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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - --- EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended April 30, 1994
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period from _____________ to _______________
Commission file number 0-8105
RYKOFF-SEXTON, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-2134693
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
761 Terminal Street, Los Angeles, California 90021
(Address of principal executive office) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (213) 622-4131
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Common Stock New York Stock Exchange
Preferred Stock
Purchase Rights New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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
---
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 __
---
The aggregate market value of the voting stock of the
registrant held by non-affiliates of the registrant, based on
the closing price at which such stock was sold on the New
York Stock Exchange on July 20, 1994 was $220,806,000.
At July 20, 1994, the registrant had 11,639,693 shares of
common stock outstanding.
Parts I and III incorporate information by reference from the
registrant's definitive Proxy Statement to be filed in
connection with the registrant's 1994 Annual Meeting of
Shareholders. Parts I and II incorporate information by
reference from the registrant's Annual Report to Shareholders
for the fiscal year ended April 30, 1994.
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PART I
ITEM 1. BUSINESS
GENERAL
Established in 1911, Rykoff-Sexton, Inc., (the "Company") is a leading
broadline distributor of high quality food and related non-food products for
the foodservice industry throughout the United States. The Company distributes
its product line of more than 45,000 items to restaurants, industrial
cafeterias, healthcare facilities, hotels, schools and colleges, supermarket
delicatessens, membership warehouse stores and other establishments where food
is prepared or consumed away from home. It also offers design and engineering
services for all types of foodservice operations through its contract/design
group. The Company's products consist of a broad line of private label and
national branded food and foodservice equipment and supplies. The Company's
proprietary private label products accounted for approximately 53% of the
Company's net sales in fiscal 1994. The Company develops and manufactures
many of its private label products, and it also manufactures other products
for certain customers under their own brand labels. In fiscal 1994, the
Company's sales of its self-manufactured products, including products sold
through the Rykoff-Sexton Distribution Division (the "Distribution Division"),
accounted for approximately 18% of net sales.
The Company's principal operations are conducted through the
Distribution Division, the Rykoff-Sexton Manufacturing Division (the
"Manufacturing Division"), Tone Brothers, Inc. ("Tone Brothers") and San
Francisco International Cheese Imports ("San Francisco International Cheese
Imports")
Distribution Division
The Distribution Division is comprised of 26 distribution branches and
eight additional sales offices that are largely located in major metropolitan
areas throughout the United States. The Distribution Division also offers
design and engineering services for all types of foodservice operations
through its ten contract/design offices. In fiscal 1994, sales of the
Distribution Division (including products sold through this division by the
Manufacturing Division, Tone Brothers and San Francisco International Cheese
Imports) generated approximately 94% of the Company's net sales.
Manufacturing Division
At its four plants, the Manufacturing Division manufactures products
primarily under the Company's proprietary private labels and also manufactures
products for other manufacturers, distributors, restaurant chains and other
large users under their own brand labels. Approximately 91% of the
Manufacturing Division's products are sold through the Distribution Division,
and the remainder are sold directly to customers.
Tone Brothers
Tone Brothers, a wholly-owned subsidiary, manufactures spices,
seasonings and salad dressing mixes and sells most of its products directly to
customers such as membership warehouses, food manufacturers, foodservice
distributors and specialty retail stores.
San Francisco International Cheese Imports
The Company also has a smaller division, San Francisco International
Cheese Imports, which distributes domestic and imported cheeses and specialty
and gourmet products both through the Distribution Division and directly to
customers.
PRODUCTS
The Company offers to the foodservice industry a single source of
supply for more than 45,000 private label and national branded items that are
distributed to approximately 100,000 foodservice establishments. The
principal product lines are:
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Food Products
The Company's food products include canned fruits and
vegetables, tomatoes and tomato products, juices, relishes
and pickle products, dry package foods, syrups, dressings and
salad oils, baking supplies, extracts and colors, spices,
condiments, seasonings and sauces, jellies and preserves,
coffee, tea and fountain goods, prepared convenience entrees,
meats, desserts and puddings, dietary foods, imported and
domestic cheeses and specialty and gourmet items. Frozen
foods include soups, prepared convenience entrees, bakery
products, fruits and vegetables, desserts, frozen meat,
chicken and fish and other frozen products customarily
distributed to the foodservice industry.
Janitorial and Paper Products
The Company's non-food products include janitorial supplies
such as detergents and cleaning compounds; plastic products
such as refuse container liners, cutlery, straws and sandwich
bags; and paper products such as napkins, cups, hats,
placemats, coasters and lace doilies.
Equipment and Supplies
The Company also distributes smallware restaurant
equipment and supply items, including cookware, glassware,
dinnerware and other commercial kitchen equipment.
The Company's products include approximately 3,250
food and 800 non-food items that are manufactured, processed
and packaged at its five plants located in Los Angeles,
California; Indianapolis, Indiana; Des Moines, Iowa;
Englewood, New Jersey; and Brooklyn, New York. These
products are primarily manufactured under the Company's
private labels. The Company also manufactures products for
certain customers such as other manufacturers, distributors,
restaurant chains and other large users under their own brand
labels.
The Manufacturing Division's food products include
mayonnaise and salad dressings, oils, margarine and
shortenings, gelatins and dessert powders, vinegars, sauces,
pancake and waffle mixes, biscuit and flour mixes, soup
bases, jams and jellies, canned and frozen soups, canned and
frozen entrees, relishes, coffee and tea. Its non-food
products include detergents, cleaning compounds, refuse
container liners, cutlery, straws and sandwich bags, paper
napkins, placemats, chefs' hats, coasters, paper lace doilies
and a line of low temperature dishwashers.
Products manufactured by Tone Brothers consist
mainly of spices, seasonings and salad dressing mixes and are
primarily supplied to customers such as membership
warehouses, food manufacturers, foodservice distributors and
specialty retail stores. These products are also sold through
the Distribution Division.
The following table sets forth the approximate sales
of the products manufactured by the Manufacturing Division
and Tone Brothers:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------
Apr 28, Apr 27, May 2, May 1, Apr 30,
1990 1991 1992 1993 1994
-------- -------- -------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Sales of Manufactured Products
Amount $223,000 $255,800 $273,400 $269,600 $274,000
Percentage of Net Sales 15.8% 17.5% 18.0% 18.1% 18.0%
</TABLE>
In addition to its extensive product line, the
Company's contract/design group has ten offices that provide
design and engineering services and equipment installations
for restaurants and other foodservice establishments.
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MARKETING AND DISTRIBUTION
The Company markets its products and contract/design services to
customers in the foodservice industry, including restaurants, industrial
cafeterias, healthcare facilities, hotels, schools and colleges, airlines,
clubs, supermarket delicatessens, membership warehouse stores and other
establishments where food is prepared or consumed away from home.
The following table sets forth the approximate customer base of the
Company for the fiscal year ended April 30, 1994:
<TABLE>
<CAPTION>
Approximate
Percentage
Type of Customer of Net Sales
---------------- ------------
<S> <C>
Restaurants (including in-plant commercial and industrial food
centers, cafeterias and coffee shops, etc.)...................... 53.4%
Hospitals, nursing homes, sanitariums and other health
care facilities.................................................. 12.5%
Schools and colleges (including fraternities and sororities)......... 7.3%
Hotels and motels.................................................... 7.0%
Distributors......................................................... 6.5%
Retail............................................................... 4.1%
Other................................................................ 9.2%
------
100.0%
======
</TABLE>
No customer of the Company accounted for as much as two percent of the
Company's sales for the fiscal year ended April 30, 1994. No product
distributed by the Company accounts for a material part of the Company's sales
volume. The Company does not experience material seasonal variations in its
sales volume.
The Company believes that product quality, close contact with
customers, prompt and accurate delivery of orders, and the ability to provide
related services are of primary importance in the distribution of products to
the foodservice industry. Sales offices are maintained at each of the
Company's 26 distribution branches and eight additional locations as listed in
the table below. The Company's sales force of approximately 1,500 employees
includes approximately 1,200 foodservice specialists from the Distribution
Division who are organized by region and who are each assigned to a
distribution branch. The sales force also includes account executives who
handle multiunit accounts such as restaurant chains and other large users. In
addition to soliciting orders, sales personnel are trained to advise customers
on menu selection, methods of preparing and serving food, merchandising
techniques, unit cost controls and other operating procedures.
Products are distributed to customers nationwide through the Company's
26 distribution branches listed in the table below, as well as through
independent distributors. With the exception of an equipment and supply
branch, each branch stocks a broad line of between 3,400 and 21,000 items for
sale in its marketing area. Customer orders are usually processed and shipped
within 24 hours of receipt and are delivered directly to the customer. The
Company uses its warehouse facilities in Los Angeles, Indianapolis and Dorsey,
Maryland to store and consolidate product orders from vendors for subsequent
shipment to the distribution branches.
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The following table sets forth the Distribution
Division's branches, sales offices and contract/design offices:
<TABLE>
<CAPTION>
Distribution Additional Contract/Design
Branches Sales Offices* Offices
-------- ------------- --------
<S> <C> <C>
Phoenix, Arizona Cotati, California Los Angeles, California***
Fresno, California*** San Bernardino, California Sacramento, California
Los Angeles, California*** San Diego, California San Francisco, California
Sacramento, California** Hyannis, Massachusetts*** Chicago, Illinois***
San Francisco, California Missoula, Montana*** Boston, Massachusetts
Washington, D.C. Las Vegas, Nevada Minneapolis/St. Paul, Minnesota
Orlando, Florida Medford, Oregon*** Cincinnati, Ohio
Atlanta, Georgia*** Seattle, Washington Portland, Oregon
Honolulu, Hawaii Seattle, Washington
Chicago, Illinois*** Spokane, Washington***
New Orleans, Louisiana***
Boston, Massachusetts
Detroit, Michigan***
Minneapolis/St. Paul, Minnesota
St. Louis, Missouri***
Reno, Nevada***
Englewood, New Jersey***
Albuquerque, New Mexico***
Greensboro, North Carolina
Cincinnati, Ohio
Philadelphia, Pennsylvania
Pittsburgh, Pennsylvania
Portland, Oregon
Dallas, Texas***
Spokane, Washington***
</TABLE>
* These sales offices are in addition to sales offices maintained at
each of the Company's distribution branches.
** A general distribution branch and an equipment and supply branch are
located in this city.
*** Indicates facility owned by the Company; all other facilities are
leased.
International sales presently account for less than two percent of the
Company's total sales. However, the Company believes that the potential for
growth in sales to foreign markets is significant, and it explores selected
opportunities to further develop this segment of its business. The Company
currently exports products to Canada, the Caribbean, Mexico, Europe, Japan and
Australia. In fiscal 1992, Tone Brothers formed a joint venture with an Indian
company for the preparation and exportation of black pepper and other spices
from India. The Company also formed a joint venture in fiscal 1992 with a
Mexican trading and manufacturing firm to establish a distribution company in
Monterey, Mexico that services northeastern Mexico.
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SOURCES OF SUPPLY
The Company purchases from approximately 7,900 suppliers. No
supplier represented more than two percent of the Company's purchases in
fiscal 1994. These suppliers, which include both large multi-line and smaller
specialty processors and packagers, are selected primarily on the basis of
their ability to meet the Company's quality standards. The Company has no
significant long-term purchasing obligations and believes that it has
adequate alternative sources of supply for almost all of the purchased items
and raw materials used in its manufacturing operations.
QUALITY CONTROL AND REGULATION
The Company maintains quality control laboratories in its Los Angeles,
Indianapolis, Englewood and Des Moines facilities. These laboratories are
staffed by chemists and food technologists who are trained to control product
quality for both self-manufactured and purchased private label products and to
provide research and development support for the Company's manufactured
products. Quality control procedures include the sampling and testing of raw
materials, purchased private label products and Company manufactured items for
quality, taste and appearance and the microbiological testing of Company
manufactured food items.
EMPLOYEES
As of April 30, 1994, the Company employed a total of approximately
5,330 people, of whom approximately 2,170 were covered by collective
bargaining agreements. These agreements expire at various times over the next
several years. The Company believes its labor relations are good.
COMPETITION
The Company operates on a nationwide basis and encounters significant
competition from a number of sources in each of its marketing areas. The
Company competes with two other large national distribution companies, Sysco
Corporation and Kraft Foodservice Group (owned by Philip Morris Companies),
both of which have substantially greater financial and other resources than
the Company. The Company also competes with numerous regional and local
distributors that offer broad lines of products. In recent years, the
foodservice distribution industry has been characterized by significant
consolidation and the emergence of larger competitors, principally through
acquisitions. There can be no assurances that the Company will not encounter
increased competition in the future, which could adversely affect the
Company's business.
The Company believes that although price is a consideration,
competition in the foodservice industry is generally on the basis of product
quality, customer relations and service. As one of the leading national
broadline distributors to the foodservice industry, the Company believes that
it carries a wider selection of food products of superior quality and value
and a greater variety of package sizes than most of its competitors. The
Company attributes its ability to compete effectively in its markets to this
wider food product selection and its broad line of related non-food products,
which are offered through a dedicated, highly skilled and customer-oriented
sales force. Further, the Company differentiates itself in part from its
competitors by (i) providing many specialty products that have been developed
specifically for the foodservice industry or for particular foodservice
customers, (ii) maintaining an extensive selection of imported and specialty
products, equipment and supplies and (iii) offering its design and engineering
services for all types of foodservice operations.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located on its owned property
in Los Angeles, California. The Los Angeles distribution branch, which
services the Southern California and Nevada markets, the Manufacturing
Division headquarters, a large manufacturing plant and a warehouse that is
used to store and consolidate product orders from
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vendors are also located on these premises. The property
consists of four buildings with approximately 1.4 million
square feet of space on 20.2 acres. The Company plans to
relocate the Los Angeles distribution branch to a new
facility of approximately 420,000 square feet in La Mirada,
California. The move is expected to take place toward the
end of fiscal 1995.
The executive offices of the Distribution Division
are located in Lisle, Illinois and occupy approximately
54,500 square feet pursuant to a lease which expires in
November 2001.
Tone Brothers leases a facility of approximately
195,000 square feet in Des Moines, Iowa for its office,
warehouse and manufacturing operations. The lease on this
property expires in April 2000. In January, 1994, the
Company completed the construction of an additional 335,000
square foot modern manufacturing facility in Des Moines.
In addition to the manufacturing plant located on the
Los Angeles property, the Company owns and operates
manufacturing plants totaling 234,000 square feet in
Indianapolis, Indiana and Englewood, New Jersey. The Company
also leases approximately 32,000 square feet in Brooklyn, New
York for office, warehouse and manufacturing facilities. The
lease on this property expires in August 1995.
Equipment and machinery owned by the Company and used
in its operations consist principally of electronic data
processing equipment, food and non-food processing and
packaging equipment and chemical compounding, blending and
product handling equipment. The Company owns a fleet of
approximately 1,200 vehicles consisting of tractors,
trailers, vans and bobtails, which are used for long hauls
and local deliveries. In addition, the Company leases
approximately 330 delivery vehicles under terms which expire
at various dates through 2000.
During fiscal 1994, the Company nearly doubled the
space and added a new freezer and cooler to its Orlando
distribution branch and relocated its San Francisco
International Cheese Imports operation to a new, larger
facility. At present, the Company is completing an expansion
of its Greensboro, North Carolina branch, is doubling the
capacity of its Detroit branch and is in the process of
planning to upgrade facilities at several other locations as
well.
The Company considers that its office, warehouse and
manufacturing facilities are adequate to support present and
immediately forseeable future operations. However, the
Company continues to locate and occupy new facilities because
of its expanding business.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal
proceedings, other than ordinary routine litigation
incidental to the business of the Company.
(THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK.)
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
CORPORATE EXECUTIVE OFFICERS
The following are the corporate executive officers of the Company:
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<CAPTION>
Officer's
Name Position Age Since
---- -------- --- -----
<S> <C> <C> <C>
Mark Van Stekelenburg President, Chief Executive
Officer and Director 43 1991
Victor B. Chavez Vice President and Chief
Accounting Officer 49 1980
F. Christopher Cruger President, Tone Brothers, Inc. 59 1993
Harold E. Feather Executive Vice President,
Corporate Planning 55 1992
Alan V. Giuliani President, Rykoff-Sexton
Manufacturing Division 48 1990
Robert J. Harter, Jr. Senior Vice President, Human
Resources and General Counsel 49 1989
James A. Iacobazzi Vice President, Real Estate
and Property Management 45 1992
Richard J. Martin Senior Vice President and
Chief Financial Officer 48 1988
Andre M. Mills Vice President, Labor Relations 47 1992
Neil I. Sell Secretary and Director 53 1985
Donald E. Willis, Jr. Senior Vice President and Chief
Information Officer 42 1994
</TABLE>
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All of the executive officers serve in their
capacities by approval of the Board of Directors. Each
executive officer has, as his principal occupation, been
employed by the Company in the capacities set forth or in
similar capacities for more than the last five years, except
as follows: Mr. Neil I. Sell's principal occupation has been
as a partner in the law firm of Maslon Edelman Borman &
Brand; Mr. Mark Van Stekelenburg was elected Executive Vice
President in 1991 and President and Chief Executive Officer
in 1992; Mr. Richard J. Martin was elected Vice President in
1988 and Senior Vice President and Chief Financial Officer in
1993; Mr. Robert J. Harter, Jr. was elected Vice President
and General Counsel in 1989 and Senior Vice President, Human
Resources and General Counsel in 1993; Mr. Alan V. Giuliani
was elected Vice President in 1990 and President,
Rykoff-Sexton Manufacturing Division in 1992; Messrs. James
A. Iacobazzi and Andre M. Mills were elected Vice Presidents
in 1992; Mr. F. Christopher Cruger was elected an executive
officer in 1993; Mr. Harold E. Feather was elected President,
Rykoff-Sexton Distribution Division in 1992 and Executive
President, Corporate Planning in 1994; and Mr. Donald E.
Willis, Jr. was elected Senior Vice President and Chief
Information Officer in 1994.
Mr. Van Stekelenburg joined the Company in March 1991
and was previously, since 1986, President and Chief Executive
Officer of G.V.A. and Kok-Ede, the foodservice division of
Royal Ahold, N.V., the largest food retailer in the
Netherlands which also has substantial holdings in food
retailing in the United States. Mr. Martin joined the
Company in August 1988 and was previously a partner with the
accounting firm of Arthur Andersen & Co.; he had been
associated with that firm for twenty-one years. Mr. Harter
joined the Company in October 1989 and was previously Senior
Vice President, General Counsel and Secretary for Tiger
International, Inc. He had been an officer of Tiger
International, Inc. for eleven years. Mr. Giuliani joined
the Company in August 1990. Previously, Mr. Giuliani was
employed by Mars, Inc., a food manufacturer, where he held
various senior management positions including Vice
President-Research and Development/Engineering for the Dove
International Division, and Vice President-New Business
Development and Vice President-Plant Manager for the M&M/Mars
Division. Mr. Iacobazzi joined the Company in 1987 and has
served as director of property management until his election
as Vice President in 1992. Mr. Mills joined the Company in
1984 and has served as director of labor relations until his
election as Vice President in 1992. Mr. F. Christopher
Cruger joined the Company in 1989 when the Company acquired
Tone Brothers. He had previously held the position of
President and Chief Executive Officer of Tone Brothers since
1985. Mr. Harold E. Feather joined the Company in 1983 when
the Company acquired John Sexton & Co. He has held various
positions within the Company and was elected Executive Vice
President, Corporate Planning in 1994; his most recent
previous position was President, Rykoff-Sexton Distribution
Division, which he held since 1992. Mr. Donald E. Willis,
Jr. joined the Company in 1994, and previously served in
several management information systems positions with other
companies, the most recent of which was at HomeBase, a
California-based specialty retailer.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Reference is made to the information with respect to
the principal markets on which the Company's common stock is
being traded, prices for each quarterly period and dividend
record for the last three years are set forth on page 2 of the
Company's 1994 Annual Report to shareholders, and by such
reference, such information is incorporated herein.
The Company estimates that there are approximately
4,300 shareholders including those through nominees, as of
June 1994.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the financial data with respect
to the Company set forth on pages 6 and 7 of the Company's
1994 Annual Report to shareholders and by such reference,
such financial data is incorporated herein.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to Management's Discussion and Analysis set forth on
pages 8 and 9 of the Company's 1994 Annual Report to shareholders, and by
such reference, such information is incorporated herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the consolidated financial statements set forth
on pages 10 through 21 of the Company's 1994 Annual Report to shareholders,
and by such reference, such information is incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Reference is made to the definitive proxy statement pursuant to
Regulation 14A, which involves the election of directors at the annual meeting
of shareholders to be held September 9, 1994 and will be filed with the
Commission within 120 days after the close of its fiscal year ended April 30,
1994, and by such reference said proxy statement is incorporated herein in
response to the information called for by Part III (Item 10. Directors and
Executive Officers of the Registrant; Item 11. Executive Compensation;
Item 12. Security Ownership of Certain Beneficial Owners and Management; and
Item 13. Certain Relationships and Related Transactions).
(THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK.)
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) (1) The financial statements listed below are
filed as part of this Annual Report on Form 10-K:
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Page Reference
--------------
Form Annual
10-K Report
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<S> <C> <C>
Data is incorporated by reference from
the attached Annual Report to shareholders
of Rykoff-Sexton, Inc. for the fiscal year
ended April 30, 1994. With the exception
of the information specifically incorporated
herein by reference, the 1994 Annual Report
to shareholders is not to be deemed "filed" as
part of this Annual Report on Form 10-K.
