
Attn:
<PAGE>
Bank of America National Trust and $24,341,279.80
Savings Association
555 South California Street, 41st Floor
San Francisco, California 94104
Telecopier No.:
Attn:
The First National Bank of Chicago $24,341,279.80
One First National Plaza
Chicago, Illinois 60670
Telecopier No.:
Attn:
Goldman Sachs Credit Partners L.P. $24,341,279.80
85 Broad Street
New York, New York 10004
Telecopier No.:
Attn:
Morgan Stanley Senior Funding, Inc. $24,341,279.80
1585 Broadway
New York, New York 10036
Telecopier No.:
Attn.:
Societe Generale Financial Corporation $24,341,279.80
181 West Madison , Suite 3400
Chicago, Illinois 60657
Telecopier No.:
Attn.:
Union Bank of California, N.A. $24,341,279.80
350 California Street, 6th Floor
San Francisco, California 94104
Telecopier No.:
Attn.:
U.S. Bank of Oregon $24,341,279.80
555 S.W. Oak Street, Suite 400
Portland, Oregon 97204
Telecopier No.:
Attn.:
2
<PAGE>
Wachovia $24,341,279.80
191 Peachtree Street NE, 28th Floor
Atlanta, Georgia 30303
Telecopier No.:
Attn.:
Marine Midland Bank $15,213,299.88
140 Broadway, 5th Floor
New York, New York 10005
Telecopier No.:
Attn.: Gina Sidorsky
Bank of Montreal $6,085,319.95
115 South La Salle Street
Chicago, Illinois 60603
Telecopier No.:
Attn.:
Compagnie Financier de CIC et de $6,085,319.95
l'Union Europeenne,
520 Madison Avenue
New York, New York 10022
Telecopier No.:
Attn.:
First Security Bank, N.A. $6,085,319.95
15 East 100 South , 2nd Floor
Salt Lake City, Utah 84111
Telecopier No.:
Attn.:
Banque Paribas $6,085,319.95
101 California Street, Suite 3150
San Francisco, CA 94111
Telecopier No.:
Attn.:
Royal Bank of Canada $6,085,319.95
600 Wilshire Blvd., Suite 800
Los Angeles, California 90017
Telecopier No.:
Attn.:
3
<PAGE>
Transamerica Life Insurance and $6,085,319.95
Annuity Company
1150 South Olive Street, Suite 2700
Los Angeles, California 90015
Telecopier No.:
Attn.:
Zions First National Bank $3,651,191.97
One South Main Street
Salt Lake City, Utah 8411
Telecopier No.:
Attn.:
ABN Amro North America, Inc. $3,042,659.97
One Union Square
600 University Street, Suite 2323
Seattle, Washington 98101-2070
Telecopier No.:
Attn.:
The Bank of New York $3,042,659.97
One Wall Street
New York, New York 10286
Telecopier No.:
Attn.:
First Union National Bank $3,042,659.97
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0737
Telecopier No.:
Attn.:
KeyBank National Association $3,042,659.97
700 Fifth Avenue, 48th Floor
Seattle, Washington 98104
Telecopier No.:
Attn.:
The Mitsubishi Trust and Banking Corporation $3,042,659.97
520 Madison Avenue
New York, New York 10286
Telecopier No.:
Attn.:
4
<PAGE>
The Sumitomo Trust and Banking Co. Ltd., $3,042,659.97
Los Angeles Agency
333 South Grand Avenue, Suite 5300
Los Angeles, California 90071
Telecopier No.:
Attn.:
Bank Leumi, U.S.A. $1,825,595.98
8383 Wilshire Blvd., Suite 400
Beverly Hills, California 90211
Telecopier No.:
Attn.:
Merita Bank $15,000,000.00
437 Madison Avenue
New York, New York 10022
Telecopier No.:
Attn.:
FirstTrust Bank $1,217,063.99
1931 Cottman Avenue
Philadelphia, Pennsylvania 19111
Telecopier No.:
Attn.:
5
LESSEE GUARANTEE
dated as of March 11, 1998
made by
FRED MEYER, INC.
as Lessee Guarantor
in favor of
FMS TRUST 1997-1,
as Lessor
BANKERS TRUST COMPANY,
as Administrative Agent
THE CHASE MANHATTAN BANK,
as Syndication Agent
THE VARIOUS FINANCIAL INSTITUTIONS
IDENTIFIED AS LENDERS IN THE PARTICIPATION AGREEMENT,
as Lenders
and
THE VARIOUS FINANCIAL INSTITUTIONS
IDENTIFIED AS INVESTORS IN THE PARTICIPATION AGREEMENT
HEREIN,
as Investors
<PAGE>
LESSEE Guarantee
THIS GUARANTEE (this "Guarantee"), dated as of March 11, 1998, is made by
FRED MEYER, INC., a Delaware corporation (the "Lessee Guarantor"), in favor of
FMS TRUST 1997-1, as Lessor; BANKERS TRUST COMPANY, as Administrative Agent (the
"Administrative Agent") under the Participation Agreement (as defined below);
THE CHASE MANHATTAN BANK, as Syndication Agent (the "Syndication Agent"); each
of the financial institutions as are or may from time to time become Lenders
pursuant to the terms of the Participation Agreement (the "Lenders"); and each
of the financial institutions as are or may from time to time become Investors
pursuant to the terms of the Participation Agreement, as Investors (the
"Investors") (each of the Lenders, the Lessor, the Investors, the Administrative
Agent and the Syndication Agent being referred to herein collectively as the
"Guaranteed Parties").
W I T N E S S E T H:
WHEREAS, as a condition to the occurrence of the Initial Closing Date under
the Participation Agreement dated as of the date hereof (together with all
amendments, supplements, amendments and restatements and other modifications, if
any, from time to time thereafter made thereto, the "Participation Agreement"),
among the Lessee Guarantor and Construction Agent, the Lessor, the Owner
Trustee, the Investors, the Administrative Agent, the Syndication Agent and the
Lenders, the Lessee Guarantor is required to execute and deliver this Guarantee
in favor of the Guaranteed Parties;
WHEREAS, the Lessee Guarantor has duly authorized the execution, delivery
and performance of this Guarantee; and
WHEREAS, it is in the best interests of the Lessee Guarantor to execute
this Guarantee inasmuch as the Lessee Guarantor will derive substantial benefits
from the transactions contemplated by the Participation Agreement and the other
Operative Agreements;
NOW, THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Guaranteed Parties to enter into
the Participation Agreement, the Lessee Guarantor agrees, for the benefit of the
Guaranteed Parties, as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Capitalized terms used but not otherwise defined
in this Guarantee have the respective meanings specified in Annex A to the
Participation Agreement. The rules of usage set forth in Annex A to the
Participation Agreement shall apply to this Guarantee.
SECTION 1.2. U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the Uniform
Commercial Code as in affect in the State of New York are used in this
Guarantee, including its preamble and recitals, with such meanings.
ARTICLE II
GUARANTEE PROVISIONS
SECTION 2.1. Guarantee. The Lessee Guarantor, as primary obligor and not as
surety, hereby absolutely, unconditionally and irrevocably guarantees to each of
the Guaranteed Parties the following obligations (collectively, the "Guaranteed
Obligations"):
(a) the due, punctual and full payment by each Loan Party (other than
the Lessee Guarantor), the Lessor and the Owner Trustee (for pur poses of
this Guarantee, each an "Obligor" and collectively the "Obli gors"),
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations and amounts to be
paid by such Obligor (except to the extent such payment is to be made by
the Trust Company in its individual capacity) pursuant to any Operative
Agreement to which such Obligor is or is to be a party, whether for Inves-
tor Contributions, Investor Yield, principal, interest, fees, expenses or
otherwise (including all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United States
Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b)
and 506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and
ss.506(b));
(b) the due, prompt and faithful performance of, and compliance with,
all other obligations, covenants, terms, conditions and undertakings of
each Obligor (except to the extent such performance and/or compliance
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LESSEE GUARANTEE
is to be made by the Trust Company in its individual capacity) contained in
each Operative Agreement to which such Obligor is or is to be a party in
accordance with the terms thereof.
Notwithstanding the foregoing, the Lessee Guarantor shall not be obligated
to make any payment hereunder in respect of principal of any Tranche B Loans or
outstanding fundings of Investor Contribution unless at such time a Default or
Event of Default has occurred and is continuing.
The Lessee Guarantor further agrees that it shall indemnify and hold
harmless each Guaranteed Party for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Guaranteed Party in
enforcing any rights under this Guarantee after the occurrence of an Event of
Default.
This Guarantee constitutes a guarantee of payment when due and not of
collection, and the Lessee Guarantor specifically agrees that it shall not be
neces sary or required that any Guaranteed Party exercise any right, assert any
claim or demand or enforce any remedy whatsoever against any Loan Party (or any
other Person) before or as a condition to the obligations of the Lessee
Guarantor hereun der.
SECTION 2.2. Guarantee Absolute, etc. This Guarantee shall in all respects
be a continuing, absolute, unconditional and irrevocable guarantee of payment,
and shall remain in full force and effect until all Guaranteed Obligations have
been paid in full and all obligations of the Lessee Guarantor hereunder shall
have been paid in full. The Lessee Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of each Operative
Agreement under which they arise, in each case regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of any Guaranteed Party. The liability of the Lessee
Guarantor under this Guarantee shall be absolute, unconditional and irrevocable
irrespective of:
(a) any lack of validity, legality or enforceability of any Operative
Agreement;
(b) the failure of any Guaranteed Party:
(i) to assert any claim or demand or to enforce any right or
remedy against the Lessee, the Owner Trustee or the Lessor or any
other Person (including any other guarantor) under the provisions of
any Operative Agreement or otherwise, or
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(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Guaranteed Obligations;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
extension, compromise or renewal of any of the Guaranteed Obligations;
(d) any reduction, limitation, impairment or termination of the
Guaranteed Obligations for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to
(and the Lessee Guarantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality, nongenuineness, irregularity, compro-
mise, unenforceability of, or any other event or occurrence affecting, the
Guaranteed Obligations;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of any Operative Agreement;
(f) any addition, exchange, release, surrender or nonperfection of any
collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guarantee, held by any Guaranteed
Party securing any of the Guaranteed Obligations; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Loan Party, any
surety or any guarantor.
SECTION 2.3. Reinstatement, etc. The Lessee Guarantor agrees that this
Guarantee shall continue to be effective or be reinstated, as the case may be,
if at any time any payment (in whole or in part) of any of the Guaranteed
Obligations is rescinded or must otherwise be restored by any Guaranteed Party,
upon the insolvency, bankruptcy or reorganization of any Loan Party or
otherwise, as though such payment had not been made.
SECTION 2.4. Waiver, etc. The Lessee Guarantor hereby waives (i)
promptness, diligence, notice of acceptance and any other notice (other than
those provided for in the Operative Agreements) with respect to any of the
Guaranteed Obligations and this Guarantee, (ii) any requirement that any
Guaranteed Party protect, secure, perfect or insure any security interest or
Lien, or any property subject thereto, or exhaust any right or take any action
against any Loan Party or
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LESSEE GUARANTEE
any other Person (including any other guarantor or entity or any collateral
securing the Guaranteed Obligations).
SECTION 2.5. Waiver of Subrogation. So long as any of the Guaranteed
Obligations remain unpaid, the Lessee Guarantor hereby agrees that it will not
claim and hereby irrevocably waives for such period any claim or other rights
which it may now or hereafter acquire against any Loan Party that arise from the
existence, payment, performance or enforcement of the Lessee Guarantor's
obligations under this Guarantee or any other Operative Agreement, including any
right of subrogation, reimbursement, exoneration, or indemnification, any right
to participate in the claim or remedy of the Guaranteed Parties against any
Lessee or any collateral which the Administrative Agent or the Lessor now has or
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including the right to take or receive
from such Loan Party, directly or indirectly, in cash or other property or by
set-off or in any manner, payment or security on account of such claim or other
rights until all Guaranteed Obligations are satisfied. If any amount shall be
paid to the Lessee Guarantor in violation of the preceding sentence and the
Guaranteed Obligations shall not have been paid in cash in full until all
Guaranteed Obligations are satisfied, such amount shall be deemed to have been
paid to the Lessee Guarantor for the benefit of, and held in trust for, the
Guaranteed Parties, and shall forthwith be paid to the Guaranteed Parties to be
credited and applied upon the Guaranteed Obligations, whether matured or
unmatured. The Lessee Guarantor acknowledges that it will receive benefits from
the financing and other arrangements contem plated by the Operative Agreements
and that the waiver set forth in this Section is knowingly made in contemplation
of such benefits.
SECTION 2.6. Consent to Jurisdiction; Waiver of Immunities. The Lessee
Guarantor hereby acknowledges and agrees that:
(a) It irrevocably submits to the jurisdiction of any federal court
sitting in the Southern District of New York in any action or proceeding
arising out of or relating to this Guarantee, and the Lessee Guarantor
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such federal court. The Lessee
Guarantor hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding. The Lessee Guarantor agrees that a final,
unappealable judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
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LESSEE GUARANTEE
(b) Nothing in this Section shall affect the right of any Guaranteed
Party to serve legal process in any manner permitted by law or affect the
right of any Guaranteed Party to bring any action or proceeding against the
Lessee Guarantor or its property in the courts of any other jurisdictions.
SECTION 2.7. Obligations Independent. The obligations of the Lessee
Guarantor hereunder are independent of the obligations of any other guarantor or
any other Loan Party, and a separate action or actions may be brought and prose
cuted against the Lessee Guarantor whether or not action is brought against any
other guarantor or any other Loan Party, and whether or not any other guarantor
or any other Loan Party be joined in any such action or actions.
SECTION 2.8. Bankruptcy. In the event of a rejection of the Lease or any
Lease Supplement in a bankruptcy or insolvency proceeding of any Lessee (other
than the Lessee Guarantor), the Lessee Guarantor agrees that it will pay
forthwith all payments required to be made by such Lessee under the Lease and
Lease Supplements as though such rejection had not occurred. Lessee Guarantor
confirms that it is the intention of all of the Participants that neither the
guarantee by the Lessee Guarantor pursuant to this Guarantee nor any liability
or payment by it hereunder shall (i) render the Lessee Guarantor "insolvent," or
(ii) constitute a fraudulent transfer or conveyance, or (iii) constitute a
transaction at an undervalue or preference, or (iv) give rise to any similar or
analogous event, thing or circumstance, in each case, for purposes of the
Bankruptcy Code, the Uniform Fraudulent Conveyances Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law. To effectuate the foregoing
intention, the Guaranteed Parties and Lessee Guarantor hereby irrevocably agree
that the Guaranteed Obligations of Lessee Guarantor shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of Lessee Guarantor, result in the Guaranteed Obligations of Lessee
Guarantor hereunder neither rendering the Lessee Guarantor "insolvent" nor
constituting such fraudulent transfer or conveyance, such transaction at an
undervalue or preference or such other event, thing or circumstance, in each
case, under any such law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Lessee Guarantor hereby
affirms the representations and warranties set forth in Section 7.3 of the
Participation Agreement, which representations and warranties are hereby
incorporated by reference.
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LESSEE GUARANTEE
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1. Operative Agreement. This Guarantee is an Operative Agreement
executed pursuant to the Participation Agreement and shall (unless expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Participation Agreement, including, without
limitation, Section 13 thereof.
SECTION 4.2. Binding on Successors, Transferees and Assigns; Assignment of
Guarantee. This Guarantee shall be binding upon the Lessee Guarantor and its
successors, transferees and assigns and shall inure to the benefit of and be
enforceable by each Guaranteed Party and their respective, permitted successors
and assigns; provided, however, that the Lessee Guarantor may not assign any of
its obligations hereunder without the prior written consent of each Participant.
SECTION 4.3. Amendments, etc. No amendment to or waiver of any provision of
this Guarantee, nor consent to any departure by the Lessee Guarantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent and the Owner Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 4.4. Addresses for Notices to the Lessee Guarantor. All notices,
demands, requests, consents, approvals and other communications hereunder shall
be in writing and directed to the address described in, and deemed received in
accordance with the provisions of, Section 13.2 of the Participation Agreement.
SECTION 4.5. No Waiver; Remedies. In addition to, and not in limitation
of, Section 2.2 and Section 2.4, no failure on the part of any Guaranteed Party
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 4.6. Section Captions. Section captions used in this Guarantee are
for convenience of reference only, and shall not affect the construction of this
Guarantee.
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LESSEE GUARANTEE
SECTION 4.7. Setoff. In addition to, and not in limitation of, any rights
of any Guaranteed Party under applicable law, each Guaranteed Party shall, upon
the occurrence of any Lease Event of Default or any Construction Agency Agree-
ment Event of Default, have the right to appropriate and apply to the payment of
the obligations of the Lessee Guarantor owing to it hereunder, to the extent
then due, and the Lessee Guarantor hereby grants to each Guaranteed Party a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Lessee Guarantor then or thereafter maintained with
such Guaranteed Party; provided, however, that any such appropriation and
application shall be subject to the provisions of the Participation Agreement.
SECTION 4.8. Severability. Wherever possible each provision of this
Guarantee shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guarantee shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guarantee.
SECTION 4.9. Termination of Guarantee. The Lessee Guarantor's obligations
under this Guarantee shall terminate on the date upon which all Guaranteed
Obligations have been paid in full, and all other Obligations shall have been
fully and finally discharged.
SECTION 4.10. Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES).
SECTION 4.11. Waiver of Jury Trial. THE LESSEE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTEE. THE LESSEE GUARANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS AND THE LESSOR
ENTERING INTO THE PARTICsIPATION AGREEMENT.
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LESSEE GUARANTEE
IN WITNESS WHEREOF, the Lessee Guarantor has caused this Guarantee to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
FRED MEYER, INC.,
as Lessee Guarantor
By JAMES C. AALBERG
--------------------------------------
Name: James C. Aalberg
Title: Vice President, Treasurer
S-1
PLEDGE AGREEMENT
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of March 11, 1998,
is entered into by FRED MEYER, INC., a Delaware corporation ("FMI"), and each of
the undersigned Subsidiaries of FMI (the "Subsidiary Pledgors"; FMI and the
Subsidiary Pledgors are each individually referred to herein as a "Pledgor" and
collectively as "Pledgors"; provided that after the Closing Date, "Pledgors"
shall be deemed to include any new subsidiary of any Pledgor which executes an
acknowledgment to this Agreement pursuant to Section 7 hereof agreeing to be
bound by the terms hereof) in favor of BANKERS TRUST COMPANY, as administrative
agent (the "Administrative Agent") and collateral agent (the "Collateral Agent")
for the Beneficiaries (as hereinafter defined).
RECITALS
WHEREAS, FMI, as borrower, the lenders from time to time party thereto
(the "Loan Agreement Lenders"), the Administrative Agent and The Chase Manhattan
Bank, as syndication agent thereunder (the "Syndication Agent") are parties to
that certain Loan Agreement, dated as of the date hereof (as the same shall be
amended, supplemented or otherwise modified from time to time, the "Loan
Agreement");
WHEREAS, FMI, as lessee, FMS Trust 1997-1, as lessor (the "Lessor"),
Wilmington Trust Company, as owner trustee (the "Owner Trustee"), the investors
from time to time party thereto, the lenders from time to time party thereto
(the "Synthetic Lease Facility Lenders" and, collectively with the Loan
Agreement Lenders, the "Lenders"), the Administrative Agent and the Syndication
Agent are parties to that certain participation agreement, dated as of the date
hereof (as the same may be amended, supplemented or otherwise modified from time
to time, the "Participation Agreement" and, collectively with the other
documents contemplated by the Participation Agreement, the "Synthetic Lease
Facility") (the Synthetic Lease Facility, together with the Loan Agreement and
the other documents contemplated thereby, the "Facility Documents") (the
transactions contemplated by the Facility Documents being collectively referred
to as the "Extensions of Credit");
WHEREAS, pursuant to a guarantee, dated as of the date hereof, the
Subsidiary Pledgors have guaranteed the obligations of FMI under the
transactions contemplated by the Loan Agreement (the "Loan Guarantee");
<PAGE>
PLEDGE AGREEMENT
WHEREAS, pursuant to a guarantee, dated as of the date hereof, FMI has
guaranteed the obligations of each Loan Party (other than FMI), the Lessor, and
the Owner Trustee under the Synthetic Lease Facility (the "Lessee Guarantee");
WHEREAS, pursuant to a guarantee, dated as of the date hereof, the
Subsidiary Pledgors have guaranteed the obligations of each Loan Party, the
Lessor and the Owner Trustee under the Synthetic Lease Facility (the "Synthetic
Lease Guarantee" and, collectively with the Loan Guarantee and the Lessee
Guarantee, the "Guarantees");
WHEREAS, FMI, the Subsidiary Pledgors, the Collateral Agent, Bankers
Trust Company, as Administrative Agent under the Loan Agreement, and Bankers
Trust Company, as Administrative Agent under the Synthetic Lease Facility, on
behalf of the Lenders, have entered into an Intercreditor and Collateral Agency
Agreement, dated as of the date hereof (the "Intercreditor Agreement"),
providing for, among other things, the appointment of the Administrative Agent
as Collateral Agent to administer and enforce the security interest granted
pursuant to this Agreement as provided therein;
WHEREAS, it is a condition precedent to the Facility Documents that
the Pledgors shall have entered into this Agreement and granted the pledges
provided herein; and
WHEREAS, each Pledgor wishes to grant pledges and security interests
in favor of Collateral Agent for the benefit of the Lenders and the persons who
may in the future become beneficiaries in accordance with the terms of the
Intercreditor Agreement and the Facility Documents (all such beneficially
interested parties being the "Beneficiaries"); and
WHEREAS, each Pledgor is the legal and beneficial owner of the shares
of capital stock or similar equity securities constituting voting interests
listed opposite the name of such Pledgor in Schedule I hereto (collectively, the
"Pledged Shares"), which shares constitute all of the issued and outstanding
shares of capital stock or similar equity securities of the corporations or
equivalent entities named therein;
NOW, THEREFORE, in consideration of the premises set forth herein and
in order to induce the Lenders to make loans and other extensions of credit
under the Facility Documents, the Pledgors hereby agree with the Collateral
Agent for the ratable benefit of the Beneficiaries as follows:
SECTION 1. Certain Defined Terms. Capitalized terms used herein
without definition herein shall have the meanings provided in the Loan
Agreement. The following terms as used herein shall have the following meanings:
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PLEDGE AGREEMENT
"Agreement" means this Pledge Agreement, as amended or supplemented
from time to time.
"Beneficiaries" shall have the meaning set forth in eighth WHEREAS
clause of this Agreement.
"Extensions of Credit" shall have the meaning set forth in the second
WHEREAS clause of this Agreement.
"Facility Documents" shall have the meaning set forth in the second
WHEREAS clause of this Agreement.
"Guarantee Obligations" shall have the meaning set forth in Section 3.
"Guarantees" shall have the meaning set forth in the fifth WHEREAS
clause of this Agreement.
"Indemnitee" shall have the meaning set forth in Section 16.
"Intercreditor Agreement" shall have the meaning set forth in the
sixth WHEREAS clause of this Agreement.
"Lenders" shall have the meaning set forth in the second WHEREAS
clause of this Agreement.
"Lessor" shall have the meaning set forth in the second WHEREAS clause
of this Agreement.
"Loan Agreement" shall have the meaning set forth in the first WHEREAS
clause of this Agreement.
"Loan Agreement Lenders" shall have the meaning set forth in the first
WHEREAS clause of this Agreement.
"Loan Guarantee" shall have the meaning set forth in the third WHEREAS
clause of this Agreement.
"Owner Trustee" shall have the meaning set forth in the second WHEREAS
clause of this Agreement.
"Participation Agreement" shall have the meaning set forth in the
second WHEREAS clause of this Agreement.
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PLEDGE AGREEMENT
"Pledge Acknowledgment" shall have the meaning set forth in Section 7.
"Pledge Amendment" shall have the meaning set forth in Section 7.
"Pledged Collateral" means:
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of a Pledgor in the entries on the books of any
financial intermediary pertaining to the Pledged Shares, and, subject to
Section 8, all dividends, cash, warrants, rights, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged
Shares;
(b) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase, stock of any issuer of the
Pledged Shares from time to time acquired by a Pledgor in any manner (which
shares shall be deemed to be part of the Pledged Shares), the certificates
or other instruments representing such additional shares, securities,
warrants, options or other rights and any interest of a Pledgor in the
entries on the books of any financial intermediary pertaining to such
additional shares, and, subject to Section 8, all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares, securities, warrants,
options or other rights;
(c) all shares of, and all securities convertible into and warrants,
options and other rights to purchase, stock of any Person that, after the
date of this Agreement, becomes, as a result of any occurrence, a direct
Subsidiary (other than an Insignificant Subsidiary) of any Pledgor (which
shares shall be deemed to be part of the Pledged Shares) and the
certificates or other instruments representing such shares, securities,
warrants, options or other rights and any interest of a Pledgor in the
entries on the books of any financial intermediary pertaining to such
shares, and, subject to Section 8, all dividends, cash, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of such shares, securities, warrants, options or other rights; and
(d) to the extent not covered above, all Proceeds thereof.
"Pledged Shares" shall have the meaning set forth in the ninth WHEREAS
clause of this Agreement.
"Pledgor" means each of FMI and each Subsidiary Pledgor.
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PLEDGE AGREEMENT
"Proceeds" shall have the meaning assigned that term under the Uniform
Commercial Code (the "Code") as in effect in any relevant jurisdiction or under
relevant law and, in any event, shall include, but not be limited to, any and
all (i) proceeds of any indemnity or guaranty payable to any Pledgor or any
Beneficiaries from time to time with respect to any of the Pledged Collateral
and (ii) any other amounts from time to time paid or payable under or in
connection with any of the Pledged Collateral or otherwise receivable or
received when the Pledged Collateral is or proceeds are sold, collected,
exchanged or otherwise disposed of, whether such disposition is voluntary or
involuntary.
"Secured Obligations" shall have the meaning set forth in Section 3.
"Securities Act" means the Securities Act of 1993, as from time to
time amended.
"Subsidiary Pledgor" shall mean each of the Subsidiaries set forth on
the signature pages of this Agreement and any Subsidiary which becomes a party
hereto after the date hereof.
"Syndication Agent" means The Chase Manhattan Bank.
"Underlying Debt" shall have the meaning set forth in Section 3.
SECTION 2. Pledge of Security. Each Pledgor hereby pledges to
Collateral Agent and grants to Collateral Agent, for the ratable benefit of the
Lenders and any other holder of Secured Obligations, a first priority security
interest in the Pledged Collateral.
SECTION 3. Security for Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, (i) the prompt payment and
performance in full when due, whether at stated maturity, by acceleration or
otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. ss. 362(a) and the operation of Sections 502(b) and 506(b) of the United
States Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506 (b), or any successor
provision thereto), of all obligations of FMI under the Facility Documents,
whether now existing or hereafter arising, voluntary or involuntary, whether or
not jointly owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time decreased or
extinguished and later increased, created or incurred and all or any portion of
such obligations that are paid to the extent all or any part of such payment is
avoided or recovered directly or indirectly from the Collateral Agent or
Beneficiaries as a preference, fraudulent transfer or otherwise (all such
obligations being the "Underlying Debt"), (ii) all obligations of the Pledgors
under their Guarantees (the "Guarantee Obligations") and (iii) all obligations
or
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PLEDGE AGREEMENT
liabilities of every nature of Pledgors now or hereafter existing under this
Agreement (all such obligations of Pledgors, together with the Underlying Debt
and the Guarantee Obligations, being the "Secured Obligations").
SECTION 4. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or, as applicable, shall be accompanied
by the Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Collateral Agent. If an Event of Default shall have occurred and be continuing,
Collateral Agent shall have the right, at any time in its discretion and without
notice to any Pledgor, to transfer to or to register in the name of Collateral
Agent or any of its nominees any or all of the Pledged Collateral, subject only
to the revocable rights specified in Section 8(a) hereof. In addition,
Collateral Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 5. Representations and Warranties. Each Pledgor represents and
warrants as follows:
(a) Pledged Collateral. All of the Pledged Shares pledged by such
Pledgor have been duly authorized and validly issued and are fully paid and
nonassessable. The Pledged Shares constitute all of the issued and outstanding
shares or membership interests, as the case may be, of each issuer thereof and
there are no outstanding options, warrants, rights to subscribe, stock purchase
rights or other agreements outstanding with respect to, or property that is now
or hereafter convertible into, or that requires the issuance or sale of, any
Pledged Shares.
(b) Ownership of Pledged Collateral. Such Pledgor is the legal, record
and beneficial owner of the Pledged Collateral pledged by such Pledgor free and
clear of any Lien except for the security interest created by this Agreement.
(c) Consents. No consent of any other party (including, without
limitation, stockholders or creditors of such Pledgor or any Person under any
contractual obligation of such Pledgor) and no consent, authorization, approval
or other action by, and no notice to or filing with, any governmental authority
or regulatory body is required either (i) for the pledge by the Pledgor of the
Pledged Collateral pursuant to this Agreement and the grant by the Pledgor of
the security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Pledgor or (ii) for the exercise by
Collateral Agent of the voting or other rights provided for in this Agreement or
the remedies in respect of the Pledged Collateral pursuant to this Agreement
(except (x) those which have been obtained or made and (y) as may be required in
connection with
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PLEDGE AGREEMENT
a disposition of Pledged Collateral by laws affecting the offering and sale of
securities generally).
(d) Perfection. The pledge and delivery to Collateral Agent of the
Pledged Collateral pursuant to this Agreement creates a valid and perfected
security interest of Collateral Agent, on behalf of the Beneficiaries, in the
Pledged Collateral of such Pledgor, securing the payment and performance of the
Secured Obligations, with the priority set forth herein, and all actions
necessary or desirable to perfect and protect such security interest have been
duly taken.
(e) Regulations G, T, U and X. The pledge of the Pledged Collateral
pursuant to this Agreement does not violate Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System.
SECTION 6. Certain Covenants. Each Pledgor hereby covenants that,
until the Secured Obligations have been indefeasibly paid in full, such Pledgor
will:
(a) not, (i) except as permitted by each of the Facility Documents,
sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral pledged
hereunder by such Pledgor, (ii) create or permit to exist any Lien upon or with
respect to any of the Pledged Collateral, except for the security interest under
this Agreement or (iii) permit, except as permitted by each of the Facility
Documents, any issuer of Pledged Shares to merge or consolidate with any Person;
provided, however, that in the event any Pledged Collateral is sold, transferred
or otherwise disposed of in any transaction permitted by each of the Facility
Documents (as long as all such agreements are in effect, otherwise by whichever
agreements remain in effect), such Pledged Collateral shall, concurrently
therewith, be automatically released from the lien and security interest under
this Agreement and the Collateral Agent shall, at such Pledgor's expense,
execute and deliver to such Pledgor such documents as such Pledgor shall
reasonably request to evidence such release; provided that arrangements
satisfactory to the Collateral Agent have been made for delivery to it of the
amounts, if any, required to be paid to the Beneficiaries out of the net
proceeds of such disposition;
(b) (i) cause each issuer of Pledged Shares not to issue any stock or
other securities or membership interests in addition to or in substitution for
the Pledged Shares issued by such issuer, except to the Pledgor, (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all additional shares of stock, membership interests or other securities
of each issuer of Pledged Shares, and (iii) pledge hereunder, immediately upon
its acquisition (directly or indirectly) thereof, any and all shares of stock or
membership interests of any Person which, after the date of this Agreement,
becomes, as a result of any occurrence, a direct Subsidiary (other than an
Insignificant Subsidiary) of Pledgor; and
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PLEDGE AGREEMENT
(c) promptly deliver to Collateral Agent all written notices received
by it with respect to the Pledged Collateral.
SECTION 7. Further Assurances; Pledge Amendments.
(a) Each Pledgor agrees that at any time and from time to time, at the
expense of the Pledgors, such Pledgor shall promptly execute and deliver all
further instruments and documents, and take all further actions, that may be
necessary or desirable, or that Collateral Agent may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable Collateral Agent to exercise and enforce its rights
and remedies hereunder with respect to any Pledged Collateral.
(b) Each Pledgor further agrees that it will, upon obtaining any
additional shares of stock, membership interests or other securities required to
be pledged hereunder as provided in Section 7(b) or (c) hereof, promptly (and in
any event within ten days) deliver to Collateral Agent a Pledge Amendment, duly
executed by such Pledgor, in substantially the form of Schedule II hereto (a
"Pledge Amendment"), in respect of the additional shares of stock or membership
interests to be pledged pursuant to this Agreement. Each Pledgor hereby
authorizes Collateral Agent to attach each Pledge Amendment to this Agreement
and agrees that all Pledged Shares listed on any Pledge Amendment delivered to
Collateral Agent shall for all purposes hereunder be considered Pledged
Collateral.
(c) Each Pledgor further agrees that it will cause any direct or
indirect Subsidiary (other than Insignificant Subsidiaries) acquired or created
after the Closing Date promptly after such acquisition or creation of such new
Subsidiary (and in any event within ten days after the date such acquisition or
creation, as the case may be) to deliver to Collateral Agent an acknowledgment
duly executed by such new Subsidiary in substantially the form of Schedule III
hereto (a "Pledge Acknowledgment").
SECTION 8. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default (as defined below) shall have
occurred and be continuing:
(i) The Pledgors shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of any of the
Facility Documents. It is understood, however, that neither (A) the voting
by Pledgors of any Pledged Shares for or the Pledgors' consent to the
election of directors at a regularly scheduled annual or other meeting of
stockholders or with respect to incidental matters at any such meeting nor
(B) the Pledgors' consent to or approval of any
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PLEDGE AGREEMENT
action otherwise permitted under each of the Facility Documents shall be
deemed inconsistent with the terms of any of the Facility Documents within
the meaning of this Section 8(a)(i), and no notice of any such voting or
consent need be given to Collateral Agent.
(ii) The Pledgors shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Agreement, any and all dividends
and other distributions paid in respect of the Pledged Collateral;
provided, however, that any and all dividends, interest and other
distributions paid or payable in additional equity securities, or warrants,
options or similar rights to acquire additional equity securities shall be,
and shall forthwith be delivered to Collateral Agent to hold as, Pledged
Collateral and shall, if received by a Pledgor, be received in trust for
the benefit of Collateral Agent, be segregated from the other property or
funds of the Pledgor and be forthwith delivered to Collateral Agent as
Pledged Collateral in the same form as so received (with all necessary
endorsements).
(iii) Collateral Agent shall promptly execute and deliver (or cause to
be executed and delivered) to the appropriate Pledgor all such proxies,
dividend payment orders and other instruments as such Pledgor may from time
to time reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other consensual rights which it is entitled to
exercise pursuant to paragraph (i) above and to receive the dividends,
principal or interest payments which it is authorized to receive and retain
pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) Upon written notice from Collateral Agent to FMI, all rights of
Pledgors to exercise the voting and other consensual rights which they
would otherwise be entitled to exercise pursuant to Section 8(a)(i) shall
cease, and all such rights shall thereupon become vested in Collateral
Agent who shall thereupon have the right to exercise such voting and other
consensual rights.
(ii) All rights of Pledgors to receive the dividends, interest and
other payments which they would otherwise be authorized to receive and
retain pursuant to Section 8(a)(ii) shall cease, and all such rights shall
thereupon become vested in Collateral Agent who shall thereupon have the
right to receive and hold as Pledged Collateral such dividends, interest
and other payments which shall, upon written notice from Collateral Agent,
be paid to Collateral Agent.
(iii) All dividends, interest and other payments which are received by
any Pledgor contrary to the provisions of paragraph (ii) of this Section
8(b) shall be received in trust for the benefit of Collateral Agent, shall
be segregated from
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<PAGE>
PLEDGE AGREEMENT
other funds of such Pledgor and shall forthwith be paid over to Collateral
Agent as Pledged Collateral in the same form as so received (with any
necessary endorsements).
(c) In order to permit Collateral Agent to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) hereof and to receive all dividends and other distributions which it may
be entitled to receive under Section 8(a)(ii) hereof or Section 8(b)(ii) hereof,
the Pledgors shall promptly execute and deliver (or cause to be executed and
delivered) to Collateral Agent all such proxies, dividend payment orders and
other instruments as Collateral Agent may from time to time reasonably request.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby irrevocably appoints Collateral Agent as such Pledgor's attorney-in-fact,
with full authority in the place and stead of such Pledgor and in the name of
such Pledgor or otherwise, from time to time in Collateral Agent's reasonable
discretion to take any action and to execute any instrument, including but not
limited to financing and continuation statements, which Collateral Agent may
deem necessary or advisable, subject to the terms and conditions of this
Agreement, to accomplish the purposes of this Agreement, including, without
limitation, (a) to receive, endorse and collect all instruments made payable to
such Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same, and (b) if an Event of Default shall have
occurred and be continuing, to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Pledged Collateral, and to file any claims or take
any action or institute any proceedings which Collateral Agent may deem
necessary or desirable for the collection of any of the Pledged Collateral or to
enforce the rights of Collateral Agent with respect to any of the Pledged
Collateral.
SECTION 10. Collateral Agent May Perform. If a Pledgor fails to
perform any agreement contained herein, Collateral Agent may, upon thirty days'
notice to the Pledgor (unless otherwise expressly set forth in this Agreement or
an Event of Default shall have occurred and be continuing, in which case, no
notice shall be required) itself perform, or cause performance of, such
agreement, and the expenses of Collateral Agent incurred in connection therewith
shall be payable by the Pledgors under Section 16(b) hereof.
SECTION 11. Standard of Care. The powers conferred on Collateral Agent
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose on it any duty to exercise such powers. Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equivalent to that
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PLEDGE AGREEMENT
which Collateral Agent accords its own property consisting of negotiable
securities, it being understood that Collateral Agent shall have no
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not any Beneficiary has or is deemed to have
knowledge of such matters, (b) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the Pledged Collateral) to preserve rights against any parties
with respect to any Pledged Collateral, (c) taking any necessary steps to
collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value.
SECTION 12. Events of Default. The occurrence of any "Event of
Default" as defined in any of the Facility Documents (other than a "Credit
Agreement Event of Default" as defined in the Participation Agreement) shall
constitute an Event of Default under this Agreement.
SECTION 13. Remedies upon Default.
(a) Remedies Upon Default. If any Event of Default shall have occurred
and be continuing:
(i) Collateral Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party
on default under the Code as in effect in the State of New York (or any
other state with jurisdiction over the Pledged Collateral) at that time,
and Collateral Agent may also in its sole discretion, without notice
(except as specified below), sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, at such time or times and at such
price or prices and upon such other terms as are commercially reasonable,
irrespective of the impact of any such sales on the market price of the
Pledged Collateral. Collateral Agent may be the purchaser of any or all of
the Pledged Collateral at any such sale and shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price
for all or any portion of the Pledged Collateral sold at any such public
sale, to use and apply any of the Secured Obligations as a credit on
account of the purchase price of any Pledged Collateral payable by
Collateral Agent at such sale. Each purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of
any Pledgor, and each Pledgor hereby waives (to the extent permitted by
law) all rights of redemption, stay and/or appraisal which it now has or
may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.
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PLEDGE AGREEMENT
Pledgors agree that, to the extent notice of sale shall be required by law,
at least ten days' notice to the Pledgors of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Collateral Agent shall not be obligated
to make any sale of Pledged Collateral regardless of notice of sale having
been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it
was so adjourned. Each Pledgor hereby waives any claims against Collateral
Agent arising by reason of the fact that the price at which any Pledged
Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if Collateral
Agent accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Pledged Collateral are insufficient to pay all the
Secured Obligations, the Pledgors shall be liable for the deficiency and
the fees of any attorneys employed by Collateral Agent to collect such
deficiency.
(ii) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and applicable state securities laws, Collateral Agent
may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of
such Pledged Collateral under the Securities Act and/or such state
securities laws, to limit purchasers to those who will agree, among other
things, to acquire the Pledged Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. Each
Pledgor acknowledges that any such private sales may be at prices and on
terms less favorable to Collateral Agent than those obtainable through a
public sale without such restrictions (including, without limitation, a
public offering made pursuant to a registration statement under the
Securities Act) and, notwithstanding such circumstances, each Pledgor
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that Collateral Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of
any Pledged Collateral for the period of time necessary to permit the
issuer thereof to register it for a form of public sale requiring
registration under the Securities Act or under applicable state securities
laws, even if such issuer would, or should, agree to so register it.
(iii) If Collateral Agent determines to exercise its right to sell any
or all of the Pledged Collateral, upon written request, the Pledgors shall
and shall cause each issuer of any Pledged Shares to be sold hereunder from
time to time to furnish to Collateral Agent all such information as
Collateral Agent may request in order to determine the number of shares and
other instruments included in the Pledged Collateral which may be sold by
Collateral Agent in exempt transactions
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PLEDGE AGREEMENT
under the Securities Act and the rules and regulations of the Securities
and Exchange Commission thereunder, as the same are from time to time in
effect.
(b) Decisions Relating to Exercise of Remedies. Notwithstanding
anything in this Agreement to the contrary, as provided in the Intercreditor
Agreement, the Collateral Agent shall exercise, or shall refrain from exercising
any remedy provided herein in accordance with the instructions of the Required
Lenders (as defined in the Intercreditor Agreement) and the Beneficiaries shall
be bound by such instructions; and the sole rights of the Beneficiaries under
this Agreement shall be (i) to be secured by the Pledged Collateral as provided
herein and (ii) to receive the payments provided for in Section 14 hereof.
SECTION 14. Application of Proceeds. All Proceeds received by
Collateral Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral may, in the
discretion of Collateral Agent, be held by Collateral Agent as Pledged
Collateral for, and/or then or at any time thereafter applied in whole or in
part by Collateral Agent against the Secured Obligations in the following order
of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, and all expenses, liabilities and advances made
or incurred by Collateral Agent in connection therewith and all amounts for
which the Collateral Agent is entitled to indemnification hereunder and all
advances made by the Collateral Agent hereunder for the account of the Pledgors
or for the payment of all costs and expenses paid or incurred by the Collateral
Agent in connection with the exercise of any right or remedy hereunder, all in
accordance with Section 16 hereof;
SECOND: To the payment in full of all Secured Obligations in
accordance with Section 8 of the Intercreditor Agreement; and
THIRD: To the payment to or upon the order of the Pledgors, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION 15. Collateral Agent. Collateral Agent shall be obligated and
shall have the right hereunder, to make demands, to give notices, to exercise or
refrain from exercising any rights, and to take or refrain from taking any
action (including, without limitation, the release or substitution of Pledged
Collateral) solely in accordance with the Intercreditor Agreement. Collateral
Agent may resign and a successor Collateral Agent may be appointed in the manner
provided for resignation and appointment of a successor in the Intercreditor
Agreement. Upon the acceptance of any appointment as a Collateral Agent by a
successor Collateral Agent, that successor Collateral Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
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PLEDGE AGREEMENT
of the retiring Collateral Agent under this Agreement, and the retiring
Collateral Agent shall thereupon be discharged from its duties and obligations
under this Agreement and shall deliver any Pledged Collateral in its possession
to the successor Collateral Agent. After any retiring Collateral Agent's
resignation, the provisions of this Agreement shall inure to its benefit as to
any actions taken or omitted to be taken by it under this Agreement while it was
Collateral Agent.
SECTION 16. Indemnity and Expenses.
(a) The Pledgors jointly and severally agree to indemnify Collateral
Agent, each Beneficiary and each of the officers, directors, agents, employees
and affiliates of each of them (each an "Indemnitee"), from and against any and
all claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting from the gross negligence or willful misconduct
of the Indemnitee seeking indemnification.
(b) Pledgors will upon demand pay to Collateral Agent the amount of
any and all reasonable costs and expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which Collateral Agent
may incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of Collateral Agent hereunder or (iv) the
failure by any Pledgor to perform or observe any of the provisions hereof.
SECTION 17. Waivers of Pledgor.
(a) Each Pledgor hereby waives any right to require Collateral Agent
to: (i) proceed against FMI, any guarantor of any of the Secured Obligations or
any other person or entity; (ii) proceed against or exhaust any other security
held from any other person or entity; (iii) give notice to any Pledgor of the
terms, time and place of any public or private sale of the Pledged Collateral or
any other security, or otherwise comply with Section 9504 of the Code (except as
provided in Section 13(a)(i)); (iv) pursue any other remedy in Collateral
Agent's power; or (v) except as otherwise expressly provided herein or in any
other Facility Document, make or give any presentments, demands for performance,
notices of nonperformance, protests, notices of protest or notices of dishonor
in connection with any obligations or evidences of indebtedness which constitute
in whole or in part the Secured Obligations or in connection with the creation
of new or additional Secured Obligations;
(b) Each Pledgor waives any defense arising by reason of: (i) any
disability or other defense of FMI, any Pledgor or any other entity, including,
without limitation, any defense based on or arising out of the unenforceability
of any of the
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PLEDGE AGREEMENT
Secured Obligations, legal or equitable discharge of the Secured Obligations or
this Agreement or any statute of limitations affecting a Pledgor's liability
hereunder; (ii) the cessation from any cause whatsoever, other than payment in
full, of the Secured Obligations or the release or substitution of any sureties
or guarantors of the Secured Obligations; (iii) any act or omission by
Collateral Agent which directly or indirectly results in or aids the discharge
of any Pledgor or any of the Secured Obligations by operation of law or
otherwise; (iv) the release of any other collateral securing the Secured
Obligations or the failure by Collateral Agent to perfect or maintain the
perfection of any such other collateral; (v) any modification of the Secured
Obligations, in any form whatsoever, including, but not limited to the renewal,
extension, acceleration or other change in the time for payment of the Secured
Obligations, and any change in the terms of the Secured Obligations, including,
but not limited to, any increase or decrease of the rate of interest on the
Secured Obligations; and (vi) any law limiting the liability of or exonerating
guarantors or sureties; and
(c) until all the Secured Obligations shall have been paid in full,
each Pledgor waives any right to enforce any remedy which Collateral Agent now
has or may hereafter have against any person or entity guaranteeing or securing
the Secured Obligations, and waives any benefit of, or any right to participate
in any security whatsoever now or hereafter held by Collateral Agent for the
Secured Obligations.
SECTION 18. Continuing Security Interest; Transfer of Indebtedness.
This Agreement shall create a continuing security interest in the Pledged
Collateral and shall, unless released and/or terminated pursuant to Section 15
of the Intercreditor Agreement, (a) remain in full force and effect until
indefeasible payment in full of all Secured Obligations, the cancellation or
termination of the Commitments to extend credit under the Facility Documents and
the cancellation or expiration of all outstanding letters of credit, (b) be
binding upon each Pledgor, its successors and assigns, and (c) inure, together
with the rights and remedies of Collateral Agent hereunder, to the benefit of
Collateral Agent and each Beneficiary and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), subject to the provisions of the Facility Documents, each Beneficiary may
assign or otherwise transfer any Debt held by it to any other person or entity,
and such other person or entity shall thereupon become vested with all the
benefits in respect thereof granted to a Beneficiary herein or otherwise. Upon
the earlier of (i) indefeasible payment in full of all Secured Obligations, the
cancellation or termination of the Commitments to extend credit under the
Facility Documents, the cancellation or expiration of all outstanding letters of
credit or (ii) the release and termination of the pledge pursuant to Section 15
of the Intercreditor Agreement, each Pledgor shall be entitled to the return,
upon its request and at its expense, against receipt and without recourse to
Collateral Agent, of such of the Pledged Collateral pledged by such Pledgor
hereunder as shall not have been sold or otherwise applied pursuant to the terms
hereof.
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PLEDGE AGREEMENT
SECTION 19. Additional Beneficiaries. Each lender, or agent on behalf
of each lender, which becomes a party to the Intercreditor Agreement from time
to time shall thereupon be deemed a Beneficiary hereunder and shall be entitled
to all of the rights and benefits of a Beneficiary hereunder subject to the
terms of this Agreement and the Intercreditor Agreement.
SECTION 20. No Waiver by Beneficiary; Authority of Pledgor. No failure
on the part of Collateral Agent to exercise, and no course of dealing with
respect to, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise by
Collateral Agent of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative to the fullest extent permitted by
law and are not exclusive of any remedies provided by law. It is not necessary
for Collateral Agent to inquire into the powers of any Pledgor or the officers,
directors or agents acting or purporting to act on behalf of any of them.
SECTION 21. Amendment, Etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by any Pledgor herefrom, shall in
any event be effective unless the same shall be in writing and signed by
Collateral Agent on behalf of the Required Lenders (as defined in the
Intercreditor Agreement), and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 22. Addresses for Notices. Unless otherwise specifically
provided herein, any notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telecopied,
telexed or sent by United States mail or courier service and shall be deemed to
have been given when delivered in person, upon receipt (in the case of telecopy
or telex) or four business days after depositing it in the United States mail,
registered or certified, with postage prepaid and properly addressed; provided
that any notice sent to Collateral Agent shall not be effective until received.
For purposes hereof, the addresses of the parties hereto (until notice of a
change thereof is delivered as provided in this Section 22) shall be as set
forth under each party's name on the signature pages hereof.
SECTION 23. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED
BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein, terms defined in Article 9 of the Code are used herein as
therein defined.
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PLEDGE AGREEMENT
SECTION 24. Severability. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdictions,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 25. Consent to Jurisdiction and Service of Process. All
judicial proceedings brought against any Pledgor with respect to this Agreement
may be brought in any state or federal court of competent jurisdiction sitting
in New York, New York, and by execution and delivery of this Agreement, each
Pledgor accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 22. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law. A copy of any such process so
served shall be mailed by registered mail to such Pledgor at its address
referred to in Section 22 hereof, except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity of
service of process. If any agent appointed by any Pledgor refuses to accept
service, such Pledgor hereby agrees that service upon it by mail shall
constitute sufficient notice. Nothing herein shall affect the right to serve
process in any other manner permitted by law or shall limit the right of the
Collateral Agent to bring proceedings against any Pledgor in the courts of any
other jurisdiction.
SECTION 26. Waiver of Jury Trial. Each Pledgor and Collateral Agent
hereby agree to waive their respective rights to jury trial of any claim or
cause of action based upon or arising out of this Agreement. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. Each Pledgor and
Collateral Agent acknowledge that this waiver is a material inducement for each
Pledgor and Collateral Agent to enter into a business relationship, that each
Pledgor and Collateral Agent have already relied on the waiver in entering into
this Agreement and that each will continue to rely on the waiver in their
related future dealings. Each Pledgor and Collateral Agent further warrant and
represent that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
17
<PAGE>
PLEDGE AGREEMENT
AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO TRIAL BY THE COURT.
SECTION 27. Marshaling; Payments Set Aside. Collateral Agent shall not
be under any obligation to marshal any assets in favor of any Pledgor or any
other party or against or in payment of any or all of the Secured Obligations.
To the extent that any Pledgor makes a payment or payments to Collateral Agent
or Collateral Agent enforces its security interests or exercises its rights of
setoff, and such payment or payments or proceeds of such enforcement or setoff
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
SECTION 28. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement or be given any substantive effect.
SECTION 29. Counterparts. This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which together shall constitute one and the same Agreement.
[Remainder of page intentionally left blank.]
18
<PAGE>
PLEDGE AGREEMENT
IN WITNESS WHEREOF, Pledgors have caused this Agreement to be duly executed
and delivered by their officers thereunto duly authorized as of the date first
above written.
"PLEDGORS"
FRED MEYER, INC.,
FRED MEYER STORES, INC.
SMITH'S FOOD & DRUG CENTERS, INC.
B&B STORES, INC.,
FM HOLDING CORPORATION,
ROUNDUP CO.,
QUALITY FOOD CENTERS, INC.
HUGHES MARKETS, INC.
FOOD 4 LESS HOLDINGS, INC.
FRED MEYER JEWELERS, INC.
SMITTY'S SUPERMARKETS, INC.
SMITTY'S SUPER VALU, INC.
QUALITY FOOD, INC.
QUALITY FOOD HOLDINGS, INC.
RALPHS GROCERY COMPANY
CALA CO.
FOOD 4 LESS OF SOUTHERN
CALIFORNIA, INC.
ALPHA BETA COMPANY
By: ROGER A. COOKE
-------------------------------------
Title: Vice President & Secretary
1
<PAGE>
PLEDGE AGREEMENT
Notice Address for Pledgors:
[ ]
Attention:
With copies to:
[ ]
2
<PAGE>
PLEDGE AGREEMENT
"Administrative Agent" and
"Collateral Agent"
BANKERS TRUST COMPANY
By:
-------------------------------------
Title:
----------------------------------
Notice Address:
3
<PAGE>
PLEDGE AGREEMENT
SCHEDULE I
to the Pledge Agreement
Attached to and forming a part of the Pledge Agreement dated as of
March 11, 1998 between Pledgors and Bankers Trust Company, as Administrative
Agent and Collateral Agent.
Pledgor: Fred Meyer, Inc.
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Fred Meyer Stores, Inc. Common 1A $.01 100
Quality Food Centers, Common QF 20005 $.0001 100
Inc.
Food 4 Less Holdings, Common 263 $.01 100
Inc.
Smith's Food & Drug Common 1A $.01 100
Centers, Inc.
- -----------------------------------------------------------------------------------------------------------
Pledgor: Fred Meyer Stores, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Roundup Co. Common 2 $1.00 1,000
Fred Meyer of Alaska, Common 2 $1.00 1,000
Inc.
Fred Meyer of Common 2 $1.00 1,000
California, Inc.
Distribution Trucking Common 3 npv 100
Company
B&B Stores, Inc. Common 3 $1.00 1,000
CB&S Advertising Common 3 $100.00 100
Agency, Inc.
- -----------------------------------------------------------------------------------------------------------
I-1
<PAGE>
PLEDGE AGREEMENT
FM Holding Common 2 $.50 1,000
Corporation
FM Retail Services, Inc. Common 2 npv 100
Fred Meyer Jewelers, Common 2 $.01 100
Inc.
FM Inc. Common 2 npv 100
- -----------------------------------------------------------------------------------------------------------
Pledgor: Smith's Food & Drug Centers, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Smith's Beverage of Common 11 $10.00 500
Wyoming
Western Property Common 11 npv 10,000
Investment Group, Inc.
Smitty's Supermarkets, Common 1 $.01 1,000
Inc.
Richies, Inc. Common 3 npv 1,000
Treasure Valley Land N/A 1 N/A 100%
Company, L.C. interest
- -----------------------------------------------------------------------------------------------------------
Pledgor: B&B Stores, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
B&B Pharmacy, Inc. Common 2 $10.00 5,000
- -----------------------------------------------------------------------------------------------------------
Pledgor: FM Holding Corporation
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Grand Central, Inc. Common 2 $1.00 2,172,561
- -----------------------------------------------------------------------------------------------------------
I-2
<PAGE>
PLEDGE AGREEMENT
Pledgor: Roundup Co.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
J H Properties, Inc. Common 1 npv 100
- -----------------------------------------------------------------------------------------------------------
Pledgor: Fred Meyer Jewelers, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Merksamer Jewlers, Common 8 npv 40,030
Inc.
- -----------------------------------------------------------------------------------------------------------
Pledgor: Quality Food Centers, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Hughes Markets, Inc. Common C-3101 $.01 1
Second Story, Inc. Common 1 npv 1,000
Quality Food, Inc. Common 1 $.001 100
KU Acquisition Common 1 npv 100
Corporation
- -----------------------------------------------------------------------------------------------------------
Pledgor: Hughes Markets, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Hughes Realty, Inc. Common 2 $100.00 200
- -----------------------------------------------------------------------------------------------------------
Pledgor: Food 4 Less Holdings, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Ralphs Grocery Common 1 $.01 1,513,938
Company
- -----------------------------------------------------------------------------------------------------------
I-3
<PAGE>
Pledgor: Ralphs Grocery Company
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Falley's, Inc. Common 4 $.50 1,000
Cala Co. Common 3 $.01 1,000
Food 4 Less of Southern Common 1 $.01 1,000
California, Inc.
Crawford Stores, Inc. Common 1 npv 100
- -----------------------------------------------------------------------------------------------------------
Pledgor: Cala Co.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Bay Area Warehouse Common 1 npv 1,000
Stores, Inc.
Cala Foods, Inc. Common 179 $1.00 400,000
Bell Markets, Inc. Common I $10.00 7,520
Bell Markets, Inc. Common J $10.00 7,200
- -----------------------------------------------------------------------------------------------------------
Pledgor: Food 4 Less of Southern California, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Alpha Beta Company Common 4 npv 1,000
- -----------------------------------------------------------------------------------------------------------
Pledgor: Alpha Beta Company
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Food 4 Less GM, Inc. Common 1 npv 1,000
Food 4 Less Common 1 npv 1,000
Merchandising, Inc.
- -----------------------------------------------------------------------------------------------------------
I-4
<PAGE>
PLEDGE AGREEMENT
Food 4 Less of Common 4 npv 1,000
California, Inc.
- -----------------------------------------------------------------------------------------------------------
Pledgor: Smitty's Supermarkets, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Smitty's Super Valu, Common 5 $.01 1,000
Inc.
- -----------------------------------------------------------------------------------------------------------
Pledgor: Smitty's Super Valu, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Saint Lawrence Holding Common 4 $100.00 2,010
Company
Compare, Inc. Common 2 npv 100
Smitty's Equipment Common 2 npv 1,000
Leasing, Inc.
- -----------------------------------------------------------------------------------------------------------
Pledgor: Quality Food, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
Quality Food Holdings, Common 1 $1.00 100
Inc.
- -----------------------------------------------------------------------------------------------------------
Pledgor: Quality Food Holdings, Inc.
</TABLE>
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
QFC Sub, Inc. Common 1 $.001 100
- -----------------------------------------------------------------------------------------------------------
</TABLE>
I-5
<PAGE>
PLEDGE AGREEMENT
SCHEDULE II
to the Pledge Agreement
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated March __, 1998, is delivered pursuant to
Section 8 of the Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Pledge Agreement dated
March __, 1998, between Fred Meyer, Inc. and its Subsidiaries who are
signatories thereto and Bankers Trust Company, as Administrative Agent and
Collateral Agent (the "Pledge Agreement"; capitalized terms defined therein
being used herein as therein defined) and that the Pledged Shares listed on this
Pledge Amendment shall be deemed to be part of the Pledged Shares and shall
become part of the Pledged Collateral and shall secure the Secured Obligations
as provided in the Pledge Agreement.
[PLEDGOR]
By:
-------------------------------------
Title:
----------------------------------
<TABLE>
<CAPTION>
Class Stock Par Number
Stock Issuer of Stock Certificate Nos. Value of Shares
------------ -------- ---------------- ----- ---------
<S> <C> <C> <C> <C>
</TABLE>
II-1
<PAGE>
PLEDGE AGREEMENT
SCHEDULE III
to the Pledge Agreement
[FORM OF ACKNOWLEDGMENT OF NEW SUBSIDIARY]
Reference is hereby made to the Pledge Agreement dated as of March __,
1998 (the "Pledge Agreement") among Fred Meyer, Inc. and its Subsidiaries who
are signatories thereto and Bankers Trust Company, as Administrative Agent and
Collateral Agent in which this Acknowledgment and its attachments are
incorporated.
The undersigned is a new Subsidiary (which is not an Insignificant
Subsidiary) and, as such, is required to pledge its Pledged Shares to secure the
Secured Obligations (all as defined in the Pledge Agreement) as provided in the
Pledge Agreement. The undersigned hereby represents and warrants that it is the
legal and beneficial owner of the shares of capital stock or similar equity
securities described in Schedule 1 hereto which shares constitute all of the
issued and outstanding shares of all classes of capital stock or similar equity
securities of the Subsidiary or Subsidiary so listed.
The undersigned acknowledges the terms of the Pledge Agreement and
agrees to be bound thereby.
[NEW SUBSIDIARY]
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
Notice Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
III-1
<PAGE>
PLEDGE AGREEMENT
SCHEDULE 1
to the Acknowledgment to New Subsidiary
Capital Stock (or similar equity securities) of Subsidiaries
1-1
INTERCREDITOR AGREEMENT
INTERCREDITOR AND
COLLATERAL AGENCY AGREEMENT
---------------------------
This INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT, dated as of
March 11, 1998 (as modified, supplemented or amended from time to time, the
"Agreement"), is entered into among BANKERS TRUST COMPANY ("BTCo."), as
Administrative Agent under the Loan Agreement (as hereinafter defined) on behalf
of the lenders party thereto (BTCo. and any successor Administrative Agent, the
"Loan Administrative Agent"), BTCo., as Administrative Agent under the
Synthetic Lease Facility (as hereinafter defined) on behalf of the lenders party
thereto (BTCo. and any successor Administrative Agent, the "Lease Administrative
Agent") (the Loan Administrative Agent and the Lease Administrative Agent,
individually, an "Agent" and collectively, the "Agents"), BTCo., as Collateral
Agent, FMI and the Subsidiary Pledgors (as hereinafter defined). Capitalized
terms used herein without definition herein shall have the meanings provided in
the Loan Agreement.
RECITALS
WHEREAS, FMI, as borrower, the lenders from time to time party thereto
(the "Loan Agreement Lenders"), the Loan Administrative Agent and The Chase
Manhattan Bank, as syndication agent thereunder (the "Syndication Agent") are
parties to that certain Loan Agreement, dated as of the date hereof (as the same
shall be amended, supplemented or otherwise modified from time to time, the
"Loan Agreement");
WHEREAS, FMI, as lessee, FMS Trust 1997-1, as lessor (the "Lessor"),
Wilmington Trust Company, as owner trustee (the "Owner Trustee"), the investors
from time to time party thereto, the Lenders from time to time party thereto (as
the same shall be amended, supplemented or otherwise modified from time to time,
the "Synthetic Lease Facility Lenders" and, collectively with the Loan Agreement
Lenders, the "Lenders"), the Lease Administrative Agent and the Syndication
Agent are parties to that certain participation agreement, dated as of
<PAGE>
INTERCREDITOR AGREEMENT
the date hereof (the "Participation Agreement" and, collectively with the other
documents contemplated by the Participation Agreement, the "Synthetic Lease
Facility") (the Synthetic Lease Facility, together with the Loan Agreement and
the other documents contemplated thereby, the "Facility Documents") (the transac
tions contemplated by the Facility Documents being collectively referred to as
the "Extensions of Credit");
WHEREAS, FMI and each of the Subsidiaries listed on the signa ture
pages thereof (the "Subsidiary Pledgors") are parties to that certain pledge
agreement, dated as of the date hereof (the "Pledge Agreement"), in favor of the
Collateral Agent for the benefit of the Lenders and the persons who may in the
future become beneficiaries in accordance with the terms of this Agreement and
the Facility Documents (all such beneficially interested parties being the
"Beneficiaries");
WHEREAS, it is a condition precedent to the Extensions of Credit to
FMI that FMI, the Subsidiary Pledgors and the Agents, on behalf of the Lenders,
shall have executed and delivered this Agreement to the Agents; and
WHEREAS, FMI, the Subsidiary Pledgors and the Agents, on behalf of the
Lenders, desire to execute this Agreement to satisfy the condition described in
the preceding paragraph;
NOW, THEREFORE, it is agreed:
1. Appointment. The Agents, on behalf of the Lenders, by their
acceptance of the benefits of the Pledge Agreement, hereby irrevocably designate
BTCo. as Collateral Agent to act as specified herein. The Agents hereby
irrevocably authorize the Collateral Agent to take such action on their behalf
under the provisions of the Pledge Agreement and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically delegated to or
required of the Collateral Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto. The Collateral Agent may perform
any of its duties hereunder by or through its agents or employees.
2
<PAGE>
INTERCREDITOR AGREEMENT
2. Nature of Duties. The Collateral Agent shall have no duties or
responsibilities except those expressly set forth herein and in the Pledge
Agreement. Neither the Collateral Agent nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted by it as
such under the Pledge Agreement or hereunder or in connection herewith or
therewith, unless caused by its or their gross negligence or willful misconduct.
The duties of the Collateral Agent shall be mechanical and administrative in
nature; the Collateral Agent shall not have by reason of this Agreement or the
Pledge Agreement a fiduciary relationship in respect of any Agent or Lender; and
nothing in this Agreement or the Pledge Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon the Collateral Agent any
obligations in respect of the Pledge Agreement except as expressly set forth
herein or therein.
3. Lack of Reliance on the Collateral Agent. Independently and without
reliance upon the Collateral Agent, each Lender, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of FMI and its
Subsidiaries in connection with the Extensions of Credit and the taking or not
taking of any action in connection therewith, and (ii) its own appraisal of the
creditworthiness of FMI and its Subsidiaries, and the Collateral Agent shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Agent or Lender with any credit or other information with respect
thereto, whether coming into its possession before the extension of any credit
under the Facility Documents, or at any time or times thereafter. The Collateral
Agent shall not be responsible to any Agent or Lender for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement, the Pledge Agreement
or the financial condition of FMI and its Subsidiaries or be required to make
any inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of the Pledge Agreement, or the financial condition of
FMI and its Subsidiaries, or the existence or possible existence of any Event of
Default.
4. Certain Rights of the Collateral Agent. No Agent shall have the
right to cause the Collateral Agent to take any action with respect to the
Collateral, with only the Required Lenders (as hereinafter defined) having the
right
3
<PAGE>
INTERCREDITOR AGREEMENT
to direct the Collateral Agent to take any such action. If the Collateral Agent
shall request instructions from the Required Lenders with respect to any act or
action (including failure to act) in connection with the Pledge Agreement, the
Collateral Agent shall be entitled to refrain from such act or taking such
action unless and until it shall have received instructions from the Required
Lenders, and to the extent requested, appropriate indemnification in respect of
actions to be taken; and the Collateral Agent shall not incur liability to any
Person by reason of so refraining. Without limiting the foregoing, no Agent
shall have any right of action whatsoever against the Collateral Agent as a
result of the Collateral Agent acting or refraining from acting (x) hereunder in
accordance with the instructions of the Required Lenders or (y) under the Pledge
Agreement as provided for therein. As used herein, the term "Required Lenders"
shall mean Lenders the sum of whose drawn loans and undrawn commitments
represent greater than 50% of the total Extensions of Credit (both drawn and
undrawn); provided, however, that upon termination of any Lender's Commitment,
such Lender may only vote with respect to drawn loans outstanding; provided,
further, that any request to act or refrain from acting which would affect only
the rights and benefits of any Class of Lenders (and not all Lenders in a like
or similar manner) shall require the written authorization of the Lenders of the
affected Class. For the purpose of this Agreement, the term "Class" shall mean
each class of Lenders, i.e., whether (x) Loan Agreement Lenders or (y) the
Synthetic Lease Facility Lenders.
5. Reliance. The Collateral Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper Person or entity, and, with respect to all legal matters pertaining
to the Pledge Agreement and its duties thereunder and hereunder, upon advice of
counsel selected by it.
6. Indemnification. To the extent the Collateral Agent is not
reimbursed and indemnified by FMI, the Agents, on behalf of the Lenders and
solely to the extent of actual receipt of such amounts from the Lenders, will
reimburse and indemnify the Collateral Agent, in proportion to the Lenders'
respective principal amounts of Extensions of Credit (both drawn and undrawn),
for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature
4
<PAGE>
whatsoever which may be imposed on, incurred by or asserted against the Collat-
eral Agent in performing its duties hereunder or under the Pledge Agreement, or
in any way relating to or arising out of this Agreement or the Pledge Agreement
except for those resulting solely from the Collateral Agent's own gross
negligence or willful misconduct. The indemnities set forth in this Section 6
shall survive the repayment of all Extensions of Credit.
7. The Collateral Agent in its Individual Capacity. With respect to
its obligations as a lender under the Facility Documents, the Collateral Agent
shall have the rights and powers specified therein and herein for a "Lender" or
"Agent," as the case may be, and may exercise the same rights and powers as
though it were not performing the duties specified herein; and the term "Lender"
or any similar term shall, unless the context clearly otherwise indicates,
include the Collateral Agent in its individual capacity. The Collateral Agent
may accept deposits from, lend money to, and generally engage in any kind of
banking, trust or other business with FMI or any of its affiliates as if it were
not performing the duties specified herein or in the Pledge Agreement, and may
accept fees and other consideration from them for services in connection with
the Facility Documents and otherwise without having to account for the same to
the Agents.
8. Application of Proceeds. (a) Any and all amounts actually received
by the Collateral Agent in connection with the enforcement of the Pledge
Agreement, including the proceeds of any collection, sale or other disposition
of the Collateral or any portion thereof (collectively, "Proceeds") shall first
be applied to the payment of all costs and expenses of such sale, collection or
other realization, and all expenses, liabilities and advances made or incurred
by Collateral Agent in connection therewith and all amounts for which the
Collateral Agent is entitled to indemnification under this Agreement or the
Pledge Agreement and all advances made by the Collateral Agent under the Pledge
Agreement for the account of the Pledgors or for the payment of all costs and
expenses paid or incurred by the Collateral Agent in connection with the
exercise of any right or remedy under the Pledge Agreement, all in accordance
with Section 6 hereof and/or Section 16 of the Pledge Agreement. Until Proceeds
are so applied, the Collateral Agent shall hold such Proceeds in its custody in
accordance with regular procedures for handling deposited funds.
5
<PAGE>
INTERCREDITOR AGREEMENT
(b) Any Proceeds remaining after application in accordance with clause
(a) above shall be paid to the Agents pro rata in accordance with the aggregate
Extensions of Credit then outstanding under the respective Facility Documents
and the Agents shall apply such Proceeds so that each Lender shall receive
payment of its proportionate amount of all such Proceeds. For the purposes of
determining the proportionate amounts of all Extensions of Credit at the time
any Proceeds are due to be distributed under this Section 8, the amount of the
outstanding Extensions of Credit shall be deemed to be the principal and
interest then due and payable under the Facility Documents. For purposes of
determining the amount payable to each Agent, the Collateral Agent shall be
entitled to request each Agent to furnish it with written notice of the amount
of Extensions of Credit then owed to each Lender under its respective Facility
Documents and shall be entitled to rely upon the amounts stated therein in
making such distribution.
(c) For purposes of applying payments received in accordance with this
Section 8, the Collateral Agent shall be entitled to rely upon the Agents for a
determination (which the Agents by their acceptance of the benefits of this
Agreement shall be obligated to provide upon request of the Collateral Agent)
of the outstanding Extensions of Credit owed to the Lenders. Unless they have
actual knowledge (including by way of written notice from a Lender) to the
contrary, the Agents, in furnishing information pursuant to the preceding
sentence, and the Collateral Agent, in acting hereunder, shall be entitled to
assume that no obliga tions other than principal, interest and regularly
accruing fees are owing to any Lender.
9. Joinder of New Subsidiaries. FMI agrees that, promptly after the
acquisition or creation of any new Subsidiary (and in any event within ten days
after the date of such acquisition or creation, as the case may be) it will
cause any such Subsidiary (other than an Insignificant Subsidiary) required to
pledge its capital stock pursuant to the Pledge Agreement to deliver to the
Agents and the Collateral Agent an acknowledgment duly executed by such new
Subsidiary in substantially the form of Exhibit A hereto (an "Intercreditor
Acknowledgment").
10. Definitions. The following terms shall have the meanings herein
specified unless the context otherwise requires. Such definitions shall be
equally applicable to the singular and plural forms of the terms defined.
6
<PAGE>
INTERCREDITOR AGREEMENT
"Agents" shall have the meaning provided in the first paragraph of
this Agreement.
"Agreement" shall mean this Intercreditor and Collateral Agency
Agreement as modified, supplemented or amended from time to time.
"Beneficiaries" shall have the meaning provided in the third WHEREAS
clause of this Agreement.
"BTCo." means Bankers Trust Company.
"Class" shall have the meaning provided in Section 4.
"Collateral" shall mean the "Pledged Collateral" under, and as defined
in, the Pledge Agreement.
"Collateral Agent" shall mean Bankers Trust Company acting in its
capacity as collateral agent hereunder.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Facility Documents.
"Extensions of Credit" shall have the meaning provided in the second
WHEREAS clause of this Agreement.
"Facility Documents" shall have the meaning provided in the second
WHEREAS clause of this Agreement.
"Intercreditor Acknowledgment" shall have the meaning provided in
Section 10.
"Lease Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement.
"Lenders" shall have the meaning provided in the second WHEREAS clause
of this Agreement.
7
<PAGE>
INTERCREDITOR AGREEMENT
"Lessor" shall mean FMS Trust 1997-1, as lessor under the Partici-
pation Agreement.
"Loan Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement.
"Loan Agreement" shall have the meaning provided in the first WHEREAS
clause of this Agreement.
"Loan Agreement Lenders" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Owner Trustee" shall mean Wilmington Trust Company, as owner trustee
under the Participation Agreement.
"Participation Agreement" shall have the meaning provided in the
second WHEREAS clause of this Agreement.
"Pledge Agreement" shall have the meaning provided in the third
WHEREAS clause of this Agreement.
"Pledgor" shall mean each "Pledgor" under, and as defined in, the
Pledge Agreement.
"Proceeds" shall have the meaning provided in Section 8.
"Required Lenders" shall have the meaning provided in Section 4.
"Subsidiary Pledgors" shall have the meaning provided in the third
WHEREAS clause of this Agreement.
"Syndication Agent" shall mean The Chase Manhattan Bank, as
syndication agent under the Loan Agreement.
"Synthetic Lease Facility" shall have the meaning provided in the
second WHEREAS clause of this Agreement.
8
<PAGE>
INTERCREDITOR AGREEMENT
"Synthetic Lease Facility Lenders" shall have the meaning provided in
the second WHEREAS clause of this Agreement.
11. Resignation by the Collateral Agent. (a) The Collateral Agent may
resign from the performance of all its functions and duties hereunder and under
the Pledge Agreement at any time by giving 30 days' prior written notice to FMI,
the Subsidiary Pledgors and the Agents. Such resignation shall take effect upon
the appointment of a successor Collateral Agent pursuant to clauses (b) and (c)
below.
(b) Upon any such notice of resignation, the Required Lenders shall
appoint a successor Collateral Agent hereunder who shall be a commercial bank or
trust company; provided that so long as no Default under any of the Facility
Documents shall be in existence such appointment shall be reasonably acceptable
to FMI.
(c) If a successor Collateral Agent shall not have been so appointed
within said 30-day period, the Collateral Agent shall then appoint a successor
Collateral Agent who shall serve as Collateral Agent hereunder or thereunder
until such time, if any, as the Required Lenders appoint a successor Collateral
Agent as provided above.
12. Governing Law. This Agreement and the rights and obligations of
FMI, the Subsidiary Pledgors and the Agents hereunder shall be construed in
accordance with and be governed by the law of the State of New York.
13. Miscellaneous. This Agreement shall be binding upon FMI, each
Subsidiary Pledgor and each Agent, on behalf of the Lenders, and shall inure to
the benefit of and be enforceable by the successors and assigns of the parties
hereto. The headings in this Agreement are for purposes of reference only and
shall not limit or define the meaning hereof. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
shall constitute one instrument. In the event that any provision of this
Agreement shall prove to be invalid or unenforceable, such provision shall be
deemed to be severable from the other provisions of this Agreement which shall
remain binding on all parties hereto.
9
<PAGE>
INTERCREDITOR AGREEMENT
14. Amendment or Waiver of this Agreement and the Pledge Agreement.
None of the terms and conditions of this Agreement or the Pledge Agreement may
be changed, waived, modified or varied in any manner whatsoever unless in
writing duly signed by (i) with respect to this Agreement, the parties hereto
and (ii) with respect to the Pledge Agreement, the Pledgors and the Collateral
Agent thereunder, in each case with the consent of the Required Lenders;
provided, however, that any change, waiver, modification or variance affecting
the rights and benefits of a single Class of Lenders (and not all Lenders in a
like or similar manner) shall require the written consent of the Required
Lenders of such affected Class.
15. Termination; Release of Collateral and Pledge Agreement. (a) This
Agreement shall terminate on the date upon which the total commitments under the
Facility Documents are terminated, all Letters of Credit issued under the Loan
Agreement are terminated, and when all Extensions of Credit have been
indefeasibly paid in full (other than Extensions of Credit relating to
indemnities to the extent not previously requested at the time of the
termination of the other Extensions of Credit);
(b) The Collateral Agent shall, upon at least ten days' prior notice
and at the request of a Pledgor, release (without recourse and without any
representation or warranty) any or all of the Collateral in accordance with the
terms of the Facility Documents; provided that (x) the sale of the respective
Collateral is permitted under the Facility Documents or such release has been
approved in writing by the requisite Lenders under the Facility Documents and
(y) the proceeds of such Collateral are applied in a manner consistent herewith
and with the Facility Documents. Prior to the release of any Collateral pursuant
to this Section 15, the Collateral Agent shall be entitled to receive a
certificate signed by the chief financial officer or other authorized
representative of the Pledgor (i) identifying any and all financing statements
or other filings or registrations that must be amended or terminated in order to
consummate the sale contemplated in clause (x) of the immediately preceding
sentence and (ii) certifying that the financing statements or other filings or
registrations identified in immediately preceding clause (i) relate exclusively
to the Collateral then being sold.
(c) Not more than ten days after receipt by the Agents from FMI of
evidence satisfactory to it that FMI has received a rating on its senior
unsecured
10
<PAGE>
INTERCREDITOR AGREEMENT
long-term debt of Baa3 or higher from Moody's and BBB- from S&P, and pro vided
that no Event of Default shall be in existence, the Pledge Agreement shall
terminate and, at the request and sole expense of FMI, the Agents shall take all
steps necessary to release the Pledged Collateral. Upon such termination any and
all obligations of FMI or the Subsidiaries with respect to such Pledge Agreement
and the transactions contemplated thereby shall terminate.