Consolidated statements of operations for
each of the three years in the period
ended April 30, 1994 10
Consolidated balance sheets as of April 30,
1994 and May 1, 1993 12
Consolidated statements of cash flows for
each of the three years in the period ended
April 30, 1994 11
Consolidated statements of shareholders' equity
for each of three years in the period ended
April 30, 1994 13
Notes to consolidated financial statements 14-20
Report of independent public accountants 21
Attachments incorporated herewith to Form
10-K:
Report of independent public accountants on
supplemental schedules to the consolidated
financial statements 18
</TABLE>
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<TABLE>
<CAPTION>
Page Reference
--------------
Form Annual
10-K Report
---- ------
<S> <C> <C>
(2) Supplemental Schedules incorporated herewith to
Form 10-K.:
Schedule II - Amounts receivable from related
parties and underwriters, promoters and
employees other than related parties for each
of the three years in the period ended
April 30, 1994 19
Schedule V - Property, plant and equipment
for each of the three years in the period ended
April 30, 1994 20
Schedule VI - Accumulated depreciation,
depletion and amortization of property,
plant and equipment for each of the three
years in the period ended April 30, 1994 21
Schedule VIII - Valuation and qualifying
accounts for each of the three years in the
period ended April 30, 1994 22
Schedule IX - Short-term borrowings for each
of the three years in the period ended
April 30, 1994 23
(3) The following exhibits, as required by Item 601 of Regulation S-K, are filed as part of
this report:
3.1 Restated Certificate of Incorporation of Rykoff-Sexton, Inc. (Incorporated
by reference from the Company's report on Form 10-K for the year ended May
1, 1993, as amended)
3.2 Rykoff-Sexton, Inc. By-Laws (Incorporated by reference from the Company's
report on Form 10-K for the year ended May 1, 1993, as amended)
4.1 Indenture, dated as of November 1, 1993, between Rykoff-Sexton, Inc. and
Norwest Bank Minnesota, N.A., as trustee (Incorporated by reference from the
Company's report Form 10-Q for the quarter ended October 30, 1993)
4.2 Rights Agreement, dated December 8, 1986 between Rykoff-Sexton, Inc. and
Bank of America National Trust and Savings Association (Incorporated by
reference from the Company's report on Form 10-Q for the quarter ended May
1, 1993, as amended)
</TABLE>
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<TABLE>
<S> <C>
4.2.1 Amendment, dated as of October 5, 1989 to Rights Agreement, dated December
8, 1986, between Rykoff-Sexton, Inc. and Bank of America National Trust and
Savings Association, as Rights Agent (Incorporated by reference from the
Company's report on Form 10-Q for the quarter ended October 30, 1993)
10.1 Credit Agreement dated October 25, 1993 between Rykoff-Sexton, Inc. and Bank
of America National Trust and Savings Association (Incorporated by reference
from the Company's report on Form 10-Q for the quarter ended October 30,
1993)
10.1.1 First Amendment to Credit Agreement between Rykoff-Sexton, Inc. and Bank of
America National Trust and Savings Association dated as of December 29,
1993 (Incorporated by reference from the Company's report on Form 10-Q for
the quarter ended January 29, 1994)
10.1.2 Second through Fourth Amendments to Credit Agreement between Rykoff-Sexton,
Inc. and Bank of America National Trust and Savings Association dated as of
March 18, 1994; April 15, 1994; and April 30, 1994.
10.2 Final Amendment to Employment Contract and Settlement Agreement dated March
8, 1993 between Roger W. Coleman and Rykoff-Sexton, Inc. (Incorporated by
reference from the Company's report on Form 10-K for the year ended May 1,
1993, as amended)*
10.3 1980 Stock Option Plan (Incorporated by reference from the Company's report
on Form 10-K for the year ended May 1, 1993, as amended)*
10.4 1988 Stock Option and Compensation Plan, as amended on September 13, 1991
(Incorporated by reference from the Company's report on Form 10-K for the
year ended May 1, 1993, as amended)*
10.4.1 Form of Restricted Stock Agreement (Incorporated by reference from the
Company's report on Form 10-K for the year ended May 1, 1993, as amended)*
10.4.2 Form of Non-Qualified Stock Option Agreement (Incorporated by reference from
the Company's report on Form 10-K for the year ended May 1, 1993, as
amended)*
10.4.3 Form of Converging Non-Qualified Stock Option Agreement (Incorporated by
reference from the Company's report on Form 10-K for the year ended May 1,
1993, as amended)*
10.5 1989 Director Stock Option Plan (Incorporated by reference from the
Company's Report on Form 10-K for the year ended April 28, 1990)
10.6 Demand Promissory Note dated May 14, 1991 by P.J. Marcus Van Stekelenburg
and Mirjam F.C. Van Stekelenburg (Incorporated by reference from the
Company's report on Form 10-K for the year ended May 1, 1993, as amended)*
10.7 Form of Change in Control Agreements (Incorporated by reference from the
Company's Report on 10-K for the year ended April 28, 1990)*
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C>
10.7.1 Change in Control Agreement for Mark Van Stekelenburg (Incorporated by
reference from the Company's report on Form 10-K for the year ended May 1,
1993, as amended)*
10.7.2 Change in Control Agreement for Harold Feather (Incorporated by reference
from the Company's report on Form 10-K for the year ended May 1, 1993, as
amended)*
10.7.3 Amended and Restated Change in Control Agreement, dated October 12, 1993
between Rykoff-Sexton, Inc. and Mark Van Stekelenburg (Incorporated by
reference from the Company's report on Form 10-Q for the quarter ended
October 30, 1993)*
10.8 Form of Indemnity Agreement (Incorporated by reference from the Company's
report on Form 10-K for the year ended May 1, 1993, as amended)
10.9 Form of Fiduciary Indemnity Agreement (Incorporated by reference from the
Company's report on Form 10-K for the year ended May 1, 1993, as amended)
10.10 Agreement between S.E. Rykoff and Co. and Food Drug and Beverage
Warehousemen and Clerical Employees Union, Local No. 630, International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America,
Independent dated as of April 30, 1992 (Incorporated by reference from the
Company's report on Form 10-K for the year ended May 1, 1993, as amended)
10.11 Agreement between Rykoff-Sexton, Inc. and Union Local No. 630, International
Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America
dated as of October 23, 1992 (Incorporated by reference from the Company's
report on Form 10-K for the year ended May 1, 1993, as amended)
10.12 Agreement between Rykoff-Sexton, Inc. and Union Locals 848, 14, 87, 381 and
542, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and
Helpers of America dated as of October 23, 1992 (Incorporated by reference
from the Company's report on Form 10-K for the year ended May 1, 1993, as
amended)
10.13 Agreement between Rykoff-Sexton, Inc. and Union Local No. 78, Teamsters
Warehouse, Automotive and Miscellaneous Employees dated as of April 1, 1991
(Incorporated by reference from the Company's report on Form 10-K for the
year ended May 1, 1993, as amended)
10.14 Agreement between Rykoff-Sexton, Inc. and Union Local No. 85, Brotherhood of
Teamsters and Auto Truck Drivers dated as of April 1, 1991 (Incorporated by
reference from the Company's report on Form 10-K for the year ended May 1,
1993, as amended)
10.15 Rykoff-Sexton, Inc. 1993 director Stock Option (Incorporated by reference
from the Company's report on Form 10-Q for the quarter ended October 30,
1993)
10.16 Participation Agreement, entered into among Rykoff-Sexton, Inc., as Lessee
("Lessee"), Tone Brothers, Inc., as Sublessee ("Sublessee"), BA Leasing &
Capital Corporation, as Agent ("Agent"), and BA Leasing & Capital
Corporation, Manufacturers Bank and Pitney Bowes Credit Corporation, as
Lessors (the "Lessors"), dated as of April 29, 1994
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
10.16.1 Lease Intended as Security, among Lessee, Agent and the Lessors, dated as of
April 29, 1994
10.16.2 Sublease, between Lessee and Sublessee, dated as of April 29, 1994
10.17 Employment Agreement between Harold E. Feather and Rykoff-Sexton, Inc. as of
June 20, 1994.*
10.18 Employment Agreement between Rykoff-Sexton, Inc. and Mark Van Stekelenburg
as of July 20, 1994.*
10.19 Rykoff-Sexton, Inc. Supplemental Executive Retirement Plan for Mark Van
Stekelenburg as of July 20, 1994*
13 1994 Annual Report to Shareholders
21 Subsidiaries of Rykoff-Sexton, Inc. (Incorporated by reference from the
Company's report on Form 10-K for the year ended May 1, 1993, as amended).
24 Powers of Attorney of R. Burt Gookin, James I. Maslon, James P. Miscoll,
Neil I. Sell, Bernard Sweet and Robert G. Zeller
</TABLE>
* Management contract or compensatory plan
All other schedules have been omitted since the
required information is not present or not present in amounts
sufficient to require submission of the schedule, or because
the information required is included in the consolidated
financial statements or the notes thereto.
(b) Reports on Form 8-K
None filed during the fourth quarter of fiscal year 1994.
(THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK.)
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Rykoff-Sexton, Inc. has duly cause this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: July 28, 1994 RYKOFF-SEXTON, INC.
By /s/ MARK VAN STEKELENBURG
----------------------------
Mark Van Stekelenburg,
President and Chief Executive Officer
By /s/ RICHARD J. MARTIN
----------------------------
Richard J. Martin,
Senior Vice President and
Chief Financial Officer
By /s/ VICTOR B. CHAVEZ
----------------------------
Victor B. Chavez,
Vice President and
Chief Accounting Officer
16
<PAGE> 17
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following directors on behalf of the
Registrant on the date indicated.
R. Burt Gookin
James I. Maslon
James P. Miscoll /s/ MARK VAN STEKELENBURG
------------------------------------
Mark Van Stekelenburg, signing
Neil I. Sell personally as a director and as
attorney in fact for the directors
Bernard Sweet whose names appear opposite.
Robert G. Zeller July 28, 1994
Powers of attorney authorizing Mark Van Stekelenburg, Richard J. Martin
and Victor B. Chavez, and each of them, to sign this Annual Report on Form 10-K
on behalf of the above named directors of Rykoff-Sexton, Inc. have been filed
as an exhibit to this report.
17
<PAGE> 18
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Rykoff-Sexton, Inc.
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Rykoff-Sexton,
Inc.'s Form 10-K and have issued our report thereon dated June 10, 1994. Our
audits were made for the purpose of forming an opinion on those statements
taken as a whole. The schedules listed in Item 14. (a)(2) are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Los Angeles, California
June 10, 1994.
18
<PAGE> 19
RYKOFF-SEXTON, INC.
SCHEDULE II - - AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED
PARTIES FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30, 1994
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Note Receivable (A) -
Balance, beginning of year $469,000 $469,000 $1,450,000
Additions --- --- ---
Payments --- --- 981,000
-------- -------- ----------
Balance, end of year $469,000 $469,000 $ 469,000
======== ======== ==========
</TABLE>
Note (A)
This promissory note receivable is due from Mark Van
Stekelenburg, President and Chief Executive Officer, and is
included in accounts receivable on the consolidated balance
sheet. The note is secured, non-interest bearing, and
payable upon demand.
19
<PAGE> 20
RYKOFF-SEXTON, INC.
SCHEDULE V- - PROPERTY, PLANT AND EQUIPMENT
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30, 1994
<TABLE>
<CAPTION>
Balance at
Beginning Additions Balance at
Classification of Year at Cost Retirements Other End of Year
-------------- ------- ------- ----------- ----- -----------
<S> <C> <C> <C> <C> <C>
April 30, 1994:
Land, buildings and improvements $116,389,000 $18,097,000 $ 436,000 $(2,364,000)(A) $131,686,000
Transportation equipment 45,178,000 2,331,000 3,705,000 --- 43,804,000
Office, warehouse and manufacturing
equipment $122,851,000 $17,070,000 $20,205,000 --- $119,716,000
------------ ----------- ----------- ----------- ------------
TOTAL $284,418,000 $37,498,000 $24,346,000 $(2,364,000) $295,206,000
============ =========== =========== =========== ============
May 1, 1993:
Land, buildings and improvements $110,764,000 $ 9,686,000 $ 61,000 $(4,000,000)(B) $116,389,000
Transportation equipment 44,305,000 2,937,000 2,064,000 --- 45,178,000
Office, warehouse and manufacturing
equipment 108,967,000 15,773,000 1,889,000 --- 122,851,000
------------ ----------- ----------- ----------- ------------
TOTAL $264,036,000 $28,396,000 $ 4,014,000 $(4,000,000) $284,418,000
============ =========== =========== =========== ============
May 2, 1992:
Land, buildings and improvements $ 54,915,000 $56,957,000 $ 1,108,000 --- $110,764,000
Transportation equipment 40,503,000 4,609,000 807,000 --- 44,305,000
Office, warehouse and manufacturing
equipment 94,809,000 15,209,000 1,051,000 --- 108,967,000
------------ ----------- ----------- ----------- ------------
TOTAL $190,227,000 $76,775,000 $ 2,966,000 --- $264,036,000
============ =========== =========== =========== ============
</TABLE>
(A) During the fiscal year ended April 30, 1994, the Company made
improvements to certain facilities, the cost of which was included as part of
the $31 million restructuring charge recorded in the prior year.
(B) During the fiscal year ended May 1, 1993, the Company recorded a
$31 million restructuring charge which included a writedown of certain
facilities to net realizable value.
20
<PAGE> 21
RYKOFF - SEXTON, INC.
SCHEDULE VI - - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30, 1994
<TABLE>
<CAPTION>
Additions
Balance at Charged to
Beginning Costs and Balance at
Classification of Year Expenses Retirements End of Year
-------------- ------- -------- ----------- -----------
<S> <C> <C> <C> <C>
April 30, 1994:
Land, buildings and improvements $ 22,345,000 $ 3,668,000 $ 130,000 $ 25,883,000
Transportation equipment 33,581,000 3,918,000 3,504,000 33,995,000
Office, warehouse and
manufacturing equipment 70,150,000 12,605,000 6,364,000 76,391,000
------------ ---------- ---------- ------------
TOTAL $126,076,000 $20,191,000 $9,998,000 $136,269,000
============ =========== ========== ============
May 1, 1993:
Land, buildings and improvements $ 18,738,000 $ 3,668,000 $ 61,000 $ 22,345,000
Transportation equipment 31,455,000 4,091,000 1,965,000 33,581,000
Office, warehouse and
manufacturing equipment 59,643,000 12,289,000 1,782,000 70,150,000
------------ ------------ ---------- ------------
TOTAL $109,836,000 $20,048,000 $3,808,000 $126,076,000
============ =========== ========== ============
May 2, 1992:
Land, buildings and improvements $16,472,000 $3,374,000 $1,108,000 18,738,000
Transportation equipment 28,339,000 3,892,000 776,000 31,455,000
Office, warehouse and
manufacturing equipment 50,218,000 10,340,000 915,000 59,643,000
------------ ----------- ---------- ------------
TOTAL $95,029,000 $17,606,000 $2,799,000 $109,836,000
=========== =========== ========== ============
</TABLE>
21
<PAGE> 22
RYKOFF- SEXTON, INC.
SCHEDULE VIII - - VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30, 1994
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- ---------
<S> <C> <C> <C>
Reserve for doubtful accounts:
Balance, beginning of year $4,373,000 $3,691,000 $4,229,000
Add (Deduct) -
Additions charged to $2,548,000 $4,209,000 $2,844,000
income
Accounts written off (3,177,000) (3,527,000) (3,382,000)
----------- ----------- -----------
Balance, end of year $3,744,000 $4,373,000 $3,691,000
========== ========== ==========
</TABLE>
22
<PAGE> 23
RYKOFF-SEXTON, INC.
SCHEDULE IX - - SHORT-TERM BORROWINGS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED APRIL 30, 1994
<TABLE>
<CAPTION>
Maximum Average Weighted
Category of Amount Amount Average
Aggregate Balance at Weighted Outstanding Outstanding Interest
For the Fiscal Short-Term end of Average During the During the During the
Year Ended Borrowings Period Interest Rate Period Period Period
---------- ---------- ------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
April 30, 1994 -- -- -- -- -- --
(A)
May 1, 1993 (B) Commercial -- -- $25,000,000 $15,436,000 3.8%
Paper
May 2, 1992 Commercial $20,000,00 4.2% $20,000,000 (C) (C)
Paper
</TABLE>
Note (A) No short-term borrowings outstanding.
(B) The Company ended its short-term commercial paper program in
January 1993. The average amount outstanding and the weighted average
rates are based upon the actual number of days the commercial paper program
was in place.
(C) The Company started its short-term commercial paper program in
April 1992. Thus, the average balance outstanding and weighted average
interest rate for the fiscal year were not meaningful.
23
<PAGE> 1
EXHIBIT 10.1.2
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is
made as of March 18, 1994, between RYKOFF-SEXTON, INC., a Delaware corporation,
("Borrower") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association, ("Bank").
WHEREAS, Borrower and Bank entered into that certain Credit
Agreement dated as of October 25, 1993, as amended by a First Amendment dated
as of December 29, 1993 (the "Agreement");
WHEREAS, Borrower and Bank desire to modify and amend certain
of the terms and provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises herein
contained and for other good and valuable consideration, Borrower and Bank do
hereby mutually agree as follows:
1. The definition "Person" is added to Section 1 in
proper alphabetical order:
"'Person' means any individual, corporation, limited
liability company, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or
government or any agency or political subdivisions thereof."
2. Section 7.8 is amended and restated in its entirety
as follows:
"7.8 Default of Other Financial Obligations. Any
default occurs under any other agreement, with Bank or any
other Person, involving the borrowing of money or the
extension of credit in an aggregate amount exceeding Five
Million Dollars ($5,000,000) under which Borrower or any
Subsidiary may be obligated as borrower, guarantor, or
installment purchaser, including without limitation the
Indenture, if such default consists of the failure to pay any
obligation when due or if such default gives to the holder of
the obligation concerned the right to accelerate the
obligation."
3. Section 7.9 is amended and restated in its entirety
as follows:
"7.9 [INTENTIONALLY DELETED]"
Borrower hereby represents and warrants to Bank that: (i) no
default specified in the Agreement and no event which with notice or lapse of
time or both would become such a default has occurred and is continuing, (ii)
the representations and warranties of Borrower pursuant to the Agreement are
true on and as of the date hereof as if made on and as of said date, (iii)
- 1 -
<PAGE> 2
the making and performance by Borrower of this Amendment have been duly
authorized by all necessary action, and (iv) no consent, approval,
authorization, permit or license is required in connection with the making or
performance of the Agreement as amended hereby.
In all other respects, the Agreement shall remain in full
force and effect and shall be performed by the parties hereto according to its
terms and provisions.
All capitalized terms used herein are defined as in the
Agreement.
IN WITNESS WHEREOF, this Amendment has been executed by the
parties hereto as of the date first above written.
RYKOFF-SEXTON, INC.
By: /s/ RICHARD J. MARTIN
--------------------------------
Title: Senior Vice President and
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ MARK J. GLASKY
------------------------------
Title: Vice President
- 2 -
<PAGE> 3
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is
made as of April 15, 1994, between RYKOFF-SEXTON, INC., a Delaware corporation,
("Borrower") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association ("Bank").
WHEREAS, Borrower and Bank entered into that certain Credit
Agreement dated as of October 25, 1993, as amended by a First Amendment dated
as of December 29, 1993, and a Second Amendment dated as of March 18, 1993 (the
"Agreement");
WHEREAS, Borrower and Bank desire to modify and amend certain
of the terms and provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises herein
contained and for other good and valuable consideration, Borrower and Bank do
hereby mutually agree as follows:
1. In Section 2.1 the amount "One Hundred Fifteen
Million Dollars ($115,000,000)" is deleted and the amount "One Hundred Twenty
Million Dollars ($120,000,000)" substituted in its stead.
2. In Section 2.1(b) the amount "Fifteen Million Dollars
($15,000,000)" is deleted and the amount "Twenty Million Dollars ($20,000,000)"
substituted in its stead.
Borrower hereby represents and warrants to Bank that: (i) no
default specified in the Agreement and no event which with notice or lapse of
time or both would become such a default has occurred and is continuing, (ii)
the representations and warranties of Borrower pursuant to the Agreement are
true on and as of the date hereof as if made on and as of said date, (iii) the
making and performance by Borrower of this Amendment have been duly authorized
by all necessary action, and (iv) no consent, approval, authorization, permit
or license is required in connection with the making or performance of the
Agreement as amended hereby.
In all other respects, the Agreement shall remain in full
force and effect and shall be performed by the parties hereto according to its
terms and provisions.
All capitalized terms used herein are defined as in the
Agreement.
- 1 -
<PAGE> 4
IN WITNESS WHEREOF, this Amendment has been executed by the
parties hereto as of the date first above written.
RYKOFF-SEXTON, INC.
By: /s/ RICHARD J. MARTIN
--------------------------------
Title: Senior Vice President and
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ MARK J. GLASKY
---------------------------
Mark J. Glasky
Vice President
- 2 -
<PAGE> 5
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is
made as of April 30, 1994, between RYKOFF-SEXTON, INC., a Delaware corporation,
("Borrower") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association ("Bank").
WHEREAS, Borrower and Bank entered into that certain Credit
Agreement dated as of October 25, 1993, as amended by a First Amendment dated
as of December 29, 1993, a Second Amendment dated as of March 18, 1993, and a
Third Amendment dated as of April 15, 1994 (the "Agreement");
WHEREAS, Borrower and Bank desire to modify and amend certain
of the terms and provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises herein
contained and for other good and valuable consideration, Borrower and Bank do
hereby mutually agree as follows:
In Section 1, subsections (i) and (v) of the
definition "Funded Debt" are amended and restated in their
entirety as follows:
"(i) any obligation which under GAAP is
shown on the balance sheet as a liability (including
Capitalized Lease Obligations, industrial revenue
bonds and pollution control bond financing, but
excluding reserves for deferred income taxes and
other reserves to the extent that such reserves do
not constitute an obligation and excluding any trade
payables (as defined in subsection (v) below) and
other accrued current liabilities arising in the
ordinary course of business);
(v) obligations under any contract for
the purchase of materials, supplies or other property
or services ('trade payables') if such contract (or
any related document) requires that payment for such
materials, supplies or other property or services
shall be made regardless of whether or not delivery
of such materials, supplies or other property or
services is ever made or tendered (but excluding any
trade payables and other accrued current liabilities
arising in the ordinary course of business);"
Borrower hereby represents and warrants to Bank that: (i) no
default specified in the Agreement and no event which with
- 1 -
<PAGE> 6
notice or lapse of time or both would become such a default has occurred and is
continuing, (ii) the representations and warranties of Borrower pursuant to the
Agreement are true on and as of the date hereof as if made on and as of said
date, (iii) the making and performance by Borrower of this Amendment have been
duly authorized by all necessary action, and (iv) no consent, approval,
authorization, permit or license is required in connection with the making or
performance of the Agreement as amended hereby.