16. Inconsistent Provisions. If any provision of this Agreement shall
be inconsistent with, or contrary to, any provision in the Facility Documents or
the Pledge Agreement, the provision in this Agreement shall be controlling, and
shall supersede such inconsistent provision to the extent necessary to give full
effect to all provisions contained in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
- --------
One Bankers Trust Plaza BANKERS TRUST COMPANY,
130 Liberty Street as Loan Administrative Agent
New York, NY 10006
Attn: Deal Administrator ANTHONY LO GRIPPO
Telephone: (212) By ------------------------
Telecopy: (212) 250-7351 Anthony Lo Grippo
Title: Vice President
BANKERS TRUST COMPANY, as
Lease Administrative Agent
ANTHONY LO GRIPPO
By ------------------------
Anthony Lo Grippo
Title: Vice President
11
<PAGE>
BANKERS TRUST COMPANY, as
Collateral Agent
DAVID J. BELL
By ------------------------
Title: Vice President
Acknowledged and Agreed to
this 11th day of March, 1998:
FRED MEYER, INC.,
a Delaware corporation
ROGER A. COOKE
By: ----------------------------
Title: Sr. Vice President & Secretary
FRED MEYER STORES, INC.,
a Delaware corporation
ROGER A. COOKE
By: ----------------------------
Title: Sr. Vice President & Secretary
SMITH'S FOOD & DRUG CEN
TERS, INC., a Delaware corporation
ROGER A. COOKE
By: ----------------------------
Title: Sr. Vice President & Secretary
B&B STORES, INC.,
a Montana corporation
ROGER A. COOKE
By: ----------------------------
Title: Vice President & Secretary
12
<PAGE>
FM HOLDING CORPORATION,
a Delaware corporation
ROGER A. COOKE
By: ----------------------------
Title: Vice President & Secretary
ROUNDUP CO.,
a Washington corporation
ROGER A. COOKE
By: ----------------------------
Title: Vice President & Secretary
QUALITY FOOD CENTERS, INC.
a Washington corporation
ROGER A. COOKE
By: ----------------------------
Title: Sr. Vice President & Secretary
HUGHES MARKETS, INC.
a California corporation
ROGER A. COOKE
By: ----------------------------
Title: Vice President & Secretary
FOOD 4 LESS HOLDINGS, INC.
a Delaware corporation
ROGER A. COOKE
By: ----------------------------
Title: Sr. Vice President & Secretary
13
<PAGE>
EXHIBIT A
to the Intercreditor Agreement
[FORM OF INTERCREDITOR ACKNOWLEDGMENT
OF NEW SUBSIDIARY]
Reference is hereby made to the Intercreditor and Collateral Agency
Agreement dated as of March __, 1998 (the "Intercreditor Agreement")
among Fred Meyer, Inc. and its Subsidiaries who are signatories thereto and
Bankers Trust Company, as Loan Administrative Agent,
Lease Administrative Agent and Collateral Agent in
which this Acknowledgment and its attachments are incorporated.
The undersigned is a new Subsidiary (other than an Insignificant
Subsidiary) which is required to pledge capital stock pursuant to the
Pledge Agreement and, as such,
is required to join the Intercreditor Agreement.
The undersigned acknowledges the terms of the Intercreditor Agreement
and agrees to be bound thereby.
[NEW SUBSIDIARY]
By: ----------------------
Name:_______________
Title:______________
Notice Address:
-------------------------
-------------------------
-------------------------
14
SUBSIDIARY GUARANTEE
SUBSIDIARY GUARANTEE (this "Subsidiary Guarantee"), dated as of
March 11, 198, is executed by each of the Guarantors listed on the signature
pages hereof (collectively the "Guarantors"), for the benefit of BANKERS TRUST
COMPANY, as administrative agent (the "Administrative Agent") under the Loan
Agreement (as defined below) and each Lender named therein (collectively, the
"Lenders"). Capitalized terms used but not otherwise defined herein shall have
the meanings provided for such terms in the Loan Agreement.
RECITALS :
--------
WHEREAS, it is a condition to the effectiveness of that certain Loan
Agreement (as amended, supplemented or otherwise modified from time to time, the
"Loan Agreement"), dated as of March 11, 1998, among FRED MEYER, INC., as
borrower (the "Borrower"), the Lenders, the Administrative Agent and The Chase
Manhattan Bank, as Syndication Agent, that the Guarantors execute and deliver
this Subsidiary Guarantee; and
WHEREAS, it is in the best interests of the Guarantors to execute this
Guarantee inasmuch as the Guarantors will derive substantial benefits from the
transactions contemplated by the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantors hereby agree as follows:
1. Each Guarantor hereby jointly, severally, irrevocably and
unconditionally guarantees:
(a) the full and prompt payment when due (whether at maturity, by
optional or mandatory prepayment, upon acceleration or otherwise) of the
principal and interest payable on the Loans;
(b) the payment of all other obligations and indebtedness
(including, without limitation, indemnities, fees and interest thereon and
all obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code and the operation of Sections 502(b) and 506(b) of the
<PAGE>
SUBSIDIARY GUARANTEE
Bankruptcy Code, 11 U.S.C. ss.502(b) and ss.506 (b), would become due) of
the Borrower now existing or hereafter incurred under, arising out of, or
in connection with the Loan Agreement;
(c) the due performance and compliance by the Borrower with all
of the terms, conditions and agreements contained in the Loan Agreement;
(d) the payment of all sums advanced by the Lenders under or
pursuant hereto, with interest thereon from the due date thereof, until
paid, at the rate specified in Section 2.13(c) of the Loan Agreement; and
(e) all renewals, extensions, amendments and changes of, or
substitutions or replacements for, all or any part of the foregoing (all
such principal, premiums, interest, obligations, indebtedness, performance,
compliance and payments, collectively, the "Guaranteed Obligations").
All payments by the Guarantors under this Subsidiary Guarantee shall
be made on the same basis as payments by the Borrower under Section 2.17 of the
Loan Agreement.
This guarantee is a primary obligation of each Guarantor and is a
guarantee of payment, and not merely of collection.
2. The Lenders may, at any time and from time to time, without the
consent of, or notice to, the Guarantors, without incurring responsibility to
the Guarantors and without impairing or releasing the obligations of the
Guarantors hereunder, upon or without any terms or conditions and in whole or in
part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew or alter, any of the
Guaranteed Obligations, any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the guarantee herein made
shall apply to the Guaranteed Obligations as so changed, extended, renewed
or altered;
(b) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any
time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
2
<PAGE>
SUBSIDIARY GUARANTEE
(c) exercise or refrain from exercising any rights against the
Borrower, any other Guarantor or others, or otherwise act or refrain from
acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to creditors of the Borrower
other than the Lenders and the Guarantors;
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Lenders regardless of
what liabilities or liabilities of the Borrower remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, the Loan Agreement, or otherwise amend, modify or supplement
the Loan Agreement;
(g) act or fail to act in any manner referred to in this
Subsidiary Guarantee which may deprive the Guarantors of their right to
subrogation against the Borrower to recover full indemnity for any payments
made pursuant to this Subsidiary Guarantee.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guarantee of the indebtedness of
the Borrower whether executed by such Guarantor, any other Guarantor or by
any other Person, and the liability of each Guarantor hereunder shall not
be affected or impaired by any circumstance or occurrence whatsoever,
including, without limitation: (a) any direction as to the application of
payment by the Borrower or any other Person; (b) any other continuing or
other guarantee, undertaking or maximum liability of a Guarantor or of any
other Person as to the indebtedness of the Borrower; (c) any payment on or
in reduction of any such other guarantee or undertaking; (d) any
dissolution, termination or increase, decrease or change in personnel by
the Borrower; (e) any payment made to any Lender in respect of the
Guaranteed Obligations which any Lender repays the Borrower or any
Guarantor pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and each
Guarantor waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding; (f) any action or
inaction by any of the Lenders as contemplated by Section 2 hereof; or (g)
any invalidity, irregularity or unenforceability of all or part of the
Guaranteed
3
<PAGE>
SUBSIDIARY GUARANTEE
Obligations or any security therefor. Notwithstanding the foregoing, each of the
Guarantors agrees that this Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time any payment (in whole or in part)
of any of the Guaranteed Obligations is rescinded or must otherwise be restored
by any Guaranteed Party, upon the insolvency, bankruptcy or reorganization of
the Borrower or otherwise, as though such payment had not been made.
4. The obligations of each Guarantor hereunder are independent of the
obligations of any other Guarantor, any other guarantor or the Borrower, and a
separate action or actions may be brought and prosecuted against each Guarantor
whether or not action is brought against any other Guarantor, any other
guarantor or the Borrower, and whether or not any other Guarantor, any other
guarantor or the Borrower be joined in any such action or actions.
5. In order to induce the Lenders to make Loans pursuant to the Loan
Agreement, each Guarantor makes the following representations, warranties and
agreements:
5.1 Such Guarantor (a) is a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation, (b) has the corporate power and authority to own its property and
assets and to transact the business in which it is engaged and (c) is duly
qualified as a foreign corporation and in good standing in each jurisdiction
where the ownership, leasing or operation of property or the conduct of its
business requires such qualification, except where failure to so qualify does
not have a Material Adverse Effect with respect to such Guarantor.
5.2 Such Guarantor has the corporate power to execute, deliver and
perform the terms and provisions of this Subsidiary Guarantee and has taken all
necessary corporate action to authorize the execution, delivery and performance
by it of this Subsidiary Guarantee. Such Guarantor has duly executed and
delivered this Subsidiary Guarantee, and this Subsidiary Guarantee constitutes
the legal, valid and binding obligation of such Guarantor enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and by general equitable principles (regardless of whether the
issue of enforceability is considered in a proceeding in equity or at law).
5.3 Neither the execution, delivery or performance by such Guarantor
of this Subsidiary Guarantee, nor compliance by any with the terms and
provisions hereof, (a) will contravene any provision of any law, statute, rule
or
4
<PAGE>
SUBSIDIARY GUARANTEE
regulation or any order, writ, injunction or decree of any court or governmental
instrumentality, (b) will conflict or be inconsistent with or result in any
breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien upon any of the property or assets of
such Guarantor pursuant to the terms of any indenture, mortgage, deed of trust,
credit agreement, loan agreement or any other agreement, contract or instrument
to which such Guarantor is a party or by which it or any of its property or
assets is bound or to which it may be subject or (c) will violate any provision
of the Certificate of Incorporation, Articles of Incorporation (as applicable)
or By-Laws of such Guarantor.
5.4 No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with (except as have been obtained or
made prior to the Closing Date), or exemption by, any governmental or public
body or authority, or any subdivision thereof, is required to authorize, or is
required in connection with, (a) the execution, delivery and performance of this
Subsidiary Guarantee or (b) the legality, validity, binding effect or
enforceability of this Subsidiary Guarantee.
5.5 There are no actions, suits or proceedings pending or, to the best
knowledge of such Guarantor, threatened that are reasonably likely to have a
Material Adverse Effect with respect to such Guarantor.
5.6 All factual information (taken as a whole) heretofore or
contemporaneously furnished by or on behalf of the Subsidiary Guarantor in
writing to the Administrative Agent (including, without limitation, all
information contained herein) for purposes of or in connection with this
Subsidiary Guarantee or any transaction contemplated herein is, and all other
such factual information (taken as a whole) hereafter furnished by or on behalf
of such Guarantor in writing to any Lender will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided.
5.7 Such Guarantor has filed all tax returns required to be filed by
it and has paid all income taxes payable by it which have become due pursuant to
such tax returns and all other taxes and assessments payable by it which have
become due, other than those not yet delinquent and except for those contested
in good faith and for which adequate reserves have been established. Such
Guarantor has paid, or has provided adequate reserves (in the good faith
judgment of the management of the Subsidiary Guarantor) for the payment of, all
federal and state income taxes
5
<PAGE>
SUBSIDIARY GUARANTEE
applicable for all prior fiscal years and for the current fiscal year to the
date hereof, if any.
5.8 On the date hereof, all outstanding shares of capital stock of
such Guarantor have been duly and validly issued, are fully paid and
non-assessable. Such Guarantor has no outstanding any securities convertible
into or exchangeable for its capital stock or outstanding any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
5.9 Such Guarantor is in compliance with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls) except where such noncompliance could not reasonably be expected to
have a Material Adverse Effect.
5.10 Such Guarantor is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
5.11 Such Guarantor is not a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
5.12 Such Guarantor has good and marketable title to, or valid
leasehold interests in, all its properties and assets. Such Guarantor is in
compliance in all respects with all obligations under all leases to which it is
a party, except where such non-compliance could not reasonably be expected to
have a Material Adverse Effect. All such leases are in full force and effect and
such Guarantor enjoys peaceful and undisturbed possession under all such leases,
except where the lack of force or effect or the failure to enjoy peaceful and
undisturbed possession could not reasonably be expected to have a Material
Adverse Effect.
5.13 No event has occurred or has failed to occur which, with the
giving of notice, lapse of time or both, would constitute an event of default,
default, violation or breach of or under any indenture, mortgage, deed of trust,
franchise or other agreement or instrument to which such Guarantor is a party or
by which such Guarantor or any of its properties or assets may be bound.
6
<PAGE>
SUBSIDIARY GUARANTEE
6. Each Guarantor covenants and agrees that on and after the date
hereof and until the termination of this Subsidiary Guarantee:
6.1 Except as otherwise permitted under the Loan Agreement, it will
maintain its existence and rights as a corporation in full force and effect so
long as this Subsidiary Guarantee is outstanding, and will perform all of its
obligations under the terms of each indenture, mortgage, deed of trust, credit
agreement, loan agreement or any other agreement, contract or instrument by
which it is bound.
6.2 It will, at any time and from time to time, upon the request of a
Lender and at such Guarantor's expense, promptly and duly execute and deliver or
cause to be executed and delivered any and all further instruments and documents
and take such further action as such Lender may reasonably request to effect the
purposes of this Subsidiary Guarantee.
7. This Subsidiary Guarantee is a continuing one and all liabilities
to which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on the
part of any Lender in exercising any right, power or privilege hereunder and no
course of dealing between any Guarantor and any Lender shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights, powers and remedies
herein expressly provided are cumulative and not exclusive of any rights, powers
or remedies which any Lender would otherwise have. No notice to or demand on any
Guarantor in any case shall entitle any Guarantor to any other further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
any Lender to any other or further action in any circumstances without notice or
demand.
8. This Subsidiary Guarantee shall be binding upon each Guarantor and
its successors and assigns and shall inure to the benefit of the Administrative
Agent, the Lenders and their respective successors and assigns.
9. This Subsidiary Guarantee will terminate upon the occurrence of all
of the following: (a) the Commitments have expired and been terminated; (b) the
principal and interest on each Loan and all fees, indemnities, costs, expenses
and other amounts payable under the Loan Agreement shall have been paid in full,
without respect to any termination of the Loan Agreement; (c) all Letters of
Credit shall have expired or terminated; and (d) all LC Disbursements shall have
been paid in full. Neither this Subsidiary Guarantee nor any provision hereof
may be changed,
7
<PAGE>
SUBSIDIARY GUARANTEE
waived, discharged or terminated except as provided in Section 9.2 of the Loan
Agreement.
10. Each Guarantor acknowledges that an executed (or conformed) copy
of the Loan Agreement has been made available to its principal executive
officers and such officers are familiar with the contents thereof.
11. All notices and other communications hereunder shall be made at
the addresses, in the manner and with the effect provided in Section 9.1 of the
Loan Agreement, provided that, for this purpose, the address of each Guarantor
shall be in care of the Borrower or as otherwise specified in writing by any
Guarantor to each of the parties to this Subsidiary Guarantee.
12. If claim is ever made upon any Lender for repayment or recovery of
any amount or amounts received in payment or on account of any of the Guaranteed
Obligations and any of the aforesaid payees repays all or part of said amount by
reason of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over such payee or any of its property or (b) any settlement
or compromise of any such claim effected by such payee with any such claimant
(including the Borrower), then and in such event each Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon it,
notwithstanding any revocation hereof or the cancellation of the Loan Agreement
or other instrument evidencing any liability of the Borrower, and each Guarantor
shall be and remain liable to the aforesaid payees hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by any such payee.
13. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by the Borrower or others (including each
Guarantor), with respect to any of the Guaranteed Obligations shall, if the
statute of limitations in favor of such Guarantor against any Lender shall have
commenced to run, toll the running of such statute of limitations, and if the
period of such statute of limitations shall have expired, prevent the operation
of such statute of limitations.
14. Each Guarantor confirms that it is the intention of all parties to
the Loan Agreement that neither the guarantee by such Guarantor pursuant to this
Subsidiary Guarantee nor any liability or payment by it hereunder shall (i)
render such Guarantor "insolvent," or (ii) constitute a fraudulent transfer or
conveyance, or (iii) constitute a transaction at an undervalue or preference, or
(iv) give rise to any similar or analogous event, thing or circumstance, in each
case, for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyances
Act, the Uniform Fraudulent
8
<PAGE>
SUBSIDIARY GUARANTEE
Transfer Act or any similar federal or state law. To effectuate the foregoing
intention, the Lenders and each Guarantor hereby irrevocably agree that the
Guaranteed Obligations of such Guarantor shall be limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Guarantor and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the Guaranteed Obligations
of such other Guarantor under this Guarantee, result in the Guaranteed
Obligations of such Guarantor hereunder neither rendering the Guarantor
"insolvent" nor constituting such fraudulent transfer or conveyance, such
transaction at an undervalue or preference or such other event, thing or
circumstance, in each case, under any such law.
15. This Subsidiary Guarantee and the rights and obligations of the
Lenders and each Guarantor hereunder shall be construed in accordance with and
governed by the law of the State of New York.
15.1 Any legal action or proceeding with respect to this Subsidiary
Guarantee may be brought in the courts of the State of New York or of the United
States for the Southern District of New York, and, by execution and delivery of
this Agreement, each Guarantor hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts.
15.2 Each Guarantor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to each Guarantor at its address set forth opposite its signature
below, such service to become effective 5 days after such mailing. Nothing
herein shall affect the right of any Lender to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
any Guarantor in any other jurisdiction.
15.3 Each Guarantor hereby irrevocably waives any objection it may now
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Subsidiary Guarantee
brought in the courts referred to above and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
16. Each Guarantor hereby:
(a) waives any right to require any Lender to (i) proceed against
the Borrower, any other guarantor or any other party, (ii) proceed against
or
9
<PAGE>
SUBSIDIARY GUARANTEE
exhaust any security held from the Borrower, any other guarantor or any
other party or (iii) pursue any other remedy in the Lenders' power
whatsoever;
(b) waives any defense based on or arising out of any defense of
the Borrower, any other guarantor or any other party other than payment in
full of the Guaranteed Obligations, including, without limitation, any
defense based on or arising out of the disability of the Borrower, any
other guarantor or any other party, the absence of any other party in any
proceeding or the unenforceability of the Guaranteed Obligations or any
part thereof from any cause, or the cessation from any cause of the
liability of the Borrower other than payment in full of the Guaranteed
Obligations;
(c) agrees that the Lenders may, at their election, foreclose on
any security held by them by one or more judicial or nonjudicial sales,
whether or not every aspect of any such sale is commercially reasonable (to
the extent such sale is permitted by applicable law), or exercise any other
right or remedy the Lenders may have against the Borrower or any other
party, or any security, without affecting or impairing in any way the
liability of any Guarantor hereunder, and waives any defense arising out of
any such election by the Lenders, even though such election operates to
impair or extinguish any right of reimbursement or subrogation or other
right or remedy of any Guarantor against the Borrower or any other party or
any security;
(d) waives all presentments, demands for performance, protests
and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this
Subsidiary Guarantee, and notices of the existence, creation or incurring
of new or additional indebtedness;
(e) assumes all responsibility for being and keeping itself
informed of the financial condition and assets of the Borrower, and of all
other circumstances bearing upon the risk of non-payment of the Guaranteed
Obligations and the nature, scope and extent of the risks such Guarantor
assumes and incurs hereunder, and agrees that the Lenders shall have no
duty to advise the Guarantors of information known to it regarding such
circumstances or risks;
(f) so long as any of the Guaranteed Obligations remain unpaid,
each Guarantor hereby agrees that it will not claim and hereby irrevocably
waives for such period all rights of subrogation it may at any time
otherwise have as a result of this Subsidiary Guarantee (whether
contractual, under
10
<PAGE>
SUBSIDIARY GUARANTEE
Section 509 of the United States Bankruptcy Code, or otherwise) to the
claims of the Lenders against the Borrower or any other guarantor of the
Guaranteed Obligations (collectively, the "Other Parties") and all
contractual, statutory or common law rights of reimbursement, contribution
or indemnity from any Other Party it may at any time otherwise have as a
result of this Subsidiary Guarantee;
(g) waives any right to enforce any other remedy that the Lenders
now have or may hereafter have against any Other Party, any endorser or any
other guarantor of all or any part of the Guaranteed Obligations and any
benefit of, and any right to participate in, any security or collateral
given to or for the benefit of the Lenders to secure payment of Guaranteed
Obligations; and
(h) waives all claims (as such term is defined in the United
States Bankruptcy Code) it may at any time otherwise have against the
Borrower arising from any transaction whatsoever, including, without
limitation, its right to assert or enforce any such claims.
Each Guarantor warrants and agrees that each of the waivers set forth in this
Subsidiary Guarantee is made with full knowledge of its significance and
consequences and that if any of such waivers are determined to be contrary to
any applicable law or public policy, such waivers shall be effective only to the
maximum extent permitted by law.
17. Any rights of any Guarantor, whether now existing or later
arising, to receive payment on account of any indebtedness (including interest)
owed to it by Borrower or to receive any payment from Borrower shall at all
times be subordinate as to lien and time of payment and in all other respects to
the full and prior repayment of the Guaranteed Obligations and any obligations
under the Other Corporate Loan Documents. The Guarantors shall not be entitled
to enforce or receive payment of any sums hereby subordinated until the
Guaranteed Obligations and any obligations under the Other Corporate Loan
Documents have been paid and performed in full and any such sums received in
violation of this Guarantee shall be received by the Guarantors in trust for the
Administrative Agent and the Lenders.
18. In order to provide for just and equitable contribution among the
Guarantors, the Guarantor agrees, that in the event any payment or distribution
is made by any other Guarantor (a "Funding Guarantor") under its Guarantee, such
Funding Guarantor shall be entitled to a contribution from all other Guarantors,
including the Guarantor, in a pro rata amount based on the Adjusted Net Assets
of
11
<PAGE>
SUBSIDIARY GUARANTEE
each Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Obligations of
the Borrower, and the Guarantor agrees (i) to cooperate with the other
Guarantors to determine whether such contributions are required and (ii) to make
such contribution, if the Guarantors agree that such contribution is required by
the Guarantor. "Adjusted Net Assets" of such Guarantor at any date shall mean
the lesser of (x) the amount by which the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date (other than liabilities
of such Guarantor subject to a Subordination Agreement)), but excluding
liabilities under the Guarantee, of such Guarantor at such date and (y) the
amount by which the present fair salable value of the assets of such Guarantor
at such date exceeds the amount that will be required to pay the probable
liabilities of such Guarantor on its debts, excluding debt in respect of the
Guaranty of such Guarantor, as they become absolute and matured.
12
<PAGE>
SUBSIDIARY GUARANTEE
IN WITNESS WHEREOF, each Guarantor has caused this Subsidiary
Guarantee to be executed and delivered as of the date first above written.
Fred Meyer Stores, Inc.
Roundup Co.
Fred Meyer of Alaska, Inc.
Fred Meyer of California, Inc.
Distribution Trucking Company
B & B Stores, Inc.
B&B Pharmacy, Inc.
CB&S Advertising Agency, Inc.
FM Holding Corporation.
Grand Central, Inc.
F M Retail Services, Inc.
Fred Meyer Jewelers, Inc.
Merksamer Jewelers, Inc.
FM Inc.
J H Properties, Inc.
Compare, Inc.
Richie's, Inc.
Quality Food Centers, Inc.
Hughes Markets, Inc.
Hughes Realty, Inc.
KU Acquisition Corporation
Second Story, Inc.
Quality Food, Inc.
Quality Food Holdings, Inc.
QFC Sub, Inc.
Natur Glo, Inc.
Western Property Investment Group, Inc.
ROGER A. COOKE
By: ------------------------------
Name: Roger A. Cooke
Title: Vice President and Secretary
S-1
<PAGE>
SUBSIDIARY GUARANTEE
Smith's Food & Drug Centers, Inc.
Smith's Beverage of Wyoming
Smitty's Supermarkets, Inc.
Smitty's Super Valu, Inc.
Saint Lawrence Holding Company
Smitty's Equipment Leasing, Inc.
Food 4 Less Holdngs, Inc.
Ralphs Gorcery Company
Falley's, Inc.
Cala Co.
Bay Area Warehouse Stores, Inc.
Cala Foods, Inc.
Bell Markets, Inc.
Food 4 Less of Southern California, Inc.
Alpha Beta Company
Food 4 Less GM, Inc.
Food 4 Less Merchandising, Inc.
Food 4 Less of California, Inc.
Crawford Stores, Inc.
ROGER A. COOKE
All By: ------------------------------
Name: Roger A. Cooke
Title: Vice President and Secretary
S-2
<PAGE>
SUBSIDIARY GUARANTEE
Treasure Valley Land Company, L.C.
By Smith's Food and Drug Centers, Inc., member
ROGER A. COOKE
By: ------------------------------
Name: Roger A. Cooke
Title: Vice President and Secretary
S-3
===============================================================================
$3,500,000,000
LOAN AGREEMENT
dated as of
March 11, 1998
among
FRED MEYER, INC.,
as Borrower
and
The Lenders Party Hereto
BANKERS TRUST COMPANY,
as Administrative Agent
and
THE CHASE MANHATTAN BANK,
as Syndication Agent
---------------------------
CHASE SECURITIES INC. and BT ALEX. BROWN,
as Arrangers
===============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.1. Defined Terms................................................. 1
SECTION 1.2. Classification of Loans and Borrowings........................20
SECTION 1.3. Terms Generally...............................................20
SECTION 1.4. Accounting Terms; GAAP........................................20
ARTICLE II
The Credits
-----------
SECTION 2.1. Term Loans....................................................21
SECTION 2.2. Revolving Loans...............................................21
SECTION 2.3 Loans and Borrowings..........................................21
SECTION 2.4. Requests for Borrowings.......................................22
SECTION 2.5. Letters of Credit.............................................23
SECTION 2.6. Funding of Borrowings.........................................28
SECTION 2.7 Notes.........................................................29
SECTION 2.8. Interest Elections............................................29
SECTION 2.9. Termination and Reduction of Commitments......................31
SECTION 2.10. Repayment of Loans; Evidence of Debt..........................31
SECTION 2.11. Optional Prepayment of Loans..................................32
SECTION 2.12. Fees..........................................................32
SECTION 2.13. Interest......................................................33
SECTION 2.14. Alternate Rate of Interest....................................34
SECTION 2.15. Increased Costs...............................................34
SECTION 2.16. Break Funding Payments........................................36
SECTION 2.17. Taxes.........................................................36
SECTION 2.18. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs...........................................38
SECTION 2.19. Mitigation Obligations; Replacement
of Lenders....................................................40
SECTION 2.20. Mandatory Prepayment..........................................41
i
<PAGE>
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.1. Organization; Powers......................................... 42
SECTION 3.2. Authorization; Enforceability................................ 42
SECTION 3.3. Governmental Approvals; No Conflicts......................... 43
SECTION 3.4. Financial Condition; No Material
Adverse Change............................................... 43
SECTION 3.5. Properties................................................... 44
SECTION 3.6. Litigation and Environmental Matters......................... 44
SECTION 3.7. Compliance with Laws and Agreements.......................... 44
SECTION 3.8. Investment and Holding Company Status........................ 45
SECTION 3.9. Taxes........................................................ 45
SECTION 3.10. ERISA........................................................ 45
SECTION 3.11. Disclosure................................................... 45
SECTION 3.12. Solvency..................................................... 45
SECTION 3.13. Use of Proceeds; Margin Regulations.......................... 45
SECTION 3.14. No Default................................................... 46
SECTION 3.15. Subsidiaries..................................................46
SECTION 3.16 Employee Benefit Plans........................................46
SECTION 3.17 Security Interests............................................47
ARTICLE IV
Conditions
----------
SECTION 4.1. Effective Date............................................... 47
SECTION 4.2. Each Credit Event.............................................49
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.1. Financial Statements and Other Information................... 50
SECTION 5.2. Notices of Material Events................................... 50
SECTION 5.3. Existence; Conduct of Business............................... 52
SECTION 5.4. Payment of Obligations....................................... 52
SECTION 5.5. Maintenance of Properties; Insurance......................... 52
SECTION 5.6. Books and Records; Inspection Rights......................... 52
SECTION 5.7. Compliance with Laws......................................... 52
SECTION 5.8. Use of Proceeds and Letters of Credit........................ 53
SECTION 5.9. Subsidiary Guaranties........................................ 53
ii
<PAGE>
SECTION 5.10 Further Assurances............................................ 53
ARTICLE VI
Negative Covenants
------------------
SECTION 6.1. Subsidiary Debt.............................................. 54
SECTION 6.2. Liens........................................................ 55
SECTION 6.3. Modifications of Merger Documents............................ 55
SECTION 6.4. Fundamental Changes.......................................... 56
SECTION 6.5. Investments, Loans, Advances, Suretyship
Liabilities and Acquisitions................................. 56
SECTION 6.6. Hedging Agreements........................................... 57
SECTION 6.7. Restricted Payments.......................................... 57
SECTION 6.8. Transactions with Affiliates................................. 58
SECTION 6.9. Restrictive Agreements....................................... 58
SECTION 6.10. Financial Covenants.......................................... 58
SECTION 6.11. Unconditional Purchase Obligations........................... 59
SECTION 6.12. Fiscal Year; Fiscal Quarter.................................. 59
ARTICLE VII
Events of Default.......................... 59
-----------------
ARTICLE VIII
The Administrative Agent
------------------------
SECTION 8.1. Appointment.................................................. 62
SECTION 8.2. Delegation of Duties......................................... 63
SECTION 8.3. Exculpatory Provisions....................................... 63
SECTION 8.4. Reliance by Administrative Agent............................. 63
SECTION 8.5. Notice of Default............................................ 63
SECTION 8.6. Non-Reliance on Administrative Agent and Other Lenders....... 64
SECTION 8.7. Indemnification ............................................. 64
SECTION 8.8. Administrative Agent in Its Individual Capacity ............. 65
SECTION 8.9. Successor Administrative Agent............................... 65
SECTION 8.10. Syndication Agent............................................ 65
iii
<PAGE>
ARTICLE IX
Miscellaneous
-------------
SECTION 9.1. Notices....................................................... 66
SECTION 9.2. Waivers; Amendments........................................... 67
SECTION 9.3. Expenses; Indemnity; Damage Waiver............................ 68
SECTION 9.4. Successors and Assigns........................................ 69
SECTION 9.5. Survival...................................................... 72
SECTION 9.6. Counterparts; Integration; Effectiveness...................... 72
SECTION 9.7 Marshalling; Recapture........................................ 73
SECTION 9.8. Severability.................................................. 73
SECTION 9.9. Right of Setoff............................................... 73
SECTION 9.10. Governing Law; Jurisdiction; Consent
to Service of Process......................................... 74
SECTION 9.11. WAIVER OF JURY TRIAL.......................................... 74
SECTION 9.12. Headings...................................................... 75
SECTION 9.13. Confidentiality............................................... 75
SECTION 9.14. OREGON LEGAL NOTICE........................................... 75
SCHEDULES AND EXHIBITS
Schedule 2.1 Lenders and Commitments
Schedule 2.5 Existing Letters of Credit
Schedule 2.20(a) Store Property Acquired in Mergers and Distribution Center
Schedule 2.20(e) Tendered Bonds
Schedule 3.6 Disclosed Matters
Schedule 3.15 Subsidiaries
Schedule 4.1 Refinancing of Existing Debt
Schedule 6.1 Debt
Schedule 6.2 Liens
Schedule 6.5 Investments
Schedule 6.9 Restrictive Agreements
Schedule A Term Loan Amortization
Exhibit A Assignment and Acceptance
Exhibit B Note
Exhibit C Opinion of Stoel Rives, Counsel to the Borrower
Exhibit D Subsidiary Guarantee
Exhibit E Guarantee Language
iv
<PAGE>
LOAN AGREEMENT dated as of March 11, 1998, among FRED MEYER, INC., as
Borrower, the LENDERS party hereto, BANKERS TRUST COMPANY, as Administrative
Agent, THE CHASE MANHATTAN BANK, as Syndication Agent, and NATIONSBANK OF TEXAS,
N.A., a national banking association, and SALOMON BROTHERS HOLDING CO INC. as
Co-Documentation Agents.
The parties hereto agree as follows:
ARTICLE I
Definitions
-----------
Section 1.1 Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"ABR" means, for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. For purposes hereof, "Prime Rate" means the rate of interest
per annum publicly announced from time to time by the Administrative Agent as
its prime rate in effect at its principal office in New York City (the Prime
Rate not being intended to be the lowest rate of interest charged by the
Administrative Agent in connection with extensions of credit to debtors); each
change in the Prime Rate shall be effective on the date such change is publicly
announced as effective. "Federal Funds Effective Rate" means, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by the
Administrative Agent from three Federal funds brokers of recognized national
standing selected by it. If for any reason the Administrative Agent shall have
determined that it is unable to ascertain the Federal Funds Effective Rate,
including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the ABR shall be
determined without regard to clause (b) of the first sentence of this
definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the ABR due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective on the effective
date of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"ABR Loans" means Loans made and/or being maintained at a rate of
interest based upon the ABR.
<PAGE>
LOAN AGREEMENT
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means Bankers Trust Company, in its capacity as
administrative agent for the Lenders hereunder.
"Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agents" means the Administrative Agent, the Co-Documentation Agents
and the Syndication Agent.
"Agreement" means this $3,500,000,000 Loan Agreement dated as of March
__, 1998 among the Borrower, the Lenders, the Administrative Agent and the
Syndication Agent.
"Applicable Level" means the level determined with reference to the
following chart:
Level Leverage Ratio Rating
- ----- -------------- ------
I greater than or equal to 3.0x less than or equal to BBB+ or Baa1
II less than 3.0x BBB or Baa2
III less than 3.5x BBB- or Baa3
IV less than 4.0x BB+ or Ba1
V less than 4.5x greater than or equal to BB or Ba2
For purposes of the foregoing, (i) prior to the Compliance Certificate Date, the
Applicable Level shall be Level IV; (ii) except as provided in (i) above, at any
time of determination, the Applicable Level shall be the Level corresponding to
the Leverage Ratio as set forth in the most recently delivered Compliance
Certificate (it being understood and agreed that if the Borrower shall not have
delivered the most recently due Compliance Certificate within the time period
specified in Section 5.1(c), the Applicable Level shall be Level V until such
Compliance Certificate is delivered) and the senior unsecured long term debt
rating of the Borrower from S&P and Moody's (for purposes of this definition,
the "Rating"); (iii) in the event the Leverage Ratio and the Rating do not fall
within the same Level, the Applicable Level shall be the higher (Level I being
the highest) of the two Levels; and (iv) in the event the rating from S&P and
the rating from Moody's do not fall within the same Level, the
2
<PAGE>
LOAN AGREEMENT
applicable Rating will be based upon the higher (Level I being the highest) of
the two ratings, except that, in the event one of the two ratings is two or more
Levels higher than the other, the applicable Rating shall be determined by
reference to the Level next lower than the higher of the two ratings. If any
rating established or deemed to be established by Moody's or S&P shall be
changed (other than as a result of a change in the rating system of Moody's or
S&P), such change shall be effective as of the date on which such change is
first announced by the rating agency making such change. Each such change shall
take effect on the effective date of such change and shall end on the date
immediately preceding the effective date of the next such change. If the rating
system of S&P or Moody's shall change prior to the Maturity Date, the Borrower
and the Lenders shall negotiate in good faith to amend the references to
specific ratings in this definition to reflect such changed rating system, and
pending agreement on another Applicable Level the Rating shall be determined by
reference to the rating provided by the non-changing rating agency. If the
Borrower does not have a senior long term unsecured debt rating or implied
rating from either Moody's or S&P, the Applicable Level shall be determined by
reference to the Leverage Ratio only.
"Applicable Margin" means, with respect to any Commitment Fee or
Eurodollar Loan, the applicable number of basis points per annum as set forth
below based on the Applicable Level:
Applicable Margin for
Applicable Level Commitment Fee Eurodollar Loans
- ---------------- -------------- ---------------------
I 20.0 62.5
II 25.0 75.0
III 25.0 87.5
IV 30.0 100.0
V 37.5 125.0
The Applicable Margin for ABR Loans shall be 0 at any time during which the
Applicable Level is Level IV or above. At any time during which the Applicable
Level of the Borrower is Level V, the Applicable Margin for ABR Loans shall be
25 basis points.
"Applicable Percentage" means, at any time and with respect to any
Lender, the percentage of the total Commitments represented by such Lender's
Commitment (or after the termination thereof, the percentage of the total
outstanding Credit Exposure represented by such Lender's outstanding Credit
Exposure at such time).
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.4), and accepted by the Administrative Agent,
substantially in the form of Exhibit A.
3
<PAGE>
LOAN AGREEMENT
"Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrower" means Fred Meyer, Inc., a Delaware corporation.
"Borrowing" means Loans of the same Type, made, converted or continued
on the same date and, in the case of Eurodollar Loans, as to which a single
Interest Period is in effect.
"Borrowing Request" means a request by the Borrower for a Borrowing in
accordance with Section 2.4.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the New York interbank market.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means (a) the acquisition of ownership, directly
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of shares
representing more than 33 1/3% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower; or (b)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of the Borrower by Persons who were neither (i) nominated by the board
of directors of the Borrower nor (ii) appointed by directors so nominated.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or Issuing Bank
(or, for purposes of Section 2.15(b), by any
4
<PAGE>
LOAN AGREEMENT
lending office of such Lender or by such Lender's or the Issuing Bank's holding
company, if any) with any request, guideline or directive (whether or not having
the force of law) of any Governmental Authority made or issued after the date of
this Agreement.
"Closing Date" means March 11, 1998, or such later date as the parties
hereto shall mutually agree in writing.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Co-Documentation Agents" means NationsBank of Texas, N.A. and Salomon
Brothers Holding Co Inc.
"Collateral" means the capital stock of each Subsidiary pledged under
the Pledge Agreement.
"Collateral Agent" has the meaning given thereto under the
Intercreditor Agreement.
"Commitment" means, with respect to each Lender, the commitment of
such Lender to make Loans and to acquire participations in Letters of Credit
hereunder, expressed as an amount representing the maximum aggregate amount of
such Lender's Credit Exposure hereunder, as such commitment may be (a) reduced
from time to time pursuant to Section 2.9 and (b) reduced or increased from time
to time pursuant to assignments by or to such Lender pursuant to Section 9.4.
The initial amount of each Lender's Commitment is set forth on Schedule 2.1, or
in the Assignment and Acceptance pursuant to which such Lender shall have
assumed its Commitment, as applicable. The initial aggregate amount of the
Lenders' Commitments is $3,500,000,000.
"Commitment Fee" means (i) prior to the Compliance Certificate Date,
an amount equal to 0.30% per annum, and (ii) from and after the Compliance
Certificate Date, a percentage per annum determined in accordance with the
definition of "Applicable Margin," in either case payable quarterly in arrears
on the last Business Day of each March, June, September and December and
calculated based on a year of 360 days by the Borrower to the Administrative
Agent on the average daily unused portion of the aggregate Commitments from and
including the Closing Date to but excluding the Maturity Date.
"Compliance Certificate" means a certificate signed by a Responsible
Officer of the Borrower certifying as to the matters set forth in Section
5.1(c).
5
<PAGE>
LOAN AGREEMENT
"Compliance Certificate Date" means the date upon which the
Administrative Agent receives the Compliance Certificate for the second full
fiscal quarter following the Closing Date.
"Consolidated EBITDA" of the Borrower and its Subsidiaries means "A"
minus "B"; where:
"A" equals the sum of consolidated net income plus, to the extent deducted
in determining consolidated net income, without duplication, (i)
extraordinary losses, (ii) interest expenses, including the interest
component of rent expense under all Synthetic Lease Facilities for
which the Borrower or any of its Subsidiaries has Suretyship
Liability, (iii) amortization, (iv) depreciation, (v) income taxes,
(vi) non-cash LIFO reserve charges and (vii) expenses incurred in
connection with the Mergers, including costs relating to the sale of
facilities to be disposed of in connection with the Mergers, name
change costs attributable to Hughes Markets, and severance costs; and
"B" equals, to the extent included in determining consolidated pre-tax
income, extraordinary gains.
"Consolidated EBITDAR" of the Borrower and its Subsidiaries means "A"
minus "B"; where:
"A" equals the sum of consolidated net income plus, to the extent deducted
in determining consolidated net income, without duplication, (i)
extraordinary losses, (ii) interest expense, (iii) amortization, (iv)
depreciation, (v) income taxes, (vi) non-cash LIFO reserve charges,
(vii) consolidated rental expense on operating leases (including rent
paid pursuant to any Synthetic Lease Facility) and (vii) expenses
incurred in connection with the Mergers, including costs relating to
the sale of facilities to be disposed of in connection with the
Mergers, name change costs attributable to Hughes Markets, and
severance costs; and
"B" equals, to the extent included in determining consolidated pre-tax
income, extraordinary gains.
"Consolidated Interest Expense" means the consolidated interest
expense of the Borrower, including the interest component of rent expense under
all Synthetic Lease Facilities for which the Borrower or any of its Subsidiaries
has Suretyship Liability.
6
<PAGE>
LOAN AGREEMENT
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Credit Exposure" means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender's Loans and its LC
Exposure at such time.
"Current Synthetic Lease Facility" means the transactions contemplated
by the Participation Agreement, dated the date hereof, among the Borrower,
Wilmington Trust Company, as owner trustee, FMS Trust 1997-1, as lessor, the
investors named therein, the Administrative Agent, the Syndication Agent, and
the lenders named therein.
"Debt" of any Person means, without duplication, (a) all obligations
of such Person for borrowed money, whether or not evidenced by bonds,
debentures, notes or similar instruments, (b) all Capital Lease Obligations of
such Person, (c) all obligations of such Person to pay the deferred purchase
price of property or services (other than current accounts payable in the
ordinary course of business), (d) all indebtedness secured by a Lien on the
property of such Person, whether or not such indebtedness shall have been
assumed by such Person (it being understood that if such Person has not assumed
or otherwise become personally liable for any such indebtedness, the amount of
the Debt of such Person in connection therewith shall be limited to the lesser
of the face amount of such indebtedness or the fair market value of all property
of such Person securing such indebtedness), (e) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or
not drawn) and banker's acceptances issued for the account of such Person, (f)
all obligations of such Person in respect of Hedging Agreements, (g) all
Suretyship Liabilities of such Person, (h) all other obligations of such Person
upon which interest charges are customarily paid (other than current accounts
payable in the ordinary course of business), (i) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person and (j) all Debt (as defined above) of any partnership
in which such Person is a general partner (except to the extent such Debt is not
recourse to such Person). The amount of the Debt of any Person in respect of
Hedging Agreements shall be deemed to be the unrealized net loss position of
such Person thereunder (determined for each counterparty individually, but
netted for all Hedging Agreements maintained with such counterparty).
"Debt for Borrowed Money" of any Person means all Debt of such Person
described in (without duplication) clauses (a), (b), (c), (d), (h) and, to the
extent constituting a Suretyship Liability in respect of Debt for Borrowed Money
of another Person, (g), of the definition of Debt. A Suretyship Liability
arising under a Synthetic Lease Facility shall be deemed to be a Debt for
Borrowed Money.
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LOAN AGREEMENT
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Defaulting Lenders" has the meaning set forth in Section 2.6(b).
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.6.
"dollars" or "$" refers to lawful money of the United States of
America.
"Effective Date" means the date on which the conditions specified in
Section 4.1 are satisfied (or waived in accordance with Section 9.2).
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA maintained or contributed to by any of the
Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
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<PAGE>
LOAN AGREEMENT
"ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
VII.
"Excess Cash Flow" means, with respect to each fiscal year of the
Borrower, a positive number, if any, equal to (i) consolidated net income for
such fiscal year, plus (ii) depreciation and amortization expense to the extent
deducted in determining consolidated net income for such fiscal year, plus (iii)
any other non-cash expenses (except that, with respect to reserve items, only to
the extent of any increase of such items) to the extent deducted in determining
consolidated net income for such fiscal year, plus (or minus) (iv) any
extraordinary gains (losses), plus (or minus) (v) decreases (or increases) in
the consolidated working capital of the Borrower and its Subsidiaries from the
last day of the preceding fiscal year to the last day of such fiscal year, minus
(vi) the aggregate amount actually paid in cash by the Borrower and its
Subsidiaries during such fiscal year for capital expenditures, minus (vii) all
principal repayments and prepayments of the Loans made during such fiscal year,
provided that repayments or prepayments of Revolving Loans other than pursuant
to Section 2.20(g) shall not be included in the computation of Excess Cash Flow,
minus (viii) all regularly scheduled principal payments made during such fiscal
year in respect of other Debt to the extent such Indebtedness and payments are
permitted to be incurred and made hereunder.
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<PAGE>
LOAN AGREEMENT
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.17(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.17(a).
"Existing Letters of Credit" means the letters of credit issued
pursuant to Section 2.5(l) and set forth on Schedule 2.5 which will, as of the
Closing Date, be deemed outstanding as Letters of Credit issued pursuant to
Section 2.5.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower.
"Fixed Charge Coverage Ratio" means the ratio of (a) Consolidated
EBITDAR to (b) the sum of (i) the Borrower's Consolidated Interest Expense plus
(ii) except as included in Consolidated Interest Expense, the Borrower's
consolidated rental expense on operating leases, computed as of the last day of
a fiscal quarter for the period consisting of such fiscal quarter and the
immediately preceding three fiscal quarters (or such lesser number of preceding
full fiscal quarters as shall have ended following the Closing Date).
"FFL" means Food 4 Less.
"FMI" means Fred Meyer, Inc. and its successors and assigns.
"Foreign Lender" has the meaning provided in Section 2.17(e).
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any
10
<PAGE>
LOAN AGREEMENT
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
"Guaranteed Pension Plan" means any employee pension benefit plan
within the meaning of Section 3(2) of ERISA that is maintained or contributed to
by any of the Borrower or any ERISA Affiliate or that was so maintained or
contributed to and in respect of which the Borrower or any ERISA Affiliate could
have liability under Section 4064 or 4069 of ERISA in the event that such plan
has been or were to be terminated, the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA, other
than a Multiemployer Plan.
"Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning provided in Section 9.3(b).
"Information" has the meaning provided in Section 9.13.
"Insignificant Subsidiary" means any inactive or otherwise immaterial
direct or indirect Subsidiaries of the Borrower; provided that the assets and
pre-tax income of, and the Borrower's net investment in, such Insignificant
Subsidiaries on an individual and a combined basis will not exceed three percent
(3%) of the Borrower's consolidated pre-tax income or assets, as applicable; and
provided further that any Subsidiary which owns the stock of another Subsidiary
(other than an Insignificant Subsidiary) shall not be deemed to be an
"Insignificant Subsidiary."
"Intercreditor Agreement" means the Intercreditor and Collateral
Agency Agreement dated the date hereof, among FMI, the Subsidiaries party to the
Pledge Agreement, the Administrative Agent, the Collateral Agent and Bankers
Trust Company, as Administrative Agent under the Other Corporate Loan Documents.
11
<PAGE>
LOAN AGREEMENT
"Interest Election Request" means a request by the Borrower to convert
or continue a Borrowing in accordance with Section 2.8.
"Interest Payment Date" means (a) with respect to any ABR Loan, the
last day of each March, June, September and December and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and, in
the case of a Borrowing, thereafter shall be the effective date of the most
recent conversion or continuation of such Borrowing.
"Issuing Bank" means Bankers Trust Company, in its capacity as the
issuer of Letters of Credit hereunder and its successors in such capacity as
provided in Section 2.5(i). In addition, the Borrower and the Issuing Banks may
from time to time agree (which agreement shall not be unreasonably withheld or
delayed) that one or more Lenders shall issue Letters of Credit, in which case
the term "Issuing Bank" shall include any such Lenders. Any Issuing Bank may, in
its discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of such Issuing Bank, in which case the term "Issuing Bank" shall
include any such Affiliate with respect to Letters of Credit issued by such
Affiliate.
"LC Deposit" has the meaning set forth in Section 2.5(j).
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all
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<PAGE>
LOAN AGREEMENT
LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time. The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.1 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant to this
Agreement.
"Leverage Ratio" means the ratio of Debt for Borrowed Money of the
Borrower and its Subsidiaries determined on a consolidated basis to Consolidated
EBITDA (for the most recent four consecutive fiscal quarters; provided that for
the periods ended on the Compliance Certificate Date and the last day of the
next succeeding fiscal quarter, the Leverage Ratio shall be calculated by
reference to pro forma financial information provided by the Borrower (in form
and substance satisfactory to the Administrative Agent) with respect to the
fiscal quarters ended prior to the Closing Date).
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the offered quotation to first-class banks in the New York
interbank eurodollar market by the Administrative Agent for dollar deposits of
amounts in immediately available funds comparable to the outstanding principal
amount of the applicable Eurodollar Loan, with maturities comparable to the
Interest Period applicable to such Eurodollar Loan commencing two Business Days
prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, the Notes, the Subsidiary
Guarantees, the Pledge Agreement and the Intercreditor Agreement.
"Loans" means the Term Loans and the Revolving Loans.
"Margin Stock" shall have the meaning provided such term in Regulation
U and Regulation G of the Federal Reserve Board.
13
<PAGE>
LOAN AGREEMENT
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any of its obligations under this Agreement or (c) the
rights of or benefits available to the Lenders under this Agreement.
"Material Subsidiary" means a Subsidiary which either (a) has assets
which constitute 5% or more of the consolidated assets of the Borrower and its
Subsidiaries or (b) has revenues as of the end of the Borrower's most
recently-ended fiscal year which constitute more than 5% of the consolidated
revenues of the Borrower and its Subsidiaries during the Borrower's most
recently ended fiscal year.
"Maturity Date" means February 28, 2003.
"Mergers" means the mergers of (i) FMI and Quality Food Centers, Inc.
and (ii) FMI and Food 4 Less as contemplated by the Merger Documents.
"Merger Documents" means (i) that certain Agreement and Plan of
Merger, dated as of November 6, 1997, among QFC, FMI and Q-Acquisition Corp.,
and (ii) that certain Agreement and Plan of Merger, dated as of November 6,
1997, among FFL, FMI and FFL Acquisition Corp.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Cash Proceeds" means all cash proceeds of each Debt issuance or
sale or other disposition of assets by the Borrower or a Subsidiary, in each
case net of (if applicable) (i) reasonable expenses incurred or reasonably
expected to be incurred in connection with such sale or disposition, (ii) any
income, franchise, transfer or other tax payable by the Borrower or a Subsidiary
in connection with such sale or disposition and (iii) any Debt secured by a Lien
on such property or assets and required to be repaid as a result of such sale or
other disposition.
"Non-Defaulting Lender" has the meaning specified in Section 2.6(b).
"Notes" means each Revolving Note and each Term Note.
"Obligations" means all obligations, liabilities and indebtedness of
every nature of the Borrower and the Subsidiaries from time to time owing to the
Administrative Agent or
14
<PAGE>
LOAN AGREEMENT
any Lender under or in connection with any Loan Documents or any Other Corporate
Loan Document.
"Other Corporate Loan Documents" means all of the documents
contemplated to be executed in connection with the Current Synthetic Lease
Facility, as such documents are amended, supplemented or otherwise modified from
time to time.
"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Participant" has the meaning provided in Section 9.4(e).
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.4;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 5.4;
(c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business; and
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Borrower or any Subsidiary;
15
<PAGE>
LOAN AGREEMENT
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Debt for Borrowed Money.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from
the date of acquisition thereof and having, at such date of acquisition, the two
highest credit ratings obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances
and time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in clause (c)
above.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" means the Pledge Agreement, dated as of the Closing
Date, by the Borrower and its Subsidiaries in favor of the Lenders and the
lenders under the Other Corporate Loan Documents, as amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof.
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<PAGE>
LOAN AGREEMENT
"Public Notes" means senior unsecured notes of the Borrower, described
in the Preliminary Prospectus Supplement dated February 17, 1998, and the
Prospectus, dated February 4, 1998.
"QFC" means Quality Food Centers, Inc.
"Register" has the meaning set forth in Section 9.4.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Replacement Lender" has the meaning provided in Section 2.19(b).
"Required Lenders" means, at any time, Non-Defaulting Lenders the sum
of whose Commitments (or after the termination thereof, outstanding Loans and LC
Exposures at such time) represents an amount greater than 50% of the sum of (i)
the aggregate Commitments of all Lenders less (ii) the aggregate Commitments of
all Defaulting Lenders (or after the termination thereof, the sum of the then
total outstanding Loans and LC Exposures of Defaulting Lenders at such time).
"Responsible Officer" means the Chairman or Vice Chairman of the Board
of Directors, the Chairman or Vice Chairman of the Executive Committee of the
Board of Directors, the President, any Senior Vice President or Executive Vice
President, the Chief Financial Officer, the Chief Operating Officers, the Chief
Accounting Officer, the Vice President/Treasurer or any Assistant Treasurer
responsible for compliance with this Agreement.
"Restricted Payment" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any shares of any class
of capital stock of the Borrower or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such shares of capital stock of the Borrower
or any option, warrant or other right to acquire any such shares of capital
stock of the Borrower.
"Revolving Loan Commitment" means at any time, for any Lender, the
amount set forth opposite such Lender's name on Schedule 2.1 hereto under the
heading "Revolving Loan Commitment," as such amount may be reduced from time to
time pursuant to Sections 2.9 or 9.4(b).
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LOAN AGREEMENT
"Revolving Loans" has the meaning provided in Section 2.2(a).
"Revolving Notes" has the meaning provided in Section 2.7(a).
"Smith's" means Smith's Food and Drug Centers Inc.
"Solvent" as to any Person means (i) the sum of the assets of such
Person, both at a fair valuation and at present fair salable value, will exceed
its liabilities, including contingent liabilities, (ii) such Person will have
sufficient capital with which to conduct its business as presently conducted and
(iii) such Person has not incurred debts, and does not intend to incur debts,
beyond its ability to pay such debts as they mature. For purposes of this
definition, "debt" means any liability on a claim, and "claim" means (x) a right
to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (y) a right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured. With respect to
any contingent liabilities, such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represents the amount which can reasonably be expected to become an actual or
matured liability.
"S&P" means Standard & Poor's Corporation.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which are required to be consolidated with those of
the parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as,
with respect to any Person, any Person of which such Person and/or its
18
<PAGE>
LOAN AGREEMENT
subsidiaries own, directly or indirectly, such number of outstanding shares (or
similar equity interest) as have more than 50% of the ordinary voting power for
the election of directors.
"Subsidiary" means any subsidiary of the Borrower.
"Subsidiary Guarantee" shall have the meaning set forth in Section
4.1(h).
"Surety Instruments" means all letters of credit (including standby
and commercial), banker's acceptances, guaranties, shipside bonds, surety bonds
and similar instruments under which Suretyship Liabilities arise.
"Suretyship Liability" means any agreement, undertaking or other
contractual arrangement by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to or
otherwise to invest in a debtor, or otherwise to assure a creditor against loss)
any indebtedness, obligation or other liability (including accounts payable) of
any other Person (other than by endorsements of instruments in the course of
collection), or guarantees the payment of dividends or other distributions upon
the shares of any other Person. Suretyship Liability shall include any liability
or contingent liability of a Person under or in connection with a Synthetic
Lease Facility. The amount of any Person's obligation under any Suretyship
Liability shall (subject to any limitation set forth therein) be deemed to be
the principal amount of the indebtedness, obligation or other liability
guaranteed thereby. As of any date, the amount of any Person's obligations under
any Synthetic Lease Facility shall be equal to the amount which such Person
would be obligated to pay if such Synthetic Lease Facility was accelerated on
such date (disregarding accrued scheduled lease payments which would be
characterized as interest if such Synthetic Lease Facility were treated as a
capital lease under GAAP).
"Syndication Agent" means The Chase Manhattan Bank.
"Synthetic Lease Facility" means any synthetic lease, tax ownership
operating lease, tax retention operating lease, off balance sheet lease or
similar lease transaction where the lessee is treated as owner of the leased
property for U.S. federal income tax purposes while the lease is accounted for
on the financial statements of the lessee, prepared in accordance with GAAP, as
an operating lease, including the Current Synthetic Lease Facility.
"Tangible Net Assets" means the total consolidated assets of the
Borrower and its Subsidiaries minus any amount included therein in respect of
goodwill, as shown on the most recent consolidated balance sheet of the Borrower
and its Subsidiaries referred to in Section 3.4 or delivered to the
Administrative Agent and each Lender pursuant to Section 5.1.
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<PAGE>
LOAN AGREEMENT
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Tendered Bonds" has the meaning provided in Section 2.20(e).
"Term Loan" has the meaning provided in Section 2.1.
"Term Loan Commitment" means at any time, for any Lender, the amount
set forth opposite such Lender's name in Schedule 2.1 hereto under the heading
"Term Loan Commitment".
"Term Note" has the meaning provided in Section 2.7(a).
"Total Commitment" means, at any time, the sum of the Commitments of
all of the Lenders at such time.
"Total Revolving Loan Commitment" has the meaning provided in Section
2.2(a).
"Total Term Loan Commitment" has the meaning provided in Section 2.1.
"Transactions" means the execution, delivery and performance by the
Borrower of this Agreement, the borrowing of Loans, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder.
"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the ABR.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.2 Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Type (e.g., a
"Eurodollar Loan"). Borrowings also may be classified and referred to by Type
(e.g., a "Eurodollar Borrowing").
Section 1.3 Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase
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LOAN AGREEMENT
"without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (c) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (d)
all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
Section 1.4 Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided that
for purposes of determining compliance with any covenant set forth in Article
VI, such terms shall be construed in accordance with GAAP as in effect on the
date of this Agreement applied on a basis consistent with the application used
in preparing the Borrower's audited financial statements referred to in Section
5.1. If any change in accounting principles from those used in the preparation
of the audited financial statements referred to in Section 5.1 hereafter
occasioned by the promulgation of any rule, regulation, pronouncement or opinion
by or required by the Financial Accounting Standards Board of the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) would result in a change in the method of calculation of
financial covenants, standards or terms found in Article I or Article VI, the
parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such changes with the desired result that
the criteria for evaluating the Borrower's financial condition shall be the same
after such change as if such change had not been made.
ARTICLE II
The Credits
-----------
Section 2.1 Term Loans. Subject to the terms and conditions set forth
herein, each Lender severally and not jointly agrees to make a single loan to
the Borrower on the Closing Date of a sum not to exceed the Term Loan Commitment
of such Lender (each such loan, a "Term Loan"). The aggregate principal amount
of the Term Loan Commitments shall not exceed $1,625,000,000 (the "Total Term
Loan Commitment"). The Term Loan
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LOAN AGREEMENT
Commitments shall expire on April 10, 1998 if not utilized on or prior to such
date. All unutilized Term Loan Commitments shall expire simultaneously with the
making of the Term Loans on the Closing Date. Once repaid, Term Loans may not be
reborrowed. The Term Loans shall mature on the Maturity Date and shall be
repaid, without premium or penalty, by the Borrower, on the dates and in the
amounts set forth on Schedule A hereto.
Section 2.2 Revolving Loans. (a) Subject to the terms and conditions
set forth herein, each Lender severally and not jointly agrees to make revolving
loans (collectively, "Revolving Loans") to the Borrower from time to time during
the Availability Period, which Revolving Loans (when added to the LC Exposure of
such Lender) shall not exceed in aggregate principal amount at any time
outstanding the Revolving Loan Commitment of such Lender at such time. The sum
of the Revolving Loan Commitments of all of the Lenders (the "Total Revolving
Loan Commitment") on the Closing Date shall be $1,875,000,000. The Revolving
Loan Commitments shall expire on April 10, 1998 if the Closing Date has not
occurred on or prior to such date.
(b) Revolving Loans may be voluntarily prepaid pursuant to
Section 2.11, and, subject to the other provisions of this Agreement, any
amounts so prepaid may be reborrowed. Each Lender's Revolving Loan Commitment
shall expire, and each Revolving Loan shall mature on, the Maturity Date,
without further action on the part of the Lenders or the Administrative Agent.
Section 2.3 Loans and Borrowings. (a) Each Loan shall be made as part
of a Borrowing consisting of Loans made by the Lenders ratably in accordance
with their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender's failure to make Loans as
required.
(b) Subject to Section 2.13, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.
(c) At the commencement of each Interest Period for any
Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $10,000,000. At the time that
each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $1,000,000 and not less than $10,000,000; provided
that an ABR Borrowing may be in an aggregate amount
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LOAN AGREEMENT
that is equal to the entire unused balance of the Total Commitment or that is
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.5(e). Borrowings of more than one Type may be outstanding at the same
time; provided that there shall not at any time be more than a total of 8
Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the Maturity Date.
Section 2.4 Requests for Borrowings. To request a Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone (a)
in the case of a Eurodollar Borrowing, not later than 12:00 p.m. (noon), New
York City time, three Business Days before the date of the proposed Borrowing or
(b) in the case of an ABR Borrowing, not later than 12:00 p.m. (noon), New York
City time, on the day of the proposed Borrowing; provided that any such notice
of an ABR Borrowing to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.5(e) shall be given not later than 10:00 a.m., New
York City time, on the date of the proposed Borrowing. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by the Borrower. Each
such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.3:
(i) the aggregate amount of the requested Borrowing;
(ii) whether such Borrowing shall be a Term Loan or a
Revolving Loan;
(iii) the date of such Borrowing, which shall be a Business
Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period"; and
(vi) the location and number of the Borrower's account to
which funds are to be disbursed, which shall comply with the requirements
of Section 2.6.
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LOAN AGREEMENT
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
Section 2.5 Letters of Credit. (a) General. Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of Letters of
Credit for its own account, in dollars and on a sight basis and in a form
reasonably acceptable to the Administrative Agent and the Issuing Bank, at any
time and from time to time during the Availability Period (but in no event later
than 30 days prior to the Maturity Date). In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Extension; Certain Conditions.
To request the issuance of a Letter of Credit (or the amendment or extension of
an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy
(or transmit by electronic communication, if arrangements for doing so have been
approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent
(reasonably in advance of the requested date of issuance, amendment or
extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended or extended, the date of
issuance, amendment or extension, the date on which such Letter of Credit is to
expire (which shall comply with paragraph (c) of this Section), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend or extend such Letter
of Credit. A Letter of Credit shall be issued, amended or extended only if (and
upon issuance, amendment or extension of each Letter of Credit the Borrower
shall be deemed to represent and warrant that), after giving effect to such
issuance, amendment or extension (i) the LC Exposure shall not exceed
$200,000,000 and (ii) the total Credit Exposures shall not exceed the Total
Commitment.
(c) Expiration Date. Each standby Letter of Credit shall have an
expiry date occurring not later than one year from the date of issuance,
provided that any standby Letter of Credit may be extended for successive
periods of up to one year, so long as no such period ends later than five
Business Days prior to the Maturity Date, on terms acceptable to the Issuing
Bank. Each trade Letter of Credit shall have an expiry date occurring not later
than the earlier of (i) 180 days from the date of issuance and (ii) the date
which is 30 days prior to the Maturity Date.
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LOAN AGREEMENT
(d) Participations. By the issuance of a Letter of Credit and
without any further action on the part of the Issuing Bank or the Lenders, the
Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from
the Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Applicable Percentage of the aggregate amount available to be drawn
under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of the Issuing Bank, such Lender's
Applicable Percentage of each LC Disbursement made by the Issuing Bank and not
reimbursed by the Borrower on the date due as provided in paragraph (e) of this
Section, or of any reimbursement payment required to be refunded to the Borrower
for any reason. Each Lender acknowledges and agrees that its obligation to
acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If Issuing Bank shall make any LC Disbursement
in respect of a Letter of Credit, the Borrower shall reimburse such LC
Disbursement by paying to the Issuing Bank (with notice to the Administrative
Agent) an amount equal to such LC Disbursement not later than 12:00 noon, local
time (with respect to such Issuing Bank), on the date that such LC Disbursement
is made, if the Borrower shall have received notice of such LC Disbursement
prior to 10:00 a.m., local time (with respect to such Issuing Bank), on such
date, or, if such notice has not been received by the Borrower prior to such
time on such date, then not later than 12:00 noon, local time (with respect to
such Issuing Bank), on the Business Day immediately following the day that the
Borrower receives such notice, if such notice is not received prior to such time
on the day of receipt; provided that the Borrower may, subject to the conditions
to borrowing set forth herein, request in accordance with Section 2.4 that such
payment be financed with an ABR Borrowing in an equivalent amount and, to the
extent so financed, the Borrower's obligation to make such payment shall be
discharged and replaced by the resulting ABR Borrowing. If the Borrower fails to
make such payment when due, the Administrative Agent shall notify each Lender of
the applicable LC Disbursement, the payment then due from the Borrower in
respect thereof and such Lender's Applicable Percentage thereof. Promptly
following receipt of such notice, each Lender shall pay to the Administrative
Agent its Applicable Percentage of the payment then due from the Borrower, in
the same manner as provided in Section 2.6 with respect to Loans made by such
Lender (and Section 2.6 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to
the Issuing Bank the amounts so received by it from the Lenders. Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this paragraph, the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Lenders have made payments
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LOAN AGREEMENT
pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders
and the Issuing Bank as their interests may appear. Any payment made by a Lender
pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement
(other than the funding of ABR Loans as contemplated above) shall not constitute
a Loan and shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse
LC Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. Neither
the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank's failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or wilful misconduct on the part of the
Issuing Bank, (as finally determined by a court of competent jurisdiction) the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
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LOAN AGREEMENT
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Loans; provided that,
if the Borrower fails to reimburse such LC Disbursement when due pursuant to
paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any Lender
pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be
for the account of such Lender to the extent of such payment.
(i) Replacement or Removal of the Issuing Bank. (A) Any Issuing
Bank (other than Bankers Trust Company) may be removed as an Issuing Bank at any
time by written agreement among the Borrower, the Administrative Agent and the
Issuing Bank, subject to clause (C) below.
(B) Bankers Trust Company (or any successor to Bankers Trust
Company as Issuing Bank) may be replaced as Issuing Bank at any time by written
agreement among the Borrower, the Administrative Agent, Bankers Trust Company
and the successor Issuing Bank. From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of the removed Issuing Bank under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to the term
"Issuing Bank" shall be deemed to include such successor or such previous
Issuing Bank, or such successor and all previous Issuing Banks, as the context
shall require.
(C) The Administrative Agent shall notify the Lenders of any
removal or replacement of an Issuing Bank under clause (A) or (B) above. At the
time any such removal or replacement shall become effective, the Borrower shall
pay all unpaid fees accrued for the account of the removed Issuing Bank pursuant
to Section 2.12(b). After the removal of an Issuing Bank hereunder, the removed
Issuing Bank shall remain a party hereto and shall continue to have all the
rights and obligations of an Issuing Bank under this Agreement with
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LOAN AGREEMENT
respect to Letters of Credit issued by it prior to such removal, but shall not
be required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur
and be continuing, on the Business Day that the Borrower receives notice from
the Administrative Agent or the Required Lenders (or, if the maturity of the
Loans has been accelerated, Lenders with LC Exposure representing greater than
50% of the total LC Exposure) demanding the deposit of cash collateral pursuant
to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to the LC Exposure as of such
date plus any accrued and unpaid interest thereon (the "LC Deposit"); provided
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to the Borrower described in clause (h) or (i) of Article VII. Such
deposit shall be held by the Administrative Agent as collateral for the payment
and performance of the obligations of the Borrower under this Agreement. The
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the Borrower's
risk and expense, such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account. Moneys in such
account shall be applied by the Administrative Agent to reimburse the Issuing
Banks for LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement
obligations of the Borrower for the LC Exposure at such time or, if the maturity
of the Loans has been accelerated (but subject to the consent of Lenders with LC
Exposure representing greater than 50% of the total LC Exposure), be applied to
satisfy other obligations of the Borrower under this Agreement. If the Borrower
is required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
(k) Reporting of Outstanding LC Exposure. The Issuing Bank
(unless the Issuing Bank is also serving as Administrative Agent) shall provide
written notice to the Administrative Agent: (i) promptly after the issuance of
or amendment to any standby Letter of Credit, of such issuance or amendment,
which notice shall be accompanied by a copy of such standby Letter of Credit or
amendment thereof; (ii) if any trade Letters of Credit are outstanding, on the
first Business Day of each week, by facsimile, a report of the aggregate daily
amount available to be drawn under such trade Letters of Credit during the
previous week; (iii) on or before the fifth Business Day of each month, a report
setting forth, for each type of Letter of Credit outstanding, the daily
aggregate outstanding amounts for the previous month; and (iv) the
Administrative Agent shall deliver to each Lender, on the last Business
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LOAN AGREEMENT
Day of each calendar month and upon each Letter of Credit fee payment, a report
setting forth for such period the daily aggregate amount available to be drawn
under the Letters of Credit issued by each Issuing Bank during such period.
(l) Existing Letters of Credit. Notwithstanding anything to the
contrary contained herein, as of the Closing Date, all of the Existing Letters
of Credit shall be deemed to be Letters of Credit issued hereunder and shall be
subject to all of the terms and provisions of this Agreement, including all
terms and provisions applicable to Letters of Credit hereunder. Each Lender
agrees that its obligations with respect to Letters of Credit pursuant to
Section 2.5(d) shall include the Existing Letters of Credit as of the Closing
Date. With respect to each Existing Letter of Credit, for the period commencing
on the Closing Date to and including the expiration date of any such Existing
Letter of Credit, the Borrower shall pay all fees and commissions set forth in
Section 2.12(b) at the times and in the manner set forth therein.
Section 2.6 Funding of Borrowings. (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 2:00 p.m., New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders. The Administrative Agent will make such Loans available
to the Borrower by promptly crediting the amounts so received, in like funds, to
an account of the Borrower maintained with the Administrative Agent in New York
City and designated by the Borrower in the applicable Borrowing Request;
provided that ABR Loans made to finance the reimbursement of an LC Disbursement
as provided in Section 2.5(e) shall be remitted by the Administrative Agent to
the Issuing Bank.
(b) The failure of any Lender (such Lender, a "Defaulting
Lender") to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender (each such other Lender, a "Non-Defaulting Lender")
of its obligation to make its Loans on such date, but neither any Non-Defaulting
Lender nor the Administrative Agent shall be responsible for the failure of any
Defaulting Lender to make a Loan to be made by such Defaulting Lender, and no
Defaulting Lender shall have any obligation to the Administrative Agent or any
Non-Defaulting Lender (without prejudicing the rights of the Borrower against
such Defaulting Lender). Notwithstanding anything set forth herein to the
contrary, so long as a Lender remains a Defaulting Lender, such Lender shall not
have any voting or consent rights under or with respect to this Agreement or
constitute a "Lender" (or be included in the calculation of "Required Lenders"
hereunder) for any voting or consent rights under or with respect to this
Agreement.
(c) Unless the Administrative Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent
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LOAN AGREEMENT
may assume that such Lender has made such share available on such date in
accordance with paragraph (a) of this Section and may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. In such
event, if a Lender is a Defaulting Lender, then such Defaulting Lender and the
Borrower severally agree to pay to the Administrative Agent forthwith on demand
such corresponding amount with interest thereon, for each day from and including
the date such amount is made available to the Borrower but excluding the date of
payment to the Administrative Agent, at (i) in the case of such Defaulting
Lender, the greater of the Federal Funds Effective Rate and a rate determined by
the Administrative Agent in accordance with banking industry rules on interbank
compensation or (ii) in the case of the Borrower, the interest rate applicable
to ABR Loans. If such Defaulting Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender's Loan included in such
Borrowing and such Lender shall cease to be a Defaulting Lender.
Section 2.7 Notes. (a) Any Lender may request that Loans made by it be
evidenced by a promissory note (with respect to a Revolving Loan, a "Revolving
Note" and with respect to a Term Loan, a "Term Note"). In such event, the
Borrower shall prepare, execute and deliver to such Lender a Revolving Note or
Term Note, as applicable, payable to the order of such Lender (or, if requested
by such Lender, to such Lender and its registered assigns) and in the form of
Exhibit B. Thereafter, the Loans evidenced by such Notes and interest thereon
shall at all times (including after assignment pursuant to Section 9.4) be
represented by one or more Notes in such form payable to the order of the payee
named therein (or, if a Note is a registered note, to such payee and its
registered assigns). Each Note issued to a Lender shall be dated the Closing
Date and mature on the Maturity Date.
(b) Each Lender is hereby authorized, at its option, either (i)
to endorse on the schedule attached to its Revolving Note (or on a continuation
of such schedule attached to such Note and made a part thereof) an appropriate
notation evidencing the date and amount of each Revolving Loan evidenced thereby
and the date and amount of each principal and interest payment in respect
thereof, or (ii) to record such Revolving Loans and such payments in its books
and records. Such schedule or such books and records, as the case may be, shall
constitute prima facie evidence of the accuracy of the information contained
therein; provided that any errors with respect to such schedule, books or
records shall not affect the Borrower's obligation to repay amounts owing
hereunder.
Section 2.8 Interest Elections. (a) Each Borrowing initially shall be
of the Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion
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shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.4 if the Borrower
were requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.3:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified pursuant
to clauses (iv) and (v) below shall be specified for each resulting
Borrowing);
(ii) whether such Borrowing is a Term Loan or a Revolving
Loan;
(iii) the effective date of the election made pursuant to
such Interest Election Request, which shall be a Business Day;
(iv) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(v) if the resulting Borrowing is a Eurodollar Borrowing,
the Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request,
the Administrative Agent shall advise each Lender of the details thereof and of
such Lender's portion of each resulting Borrowing.
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LOAN AGREEMENT
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
Section 2.9 Termination and Reduction of Commitments. (a) Unless
previously terminated, the Commitments shall terminate on the Maturity Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Total Revolving Loan Commitment; provided that (i) each reduction of
the Total Revolving Loan Commitment shall be in an amount that is an integral
multiple of $1,000,000 and not less than $10,000,000 and (ii) the Borrower shall
not terminate or reduce the Total Revolving Loan Commitment if, after giving
effect to any concurrent prepayment of the Loans in accordance with Section
2.11, the Credit Exposures would exceed the Total Commitment.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Total Revolving Loan Commitment under
paragraph (b) of this Section at least three Business Days prior to the
effective date of such termination or reduction, specifying such election and
the effective date thereof. Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof. Each
notice delivered by the Borrower pursuant to this Section shall be irrevocable;
provided that a notice of termination of the Total Revolving Loan Commitment
delivered by the Borrower may state that such notice is conditioned upon the
effectiveness of other credit facilities, in which case such notice may be
revoked by the Borrower (by notice to the Administrative Agent on or prior to
the specified effective date). Any termination or reduction of the Total
Revolving Loan Commitment shall be permanent. Each reduction of the Total
Revolving Loan Commitment shall be made ratably among the Lenders in accordance
with their respective Revolving Loan Commitments.
Section 2.10 Repayment of Loans; Evidence of Debt. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender thereof the then unpaid principal amount of each Loan on
the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting
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LOAN AGREEMENT
from each Loan made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Type thereof and
the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Loans in accordance with the terms of this Agreement.
Section 2.11 Optional Prepayment of Loans. (a) The Borrower shall have
the right at any time and from time to time to prepay any Borrowing in whole or
in part, subject to prior notice in accordance with paragraph (b) of this
Section and any break funding payments under Section 2.16.
(b) The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 12:00 p.m. (noon), New York
City time, three Business Days before the date of prepayment or (ii) in the case
of prepayment of an ABR Borrowing, not later than 12:00 p.m. (noon), New York
City time, one Business Day before the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date, the Type of
Borrowing and the principal amount of each Borrowing or portion thereof to be
prepaid; provided that, if a notice of prepayment is given in connection with a
conditional notice of termination of the Total Revolving Loan Commitment as
contemplated by Section 2.9, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.9. Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.3. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.13.
Section 2.12 Fees. (a) The Borrower agrees to pay the Commitment Fee
to the Administrative Agent for the account of each Lender.
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LOAN AGREEMENT
(b) The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at a rate equal to (i)
with respect to any import Letters of Credit, one half (50%) of the Applicable
Margin on Eurodollar Loans, and (ii) with respect to any other Letters of
Credit, the Applicable Margin on Eurodollar Loans, in each case based on the
daily amount of such Lender's LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date on which
such Lender's Revolving Loan Commitment terminates and the date on which such
Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting
fee, which shall accrue at a rate to be agreed by the Borrower and the Issuing
Bank on the daily amount of the LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date of
termination of the Total Revolving Loan Commitment and the date on which there
ceases to be any LC Exposure, as well as the Issuing Bank's standard fees (other
than the fronting fee described above) with respect to the issuance, amendment
or extension of any Letter of Credit or payment of drawings thereunder.
Participation fees and fronting fees accrued through and including the last
Business Day of March, June, September and December of each year shall be
payable on such day, commencing on the first such date to occur after the
Effective Date; provided that all such fees shall be payable on the date on
which the Total Revolving Loan Commitment terminates and any such fees accruing
after the date on which the Total Revolving Loan Commitment terminates shall be
payable on demand. Any other fees payable to the Issuing Bank pursuant to this
paragraph shall be payable within 10 days after demand. All participation fees
and fronting fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day of the period covered).
(c) The Borrower agrees to pay to the Administrative Agent, for
its own account, fees payable in the amounts and at the times separately agreed
upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to The Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
facility fees, to the Lenders. Fees paid shall not be refundable under any
circumstances.
Section 2.13 Interest. (a) The Loans comprising each ABR Borrowing
shall bear interest at the ABR plus the Applicable Margin.
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LOAN AGREEMENT
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin.
(c) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, the greater of (A) 2% plus the rate otherwise applicable to such Loan
as provided in the preceding paragraphs of this Section and (B) 2% plus the rate
applicable to ABR Loans or (ii) in the case of any other amount, 2% plus the
rate applicable to ABR Loans.