In all other respects, the Agreement shall remain in full
force and effect and shall be performed by the parties hereto according to its
terms and provisions.
All capitalized terms used herein are defined as in the
Agreement.
IN WITNESS WHEREOF, this Amendment has been executed by the
parties hereto as of the date first above written.
RYKOFF-SEXTON, INC.
By: /s/ VICTOR B. CHAVEZ
-------------------------------
Title: Vice President and
Chief Accounting Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ MARK J. GLASKY
-------------------------------
Mark J. Glasky
Vice President
- 2 -
<PAGE> 1
EXHIBIT 10.16
PARTICIPATION AGREEMENT
DATED AS OF APRIL 29, 1994
ENTERED INTO AMONG
RYKOFF-SEXTON, INC., AS LESSEE
TONE BROTHERS, INC., AS SUBLESSEE
BA LEASING & CAPITAL CORPORATION,
NOT INDIVIDUALLY, EXCEPT AS EXPRESSLY
SET FORTH HEREIN, BUT AS AGENT
AND
THE LESSORS LISTED ON
THE SIGNATURE PAGES HERETO
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS
ARTICLE II PURCHASES OF EQUIPMENT
Section 2.1 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . 2
Section 2.2 Time and Place of Fundings and Delivery
Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3 Delivery Date Notices . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.4 Application of Funds; Sale and Lease of
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.5 Conditions for Participants to Initial
Funding and Delivery Date . . . . . . . . . . . . . . . . . . . . 4
Section 2.6 Conditions for Participants . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III ADDITIONAL DELIVERY DATE REQUIREMENTS
Section 3.1 Lease Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.2 Delivery of Search Reports . . . . . . . . . . . . . . . . . . . . . 12
Section 3.3 Postponement of a Subsequent Delivery
Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.4 Interest Payments to Lessors . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV GENERAL PROVISIONS
Section 4.1 Nature of Transaction . . . . . . . . . . . . . . . . . . . . . . . . 14
[Section 4.2 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.3 Replacement of Equipment . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.4 Additional Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.5 Increased Capital Costs . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.6 Assignment of Purchase Agreements . . . . . . . . . . . . . . . . . . 16
ARTICLE V REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties of Lessee
and Sublessee . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.2 Representations and Warranties of Lessors . . . . . . . . . . . . . . 22
Section 5.3 Representations and Warranties of Agent . . . . . . . . . . . . . . . 24
ARTICLE VI COVENANTS
Section 6.1 Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.2 Covenants of Sublessee . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.3 Covenants of Agent and Lessors . . . . . . . . . . . . . . . . . . . 34
ARTICLE VII GENERAL INDEMNITY
Section 7.1 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.2 Excessive Use Indemnity . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII GENERAL TAX INDEMNITY
Section 8.1 General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.2 Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.3 Gross Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.4 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.5 Tax Character of Transaction . . . . . . . . . . . . . . . . . . . 42
Section 8.6 Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX LIMITATIONS
Section 9.1 Limitation of Liability of Agent . . . . . . . . . . . . . . . . . 44
ARTICLE X AMENDMENTS TO OPERATIVE AGREEMENTS
Section 10.1 Amendments to Operative Agreements With
Consent of Lessors . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.2 Amendments to Operative Agreements
Affecting Agent . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE XI MISCELLANEOUS
Section 11.1 Survival of Covenants . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.2 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.3 Effect and Modification of Participation
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.5 Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 11.8 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.9 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.10 JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.11 Captions; Table of Contents . . . . . . . . . . . . . . . . . . . 48
Section 11.12 FINAL AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.13 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . 48
Section 11.14 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.15 Reproduction of Documents . . . . . . . . . . . . . . . . . . . . 49
Section 11.16 Consideration for Consents to Waivers
and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.17 Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . 50
</TABLE>
-ii-
<PAGE> 4
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<S> <C> <C>
Schedule I -- Commitments of Lessors; Payment Instructions
Schedule II -- Description of Eligible Equipment to be Delivered by
Lessee and Sublessee on the Initial Delivery Date
Schedule III -- Description of Eligible Equipment to be Delivered on
the Subsequent Delivery Dates
Schedule IV -- Disclosure Schedule
Schedule X -- Definitions
Schedule Y -- Functional Units
Exhibit A -- Form of Lease
Schedule I -- Equipment
Schedule II -- Functional Units
Schedule III -- Rental Payment Percentage
Exhibit A -- Form of Investors Letter
Exhibit B -- Form of Lease Supplement
Schedule I -- Equipment and Purchase Prices
Schedule II -- Interest Rate; Rent Payments
Schedule III -- Allocation of Rent Payments among Lessors
Schedule IV -- Functional Unit Balances
Exhibit B -- Form of Sublease
Schedule I -- Sublease Items
Schedule II -- Notice Addresses
Exhibit C -- Form of Delivery Date Notice
Schedule I -- Equipment List, Purchase Price and Site(s)
Schedule II -- Purchase Agreements
Exhibit D -- Form of Lessee's and Sublessee's Opinion of Counsel
Exhibit E -- Form of Bill of Sale
Schedule I -- Equipment List
</TABLE>
-iii-
<PAGE> 5
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, dated as of April 29, 1994, is entered
into among: (a) Rykoff-Sexton, Inc., a Delaware corporation, as Lessee, (b)
Tone Brothers, Inc., an Iowa corporation, as Sublessee, (c) BA Leasing &
Capital Corporation, a California corporation, not in its individual capacity,
except as otherwise expressly provided herein, but solely as Agent for the
Lessors, and (d) the various Lessors listed on the signature pages hereto.
WHEREAS, on the Initial Delivery Date, the Lessee or the Sublessee
will transfer to the Agent, for the benefit of the Lessors, and the Agent, on
behalf of the Lessors will purchase, the items of Eligible Equipment identified
in Schedule II hereto;
AND WHEREAS, on each Subsequent Delivery Date, Lessee or Sublessee, as
the case may be, will cause to be transferred to the Agent, for the benefit of
the Lessors, certain of the items of Eligible Equipment generally described on
Schedule III hereto and the Agent, on behalf of the Lessors, will purchase such
Equipment directly from the Manufacturers or Lessee, as the case may be;
AND WHEREAS, the Eligible Equipment is grouped into Functional Units
as identified on Schedule Y hereto;
AND WHEREAS, upon the transfer of the Functional Units on each
Delivery Date, Lessors will lease such Functional Units to Lessee and Lessee
will lease such Functional Units from the Lessors pursuant to the terms of the
Lease substantially in the form of Exhibit A hereto and a Lease Supplement
substantially in the form of Exhibit B to the Lease;
AND WHEREAS, the Lessee will enter into the Sublease substantially in
the form of Exhibit B hereto subleasing to the Sublessee the Functional Units
described therein;
NOW THEREFORE, in consideration of the mutual terms and conditions
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but not defined herein (including those used in
the foregoing recitals) shall have the meanings
<PAGE> 6
specified in Schedule X hereto unless the context otherwise requires, which
Schedule X shall for all purposes constitute a part of this Participation
Agreement.
ARTICLE II
PURCHASES OF EQUIPMENT
Section 2.1 Payment of Purchase Price.
(a) Subject to the terms and conditions hereinafter set
forth, and in reliance on the representations and warranties contained
herein or made pursuant hereto, following receipt of the Initial
Delivery Date Notice and each Subsequent Delivery Date Notice, each
Lessor shall transfer to Agent an amount equal to the product of the
aggregate Purchase Price of the Eligible Equipment specified in the
Delivery Date Notice to be delivered by Lessee prior to such Delivery
Date, multiplied by such Lessor's Commitment Percentage (each such
transfer being referred to herein as a "Funding"). In no event shall
any Lessor be required to provide funds under this Participation
Agreement in an aggregate amount exceeding such Lessor's Commitment.
(b) Remittances pursuant to this Section 2.1 shall be
made in immediately available federal funds by wire transfer to the
account of the Agent set forth below (or as otherwise specified by
Agent to each Lessor from time to time not less than three Business
Days prior to the date of the requested Funding) and must be received
by Agent by 9:00 a.m., San Francisco time on the applicable Delivery
Date:
<TABLE>
<S> <C>
Bank: Bank of America NT&SA
San Francisco Main Branch
San Francisco, California
ABA Routing #: 121 000 358
Account #: 06568-57503
Payee: BA Leasing & Capital Corporation
Notify: Richard Walter (415) 765-7476.
</TABLE>
(c) If on any date specified for a Funding, any Lessor
wrongfully fails to make any payment then required of it, then any
party hereto (other than the party so failing to make the payment or
otherwise in breach) may cancel its obligations under this
Participation Agreement and the transactions contemplated hereby by
notice to the other parties; provided, however, that if such failure to
pay is on the part of only one Lessor, then the other Lessors shall be
obligated to make the payments that they would otherwise have been
obligated to make pursuant to the relevant
2
<PAGE> 7
Funding, so long as the Equipment to be delivered on the corresponding
Delivery Date consists solely of Functional Units; and provided,
further, that if the total Purchase Price of the Equipment subject to
the Lease must be reduced because of a Lessor's wrongful failure to
fund, the Required Lessors shall have the right to reject any tendered
delivery of a Functional Unit so long as there are one or more other
Functional Units described on Schedule III which have not previously
been delivered and which have a total Purchase Price approximately
equal to the rejected Functional Unit. The party wrongfully failing
to make its payment shall not be responsible for any consequential
damages suffered by the Sublessee or the Lessee or any of their
Affiliates as a result of its failure to so fund.
Section 2.2 Time and Place of Fundings and Delivery Dates.
(a) The following shall be applicable to the Fundings and
the Delivery Dates:
(i) no more than four Fundings and four Delivery
Dates may occur;
(ii) each Funding and each Delivery Date shall occur
on a Business Day on or after April 29, 1994 and before March
31, 1995, it being understood that there may be a Funding
without a Delivery Date Closing if Lessee has postponed the
Delivery Date pursuant to Section 3.3, so long as such
Delivery Date occurs prior to March 31, 1995;
(iii) each Funding shall provide for financing of
Eligible Equipment having an aggregate Purchase Price which
equals or exceeds, except in the case of the final Funding,
$1,000,000;
(iv) all items of Eligible Equipment to be purchased
with the proceeds of such Funding shall comprise one or more
complete Functional Units; and
(v) in no event shall the aggregate amount advanced
by the Lessors exceed the aggregate amount of the Commitment.
(b) The closing for each Funding shall take place on the
Delivery Date set forth in the Delivery Date Notice applicable to such
Funding, commencing at 9:00 a.m. Los Angeles time, at Mayer, Brown &
Platt, 350 South Grand Avenue, Suite 2500, Los Angeles, California
90071.
3
<PAGE> 8
Section 2.3 Delivery Date Notices. With respect to each Funding
(unless waived by the parties hereto), the Lessee shall, not later than 1:00
p.m. San Francisco time on the tenth (10th) Business Day prior thereto, provide
an irrevocable (subject to Section 3.3) notice to Agent and each of the Lessors
(a "Delivery Date Notice") substantially in the form of Exhibit C, specifying
(i) the Delivery Date, (ii) a description of each item of Eligible Equipment to
be purchased on such Delivery Date, categorized on a Functional Unit basis,
(iii) the aggregate Purchase Price of all Eligible Equipment to be purchased on
such Delivery Date, (iv) wire transfer instructions for the disbursement of
funds, and (v) in the event such Delivery Date is to be the final Delivery
Date, that such Delivery Date is to be the final Delivery Date.
Section 2.4 Application of Funds; Sale and Lease of Equipment. On
each Delivery Date, upon (a) receipt by Agent of all amounts to be paid by the
Lessors pursuant to Section 2.1, and (b) satisfaction or waiver of the
conditions set forth in Sections 2.5 and 2.6, (i) Agent shall purchase, for the
benefit of the Lessors, the Equipment to be acquired on such Delivery Date, as
specified in the Delivery Date Notice delivered pursuant to Section 2.3, and
the Bill of Sale and Lease Supplement to be executed on such Delivery Date,
(ii) in consideration therefor, the Agent, on behalf of the Lessors, shall pay,
from the funds made available by the Lessors pursuant to Section 2.1, an amount
equal to the aggregate Purchase Price of Equipment then being sold and
purchased pursuant thereto in immediately available federal funds remitted by
wire transfer to the account of the Lessee at: Bank of America, ABA #121 000
358, Beneficiary: Rykoff-Sexton, Inc., Benef. A/C #14 596 01430 (or as
otherwise specified by the Lessee to the Agent at least three (3) Business Days
before such Delivery Date) in the case of Eligible Equipment described at
Schedule II or directly to the Manufacturer for all Eligible Equipment
described in Schedule III hereto and (iii) Lessors shall lease to the Lessee
the Equipment purchased by the Agent on behalf of Lessors on such Delivery Date
and Lessee shall accept delivery of and lease from Lessors such Equipment
pursuant to the Lease and the Lease Supplement entered into by Lessors, Agent
and Lessee on such Delivery Date. Delivery of the Eligible Equipment to be
purchased by the Agent on behalf of Lessors on such Delivery Date shall be
effected by the delivery by Lessee or the Manufacturer, as applicable, of one
or more Bills of Sale specifically identifying the Equipment delivered on such
Delivery Date. Each Lessor shall hold an undivided interest in the Equipment
equal to such Lessor's Lease Percentage.
Section 2.5 Conditions for Participants to Initial Funding and
Delivery Date. The obligation of each Participant to perform its obligations
on the Initial Delivery Date, and of each Lessor
4
<PAGE> 9
to make its initial Funding, shall be subject to the fulfillment to the
satisfaction of (including, with respect to writings, such writings being in
form and substance reasonably satisfactory to the addressee or beneficiary
thereof), or the waiver in writing by, such Participant of the following
conditions precedent on or prior to the Initial Delivery Date (except that the
obligation of any party hereto shall not be subject to such party's own
performance or compliance):
(a) each of the Participants shall have received a fully
executed counterpart of this Participation Agreement;
(b) each Participant shall have received a fully executed
counterpart of the Lease; provided, however, only Agent shall receive
the Lease marked "Counterpart No. 1 - Agent's Original Copy";
(c) each Participant shall have received a fully executed
counterpart of the Sublease; provided, however, only Agent shall have
received the Sublease marked "Counterpart No. 1 - Sublessor's Original
Copy";
(d) at least two (2) Business Days prior to the Initial
Delivery Date, the Agent and Lessors shall have received a report from
the Appraiser to their satisfaction opining:
(i) that the Appraised Value of the Functional Units
Numbered 1 through 32 on Schedule Y hereto is reasonably
expected to be as follows:
<TABLE>
<S> <C>
Date Value
---- -----
Sum of Fair Market Value
of Eligible Equipment
described at Schedule II
on the Initial Delivery Date $18,646,310
End of Initial Term $16,395,359
End of First Renewal Term $13,978,188
End of Second Renewal Term $11,770,338
End of Third Renewal Term $ 9,981,357
End of Fourth Renewal Term $ 8,497,320
End of Fifth Renewal Term $ 7,363,875
</TABLE>
(ii) that the remaining composite economic useful
life of the Eligible Equipment is not less than eight (8) years,
(iii) that it would be reasonable to assume an
increase for inflation of at least two percent (2%) per
5
<PAGE> 10
annum in the values set forth in the foregoingclause (i), and
(iv) that it is commercially feasible for a Person
other than the Lessee or Sublessee to use the Eligible
Equipment at the end of the Lease Term and each Renewal Term;
(e) Lessee shall have paid to Agent, for the benefit of
Agent and the Lessors, the Transaction Costs. Such payment shall be
made by wire transfer of immediately available funds to the account
specified for Agent atSchedule I;
(f) each Lessor and the Agent shall have received the
opinions of Maslon, Edelman, Borman & Brand, as counsel to Lessee and
Sublessee, and of local counsel in each jurisdiction in which any
Equipment to be delivered on the Initial Delivery Date is located,
substantially to the effect of the matters set forth in Exhibit D;
(g) each Lessor and the Agent shall have received: (i)
copies of each of the Lessee's and the Sublessee's certificate of
incorporation, certified by the Secretary of State of the States of
their incorporation no earlier than the 15th day prior to the Initial
Delivery Date, and by-laws of such corporation, accompanied by an
Officer's Certificate, dated the Initial Delivery Date, stating that
such documents are in full force and effect and have not been amended
since the respective dates thereof; (ii) certificates of existence and
good standing from the Secretary of State of the States of their
incorporation and the Secretary of State of the State of California,
dated no earlier than the 15th day prior to the Initial Delivery Date,
with respect to each of the Lessee and Sublessee; (iii) a copy of
resolutions of each of the Lessee's and Sublessee's board of directors
authorizing the execution, delivery and performance by each such
corporation of each of the Operative Agreements to which it is or will
be a party, accompanied by an Officer's Certificate, dated the Initial
Delivery Date, of each such corporation, stating that such resolution
is in full force and effect and has not been amended since the date of
its adoption; and (iv) an incumbency certificate, dated the Initial
Delivery Date, of each of the Lessee and Sublessee; and
(h) each Lessor and the Agent shall have received: (i) a
report or reports, in form and substance reasonably satisfactory to
them, from a satisfactory environmental consultant, as to the
compliance of the Sites on which the Eligible Equipment being
delivered on the Initial Delivery
6
<PAGE> 11
Date is to be located with all applicable Environmental Laws and as to
such other matters as shall be reasonably requested by such
Participant; and (ii) a written agreement from such environmental
consultant that each Lessor and the Agent may rely upon such report or
reports to the same extent as the Person that engaged such firm to
provide such report or reports.
Section 2.6 Conditions for Participants on each Delivery Date. The
obligation of each Participant to perform its obligations on each Delivery Date
shall be subject to the fulfillment to the satisfaction of (including, with
respect to writings, such writings being in form and substance reasonably
satisfactory to the addressee or beneficiary thereof), or the waiver in writing
by, such Participant of the following conditions precedent on or prior to the
Delivery Date (except that the obligation of any party hereto shall not be
subject to such party's own performance or compliance):
(a) Each of the Participants shall have received a fully
executed counterpart of a Lease Supplement as required by Section 3.1;
provided, however, only Agent shall receive the Lease Supplement
marked "Counterpart No. 1 - Lessors' Original Copy."
(b) (i) Lessee and Sublessee shall have executed and
delivered to the Agent financing statements with respect to
the Equipment identified in such Delivery Date Notice. Such
financing statements shall have been filed for record in all
appropriate offices of all relevant jurisdictions;
(ii) the Agent shall have received such releases of
liens, termination statements, landlord consents (from Site
landlords) and mortgagee consents (from Site mortgagees) as
may be necessary to insure (x) a first priority security
interest in the Equipment which may be deemed "fixtures" and
thereby subject to prior liens and (y) the ability of the
Agent and Lessors to obtain access to such Sites and remove
the Equipment therefrom in connection with exercising their
rights and remedies under the Operative Agreements; and
(iii) the Agent, on behalf of the Lessors, shall
have received a fully executed Bill of Sale substantially in
the form of Exhibit E hereof with respect to the items of
Eligible Equipment identified in such Delivery Date Notice;
7
<PAGE> 12
(c) at least ten (10) Business Days prior to each
Subsequent Delivery Date, each Lessor and Agent shall have received a
report from the Appraiser to their satisfaction opining, with respect
to any Equipment proposed to be delivered on such Delivery Date that
was not covered in any Appraisal previously delivered to the Agent and
the Lessors, that:
(i) the Fair Market Value of the Equipment identified
in the Delivery Date Notice preceding and relating to such
Subsequent Delivery Date is equal to the Purchase Price for
such Equipment,
(ii) the estimated Fair Market Value of such
Equipment at the end of the Initial Term and each Renewal
Term, which shall be set forth in such report, is a reasonable
estimate, and that it would be reasonable to assume an
increase for inflation of at least two percent (2%) per annum
in such Fair Market Values, and
(iii) the remaining composite economic useful life
of such Eligible Equipment is not less than eight (8) years,
and
(iv) it is commercially feasible for a Person other
than the Lessee or Sublessee, as appropriate, to use such
Eligible Equipment at the end of the Lease Term and each
Renewal Term;
(d) the representations and warranties of each of the
parties hereto contained in this Participation Agreement and in any of
the other Operative Agreements shall be true and correct in all
material respects on the Delivery Date with the same effect as though
made on and as of the Delivery Date (provided that the representation
set forth in Section 5.1(b) shall be true with respect to each State,
County and Parish in which any Equipment to be delivered on the
applicable Delivery Date is located), and an Officer's Certificate,
dated the Delivery Date, of each of such parties (other than the
Lessors and the Agent) to that effect shall have been delivered to
each Participant, and in the case of any Lessor, the funding of its
Commitment (or portion thereof) pursuant to Section 2.1, shall be
deemed to constitute a confirmation by it that its representations and
warranties contained herein are true and correct in all material
respects on such Delivery Date;
(e) all Impositions other than Charges payable on or
prior to such Delivery Date in connection with the execution,
delivery, recording or filing of any of the
8
<PAGE> 13
Operative Agreements, in connection with the filing of any of the
financing statements, any applications regarding certificates of title
and any other documents, in connection with the consummation of any
other transactions contemplated hereby or by any of the other
Operative Agreements, shall have been paid in full by Lessee;
(f) the Agent and each of the Lessors shall have received
reports acceptable to the Agent and each of the Lessors (i) as to each
of the Lessee and Sublessee by the office of the Secretaries of State
of the States in which the Equipment to be delivered on such Delivery
Date is to be located, each dated as close to the relevant Delivery
Date as practicable, in respect of a search of the applicable Uniform
Commercial Code files maintained by such offices and (ii) as to each
of the Lessee and Sublessee by the appropriate county filing or
recording office of each County or Parish in which the Equipment to be
delivered on such Delivery Date is to be located, each dated as close
to the relevant Delivery Date as practicable, in respect of a search
of the applicable Uniform Commercial Code files and any indices of
Liens maintained by such offices (including, if applicable, indices of
judgment, revenue and tax liens);
(g) the Agent shall have received (and each Lessor shall
have received a copy of) a current certificate to the effect that
insurance complying with Section 7.2 of the Lease is in full force and
effect;
(h) the Lessors and the Agent shall have received
satisfactory evidence that the Purchase Price of the Equipment
accepted on the Delivery Date does not exceed (i) with respect to
Eligible Equipment described in Schedule II, the Fair Market Value of
such Equipment, and (ii) to the extent such Equipment constitutes
Eligible Equipment described in Schedule III, the invoice cost for
such Equipment plus the Charges properly attributable thereto;
(i) all proceedings taken in connection with the Delivery
Date Closing and all documents relating thereto shall be reasonably
satisfactory to each Participant and its counsel, and each Participant
and its counsel shall have received copies of such documents as such
Participant or its counsel may reasonably request in connection
therewith, all in form and substance reasonably satisfactory to such
Participant and its counsel;
(j) each Lessor and the Agent shall have received one or
more opinions of local counsel to the Lessee to the effect that the
Agent, for the benefit of the Lessors, has a perfected security
interest in the Collateral delivered on
9
<PAGE> 14
such Delivery Date in each State where such Collateral is located to
the extent a security interest can be so perfected by filing in each
such State;
(k) no material adverse change (financial or otherwise)
in the condition, operation, property or business on either a
consolidated or separate basis of the Lessee has occurred since the
previous Delivery Date (or, with respect to the Initial Delivery Date,
since May 1, 1993);
(l) no Lease Default or an event which with the giving of
notice and/or lapse of time could become a Lease Default shall have
occurred and be continuing;
(m) the Agent and the Lessors shall have received
evidence to their reasonable satisfaction that no materially adverse
environmental conditions or instances of non-compliance with
applicable Environmental Laws exist with respect to any Site(s) on
which the Eligible Equipment being delivered on such Delivery Date is
to be located; and
(n) the Agent and Lessors shall have received such other
documents as they may reasonably request and which are consistent with
the terms hereof including any third party approvals.