(d) Accrued interest on each Loan shall be payable in arrears on
each Interest Payment Date for such Loan and, in the case of Loans, upon
termination of the Commitments; provided that (i) interest accrued pursuant to
paragraph (c) of this Section shall be payable on demand, (ii) in the event of
any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan
prior to the end of the Availability Period), accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior
to the end of the current Interest Period therefor, accrued interest on such
Loan shall be payable on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the ABR at times
when the ABR is based on the Prime Rate shall be computed on the basis of a year
of 365 days (or 366 days in a leap year), and in each case shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day). The applicable ABR, Adjusted LIBO Rate or LIBO Rate shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
Section 2.14 Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as
applicable, for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders
that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period will not
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LOAN AGREEMENT
adequately and fairly reflect the cost to such Lenders (or Lender) of making or
maintaining their Loans (or its Loan) included in such Borrowing for such
Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing; provided that if the circumstances
giving rise to such notice affect only one Type of Borrowing, then the other
Type of Borrowings shall be permitted.
Section 2.15 Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or Eurodollar
Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or such
Bank hereunder (whether of principal, interest or otherwise), then the Borrower
will pay to such Lender or the Issuing Bank, as the case may be, such additional
amount or amounts as will compensate such Lender or the Issuing Bank, as the
case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change
in Law regarding capital requirements has or would have the effect of reducing
the rate of return on such Lender's or the Issuing Bank's capital or on the
capital of such Lender's or the Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by, or participations in Letters
of Credit held by, such Lender, or the Letters of Credit issued by the Issuing
Bank, to a level below that which such Lender or the Issuing Bank or such
Lender's or the Issuing Bank's holding company could have achieved but for such
Change in Law (taking into consideration such Lender's or the Issuing Bank's
policies and the policies of
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LOAN AGREEMENT
such Lender's or the Issuing Bank's holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth
the basis of the calculations and the amount or amounts necessary to compensate
such Lender or the Issuing Bank or its holding company, as the case may be, as
specified in paragraph (a) or (b) of this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender or the Issuing Bank, as the case may be, the amount shown as due on
any such certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing
Bank to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender's or the Issuing Bank's right to demand such compensation;
provided that the Borrower shall not be required to compensate a Lender or the
Issuing Bank pursuant to this Section for any increased costs or reductions
incurred more than 180 days prior to the date that such Lender or the Issuing
Bank, as the case may be, notifies the Borrower of the Change in Law giving rise
to such increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
Section 2.16 Break Funding Payments. In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.11(b) and is revoked in accordance therewith) or (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.19, then,
in any such event, the Borrower shall compensate each Lender for the loss, cost
and expense attributable to such event (excluding loss of Applicable Margin
after the date of such event). In the case of a Eurodollar Loan, such loss, cost
or expense to any Lender shall be deemed to include an amount determined by such
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate (excluding loss of Applicable Margin) that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such
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LOAN AGREEMENT
period at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.
Section 2.17 Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) to the Administrative Agent, Lender
or Issuing Bank (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each
Lender and the Issuing Bank, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. The Borrower shall also
indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10
days after written demand therefor, for the full amount of Excluded Taxes as the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, shall
determine are payable in respect of amounts paid to or on behalf of the
Administrative Agent, such Lender or the Issuing Bank, as the case may be,
pursuant to this Section 2.17. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes
or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the
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LOAN AGREEMENT
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Any Lender that is not incorporated under the United States
of America or a state thereof (each a "Foreign Lender") shall:
(i) on the date it becomes a Lender, deliver to the
Administrative Agent (A) two completed copies of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable form, as the
case may be, and shall certify that it is entitled to receive payments
under this Agreement without deduction or withholding (or at a reduced rate
of deduction or withholding) of any United States Federal income taxes and
(B) an Internal Revenue Services Form W-8 or W-9, or successor applicable
form, as the case may be and shall certify that it is entitled to an
exemption from United States backup withholding tax;
(ii) deliver to the Administrative Agent two further copies
of any such form or certification on or before the date that any such
certification described above expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered to it; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Administrative Agent;
except that the forms and certificates described in clauses (ii) and (iii) above
shall not be required if any Change in Law has occurred prior to the date on
which any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Administrative Agent.
Section 2.18 Payments Generally; Pro Rata Treatment; Sharing of
Set-offs. (a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at
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LOAN AGREEMENT
130 Liberty Street, New York, New York, 10006, except payments to be made
directly to the Issuing Bank as expressly provided herein and except that
payments pursuant to Sections 2.15, 2.16, 2.17 and 9.3 shall be made directly to
the Persons entitled thereto. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.
All payments hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or participations in LC Disbursements resulting in
such Lender receiving payment of a greater proportion of the aggregate amount of
its Loans and participations in LC Disbursements and accrued interest thereon
than the proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in the
Loans and participations in LC Disbursements of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and participations in LC
Disbursements; provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or participations in LC Disbursements to any
assignee or participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this paragraph shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such
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LOAN AGREEMENT
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative Agent
may assume that the Borrower has made such payment on such date in accordance
herewith and may, in reliance upon such assumption, distribute to the Lenders or
the Issuing Bank, as the case may be, the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders or the
Issuing Bank, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender or the Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be
made by it pursuant to Section 2.5(d) or (e), 2.6(a) or 2.18(d), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Sections until all such unsatisfied obligations are fully paid.
Section 2.19 Mitigation Obligations; Replacement of Lenders. (a) If
any Lender requests compensation under Section 2.15, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If (i) any Lender requests compensation under Section 2.15,
or (ii) the Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section
2.17, or (iii) any Lender defaults in its obligation to fund Loans hereunder, or
(iv) any Lender refuses to consent to certain proposed changes, waivers,
discharges or termination with respect to this Agreement which require the
consent of all Lenders and have been approved by the Required Lenders as (and to
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LOAN AGREEMENT
the extent) provided in Section 9.2(b), then the Borrower may, at its sole
expense and effort, if no Default then exists (or, in the case of preceding
clause (iv), no Default will exist immediately upon giving effect to such
replacement), upon notice to such Lender and the Administrative Agent, require
such Lender to assign and delegate, without recourse (in accordance with and
subject to the restrictions contained in Section 9.4), all its interests, rights
and obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment) (such Assignee a "Replacement Lender"); provided that (x) the
Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Commitment is being assigned, the Issuing Bank), which consent
shall not unreasonably be withheld, (y) such Lender shall have received payment
of an amount equal to the outstanding principal of its Loans and participations
in LC Disbursements, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder, from the Replacement Lender (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (z) in the case of any such assignment
resulting from a claim for compensation under Section 2.15 or payments required
to be made pursuant to Section 2.17, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.
Section 2.20 Mandatory Prepayment. Subject to the terms of Section
2.20(g) below, the Borrower shall prepay the outstanding Loans as follows:
(a) Subject to Section 2.20(f), in an amount equal to 100% of the
Net Cash Proceeds in excess of $150,000,000 received by the Borrower or its
Subsidiaries from the conveyance, sale, transfer or other disposition of its
property or assets during the term of this Agreement; provided that such
prepayment obligation shall not be incurred in connection with the conveyance,
sale, transfer or other disposal of (i) property or assets in the case of sales
of inventory in the ordinary course of business, (ii) sales of equipment which
is uneconomic, obsolete or no longer useful in its business, or (iii) stores and
related property acquired pursuant to the Mergers, and certain distribution
center, in each case set forth on Schedule 2.20(a).
(b) Subject to Section 2.20(f), in an amount equal to 100% of the
Net Cash Proceeds of the fair market value received by the Borrower or any of
its Subsidiaries in excess of $50,000,000 in any one year period from any
transaction in which the Borrower or any of its Subsidiaries becomes liable,
directly or indirectly, with respect to any lease, whether an operating lease or
a capital lease, of any property (whether real or personal or mixed) whether now
owned or hereafter acquired, (i) which the Borrower or such Subsidiary has sold
or transferred or is to sell or transfer to any other Person, or (ii) which the
Borrower or such
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LOAN AGREEMENT
Subsidiary intends to use for substantially the same purposes as any other
property which has been or is to be sold or transferred by the Borrower or such
Subsidiary to any other Person in connection with such lease.
(c) In an amount equal to 50% of the Borrower's Excess Cash Flow
for any fiscal year, within 100 days after the end of such fiscal year.
(d) Subject to Section 2.20(e), in an amount equal to 100% of the
Net Cash Proceeds received by the Borrower or its Subsidiaries from the issuance
of any Debt described in (without duplication) clauses (a), (d) and, to the
extent constituting a Suretyship Liability in respect of such Debt for Borrowed
Money of another Person, clause (g) of the definition of Debt) (other than (i)
commercial paper issued by the Borrower in the ordinary course of business, (ii)
Debt with a maturity of less than one year (regardless of how it is accounted
for by the Borrower), (iii) the Public Notes, (iv) any Synthetic Lease Facility
and (v) any Debt issued to refinance Debt (other than the Public Notes)
outstanding as of the date hereof.
(e) In the event any tender for bonds or similar debt instruments
of the Borrower or its Subsidiaries in connection with the Mergers ("Tendered
Bonds", as set forth on Schedule 2.20(e)) results in more than $25,000,000 of
such Tendered Bonds remaining outstanding, in an amount equal to the face amount
of such Tendered Bonds remaining outstanding after the consummation of such
offer.
(f) Any Net Cash Proceeds received by the Borrower or any of its
Subsidiaries under clauses (a) or (b) of this Section 2.20 which are reinvested
by the Borrower or any of its Subsidiaries within 270 days of the receipt
thereof shall be excluded from the prepayment obligations set forth in such
clauses and shall not be counted in calculating such $150,000,000 or $50,000,000
amounts.
(g) Notwithstanding the foregoing, any Net Cash Proceeds
otherwise required to be paid to the Lenders under this Section 2.20 shall be
applied first, to prepay the Term Loans until such Term Loans shall have been
repaid in full, together with accrued and unpaid interest thereon, second, to
prepay the Revolving Loans until such Revolving Loans shall have been repaid,
together with accrued and unpaid interest thereon, and third, to all other
outstanding Obligations. All prepayments of the Loans required by this Section
2.20 shall be made in accordance with Section 2.11(b) and shall be applied on a
pro rata basis among the Lenders to prepay the Loans until such Loans have been
repaid in full, together with accrued and unpaid interest thereon. Prepayments
of the Term Loans shall reduce the quarterly payments required under Section
2.1, pro rata. Simultaneously with any prepayment of the principal amount of the
Loans pursuant to the preceding sentence, each Lender's Commitment shall be
permanently reduced by such Lender's Applicable Percentage of such prepayment.
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LOAN AGREEMENT
ARTICLE III
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lenders that:
Section 3.1 Organization; Powers. Each of the Borrower and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
Section 3.2 Authorization; Enforceability. The Transactions are within
the Borrower's corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action, and the use of proceeds of the
Loans will be, in each instance, within the Borrower's corporate powers and will
have been duly authorized by all necessary corporate and, if required,
stockholder action, as of the time of such use. Each Loan Document to which it
is a party has been duly executed and delivered by the Borrower and constitutes
a legal, valid and binding obligation of the Borrower, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
Section 3.3 Governmental Approvals; No Conflicts. The Transactions (a)
do not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as have been obtained
or made and are in full force and effect, (b) will not violate any applicable
law or regulation or the charter, by-laws or other organizational documents of
the Borrower or any of its Subsidiaries or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or any of their respective assets, or give rise to a right
thereunder to require any payment to be made by the Borrower or any of its
Subsidiaries, and (d) will not result in the creation or imposition of any Lien
on any asset of the Borrower or any of its Subsidiaries.
Section 3.4 Financial Condition; No Material Adverse Change. (a) The
Borrower has heretofore furnished to the Lenders consolidated balance sheets and
statements of income, stockholders equity and cash flows for (i) FMI and its
subsidiaries, as of and for the fiscal year ended February 1, 1997, reported on
by Deloitte & Touche, independent public accountants of FMI, and the fiscal
quarter and the portion of the fiscal year ended November
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LOAN AGREEMENT
8, 1997, certified by the chief financial officer of FMI, (ii) Smith's and its
subsidiaries, as of and for the fiscal year ended December 28, 1996, reported on
by Deloitte & Touche, independent public accountants of Smith's, certified by
the chief financial officer of Smith's, (iii) QFC and its subsidiaries, as of
and for the fiscal year ended December 28, 1996, reported on by Deloitte &
Touche, independent public accountants of QFC, and the fiscal quarter and the
portion of the fiscal year ended September 6, 1997, certified by the chief
financial officer of QFC and (iv) FFL and its subsidiaries, as of and for the
fiscal year ended February 2, 1997, reported on by Arthur Andersen, independent
public accountants of FFL, and the fiscal quarter and the portion of the fiscal
year ended October 12, 1997, certified by the chief financial officer of FFL.
Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of FMI, Smith's,
QFC, FFL and their respective subsidiaries as of such dates and for such periods
in accordance with GAAP, subject to year-end audit adjustments and the absence
of footnotes in the case of the statements for the fiscal quarters.
(b) There has been no material adverse change in the business,
assets, operations, prospects or condition, financial or otherwise, of (i) FMI
and its subsidiaries, taken as a whole, since February 1, 1997, (ii) Smith's and
its subsidiaries, taken as a whole, since December 28, 1996, (iii) QFC and its
subsidiaries, taken as a whole, since December 28, 1996 or (iv) FFL and its
subsidiaries, taken as a whole, since February 2, 1997.
Section 3.5 Properties. (a) Each of the Borrower and its Subsidiaries
has good title to, or valid leasehold interests in, all its real and personal
property material to its business, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes, subject to no Lien of any
kind except Liens permitted hereby.
(b) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
Section 3.6 Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.
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LOAN AGREEMENT
(b) Except for the Disclosed Matters and except with respect to
any other matters that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect, neither the Borrower nor any
of its Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change in
the status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
Section 3.7 Compliance with Laws and Agreements. Each of the Borrower
and its Subsidiaries is in compliance with all laws, regulations and orders of
any Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
Section 3.8 Investment and Holding Company Status. Neither the
Borrower nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
Section 3.9 Taxes. Each of the Borrower and its Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have
been filed and has paid or caused to be paid all Taxes required to have been
paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
Section 3.10 ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect.
Section 3.11 Disclosure. The Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the
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LOAN AGREEMENT
Borrower to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or delivered hereunder (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.
Section 3.12 Solvency. On the Closing Date and after giving effect to
the Transactions, the Borrower and each of its Material Subsidiaries will be
Solvent.
Section 3.13 Use of Proceeds; Margin Regulations. All proceeds of each
of the Loans will be used by the Borrower only in accordance with the provisions
of Section 5.8. No part of the proceeds of any of the Loans will be used by the
Borrower to purchase or carry any Margin Stock or to extend credit to others for
the purpose of purchasing or carrying any Margin Stock. Neither the making of
any of the Loans nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulations G, T, U or X of the Federal
Reserve Board.
Section 3.14 No Default. The Borrower is not in default under or with
respect to any agreement, instrument or undertaking to which it is a party or by
which it or any of its property is bound in any respect which could result in a
Material Adverse Effect. No Default or Event of Default exists.
Section 3.15 Subsidiaries. After giving effect to the Mergers, the
Persons listed on Schedule 3.15 are the only Subsidiaries of the Borrower.
Schedule 3.15 correctly sets forth, after giving effect to the Mergers, the
percentage ownership (direct and indirect) of the Borrower in each class of
capital stock of each of its Subsidiaries and also identifies the direct owner
thereof and identifies each Material Subsidiary as of the Closing Date.
Section 3.16 Employee Benefit Plans. (a) Each Employee Benefit Plan
and each Plan has been maintained and operated in compliance in all material
respects with the provisions of ERISA and, to the extent applicable, the Code,
including the provisions thereunder respecting prohibited transactions. The
Borrower has made all required contributions to each Employee Benefit Plan and
each Multiemployer Plan. To the extent applicable, the Borrower has heretofore
delivered to the Administrative Agent the most recently completed annual report,
Form 5500, with all required attachments, and actuarial statement required to be
submitted under Section 103(d) of ERISA, with respect to each Guaranteed Pension
Plan.
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LOAN AGREEMENT
(b) The Borrower or an ERISA Affiliate, as appropriate, may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of any of
the Borrower or such ERISA Affiliate without liability to any Person.
(c) Each contribution required to be made to a Guaranteed Pension
Plan, whether required to be made to avoid the incurrence of an accumulated
funding deficiency, the notice or lien provisions of Section 302(f) of ERISA, or
otherwise, has been timely made. No waiver of minimum funding standards or
extension of amortization periods has been requested or received with respect to
any Guaranteed Pension Plan. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been incurred by the
Borrower or any ERISA Affiliate with respect to any Guaranteed Pension Plan and
there has not been any ERISA Event, or any other event or condition that
presents a material risk of termination of any Guaranteed Pension Plan by the
PBGC. Neither the Borrower nor any ERISA Affiliate has instituted or intends to
institute proceedings to terminate a Guaranteed Pension Plan. No event requiring
notice to the PBGC under Section 302(f)(4)(A) of ERISA has occurred with respect
to any Guaranteed Pension Plan and no amendment with respect to which security
is required under Section 307 of ERISA has been made or is reasonably expected
to be made to any Guaranteed Pension Plan.
(d) Neither the Borrower nor any ERISA Affiliate has incurred or
expects to incur any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of
assets described in Section 4204 of ERISA. Neither the Borrower nor any ERISA
Affiliate has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA
or that any Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA.
Section 3.17 Security Interests. The security interests granted under
the Pledge Agreement constitute valid, binding and continuing duly perfected
first-priority Liens in and to the Collateral (except for Permitted Encumbrances
that have priority under applicable law) in favor of the Collateral Agent, for
the benefit of the Administrative Agents and the Lenders, as well as the lenders
under the Other Corporate Loan Documents.
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LOAN AGREEMENT
ARTICLE IV
Conditions
----------
Section 4.1 Effective Date. The obligations of the Lenders to make
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.2):
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto (A) either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the Administrative
Agent (which may include telecopy transmission of a signed signature page of
this Agreement) that such party has signed a counterpart of this Agreement and
(B) such other documents, in form and substance satisfactory to the
Administrative agent, as the Administrative Agent may reasonably request.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of Stoel Rives LLP, counsel for the Borrower, substantially
in the form of Exhibit C, and covering such other matters relating to the
Borrower, this Agreement or the Transactions as the Required Lenders shall
reasonably request. The Borrower hereby requests such counsel to deliver such
opinion.
(c) The Administrative Agent shall have received such documents
and certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of the
Borrower, the authorization of the Transactions and any other legal matters
relating to the Borrower, this Agreement or the Transactions, all in form and
substance satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate,
dated the Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the conditions set
forth in paragraphs (b) and (c) of Section 4.2.
(e) The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrower hereunder.
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LOAN AGREEMENT
(f) The Mergers shall have been completed in accordance with the
Merger Documents, or on other terms reasonably satisfactory to the Lenders.
(g) The Loan Documents and the Other Corporate Loan Documents
shall have been executed and delivered and shall be in full force and effect.
(h) Each Subsidiary (other than Insignificant Subsidiaries) shall
have executed and delivered to the Administrative Agent a guarantee
substantially in the form set forth as Exhibit D (each such guarantee, as
amended, supplemented or otherwise modified, a "Subsidiary Guarantee").
(i) The Administrative Agent shall have received evidence
satisfactory to it of prior or simultaneous repayment or refinancing of the Debt
of the Borrower and its Subsidiaries set forth on Schedule 4.1 hereto (except as
otherwise agreed to the satisfaction of the Agents).
(j) The Administrative Agent shall have received evidence
satisfactory to it of the prior or simultaneous receipt of not less than
$1,500,000,000 (net of underwriting and other expenses in connection with such
issuance) by FMI from the issuance of senior unsecured bonds on terms
satisfactory to the Lenders.
(k) The Administrative Agent shall have received the financial
information required under Section 3.4(a), including a pro forma balance sheet
giving effect to the Mergers, in form and substance satisfactory to the
Administrative Agent.
(l) The Administrative Agent shall have received financial
projections prepared by FMI demonstrating the projected consolidated financial
condition and results of operations of FMI and its Subsidiaries after giving
effect to the Mergers, for the period commencing on the Closing Date and ending
on the Maturity Date.
(m) The Administrative Agent shall have received acknowledgment
copies (or other evidence of filing) of each filed UCC-1 financing statement
signed by the Borrower as debtor naming the Administrative Agent as secured
party.
(n) The Administrative Agent shall have received the original
stock certificates evidencing the stock pledged pursuant to the Pledge
Agreement, together with undated stock powers duly executed in blank in
connection therewith.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall
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LOAN AGREEMENT
not become effective unless each of the foregoing conditions is satisfied (or
waived pursuant to Section 9.2) at or prior to 3:00 p.m., New York City time, on
April 10, 1998 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
Section 4.2 Each Credit Event. The obligation of each Lender to make a
Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend,
renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:
(a) The Administrative Agent shall have received a fully executed
Borrowing Request in respect of the Loans to be made on such date.
(b) The representations and warranties of the Borrower set forth
in this Agreement (other than the representations and warranties set forth in
Section 3.4) shall be true and correct on and as of the date of such Borrowing
or the date of issuance, amendment, renewal or extension of such Letter of
Credit, as applicable.
(c) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (b) and
(c) of this Section.
ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:
Section 5.1 Financial Statements and Other Information. The Borrower
will furnish to the Administrative Agent and each Lender:
(a) within 100 days after the end of each fiscal year of the
Borrower, its audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for such
year, setting forth in each case in comparative
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LOAN AGREEMENT
form the figures for the previous fiscal year, all reported on by Deloitte &
Touche LLP or other independent public accountants of recognized national
standing (without a "going concern" or like qualification or exception and
without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP.
(b) within 55 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash flows
as of the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP, subject to normal year-end audit
adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a Compliance Certificate (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations (x) demonstrating compliance with
Section 6.10(a) and (b) and (y) establishing the Applicable Margin, and (iii)
stating whether any change in GAAP or in the application thereof has occurred
since the date of the audited financial statements referred to in Section 3.4
and, if any such change has occurred, specifying the effect of such change on
the financial statements accompanying such certificate;
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on such
financial statements stating whether they obtained knowledge during the course
of their examination of such financial statements of any Default (which
certificate may be limited to the extent required by accounting rules or
guidelines);
(e) promptly after the same become publicly available, copies of
all periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be; and
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LOAN AGREEMENT
(f) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Borrower or any Subsidiary, or compliance with the terms of this
Agreement, as the Administrative Agent or any Lender may reasonably request.
Section 5.2 Notices of Material Events. The Borrower will furnish to
the Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default upon actual knowledge of a
Responsible Officer of the Borrower;
(b) the filing or commencement of any action, suit or proceeding
by or before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be expected to
result in material liability of the Borrower and its Subsidiaries; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
Section 5.3 Existence; Conduct of Business. The Borrower will, and
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; provided that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under Section
6.5.
Section 5.4 Payment of Obligations. The Borrower will, and will cause
each of its Subsidiaries to, pay its obligations, including Tax liabilities,
that, if not paid, could result in a Material Adverse Effect before the same
shall become delinquent or in default, except where (a) the validity or amount
thereof is being contested in good faith by appropriate proceedings, (b) the
Borrower or such Subsidiary has set aside on its books adequate reserves
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LOAN AGREEMENT
with respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
Section 5.5 Maintenance of Properties; Insurance. The Borrower will,
and will cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, and (b) maintain, with financially sound and
reputable insurance companies, insurance in such amounts and against such risks
(and having such deductibles and self-insurance) as are customarily maintained
by companies engaged in the same or similar businesses operating in the same or
similar locations.
Section 5.6 Books and Records; Inspection Rights. The Borrower will,
and will cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
Section 5.7 Compliance with Laws. The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property, including
without limitation ERISA and all Environmental Laws, except where the failure to
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
Section 5.8 Use of Proceeds and Letters of Credit. The proceeds of the
Loans will be used only to finance certain costs and expenses associated with
the Mergers, refinance existing indebtedness (including related prepayment
premiums) and for general corporate purposes. No part of the proceeds of any
Loan will be used, whether directly or indirectly, for any purpose that entails
a violation of any of the Regulations of the Board, including Regulations G, U
and X. Standby Letters of Credit will be issued only to support on a standby
basis, liabilities relating to worker's compensation, judgments pending appeal,
construction or similar liabilities in the ordinary course of business, and
trade Letters of Credit will be issued only to support liabilities for the
purchase of goods upon delivery or against invoice.
Section 5.9 Subsidiary Guarantees and Pledge. (a) The Borrower shall
cause each Person which becomes a Subsidiary after the Closing Date (other than
Insignificant Subsidiaries) to execute and deliver to the Administrative Agent a
Subsidiary Guarantee together with such officer's certificates, resolutions and
other assurances related thereto as the
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LOAN AGREEMENT
Administrative Agent shall reasonably request within 10 days of such Person
becoming a Subsidiary. Furthermore, the Borrower shall within such 10 day period
deliver to the Collateral Agent the stock certificates or other evidence of
ownership interest in such Subsidiary, together with stock powers duly executed
in blank, and execute such other documents in connection therewith as the
Collateral Agent may reasonably request.
(b) The Borrower shall cause each Subsidiary and each Person
which becomes a Subsidiary after the Closing Date (other than Insignificant
Subsidiaries) to include in any guarantee issued to any lender or creditor other
than the parties to this Agreement and the Other Corporate Loan Documents the
language in substantially the form attached as Exhibit E.
Section 5.10 Further Assurances. The Borrower shall, and cause each of
its Subsidiaries to, cooperate with the Lenders and the Administrative Agent and
shall execute and pay for the filing of all such further instruments and
documents, including UCC financing statements and other security documents, as
the Required Lenders or the Administrative Agent shall reasonably deem
appropriate in order to effectuate the grant of the Liens and security interests
to the Collateral Agent contemplated by the Intercreditor Agreement, this
Agreement and the Other Corporate Loan Documents and to carry out to their
satisfaction the transactions contemplated by such agreements.
ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:
Section 6.1 Subsidiary Debt. The Borrower will not permit any
Subsidiary to create, incur, assume or permit to exist any Debt, except:
(a) Debt owed to the Borrower or to another Subsidiary;
(b) Debt existing on the date hereof; provided that to the extent
any item of such Debt exceeds $5,000,000, or the aggregate of all such Debt
exceeds $25,000,000, such Debt shall be identified in Schedule 6.1;
(c) Debt secured by Permitted Encumbrances;
(d) Capital Lease Obligations not to exceed $100,000,000;
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LOAN AGREEMENT
(e) Debt outstanding when a Person becomes a Subsidiary or is
merged or consolidated with another Subsidiary, provided that such Debt exists
at the time such Person becomes a Subsidiary and is not created in contemplation
of or in connection with such Person becoming a Subsidiary;
(f) Debt in respect of letters of credit issued to support the
purchase of goods by the applicable Subsidiary in the ordinary course of
business;
(g) Debt in respect of commercial letters of credit issued to
support liabilities of a Subsidiary relating to worker's compensation, judgments
pending appeal (and as to which there is no Event of Default under clause (k) of
Article VII), construction or similar liabilities in the ordinary course of
business;
(h) Suretyship Liabilities constituting guarantees of the
Borrower's unsecured Debt; provided that such Debt is not senior to the
obligations of the Borrower hereunder and such guarantees contain language in
substantially the form attached as Exhibit E; and Suretyship Liabilities
constituting guarantees of the Borrower's Synthetic Lease Facilities; provided
that such guarantees contain language in substantially the form attached as
Exhibit E; and
(i) Debt not otherwise permitted by the foregoing clauses of this
Section 6.1 so long as the sum, without duplication, of (x) all such Debt and
(y) all Debt secured by Liens permitted solely by clause (f) of Section 6.2 does
not exceed 5.0% of Tangible Net Assets.
Section 6.2 Liens. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof (including Liens created pursuant to the
Other Corporate Loan Documents and the Pledge Agreement) and set forth in
Schedule 6.2; provided that (i) such Lien shall not apply to any other property
or asset of the Borrower or any Subsidiary and (ii) such Lien shall secure only
those obligations which it secures on the date hereof;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date hereof
prior to the time such Person becomes a
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LOAN AGREEMENT
Subsidiary; provided that (i) such Lien is not created in contemplation of or in
connection with such acquisition or such Person becoming a Subsidiary, as the
case may be, (ii) such Lien shall not apply to any other property or assets of
the Borrower or any Subsidiary and (iii) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date such
Person becomes a Subsidiary, as the case may be;
(d) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary; provided that (i) such security
interests and the Indebtedness secured thereby are incurred prior to or within
180 days after such acquisition or the completion of such construction or
improvement, (ii) the Debt secured thereby does not exceed the cost of
acquiring, constructing or improving such fixed or capital assets and (iii) such
security interests shall not apply to any other property or assets of the
Borrower or any Subsidiary;
(e) Liens on assets acquired after the date hereof under
Synthetic Lease Facilities; and
(f) Liens not otherwise permitted by the foregoing clauses of
this Section 6.2, securing Debt of the Borrower or its Subsidiaries, so long as
the sum, without duplication, of (i) all such Debt and (ii) all Debt permitted
solely by clause (i) of Section 6.1 does not exceed 5.0% of Tangible Net Assets.
Section 6.3 Modifications of Merger Documents. The Borrower shall not,
and shall not permit any of its Subsidiaries to amend, modify or waive, or
permit the amendment, modification or waiver of, any provision of the Merger
Documents.
Section 6.4 Fundamental Changes. (a) The Borrower will not, and will
not permit any Material Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) all or any substantial part of its assets, or all or
substantially all of the stock of any of its Material Subsidiaries (in each
case, whether now owned or hereafter acquired), or liquidate or dissolve, except
that, if at the time thereof and immediately after giving effect thereto no
Default shall have occurred and be continuing (i) any Subsidiary may merge into
the Borrower in a transaction in which the Borrower is the surviving
corporation, (ii) any Subsidiary may merge into any Subsidiary in a transaction
in which the surviving entity is a Subsidiary, (iii) any Subsidiary may sell,
transfer, lease or otherwise dispose of its assets to the Borrower or to another
Subsidiary and (iv) any Subsidiary may liquidate or dissolve if the Borrower
determines in good faith that such liquidation or dissolution is in the best
interests of the Borrower and is not materially disadvantageous to the Lenders.
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LOAN AGREEMENT
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on the
date of execution of this Agreement and businesses reasonably related thereto.
Section 6.5 Investments, Loans, Advances, Suretyship Liabilities and
Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries
to, purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, incur Suretyship Liabilities in respect of any obligations
of, or make or permit to exist any investment or any other interest in, any
other Person, or purchase or otherwise acquire (in one transaction or a series
of transactions) any assets of any other Person constituting a business unit,
except:
(a) Permitted Investments;
(b) investments by the Borrower and its Subsidiaries in its
Subsidiaries including Persons which, as a result of such investment, become
Subsidiaries;
(c) loans or advances made, or Suretyship Liabilities incurred,
by the Borrower to or in respect of any Subsidiary and made or incurred by any
Subsidiary to or in respect of the Borrower or any other Subsidiary;
(d) Suretyship Liabilities with respect to Hedging Agreements
permitted by Section 6.6;
(e) Suretyship Liabilities constituting Debt permitted by Section
6.1 which are (i) in respect of commercial paper, or (ii) Suretyship Liabilities
other than in respect of commercial paper in aggregate amount not to exceed
$200,000,000 at any one time;
(f) Suretyship Liabilities created under the Other Corporate Loan
Documents;
(g) Suretyship Liabilities with respect to Surety Instruments
incurred in the ordinary course of business;
(h) investments existing on the date hereof; provided that to the
extent any such investment exceeds $5,000,000, or the aggregate of all such
investments exceeds $25,000,000, such investments shall be identified in
Schedule 6.5; and
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LOAN AGREEMENT
(i) investments by the Borrower and its Subsidiaries not
otherwise permitted by the foregoing clauses of this Section 6.5, so long as
such additional investments made in reliance on this clause (i) do not exceed
$200,000,000 in the aggregate at any time.
Section 6.6 Hedging Agreements. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any Hedging Agreement, other than
Hedging Agreements entered into in the ordinary course of business to hedge or
mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct
of its business or the management of its liabilities.
Section 6.7 Restricted Payments. The Borrower will not, and will not
permit any of its Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except that, so long as no Event
of Default has occurred and is continuing, (a) the Borrower may declare and pay
dividends with respect to its capital stock payable solely in additional shares
of its common stock, (b) the Borrower may make Restricted Payments pursuant to
and in accordance with stock option plans or other benefit plans for management
or employees of the Borrower and its Subsidiaries, (c) any Subsidiary may
declare and pay Restricted Payments to the Borrower or any other Subsidiary, and
(d) the Borrower and its Subsidiaries may pay cash dividends and repurchase
their respective stock from any Person which is not the Borrower or another
Subsidiary so long as on the date of payment or repurchase (i) such cash
dividends and stock repurchases do not exceed $150,000,000 in any single fiscal
year, and (ii) the total of such cash dividends and stock repurchases during the
term of this Agreement do not exceed an aggregate amount of $200,000,000 plus
40% of the Borrower's and its Subsidiaries' aggregate net income earned
commencing with the fiscal year ending January 31, 1999, and each fiscal year
thereafter; provided that a payment in connection with the repurchasing of
certain warrants from the shareholders of FFL in an amount not to exceed
$20,000,000 shall not be counted against the amounts set forth in clauses (i)
and (ii) above.
Section 6.8 Transactions with Affiliates. Except during the
continuance of an Event of Default, the Borrower will not, and will not permit
any of its Subsidiaries to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except (a) at prices and on terms and conditions not less favorable to the
Borrower or such Subsidiary than could be obtained on an arm's-length basis from
unrelated third parties, (b) transactions between or among the Borrower and its
wholly owned Subsidiaries not involving any other Affiliate and (c) any
Restricted Payment permitted by Section 6.7.
Section 6.9 Restrictive Agreements. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon the
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LOAN AGREEMENT
ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its capital stock or to make or repay loans or advances to the
Borrower or any other Subsidiary or to incur Suretyship Liabilities in respect
of Debt of the Borrower or any other Subsidiary; provided that (i) the foregoing
shall not apply to restrictions and conditions imposed by law or by this
Agreement, (ii) the foregoing shall not apply to restrictions and conditions (x)
contained in the Other Corporate Loan Documents or (y) existing on the date
hereof and identified on Schedule 6.9 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition) and (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided that such restrictions and conditions
apply only to the Subsidiary that is to be sold and such sale is permitted
hereunder and provided further that such restrictions and conditions cannot be
imposed at any time that a Default has occurred and is continuing.
Section 6.10 Financial Covenants.
(a) Leverage Ratio. The Borrower shall not permit its Leverage
Ratio to exceed, at the end of any fiscal quarter ending on or during any period
listed below, the ratio set forth opposite such period; provided that there
shall be added to Consolidated EBITDA for purposes of determining the Leverage
Ratio the following amounts: (i) with respect to the two fiscal quarters ended
August 15, 1998, $25,000,000 and (ii) in addition to clause (i) above, with
respect to the fiscal quarter ended November 7, 1998, $12,500,000:
Period Ratio
------ -----
From and including August 15, 1998 5:00 to 1.00
to and including January 29, 1999
From and including January 30, 1999 4.50 to 1.00
to and including January 28, 2000
From and including January 29, 2000 4.00 to 1.00
and therafter
(b) Fixed Charge Coverage Ratio. The Borrower shall not permit
the Fixed Charge Coverage Ratio to be less than, at the end of any fiscal
quarter ending on or during any period listed below, the ratio set forth
opposite such period:
Period Ratio
------ -----
From and including August 15, 1998 1.75 to 1.00
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LOAN AGREEMENT
to and including January 29, 1999
From and including January 30, 1999 2.00 to 1.00
to and including February 2, 2001
From and including February 3, 2001 2.25 to 1.00
and thereafter
Section 6.11 Unconditional Purchase Obligations. The Borrower shall
not, and shall not permit any Subsidiary to, enter into or be a party to any
contract for the purchase of materials, supplies or other property or services,
if such contract requires that payments be made by it regardless of whether or
not delivery is ever made of such materials, supplies or other property or
services.
Section 6.12 Fiscal Year; Fiscal Quarter. The Borrower shall not, and
shall not permit any of its Subsidiaries to, change its fiscal year or any of
its fiscal quarters.
ARTICLE VII
Events of Default
-----------------
If any of the following events ("Events of Default") shall occur:
(a) the Borrower shall fail to pay any principal of any Loan or
any reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise; or
(b) the Borrower shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of
three (3) Business Days; or
(c) any representation or warranty made or deemed made by or on
behalf of the Borrower or any Subsidiary in or in connection with this Agreement
or any amendment or modification hereof or waiver hereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any amendment or modification hereof or waiver
hereunder, shall prove to have been incorrect in any material respect when made
or deemed made; or
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LOAN AGREEMENT
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Sections 5.2(a), 5.3 (with respect to the
Borrower's existence) or 5.8 or in Sections 6.1, 6.2, 6.4, 6.5, 6.6, 6.7, 6.9,
6.10, 6.11 or 6.12; or
(e) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clauses (a), (b), (c) or (d) of this Article), and such failure shall
continue unremedied for a period of 30 days after notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender); or
(f) the Borrower or any Material Subsidiary shall default in any
obligation (payment or otherwise) that results in any Debt of $10,000,000 or
more in the aggregate becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Debt of $10,000,000 or more in the aggregate
or any trustee or agent on its or their behalf to cause any such Debt to become
due, or to require the prepayment, repurchase, redemption or defeasance thereof,
prior to its scheduled maturity; or
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Borrower or any Material Subsidiary or their
respective debts, or of a substantial part of their respective assets, under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower or any
Material Subsidiary or for a substantial part of their respective assets, and,
in any such case, such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the foregoing shall be
entered; or
(h) the Borrower or any Material Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (g) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Material Subsidiary or
for a substantial part of their respective assets, (iv) file an answer admitting
the material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors or (vi) take any
action for the purpose of effecting any of the foregoing; or
(i) the Borrower or any Material Subsidiary shall become unable,
admit in writing or fail generally to pay its debts as they become due; or
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LOAN AGREEMENT
(j) one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 shall be rendered against the
Borrower, any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any Subsidiary to
enforce any such judgment; or
(k) an ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower
and its Subsidiaries in an aggregate amount exceeding $10,000,000; or
(l) a Change in Control shall occur; or
(m) any Subsidiary Guarantee shall cease to be in full force and
effect (other than in accordance with its terms), or any guarantor under any
Subsidiary Guarantee or any Person acting by or on behalf of such guarantor
shall deny or disaffirm all or any portion of the guarantor's obligation under
such Subsidiary Guarantee; or
(n) the Pledge Agreement shall for any reason cease to be in full
force and effect (other than in accordance with its terms), or shall cease to
give the Collateral Agent the Liens, rights, powers and privileges purported to
be created thereby including, without limitation, a perfected first priority
security interest in, and Lien on, all of the Collateral in accordance with the
terms thereof;
then, and in every such event (other than an event with respect to the Borrower
described in clause (g) or (h) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent shall, at the
request of the Required Lenders, by notice to the Borrower, take any or all of
the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, (ii)
terminate any Letter of Credit that may be terminated under its terms, (iii)
direct the Borrower to make (and the Borrower agrees that upon receipt of such
notice it will make) the LC Deposit and (iv) declare the Loans then outstanding
to be due and payable in whole or in part (in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in case of any event with
respect to the Borrower described in clause (g) or (h) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon, the LC Deposit and all fees
and other
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LOAN AGREEMENT
obligations of the Borrower accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent
------------------------
Section 8.1 Appointment. Each Lender hereby irrevocably designates and
appoints Bankers Trust Company as the Administrative Agent and Collateral Agent
of such Lender under the Loan Documents, and each such Lender irrevocably
authorizes Bankers Trust Company as the Administrative Agent and Collateral
Agent for such Lender, to enter into the Loan Documents and take such action on
its behalf under the provisions of the Loan Documents and to exercise such
powers and perform such duties as are expressly delegated to the Administrative
Agent and the Collateral Agent by the terms of the Loan Documents, respectively,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in the Loan Documents,
the Administrative Agent and Collateral Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Administrative Agent or Collateral Agent shall be read into the Loan Documents
or otherwise exist against the Administrative Agent or Collateral Agent. The
provisions of this Article VIII are solely for the benefit of the Administrative
Agent and Collateral Agent, and the Lenders and the Borrower shall have no
rights as a third party beneficiary or otherwise under any of the provisions in
the Loan Documents. In performing its functions and duties under the Loan
Documents, the Administrative Agent and Collateral Agent shall act solely as the
agent of the Lenders and does not assume nor shall be deemed to have assumed any
obligation or relationship of trust or agency with or for the Borrower or any of
its successors and assigns.