ARTICLE III
ADDITIONAL DELIVERY DATE REQUIREMENTS
Section 3.1 Lease Supplements. On each Delivery Date, Lessee shall
execute and deliver to each of the Lessors and the Agent a Lease Supplement in
form and substance reasonably satisfactory to Lessors and substantially in the
form set forth in Exhibit B to the Lease (a "Lease Supplement"). Each Lease
Supplement to be executed and delivered by Lessee on each Delivery Date shall
set forth:
(a) in Schedule I thereto, a description of and the
Purchase Price for each Functional Unit to be purchased by Lessor on
such Delivery Date;
(b) in Schedule II thereto, the Interest Rate, the Interim
Rent, the Applicable Percentage Amount, a schedule of the installments
of Basic Rent and Renewal Rent and the Payment Dates therefor and the
Supplement Balance of such Lease Supplement as of the end of the
Initial Term and each Renewal Term;
10
<PAGE> 15
(c) in Schedule III thereto, a schedule of each Lessor's
proportionate share of each installment of Rent and of the Supplement
Balance as of the end of the Initial Term and each Renewal Term, based
on each such Lessor's Lease Percentage; and
(d) in Schedule IV thereto, the Functional Unit Balance
of each Functional Unit subject to that Lease Supplement as of the
Delivery Date therefor and as of each Payment Date in the Initial Term
and each Renewal Term.
Schedules I, II, III and IV to each Lease Supplement shall be prepared by Agent
and delivered on or prior to the relevant Delivery Date. With respect to the
Lease Supplement delivered on the Initial Delivery Date, all parties hereto
hereby approve such Schedules, and with respect to all Lease Supplements
delivered on subsequent Delivery Dates, the items set forth by Agent in such
Schedules shall be conclusive and binding upon Lessee for all purposes
hereunder. The schedule of Rent set forth in Schedule II to each Lease
Supplement shall be calculated based upon the following assumptions:
(i) that Lessors have loaned the total Purchase Price of the
Eligible Equipment to be covered by the Lease Supplement to the Lessee
on the applicable Delivery Date Closing;
(ii) that such principal amount of such deemed loan will bear
interest at the Interest Rate;
(iii) that the maturity date of such deemed loan will be April
30, 2000;
(iv) that the average life of such deemed loan will be four
years plus or minus six months;
(v) that the "Specified Portion" of the principal amount of
such deemed loan on each anniversary of the Base Commencement Date of
such Lease Supplement shall be 21-1/2% of the outstanding principal
balance of the deemed loan on the immediately preceding anniversary of
such Base Commencement Date;
(vi) that a payment consisting solely of interest accrued on
the outstanding principal of the deemed loan at the Interest Rate will
be due and payable on the last day of the 90-day period ending on
April 30, July 30, October 30 or January 30 (as the case may be) in
which the deemed loan was made, and that thereafter principal and
interest will be paid on each Payment Date; and
11
<PAGE> 16
(vii) that the Supplement Balance of the relevant Lease
Supplement at the end of the second Renewal Term and each Renewal Term
thereafter will be equal to the Adjusted Appraised Value of the
Functional Units subject to such Lease Supplement.
Upon execution and delivery of each Lease Supplement, Lessee conclusively
agrees to lease from Lessors on the terms and conditions set forth in the Lease
and such Lease Supplement the Functional Units described in Schedule I to such
Lease Supplement.
Section 3.2 Delivery of Search Reports. No later than April 30,
1995, Lessee shall cause to be delivered to the Agent and each Lessor (i)
reports as to each of the Lessee and Sublessee by the office of the Secretary
of State of each State in which any of the Equipment is located, each dated as
close to April 30, 1995 as practicable, in respect of a search of the Uniform
Commercial Code files maintained by such offices; and (ii) acceptable reports
as to each of the Lessee and Sublessee by the offices of the appropriate filing
or recording office of each County or Parish in which any of the Equipment is
located, each dated as close to April 30, 1995 as practicable in respect of a
search of the Uniform Commercial Code files and any indices of Liens maintained
by such offices (including, if applicable, indices of judgment, revenue and tax
liens), to determine in each case whether there are any Liens (other than
Permitted Liens) filed against the Equipment.
Section 3.3 Postponement of a Subsequent Delivery Date. A Subsequent
Delivery Date with respect to all or any Functional Units identified in a
Delivery Date Notice may be postponed by the Lessee from time to time (but
subject in any event to Section 2.2(a)) if the Lessee gives the Agent and each
Lessor written notice of such postponement no later than two days prior to such
date. The notice shall indicate that the delivery of all of the Functional
Units identified in the applicable Delivery Date Notice, or if only a portion
is being delayed, the notice shall identify the Functional Unit(s) that will
not be delivered on such date. The notice shall also indicate the Subsequent
Delivery Date on which such items will be purchased. A postponement of a
Delivery Date shall not postpone the corresponding Funding, which shall be made
in any event, and to the extent proceeds are not used to purchase Eligible
Equipment, such proceeds shall be held by Agent in trust for the Lessors,
subject to the terms of Section 3.4.
Section 3.4 Interest Payments to Lessors. (a) In the event of any
postponement of a Subsequent Delivery Date with respect to all or any
Functional Unit(s) pursuant to Section 3.3 hereof, or if on a Subsequent
Delivery Date all or any Functional
12
<PAGE> 17
Unit(s) is not delivered or accepted by the Lessee under the Lease for any
reason, the Lessee will reimburse each Lessor for the loss of the use of its
funds occasioned by such deposit, postponement or failure to deliver or accept
(unless such failure to accept is caused by a default by such Lessor) by paying
to each such Lessor on demand (A) interest at the Assumed Interest Rate on the
amount funded by such Lessor but which is not applied to the purchase of
Functional Units (the "Unfunded Amount") for the period from and including the
Subsequent Delivery Date specified in such notice to but excluding the earlier
of (x) the Business Day on which such Unfunded Amount is returned to it and (y)
the next Delivery Date when such Unfunded Amount is applied by the Agent to
purchase Functional Units pursuant to Article II minus (B) such interest as
shall have been realized from the investments by the Agent of the amount of the
Unfunded Amount (if investment thereof was effected pursuant to Section 3.4(b)
hereof). If the requisite amount of Equipment is not accepted on a Subsequent
Delivery Date, the Agent shall retain the Unfunded Amount in trust for such
Lessor until March 31, 1995, on which day (or at such earlier time as may have
been directed in the same manner by the Lessee), such funds (together with
accrued interest thereon) shall be returned to such Lessor not later than 11:00
a.m., California time in the same form as such funds were made available by
such Lessor, unless the requisite amount of Equipment shall have been accepted
by the Lessee, and the conditions set forth in Section 2.6 hereof shall have
been satisfied or waived, prior to such return of funds, in which case such
funds shall be applied in the manner and at the times provided in Section 2.4
hereof. Upon return of such funds pursuant to the preceding sentence, such
Lessor's Commitment shall be canceled and Lessee shall pay to each Lessor on
demand a Make-Whole Premium with respect to the Unfunded Amount.
(b) Upon any failure to deliver or accept the requisite amount of
Equipment on a Subsequent Delivery Date, the Agent shall, to the extent
practicable, invest all funds held by it, if any, under Section 3.4(a) hereof,
in Permitted Investments pursuant to written instructions by the Required
Lessors. Agent shall bear no liability for any losses on such investments.
Agent shall distribute, quarterly in arrears (or promptly upon the return or
application of such Lessor's Commitment, if earlier), to each Lessor which had
previously delivered its Commitment to it any interest or other income realized
from the investment thereof, ratably, in the proportion that such Lessor's
Commitment bears to the total of such Commitments.
(c) Notwithstanding the foregoing provisions of this Section 3.4,
no Lessor shall be under any obligation to make its Commitment available after
March 31, 1995, and such time shall be of the essence in this Participation
Agreement.
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ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Nature of Transaction. It is the intent of the
Participants that: (a) the transaction contemplated hereby constitutes an
operating lease from the Agent and Lessors to Lessee for purposes of Lessee's
financial reporting, (b) the transaction contemplated hereby grants (and with
respect to existing Equipment, preserves) ownership in the Equipment to the
Lessee for purposes of Federal and state income tax, bankruptcy and Uniform
Commercial Code purposes, and (c) the Lease grants a security interest in the
Equipment and the other Collateral to the Agent for the benefit of the Agent
and the Lessors. Nevertheless, the Lessee and Sublessee acknowledge and agree
that no Participant or any other Person has made any representations or
warranties concerning the tax, accounting or legal characteristics of the
Operative Agreements and that the Lessee and Sublessee have obtained and relied
upon such tax, accounting and legal advice concerning the Operative Agreements
as they deem appropriate.
[Section 4.2 Reserved]
Section 4.3 Replacement of Equipment. Required Lessors shall
instruct the Agent to release a Substituted Item or a Replaced Unit from the
Lease and evidence such release by the execution and delivery of a termination
statement release, a Bill of Sale and such other documents as may be required
to release the Substituted Item or Replaced Unit from the Lease and which are
in form and substance satisfactory to the Required Lessors subject to the
following conditions:
(a) each of the Lessors and Agent has received a written
notice from the Lessee (the "Replacement Notice") at least 10 days
prior to the requested release which identifies (i) the Replacement
Part and Substituted Item or (ii) the Replacement Unit and the
Replaced Unit, as the case may be;
(b) in the case of a substitution pursuant to Section
5.4(a) of the Lease, the Replacement Part is new and of the same or
greater value, utility and useful life than the Substituted Item on
the date it became subject to the Lease to the satisfaction of the
Lessors;
(c) Lessee shall execute and deliver to the Agent, for
the benefit of the Lessors, a Bill of Sale and a certificate of
acceptance conforming to Sections 1, 2, 3 and 4 of the Lease
Supplement in respect of the Replacement Part or the Replacement Unit,
as the case may be; and
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(d) the conditions set forth in Sections 2.6(b), 2.6(e),
2.6(g), 2.6(h), 2.6(l) and 2.6(m) (and Section 2.6(c), if requested by
the Required Lessors in connection with a substitution pursuant
to Section 5.4(a) of the Lease) have been satisfied with respect to the
Replacement Part or the Replacement Unit, as the case may be, as
though it had been identified in a Delivery Date Notice. Lessee shall
purchase the Replacement Part or the Replacement Unit, as the case may
be, with its own funds. There shall be no obligation on the part of
the Agent or the Lessors to pay for or otherwise finance any
Replacement Part or Replacement Unit except by way of releasing the
corresponding Substituted Item or Replaced Unit as provided by
this Section 4.3.
Section 4.4 Additional Fees.
(a) On March 31, 1995, Lessee shall pay directly to the
Lessors (pro rata in accordance with each Lessor's Commitment
Percentage) a nonutilization fee equal to one percent (1.00%) of the
amount by which $20,000,000 exceeds the funded amount of the
Commitment on such date.
(b) If Lessee elects the Sale Option during the second or
fourth Renewal Term pursuant to Section 11.1(c) of the Lease as to all
or any portion of the Equipment, Lessee shall, as a condition to
exercising the Lessee Sale Option, pay to each Lessor on the
Termination Date an additional fee equal to the product of (A)
$250,000 if such option is exercised during the second Renewal Term or
$160,000 if such option is exercised during the fourth Renewal Term,
multiplied by (B) such Lessor's Lease Percentage.
Section 4.5 Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lessor directly (or by its parent
company) and such Lessor determines (in its sole and absolute discretion) that
the rate of return on it or its parent's capital as a consequence of the
Fundings made by such Lessor hereunder is reduced to a level below that which
such Lessor or its parent could have achieved but for the occurrence of any
such circumstances, then, in any such case, upon written notification from time
to time by such Lessor to Lessee, Lessee shall immediately pay as Supplemental
Rent hereunder directly to such Lessor additional amounts sufficient to
compensate Lessor or its parent on an after-tax basis for such reduction in
rate of return. A statement of each Lessor as to
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any such additional amount or amounts (including calculations thereof in
reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on Lessee. In determining such amount, each Lessor shall use any
method of averaging or attribution that it (in its reasonable discretion) shall
deem applicable.
Section 4.6 Assignment of Purchase Agreements. Lessee does hereby
sell, assign, transfer and set over unto Agent for the benefit of the Lessors
all of the Lessee's right, title and interest in and to each of the Purchase
Agreements, whether now or hereafter existing, as and to the extent that the
same relate to the Equipment and the purchase and operation thereof. Subject
to the terms and conditions hereof and of the Lease, the Agent hereby and from
time to time accepts the assignments contained in this Section 4.6.
Notwithstanding anything herein to the contrary, the Agent shall not have any
obligation or liability under any Purchase Agreement by reason of, or arising
out of, the assignment contained in this Section 4.6 or be obligated to perform
any of the obligations or duties of the Lessee under any Purchase Agreement or
to make any payment or to take any other related action thereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties of Lessee and Sublessee.
Lessee and Sublessee jointly and severally represent and warrant to the Agent
and Lessors that, as of the Effective Date and as of each Delivery Date:
(a) Lessee has good and marketable title to the items of
Eligible Equipment identified in Schedule II hereto delivered through
such date and all of the items of Eligible Equipment delivered through
such date are free from all Liens except for Permitted Liens;
(b) no filing, recordation or registration is necessary
in order to perfect the security interest in the Equipment referred to
in the foregoing subsection (a), except for the filing of a Uniform
Commercial Code financing statement with respect to Lessee and
Sublessee in the office of the Secretary of State of the States of
California and Iowa, in the county records of Los Angeles County,
California, and Polk County, Iowa, and a Uniform Commercial Code
fixture filing in the real property records of each of the foregoing
Counties, and that upon such filings, the security interest in such
Equipment are enforceable and properly perfected;
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(c) the information provided by Lessee to the Appraiser
and forming the basis for the conclusions set forth in the Appraiser's
reports, taken as a whole, was true and correct in all material
respects and did not omit any information necessary to make the
information provided not materially misleading;
(d) Lessee and Sublessee are corporations duly
incorporated, validly existing and in good standing under the laws of
the States of Delaware and Iowa, respectively;
(e) Lessee is duly qualified or licensed and in good
standing as a foreign corporation authorized to do business in the
States of California and Oregon, and Lessee and Sublessee are duly
qualified or licensed and in good standing as foreign corporations
authorized to do business in each other jurisdiction where, because of
the nature of their respective activities or properties, such
qualification or licensing is required, except for such jurisdictions
where the failure to be so qualified or licensed will not materially
adversely affect the consolidated condition (financial or otherwise),
business, prospects or operations of Lessee or Sublessee and their
respective consolidated subsidiaries;
(f) Lessee and Sublessee each have all requisite
corporate power and authority to execute, deliver, and perform its
respective obligations under each Operative Agreement to which it is a
party;
(g) the execution and delivery by each of Lessee and
Sublessee of the Operative Agreements to which it is a party, and the
performance by Lessee and Sublessee of their respective obligations
under such Operative Agreements, have been duly authorized by all
necessary corporate action (including any necessary stockholder
action) on its part, and do not and will not: (i) violate any
provision of any law, rule or regulation presently in effect having
applicability to Lessee or Sublessee or of any order, writ, judgment,
decree, determination or award presently in effect having
applicability to Lessee or Sublessee or of the charter or bylaws of
Lessee or Sublessee; (ii) result in a breach of or constitute a
default under any indenture or loan or credit agreement (which are,
individually or in the aggregate, material to the consolidated
condition (financial or otherwise), business, prospects or operations
of Lessee or Sublessee and their respective consolidated
subsidiaries), or result in a breach of or constitute a default under
any other agreement or instrument to which Lessee or Sublessee is a
party or by which Lessee or Sublessee or their respective properties
may be bound or affected; or
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(iii) result in, or require, the creation or imposition of any Lien of
any nature upon or with respect to any of the properties now owned or
hereafter acquired by Lessee or Sublessee (other than the security
interest contemplated by the Lease), and none of Lessee or Sublessee
is in default under or in violation of their respective charters or
bylaws;
(h) each of the Operative Agreements to which Lessee or
Sublessee is a party constitutes the legal, valid and binding
obligation of Lessee or Sublessee, respectively, enforceable against
Lessee or Sublessee, respectively, in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles
of equity;
(i) there is no litigation (including, without
limitation, derivative actions), arbitration or governmental
proceedings pending or, to the knowledge of Lessee or Sublessee,
threatened against Lessee or Sublessee which may adversely affect the
consolidated condition (financial or otherwise), business, prospects
or operations of Lessee, Sublessee or their respective consolidated
subsidiaries or impair Lessee's or Sublessee's ability to perform
their respective obligations under the Operative Agreements to which
they are party;
(j) no authorization, consent, approval, license or
formal exemption from, nor any filing, declaration or registration
with, any court, governmental agency or regulatory authority (Federal,
state, local or foreign), including, without limitation, the
Securities and Exchange Commission, or with any securities exchange,
is or will be required in connection with the execution and delivery
by Lessee or Sublessee of the Operative Agreements to which they are
party, the performance by Lessee or Sublessee of their respective
obligations under such Operative Agreements or the ownership,
operation and maintenance of the Equipment as contemplated by the
Operative Agreements;
(k) there is no agreement, understanding, contract or
document to which the Lessee or Sublessee is a party which is
necessary in order to test, maintain, repair, use or operate any item
of Equipment (other than as described on Schedule IV hereto, which
Schedule may be supplemented from time to time on each Delivery Date);
(l) the principal place of business and chief executive
office (as such term is used in Article 9 of the
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Uniform Commercial Code) of the Lessee is located at 761 Terminal
Street, Los Angeles, CA 90021; and Sublessee is located at 2301
Southeast Tones Drive, Ankeny, IA 50021-8888;
(m) relying upon the accuracy of the representations in
Section 5.2(f) hereof, the execution and delivery of the Operative
Agreements by the Lessee and Sublessee will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended;
(n) the Lessee and Sublessee have filed or caused to be
filed all United States Federal and all other material tax returns
that are required to be filed by the Lessee or Sublessee, and have
paid or caused to be paid all taxes shown to be due and payable on
such returns or on any assessment received by the Lessee or Sublessee
to the extent that such taxes have become due and payable except to
the extent that taxes due, but unpaid, are being contested in good
faith by Lessee or Sublessee by appropriate action or proceeding and,
to the extent (if any) that such taxes are not due and payable, has
established or caused to be established reserves that are adequate for
the payment thereof in accordance with GAAP;
(o) to the best of Lessee's and Sublessee's knowledge,
the Equipment and the property where it is located and the current
operation thereof and thereon do not violate any laws, rules,
regulations, or orders of any Authorities that are applicable thereto,
including, without limitation, any thereof relating to matters of
occupational safety and health or Environmental Laws the violation of
which would have a material adverse effect on Lessee, Sublessee or any
of the Equipment;
(p) taken as a whole, neither this Participation
Agreement, nor any offering materials, nor the other Operative
Agreements to which the Lessee or Sublessee is or will be a party nor
the other documents and certificates furnished pursuant to this
Participation Agreement to the Agent, or the Lessors in connection
with the transactions contemplated by this Participation Agreement,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained
herein and therein, in the light of the circumstances under which they
were made, not misleading. There is no fact known to the Lessee or
Sublessee that materially and adversely affects the ability of the
Lessee or Sublessee to perform their respective obligations under this
Participation Agreement or the Operative Agreements.
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Except for matters described in the Environmental Reports, there is no
fact of a materially adverse nature concerning the environmental
conditions at the Sites known to the Lessee or Sublessee;
(q) neither Lessee nor the Sublessee is subject to
regulation as a "holding company," an "affiliate" of a "holding
company", or a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended;
(r) neither the Lessee nor the Sublessee is an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended;
(s) there are no patents, patent rights, trademarks,
service marks, trade names, copyrights, licenses or other intellectual
property rights with respect to the Equipment that are necessary for
the continued economic operation of the Equipment (other than as
described on Schedule IV hereto, which Schedule may be supplemented
from time to time on each Delivery Date);
(t) neither the Agent nor any Lessor will, solely by
reason of entering into the Operative Agreements or the consummation
and performance of the transactions contemplated thereby (other than
upon the exercise of remedies under the Lease) (i) be required to
qualify to do business in any jurisdiction, (ii) become subject to
ongoing regulation by any authority as a company engaged in the
business of Lessee in any jurisdiction or (iii) to the best of
Lessee's knowledge, become subject to any other ongoing regulation of
its operations by any Authority;
(u) the use of the proceeds from the transaction
contemplated by this Participation Agreement will not violate or
result in any violation of Section 7 of the Securities Exchange Act of
1934, as amended, or any regulations issued pursuant thereto,
including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System;
(v) no Lease Default or event which with the passage of
time and/or giving of notice could become a Lease Default has occurred
and is continuing;
(w) no Casualty has occurred with respect to the
Equipment to be delivered on such Delivery Date;
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(x) the transfer of Equipment made by the Lessee pursuant
to the Delivery Date Closing did not render the Lessee insolvent, nor
was it made in contemplation of the Lessee's insolvency; the value of
the assets and properties of the Lessee at fair valuation and at their
then present fair salable value is and, after such transfers, will be
greater than Lessee's total liabilities, including contingent
liabilities, as they become due; the property remaining in the hands
of the Lessee after such transfers was not and will not be an
unreasonably small amount of capital;
(y) all insurance coverages required by Section 7.1 of
the Lease are in full force and effect and there are no past due
premiums in respect of any such insurance;
(z) the Equipment is personal property within the meaning
of the laws of each jurisdiction in which it is located; and the
Equipment is "goods" (as defined in the Uniform Commercial Code);
(aa) the Lessee has delivered to the Agent and Lessors the
audited consolidated balance sheet of the Lessee and its consolidated
subsidiaries as of May 1, 1993 and the related audited consolidated
statements of income, cash flows and changes in shareholders' equity
accounts for the year then ended and the unaudited consolidated
balance sheets of the Lessee and its consolidated subsidiaries as of
July 31 and October 31, 1993 and the related consolidated statements
of income, cash flows and changes in shareholders' equity accounts for
the months then ended; such consolidated financial statements have
been prepared in accordance with GAAP, applied on a consistent basis
throughout the periods covered thereby and on a basis consistent with
prior periods; and such consolidated financial statements fairly
present the consolidated financial condition of the Lessee and its
consolidated subsidiaries at such dates and the consolidated results
of their operations for such periods. There has been no material
adverse change (financial or otherwise) in the condition, operation,
prospects or business of Lessee or Sublessee on either a consolidated
or separate basis since May 1, 1993;
(ab) the combined single limit insurance amount of
$5,000,000 set forth in Section 7.1(b) of the Lease is the limit of
insurance customarily insured against by similar corporations engaged
in similar operations in each State where the Equipment to be
delivered on the Delivery Date is located;
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(ac) each of the Purchase Agreements is either freely
assignable by the Lessee to the Agent or a consent to the Lessee's
assignment of its rights under each of such Purchase Agreements to the
Agent has been received from each Manufacturer related thereto. The
Purchase Agreements are in full force and effect and are legal, valid
and binding obligations of the Lessee, enforceable against it in
accordance with their terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally and by general principles
of equity, and the Lessee is not in default thereunder; the Lessee has
not assigned or pledged, and hereby covenants that it will not assign
or pledge, so long as this Participation Agreement shall remain in
effect, the whole or any part of the rights in, to and under the
Purchase Agreements assigned herein to anyone other than the Agent;
(ad) the Charges relating to each of the Functional Units do
not exceed 20% of the Purchase Price thereof; and
(ae) neither it nor anyone acting on its behalf has taken or
will take any action which will subject the issue and sale of any
interest being acquired by the Lessors under the Operative Agreements
to the requirements of Section 5 of the Securities Act of 1933, as
amended (the "Securities Act"), and, assuming the truth and accuracy
of the representations set forth in Section 5.2(g), the issuance, sale
and delivery of such interests under the circumstances contemplated by
this Agreement do not require the registration of such interests under
the Securities Act or the qualification of any of the Operative
Agreements under the Trust Indenture Act of 1939, as amended.
Section 5.2 Representations and Warranties of Lessors. Each of the
Lessors hereby represents and warrants severally but not jointly to the other
Participants as follows:
(a) it is organized and validly existing in good standing
under the laws of its jurisdiction and has the corporate power and
authority to enter into and perform its obligations under each of the
Operative Agreements to which it is a party;
(b) each of the Operative Agreements to which it is a
party has been duly authorized, executed and delivered by it and is
the valid, legal and binding agreement of it, enforceable against it
in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the rights of creditors
generally and
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by general principles of equity, including, without limitation,
concepts of good faith and fair dealing, materiality, reasonableness
and the possible unavailability of specific performance or injunctive
relief (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(c) neither the execution and delivery of any of the
Operative Agreements to which it is a party nor compliance with the
terms and provisions of any of the Operative Agreements to which it is
a party conflicts with, results in a breach of, constitutes a default
under (with or without the giving of notice or lapse of time or both),
or violates any of the terms, conditions or provisions of: (i) its
articles of association or by-laws, (ii) to the best of its knowledge,
any bond, debenture, note, mortgage, indenture, agreement, lease or
other instrument to which it is now a party or by which it or its
property, is bound or affected, where such conflict, breach, default
or violation would materially and adversely affect the ability of it
to perform its obligations hereunder, or (iii) to the best of its
knowledge, any of the terms, conditions or provisions of any law,
rule, regulation, order, injunction or decree of any Authority
applicable to it, where such conflict, breach, default or violation
would materially and adversely affect the ability of it to perform its
obligations hereunder;
(d) there is no litigation (including, without
limitation, derivative actions), arbitration or governmental
proceeding pending or, to its knowledge, threatened against it which
may adversely affect its ability to perform its respective obligations
under the Operative Agreements to which it is party;
(e) to the best of its knowledge, no authorization,
consent, approval, license or formal exemption from, nor any filing,
declaration or registration with, any court, governmental agency or
regulatory authority (Federal, state, local or foreign), including,
without limitation, the Securities and Exchange Commission, or with
any securities exchange, is or will be required in connection with the
execution and delivery by it of the Operative Agreements to which it
is party, the acquisition of its interest in the Equipment and the
Operative Agreements, or the performance by it of its obligations
under such Operative Agreements;
(f) it is not and will not be funding any of its
Commitment or performing any of its obligations under the Operative
Documents with the assets of an "employee benefit plan" (as defined in
Section 3(3) of ERISA) which is subject
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to Title I of ERISA, or a "plan" (as defined in Section 4975(e)(1) of
the Code; and
(g) the interest being acquired by it under the Operative
Agreements is being acquired for its own account, without any view to
the distribution thereof or any interest therein, provided that such
Lessor shall be entitled to assign, transfer or convey its interest in
accordance with Section 22.2 of the Lease.
Section 5.3 Representations and Warranties of Agent. BA Leasing &
Capital Corporation, in its individual capacity, hereby represents and warrants
to the other parties as follows:
(a) it is a California corporation duly organized and
validly existing in good standing under the laws of the State of
California and has the corporate power and authority to enter into and
perform its obligations under the Operative Agreements;
(b) the Operative Agreements to which the Agent is or
will be a party have been or will be, on the date required to be
delivered hereby, duly authorized, executed and delivered by the
Agent, and this Participation Agreement is, and such other Operative
Agreements are, or, when so executed and delivered by the Agent will
be, valid, legal and binding agreements of the Agent, enforceable
against the Agent in accordance with their respective terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
rights of creditors generally and by general principles of equity,
including, without limitation, concepts of good faith and fair
dealing, materiality, reasonableness and the possible unavailability
of specific performance or injunctive relief (regardless of whether
such enforceability is considered in a proceeding in equity or at
law);
(c) neither the execution and delivery by the Agent of
the Operative Agreements to which it is or will be a party, either in
its individual capacity, as Agent, or both, nor compliance with the
terms and provisions thereof, conflicts with, results in a breach of,
constitutes a default under (with or without the giving of notice or
lapse of time or both), or violates any of the terms, conditions or
provisions of: (i) the articles of incorporation or by-laws of the
Agent; (ii) to the best of Agent's knowledge any bond, debenture,
note, mortgage, indenture, agreement, lease or other instrument to
which the Agent, either in its individual capacity, as Agent, or both,
is now a party or by
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which it or its property, either in its individual capacity, as Agent,
or both, is bound or affected, where such conflict, breach, default or
violation would materially and adversely affect the ability of the
Agent, either in its individual capacity, as Agent or both, to perform
its obligations under any Operative Agreement to which it is or will
be a party, either in its individual capacity, as Agent, or both; or
(iii) to the best of Agent's knowledge, any of the terms, conditions
or provisions of any law, rule, regulation, order, injunction or
decree of any Authority applicable to it in its individual capacity,
as Agent, or both;
(d) there is no litigation (including, without
limitation, derivative actions), arbitration or governmental
proceedings pending or, to the knowledge of Agent, threatened against
it which may adversely affect Agent's ability to perform its
obligations under the Operative Agreements to which it is party;
(e) no authorization, consent, approval, license or
formal exemption from, nor any filing, declaration or registration
with, any court, governmental agency or regulatory authority (Federal,
state, local or foreign), including, without limitation, the
Securities and Exchange Commission, or with any securities exchange,
is or will be required in connection with the execution and delivery
by Agent of the Operative Agreements to which it is party or the
performance by Agent of its obligations under such Operative
Agreements.
ARTICLE VI
COVENANTS
Section 6.1 Covenants of Lessee. Lessee covenants and agrees with
the Lessors and the Agent that during the Lease Term, and, if the Lessee has
not purchased the Equipment pursuant to the Lease, for 90 days thereafter,
except with respect to clauses (a)(ii), (a)(iii) and (a)(iv) below, which
Lessee may comply with at any time after the execution hereof without being
required to wait for 90 days:
(a) (i) Lessee shall at all times maintain its corporate
existence except as otherwise permitted by clause (ii) hereof,
and Lessee shall do or cause to be done all things necessary
to preserve and keep in full force and effect its full
corporate power and authority
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to perform its obligations under each Operative Agreement to
which it is or will be a party;
(ii) Lessee shall not, without the consent of each
of the Lessors: (A) consolidate with or merge with or into
any other corporation (a "Merger"), unless (x) Lessee is the
surviving corporation of such Merger, (y) Lessee's
Consolidated Net Worth after giving effect to such Merger is
no less than it was immediately prior to such Merger, and (z)
immediately before and after giving effect to such Merger, no
default under the Lease or any of the Prior Debt Agreements
shall have occurred and be continuing, or (B) transfer,
directly or indirectly, by sale, exchange, lease or other
disposition, in one transaction or a series of related
transactions to one or more Persons, all or substantially all
of its assets or all or substantially all of the assets of any
of its divisions (a "Transfer") unless immediately before and
after giving effect to such Transfer, no default under the
Lease or any of the Prior Debt Agreements shall have occurred
and be continuing, and any transaction described in this
clause (ii) shall be subject in any event to Section 22.1 of
the Lease;
(iii) Lessee shall not, without the consent of each
of the Lessors, permit any sublessee (other than Sublessee in
accordance with the following clause (iv) or Section
6.2(a)(ii)) to effect a Merger, unless such sublessee is the
surviving corporation of such Merger and continues to be a
Subsidiary of Lessee, and immediately before and after giving
effect to such Merger, no default under the Lease or any of
the Prior Debt Agreements shall have occurred and be
continuing;
(iv) Lessee shall not dispose of any of the
outstanding shares of capital stock of Sublessee, consent to a
Merger or a Transfer in respect of the assets or outstanding
shares of capital stock of Sublessee, or permit Sublessee to
assign the Sublease to any Person that is not a Subsidiary of
Lessee, and Sublessee shall not do any of the foregoing and
shall not issue any shares of its capital stock to any Person
other than Lessee, without the consent of each of the Lessors,
unless one of the following options is satisfied:
(A) Lessee shall, concurrently with or
prior to such transaction, purchase from the Lessors all of
the Functional Units then subject to the Sublease in
accordance with the procedures set forth in Article X
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of the Lease, for a purchase price equal to the sum of (x) the
Functional Unit Balances for all such Functional Units plus
(y) the applicable Make-Whole Premiums for all such Functional
Units, and Lessee shall pay to the Lessors all unpaid Accrued
Rent due and payable on or prior to the date of such purchase
with respect to such Functional Units;
(B) in the case of an assignment by
Sublessee of its rights and obligations under the Sublease to,
or a Merger of Sublessee with, a Person that is not a
Subsidiary of Lessee, each of the following conditions must be
satisfied: (1) the assignee or surviving corporation must be a
corporation organized under the laws of the United States, (2)
the assignee or surviving corporation must expressly assume in
writing the due and punctual performance and observance of
each obligation of Sublessee under this Agreement and the
other Operative Agreements and affirm and acknowledge the
security interest of the Agent, for the benefit of the
Lessors, thereunder, (3) the assignee or surviving corporation
must deliver to the Agent and each Lessor an opinion of
counsel, in form and scope reasonably acceptable to the Agent
and the Lessors, to the effect that each obligation of the
Sublessee under the Sublease and each other Operative
Agreement to which Sublessee is a party is the legal, valid
and binding obligation of such assignee or surviving
corporation, and that the Sublease remains subject to the
Agent's security interest and subordinate to the Lease, and
covering such other matters as the Agent and the Lessors may
reasonably request, (4) both at the time of, and immediately
after giving effect to, such assignment or Merger, no default
under the Lease or any of the Prior Debt Agreements shall have
occurred and be continuing, (5) such assignment or Merger
shall not release Lessee from any of its obligations under the
Lease or any of the other Operative Agreements with respect to
the Equipment subject to the Sublease, and (6) Lessee shall
have made an irrevocable election to exercise the Lessee
Purchase Option with respect to all of the Equipment subject
to the Sublease upon the expiration of the Lease Term, and
(C) in the case of a transfer of any of
the Equipment subject to the Sublease by Lessee to any Person
that is not a Subsidiary of Lessee, Lessors will instruct the
Agent to release such Equipment from the Lease upon the
satisfaction of each of the following conditions:
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(1) such transferee ("Transferee") shall
enter into a new lease (the "Transferee Lease") for
such Equipment upon substantially similar terms and
conditions as those contained in the Lease (including
without limitation, the granting and perfection of a
security interest in favor of the Agent, for the
benefit of the Lessors, in such Equipment), provided
that Transferee shall be required to purchase all of
the Equipment subject to the Transferee Lease at the
termination thereof and if Transferee fails to
satisfy the following conditions (2) and (3), then
Transferee's parent company ("Parent") must guarantee
Transferee's obligations under the Transferee Lease
and satisfy conditions (2) and (3) below,
(2) Transferee, or Parent if a guarantee
of Parent is required, shall have a Consolidated Net
Worth
(x) after giving effect to the
transaction in question, equal to or greater
than that of Lessee immediately prior to
giving effect to such transaction, and
(y) at the end of such Person's most
recently ended fiscal year, equal to or
greater than $147,348,000,
(3) Transferee, or Parent if a guarantee
of Parent is required, shall have had a Fixed Charge
Coverage Ratio of not less than 1.30 : 1.00 as of the
end of its most recently ended fiscal quarter for the
period of four consecutive fiscal quarters ended on
such date,
(4) There shall be no constraints or
restrictions (whether imposed by law or regulation or
by the internal credit or underwriting policies, oral
or written, of any Lessor) preventing any Lessor in
its sole and absolute discretion from doing business
with such Transferee or with the business or industry
in which such Transferee is engaged,
(5) Both at the time of and immediately
after giving effect to such transaction, no default
shall have occurred and be continuing under the Prior
Debt Agreements with respect to Lessee,
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(6) Transferee and each Lessor shall
have agreed, in their sole and absolute discretion,
upon new affirmative and negative (including
financial) covenants of a type similar to those
contained in the Prior Debt Agreements (as in effect
on the date hereof) for purposes of the Transferee
Lease, and
(7) Transferee must (x) be a corporation
organized under the laws of the United States, (y)
deliver to the Agent and each Lessor an opinion of
counsel in form and scope reasonably acceptable to
the Agent and the Lessors, to the effect that each
obligation of Transferee (and Parent, if Parent is
required to guarantee Transferee's obligations) under
the Transferee Lease and each other Operative
Agreement to which Transferee (and Parent, if
applicable) is a party is the legal, valid and
binding obligation of Transferee (and Parent, if
applicable), and that the security interest in favor
of the Agent, for the benefit of the Lessors, created
by the Transferee Lease, is a valid and perfected
security interest, and covering such other matters as
the Agent and the Lessors may reasonably request, and
(z) if Parent is required to guarantee Transferee's
obligations, Parent must be a corporation organized
under the laws of the United States unless the
Lessors are satisfied as to the enforceability of
Parent's guarantee;
(b) Lessee shall furnish to the Agent notice on or before
the 30th day prior to any relocation of its chief executive office,
change of its name or change in its corporate structure;
(c) Lessee, at its expense, shall cause, as soon as
possible, but in any event no later than the 10th day after any
request, financing statements (and continuation statements with
respect thereto) and all other documents necessary or reasonably
requested by the Agent in connection with the establishment and
perfection of the interest of the Agent in the Collateral, to be
recorded or filed at such places and times, and in such manner, and,
at its expense, shall take, or shall cause to be taken, all such other
action as may be necessary or reasonably requested by the Agent in
order to establish, preserve, protect and perfect the rights, titles
and interests of the Agent to the Collateral;
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<PAGE> 34
(d) Lessee shall continually use all Equipment in its
business (subject to normal interruption in the ordinary course of
business for maintenance, inspection, service, repair and testing)
unless such Equipment has been sublet to the Sublessee pursuant to the
Sublease, exchanged for a Replacement Part pursuant to Section 4.3
hereto or a Casualty has been declared with respect thereto;
(e) without limiting the terms of Section 7.1 hereof,
Lessee shall pay: (i) to the Agent and each Lessor all reasonable
expenses, including, without limitation, legal fees and expenses
incurred by it in connection with the entering into, or giving or (in
the case of any amendments, supplements, waivers or consents proposed
by the Lessee or the Sublessee) withholding, of any future amendments
or supplements or waivers or consents: (A) with respect to the
Operative Agreements (including without limitation any legal services
rendered in connection with or arising under Sections 6.1 and 6.2
hereof); or (B) which are further assurances requested pursuant
to Section 11.14 hereof or a similar provision in other Operative
Agreements; and (ii) the ongoing fees and expenses of the Agent under
the Lease.
(f) the Lessee shall deliver to the Agent:
(i) as soon as practicable but in any event no later
than the 60th day after the end of each quarterly accounting
period in each fiscal year of the Lessee, copies of the
unaudited consolidated balance sheet of the Lessee and its
consolidated subsidiaries as of the end of such accounting
period and a copy of the related unaudited consolidated
statements of income and cash flows of the Lessee and its
consolidated subsidiaries for such quarterly period and for
the portion of its fiscal year ended with the last day of such
quarterly period, all in accordance with GAAP (except for the
absence of footnotes and subject to year-end audit
adjustments);
(ii) as soon as practicable after the end of each
fiscal year of the Lessee, but in any event no later than the
120th day thereafter, a copy of the audited consolidated
financial statements of the Lessee and its consolidated
subsidiaries in comparative form certified as fairly presented
and in accordance with GAAP consistently applied by a
nationally recognized firm of independent certified public
accountants (which certification shall state that its audit
was made without any limitation upon the scope thereof being
required by the Lessee);
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(iii) as soon as practicable, but in any event not
later than the 60th day after the end of each quarterly
accounting period in each fiscal year of Lessee, an Officer's
Certificate of Lessee stating that such officer has reviewed
the activities of the Lessee and Sublessee during such period
and that, to the best of such officer's knowledge, the Lessee
and Sublessee during such period have observed, performed and
fulfilled each and every covenant, obligation and condition
contained in the Operative Agreements, no Lease Default, event
which with the passage of time and/or giving of notice could
become a Lease Default, or Casualty exists under any of the
Operative Agreements, or if such condition shall exist,
specifying the nature and status thereof;
(iv) promptly following such delivery or filing (but
in no event more than ten (10) days thereafter), a copy of
each report or statement delivered to the Lessee's
stockholders and each regular or periodic report and any
Current Report on Form 8-K filed by the Lessee with any
securities exchange or with the Securities and Exchange
Commission or any successor agency, and the delivery of any
Quarterly Report on Form 10-Q or any Annual Report on Form
10-K in either case as filed with the Securities and Exchange
Commission, shall be deemed to satisfy the Lessee's
obligations under Section 6.1(f)(i) and Section 6.1(f)(ii),
respectively, for the period covered by such report; and
(v) if: (A) the Lessee shall cease to be subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934;
and (B) the Agent or any Lessor at the time outstanding shall
request that the Lessee deliver to the Agent, or to such
holder, information with respect to the Lessee that meets the
requirements of Rule 144A(d)(4)(i) of such Act (or any
successor provision), then: (x) promptly following the
receipt by the Lessee of that request, the Lessee shall
deliver such information to the Agent, or to Lessors, and (y)
such information shall, at the time of such delivery, be as of
a date so as to be entitled to the presumption that such
information is "reasonably current" within the meaning of Rule
144A(d)(4)(ii) of such Act (or any successor provision);
(g) if there is any change in the ownership interest of
the Sublessee during the Lease Term or any Renewal Term, the Lessee
shall promptly notify the Agent and the Lessors;
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(h) promptly upon becoming aware of the occurrence of any
(i) "Reportable Event" as such term is defined in Section 4043 of
ERISA, (ii) "Accumulated Funding Deficiency" as such term is defined
in Section 302 of ERISA or (iii) "Prohibited Transaction", as such
term is defined in 4975 of the Code or described in Section 406 of
ERISA, in connection with any Pension Plan (or any trust created
thereunder), Lessee shall notify Agent and each of the Lessors in
writing specifying the nature thereof, what action Lessee or the
Related Person is taking or proposes to take with respect thereto,
and, when known, any action taken by the Internal Revenue Service with
respect thereto;
(i) promptly upon, but in no event later than seven (7)
days after Lessee shall have obtained Actual Knowledge thereof, Lessee
shall notify the Agent and each Lessor in writing of the existence of
a Lease Default or any event which with the passage of time and/or
giving of notice could result in a Lease Default, or any other matter
which has resulted or could reasonably be expected to result in a
material adverse change in the financial condition or operations of
Lessee and its Subsidiaries, taken as a whole, which notice shall
describe the nature of such Lease Default or other matter and the
action Lessee is taking with respect thereto;
(j) promptly upon Lessee's becoming aware of (i) any
proposed or pending investigation of it or any Affiliate by any
Authority, (ii) any court or administrative proceeding involving
Lessee or a Subsidiary, or (iii) any notice, claim or demand from any
Authority which alleges that Lessee or any Affiliate is in violation
of any law or has failed to comply with any order issued pursuant to
any Federal, state or local statute regulating its operation and
business, which in any case involves (A) a claim in the amount of
$5,000,000 or more, or (B) the possibility of materially and adversely
affecting the properties, business, profits or financial condition of
Lessee and its subsidiaries taken as a whole, Lessee shall notify
Agent and each of the Lessors specifying its nature and the action the
Lessee is taking with respect thereto; and
(k) promptly upon receipt of a written request from the
Agent or any Lessor, Lessee shall deliver to such requesting party
such other data and information as from time to time may be reasonably
requested.