Section 8.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under this Agreement by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. The Administrative Agent shall not be responsible for the
negligence or misconduct or any agents or attorneys-in-fact selected by it with
reasonable care.
Section 8.3 Exculpatory Provisions. The Administrative Agent shall not
be (i) liable for any action lawfully taken or omitted to be taken by it or any
Person described in Section 8.2 under or in connection with this Agreement
(except for its or such Person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower
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LOAN AGREEMENT
contained in this Agreement or in any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or for any failure of the
Borrower to perform its obligations hereunder or thereunder. The Administrative
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement, or to inspect the properties, books or records of
the Borrower. This Section is intended solely to govern the relationship between
the Administrative Agent, on the one hand, and the Lenders, on the other.
Section 8.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in act ing, or in refraining from acting, under
this Agreement in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders.
Section 8.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default and stating that such notice is a
"notice of default". In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall promptly give notice thereof to the
Lenders. The Administrative Agent shall take such action with respect to such
Default as shall be directed by the Required Lenders.
Section 8.6 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent, nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Administrative Agent hereafter taken, including, without limitation, any
review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Administrative Agent. Each Lender represents
and warrants to the Administrative Agent that it has, independently and without
reliance upon the
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Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, opera tions, property, prospects, financial and
other conditions and creditworthiness of the Borrower and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, prospects, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents expressly required under this Agreement to be furnished to the
Lenders by the Administrative Agent, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, prospects, financial
and other condition or creditworthiness of the Borrower which may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
Section 8.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent, the Syndication Agent and each of their respective
officers, directors, employees, representatives and agents (to the extent not
reimbursed by the Borrower and without limiting the obligation of the Borrower
to do so), ratably according to their Applicable Percentage, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of counsel
for the Administrative Agent, Syndication Agent or such Person in connection
with any investigative, administrative or judicial proceeding commenced or
threatened, whether or not the Administrative Agent or such Person shall be
designated a party thereto) that may at any time (including, without limitation,
at any time following the payment of the Obligations) be imposed on, incurred by
or asserted against the Administrative Agent, Syndication Agent or such Person
as a result of, or arising out of, or in any way related to or by reason of, any
of the Transactions or the execution, delivery or performance of this Agreement
(but excluding any such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the gross negligence or willful misconduct of the Administrative Agent,
Syndication Agent or such Person as finally determined by a court of competent
jurisdiction).
Section 8.8 Administrative Agent in its Individual Capacity. The
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not the Administrative Agent hereunder. With respect
to Loans made or renewed by it, the Administrative Agent shall have the same
rights and powers under this Agreement as any
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Lender and may exercise the same as though it were not the Administrative Agent,
and the terms "Lender" and "Lenders" shall include the Administrative Agent in
its individual capacity.
Section 8.9 Successor Administrative Agent. The Administrative Agent
may resign as Administrative Agent upon 30 days' notice to the Borrower and the
Lenders. If the Administrative Agent shall resign as Administrative Agent under
this Agreement, then the Required Lenders during such 30-day period shall
appoint from among the Lenders a successor agent, whereupon such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent and
the term "Administrative Agent" shall mean such successor agent, effective upon
its appointment, and the former Administrative Agent's rights, powers and duties
as Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement. After any retiring Administrative Agent's resignation hereunder
as Administrative Agent, the provisions of this Article VIII and Section 9.3
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
Section 8.10 Syndication Agent. Without limiting any provision
contained in this Article VIII, the Syndication Agent shall not have, except as
to and to the limited extent expressly provided herein, any obligation,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such. Each Lender acknowledges that it has not relied, and will not
rely, on the Syndication Agent in deciding to enter into this Agreement or in
taking or not taking action hereunder.
Section 8.11 Co-Documentation Agents. Without limiting any provision
contained in this Article VIII, the Co-Documentation Agents shall not have,
except as to and to the limited extent expressly provided herein, any
obligation, responsibility or duty under this Agreement other than those
applicable to all Lenders as such. Each Lender acknowledges that it has not
relied, and will not rely, on the Co-Documentation Agents in deciding to enter
into this Agreement or in taking or not taking action hereunder.
ARTICLE IX
Miscellaneous
-------------
Section 9.1 Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
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(a) if to the Borrower, to it at:
Fred Meyer, Inc.
P.O. Box 42121
3800 SE 22nd Avenue
Portland, Oregon 97242-0121
Telecopy: (503) 797-5299
Attn: Mr. James C. Aalberg;
with a copy of notices pursuant to Article VII to:
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, Oregon 97204-1268
Telecopy: (503) 220-2480
Attn: Mr. Gary R. Barnum
(b) if to the Administrative Agent, to it at:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Telecopy: (212) 250-7351
Attn: Deal Administrator
(c) if to any Issuing Bank, to it at the address specified in
writing to the Administrative Agent from time to time by the Issuing Bank;
except that, if to Bankers Trust as Issuing Bank, to it at:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Telecopy: (212) 250-5817
Attn: Letter of Credit Unit
(d) if to any other Lender, to it at its address (or telecopy
number) set forth opposite its signature below.
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LOAN AGREEMENT
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt. It
is understood and agreed that the delivery of copies of notices to counsel as
set forth above is for courtesy purposes only and any failure to deliver such
copy shall not constitute failure with respect to any obligation to provide
notices hereunder.
Section 9.2 Waivers; Amendments. (a) Except as provided in the
Intercreditor Agreement, neither this Agreement nor any terms hereof may be
changed, waived, discharged, or terminated, nor any Collateral released, unless
such change, waiver, discharge, termination or release is in writing signed by
the Required Lenders, provided that no such change, waiver, discharge,
termination or release shall, without the consent of each Lender (other than a
Defaulting Lender), (i) extend the final scheduled maturity of any Loan or
extend the stated expiration date of any Letter of Credit beyond the Maturity
Date, or reduce the rate or extend the time of payment of interest of fees
thereon, or reduce the principal amount thereof (except to the extent repaid in
cash), (ii) amend, modify or waive any provision of this Section 9.2, (iii)
reduce the percentage specified in the definition of Required Lenders, (iv)
release all or a substantial portion of the Collateral, (iv) consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement or (v) release any Subsidiary which is party to a
Subsidiary Guarantee from its obligations under such Subsidiary Guarantee or
amend any Subsidiary Guarantee to materially reduce any Subsidiary's obligations
thereunder; provided further that no such change, waiver, discharge, termination
or release shall (w) increase the Commitment of any Lender without the consent
of such Lender (it being understood that waivers or modifications of conditions
precedent, covenants, Defaults or of a mandatory reduction in the aggregate
Commitments shall not constitute an increase of the Commitment of any Lender,
and that an increase in the available portion of any Commitment of any Lender
shall not constitute an increase of the Commitment of such Lender), (x) without
the consent of the Issuing Bank, amend, modify or waive any provision of Section
2.5 or alter its rights or obligations with respect to Letters of Credit, or (y)
without the consent of the Administrative Agent, amend, modify or waive any
provision of Article VIII or any other provision as the same relates to the
Administrative Agent. No failure or delay by the Administrative Agent, the
Issuing Bank or any Lender in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Issuing Bank and the Lenders hereunder are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective
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only in the specific instance and for the purpose for which given. Without
limiting the generality of the foregoing, the making of a Loan or issuance of a
Letter of Credit shall not be construed as a waiver of any Default, regardless
of whether the Administrative Agent, any Lender or the Issuing Bank may have had
notice or knowledge of such Default at the time.
(b) If, in connection with any proposed change, waiver, discharge
or termination to any of the provisions of this Agreement contemplated by
clauses (i) through (v), inclusive, of the first proviso of Section 9.2(a), the
consent of the Required Lenders is obtained but the consent of one or more of
such other Lenders whose consent is required is not obtained, then the Borrower
shall have the right, so long as all non-consenting Lenders whose individual
consent is required are treated as described in either clauses (A) or (B) below,
to either (A) replace each such non-consenting Lender or Lenders with one or
more Replacement Lenders pursuant to Section 2.19(b) so long as at the time of
such replacement each such Replacement Lender consents to the proposed change,
waiver, discharge or termination or (B) terminate such non-consenting Lender's
Commitment and repay any outstanding Loans of such Lender and cash collateralize
its applicable LC Exposure in accordance with Section 2.5(j), provided that,
unless the Commitment that is terminated and Loans repaid pursuant to preceding
clause (B) are immediately replaced in full at such time through the addition of
new Lenders or the increase of the Commitments and/or outstanding Loans of
existing Lenders (who in each case must specifically consent thereto), then in
the case of any action pursuant to preceding clause (B) the Required Lenders
(determined after giving effect to the proposed action) shall specifically
consent thereto, provided further, that in any event the Borrower shall not have
the right to replace a Lender, terminate its Commitment or repay its Loans
solely as a result of the exercise of such Lender's rights (and the withholding
of any required consent by such Lender) pursuant to the second proviso to
Section 9.2(a).
Section 9.3 Expenses; Indemnity; Damage Waiver. (a) The Borrower shall
pay (i) all reasonable out-of-pocket expenses incurred by the Administrative
Agent and its Affiliates, including the reasonable fees, charges and
disbursements of counsel for the Administrative Agent, in connection with the
syndication of the credit facilities provided for herein, the preparation and
administration of this Agreement or any amendments, modifications or waivers of
the provisions hereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Bank in connection with the issuance, amendment, renewal
or extension of any Letter of Credit or any demand for payment thereunder and
(iii) all out-of-pocket expenses incurred by the Administrative Agent, the
Issuing Bank or any Lender, including the fees, charges and disbursements of any
counsel for the Administrative Agent, the Issuing Bank or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement after the occurrence of an Event of Default, including its rights
under this Section, or in connection with the Loans made or Letters of Credit
issued
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hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.
(b) The Borrower shall indemnify the Administrative Agent, the
Issuing Bank and each Lender, and each Related Party of any of the foregoing
Persons (each such Person being called an "Indemnitee") against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the Transactions or any other transactions contemplated hereby, (ii) any Loan
or Letter of Credit or the use of the proceeds therefrom (including any refusal
by the Issuing Bank to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by
the Borrower or any of its Subsidiaries, or any Environmental Liability related
in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee.
(c) To the extent permitted by applicable law, the Borrower shall
not assert, and hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement or any agreement or instrument contemplated hereby,
the Transactions, any Loan or Letter of Credit or the use of the proceeds
thereof.
(d) All amounts due under this Section shall be payable not later
than 10 days after written demand therefor.
Section 9.4 Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that the
Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and
void).
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Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Bank and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans and a corresponding amount of its LC
Exposure at the time owing to it); provided that (i) except in the case of an
assignment to a Lender or an Affiliate of a Lender, each of the Borrower, the
Administrative Agent and (with respect to Revolving Loans only) the Issuing Bank
must give its prior written consent to such assignment (which consent shall not
be unreasonably withheld), (ii) except in the case of an assignment to a Lender
or an Affiliate of a Lender or an assignment of the entire remaining amount of
the assigning Lender's Commitment, the amount of the Commitment of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $10,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent and (iii) the parties to
each assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500; and provided further that any consent of the Borrower otherwise required
under this paragraph shall not be required if a Default has occurred and is
continuing. Subject to acceptance and recording thereof pursuant to paragraph
(d) of this Section, from and after the effective date specified in each
Assignment and Acceptance the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Acceptance, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.15, 2.16, 2.17 and 9.3). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.
(c) The Administrative Agent, acting for this purpose as an agent
of the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the
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LOAN AGREEMENT
"Register"). The entries in the Register shall be conclusive (absent manifest
error), and the Borrower, the Administrative Agent, the Issuing Bank and the
Lenders may treat each Person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the processing and
recordation fee referred to in paragraph (b) of this Section and any written
consent to such assignment required by paragraph (b) of this Section, the
Administrative Agent shall accept such Assignment and Acceptance and record the
information contained therein in the Register. No assignment shall be effective
for purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; and provided further that no Lender shall
transfer or grant any participation under which the Participants shall have
rights to approve any amendment to or waiver of this Agreement except to the
extent that such amendment or waiver would (i) extend the final scheduled
maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is
not extended beyond the Maturity Date) in which the Participant is
participating, or reduce the rate or extend the time of payment of interest or
fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates) or reduce the principal amount thereof,
or increase the amount of the Participant's participation over the amount
thereof then in effect (it being understood that a waiver of any Default or of a
mandatory reduction in the aggregate Commitments shall not constitute a change
in the terms of such participation and that an increase in any Commitment or
Loan shall be permitted without the consent of any participant if the
Participant's participation is not increased as a result thereof), or (ii)
consent to the assignment by the Borrower of any of its rights and obligations
under this Agreement.
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(f) A Participant shall not be entitled to receive any greater
payment under Section 2.15 or 2.17 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that, subject to the foregoing,
would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 2.17 unless the Borrower is notified of the participation
sold to such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.17(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
Section 9.5 Survival. All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.3 and Article
VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
Section 9.6 Counterparts; Integration; Effectiveness. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. Except as provided in
Section 4.1, this Agreement shall become effective when it shall have been
executed by the Administrative
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LOAN AGREEMENT
Agent and when the Administrative Agent shall have received counterparts hereof
which, when taken together, bear the signatures of each of the other parties
hereto, and thereafter shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.
Section 9.7 Marshalling; Recapture. Neither the Administrative Agent
nor any Lender shall be under any obligation to marshall any assets in favor of
the Borrower or the Subsidiaries or any other party or against or in payment of
any or all of the obligations, liabilities and indebtedness of every nature of
the Borrower or any Subsidiary from time to time owing to the Administrative
Agent or any Lender under or in connection with this Agreement, the Other
Corporate Loan Documents or the Loan Documents. To the extent any Lender
receives any payment by or on behalf of the Borrower or the Subsidiaries, which
payment or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to such Borrower
or Subsidiary or its estate, trustee, receiver, custodian or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such payment or repayment, the obligation or part thereof
which has been paid, reduced or satisfied by the amount so repaid shall be
reinstated by the amount so repaid and shall be included within the liabilities
of the Borrower or Subsidiary to such Lender as of the date such initial
payment, reduction or satisfaction occurred.
Section 9.8 Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
Section 9.9 Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
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Section 9.10 Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent,
the Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against the Borrower or its properties in
the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to
in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 9.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 9.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER
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<PAGE>
LOAN AGREEMENT
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
Section 9.12 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
Section 9.13 Confidentiality. Each of the Administrative Agent, the
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) to any participant or prospective participant in or assignee or prospective
assignee of any of the rights and obligations under this Agreement, provided
that such participant, prospective participant, assignee or prospective assignee
agrees to be bound by the confidentiality provisions contained in this Section
9.13, (g) with the consent of the Borrower or (h) to the extent such Information
(i) becomes publicly available other than as a result of a breach of this
Section or (ii) becomes available to the Administrative Agent, the Issuing Bank
or any Lender on a nonconfidential basis from a source other than the Borrower.
For the purposes of this Section, "Information" means all information received
from the Borrower relating to the Borrower or its business, other than any such
information that is available to the Administrative Agent, the Issuing Bank or
any Lender on a nonconfidential basis prior to disclosure by the Borrower;
provided that, in the case of information received from the Borrower after the
date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.
Section 9.14 OREGON LEGAL NOTICE. WITHOUT LIMITING THE VALIDITY OF THE
CHOICE OF NEW YORK LAW PROVIDED HEREIN, UNDER OREGON LAW, MOST AGREEMENTS,
PROMISES AND COMMITMENTS MADE BY THE LENDERS AFTER THE RESTATEMENT DATE OF THE
ACT SPECIFIED HEREIN CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
77
<PAGE>
LOAN AGREEMENT
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND
BE SIGNED BY THE LENDERS TO BE ENFORCEABLE. THE ACT SPECIFIED
HEREIN MEANS CHAPTER 967 OREGON LAWS 1989, THE EFFECTIVE DATE OF
WHICH WAS OCTOBER 3, 1989.
78
<PAGE>
LOAN AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
FRED MEYER, INC.
as Borrower
JAMES C. AALBERG
By: --------------------------------
Name: James C. Aalberg
Title: Vice President, Treasurer
S-1
<PAGE>
LOAN AGREEMENT
BANKERS TRUST COMPANY,
as Administrative Agent and as a Lender
GINA S. THOMPSON
By: --------------------------------
Name: Gina S. Thompson
Title: Vice President
S-2
<PAGE>
LOAN AGREEMENT
THE CHASE MANHATTAN BANK,
as Syndication Agent and as a Lender
LAURIE B. PERPER
By: --------------------------------
Name: Laurie B. Perper
Title: Vice President
S-3
<PAGE>
LOAN AGREEMENT
NATIONSBANK OF TEXAS, N.A.,
as Co-Documentation Agent and as a Lender
CHARLES F. LILYGREN
By: --------------------------------
Name: Charles F. Lilygren
Title: Senior Vice President
S-4
<PAGE>
LOAN AGREEMENT
SALOMON BROTHERS HOLDING CO INC.,
as Co-Documentation Agent and as a Lender
CHAD A. LEAT
By: --------------------------------
Name: Chad A. Leat
Title: Managing Director
S-5
<PAGE>
LOAN AGREEMENT
ABN AMRO BANK N.V.,
as a Lender
DAVID MCGINNIS
By: --------------------------------
Name: David McGinnis
Title: Vice President
JAMES J. RICE
By: --------------------------------
Name: James J. Rice
Title: Vice President
S-6
<PAGE>
LOAN AGREEMENT
MARINE MIDLAND BANK,
as a Lender
GINA SIDORSKY
By: --------------------------------
Name: Gina Sidorsky
Title: Authorized Signatory
S-7
<PAGE>
LOAN AGREEMENT
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
TIMOTHY P. STREB
By: --------------------------------
Name: Timothy P. Streb
Title: Vice President
S-8
<PAGE>
LOAN AGREEMENT
WACHOVIA BANK, N.A.,
as a Lender
JOHN A. WHITNER
By: -----------------------
Name: John A. Whitner
Title: Senior Vice President
S-9
<PAGE>
LOAN AGREEMENT
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Lender
STEPHEN J. MCGUINNESS
By: -----------------------
Name: Stephen J. McGuinness
Title: Authorized Signatory
S-10
<PAGE>
LOAN AGREEMENT
BANK OF MONTREAL,
as a Lender
R.W. CAMM
By: -----------------------
Name: R.W. Camm
Title: Managing Director
S-11
<PAGE>
LOAN AGREEMENT
DLJ CAPITAL FUNDING, INC.,
as a Lender
STEPHEN P. HICKEY
By: -----------------------
Name: Stephen P. Hickey
Title: Managing Director
S-12
<PAGE>
LOAN AGREEMENT
SOCIETE GENERALE,
as a Lender
J. BLAINE SHAUM
By: -----------------------
Name: J. Blaine Shaum
Title: Regional Manager
S-13
<PAGE>
LOAN AGREEMENT
MORGAN STANLEY SENIOR FUNDING, INC.,
as a Lender
MICHAEL T. MCLAUGHLIN
By: -----------------------
Name: M. McLaughlin
Title: Principal
S-14
<PAGE>
LOAN AGREEMENT
WELLS FARGO BANK, N.A.,
as a Lender
ALFRED ARTIS
By: -----------------------
Name: Alfred Artis
Title: Vice President
DONALD A. HARTMANN, JR.
By: -----------------------
Name: Donald A. Hartmann, Jr.
Title: Senior Vice President
S-15
<PAGE>
LOAN AGREEMENT
THE FIRST NATIONAL BANK OF CHICAGO,
as a Lender
PAUL E. RIGBY
By: -----------------------
Name: Paul E. Rigby
Title: Managing Director
S-16
<PAGE>
LOAN AGREEMENT
TRANSAMERICA LIFE INSURANCE
AND ANNUITY COMPANY,
as a Lender
JOHN M. CASPARIAN
By: -----------------------
Name: John M. Casparian
Title: Investment Officer
S-17
<PAGE>
LOAN AGREEMENT
THE MITSUBISHI TRUST AND BANKING
CORPORATION,
as a Lender
TOSHIHIRO HAYASHI
By: -----------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
S-18
<PAGE>
LOAN AGREEMENT
ROYAL BANK OF CANADA,
as a Lender
JULIE BOTHAMLEY
By: -----------------------
Name: Julie Bothamley
Title: Senior Manager
S-19
<PAGE>
LOAN AGREEMENT
THE SUMITOMO TRUST AND
BANKING CO. LTD., LOS ANGELES AGENCY,
as a Lender
ELEANOR CHAN
By: -----------------------
Name: Eleanor Chan
Title: Manager & Vice President
S-20
<PAGE>
LOAN AGREEMENT
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE,
as a Lender
ANTHONY ROCK
By: -----------------------
Name: Anthony Rock
Title: Vice President
BRIAN O'LEARY
By: -----------------------
Name: Brian O'Leary
Title: Vice President
S-21
<PAGE>
LOAN AGREEMENT
KEYBANK NATIONAL ASSOCIATION,
as a Lender
MARY K. YOUNG
By: -----------------------
Name: Mary K. Young
Title: Commercial Banking Officer
S-22
<PAGE>
LOAN AGREEMENT
FIRST SECURITY BANK, N.A.,
as a Lender
JUDY CALLISTER
By: -----------------------
Name: Judy Callister
Title: Vice President
S-23
<PAGE>
LOAN AGREEMENT
FIRSTRUST BANK,
as a Lender
EDWARD D'ANCONA
By: -----------------------
Name: Edward D'Ancona
Title: Chief Banking Officer
S-24
<PAGE>
LOAN AGREEMENT
US BANK OF OREGON,
as a Lender
GAYLE BURGESS
By: -----------------------
Name: Gayle Burgess
Title: Asst. Relationship Manager
S-25
<PAGE>
LOAN AGREEMENT
FIRST UNION NATIONAL BANK,
as a Lender
ED ROSS
By: -----------------------
Name: Ed Ross
Title: Senior Vice President
S-26
<PAGE>
LOAN AGREEMENT
THE BANK OF NEW YORK,
as a Lender
CHARLOTTE SOHN
By: -----------------------
Name: Charlotte Sohn
Title: Vice president
S-27
<PAGE>
LOAN AGREEMENT
ZIONS FIRST NATIONAL BANK,
as a Lender
RICHARD P. JACKSON
By: -----------------------
Name: Richard P. Jackson
Title: Vice President
S-28
<PAGE>
LOAN AGREEMENT
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Lender
MARIA VICKROY-PERALTA
By: ----------------------------
Name: Maria Vickroy-Peralta
Title: Vice President
S-29
<PAGE>
LOAN AGREEMENT
BANQUE PARIBAS,
as a Lender
BRIAN A. STAPF
By: -----------------------
Name: Brian A. Stapf
Title: Vice President
LEE S. BUCKNER
By: -----------------------
Name: Lee S. Buckner
Title: Managing Director
S-30
<PAGE>
LOAN AGREEMENT
FIRST HAWAIIAN BANK,
as a Lender
TRAVIS RUETENIK
By: -----------------------
Name: Travis Ruetenik
Title: Corporate Banking Officer
National Corporate Banking
S-32
<PAGE>
LOAN AGREEMENT
BANK LEUMI U.S.A.,
as a Lender
JACQUES DELVOYE
By: -----------------------
Name: Jacques Delvoye
Title: Vice President
S-33
<PAGE>
Schedule 2.1
Lenders and Commitments
Revolving Loan Term Loan
Name and Address of Lender Commitment Commitment
- -------------------------- -------------- ----------
Bankers Trust Company $157,114,850.33 $136,166,203.62
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Telecopier No.: (212) 250-7351
Attn: Deal Administrator
The Chase Manhattan Bank $158,092,848.18 $137,013,801.76
270 Park Avenue
New York, New York 10017
Telecopier No.: (212)
Attn:
NationsBank of Texas, N.A. $145,388,958.59 $126,003,764.12
444 South Flower, Suite 4100
Los Angeles, California 90071
Telecopier No.: (213)
Attn:
Salomon Brothers Holding Co Inc. $145,388,958.59 $126,003,764.12
7 World Trade Center
New York, New York 10048
Telecopier No.: (212)
Attn:
Wells Fargo Bank $117,628,607.28 $101,944,792.97
420 Montgomery Street, 9th Floor
San Francisco, California 94163
Telecopier No.:
Attn:
DLJ Capital Funding, Inc. $94,102,885.82 $81,555,834.38
277 Park Avenue
New York, New York 10172
Telecopier No.:
Attn:
<PAGE>
Bank of America National Trust and $94,102,885.82 $81,555,834.38
Savings Association
555 South California Street, 41st Floor
San Francisco, California 94104
Telecopier No.:
Attn:
The First National Bank of Chicago $94,102,885.82 $81,555,834.38
One First National Plaza
Chicago, Illinois 60670
Telecopier No.:
Attn:
Goldman Sachs Credit Partners L.P. $94,102,885.82 $81,555,834.38
85 Broad Street
New York, New York 10004
Telecopier No.:
Attn:
Morgan Stanley Senior Funding, Inc. $94,102,885.82 $81,555,834.38
1585 Broadway
New York, New York 10036
Telecopier No.:
Attn.:
Societe Generale $94,102,885.82 $81,555,834.38
2029 Century Park East, Suite 2900
Los Angeles, California 90067
Telecopier No.:
Attn.:
Union Bank of California, N.A. $94,102,885.82 $81,555,834.38
350 California Street, 6th Floor
San Francisco, California 94104
Telecopier No.:
Attn.:
U.S. Bank of Oregon $94,102,885.82 $81,555,834.38
555 S.W. Oak Street, Suite 400
Portland, Oregon 97204
Telecopier No.:
Attn.:
2
<PAGE>
Wachovia $94,102,885.82 $81,555,834.38
191 Peachtree Street NE, 28th Floor
Atlanta, Georgia 30303
Telecopier No.:
Attn.:
Marine Midland Bank $58,814,303.64 $50,972,396.49
140 Broadway, 5th Floor
New York, New York 10005
Telecopier No.:
Attn.: Gina Sidorsky
Bank of Montreal $23,525,721.46 $20,388,958.59
115 South La Salle Street
Chicago, Illinois 60603
Telecopier No.:
Attn.:
Compagnie Financier de CIC et de $23,525,721.46 $20,388,958.59
l'Union Europeenne,
520 Madison Avenue
New York, New York 10022
Telecopier No.:
Attn.:
First Security Bank, N.A. $23,525,721.46 $20,388,958.59
15 East 100 South , 2nd Floor
Salt Lake City, Utah 84111
Telecopier No.:
Attn.:
Banque Paribas $23,525,721.46 $20,388,958.59
101 California Street, Suite 3150
San Francisco, CA 94111
Telecopier No.:
Attn.:
Royal Bank of Canada $23,525,721.46 $20,388,958.59
600 Wilshire Blvd., Suite 800
Los Angeles, California 90017
Telecopier No.:
Attn.:
3
<PAGE>
Transamerica Life Insurance and $23,525,721.46 $20,388,958.59
Annuity Company
1150 South Olive Street, Suite 2700
Los Angeles, California 90015
Telecopier No.:
Attn.:
Zions First National Bank $14,115,432.87 $12,233,375.16
One South Main Street
Salt Lake City, Utah 8411
Telecopier No.:
Attn.:
ABN Amro North America, Inc. $11,762,860.73 $10,194,479.30
One Union Square
600 University Street, Suite 2323
Seattle, Washington 98101-2070
Telecopier No.:
Attn.:
The Bank of New York $11,762,860.73 $10,194,479.30
One Wall Street
New York, New York 10286
Telecopier No.:
Attn.:
First Union National Bank $11,762,860.73 $10,194,479.30
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0737
Telecopier No.:
Attn.:
KeyBank National Association $11,762,860.73 $10,194,479.30
700 Fifth Avenue, 48th Floor
Seattle, Washington 98104
Telecopier No.:
Attn.:
The Mitsubishi Trust and Banking $11,762,860.73 $10,194,479.30
Corporation
520 Madison Avenue
New York, New York 10286
Telecopier No.:
Attn.:
4
<PAGE>
The Sumitomo Trust and Banking Co. $11,762,860.73 $10,194,479.30
Ltd., Los Angeles Agency
333 South Grand Avenue, Suite 5300
Los Angeles, California 90071
Telecopier No.:
Attn.:
Bank Leumi, U.S.A. $7,057,716.44 $6,116,687.58
8383 Wilshire Blvd., Suite 400
Beverly Hills, California 90211
Telecopier No.:
Attn.:
First Hawaiian Bank $8,035,714.29 $6,964,285.71
999 Bishop Street, 11th Floor
Honolulu, Hawaii 96813
Telecopier No.:
Attn.:
FirstTrust Bank $4,705,144.29 $4,077,791.72
1931 Cottman Avenue
Philadelphia, Pennsylvania 19111
Telecopier No.:
Attn.:
5
<PAGE>
SCHEDULE 2.5 TO
LOAN AGREEMENT
--------------
EXISTING LETTERS OF CREDIT
Union Bank as Issuing Bank:
Letter of Stated
Credit Number Beneficiary Amount Maturity
- ------------- ----------- ------ --------
Issued under Hughes Market, Inc.
S006588 Reliance Insurance Co. $8,879,626 12/31/98
S008016 City of Los Angeles
Dept. of Transportation $103,000 8/1/98
Issued under Alpha Beta Company
S001078 Lou Jones & Assoc. $365,000 5/31/98
S068494 Calif. Dept. of Ind. Rel. Self
Ins. Plans
(Workers Comp.) $4,688,363 6/17/98
S068504 Calif. Dept. of Ind. Rel. Self
Ins. Plans
(Workers Comp.) $34,889,886 6/17/98
S230034 Riverside County Waste
Services $12,400 8/7/98
S230713 Amwest Surety Insurance
Company $166,000 7/30/98
Issued under Falleys Inc.
S011828 The Travelers Companies $695,000 4/18/98
1
<PAGE>
Bankers Trust Company as Issuing Bank:
Letter of Stated
Credit Number Beneficiary Amount Maturity
- ------------- ----------- ------ --------
Issued under Ralphs Grocery Company
S05520 U.S. Trust Co.
of CA, N.A. $771,057 9/30/98
S11504 American Food and Drug
Inc. (Alpha Beta Promissory
Note) $2,200,000 10/28/98
S11560 CA Dept. of Fish & Game,
Dept. Army, City of Riverside
(Riverside Warehouse) $177,000 10/21/98
2
<PAGE>
Bank of America as Issuing Bank:
Letter of Stated
Credit Number Beneficiary Amount Maturity
- ------------- ----------- ------ --------
Issued Under Ralphs Grocery Company
LASB - 216214 Calif. Dept. of Ind. Rel.
(910091718678LA) Self Ins. Plans
(Workers Comp.) $31,507,241 5/16/98
3
<PAGE>
SCHEDULE 2.20(a) TO
LOAN AGREEMENT
-------------------
STORE PROPERTY AND DISTRIBUTION CENTER
ACQUIRED IN MERGERS
1. Hughes Distribution Center (Irwindale, California)
2. Hughes office building (Irwindale, California)
3. Hughes Stores:
a. Santa Clarita (#18)
b. Sherman Oaks (#7)
c. N. Mission Viejo (#58)
4. Ralphs Stores:
a. Studio City (#150)
b. Devonshire (#45)
c. Northridge (#153)
d. Santa Monica (#290)
e. University Park (#226)
f. San Marino (#43)
g. N. Fountain Valley (#230)
h. Hastings Ranch (#204)
i. Camarillo (#98)
j. Canoga Park (#122)
k. West Hills (#640)
l. South Torrance (#259)
m. Laguna Niguel (#222)
n. El Toro (#225)
o. Canyon Country (#184)
p. Triangle Square (#228)
5. Four (4) Stock Market stores
4
<PAGE>
SCHEDULE 2.20(e) TO
LOAN AGREEMENT
-------------------
TENDERED BONDS
A. Food 4 Less Holdings, Inc.
1. Indenture dated as of June 1, 1995 among Food 4 Less Holdings, Inc.
and United States Trust Company (13.625% Senior Discount Debentures
due 2005) ($193,363,000 at maturity).
2. Indenture dated as of June 1, 1995 among Food 4 Less Holdings, Inc.
and Norwest Bank Minnesota, N.A. (13.625% Senior Subordinated
Pay-in-Kind Debentures due 2007) ($182,889,850).
B. Ralphs Grocery Company, Inc.
1. Indenture dated as of June 1, 1995 among Food 4 Less Supermarkets,
Inc. (now Ralphs), Subsidiary Guarantors, and Norwest Bank Minnesota,
N.A. ($520,326,000 10.45% Senior Notes Due 2004).
2. Indenture dated as of June 6, 1996 among Ralphs Grocery Company,
Subsidiary Guarantors and Norwest Bank Minnesota, N.A. ($100,000,000
10.45% Senior Notes Due 2004).
3. Indenture dated as of June 1, 1995 among Food 4 Less Supermarkets,
Inc. (to be merged with and into Ralphs Grocery Company), Subsidiary
Guarantors and United States Trust Company of New York ($524,055,000
11% Senior Subordinated Notes due 2005).
4. Indenture dated as of March 26, 1997 among Ralphs Grocery Company,
Subsidiary Guarantors and United States Trust Company of New York
($155,000,000 11% Senior Subordinated Notes Due 2005).
C. Quality Food Centers, Inc.
1. Indenture dated as of March 19, 1997 among Quality Food Centers, Inc.,
Certain Guarantors and First Trust National Association ($150,000,000
of 8.70% Senior Subordinated Notes due 2007).
5
<PAGE>
SCHEDULE 3.6 TO
LOAN AGREEMENT
---------------
DISCLOSED MATTERS
None.
6
<PAGE>
SCHEDULE 3.15 TO
LOAN AGREEMENT
----------------
<TABLE>
<CAPTION>
SUBSIDIARIES
Percent
Subsidiary1 Ownership Direct Owner
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Fred Meyer Stores, Inc. 100% (direct) Fred Meyer, Inc.
B&B Stores, Inc. 100% (indirect) Fred Meyer Stores, Inc.
B&B Pharmacy, Inc.2 100% (indirect) B&B Stores, Inc.
CB&S Advertising Agency, Inc. 100% (indirect) Fred Meyer Stores, Inc.
Distribution Trucking Company 100% (indirect) Fred Meyer Stores, Inc.
FM Retail Services, Inc. 100% (indirect) Fred Meyer Stores, Inc.
FM, Inc.2 100% (indirect) Fred Meyer Stores, Inc.
FM Holding Corporation 100% (indirect) Fred Meyer Stores, Inc.
Fred Meyer of Alaska, Inc. 100% (indirect) Fred Meyer Stores, Inc.
Fred Meyer of California, Inc. 100% (indirect) Fred Meyer Stores, Inc.
Fred Meyer (HK) Limited3 80% (indirect) Fred Meyer Stores, Inc.
Fred Meyer Jewelers, Inc. 100% (indirect) Fred Meyer Stores, Inc.
Fred Meyer, Inc. a 100% (indirect) Fred Meyer Stores, Inc.
Washington corporation3
Grand Central, Inc. 100% (indirect) FM Holding Corporation
JH Properties, Inc. 100% (indirect) Roundup Co.
Merksamer Jewelers, Inc. 100% (indirect) Fred Meyer Jewelers, Inc.
Natur Glo, Inc.3 100% (indirect) Fred Meyer Stores, Inc.
Roundup Co. 100% (indirect) Fred Meyer Stores, Inc.
Smith's Food & Drug Centers, Inc. 100% (direct) Fred Meyer, Inc.
Compare, Inc. 100% (indirect) Smitty's Super Valu, Inc.
Richie's, Inc. 100% (indirect) Smith's Food & Drug Centers, Inc.
Saint Lawrence Holding Company 100% (indirect) Smitty's Super Valu, Inc.
SLHC 2, Inc.3 100% (indirect) Smith's Food & Drug Centers, Inc.
Smith's Beverage of Wyoming, Inc. 100% (indirect) Smith's Food & Drug Centers, Inc.
Smitty's Super Valu, Inc. 100% (indirect) Smitty's Supermarkets, Inc.
Smitty's Equipment Leasing, Inc. 100% (indirect) Smitty's Super Valu, Inc.
Smitty's Supermarkets, Inc. 100% (indirect) Smith's Food & Drug Centers, Inc.
Treasure Valley Land Company, L.C. 100% (indirect) Smith's Food & Drug Centers, Inc.
Western Property Investment 100% (indirect) Smith's Food & Drug Centers, Inc.
Group, Inc.2
Quality Food Centers, Inc. 100% (direct) Fred Meyer, Inc.
Hughes Markets, Inc. 100% (indirect) Quality Food Centers, Inc.
Hughes Realty, Inc. 100% (indirect) Hughes Markets, Inc.
KU Acquisition Corporation 100% (indirect) Quality Food Centers, Inc.
QFC Sub, Inc.2 100% (indirect) Quality Food Holdings, Inc.
Quality Food, Inc.2 100% (indirect) Quality Food Centers, Inc.
Quality Food Holdings, Inc.2 100% (indirect) Quality Food, Inc.
Second Story, Inc. 100% (indirect) Quality Food Centers, Inc.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Food 4 Less Holdings, Inc. 100% (direct) Fred Meyer, Inc.
Alpha Beta Company 100% (indirect) Food 4 Less of S. California, Inc.
Bay Area Warehouse Stores, Inc. 100% (indirect) Cala Co.
Bell Markets, Inc. 100% (indirect) Cala Co.
Cala Co. 100% (indirect) Ralphs Grocery Company
Cala Foods, Inc. 100% (indirect) Cala Co.