Section 6.2 Covenants of Sublessee. Sublessee covenants and agrees
(while the Sublease is in effect) with the Agent and each of the Lessors that
during the Lease Term and Renewal Terms and, if the Lessee has not purchased
the Equipment pursuant to
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the Lease, for 90 days thereafter, except with respect to clause (ii) below,
which Sublessee may comply with at any time without being required to wait for
90 days:
(a) (i) Sublessee shall at all times maintain its
corporate existence except as otherwise permitted by paragraph
(ii) hereto, and Sublessee shall do or cause to be done all
things necessary to preserve and keep in full force and effect
its full corporate power and authority to perform its
obligations under each Operative Agreement to which it is or
will be a party;
(ii) Sublessee shall not effect a Merger or a
Transfer or an assignment of the Sublease except as provided
in Section 6.1(a)(iv) hereof;
(b) Sublessee shall furnish to the Agent notice on or
before the 30th day prior to any relocation of its chief executive
office, change of its name or change in its corporate structure;
(c) Sublessee, at its expense, shall cause, as soon as
possible, but in any event no later than the 10th day after any
request, financing statements (and continuation statements with
respect thereto) and all other documents necessary or reasonably
requested by the Agent in connection with the establishment and
perfection of the interest of the Agent in the Collateral, to be
recorded or filed at such places and times, and in such manner, and,
at its expense, shall take, or shall cause to be taken, all such other
action as may be necessary or reasonably requested by the Agent in
order to establish, preserve, protect and perfect the rights, titles
and interests of the Agent to the Collateral;
(d) Sublessee shall continually use all Equipment in its
business (subject to normal interruption in the ordinary course of
business for maintenance, inspection, service, repair and testing)
that has been sublet to the Sublessee pursuant to the Sublease, unless
such Equipment has been exchanged for a Replacement Part pursuant to
Section 4.3 hereof or a Casualty has been declared with respect
thereto;
(e) promptly upon becoming aware of the occurrence of any
(i) "Reportable Event" as such term is defined in Section 4043 of
ERISA, (ii) "Accumulated Funding Deficiency" as such term is defined
in Section 302 of ERISA or (iii) "Prohibited Transaction", as such
term is defined in 4975 of the Code or described in Section 406 of
ERISA, in connection with any Pension Plan (or any trust created
thereunder), Sublessee shall notify Agent specifying the
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nature thereof, what action Sublessee or Related Person is taking or
proposes to take with respect thereto, and, when known, any action
taken by the Internal Revenue Service with respect thereto;
(f) promptly upon, but in no event later than seven (7)
days after Sublessee shall have obtained Actual Knowledge thereof,
Sublessee shall notify the Agent and each Lessor in writing of the
existence of a default under the Sublease, a Lease Default or any
event which with the passage of time and/or giving of notice could
result in a Lease Default, or any other matter which has resulted or
could reasonably be expected to result in a material adverse change in
the financial condition or operations of Sublessee and its
Subsidiaries, taken as a whole, which notice shall describe the nature
of such Lease Default or other matter and the action Sublessee is
taking with respect thereto;
(g) promptly upon Sublessee's becoming aware of (i) any
proposed or pending investigation of it or any Affiliate by any
Authority, (ii) any court or administrative proceeding involving
Sublessee or a Subsidiary of Sublessee, or (iii) any notice, claim or
demand from any Authority which alleges that Sublessee or any
Affiliate is in violation of any law or has failed to comply with any
order issued pursuant to any Federal, state or local statute
regulating its operation and business, which in any case involves (A)
a claim in the amount of $5,000,000 or more, or (B) the possibility of
materially and adversely affecting the properties, business, profits
or financial condition of Sublessee and its subsidiaries taken as a
whole, Sublessee shall notify Agent and each of the Lessors specifying
its nature and the action the Sublessee is taking with respect
thereto; and
(h) promptly upon receipt of a written request from the
Agent or any Lessor, Sublessee shall deliver to such requesting party
such other data and information as from time to time may be reasonably
requested.
In addition to the foregoing, Lessee shall, concurrently with any
notice, delivery or other communication to Agent pursuant to any Operative
Agreement, deliver a copy of such notice, delivery or other communication to
each Lessor at such Lessor's current address.
Section 6.3 Covenants of Agent and Lessors. The Agent, in its
individual capacity, and each of the Lessors covenants and agrees with each of
the other parties that: (a) it will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Liens arising by, through or under it on
the
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Collateral, other than Permitted Lessor Liens; (b) it will, at its own cost and
expense, promptly take such action in its individual capacity as may be
necessary to discharge fully such Lessor Liens created by it on the Collateral,
other than Permitted Lessor Liens; and (c) it will not sell, transfer or
otherwise dispose of all or any part of the Equipment or the other Collateral
where such sale, transfer or disposition would violate the Operative
Agreements.
ARTICLE VII
GENERAL INDEMNITY
Section 7.1 Indemnity. Whether or not the transactions contemplated
hereby are consummated, to the fullest extent permitted by applicable law,
Lessee and Sublessee waive and release any claims now or hereafter existing
against Indemnitees on account of, and shall indemnify, reimburse and hold the
Indemnitees harmless from, any and all claims by third parties (including, but
not limited to, claims relating to trademark or patent infringement and claims
based upon negligence, strict liability in tort, violation of laws, including,
without limitation, Environmental Laws, statutes, rules, codes or orders or
claims arising out of any loss or damage to any property or death or injury to
any Person), any losses, damages or obligations owing to third parties, any
penalties, liabilities, demands, suits, judgments or causes of action, and all
legal proceedings (either administrative or judicial), and any costs or
expenses in connection therewith (including costs incurred in connection with
discovery) or in connection with the enforcement of this indemnity (including
reasonable attorneys' fees and expenses, and fees and expenses of internal
counsel, incurred by the Indemnitees), including, in each case, matters based
on the negligence of Indemnitees (subject to the proviso below), which may be
imposed on, incurred by or asserted against the Indemnitees in any way relating
to or arising in any manner out of:
(a) the registration, purchase, taking or foreclosure of
a security interest in, ownership, delivery, condition, lease,
sublease, assignment, storage, transportation, possession, use,
operation, return or other disposition of any of the Equipment, or any
defect in any such Equipment, arising from the material or any article
used therein or from the design, testing or use thereof, or from any
maintenance, service, repair, overhaul or testing of any such
Equipment regardless of when such defect shall be discovered, whether
or not such Equipment is in the possession of Lessee or Sublessee and
no matter where it is located; or
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(b) this Participation Agreement, any other Operative
Agreement or any document or certificate delivered in connection
therewith, the enforcement hereof or thereof or the consummation of
the transactions contemplated hereby or thereby;
provided that Lessee and Sublessee shall not be obligated to indemnify an
Indemnitee for any such claim, loss, damage or liability which results directly
from
(c) the willful misconduct or gross negligence of such
Indemnitee;
(d) acts or events that occur with respect to any of the
Equipment from and after (but not before) the delivery thereof by
Lessee to Agent by reason of the expiration of the Lease Term in
accordance with the terms of the Lease;
(e) the incorrectness in any material respect of any
representation or warranty made by such Indemnitee in the Operative
Agreements;
(f) the willful failure by such Indemnitee to perform or
observe in any material respect any agreement or covenant made by it
in any of the Operative Agreements;
(g) the creation or existence of a Lessor Lien
attributable to such Indemnitee other than Permitted Lessor Liens; or
(h) a disposition by such Indemnitee of any Equipment
following the purchase of such Equipment by such Indemnitee from the
Agent in a foreclosure sale;
provided, however, that nothing in the preceding proviso shall be deemed to
exclude or limit any claim that any Indemnitee may have under any Operative
Agreement or applicable laws for damages from Lessee or Sublessee for breach of
their representations, warranties or covenants.
Section 7.2 Excessive Use Indemnity. In the event that at the end of
the Lease Term: (a) Lessee elects the Sale Option with respect to one or more
Functional Units; and (b) after paying to the Agent any amounts due under
Section 11.1(c) of the Lease, Proceeds and the Sale Recourse Amount, the Agent
does not have sufficient funds to reduce the Lease Balance to zero, then the
Lessee shall promptly pay over to the Agent the shortfall unless and to the
extent that the Lessee delivers a report from the Appraiser in form and
substance satisfactory to the Required Lessors which establishes that the
decline in value in the Equipment which was sold pursuant to the Sale Option
from that
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<PAGE> 41
amount anticipated for such date in the Appraiser's report delivered with
respect to such Equipment on the applicable Delivery Date was not due to
extraordinary use, failure to maintain or replace, failure to use, workmanship
or method of installation or removal or any other cause or condition within the
power of the Lessee to control or effect.
ARTICLE VIII
GENERAL TAX INDEMNITY
Section 8.1 General Tax Indemnity. Lessee agrees to pay or reimburse
Indemnitees for, and to indemnify and hold Indemnitees harmless from, all
Impositions arising at, or relating to, any time prior to or during the Lease
Term or Renewal Terms, or upon any termination of the Lease or prior to, or
upon the return of, the Equipment to Agent, and levied or imposed upon
Indemnitees directly or otherwise, by any Federal, state or local government or
taxing authority in the United States or by any foreign country or foreign or
international taxing authority upon or with respect to: (a) the Equipment; (b)
the exportation, importation, registration, purchase, ownership, delivery,
condition, lease, sublease, assignment, storage, transportation, possession,
use, operation, maintenance, repair, return, sale (including to Agent or Lessee
pursuant to the Operative Agreements), transfer of title or other disposition
thereof; (c) the rentals, receipts, or earnings arising from any of the
Equipment; or (d) the Lease or any payment made thereunder; provided that this
Section 8.1 shall not apply to:
(i) Impositions which are based upon or measured by the
Indemnitee's net income, or which are expressly in substitution for,
or relieve Indemnitee from, any actual Imposition based upon or
measured by Indemnitee's net income;
(ii) Impositions characterized under local law as franchise,
net worth, or shareholder's capital (excluding, however, any
value-added, license, property or similar Impositions);
(iii) Impositions based upon the voluntary transfer,
assignment or disposition by Agent or any Lessor of any interest in
any of the Equipment (other than a transfer pursuant to the exercise
of remedies under the Operative Agreements, transfers pursuant to the
exercise of the Sale Option or the Lessee Purchase Option or a
transfer to Lessee or otherwise pursuant to the Lease);
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(iv) Impositions based upon the involuntary transfer by
Agent or any Lessor of any interest in the Equipment in connection
with any bankruptcy or other similar proceeding for the relief of
debtors in which such Indemnitee is the debtor or any foreclosure by a
creditor of such Indemnitee;
(v) any interest, penalties or additions to tax imposed
on an Indemnitee that would not have resulted but for the failure of
such Indemnitee to file any return properly and timely unless such
failure shall result from the failure of the Lessee to fulfill its
obligations, if any, underSection 8.4 with respect to such return;
(vi) with respect to an Indemnitee, Impositions that result
from such Indemnitee engaging, with respect to the Equipment or any
part thereof, in transactions other than those permitted by this
Agreement or any other Operative Agreement;
(vii) Impositions to the extent of the excess of such
Impositions over the amount of such Impositions that would have been
imposed (or, if less, that would not have been subject to
indemnification hereunder) had there not been a transfer by a
predecessor in interest of the Indemnitee (other than the Agent in its
capacity as Agent) of any interest in the Equipment or any interest
arising under any Operative Agreement or any Lessor other than a
transfer in contemplation of the exercise of remedies while an Event
of Default shall have occurred and be continuing;
(viii) subject to the penultimate sentence of Section 8.2,
Impositions that are being contested in accordance with Section 8.2
during the pendency of such contest;
(ix) subject to the last paragraph of this Section 8.1,
Impositions to the extent such Impositions would not have been imposed
if such Indemnitee had not engaged in activities in the jurisdiction
imposing such Imposition which activities are unrelated to the
transactions contemplated by the Operative Agreements;
(x) any Impositions imposed on an Indemnitee to the extent
the payment or accrual of such Impositions actually reduces
permanently the Impositions of such Indemnitee otherwise payable by
such Indemnitee;
(xi) any Impositions that would not have been imposed but for
the existence of any Lessor Liens created by such Indemnitee or any
act or omission of the Indemnitee that are in violation of any of the
terms of the Operative Agreements or that constitute gross negligence
or willful misconduct or
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the inaccuracy of any representation, warranty or covenant in any
material respect by the Indemnitee, but only if, in any such case,
such act, omission or inaccuracy is not a result of (a) any act or
omission of the Lessee or the Sublessee or (b) the breach or
inaccuracy of any representation, warranty or covenant of the Lessee
or the Sublessee; and
(xii) except where there exists an Event of Default,
Impositions in respect of any of the Equipment arising after the
expiration or earlier termination of the Lease in respect of such
Equipment and the return or other disposition of such Equipment in
full compliance with the terms of the Lease, provided that such
Impositions do not relate to acts or events arising or occurring prior
to or coincident with such time.
Notwithstanding anything to the contrary in this Section 8.1, Lessee agrees to
pay or reimburse Indemnitees for, and to indemnify and hold Indemnitees
harmless from, any Impositions imposed by any State or any political
subdivision thereof in which any Equipment is located (including income,
severance, franchise and personal property taxes, but net of any foreign,
Federal, state or local income tax benefits which are recognized by Indemnitees
as a result of such Imposition) arising solely by virtue of, and to the extent
attributable to, Indemnitees participation in the transactions contemplated by
the Operative Agreements or the exercise of remedies under the Operative
Agreements.
Notwithstanding anything in the foregoing clauses (i) through (xii) of
this Section 8.1, Lessee agrees to pay or reimburse Indemnitees for, and to
indemnify and hold Indemnitees harmless from: (A) any Imposition based on, or
measured by the net income of Indemnitees imposed by any federal, state or
local taxing authority in the United States or any taxing authority in any
other jurisdiction in which Indemnitee maintains its principal place of
business to the extent they would not have been imposed if on each Delivery
Date the Lessors had advanced funds directly to Lessee in the form of a loan
secured by the Equipment in an amount equal to the amount advanced on such
Delivery Date or Dates with the debt service for such loan equal to scheduled
rental payments payable from time to time and a principal balance in the amount
of the Lease Balance remaining at the end of the Initial Term and each Renewal
Term was due at the end of such terms (the "Income Tax Indemnity"); and (B)
Impositions imposed with respect to the payment, receipt or accrual of any
indemnity payment hereunder; and (C) with respect to any Lessor which is not
incorporated under the laws of the United States, or a state thereof, and which
has complied with
39
<PAGE> 44
Section 8.6, any deduction or withholding of any United States Federal income
tax.
Section 8.2 Contest. Lessee shall pay on or before the time or times
prescribed by law any Impositions (except any Impositions excluded by Section
8.1); provided, however, that Lessee shall be under no obligation to pay any
such Imposition so long as the payment of such Imposition is not delinquent or
is being contested by a Permitted Contest. If any claim or claims is or are
made against any Indemnitee solely for any Imposition which is subject to
indemnification as provided in Section 8.1, Indemnitee shall as soon as
practicable, but in no event more than 20 days after receipt of formal written
notice of the Imposition or proposed Imposition, notify Lessee and if, in the
opinion of Lessee and tax counsel acceptable to the Indemnitee, there exists a
reasonable basis to contest such Imposition (and if clause (ii) of the
definition of "Permitted Contest" continues to be satisfied and so long as no
Event of Default exists), Lessee at its expense may, to the extent permitted by
applicable law, contest such Imposition (other than an Imposition resulting in
an Income Tax Indemnity), and subsequently may appeal any adverse
determination, in the appropriate administrative and legal forums; provided
that in all other circumstances, upon notice from Lessee that there exists a
reasonable basis to contest any such Imposition, the Indemnitee, at Lessee's
expense, shall contest any such Imposition. Lessee shall pay all expenses
incurred by the Indemnitee in contesting any such Imposition (including,
without limitation, all reasonable attorneys' and accountants' fees, including
the allocated costs of internal counsel), upon demand by the Indemnitee.
Lessee shall have the right to participate in the conduct of any proceedings
controlled by the Indemnitee to the extent that such participation by such
Person does not interfere with the Indemnitee's control of such contest and
Lessee shall in all events be kept informed of material developments relative
to such proceedings. The Indemnitee shall have the right to participate in the
conduct of any proceedings controlled by Lessee and the Indemnitee shall in all
events be kept informed of material developments relative to such proceedings.
The Indemnitees agree that a contested claim for which Lessee would be required
to make a reimbursement payment hereunder will not be settled or compromised
without Lessee's prior written consent, unless clause (ii) of the definition of
"Permitted Contest" would not continue to be satisfied. Indemnitee shall
endeavor to settle or compromise any such contested claim in accordance with
written instructions received from Lessee, provided that: (x) Lessee on or
before the date the Indemnitee executes a settlement or compromise pays the
contested Imposition to the extent agreed upon or makes an indemnification
payment to the Indemnitee in an amount acceptable to the Indemnitee; and (y)
the settlement or compromise does not, in the reasonable opinion of the
Indemnitee materially adversely
40
<PAGE> 45
affect the right of the Lessor to receive payment of Rent or the Lease Balance,
or involve a material risk of sale, forfeiture or loss of any of the Equipment
or any interest therein or materially adversely affect the security interests
created by the Lease. The failure of an Indemnitee to timely contest a claim
against it for any Imposition which is subject to indemnification under Section
8.1 and for which it has an obligation to Lessee to contest under this Section
8.2 in the manner required by applicable law or regulations where Lessee has
timely requested that such Indemnitee contest such claim shall relieve Lessee
of its obligations to such Indemnitee under Section 8.1 with respect to such
claim to the extent such failure results in the loss of an effective contest.
If applicable law requires the payment of a contested Imposition as a condition
to, or regardless of, its being contested, and Lessee chooses to contest such
Imposition or to direct the Indemnitee to contest such Imposition in accordance
with this Section, then Lessee shall provide the Indemnitee with the funds to
pay such Imposition, such provision of funds to be deemed a non-interest
bearing loan by Lessee to the Indemnitee to be repaid by any recovery of such
Imposition from such contest and any remaining unpaid amount not recovered to
offset Lessee's obligation to indemnify the Indemnitee for such Imposition. In
the event that the Indemnitee receives a refund (or like adjustment) in respect
of any Imposition for which the Indemnitee has been reimbursed by Lessee, the
Indemnitee shall immediately remit the amount of such refund (or like
adjustment) to Lessee, net of all costs and expenses incurred by such
Indemnitee.
Section 8.3 Gross Up. If an Indemnitee shall not be entitled to a
corresponding and equal deduction with respect to any Imposition which Lessee
is required to pay or reimburse under Section 8.1 or 8.2 and which payment or
reimbursement constitutes income to such Indemnitee, then Lessee shall also pay
to such Indemnitee on demand the amount of such Imposition on a gross-up basis
such that, after subtracting all Impositions imposed on such Indemnitee with
respect to such payment by Lessee (including any Impositions otherwise excluded
by Section 8.1 and assuming for this purpose that such Indemnitee was subject
to taxation at the applicable Federal, state or local marginal rates used to
compute such Indemnitee's tax return for the year in which such income is
taxable) such Indemnitee shall be fully reimbursed for the Imposition with
respect to which such Indemnitee is entitled to be paid or reimbursed.
Section 8.4 Tax Returns. Except as otherwise provided in the third
sentence below, Lessee shall prepare and file (whether or not it is a legal
obligation of an Indemnitee) all tax returns or reports that may be required
with respect to any Impositions assessed, charged or imposed on the Equipment
or the Lease, including, but not limited to sales and use taxes (as to which
Lessee shall prepare all returns as hereinabove provided and file
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<PAGE> 46
all such returns to the extent permitted by applicable law), property taxes (ad
valorem and real property) and any other tax or charge based upon the
ownership, leasing, subleasing, rental, sale, purchase, possession, use,
operation, delivery, return or other disposition of any of the Equipment or
upon the rentals or the receipts therefrom (excluding, however, any tax based
upon the net income of an Indemnitee or any tax which is in substitution for or
relief of a tax imposed upon or measured by the net income of an Indemnitee).
Lessee may notify in writing all applicable governmental authorities having
jurisdiction with respect to personal property taxes that Lessee is the
appropriate party for receiving notices of (or copies of, if such governmental
authority is required by law to notify Agent) assessment, appeal and payment
with respect to the Equipment. If an Indemnitee is obligated by law to file
any such reports or returns, then Lessee shall at least 10 days before the same
are due prepare the same and forward them to the Indemnitee, as appropriate,
with detailed instructions as to how to comply with all applicable filing
requirements, together with funds in the amount of any payment required
pursuant thereto. Indemnitee shall forward to Lessee at its address listed on
the signature page hereto copies of all assessment and valuation notices it
receives within 10 days of receipt; provided that Indemnitee's failure to
deliver on a timely basis such notices shall not relieve Lessee of any
obligations hereunder.
Section 8.5 Tax Character of Transaction. It is the intention of the
Participants that for Federal and state income tax purposes: (a) the Lessee or
a corporation that is a member of its affiliated group shall be treated as
owner of the Equipment with the ability to claim depreciation on the Equipment
and to deduct the interest component of the Rents; and (b) the Rents payable to
Agent under the Lease constitute payments of interest and principal.
Participants agree that neither they nor any corporation controlled by them, or
under common control with them, directly or indirectly will at any time take
any action or fail to take any action with respect to the filing of any income
tax return, including an amended income tax return, inconsistent with the
intention of the parties expressed in the preceding sentence.
Section 8.6 Withholding Tax Exemption. (a) At least five (5)
Business Days prior to the first date on which any Rent is payable hereunder or
under any other Operative Agreement for the account of any Lessor not
incorporated under the laws of the United States or a state thereof, such
Lessor agrees that it will have delivered to each of the Lessee and the Agent
two duly completed copies of United States Internal Revenue Service Form 1001
or 4224, certifying in either case that such Lessor is entitled to receive
payments under this Agreement and the other Operative Agreements without
deduction or withholding of any
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<PAGE> 47
United States Federal income taxes. Each Lessor which so delivers a Form 1001
or 4224 further undertakes to deliver to each of the Lessee and the Agent two
additional copies of such form (or a successor form) on or before the date that
such form expires (currently, three successive calendar years for Form 1001 and
one calendar year for Form 4224) or becomes obsolete or after the occurrence of
any event requiring a change in the most recent forms so delivered by it, and
such amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Lessee or the Agent, in each case certifying that such Lessor
is entitled to receive payments under this Agreement and the other Operative
Agreements without deduction or withholding of any United States Federal income
taxes, unless an event (including any change in treaty, law or regulation) 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
Lessor from duly completing and delivering any such form with respect to it and
such Lessor advises the Lessee and the Agent that it is not capable of
receiving payments without any withholding of United States Federal income tax.
(b) At least five (5) Business Days prior to the first date on which
any Rent is payable hereunder or under any other Operative Agreement for the
account of any Lessor who does not have a street address in the State of
California , such Lessor agrees that it will have delivered to each of the
Lessee and the Agent two duly completed copies of California Form 587 or 590,
certifying in either case that such Lessor is entitled to receive payments
under this Agreement and the other Operative Agreements without deduction or
withholding of any California income taxes. Each Lessor which so delivers a
Form 587 or 590 further undertakes to deliver to each of the Lessee and the
Agent two additional copies of such form (or a successor form) on or before the
date that such form expires or becomes obsolete or after the occurrence of any
event requiring a change in the most recent forms so delivered by it
(including, without limitation, any change in residency or address), and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Lessee or the Agent, in each case certifying that such Lessor
is entitled to receive payments under this Agreement and the other Operative
Agreements without deduction or withholding of any California income taxes,
unless an event (including any change in law or regulation) 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 Lessor from
duly completing and delivering any such form with respect to it and such Lessor
advises the Lessee and the Agent that it is not capable of receiving payments
without any withholding of California income tax.
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<PAGE> 48
ARTICLE IX
LIMITATIONS
Section 9.1 Limitation of Liability of Agent. It is expressly
understood and agreed by and among the parties hereto that, except as otherwise
provided herein or in the other Operative Agreements: (a) this Participation
Agreement and the other Operative Agreements to which the Agent is a party are
executed by the Agent, not in its individual capacity, but solely as Agent
under the Lease in the exercise of the power and authority conferred and vested
in it as such Agent; (b) each and all of the undertakings and agreements herein
made on the part of the Agent are each and every one of them made and intended
not as personal undertakings and agreements by the Agent, or for the purpose or
with the intention of binding the Agent personally, but are made and intended
for the purpose of binding only the Collateral unless expressly provided
otherwise; (c) actions to be taken by the Agent pursuant to its obligations
under the Operative Agreements may, in certain circumstances, be taken by the
Agent only upon specific authority of the Lessors; (d) nothing contained in the
Operative Agreements shall be construed as creating any liability on the Agent,
individually or personally, or any incorporator or any past, present or future
subscriber to the capital stock of, or stockholder, officer or director of, the
Agent to perform any covenants either express or implied contained herein, all
such liability, if any, being expressly waived by the other parties hereto and
by any Person claiming by, through or under them; and (e) so far as the Agent,
individually or personally, is concerned, the other parties hereto and any
Person claiming by, through or under them shall look solely to the Collateral
and the Lessee (and the Sublessee, if appropriate) for the performance of any
obligation under any of the instruments referred to herein; provided, however,
that nothing in this Section 9.1 shall be construed to limit in scope or
substance the general corporate liability of the Agent in respect of its gross
negligence or willful misconduct or those representations, warranties and
covenants of the Agent in its individual capacity set forth herein or in any of
the other agreements contemplated hereby.
ARTICLE X
AMENDMENTS TO OPERATIVE AGREEMENTS
Section 10.1 Amendments to Operative Agreements With Consent of
Lessors. This Participation Agreement and each of the other Operative
Agreements shall be changed, waived, discharged or terminated with respect to
each Lessor upon the ratification in writing of such change, waiver, discharge
or termination by
44
<PAGE> 49
the Required Lessors, in which case such change, waiver, discharge or
termination shall be effective as to each Lessor; provided no such change,
waiver, discharge or termination shall, without the written ratification of
each Lessor:
(i) modify any of the provisions of this Section 10.1, change
the definition of "Required Lessors" or modify or waive any provision
of an Operative Agreement requiring action by the foregoing, or
release any Collateral (except as otherwise specifically provided in
any Operative Agreement);
(ii) modify, amend, waive or supplement any of the provisions
of Section 7.1, 7.2, 8.1, 8.2, 8.3, 11.1, 13, 22.1, 22.2 or 28 of the
Lease, or Section 6.1(a) of this Agreement;
(iii) reduce, modify, amend or waive any indemnities in favor
of any Participant (except that any Person may consent to any
reduction, modification, amendment or waiver of any indemnity payable
to it);
(iv) modify, postpone, reduce or forgive, in whole or in
part, any payment of Rent (other than pursuant to the terms of any
Operative Agreement), Make-Whole Premium, Lease Balance, Supplement
Balance, Functional Unit Balance, Purchase Option Exercise Amount,
Recourse Deficiency Amount, Applicable Percentage Amount, interest or
yield or, subject to clause (iii) above, any other amount payable under
the Lease or Participation Agreement, or modify the definition or
method of calculation of any payment of Rent (other than pursuant to
the terms of any Operative Agreement), Make-Whole Premium, Lease
Balance, Supplement Balance, Functional Unit Balance, Purchase Option
Exercise Amount, Recourse Deficiency Amount, Applicable Percentage
Amount or other amount payable hereunder;
(v) consent to any assignment of the Lease releasing the
Lessee from its obligations in respect of the payments of Rent or
changing the absolute and unconditional character of such obligations,
or any similar assignment of the Sublease similarly releasing the
Sublessee; or
(vi) permit the creation of any Lien on the Collateral or any
part thereof except as contemplated in the Operative Agreements, or
deprive any Lessor of the benefit of the security interest in the
Collateral granted by Lessee.
Section 10.2 Amendments to Operative Agreements Affecting Agent.
Without the prior written consent of the Agent, no amendment of, supplement to,
or waiver or modification of, any
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<PAGE> 50
Operative Agreement shall adversely affect Agent's rights or immunities or
modify or increase the duties or obligations of the Agent with respect to any
Operative Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Survival of Covenants. All claims pertaining to the
representations, warranties, covenants or indemnities of Lessee or Sublessee
shall survive the termination of the Lease to the extent such claims arose out
of events occurring or conditions existing prior to any such termination.
Without limiting the foregoing, the provisions of Article VII and Article VIII
hereof shall survive the termination of the Lease.
Section 11.2 APPLICABLE LAW. THIS PARTICIPATION AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED UNDER THE LAWS OF CALIFORNIA WITHOUT REGARD TO THE
CHOICE OF LAW PROVISIONS THEREOF.
Section 11.3 Effect and Modification of Participation Agreement. No
variation, modification, amendment or waiver of this Participation Agreement,
including any Schedules or Exhibits hereto, or any other Operative Agreement to
which Agent is a party shall be valid unless in writing and signed by the
Lessee and the Agent with the consent of the Lessors required to effect such
variation, modification, amendment or waiver pursuant to Article X hereof.
Section 11.4 Notices. All notices, demands, declarations, consents,
directions, approvals, instructions, requests and other communications required
or permitted by the terms hereof shall be in writing and shall be deemed to
have been duly given when delivered personally, by facsimile (and confirmed,
which confirmation may be mechanical) or otherwise actually received or 5
Business Days after being deposited in the United States mail certified,
postage prepaid, addressed as follows:
If to the Lessee:
Rykoff-Sexton, Inc.
761 Terminal Street
Los Angeles, CA 90021
Attn: Chief Financial Officer
with a copy to:
Maslon, Edelman, Borman & Brand
3300 Norwest Center
Minneapolis, MN 55402-4140
Attention: Terri Krivosha, Esq.
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<PAGE> 51
If to the Sublessee:
Tone Brothers, Inc.
2301 Southeast Tones Drive
Ankeny, IA 50021-8888
Attn: President
If to the Agent:
BA Leasing & Capital Corporation
Four Embarcadero Center, Suite 1200
San Francisco, California 94111
Attn: Contract Administration
If to the Lessors, to their respective addresses set forth on Schedule
I hereto or at such other place in the United States as any such party may
designate by notice given in accordance with this Section 11.4.
Section 11.5 Transaction Costs. The Lessee shall pay all Transaction
Costs whether or not the transactions contemplated hereby close. In addition,
the Lessee agrees to pay or reimburse the Agent and the Lessors for all other
out-of-pocket costs and expenses reasonably incurred in connection with: (a)
negotiating and entering into the Operative Agreements or entering into, or the
giving or withholding of, any future amendments, supplements, waivers or
consents with respect to the Operative Agreements; (b) any Casualty or
termination of the Lease or any other Operative Agreement; (c) the negotiation
and documentation of any restructuring or "workout," whether or not
consummated, of any Operative Agreement; (d) the enforcement of the rights or
remedies under the Operative Agreements; (e) any transfer by Agent or a Lessor
of any interest in the Operative Agreements during the continuance of an Event
of Default; or (f) any Delivery Date.
Section 11.6 Counterparts. This Participation Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each executed counterpart constituting an original but
all together one agreement.
Section 11.7 Severability. Whenever possible, each provision of this
Participation Agreement shall be interpreted in such manner as to be effective
and valid under applicable law; but if any provision of this Participation
Agreement shall be prohibited by or invalid under applicable 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 Participation Agreement.
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Section 11.8 Successors and Assigns. This Participation Agreement
shall be binding upon the parties hereto and their respective successors and
assigns, and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 11.9 Brokers. None of the Participants has engaged or
authorized any broker, finder, investment banker or other third party to act on
its behalf, directly or indirectly, as a broker, finder, investment banker,
agent or any other like capacity in connection with this Participation
Agreement or the transactions contemplated hereby, except that Lessee and its
Affiliates have retained BA Leasing & Capital Corporation as arranger in
connection with the transactions contemplated hereby and the Lessee shall be
responsible for, and shall indemnify, defend, and hold the other Participants
harmless from and against any and all claims, liabilities, or demands by BA
Leasing & Capital Corporation for fees or other entitlements with respect to
the Lease or the transactions contemplated hereby.
SECTION 11.10 JURY TRIAL. THE LESSEE AND SUBLESSEE WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THIS PARTICIPATION AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS PARTICIPATION AGREEMENT OR ANY
OPERATIVE AGREEMENT AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
Section 11.11 Captions; Table of Contents. Section captions and the
table of contents used in this Participation Agreement (including the exhibits
and schedules) are for convenience of reference only and shall not affect the
construction of this Participation Agreement.
Section 11.12 FINAL AGREEMENT. THIS PARTICIPATION AGREEMENT,
TOGETHER WITH THE OTHER OPERATIVE AGREEMENTS, REPRESENT THE ENTIRE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY AND IN THE OTHER OPERATIVE AGREEMENTS. THIS PARTICIPATION AGREEMENT
CANNOT BE MODIFIED, SUPPLEMENTED, AMENDED, RESCINDED OR CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES, EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 11.13 No Third-Party Beneficiaries. Nothing in this
Participation Agreement or the other Operative Agreements shall be deemed to
create any right in any Person not a party
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<PAGE> 53
hereto or thereto (other than the permitted successors and assigns of the
Lessors, the Agent, the Lessee and the Sublessee), and such agreements shall
not be construed in any respect to be a contract in whole or in part for the
benefit of any third party except as aforesaid.
Section 11.14 Further Assurances. Each Participant, at the expense
of the Lessee, will promptly and duly execute and deliver all such documents
and take such further action as may be necessary or appropriate in order to
effect the intent or purpose of this Participation Agreement and the other
Operative Agreements and to establish and protect the rights and remedies
created or intended to be created in favor of the Lessors and the Agent for the
benefit of the Lessors, including, without limitation, if requested by Required
Lessors at the expense of the Lessee, the recording or filing of any Operative
Agreement or any other document in accordance with the laws of the appropriate
jurisdictions.
Section 11.15 Reproduction of Documents. This Participation
Agreement, all documents constituting Schedules or Exhibits hereto, and all
documents relating hereto received by a party hereto, including, without
limitation: (a) consents, waivers and modifications that may hereafter be
executed; (b) documents received by the Lessors or the Agent in connection with
the receipt and/or acquisition of the Equipment; and (c) financial statements,
certificates, and other information previously or hereafter furnished to the
Agent or any Lessor may be reproduced by the party receiving the same by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. Each of the Participants agrees and stipulates that, to
the extent permitted by law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such party in the regular course of business) and
that, to the extent permitted by law, any enlargement, facsimile, or further
reproduction of such reproduction shall likewise be admissible in evidence.
Section 11.16 Consideration for Consents to Waivers and Amendments.
Each of the Lessee and the Sublessee hereby jointly and severally agrees that
it will not, and that it will not permit any of its Affiliates to, offer or
give any consideration or benefit of any kind whatsoever to any Lessor in
connection with, in exchange for, or as an inducement to, such Lessor's consent
to any waiver in respect of, any modification or amendment of, any supplement
to, or any other consent or approval under, any Operative Agreement unless such
consideration or benefit is offered ratably to all Lessors.
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<PAGE> 54
Section 11.17 Submission to Jurisdiction. Any suit by the Agent and
the Lessors to enforce any claim arising out of the Operative Agreements shall
be brought (subject to the penultimate sentence of this Section 11.17) in any
state or Federal court located in San Francisco, California having subject
matter jurisdiction, and with respect to any such claim, each Participant
hereby irrevocably: (a) submits to the jurisdiction of such courts; and (b)
consents to the service of process out of said courts by mailing a copy
thereof, by registered mail, postage prepaid, to the Lessee or Sublessee at
their respective addresses specified in this Participation Agreement, and
agrees that such service, to the fullest extent permitted by law: (i) shall be
deemed in every respect effective service of process upon it in any such suit,
action or proceeding; and (ii) shall be taken and held to be valid personal
service upon and personal delivery to it. Each of the Lessee and Sublessee
irrevocably waives, to the fullest extent permitted by law: (A) any claim, or
any objection, that it now or hereafter may have, that venue is not proper with
respect to any such suit, action or proceeding brought in such a court located
in San Francisco, California including, without limitation, any claim that any
such suit, action or proceeding brought in such court has been brought in an
inconvenient forum; and (B) any claim that any of the Lessee or Sublessee is
not subject to personal jurisdiction or service of process in such forum. The
Lessee and Sublessee agree that any suit to enforce any claim arising out of
the Operative Agreements or any course of conduct or dealing of the Agent or
any Lessor shall be brought and maintained exclusively in any state or Federal
court located in San Francisco, California. Nothing herein contained shall
preclude any Participant (other than the Lessee and Sublessee) from bringing an
action or proceeding in respect hereof in any other state or Federal court in
any jurisdiction where any Equipment is located. Lessee and Sublessee agree
that a final judgment in any action or proceeding in a state or Federal court
within the United States may be enforced in any other jurisdiction by suit on
the judgment or in any other manner provided by law.
[Remainder of page intentionally left blank.]
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<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have caused this Participation
Agreement to be executed and delivered as of the date first above written.
<TABLE>
<S> <C>
RYKOFF-SEXTON, INC., BA LEASING & CAPITAL CORPORATION,
as Lessee not individually, but solely
as Agent for the Lessors
By VICTOR B. CHAVEZ By CHERYL J. EMERSON
Name Printed: Victor B. Chavez Name Printed: Cheryl J. Emerson
Title: Vice Pres. & Chief Acctg. Officer Title: Asst. Vice Pres.
TONE BROTHERS, INC.,
as Sublessee By CHRISTINE BENNETT
Name Printed: Christine Bennett
Title: Asst. Vice Pres.
By GARTH B. THOMAS
Name Printed: Garth B. Thomas
Title: Vice Pres., Finance
LESSORS:
- - --------
PITNEY BOWES CREDIT BA LEASING & CAPITAL CORPORATION
CORPORATION
By RUSSELL D. PIPER By CHRISTINE BENNETT
Name Printed: Russell D. Piper Name Printed: Christine Bennett
Title: Region Credit Manager Title: Asst. Vice Pres.
By CHERYL J. EMERSON
Name Printed: Cheryl J. Emerson
Title: Asst. Vice Pres.
MANUFACTURERS BANK
By MIKE TOOMEY
Name Printed: Mike Toomey
Title: Vice President
</TABLE>
52
<PAGE> 56
SCHEDULE I
TO
PARTICIPATION AGREEMENT
COMMITMENTS OF LESSOR
<TABLE>
<CAPTION>
INITIAL COMMITMENT REMAINING AFTER FUNDING
LESSORS DELIVERY DATE INITIAL DELIVERY DATE COMMITMENTS
------- ------------- --------------------- -----------
<S> <C> <C> <C> <C>
4/29/94
$2,700,982.13 $10,000,000 44.44%
1. BA Leasing & Capital Corporation
Four Embarcadero Center, Suite 1200
San Francisco, CA 94111
Bank of America NT & SA
San Francisco Main Branch
San Francisco, CA
ABA# 121 000 358
Account# 06568-57503
Payee: BA Leasing & Capital
Corporation
Notify: Richard Walter (415)765-7476
2. Pitney Bowes Credit Corporation $2,025,736.72 $ 7,500,000 33.33%
Mellon Bank, N.A.
ABA# 043 000 261
Account# 092-0931
Notify: Jeff Ramos (203)846-5732
3. Manufacturers Bank $1,350,491.15 $ 5,000,000 22.22%
515 South Figueroa Street
Los Angeles, CA 90071
ABA# 122226076
Notify: Grace Surell or
Marie Galoosian
------------- ----------- -------
TOTAL: $6,077,210.00 $22,500,000 100.00%
============= =========== =======
</TABLE>
SI-1
<PAGE> 57
SCHEDULE II
TO
PARTICIPATION AGREEMENT
DESCRIPTION OF EQUIPMENT ACQUIRED FROM LESSEE TO BE
DELIVERED ON THE INITIAL DELIVERY DATE
SII-1
<PAGE> 58
SCHEDULE II
TO
PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
Functional Purchase
Unit # Equipment Description Price
- - ---------- --------------------- --------
<S> <C> <C>
1 Packaging Line #1 (5 lb.) $ 132,533.00
2 Packaging Line #3 [Ankeny #11] (1 lb.) $ 253,500.00
3 Packaging Line #4 [Ankeny #8] (2 lb.) $ 239,731.00
4 Packaging Line #5 [Ankeny #10] (Hand Feed) $ 33,600.00
5 Packaging Line #6 (4 & 8 oz.) $ 131,600.00
6 Packaging Line #7 (1 lb.) $ 288,333.00
7 Packaging Line #8 (1 oz. Tube) $ 177,000.00
8 Packaging Line #9 (1 oz. Tube) $ 179,000.00
9 Pkgg Line #10 [A#12] (O.M. Bag Fill) $ 205,233.00
10 Packaging Line #11 (Mr. Pepper/Jollytime) $ 81,200.00
11 Packaging Line #12 (1 lb. Kraft/Rykoff) $ 204,307.00
12 Extract Food Service Packaging Line $ 100,200.00
13 Extract Retail Packaging Line $ 96,367.00
14 Packaging Line #2 [Future] (4 & 8 lb.) $ 102,667.00
15 Blending Equipment $ 3,741,314.00
16 Production & Distribution Support $ 1,612,982.00
17 Office & Building Support $ 3,678,333.00
18 Oil Production $ 190,680.00
19 Margarine Production $ 1,052,750.00
20 Receiving/Distribution $ 806,830.00
21 Injection Molding $ 359,850.00
22 Blow Molding $ 789,420.00
23 Straw $ 441,660.00
24 Mayonaisse Production $ 363,360.00
25 Cook Line/Dry Mix $ 269,050.00
26 Repro Line $ 609,820.00
27 Plastics $ 281,470.00
--------------
TOTAL FOR ALL FUNCTIONAL UNITS $16,422,790.00
==============
</TABLE>
<PAGE> 59
SCHEDULE III
TO
PARTICIPATION AGREEMENT
DESCRIPTION OF ELIGIBLE EQUIPMENT TO BE
DELIVERED ON THE SUBSEQUENT DELIVERY DATES
SIII-1
<PAGE> 60
SCHEDULE III
TO
PARTICIPATION AGREEMENT
A.
<TABLE>
<CAPTION>
Functional Purchase
Unit # Equipment Description Price
---------- --------------------- --------
<S> <C> <C>
28 Packaging Line Equipment $590,000.00
29 Production & Distribution Support $870,000.00
30 Office & Building Support $143,000.00
31 Portland Location $500,550.00
32 San Francisco Location $119,970.00
</TABLE>
B. The Equipment described in this part B has not been appropriately
designated as Functional Units, and each Lessor shall have the right to
reject any item of Equipment which otherwise complies with the general
categories set forth below, in which case Lessee shall have the right to
propose in lieu thereof other Equipment (consisting solely of Functional
Units) by providing an amended Delivery Date Notice, and the originally
proposed Delivery Date shall not be delayed as a result of such amendment.
<TABLE>
<S> <C>
Material handling equipment, pallet The aggregate price of
racks and office furniture at Lessee's all equipment delivered
La Mirada, CA distribution center, and pursuant to this part B
Manufacturing and processing equipment shall not exceed
located at Sublessee's Ankeny, Iowa facility $3,853,690.00
</TABLE>
<PAGE> 61
SCHEDULE IV
TO
PARTICIPATION AGREEMENT
DISCLOSURE SCHEDULE
None.