Crawford Stores, Inc. 100% (indirect) Ralphs Grocery Company
Falley's, Inc. 100% (indirect) Ralphs Grocery Company
Food 4 Less of Southern 100% (indirect) Ralphs Grocery Company
California, Inc.
Food 4 Less GM, Inc 100% (indirect) Alpha Beta Company
Food 4 Less Merchandising, Inc. 100% (indirect) Alpha Beta Company
Food 4 Less of California, Inc. 100% (indirect) Alpha Beta Company
Ralphs Grocery Company 100% (indirect) Food 4 Less Holdings, Inc.
- ----------------------
1 Unless otherwise indicated, each Subsidiary is a Material Subsidiary
and is a party to the Subsidiary Guarantee.
2 Not a Material Subsidiary.
3 Not a Material Subsidiary and not a party to the Subsidiary Guarantee.
</TABLE>
8
<PAGE>
SCHEDULE 4.1 TO
LOAN AGREEMENT
---------------
REFINANCED DEBT1/
A. Refinanced Debt -- Fred Meyer:
1. $1,030,000,000 Credit Agreement, dated as of September 9, 1997, among
Fred Meyer, Bankers Trust Company, as Administrative Agent, The Chase
Manhattan Bank, as Syndication Agent, and the lenders named therein
($820,000,000).
2. $500,000,000 364-Day Credit Agreement, dated as of September 9, 1997,
among Fred Meyer, Bankers Trust Company, as Administrative Agent, The
Chase Manhattan Bank, as Syndication Agent, and the lenders named
therein (zero).
3. $500,000,000 Bridge Credit Agreement, dated as of September 9, 1997,
among Fred Meyer, Bankers Trust Company, as Administrative Agent, The
Chase Manhattan Bank, as Syndication Agent, and the lenders named
therein ($500,000,000).
4. Participation Agreement, dated as of September 9, 1997, among Fred
Meyer Stores, as lessee, FMS Trust 1997-1, as lessor, Wilmington Trust
Company, not individually but solely as the Owner Trustee under the
FMS 1997-1 Trust, Bankers Trust Company, as Administrative Agent, The
Chase Manhattan Bank, as Syndication Agent, and the lenders named
therein ($251,000,000).
5. Participation Agreement, dated as of January 27, 1998, among Fred
Meyer Stores, as lessee, FMS Trust 1998-1, as lessor, Wilmington Trust
Company, not individually but solely as the Owner Trustee under the
FMS 1998-1 Trust, The Chase Manhattan Bank, as Administrative Agent,
and the lenders named therein ($52,000,000).
-----------------
1/ Estimated payoff amounts at Closing are indicated in parentheses.
9
<PAGE>
B. Refinanced Debt -- Food 4 Less:
1. $875,000,000 Amended and Restated Credit Agreement dated as of April
17, 1997 among Ralphs Grocery Company, Food 4 Less Holdings, Inc.,
Various Lenders and Bankers Trust Company ($685,000,000).
2. Indenture dated as of June 1, 1995 among Food 4 Less Holdings, Inc.
and United States Trust Company (13.375% Senior Discount Debentures
due 2005), as amended by the First Supplemental Indenture, dated
February 26, 1998.2
3. Indenture dated as of June 1, 1995 among Food 4 Less Holdings, Inc.
and Norwest Bank Minnesota, N.A. (13.375% Senior Subordinated
Pay-in-Kind Debentures due 2007), as amended by the First Supplemental
Indenture, dated February 26, 1998.2
4. Indenture dated as of June 1, 1995 among Food 4 Less Supermarkets,
Inc. (now Ralphs), Subsidiary Guarantors, and Norwest Bank Minnesota,
N.A. ($520,326,000 10.45% Senior Notes due 2004); as amended by First
Supplemental Indenture for 10.45% Senior Notes due 2004, dated as of
June 14, 1995, as amended by the First Supplemental Indenture, dated
February 26, 1998.2
5. Indenture dated as of June 6, 1996 among Ralphs Grocery Company,
Subsidiary Guarantors and Norwest Bank Minnesota, N.A. ($100,000,000
10.45% Senior Notes Due 2004), as amended by the First Supplemental
Indenture, dated February 26, 1998.2
6. Indenture dated as of June 1, 1995 among Food 4 Less Supermarkets,
Inc. (to be merged with and into Ralphs Grocery Company), Subsidiary
Guarantors and United States Trust Company of New York ($524,055,000
11% Senior Subordinated Notes due 2005), as amended by the First
Supplemental Indenture, dated February 26, 1998.2
7. Indenture dated as of March 26, 1997 among Ralphs Grocery Company,
Subsidiary Guarantors and United States Trust Company of New York
($155,000,000 11% Senior Subordinated Notes Due 2005), as amended by
the First Supplemental Indenture, dated February 26, 1998.2
- -------------------
2/ Subject of $1,675,583,850 Offer to Purchase and Consent Solicitation
Statement dated January 22, 1998.
10
<PAGE>
C. Refinanced Debt -- QFC:
1. Amended and Restated Credit Agreement dated as of March 14, 1997 among
Quality Food Centers, Inc., Quality Food Holdings, Inc., Quality Food,
Inc., Bank of America National Trust and Savings Association and
Various Financial Institutions ($184,000,000).
2. Indenture dated as of March 19, 1997 among Quality Food Centers, Inc.,
Certain Guarantors and First Trust National Association ($150,000,000
of 8.70% Senior Subordinated Notes due 2007), as amended by the First
Supplemental Indenture, dated [ ], 1998.3
- --------------
3 Subject of $150,000,000 Offer to Purchase and Consent Solicitation
Statement dated January 26, 1998.
11
<PAGE>
SCHEDULE 6.1 TO
LOAN AGREEMENT
---------------
EXISTING DEBT/1
A. Outstanding Debt -- Fred Meyer:
1. Commercial Paper (unsecured notes; approximately $367,000,000 with
various maturities through 180 days).2
2. Aircraft Lease Agreement, dated as of February 5, 1997, between
NationsBanc Leasing Corporation of North Carolina, as lessor, and Fred
Meyer, as lessee.
3. Long-term Notes, secured by trust deeds, due through 2012, fixed
interest rates from 9.0% to 9.52% ($40,972,061 as of 2/25/98).
4. Continuing Guaranty, dated October 23, 1996, from Fred Meyer for the
benefit of Monogram Credit Card Bank of Georgia, relating to Consumer
Credit Card Program Agreement, dated as of October 23, 1996, by and
among Merksamer Jewelers, Inc., Fred Meyer Jewelers, Inc. and Monogram
Credit Card Bank of Georgia.
5. Indenture dated as of May 23, 1996 by and between Smith's Food & Drug
Centers, Inc. and Fleet National Bank of Connecticut, as trustee, with
respect to the 11.25% Senior Subordinated Notes due 2007 ($5,045,000
as of 2/25/98).
6. Smith's Food & Drug Centers, Inc. Full Recourse Notes with Wilmington
Trust Company as Pass Thru Trustee. Series E 8.64% and 9.20% due July
2, 2012 and July 2, 2018; Series F 8.64% and 9.20% due July 2, 2012
and July 2, 2018; and Series H 8.64% and 9.20% due July 2, 2012 and
July 2, 2018 ($24,164,000 as of 2/25/98).
- -----------------------
1 Debt of Material Subsidiaries exceeding $5,000,000; aggregate of debt
less than $5,000,000 and not set forth herein does not exceed
$25,000,000. Debt to be refinanced at Closing separately reported on
Schedule 4.1.
2 Fred Meyer commercial paper issued pursuant to programs in place with
United States National Bank, N.A., Wells Fargo Bank, N.A., and Bank of
America NW, N.A., doing business as SeaFirst Bank (the "Placement
Agents"). Commercial paper of Fred Meyer is not subject to prepayment
and will be paid as it becomes due.
12
<PAGE>
7. Indenture, dated as of July 16, 1986, between Saint Lawrence Holding
Company and First Interstate Bank of Arizona, N.A., as Trustee, as
supplemented by the First Supplemental Indenture, dated as of July 16,
1986 ($13,000,000 10.5% First Mortgage Sinking Fund Bonds, Series
1986, due July 31, 2016) ($11,579,893 as of 2/25/98).
B. Outstanding Debt -- F4L:
1. Debt identified on Schedule 2.20(e) Sections A and B, to the extent
not tendered pursuant to Offer to Purchase and Consent Solicitation
Statement dated January 22, 1998.
2. Indenture dated as of April 15, 1992 among Food 4 Less Supermarkets,
Inc., the Subsidiary Guarantors and Norwest Bank Minnesota,
N.A.($175,000,000 10.45% Senior Notes due 2000); as amended by the
First Supplemental Indenture for 10.45% Notes due 2000, dated as of
July 24, 1992; as amended by the Second Supplemental Indenture for
10.45% Notes due 2000, dated as of June 14, 1995; as amended by the
Third Supplemental Indenture for 10.45% Notes due 2000, dated as of
June 14, 1995.
3. Indenture Dated as of July 29, 1992 among Ralphs Grocery Company and
United States Trust Company of New York (10.25% Senior Subordinated
Notes due 2002); as amended by the First Supplemental Indenture for
10.25% Senior Subordinated Notes due 2002, dated as of May 30, 1995;
as amended by the Second Supplemental Indenture for 10.25% Senior
Subordinated Notes due 2002, dated as of June 14, 1995.
4. Indenture Dated as of March 30, 1993 among Ralphs Grocery Company and
United States Trust Company of New York (9% Senior Subordinated Notes
due 2003); as amended by the First Supplemental Indenture for 9%
Senior Subordinated Notes due 2003, dated as of June 23, 1993; as
amended by the Second Supplemental Indenture for 9% Senior
Subordinated Notes due 2003, dated as of May 30, 1995; as amended by
the Third Supplemental Indenture for 9% Senior Subordinated Notes due
2003, dated as of June 14, 1995.
5. Long-term notes secured by trust deeds with respect to the Adams and
Vermont Renaissance Plaza and Falley's store # 5 in St. Joseph, MO
(approx. $7,200,000 as of 3/11/98).
6. Capital leases with respect to equipment installed at numerous
property locations (approx. $156,000,000 as of 3/11/98).
13
<PAGE>
7. Note payable to IBM Credit for mainframe computer system and related
store equipment ($5,631,000).
C. Outstanding Debt -- QFC:
1. Debt identified on Schedule 2.20(e) Section C, to the extent not
tendered pursuant to Offer to Purchase and Consent Solicitation
Statement dated January 26, 1998.
2. Note Purchase Agreements dated as of July 30, 1997 among Santee
Dairies, Inc. and Various Purchasers, as amended by that certain
Waiver, Amendment and Guaranty, dated as of March 6, 1998, among
Santee Dairies, Inc., Hughes Markets, Inc., various Noteholders, Union
Bank of California, as trustee, and Fred Meyer, Inc. ($80,000,000
Senior Subordinated Notes due 2008).
14
<PAGE>
SCHEDULE 6.2 TO
LOAN AGREEMENT
---------------
LIENS
A. Liens - Fred Meyer:
1. Trust deeds, securing long-term notes, due through 2012, fixed
interest rates from 9.0% to 9.52% (aggregate of $40,972,061 as of
2/25/98):
a. Lien on Auburn, Washington Store, in connection with financing
from Nationwide Life Insurance.
b. Lien on Walker Road Store, Portland, Oregon, in connection with
financing from Nationwide Life Insurance ($10,306,000 remaining
outstanding as of 2/1/97) and Employers Life Insurance.
c. Lien on West Fairbanks, Alaska Store, in connection with
financing from Nationwide Life Insurance.
2. Lien on Brigham City Utah Store (Store No. #78), in connection with
IRB financing (approximately $512,000 remaining outstanding as of
2/25/98).
3. Lien on North Ogden, Utah Store (Store No. #79), in connection with
IRB financing (approximately $1,908,000 remaining outstanding as of
2/25/98).
4. Lien on Provo City, Utah Store (Store No. #136), in connection with
IRB financing (approximately $3,262,000 remaining outstanding as of
2/25/98).
5. Lien on Riverside, California Store (Store No. #706), in connection
with promissory note to Marilyn & Gilbert Smith (approximately
$2,700,000 remaining outstanding as of 2/25/98).
6. Lien on Almagordo, New Mexico Store (Store No. #434), in connection
with promissory note to Joe & Flo Erwin (approximately $39,000
remaining outstanding as of 2/25/98).
7. Lien on Scottsdale, Arizona Store and Mesa, Arizona Store (Store Nos.
#621 and 622), in connection with 10.5% Sinking Fund Bonds
(approximately $11,580,000 remaining outstanding as of 2/25/98).
15
<PAGE>
B. Liens - Food 4 Less:
1. Liens on Falley's store #5 in St. Joseph, MO in favor of Business
Men's Assurance Company of America; Falley's store #989 in Topeka, KS
in favor of Falger's, Inc.; and the Adams and Vermont Renaissance
Plaza (approx. $7,200,000 aggregate).
2. Those Liens on assets of Ralphs Grocery Company in favor of Future
Systems Development, Inc., arising under Sales Agreement dated Dec.
15, 1989 between Future Systems Development Inc. and Ralphs Grocery
Co. and as set forth in UCC-1 financing statement filed December 19,
1989 (file no. 89320805) with the California Secretary of State
(specifically identified accounts, contract rights, chattel paper,
instruments, equipment, proceeds).
3. Those Liens on certain Patronage Refund Certificates issued by
Associated Wholesale Grocers, Inc. to Falley's.
4. Those liens on assets of Adams & Vermont Renaissance Plaza in favor of
Tokai Bank of California, as set forth on UCC-1 financing statement
filed May 16, 1996 (file no. 9613860421) with the California Secretary
of State (accounts, equipment, fixtures, chattel paper, general
intangibles, contract rights, and negotiable instruments).
5. Those liens on assets of Falley's, Inc. in favor of Associated
Wholesale Grocers, Inc., as set forth on numerous UCC-1 financing
statements filed with the Kansas Secretary of State (all inventory,
equipment and fixtures at specified store sites).
C. Liens - Quality Food Centers:
1. Mechanic's lien in amount of approximately $900,000 as to Store No.
847; QFC is being indemnified by title company with respect to
thereto.
2. Liens on Sherman Oaks, CA store (Hughes store #2) in favor of Fidelity
Mutual Life Insurance Company and Her-Dek Corporation.
3. Lien on Granada Hills, CA store (Hughes store #4) in favor of
Geraldine Russell Family Trust.
16
<PAGE>
SCHEDULE 6.5 TO
LOAN AGREEMENT
---------------
INVESTMENTS
A. Fred Meyer:
None.
B. Quality Food Centers:
1. Quality Food Centers, Inc. holds a 22% interest in Associated Grocers,
Inc., with a book value of $14,305,000.
2. Hughes Markets, Inc. holds a 50% interest in Santee Dairies, LLC, with
a book value of $9,295,000.
C. Food 4 Less:
1. Alpha Beta, as successor to The Boys Markets, Inc., owns 12.2% of the
shares of Hawthorne Center Parking Company, which owns the common area
in a shopping center located in Hawthorne, California.
2. Ralphs Grocery Company has loaned an aggregate of $9,300,000 to
developers of the following three stores: Beverwill (store #198),
$2,800,000; Westwood (store #203) $5,000,000; Santa Barbara (store
#208), $1,500,000.
3. F4L holds interests in the following joint ventures and partnerships:
Adams West Associates, Ltd. 33.3%
Adams West Supermarket Associates, Ltd.
Adams/Vermont Renaissance Plaza, Ltd. 75%
Beverage Partners, LP 18.18%
Cathedral City Marketplace, Ltd. 15%
La Brea Marketplace, LP 33%
Mid Valley Dairy - Turlock 6.66%
Pacoima Plaza Partnership 40%
RGC Partners, LP 5%
Sunnyside Partners 27.92%
Price Enterprise, Inc.
4. Food 4 Less has outstanding investments in suppliers and supplier
cooperatives made in the ordinary course of business and consistent
with past practice,
17
<PAGE>
including Certified Grocers of California, Ltd. and Associated
Wholesale Grocers, Inc. (Kansas).
18
<PAGE>
SCHEDULE 6.9 TO
LOAN AGREEMENT
---------------
RESTRICTIVE AGREEMENTS
None.
19
<PAGE>
Schedule A
Amortization Schedule
The Borrower shall make equal quarterly payments in respect of the
Term Loans and in accordance with Section 2.1 of the Loan Agreement, as follows:
Date Amount
August 15, 1998 $6,250,000.00
November 7, 1998 $6,250,000.00
January 30, 1999 $6,250,000.00
May 22, 1999 $6,250,000.00
August 14, 1999 $37,500,000.00
November 6, 1999 $37,500,000.00
January 29, 2000 $37,500,000.00
May 20, 2000 $37,500,000.00
August 12, 2000 $62,500,000.00
November 4, 2000 $62,500,000.00
February 3, 2001 $62,500,000.00
May 26, 2001 $62,500,000.00
August 18, 2001 $100,000,000.00
November 10, 2001 $100,000,000.00
February 2, 2002 $100,000,000.00
May 25, 2002 $100,000,000.00
August 17, 2002 $125,000,000.00
November 9, 2002 $125,000,000.00
February 1, 2003 $125,000,000.00
Maturity Date Outstanding principal balance
1
<PAGE>
EXHIBIT A TO
LOAN AGREEMENT
--------------
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Loan Agreement, dated as of March __, 1998
(as amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"), among Fred Meyer, Inc. (the "Borrower") the Lenders named therein
(the "Lenders"), Bankers Trust Company, as administrative agent for the Lenders
(in such capacity, the Administrative Agent") and The Chase Manhattan Bank, as
syndication agent. Unless otherwise defined herein, terms defined in the Loan
Agreement and used herein shall have the meanings given to them in the Loan
Agreement.
_________________ (the "Assignor") and _____________(the "Assignee")
agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the As signee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Closing Date (as defined below), an interest (the "Assigned Inter
est"), as specified on SCHEDULE 1, in and to the Assignor's rights and
obligations under the Loan Agreement with respect to those credit facilities
contained in the Loan Agreement as are set forth on SCHEDULE 1 (individually, an
"Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
amount for each Assigned Facility as set forth on SCHEDULE 1.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or represen tations
made in or in connection with the Loan Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Loan Agreement or any other instrument or document furnished pursuant
thereto, other than that the Assignor has not created any adverse claim upon the
interest being assigned by it hereunder and that such interest is free and clear
of any such adverse claim; and (b) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of Borrower or
any of its
<PAGE>
Subsidiaries or any other obligor or the performance or observance by Borrower
or any of its Subsidiaries or any other obligor of any of their respective
obligations under the Loan Agreement or any other instrument or document
furnished pursuant hereto or thereto.
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Loan Agreement, together with copies of the financial
statements delivered pursuant to the Loan Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the Administrative Agent
or any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Agreement or any other instrument or document
furnished pursuant hereto or thereto; (d) appoints and authorizes the Administra
tive Agent to take such action as agent on its behalf and to exercise such
powers and discretion under the Loan Agreement or any other instrument or
document furnished pursuant hereto or thereto as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions of
the Loan Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Loan Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to Section
2.17(e) of the Loan Agreement.
4. The effective date of this Assignment and Acceptance shall be the
date set forth on Schedule 1, (the "Effective Date"). Following the execution of
this Assignment and Acceptance, it will be delivered to the Administrative Agent
for acceptance by it and recording by the Administrative Agent pursuant to the
Loan Agreement, effective as of the Effective Date (which shall not, unless
other wise agreed to by the Administrative Agent, be earlier than five Business
Days after the date of such acceptance and recording by the Administrative
Agent).
5. Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignee whether such amounts have accrued prior to the
Effective Date or accrue subsequent to the Effective Date. The Assignor and the
Assignee shall make all
A-2
<PAGE>
appropriate adjustments in payments by the Administrative Agent for periods
prior to the Effective Date or with respect to the making of this assignment
directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a
party to the Loan Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and shall be
bound by the provisions thereof and (b) the Assignor shall, to the extent
provided in this Assignment and Acceptance and the Loan Agreement, relinquish
its rights and be released from its obligations under the Credit Agreement.
7. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
8. This Assignment and Acceptance may be executed by one or more of
the parties to this Assignment and Acceptance on any number of separate
counterparts (including by facsimile transmission), and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
A-3
<PAGE>
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE 364 LOAN AGREEMENT, DATED AS OF MARCH , 1997,
AMONG
FRED MEYER, INC.
THE LENDERS NAMED THEREIN,
BANKERS TRUST COMPANY, AS ADMINISTRATIVE AGENT FOR THE LENDERS (IN SUCH
CAPACITY, THE "ADMINISTRATIVE AGENT")
AND
THE CHASE MANHATTAN BANK, AS SYNDICATION AGENT
- -------------------------------------------------------------------------------
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Credit Commitment/Term Loan
Facility Assigned Amount Assigned Commitment Percentage Assigned1/
- --------------------- -------------------- --------------------------------
$___________ __.__________%
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By ------------------- By -----------------
Name: Name:
Title: Title:
------------------
1/ Calculate the Commitment Percentage that is assigned to at least 15 decimal
places and show as a percentage of the aggregate commitments of all
Lenders.
S-1
<PAGE>
Accepted for Recordation in Consented To:*/
the Register:
Bankers Trust Company, FRED MEYER, INC.
as Administrative Agent
By ----------------------
By -------------------- Name:
Name: Title:
Title:
Bankers Trust Company
as Administrative Agent
By ----------------------
Name:
Title:
- ------------------------
*/ If required.
S-2
<PAGE>
EXHIBIT B TO
LOAN AGREEMENT
--------------
TERM NOTE
New York, New York
March _, 1998
$[ ]
FOR VALUE RECEIVED, Fred Meyer, Inc., a Delaware corporation (the
"Borrower") promises to pay to the order of [LENDER] (the "Payee") or its
registered assigns, (x) the principal sum of [ ] U.S. Dollars [$], less (y) any
principal payments made in accordance with the Loan Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at the
times which shall be determined in accordance with the provisions of that
certain Loan Agreement, dated as of March 11, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"), the terms defined
therein and not otherwise defined herein being used herein as therein defined,
by and among the Borrower, the financial institutions listed therein as Lenders,
Bankers Trust Company, as Administrative Agent and The Chase Manhattan Bank, as
Syndication Agent.
This Note is one of the promissory notes referred to in Section 2.7(a)
of the Loan Agreement and is issued pursuant to and entitled to the benefits of
the Loan Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Loans evidenced hereby
were made and are to be repaid.
All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in same day funds at the
office of the Administrative Agent located at 130 Liberty Street, New York, New
York, or at such other place as shall be designated in writing for such purpose
in accordance with the terms of the Loan Agreement. Unless and until an
Assignment and Acceptance effecting the assignment or transfer of this Note
shall have been accepted by the Administrative Agent, and the Borrower has
either executed a consent to such assignment (if consent is required under
Section 9.4(b) of the Loan Agreement) or been notified in writing of such
assignment, and recorded in the Register as provided in Section 9.4 of the Loan
Agreement, the Borrower and the Administrative Agent shall be entitled to deem
and treat Payee as the owner and holder of this Note and the Loans evidenced
hereby. Payee hereby agrees, by its acceptance hereof, that before disposing of
this Note or any part hereof it will make a notation hereon of all principal
<PAGE>
payments previously made hereunder and of the date to which interest hereon has
been paid; provided, however, that the failure to make a notation of any payment
made on this Note shall not limit or otherwise affect the obligations of the
Borrower hereunder with respect to payments of principal of or interest on this
Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
THE LOAN AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH , THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in Section 9.4 of the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this
Note or the Loan Agreement shall alter or impair the obligations of the
Borrower, which are absolute and unconditional, to pay the principal of and
interest on this Note at the place, at the respective times, and in the currency
herein prescribed.
The Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, all as provided in the Loan Agreement, incurred in
the collection and enforcement of this Note. The Borrower and any endorsers of
this Note hereby consent to renewals and extensions of time at or after the
maturity hereof, without notice, and hereby waive diligence, presentment,
protest, demand and notice of every kind and, to the full extent permitted by
law, the right to plead any statute of limitations as a defense to any demand
hereunder.
B-2
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above.
FRED MEYER, INC.
By:--------------------------
Name:
Title:
S-1
<PAGE>
TRANSACTIONS
ON
NOTE
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
- ---- --------- --------- --------------- ------------ --------
<PAGE>
EXHIBIT B TO
LOAN AGREEMENT
--------------
REVOLVING NOTE
REVOLVING NOTE
New York, New York
March _, 1998
$[ ]
FOR VALUE RECEIVED, FRED MEYER, INC., a Delaware corporation (the
"Borrower") promises to pay to the order of [LENDER] (the "Payee") or its
registered assigns, the lesser of (x) [ ] U.S. Dollars [$] and (y) the unpaid
principal amount of all advances made by Payee to the Borrower as Revolving
Loans under the Loan Agreement referred to below.
The Borrower also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at the
times which shall be determined in accordance with the provisions of that
certain Loan Agreement, dated as of March 11, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"), the terms defined
therein and not otherwise defined herein being used herein as therein defined,
by and among the Borrower, the financial institutions listed therein as Lenders,
Bankers Trust Company, as Administrative Agent and The Chase Manhattan Bank, as
Syndication Agent.
This Note is one of the promissory notes referred to in Section 2.7(a)
of the Loan Agreement and is issued pursuant to and entitled to the benefits of
the Loan Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Loans evidenced hereby
were made and are to be repaid.
All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in same day funds at the
office of the Administrative Agent located at 130 Liberty Street, New York, New
York, or at such other place as shall be designated in writing for such purpose
in accordance with the terms of the Loan Agreement. Unless and until an
Assignment and Acceptance effecting the assignment or transfer of this Note
shall have been accepted by the Administrative Agent, and the Borrower has
either executed a consent to such assignment (if consent is required under
Section 9.4(b) of the Loan Agreement) or been notified in writing of such
assignment, and recorded in the Register as provided in Section 9.4 of the Loan
Agreement, the Borrower and the Adminis trative Agent shall be entitled to deem
and treat Payee as the owner and holder of this Note and the Loans evidenced
hereby. Payee hereby agrees, by its acceptance hereof, that before
B-1
<PAGE>
disposing of this Note or any part hereof it will make a notation hereon of all
principal payments previously made hereunder and of the date to which interest
hereon has been paid; provided, however, that the failure to make a notation of
any payment made on this Note shall not limit or otherwise affect the
obligations of the Borrower hereunder with respect to payments of principal of
or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
THE LOAN AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH , THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in Section 9.4 of the Loan Agreement.
No reference herein to the Loan Agreement and no provision of this
Note or the Loan Agreement shall alter or impair the obligations of the
Borrower, which are absolute and unconditional, to pay the principal of and
interest on this Note at the place, at the respective times, and in the currency
herein prescribed.
The Borrower promises to pay all costs and expenses, including
reasonable attorneys' fees, all as provided in the Loan Agreement, incurred in
the collection and enforcement of this Note. The Borrower and any endorsers of
this Note hereby consent to renewals and extensions of time at or after the
maturity hereof, without notice, and hereby waive diligence, presentment,
protest, demand and notice of every kind and, to the full extent permitted by
law, the right to plead any statute of limitations as a defense to any demand
hereunder.
B-2
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above.
FRED MEYER, INC.
By:----------------------
Name:
Title:
S-1
<PAGE>
TRANSACTIONS
ON
NOTE
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
- ---- --------- --------- --------------- ------------ --------
<PAGE>
EXHIBIT C TO
LOAN AGREEMENT
--------------
FORM OF OPINION LETTER, STOEL RIVES LLP
March 11, 1998
TO EACH OF THE PARTIES
SET FORTH IN
SCHEDULE I ATTACHED HERETO
Re: $3,500,000,000 Loan Agreement, dated as of March 11, 1998
Dear Administrative Agent, Syndication Agent and Lenders:
We have acted as counsel to Fred Meyer, Inc., a Delaware corporation
("Borrower"), and the guarantors listed on attached Schedule II ("Guarantors"),
in connection with the Loan Agreement, dated as of March 11, 1998 (the "Loan
Agreement"), among Borrower, Bankers Trust Company, as administrative agent
("Administrative Agent"), The Chase Manhattan Bank, as syndication agent
("Syndication Agent"), and the lenders party thereto ("Lenders"). This opinion
is delivered pursuant to Section 4.1(b) of the Loan Agreement. Unless otherwise
defined in the opinion, all capitalized terms used in this opinion shall have
the meanings assigned to them in the Loan Agreement.
For the purpose of rendering our opinions herein, we have examined (i)
the Loan Agreement, the Notes, the Subsidiary Guaranty, the Pledge Agreement and
the Intercreditor Agreement (such agreements sometimes collectively referred to
as the "Loan Documents"), (ii) certificates of public officials and officers of
Borrower, (iii) certified copies of Borrower's Restated Certificate of
Incorporation and Amended and Restated Bylaws, (iv) Board of Directors'
resolutions of Borrower authorizing Borrower's participation in the transactions
contemplated by the Loan Agreement, (v) certified copies of Articles or
Certificate of Incorporation or other charter documents, as the case may be, and
Bylaws for each Guarantor, (vi) Board of Directors' resolutions of each
Guarantor authorizing such Guarantor's participation in the transactions
contemplated by the Loan Agreement, and (vii) the agreements referred to as
"material agreements" in the Officer's Certificate of Borrower (the "Officer's
Certificate"), attached hereto as Exhibit A.
<PAGE>
To Each of the Parties Set
Forth in Schedule I Attached Hereto
Page 2
March 11, 1998
With respect to such examination, we have assumed: (i) the statements
of fact made in all such certificates, documents, and instruments are true,
accurate, and complete; (ii) the due authorization, execution, and delivery of
the Loan Documents by the parties thereto (other than Borrower and Guarantors);
(iii) the genuineness of all signatures (other than the signatures of persons
signing on behalf of Borrower and Guarantors); (iv) the authenticity and
completeness of all documents, certificates, instruments, records, and corporate
records submitted to us as originals, the conformity to the original instruments
of all documents submitted to us as copies, and the authenticity and
completeness of the originals of such copies; (v) that all parties other than
Borrower and Guarantors have all requisite corporate power and authority to
execute, deliver, and perform the Loan Documents; and (vi) the enforceability of
the Loan Documents against all parties thereto other than Borrower and
Guarantors.
Our opinions in paragraph (1) through (3) below as to qualification,
current status and good standing are based solely upon certificates of public
officials. Our opinion in paragraph (3) below as to valid existence is based
solely upon our review of certified copies of the Articles or Certificate of
Incorporation, as the case may be, and Bylaws for each Guarantor and the factual
representations made by Borrower within the Loan Agreement.
In rendering the opinions set forth in paragraphs (3) and (4) below,
we have assumed that the Subsidiary Guaranty executed by each Guarantor may
reasonably be expected to benefit, directly or indirectly, such Guarantor. In
rendering the opinions set forth in paragraph (5) below, we have assumed that
the indebtedness listed as "Refinanced Debt" is being repaid simultaneously with
the closing of the transactions contemplated hereunder.
We have also examined such other documents and records and have made
such investigations of law, as we have deemed necessary to enable us to render
this opinion. As to the accuracy of certain factual matters, we have relied on
certificates and written statements of officers of Borrower and Guarantors and
factual representations made by Borrower within the Loan Agreement.
<PAGE>
To Each of the Parties Set
Forth in Schedule I Attached Hereto
Page 3
March 11, 1998
For purposes of this opinion, "actual knowledge" means the conscious
awareness of facts or other information by Gary R. Barnum and Kris Ormseth,
being the persons at this firm principally involved with the transactions
contemplated by the Loan Agreement, except that in the case of numbered
paragraph (8) herein, "actual knowledge" shall include the above-named persons
and the other persons at our firm who have worked on matters pertaining to
Borrower since February 1, 1997.
Based on the foregoing and subject to the qualifications below, we are
of the opinion that:
(1) Borrower is a corporation duly organized, validly existing, and in
good standing under the laws of the state of Delaware and has all
requisite corporate power and authority (a) to execute, deliver, and
perform its obligations under the Loan Agreement, and (b) to own and
operate its properties and to carry on its business as a holding
company of Fred Meyer Stores, Inc. ("Fred Meyer"), Smith's Food & Drug
Centers, Inc. ("Smiths"), Quality Food Centers, Inc. ("QFC"), Food 4
Less Holdings, Inc. ("FFL"), and their respective subsidiaries, as
described in the "1934 Act Documents" referenced in the Officer's
Certificate.
(2) Borrower is duly qualified as a foreign corporation to do business and
is of current status in the state of Oregon.
(3) Each Guarantor is a corporation (or, in the case of Treasure Valley
Land Company, L.C., a limited liability company) validly existing and
in good standing or of current status, as the case may be, under the
laws of its respective state of incorporation and has all requisite
corporate power and authority (a) to execute, deliver, and perform its
obligations under the Loan Documents to which it is a party, and (b)
to own and operate its properties and to carry on its business as
described in the "1934 Act Documents" referenced in the Officer's
Certificate.
(4) The Loan Documents to which Borrower or any Guarantor, as the case may
be, is a party have been duly authorized by all necessary corporate
action on the part of Borrower or such Guarantor, as the case may be,
and the Loan Documents to which Borrower or such Guarantor, as the
case may be, is a party have been duly executed and delivered by
Borrower or such Guarantor, as the case may be, and constitute legal,
valid, and binding
<PAGE>
To Each of the Parties Set
Forth in Schedule I Attached Hereto
Page 4
March 11, 1998
obligations of Borrower or such Guarantor, as the case may be,
enforceable against Borrower or such Guarantor, as the case may be, in
accordance with their respective terms.
(5) Neither the execution and delivery by Borrower or any Guarantor, as
the case may be, of the Loan Documents to which it is a party, the
consummation by Borrower or any Guarantor of the transactions
contemplated by the Loan Documents, nor the compliance by Borrower or
any Guarantor with the terms and conditions of the Loan Documents
conflicts with, results in a breach of, or constitutes a default under
any of the terms, conditions, or provisions of (a) the Restated
Certificate of Incorporation or the Amended and Restated Bylaws of
Borrower, or (b) the Articles or Certificate of Incorporation or other
charter document, as the case may be, or Bylaws of any Guarantor, or
(c) any "material agreement" set forth in the Officer's Certificate
or, to our actual knowledge, any judicial order by which Borrower or
any Guarantor is bound, or, (d) except as specifically contemplated
under the Loan Documents, results in the creation of any Lien on any
of the properties or assets of Borrower or any Guarantor under any
such agreement or, to our actual knowledge, any such order.
(6) Neither the execution and delivery by Borrower or any Guarantor, as
the case may be, of the Loan Documents to which it is a party, the
consummation by Borrower and any Guarantor of the transactions
contemplated by the Loan Documents, nor the compliance by Borrower or
any Guarantor with the terms and conditions of the Loan Documents
conflicts with (a) any present federal or Oregon statute, rule or
regulation binding on Borrower or any Guarantor (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System), or (b) any Delaware statute, rule, or
regulation contained in or promulgated under the General Corporation
Law of the state of Delaware binding on Borrower or any Guarantor.
(7) No order, consent, approval, license, authorization or validation of,
or filing, recording or registration with, or exemption by, any
governmental or public body or authority, or any subdivision thereof,
is required to authorize, or is required to be obtained by Borrower or
any Guarantor in connection with, (i) the execution, delivery and
performance by Borrower or any Guarantor of any Credit Document to
which it is a party or (ii) the legality, validity,
<PAGE>
To Each of the Parties Set
Forth in Schedule I Attached Hereto
Page 5
March 11, 1998
binding effect or enforceability of any such Credit Document against
Borrower or any Guarantor.
(8) To our actual knowledge after due inquiry, except as set forth under
"Legal Proceedings" in the "1934 Act Documents" referenced in the
Officer's Certificate, there are no actions, suits, or proceedings
pending or threatened against Borrower or any Guarantor in any court
or before any Governmental Authority that could reasonably be expected
to result in a Material Adverse Effect.
(9) The provisions in the Loan Documents concerning interest, fees,
prepayment premiums and other similar charges do not violate the usury
laws or other similar laws regulating the use or forbearance of money
of the State of Oregon.
(10) The Lenders are not required under the laws of the State of Oregon to
qualify as a foreign corporation solely as a result of the execution,
delivery and performance of the Loan Documents to which they are a
party.
(11) None of Borrower, Guarantors, or their respective Subsidiaries is an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(12) None of Borrower, Guarantors, or their respective Subsidiaries is a
"holding company," or a "subsidiary company" of a "holding company,"
or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
The opinions set forth in paragraph (4) above are subject to (a) the
effect of bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and other similar laws affecting creditors' rights generally
(including, without limitation, the effectiveness of waivers of defenses and
legal rights), and (b) the application of general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or
equity), including, without limitation, the right to specific performance. A
court might not enforce certain covenants or allow acceleration of the amounts
due from Borrower or any Guarantor under the Loan Documents to which Borrower or
any Guarantor is a party if it concludes that such enforcement or acceleration
would be unreasonable or not undertaken
<PAGE>
To Each of the Parties Set
Forth in Schedule I Attached Hereto
Page 6
March 11, 1998
in good faith under the then existing circumstances, but the inclusion of such
remedies does not, in our opinion, affect the validity of the Loan Documents to
which Borrower or any Guarantor is a party. In addition, no opinion is expressed
herein as to Section 9.3 of the Loan Agreement (to the extent indemnification
provided for therein is for the negligence of any Person, any violation of law
or might otherwise be determined as violative of public policy).
The opinion set forth in paragraph (4) above is subject to the further
qualification that the enforceability of any Guarantor's obligations under the
Subsidiary Guaranty may be limited by certain rights and defenses at law and in
equity which are available to a guarantor. In certain circumstances, a guarantor
may be exonerated if the creditor materially alters the original obligation of
the principal without the consent of the guarantor, elects remedies for default
which impair the subrogation rights of the guarantor against the principal, or
otherwise takes any action without notifying the guarantor which materially
prejudices the guarantor. However, there is also authority to the effect that a
guarantor may validly waive such rights if such waivers are expressly set forth
in the guaranty. While we believe that a court should enforce language contained
in the Subsidiary Guaranty waiving notice, limiting subrogation rights of each
Guarantor, and making the obligations of each Guarantor unconditional,
irrespective of any amendment to the obligations guaranteed by such Subsidiary
Guaranty, the issue is not free from doubt and a court might conclude otherwise.
The opinions expressed herein are limited to matters governed by the
laws of the United States of America and the state of Oregon, and, as to the
opinions expressed in paragraphs (1) and (3) through (6) above, the General
Corporation Law of the state of Delaware, in each case as it exists at the date
of this opinion, and we express no opinion as to the law of any other
jurisdiction. The opinion expressed in paragraph (4), above, is given as if the
Loan Documents were governed by the laws of the State of Oregon. Our opinion is
limited to the matters expressly stated herein, and no other opinions may be
implied or inferred. We are not undertaking any duty to advise you of changes
which hereafter may be brought to our attention with respect to the laws covered
by this opinion. In giving the opinions set forth in paragraphs (3), (4) (as to
authorization), (5) and (8), in each case as they pertain to the FFL Companies
listed on attached Schedule II, with your consent we have relied upon the
opinion of Latham & Watkins, special counsel to FFL, and the opinion of Clutter,
Hinkel & Aadalen, LLP, special Kansas counsel to Falley's, Inc., attached hereto
as Exhibits B and C.
<PAGE>
To Each of the Parties Set
Forth in Schedule I Attached Hereto
Page 7
March 11, 1998
We express no opinion as to (a) the enforceability under certain
circumstances of any provision imposing penalties, late payment charges or
increases in interest rate upon delinquency in payment or the occurrence of
Events of Default, (b) the enforceability of any choice-of-law provision, (c)
the compliance with certain financial covenants under the "material agreements"
set forth in the Officer's Certificate or (d) the compliance with applicable
federal or state securities laws.
This opinion is rendered only to Administrative Agent, Syndication
Agent and Lenders (and their respective permitted successors and assigns) and is
solely for their benefit in connection with the above transactions. This opinion
may not be relied upon by Administrative Agent, Syndication Agent and Lenders
for any other purpose or quoted to, copies given to or relied upon by any other
person, firm, or corporation for any purpose without our prior written consent,
except that copies may be given or made available to governmental bodies or
regulators in accordance with the ordinary course of business and may be
provided to prospective permitted assigns.
Very truly yours,
STOEL RIVES, LLP
By:------------------------
Gary R. Barnum
<PAGE>
SCHEDULE I
Addressees
Bankers Trust Company, as Administrative Agent
The Chase Manhattan Bank, as Syndication Agent
The Lenders, party to the Loan Agreement
<PAGE>
SCHEDULE II
Guarantors
Percent
Subsidiary Ownership Direct Owner
[Fred Meyer/Smith's Companies]
Fred Meyer Stores, Inc. 100% (indirect) Fred Meyer, Inc.
Roundup Co. 100% (indirect) Fred Meyer Stores, Inc.
JH Properties, Inc. 100% (indirect) Roundup Co.
Fred Meyer of Alaska, Inc. 100% (indirect) Fred Meyer Stores, Inc.
Fred Meyer of California, Inc. 100% (indirect) Fred Meyer Stores, Inc.
Distribution Trucking Company 100% (indirect) Fred Meyer Stores, Inc.
B&B Stores, Inc. 100% (indirect) Fred Meyer Stores, Inc.
B&B Pharmacy, Inc. 100% (indirect) B&B Stores, Inc.
CB&S Advertising Agency, Inc. 100% (indirect) Fred Meyer Stores, Inc.
FM Holding Corporation 100% (indirect) Fred Meyer Stores, Inc.
Grand Central, Inc. 100% (indirect) FM Holding Corporation
FM Retail Services, Inc. 100% (indirect) Fred Meyer Stores, Inc.
Fred Meyer Jewelers, Inc. 100% (indirect) Fred Meyer Stores, Inc.
Merksamer Jewelers, Inc. 100% (indirect) Fred Meyer Jewelers, Inc.
FM, Inc. 100% (indirect) Fred Meyer Stores, Inc.
Smith's Food & Drug Centers, Inc. 100% (direct) Fred Meyer, Inc.
Smith's Beverage of Wyoming, Inc. 100% (indirect) Smith's Food & Drug
Centers, Inc.
Western Property Investment 100% (indirect) Smith's Food & Drug
Group, Inc.
Centers, Inc.
Smitty's Supermarkets, Inc. 100% (indirect) Smith's Food & Drug
Centers, Inc.
Smitty's Super Valu, Inc. 100% (indirect) Smitty's Supermarkets, Inc.
Saint Lawrence Holding Company 100% (indirect) Smitty's Super Valu, Inc.
Smitty's Equipment Leasing, Inc. 100% (indirect) Smitty's Super Valu, Inc.
Compare, Inc. 100% (indirect) Smith's Food & Drug
Centers, Inc
Richie's, Inc. 100% (indirect) Smith's Food & Drug
Centers, Inc
Treasure Valley Land 100% (indirect) Smith's Food & Drug
Company, L.C. Centers, Inc
<PAGE>
[QFC Companies]
Quality Food Centers, Inc. 100% (direct) Fred Meyer, Inc.
Hughes Markets, Inc. 100% (indirect) Quality Food Centers, Inc.
Hughes Realty, Inc. 100% (indirect) Hughes Markets, Inc.
KU Acquisition Corporation 100% (indirect) Quality Food Centers, Inc.
Second Story, Inc. 100% (indirect) Quality Food Centers, Inc.
Quality Food, Inc. 100% (indirect) Quality Food Centers, Inc.
Quality Food Holdings, Inc. 100% (indirect) Quality Food, Inc.
QFC Sub, Inc. 100% (indirect) Quality Food Holdings, Inc.
[FFL Companies]
Food 4 Less Holdings, Inc. 100% (direct) Fred Meyer, Inc.
Ralphs Grocery Company 100% (indirect) Food 4 Less Holdings, Inc.
Falley's, Inc. 100% (indirect) Ralphs Grocery Company
Cala Co. 100% (indirect) Ralphs Grocery Company
Bay Area Warehouse Stores, Inc. 100% (indirect) Cala Co.
Cala Foods, Inc. 100% (indirect) Cala Co.
Bell Markets, Inc. 100% (indirect) Cala Co.
Food 4 Less of Southern 100% (indirect) Ralphs Grocery Company
California, Inc.
Alpha Beta Company 100% (indirect) Food 4 Less of S. California,
Inc.
Food 4 Less GM, Inc 100% (indirect) Alpha Beta Company
Food 4 Less Merchandising, Inc. 100% (indirect) Alpha Beta Company
Food 4 Less of California, Inc. 100% (indirect) Alpha Beta Company
Crawford Stores, Inc. 100% (indirect) Ralphs Grocery Company
<PAGE>
EXHIBIT A
OFFICER'S CERTIFICATE
<PAGE>
EXHIBIT B
OPINION OF LATHAM & WATKINS
<PAGE>
EXHIBIT C
OPINION OF CLUTTER, HINKEL & AADALEN, LLP
<PAGE>
EXHIBIT D TO
LOAN AGREEMENT
--------------
SUBSIDIARY GUARANTEE
See Tab 2.
<PAGE>
EXHIBIT E TO
LOAN AGREEMENT
--------------
Guarantee Language
The guarantee language described in that certain Prospectus Supple
ment, dated March 4, 1998, to the Prospectus, dated February 4, 1998
(collectively, the "Prospectus"), for (i) the offering of senior unsecured notes
of the Borrower in the aggregate principal amount of $1,750,000,000 and (ii) any
subsequent offering of such notes under the Indenture described in such
Prospectus.
As to any other Debt, guarantee language in substantially the follow-
ing form:
This Guarantee shall be automatically and unconditionally released and
discharged, without any further action required on the part of the beneficiary
hereof or any other party hereto, upon: (i) the release of the Guarantor from
its Bank Credit Facility Guarantee and its Bank Lease Facility Guarantee (as
defined below); or (ii) any sale or other disposition (by merger or otherwise)
to any Person which is not a subsidiary of Fred Meyer, Inc. of all of the
Capital Stock in, or all or substan tially all of the assets of, the Guarantor,
provided that such sale or disposition of such Capital Stock or assets is
otherwise in compliance with the terms of the Bank Credit Facility or Bank Lease
Facility, as the case may be. The parties hereto agree that the foregoing is for
the benefit of the lenders party to the Bank Credit Facility and may not be
amended, modified or waived (and no provision inconsistent therewith adopted)
without the consent of such lenders.
Certain Definitions
"Bank Credit Facility" means the transactions contemplated by the
$3,500,000,000 Loan Agreement, dated as of March 11, 1998, among Fred Meyer
Inc., as borrower, the lenders identified therein, Bankers Trust Company, as
administrative agent, and The Chase Manhattan Bank, as syndication agent, as
such agreement and related agreements may by amended (including any amendment
and restatement), supplemented or modified from time to time, including any
replacement or refinancing thereof in the commercial bank market (including any
such replacement or refinancing that increases the amount thereof).
<PAGE>
"Bank Credit Facility Guarantee" means the guarantee of the guarantor,
dated March 11, 1998, in respect of the Bank Credit Facility, as such guarantee
may by amended (including any amendment and restatement), supplemented or
modified from time to time, including any replacement guarantee issued in
connection with the replacement or refinancing of the Bank Credit Facility in
the commercial bank market (including any such replacement or refinancing that
increases the amount thereof).
"Bank Lease Facility" means the transactions contemplated by the
Participation Agreement, dated as of March 11, 1998, among Fred Meyer, Inc.,
Wilmington Trust Company, FMS Trust 1997-1, the investors named therein, the
lenders identified therein, Bankers Trust Company, as administrative agent, The
Chase Manhattan Bank, as syndication agent, as such agreement and related
agreements may by amended (including any amendment and restatement),
supplemented or modified from time to time, including any replacement or
refinancing thereof in the commercial bank market (including any such
replacement or refinancing that increases the amount thereof).
"Bank Lease Facility Guarantee" means the guarantee of the guarantor,
dated March 11, 1998, in respect of the Bank Lease Facility, as such guarantee
may by amended (including any amendment and restatement), supplemented or
modified from time to time, including any replacement guarantee issued in
connection with the replacement or refinancing of the Bank Lease Facility in the
commercial bank market (including any such replacement or refinancing that
increases the amount thereof).
2
Quality Food Centers, Inc.
300 Atlantic Street
Suite 1001
Stamford, Connecticut 06901
October 15, 1997
Mr. Dan Kourkoumelis
6016 N.E. Bothell Way, F-144
Seattle, Washington, 98155
Dear Dan:
This letter will serve to formalize our previous discussions regarding a
change in your responsibilities within the Company and its subsidiaries. As we
discussed, while you will continue to serve as President and Chief Executive
Officer of Hughes, effective immediately, you will also be assigned substantial
responsibilities with respect to QFC's Seattle/Puget Sound operations. As a
result, your principal place of employment will be the Seattle/Puget Sound area.
You will, of course, be reimbursed for the travel, lodging and other expenses
which you incur in connection with your trips to and from Seattle.
With respect to your current Employment Agreement, it will remain in effect
in all respects except that your duties will be modified as set forth above. To
the extent that this letter conflicts with your current Employment Agreement, it
should be considered as a modification to the agreement.
If you agree with the foregoing, please sign and return the enclosed copy
of this letter, which countersigned letter shall constitute our agreement
regarding the matters addressed herein.
Sincerely,
CHRISTOPHER A. SINCLAIR
-----------------------------------------
Christopher A. Sinclair,
Chief Executive Officer
Agreed and Accepted:
DAN KOURKOUMELIS
- -----------------------------------------
Dan Kourkoumelis
QUALITY FOOD CENTERS, INC.
1997 STOCK OPTION PLAN
----------------------
This 1997 Stock Option Plan (the "Plan") provides for the grant of options
to acquire shares of common stock, $.001 par value (the "Common Stock"), of
Quality Food Centers, Inc., a Washington corporation (the "Company"). Stock
options granted under this Plan may be either options that qualify under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") ("Incentive
Stock Options"), or options that do not qualify under Section 422 of the Code
("Non-Qualified Stock Options"). Incentive Stock Options and Non-Qualified Stock
Options granted under this Plan are referred to herein collectively as
"Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key
employees and consultants of the Company and such other persons as the Plan
Administrator shall select in accordance with Section 3 below, to encourage such
persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company, and to serve as an aid and inducement in the hiring of new
employees and to provide an equity incentive to consultants and other persons
selected by the Plan Administrator.
2. ADMINISTRATION.
This Plan shall be administered initially by the Board of Directors of the
Company (the "Board"), except that the Board may, in its discretion, establish a
committee composed of two (2) or more members of the Board or two (2) or more
other persons to administer the Plan, which committee (the "Committee") may be
an executive, compensation or other committee, including a separate committee
especially created for this purpose. The Committee shall have the powers and
authority vested in the Board hereunder (including the power and authority to
interpret any provision of the Plan or of any Option). The members of any such
Committee shall serve at the pleasure of the Board. A majority of the members of
the Committee shall constitute a quorum, and all actions of the Committee shall
be taken by a majority of the members present. Any action may be taken by a
written instrument signed by all of the members of the Committee and any action
so taken shall be fully effective as if it had been taken at a meeting. The
Board or, if applicable, the Committee is referred to herein as the "Plan
Administrator."
The Plan shall be administered by the Board if each director is an "outside
director" (as defined below) or by the Committee which, for the purposes hereof,
shall be composed of two (2) or more members of the Board who are "Non-Employee
Directors" (as defined below), and, as applicable, outside directors. The term
"outside director" shall have the meaning assigned to it under Section 162(m) of
the Code (as amended from time to time) and the regulations (or any successor
regulations) promulgated thereunder ("Section 162(m) of the Code"). The term
"Non-Employee Director" shall have the meaning assigned to it under Rule 16b-3
(as amended from time to time) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act") or any successor rule or regulatory
requirement.
<PAGE>
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (i) construe and interpret this Plan; (ii) define the terms used
in the Plan; (iii) prescribe, amend and rescind the rules and regulations
relating to this Plan; (iv) correct any defect, supply any omission or reconcile
any inconsistency in this Plan; (v) grant Options under this Plan; (vi)
determine the individuals to whom Options shall be granted under this Plan and
whether the Option is an Incentive Stock Option or a Non-Qualified Stock Option;
(vii) determine the time or times at which Options shall be granted under this
Plan; (viii) determine the number of shares of Common Stock subject to each
Option, the exercise price of each Option, the duration of each Option and the
times at which each Option shall become exercisable; (ix) determine all other
terms and conditions of the Options; and (x) make all other determinations and
interpretations necessary and advisable for the administration of the Plan. All
decisions, determinations and interpretations made by the Plan Administrator
shall be binding and conclusive on all participants in the Plan and their legal
representatives, heirs and beneficiaries.
The Board or, if applicable, the Committee may delegate to one or more
executive officers of the Company the authority to grant Options under this Plan
to employees of the Company who, on the Date of Grant (as defined in Section
5(c) below), are not subject to Section 16 of the Exchange Act with respect to
the Common Stock ("Non-Insiders"), and are not "covered employees" as such term
is defined for purposes of Section 162(m) of the Code ("Non-Covered Employees"),
and in connection therewith the authority to determine: (i) the number of shares
of Common Stock subject to such Options; (ii) the duration of the Option; (iii)
the vesting schedule for determining the times at which such Option shall become
exercisable; and (iv) all other terms and conditions of such Options. The
exercise price for any Option granted by action of an executive officer or
officers pursuant to such delegation of authority shall not be less than the
fair market value per share of the Common Stock on the Date of Grant. Unless
expressly approved in advance by the Board or the Committee, such delegation of
authority shall not include the authority to accelerate vesting, extend the
period for exercise or otherwise alter the terms of outstanding Options. The
term "Plan Administrator" when used in any provision of this Plan other than
Section 2, 5(f), 5(m), and 11 shall be deemed to refer to the Board or the
Committee, as the case may be, and an executive officer who has been authorized
to grant Options pursuant thereto, insofar as such provisions may be applied to
persons that are Non-Insiders and Non-Covered Employees and Options granted to
such persons.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the time
the Option is granted, is an employee of the Company or any Related Corporation
(as defined below) ("Employees"). Non-Qualified Stock Options may be granted to
Employees and to such other persons other than directors who are not Employees
as the Plan Administrator shall select. Options may be granted in substitution
for outstanding Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization between
such other corporation and the Company or any subsidiary of the Company. Options
also may be granted in exchange for outstanding Options. No person
- 2 -
<PAGE>
shall be eligible to receive in any fiscal year Options to purchase more than
50,000 shares of Common Stock (subject to adjustment as set forth in Section
5(m) hereof). Any person to whom an Option is granted under this Plan is
referred to as an "Optionee." Any person who is the owner of an Option is
referred to as a "Holder."
As used in this Plan, the term "Related Corporation" shall mean any
corporation (other than the Company) that is a "Parent Corporation" of the
Company or "Subsidiary Corporation" of the Company, as those terms are defined
in Sections 424(e) and 424(f), respectively, of the Code (or any successor
provisions) and the regulations thereunder (as amended from time to time).
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a
total of 1,000,000 shares of the Company's authorized but unissued, or
reacquired, Common Stock. The number of shares with respect to which Options may
be granted hereunder is subject to adjustment as set forth in Section 5(m)
hereof. In the event that any outstanding Option expires or is terminated for
any reason, the shares of Common Stock allocable to the unexercised portion of
such Option may again be subject to an Option granted to the same Optionee or to
a different person eligible under Section 3 of this Plan; provided however, that
any canceled Options will be counted against the maximum number of shares with
respect to which Options may be granted to any particular person as set forth in
Section 3 hereof.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Plan Administrator (the "Agreement"). Agreements may
contain such provisions, not inconsistent with this Plan, as the Plan
Administrator in its discretion may deem advisable. All Options also shall
comply with the following requirements:
(a) Number of Shares and Type of Option.
Each Agreement shall state the number of shares of Common Stock to
which it pertains and whether the Option is intended to be an Incentive Stock
Option or a Non-Qualified Stock Option. In the absence of action to the contrary
by the Plan Administrator in connection with the grant of an Option, all Options
shall be Non-Qualified Stock Options. The aggregate fair market value
(determined at the Date of Grant, as defined below) of the stock with respect to
which Incentive Stock Options are exercisable for the first time by the Optionee
during any calendar year (granted under this Plan and all other Incentive Stock
Option plans of the Company, a Related Corporation or a predecessor corporation)
shall not exceed $100,000, or such other limit as may be prescribed by the Code.
Any portion of an Option which exceeds the annual limit shall not be void but
rather shall be a Non-Qualified Stock Option.
- 3 -
<PAGE>
(b) Date of Grant.
Each Agreement shall state the date the Plan Administrator has deemed
to be the effective date of the Option for purposes of this Plan (the "Date of
Grant").
(c) Option Price.
Each Agreement shall state the price per share of Common Stock at
which it is exercisable. The exercise price shall be fixed by the Plan
Administrator at whatever price the Plan Administrator may determine in the
exercise of its sole discretion; provided that the per share exercise price for
an Incentive Stock Option or any Option granted to a "covered employee" as such
term is defined for purposes of Section 162(m) of the Code ("Covered Employee")
shall not be less than the fair market value per share of the Common Stock at
the Date of Grant as determined by the Plan Administrator in good faith; provide
further, that with respect to Incentive Stock Options granted to
greater-than-ten percent (greater than 10%) shareholders of the Company (as
determined with reference to Section 424(d) of the Code), the exercise price per
share shall not be less than one hundred ten percent (110%) of the fair market
value per share of the Common Stock at the Date of Grant as determined by the
Plan Administrator in good faith; and provided further, that Options granted in
substitution for outstanding options of another corporation in connection with
the merger, consolidation, acquisition of property or stock or other
reorganization involving such other corporation and the Company or any
subsidiary of the Company may be granted with an exercise price equal to the
exercise price for the substituted option of the other corporation, subject to
any adjustment consistent with the terms of the transaction pursuant to which
the substitution is to occur.
(d) Duration of Options.
At the time of the grant of the Option, the Plan Administrator shall
designate, subject to paragraph 5(g) below, the expiration date of the Option,
which date shall not be later than ten (10) years from the Date of Grant in the
case of Incentive Stock Options; provided, that the expiration date of any
Incentive Stock Option granted to a greater-than-ten percent (greater than 10%)
shareholder of the Company (as determined with reference to Section 424(d) of
the Code) shall not be later than five (5) years from the Date of Grant. In the
absence of action to the contrary by the Plan Administrator in connection with
the grant of a particular Option, and except in the case of Incentive Stock
Options as described above, all Options granted under this Section 5 shall
expire ten (10) years from the Date of Grant.
(e) Vesting Schedule.
No Option shall be exercisable until it has vested. The vesting
schedule for each Option shall be specified by the Plan Administrator at the
time of grant of the Option prior to the provision of services with respect to
which such Option is granted; provided, that
- 4 -
<PAGE>
if no vesting schedule is specified at the time of grant, the Option shall vest
according to the following schedule:
Number of Years Percentage of Total
Following Date of Grant Option Vested
----------------------- -------------------
One 20%
Two 40%
Three 60%
Four 80%
Five 100%
The Plan Administrator may specify a vesting schedule for all or any
portion of an Option based on the achievement of performance objectives
established in advance of the commencement by the Optionee of services related
to the achievement of the performance objectives. Performance objectives shall
be expressed in terms of one or more of the following: return on equity, return
on assets, share price, market share, sales, earnings per share, costs, net
earnings, net worth, inventories, cash and cash equivalents, gross margin or the
Company's performance relative to its internal business plan. Performance
objectives may be in respect of the performance of the Company as a whole
(whether on a consolidated or unconsolidated basis), a Related Corporation, or a
subdivision, operating unit, product or product line of either of the foregoing.
Performance objectives may be absolute or relative and may be expressed in terms
of a progression or a range. An Option that is exercisable (in full or in part)
upon the achievement of one or more performance objectives may be exercised only
following written notice to the Optionee and the Company by the Plan
Administrator that the performance objective has been achieved.
(f) Acceleration of Vesting.
The vesting of one or more outstanding Options may be accelerated by
the Plan Administrator at such times and in such amounts as it shall determine
in its sole discretion, including under the circumstances described in Section
5(g) below.
(g) Term of Option.
Vested Options shall terminate, to the extent not previously
exercised, upon the occurrence of the first of the following events: (i) the
expiration of the Option, as designated by the Plan Administrator in accordance
with Section 5(d) above; (ii) the date on an Optionee's termination of
employment or contractual relationship with the Company or any Related
Corporation for cause (as determined in the sole discretion of the Plan
Administrator); (iii) the expiration of three (3) months from the date of an
Optionee's termination of employment or contractual relationship with the
Company or any Related
- 5 -
<PAGE>
Corporation for any reason whatsoever other than cause, death or Disability (as
defined below) unless, in the case of a Non-Qualified Stock Option, the exercise
period is extended by the Plan Administrator until a date not later than the
expiration date of the Option; or (iv) the expiration of one year from
termination of an Optionee's employment or contractual relationship by reason of
death or Disability (as defined below) unless, in the case of a Non-Qualified
Stock Option, the exercise period is extended by the Plan Administrator until a
date not later than the expiration date of the Option. Upon the death of an
Optionee, any vested Options held by the Optionee shall be exercisable only by
the person or persons to whom such Optionee's rights under such Option shall
pass by the Optionee's will or by the laws of descent and distribution of the
state or county of the Optionee's domicile at the time of death and only until
such Options terminate as provided above. For purposes of the Plan, unless
otherwise defined in the Agreement, "Disability" shall mean medically
determinable physical or mental impairment which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months or that can
be expected to result in death. The Plan Administrator shall determine whether
an Optionee has incurred a Disability on the basis of medical evidence
acceptable to the Plan Administrator. Upon making a determination of Disability,
the Plan Administrator shall, for purposes of the Plan, determine the date of an
Optionee's termination of employment or contractual relationship.
Unless accelerated in accordance with Section 5(f) above, unvested
Options shall terminate immediately upon termination of employment of the
Optionee by the Company for any reason whatsoever, including death or
Disability. For purposes of this Plan, transfer of employment between or among
the Company and/or any Related Corporation shall not be deemed to constitute a
termination of employment with the Company or any Related Corporation. For
purposes of this subsection, employment shall be deemed to continue while the
Optionee is on military leave, sick leave or other bona fide leave of absence
(as determined by the Plan Administrator). The foregoing notwithstanding,
employment shall not be deemed to continue beyond the first ninety (90) days of
such leave, unless the Optionee's re-employment rights are guaranteed by statute
or by contract.
In addition, if an Optionee is demoted (whether voluntarily or
involuntarily), such Optionee shall be entitled to exercise all vested Options
not otherwise terminated until such Options expire in accordance with the terms
of the Option Plan. Each unvested Option granted to the demoted Optionee shall
terminate on the date of demotion; provided, however, that the Plan
Administrator may, in its discretion, accelerate the vesting of any unvested
options to increase the number of vested options to that number which would be
granted to an employee in the position to which the Optionee has been demoted.
Notwithstanding anything contained herein to the contrary, if an
Employee should have attained the age of sixty-two (62) years or more by the
date on which such Employee's employment by the Company is terminated by the
Company for reasons other than death, Disability or cause, all Incentive Stock
Option held by such Employee shall accelerate and become fully vested and
immediately exercisable for a period of one (1) month beginning on the date of
such termination.
- 6 -
<PAGE>
(h) Exercise of Options.
Options shall be exercisable, in full or in part, at any time after
vesting, until termination. If less than all of the shares included in the
vested portion of any Option are purchased, the remainder may be purchased at
any subsequent time prior to the expiration of the Option term. No portion of
any Option for less than fifty (50) shares (as adjusted pursuant to Section 5(m)
below) may be exercised; provided, that if the vested portion of any Option is
less than fifty (50) shares, it may be exercised with respect to all shares for
which it is vested. Only whole shares may be issued pursuant to an Option, and
to the extent that an Option covers less than one (1) share, it is
unexercisable.
Options or portions thereof may be exercised by giving written notice
to the Company, which notice shall specify the number of shares to be purchased,
and be accompanied by payment in the amount of the aggregate exercise for the
Common Stock so purchased, which payment shall be in the form specified in
Section 5(i) below. The Company shall not be obligated to issue, transfer or
deliver a certificate of Common Stock to the Holder of any Option, until
provision has been made by the Holder, to the satisfaction of the Company, for
the payment of the aggregate exercise price for all shares for which the Option
shall have been exercised and for satisfaction of any tax withholding
obligations associated with such exercise. During the lifetime of an Optionee,
Options are exercisable only by the Optionee or in the case of a Non-Qualified,
transferee who takes title to such Option in the manner permitted by subsection
5(k) hereof.
(i) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate exercise price shall be
paid to the Company in cash or by certified or cashier's check. In addition, the
Holder may pay for all or any portion of the aggregate exercise price by
complying with one or more of the following alternatives:
(1) by delivering to the Company shares of Common stock previously
held by such Holder, or by the Company withholding shares of Common Stock
otherwise deliverable pursuant to exercise of the Option which shares of Common
Stock received or withheld shall have a fair market value at the date of
exercise (as determined by the Plan Administrator) equal to the aggregate
exercise price to be paid by the Optionee upon such exercise;
(2) by delivering a properly executed exercise notice together with
irrevocable instructions to a broker promptly to sell or margin a sufficient
portion of the shares and deliver directly to the Company the amount of sale or
margin loan proceeds to pay the exercise price; or
(3) by complying with any other payment mechanism approved by the Plan
Administrator at the time of exercise.
- 7 -
<PAGE>
(j) Rights as a Shareholder.
A Holder shall have no rights as a shareholder with respect to any
shares covered by an Option until such Holder becomes a record holder of such
shares, irrespective of whether such Holder has given notice of exercise.
Subject to the provisions of Section 5(m) hereof, no rights shall accrue to a
Holder and no adjustments shall be made on account of dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights declared on, or created in, the Common Stock for which the
record date is prior to the date the Holder becomes a record holder of the
shares of common Stock covered by the Option, irrespective of whether such
Holder has given notice of exercise.
(k) Transfer of Option.
Options granted under this Plan and the rights and privileges
conferred by this Plan may not be transferred, assigned, pledged or hypothecated
in any manner (whether by operation of law or otherwise) other than by will, by
applicable laws of descent and distribution or (except in the case of an
Incentive Stock Option) pursuant to a qualified domestic relations order, and
shall not be subject to execution, attachment or similar process; provided
however, that any Agreement may provide or be amended to provide that a
NonQualified Stock Option to which it relates is transferable without payment of
consideration to immediate family members of the Optionee or to trusts or
partnerships or limited liability companies established exclusively for the
benefit of the Optionee and the Optionee's immediate family members. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
Option or of any right or privilege conferred by this Plan contrary to the
provisions hereof, or upon the sale, levy or any attachment or similar process
upon the rights and privileges conferred by this Plan, such Option shall
thereupon terminate and become null and void.
(l) Securities Regulation and Tax Withholding.
(1) Shares shall not be issued with respect to an Option unless the
exercise of such Option and the issuance and delivery of such shares shall
comply with all relevant provisions of law, including, without limitation,
Section 162(m) of the Code, any applicable state securities laws, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations thereunder
and the requirements of any stock exchange or automated inter-dealer quotation
system of a registered national securities association upon which such shares
may then be listed, and such issuance shall be further subject to the approval
of counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of such
shares. The inability of the Company to obtain from any regulatory body the
authority deemed by the Company to be necessary for the lawful issuance and sale
of any shares under this Plan, or the unavailability of an exemption from
registration for the issuance and sale of any shares under this Plan, shall
relieve the Company of any liability with respect to the non-issuance or sale of
such shares.
- 8 -
<PAGE>
As a condition to the exercise of an Option, the Plan Administrator
may require the Holder to represent and warrant in writing at the time of such
exercise that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of the
Plan Administrator, a stop-transfer order against such shares may be placed on
the stock books and records of the Company, and a legend indicating that the
stock may not be pledged, sold or otherwise transferred unless an opinion of
counsel is provided stating that such transfer is not in violation of any
application law or regulation, may be stamped on the certificates representing
such shares in order to that an exemption from registration. The Plan
Administrator also may require such other documentation as may from time to time
be necessary to comply with federal and state securities laws. THE COMPANY HAS
NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK
ISSUABLE UPON THE EXERCISE OPTIONS.
(2) The Holder shall pay to the Company by certified or cashier's
check, promptly upon exercise of an Option or, if later, the date that the
amount of such obligations becomes determinable, all applicable federal, state,
local and foreign withholding taxes that the Plan Administrator, in its
discretion, determines to result upon exercise of an Option or from a transfer
or other disposition of shares of Common Stock acquired upon exercise of an
Option or otherwise related to an Option or shares of Common Stock acquired in
connection with an Option. Upon approval of the Plan Administrator, a Holder may
satisfy such obligation by complying with one or more of the following
alternatives selected by the Plan Administrator.
(A) by delivering to the Company shares of Common Stock
previously held by such Holder or by the Company withholding shares of Common
Stock otherwise deliverable pursuant to the exercise of the Option, which shares
of Common Stock received or withheld shall have a fair market value at the date
of exercise (as determined by the Plan Administrator) equal to any withholding
tax obligations arising as a result of such exercise, transfer or other
disposition;
(B) by executing appropriate loan documents approved by the Plan
Administrator by which the Holder borrows funds from the Company to pay any
withholding taxes due under this Paragraph 2, with such repayment terms as the
Plan Administrator shall select; or
(C) by complying with any other payment mechanism approved by the
Plan Administrator from time to time.
(3) The issuance transfer or delivery of certificates of Common Stock
pursuant to the exercise of Options may be delayed, at the discretion of the
Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of the federal and state securities laws and the
withholding provisions of the Code have been met and that the Holder has paid or
otherwise satisfied any withholding tax obligation as described in (2) above.
- 9 -
<PAGE>
(m) Stock Dividend or Reorganization.
(1) If (i) the Company shall at any time be involved in a transaction
described in Section 424(a) of the Code (or any successor provision) or any
"corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock or (iii) any other event with substantially the same effect shall
occur, the Plan Administrator shall, subject to applicable law, with respect to
each outstanding Option, proportionately adjust the number of shares of Common
Stock subject to such Option and/or the exercise price per share so as to
preserve the rights of the Holder substantially proportionate to the rights of
the Holder prior to such event, and to the extent that such action shall include
an increase or decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under Section 4 of this Plan
shall automatically be increased or decreased, as the case may be,
proportionately, without further action on the part of the Plan Administrator,
the Company, the Company's shareholders, or any Holder.
(2) In the event that the presently authorized capital stock of the
Company is changed into the same number of shares with a different par value, or
without par value, the stock resulting from any such change shall be deemed to
be Common Stock within the meaning of the Plan, and each Option shall apply to
the same number of shares of such new stock as it applied to old shares
immediately prior to such change.
(3) If the Company shall at any time declare an extraordinary dividend
with respect to the Common Stock, whether payable in cash or other property, the
Plan Administrator may, subject to applicable law, in the exercise of its sole
discretion and with respect to each outstanding Option, proportionately adjust
the number of shares of Common Stock subject to such Option and/or adjust the
exercise price per share so as to preserve the rights of the Holder
substantially proportionate to the rights of the Holder prior to such event, and
to the extent that such action shall include an increase or decrease in the
number of shares of Common Stock subject to outstanding Options, the number of
shares available under Section 4 of this Plan shall automatically be increased
or decreased, as the case may be, proportionately, without further action on the
part of the Plan Administrator, the Company, the Company's shareholders, or any
Holder.
(4) The foregoing adjustments in the shares subject to Options shall
be made by the Plan Administrator, or by any successor administrator of this
Plan, or by the applicable terms of any assumption or substitution document.
(5) The grant of an Option shall no affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge, consolidate or dissolve,
to liquidate or to sell or transfer all or any part of its business or assets.
- 10 -
<PAGE>
6. EFFECTIVE DATE; TERM.
Incentive Stock Options may be granted by the Plan Administrator from
time to time on or after the date on which this Plan is adopted (the "Effective
Date") through the day immediately preceding the tenth anniversary of the
Effective Date. Non-Qualified Stock Options may be granted by the Plan
Administrator on or after the Effective Date and until this Plan is terminated
by the Board in its sole discretion. Termination of this Plan shall not
terminate any Option granted prior to such termination. Any Incentive Stock
Options granted by the Plan Administrator prior to the approval of this Plan by
the shareholders of the Company in accordance with Section 422 of the Code shall
be granted subject to ratification of this Plan by the shareholders of the
Company within twelve (12) months before or after the Effective Date. Any Option
granted by the Plan Administrator to any Covered Employee prior to the approval
of this Plan by the shareholders of the Company in accordance with such Code
provision shall be granted subject to ratification of this Plan by the
shareholders of the Company within twelve (12) months before or after the
Effective Date. If such shareholder ratification is sought and not obtained, all
Options granted prior thereto and thereafter shall be considered Non-Qualified
Stock Options and any Options granted to Covered Employees will not be eligible
for the exclusion set forth in Section 162(m) of the Code with respect to the
deductibility by the Company of certain compensation.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person any right to
participate under this Plan. The grant of an Option shall in no way constitute
any form of agreement or understanding binding on the Company or any Related
Company, express or implied, that the Company or any Related Company will employ
or contract with an Optionee for any length of time, nor shall it interfere in
any way with the Company's or, where applicable, a Related Company's right to
terminate Optionee's employment at any time, which right is hereby reserved.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
issued upon the exercise of Options shall be used for general corporate
purposes, unless otherwise directed by the Board.
- 11 -
<PAGE>
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as
members of the Board, members of the Plan Administrator shall be indemnified by
the Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company), except to the
extent that such expenses related to matters for which it is adjudged that such
Plan Administrator member is liable for willful misconduct; provided, that
within fifteen (15) days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall, in writing
notify the Company of such action, suit or proceeding, so that the Company may
have the opportunity to make appropriate arrangements to prosecute or defend the
same.
11. AMENDMENT OF PLAN.
The Plan Administrator may, at any time, modify, amend or terminate
this Plan or modify or amend Options granted under this Plan, including, without
limitation, such modifications or amendments as are necessary to maintain
compliance with applicable statutes, rules or regulations; provided however, no
amendment with respect to an outstanding Option which has the effect of reducing
the benefits afforded to the Holder thereof shall be made over the objection of
such Holder, further provided, that the events triggering acceleration of
vesting of outstanding Options may be modified, expanded or eliminated without
the consent of Holders. The Plan Administrator may condition the effectiveness
of any such amendment on the receipt of shareholder approval at such time and in
such manner as the Plan Administrator may consider necessary for the Company to
comply with or to avail the Company and/or the Optionees of the benefits of any
securities, tax, market listing or other administrative or regulatory
requirement. Without limiting the generality of the foregoing, the Plan
Administrator may modify grants to persons who are eligible to receive Options
under this Plan who are foreign nationals or employed outside the United States
to recognize differences in local law, tax policy or custom.
12. REORGANIZATION OF THE COMPANY.
It is the present intention of the Board of Directors of the Company
to adopt a holding company structure such that the Company would become a
wholly-owned subsidiary of another corporation ("Parent"). Upon effectiveness of
any such holding company structure, the rights and obligations of the Company
hereunder shall become the rights and obligations of Parent and options
outstanding, as well as, as those that may in the future be granted hereunder,
shall be exercisable for shares of common stock of Parent.
Effective Date: __________________
- 12 -
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-44537 and 333-46835, of Fred Meyer, Inc. on Forms S-3 and Registration
Statement No. 333-47523 of Fred Meyer, Inc. on Form S-8 of our report dated
March 23, 1998, included in this Annual Report on Form 10-K of Quality Food
Centers, Inc. for the year ended December 27, 1997.
DELOITTE & TOUCHE LLP
Seattle, Washington
March 23, 1998
POWER OF ATTORNEY
-----------------
(QFC Form 10-K)
The undersigned, an officer and/or director of Quality Food Centers,
Inc., a Washington corporation (the "Company"), does hereby constitute and
appoint Kenneth Thrasher, Marc W. Evanger, David R. Jessick and James C.
Aalberg, and each of them, the undersigned's true and lawful attorney and agent,
to do any and all acts and things and execute in the undersigned's name as an
officer or director of the Company the Annual Report on Form 10-K and any and
all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission; and the undersigned does hereby ratify and confirm all that said
attorneys and agents and each of them shall do or cause to be done by virtue
hereof. Any one of said attorneys or agents shall have, and may exercise, all
powers conferred.
Dated: March 27, 1998.
ROGER A. COOKE
-------------------------------------------
Roger A. Cooke
<PAGE>
POWER OF ATTORNEY
-----------------
(QFC Form 10-K)
The undersigned, an officer and/or director of Quality Food Centers,
Inc., a Washington corporation (the "Company"), does hereby constitute and
appoint Kenneth Thrasher, Marc W. Evanger, Roger A. Cooke, David R. Jessick and
James C. Aalberg, and each of them, the undersigned's true and lawful attorney
and agent, to do any and all acts and things and execute in the undersigned's
name as an officer or director of the Company the Annual Report on Form 10-K and
any and all amendments thereto, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission; and the undersigned does hereby ratify and confirm all that said
attorneys and agents and each of them shall do or cause to be done by virtue
hereof. Any one of said attorneys or agents shall have, and may exercise, all
powers conferred.
Dated: March 27, 1998.
ROBERT G. MILLER
-------------------------------------------
Robert G. Miller
<PAGE>
POWER OF ATTORNEY
-----------------
(QFC Form 10-K)
The undersigned, an officer and/or director of Quality Food Centers,
Inc., a Washington corporation (the "Company"), does hereby constitute and
appoint Marc W. Evanger, Roger A. Cooke, David R. Jessick and James C. Aalberg,
and each of them, the undersigned's true and lawful attorney and agent, to do
any and all acts and things and execute in the undersigned's name as an officer
or director of the Company the Annual Report on Form 10-K and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission;
and the undersigned does hereby ratify and confirm all that said attorneys and
agents and each of them shall do or cause to be done by virtue hereof. Any one
of said attorneys or agents shall have, and may exercise, all powers conferred.
Dated: March 27, 1998.
KENNETH THRASHER
-------------------------------------------
Kenneth Thrasher
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<PERIOD-START> DEC-29-1996
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0
0
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