SIV-1
<PAGE> 62
SCHEDULE X
TO
PARTICIPATION AGREEMENT
DEFINITIONS
The following terms (or other terms used or defined in any Operative
Agreement which have meanings substantially similar or equivalent to the
meanings assigned to such terms) shall have the following meanings for all
purposes, and such meanings shall be equally applicable both to the singular
and plural forms of the terms defined. Any agreement, document or instrument
defined or referred to in this Schedule X shall include each amendment,
modification or supplement thereto including each waiver and consent that may
(pursuant to the Operative Agreements) be effective from time to time, except
as otherwise expressly indicated. The definition of any person herein shall
include its successors and permitted assigns. Reference to schedules and
exhibits in this Schedule X shall mean Schedules and Exhibits attached to the
Participation Agreement, except as otherwise indicated.
"Accrued Rent" shall mean, as of any date of determination, the
aggregate Accrued Supplement Rent under all of the Lease Supplements as of such
date.
"Accrued Supplement Rent" shall mean, with respect to any Lease
Supplement, the interest that has accrued on the Functional Unit Balances
covered by such Lease Supplement at the applicable Interest Rate to the date of
determination.
"Actual Knowledge" with respect to any Person shall mean the actual
knowledge of a Responsible Officer of such Person and shall include receipt of
a notice of a fact by any such Person.
"Adjusted Appraised Value" shall mean, with respect to any Functional
Unit as of any date of determination, the Appraised Value of such Functional
Unit, adjusted on the basis of an assumed annual inflation rate of two percent
(2%), as set forth on Schedule III to the Lease Supplement governing such
Functional Unit.
"Affiliate(s)" of any Person shall mean any other Person that directly
or indirectly through one or more intermediaries controls, is controlled by, or
is under common control with, such Person. No Person shall be considered an
Affiliate of the Agent unless such Person directly or indirectly through one or
more intermediaries controls, is controlled by, or is under common
SX-1
<PAGE> 63
control with, the Agent solely in its capacity as agent under the Lease.
"Agent" shall have the meaning assigned to such term in the preamble
of the Lease.
"Agent's Corporate Office" shall mean the principal corporate office
of the Agent, which office is, on the date the Participation Agreement is
executed by all parties thereto, located at the address for the Agent set forth
in Section 11.4 of the Participation Agreement.
"Aggregate Make-Whole Premium" shall mean, as of any date of
determination, the sum of the Make-Whole Premiums then payable with respect to
each Lease Supplement as determined pursuant to clause (B) of the definition of
"Make-Whole Premium" set forth in this Schedule X.
"Allocable Rent" shall mean, for any period with respect to any
Functional Unit as of any date of determination, the sum of the portions of the
principal component of each payment of Rent required to reduce the Functional
Unit Balance of such Functional Unit to the amount specified in Schedule IV of
the applicable Lease Supplement as of each Payment Date, plus interest that
would accrue during the relevant period on such principal amount at the
Interest Rate.
"alter" shall have the meaning assigned to such term in Section 5.5(a)
of the Lease.
"Applicable Percentage" shall mean, with respect to each Lease
Supplement as of the end of the Initial Term and each Renewal Term, the
percentage set forth opposite each such date in Schedule II to such Lease
Supplement.
"Applicable Percentage Amount" shall mean the sum of the products
obtained by multiplying the Purchase Price of each Functional Unit subject to
the Sale Option by the Applicable Percentage set forth in Schedule II to the
Lease Supplement governing such Functional Unit.
"Appraisal(s)" shall mean each of the appraisals of the Equipment from
the Appraiser received pursuant to a Delivery Date Closing.
"Appraised Value" shall mean, with respect to any Functional Unit as
of any date of determination, the Fair Market Value of such Functional Unit as
set forth on the Appraisal therefor.
SX-2
<PAGE> 64
"Appraiser" shall mean the American Appraisal Company, The
Manufacturers' Appraisal Company or such other Person as is acceptable to the
Required Lessors.
"Assumed Interest Rate" shall mean, as of the date of any Funding, the
Interest Rate that would have been applicable under a Lease Supplement in the
event that a Delivery Date had occurred on such date.
"Authority" shall mean any: (a) Federal, state, local or (if the
Equipment or any component thereof has been moved outside of the United States)
foreign, tribunal, legislative body, governmental subdivision, administrative
agency or other governmental authority; or (b) arbitrator or panel of
arbitrators, in the case of each of clause (a) and (b) having or exercising
jurisdiction over the Lessee, the Sublessee, the Agent, or the Equipment (or
any component thereof).
"Base Commencement Date" shall mean, with respect to each Lease
Supplement, the date immediately succeeding the last day of the Interim Period
of such Lease Supplement.
"Basic Rent" shall mean, (a) with respect to each Lease Supplement,
all installments of Rent due and payable by Lessee on each Payment Date during
the period commencing on the Base Commencement Date and ending on April 29,
1995, as set forth in Schedule II to such Lease Supplement, and (b) with
respect to the Lease, the aggregate of the payments described in the preceding
clause (a) for all Lease Supplements.
"Bill of Sale" shall mean a bill of sale substantially in the form of
Exhibit E to the Participation Agreement to be delivered to the Lessors
pursuant to Article II or Section 4.3 of the Participation Agreement, granting
to each Lessor an undivided interest in the Equipment described in such Bill of
Sale equal to each Lessor's Lease Percentage.
"Business Day" shall mean any day on which Federal and state chartered
banks in San Francisco, California are open for commercial banking business.
"Capitalized Lease Obligations" of any Person shall mean all rental
obligations which, under GAAP, are or will be required to be capitalized on the
books of such Person or any Subsidiary, in each case taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with GAAP but excluding industrial revenue bonds and pollution control
financing.
"Casualty" shall mean any of the following events in respect of each
Functional Unit: (a) the total loss of a Functional
SX-3
<PAGE> 65
Unit, the total loss of use thereof due to theft, disappearance, destruction,
damage beyond repair or rendition of a Functional Unit permanently unfit for
normal use for any reason whatsoever; (b) any damage to a Functional Unit which
results in an insurance settlement with respect to the Functional Unit on the
basis of a total loss; (c) the permanent condemnation, confiscation or seizure
of, or requisition of title to or use of, a Functional Unit; or (d) as a result
of any rule, regulation, order or other action by any Authority, the use of a
Functional Unit in the normal course of the business of Lessee shall have been
prohibited, directly or indirectly, for a period of 180 consecutive days,
unless Lessee, prior to the expiration of such 180-day period, shall have
undertaken and shall be diligently carrying forward all steps which are
necessary or desirable to permit the normal use of such Functional Unit by
Lessee or, in any event, if use of such Functional Unit shall have been
prohibited, directly or indirectly, for a period of twelve consecutive months.
"Casualty Notice" shall have the meaning assigned to such term in
Section 6.1 of the Lease.
"Casualty Proceeds" shall have the meaning assigned to such term in
Section 6.1(b) of the Lease.
"Casualty Settlement Date" shall have the meaning assigned to such
term in Section 6.1(a) of the Lease.
"Charges" shall mean freight, installation and applicable sales, use
or similar taxes imposed upon an item of Eligible Equipment described at
Schedule III to the Participation Agreement.
"Closing" shall mean the completion of those transactions described in
Section 2.1 of the Participation Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean
(a) the Equipment;
(b) the Intellectual Property Collateral;
(c) the Sublease and all subleases entered into in connection
with the Equipment as permitted pursuant to Section 5.2 of the Lease,
together with all security interests granted pursuant to the Sublease
and all such Subleases;
SX-4
<PAGE> 66
(d) all contracts necessary to purchase, operate and maintain
the Equipment, including without limitation the Purchase Agreements;
(e) the Deposit Account;
(f) any rights to a rebate, offset or other assignment under
a purchase order, invoice or purchase agreement with any manufacturer
of any item of Equipment;
(g) all books, records, writings, data bases, information and
other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the
foregoing; and
(h) all products, accessions, rents, issues, profits,
returns, income and proceeds of and from any and all of the foregoing
Collateral (including proceeds which constitute property of the types
described inclauses (a), (b), (d), (e), (f) and (g) above and, to the
extent not otherwise included, all payments under insurance (whether
or not Lessor is the loss payee thereof), or any indemnity, warranty
or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing Collateral).
"Commitment(s)" for each Lessor shall mean the aggregate amount set
forth in Schedule I to the Participation Agreement across from the name of such
Lessor.
"Commitment Percentage" shall mean, with respect to each Lessor, the
quotient (expressed as a percentage) of such Lessor's Commitment divided by the
Total Commitment.
"Computer Software Collateral" shall mean:
(a) all software programs (including both source code, object
code and all related applications and data files), whether now owned,
licensed or leased or hereafter acquired by Lessee or Sublessee,
designed for use on any computers and electronic data processing
hardware constituting part of the Equipment and necessary for the
operation and maintenance of the Equipment;provided that with respect
to any licensed or leased software program the foregoing shall be
included in "Computer Software Collateral" only to the extent that a
grant of a security interest is not prohibited by the terms of the
license or lease;
(b) all firmware associated therewith;
SX-5
<PAGE> 67
(c) all documentation (including flow charts, logic diagrams,
manuals, guides and specifications) with respect to such hardware,
software and firmware described in the preceding clauses (a) and (b);
and
(d) all rights with respect to all of the foregoing,
including, without limitation, any and all copyrights, licenses,
options, warranties, service contracts, program services, test rights,
maintenance rights, support rights, improvement rights, renewal rights
and indemnifications and any substitutions, replacements, additions or
model conversions of any of the foregoing.
"Consolidated Net Earnings" of any Person shall mean the consolidated
gross revenues of such Person and its Subsidiaries less all operating and
non-operating expenses of such Person and its Subsidiaries including all
charges of a proper character (including current and deferred taxes on income,
provision for taxes on unremitted foreign earnings which are included in gross
revenues, and current additions to reserves), but not including in gross
revenues any gains (net of expenses and taxes applicable thereto) in excess of
losses resulting from the sale, conversion or other disposition of capital
assets (i.e., assets other than current assets) when such gains exceed Two
Hundred Fifty thousand Dollars ($250,000) in the aggregate, any gains resulting
from the write-up of assets, any equity of such Person or any Subsidiary in the
unremitted earnings of any corporation which is not a Subsidiary, any earnings
of any other Person acquired by such Person or any Subsidiary through purchase,
merger or consolidation or otherwise for the period prior to the date of
acquisition, or any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment in such
Subsidiary.
"Consolidated Net Worth" of any Person shall mean the amount by which
the total consolidated assets (excluding goodwill, trade names, trademarks,
patents, treasury stock, organization expense and other intangible assets) of
such Person and its Subsidiaries exceeds the total consolidated liabilities
(including deferred taxes and minority interests) of such Person and its
Subsidiaries, in each case determined in accordance with GAAP.
"Credit Agreement" shall mean the Credit Agreement dated as of October
25, 1993, between Rykoff-Sexton, Inc. and Bank of America National Trust and
Savings Association ("Bank of America"), as such agreement is amended,
modified, restated or refinanced from time to time.
"Delivery Date" shall mean each of the actual dates on which the
transactions contemplated in Sections 2.1 and 3.1 of the Participation
Agreement are completed.
SX-6
<PAGE> 68
"Delivery Date Closing" shall mean, with respect to a Delivery Date,
the completion of those transactions described in Article II of the
Participation Agreement.
"Delivery Date Notice" shall have the meaning assigned to such term at
Section 2.3.
"Deposit Account" shall have the meaning assigned to such term in
Section 6.1(b) of the Lease.
"Effective Date" shall have the meaning assigned to such term in the
preamble to the Lease.
"Eligible Equipment" shall mean items of Equipment which qualify to be
purchased by Agent, on behalf of the Lessors under the Participation Agreement
on the Initial Delivery Date or any Subsequent Delivery Date, as described in
Schedule II or Schedule III to the Participation Agreement.
"Environmental Laws" shall mean all applicable Federal, state or local
statutes, laws, ordinances, codes, rules, regulations and orders (including
consent decrees) relating to public health and safety and protection of the
environment.
"Environmental Reports" shall mean the environmental reports or audits
styled as follows:
(a) Report for Phase I and II Environmental Audits of
Dennis Elwell Property, Ankeny (Polk County), Iowa. SENECA Project
No. 8626.
(b) Phase I Environmental Assessment, Jacobson Warehouse
Company 4121, 4141, and 4161 MacDonald Avenue, Des Moines, Iowa,
prepared by Environmental Science & Engineering, Inc. Project Number
593-3082.
(c) Remedial Action Plan for Soil and Groundwater and the
Unleaded Gasoline Tank Area, Previous UST Area, and PSC Car Wash Area,
Former Ford Predelivery Service Center, La Mirada, California, August
7, 1992, prepared by Geraghty & Miller, Inc.
(d) Work Plan for Remediation System Modification, Former
Ford Pre-Delivery Service Center, La Mirada, California, November 12,
1993, CA0209.001, prepared by Geraghty & Miller, Inc.
"Equipment" shall mean those items of equipment listed on Schedule I
to the Lease purchased by Lessors on a Delivery Date for which a Lease
Supplement has been delivered to each Lessor by
SX-7
<PAGE> 69
Lessee, all Replacement Units, Replacement Parts and Mandatory Parts.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" shall have the meaning assigned to such term in
Section 8.1 of the Lease.
"Expiration Date" shall mean the date upon which the Credit Agreement
is repaid in its entirety or otherwise expires, or when Bank of America (or any
successor to Bank of America by operation of law) ceases to be a party thereto.
"Fair Market Value" shall mean, with respect to any item of Equipment
as of any date, the price which a purchaser would pay to purchase such
Equipment in an arm's-length transaction between a buyer and seller, neither of
them being under any compulsion to buy or sell. In making any determination of
Fair Market Value the appraiser may assume such Equipment has been maintained
in accordance with the requirements of the Lease and that such Equipment is in
the condition in which it is required to be hereunder as of the date for which
such determination is made. Appraiser shall use such reasonable methods of
appraisal as are chosen by the Agent upon instructions from the Required
Lessors.
"Fixed Charge Coverage Ratio" of any Person shall mean, for any
period, the ratio derived from dividing (a) the sum of (i) Consolidated Net
Earnings (ii) income taxes, (iii) Rental Expense and (iv) interest on Funded
Debt to (b) Rental Expense and interest on Funded Debt. For purposes of this
definition, amounts attributable to accreted or other interest or accreted or
other value in respect of so-called "zero coupon" subordinated Funded Debt of
such Person that is convertible into shares of capital stock of such Person
shall be included as interest on such subordinated Funded Debt only to the
extent of the amount paid in cash during such period.
"Functional Unit(s)" shall mean each group of items of Equipment
classified as a Functional Unit on Schedule Y to the Participation Agreement or
on Schedule I to a Lease Supplement. Each Functional Unit has an assigned
number on Schedule Y and on Schedule I to the Lease Supplement governing such
Functional Unit, and all references to the assigned number of any Functional
Unit shall be deemed to refer to such Functional Unit and to all items of
Equipment comprising such Functional Unit.
"Functional Unit Balance" shall mean, with respect to any Functional
Unit as of any date of determination, the amount set forth on Schedule IV to
the applicable Lease Supplement opposite
SX-8
<PAGE> 70
the most recent Payment Date through which all installments of Rent have been
paid.
"Funded Debt" shall mean and includes, without duplication, in each
case as to any Person and its Subsidiaries, the following (all as determined in
accordance with GAAP):
(i) any obligation which under GAAP is shown on the
balance sheet as a liability (including Capitalized Lease Obligations,
industrial revenue bonds and pollution control bond financing, but
excluding reserves for deferred income taxes and other reserves to the
extent that such reserves do not constitute an obligation);
(ii) indebtedness which is secured by any Lien on property
owned by such Person or any subsidiary, whether or not the
indebtedness secured thereby shall have been assumed by such Person or
such Subsidiary;
(iii) guarantees, endorsements (other than endorsements of
negotiable instruments for collection in the ordinary course of
business) and other contingent liabilities (whether direct or
indirect) in connection with the obligations, stock or dividends of
any Person;
(iv) obligations under any contract providing for the
making of loans, advances or capital contributions to any Person, or
for the purchase of any property from any Person, in each case in
order to enable such Person primarily to maintain working capital, net
worth or any other balance sheet condition or to pay debts, dividends
or expenses;
(v) obligations under any contract for the purchase of
materials, supplies or other property or services if such contract (or
any related document) requires that payment for such materials,
supplies or other property or services shall be made regardless of
whether or not delivery of such materials, supplies or other property
or services is ever made or tendered;
(vi) obligations under any contract to rent (as lessee)
any real or personal property if such contract (or any related
document) provides that the obligation to make payments thereunder is
absolute and unconditional under conditions not customarily found in
commercial leases then in general use or requires that the lessee
purchase or otherwise acquire securities or obligations of the lessor;
and
(vii) obligations under any contract for the sale or use of
materials, supplies or other property or services if such
SX-9
<PAGE> 71
contract (or any related document) requires that payment for such
materials, supplies or other property or services, or the use thereof,
shall be subordinated to any indebtedness (of the purchaser or user of
such materials, supplies or other property or the Person entitled to
the benefit of such services) owed or to be owed to any Person;
provided, however, that Funded Debt shall not include noncompete agreements of
the nature and type heretofore entered into by such Person in connection with
its purchase of a business through the purchase of its stock or assets.
"Funding" shall have the meaning assigned to that term in Section 2.1
of the Participation Agreement.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time, applied on a consistent
basis both as to classification of items and amounts.
"Impositions" shall mean all fees (including, but not limited to,
license, documentation, recording or registration fees) and taxes (including
but not limited to all income, sales, use, lease, sublease, gross receipts,
personal property, occupational, value added or other taxes, levies, imposts,
duties, assessments, charges or withholdings of any nature whatsoever),
together with any penalties, fines or additions to tax or interest thereon.
"Income Tax Indemnity" shall have the meaning assigned to such term in
Section 8.1 of the Participation Agreement.
"Indemnitee(s)" shall mean the Agent in both its individual and agent
capacity, the Lessors, any Affiliate of any of them and any assign, officer,
director, employee, attorney or agent of any of them.
"Indenture" shall mean that certain Indenture dated as of November 1,
1993, between Lessee and Norwest Bank Minnesota, N.A., as trustee.
"Initial Delivery Date" shall mean the first Delivery Date completed
pursuant to Article II of the Participation Agreement.
"Initial Delivery Date Notice" shall mean the Delivery Date Notice
relating to the Initial Delivery Date.
"Initial Term" shall have the meaning assigned to such term in Section
2.1 of the Lease.
SX-10
<PAGE> 72
"Insolvency Default" shall have the meaning assigned to such term in
Section 8.2(d) of the Lease.
"Intellectual Property Collateral" shall mean all Computer Software
Collateral, all copyrights, whether statutory or common law, registered or
unregistered, and all applications therefore, all trademarks and trade names,
all common law and statutory trade secrets and all other confidential or
proprietary information, but only to the extent in each case necessary to
operate and maintain the Equipment, and all know-how (which know-how is used in
connection with the Equipment).
"Interest Rate" shall mean with respect to each Lease Supplement a
fixed rate of interest to be established by Agent two days prior to each
Delivery Date pursuant to Section 3.1 of the Participation Agreement in an
amount equal to the sum of (i) the rate of interest of United Stated Treasury
securities having a weighted average life equal to a period commencing on the
Delivery Date applicable to the Equipment described in such Lease Supplement
and continuing to and ending on April 29, 2000 plus (ii) 316 basis points.
"Interim Period" shall mean as to each Lease Supplement a period
commencing on the Delivery Date applicable to the Equipment described in such
Lease Supplement and continuing to and ending on the last day of the 90-day
period ending on April 30, July 30, October 30 or January 30 (as the case may
be) in which such Delivery Date occurs.
"Interim Rent" shall mean all payments due and payable by Lessee under
each Lease Supplement on the last day of the applicable Interim Period. The
Interim Rent payable under each Lease Supplement is set forth on Schedule II to
such Lease Supplement.
"IRS" shall mean the Internal Revenue Service.
"Lease" shall mean that certain Lease Intended as Security, dated as
of April 29, 1994, by and between the Agent, the Lessors and Lessee,
substantially in the form of Exhibit A.
"Lease Balance" shall mean, as of any determination date, the
aggregate of all Supplement Balances due under all Lease Supplements.
"Lease Default" shall mean an Event of Default.
"Lease Percentage" shall mean, with respect to each Lessor, the
quotient (expressed as a percentage) of (i) the aggregate amount funded by such
Lessor on all Delivery Dates, divided by
SX-11
<PAGE> 73
(ii) the aggregate amount funded by all Lessors on all Delivery Dates as of the
date such determination is made.
"Lease Supplement" shall have the meaning attributed to such term at
Section 3.1 of the Participation Agreement.
"Lease Term" shall mean the Initial Term and all of the Renewal Terms.
"Lessee" shall mean Rykoff-Sexton, Inc., a Delaware corporation.
"Lessee Purchase Option" shall have the meaning assigned to such term
in Section 11.1(b) of the Lease.
"Lessors" shall mean each of the Persons identified as a Lessor in the
preamble to the Lease and those persons to whom the interests in the Lease and
the Collateral shall have been transferred or assigned from time to time in
accordance with the provisions of the Lease and the Participation Agreement.
"Lessor Commitment" shall mean, with respect to each Lessor, the
amount set forth opposite such Lessor's name on Schedule I of the Participation
Agreement.
"Lessor Liens" shall mean Liens or other conveyances resulting from
any act of or claim against the Agent in its individual capacity (or any Person
claiming by, through or under the Agent in its individual capacity) or any
Lessor, in each case arising out of any event or condition not related to the
exercise of such Person's rights or the performance of its duties expressly
provided under any Operative Agreement.
"Lien" shall mean: (a) any interest in property securing an
obligation owed to, or claimed by, a Person other than the owner of the
property, whether such interest is based on the common law, statute or
contract, and including, without limitation, any judgment lien, security
interest, mortgage, encumbrance, pledge, conditional sale, right of distraint
or trust receipt or a lease, consignment or bailment for security purposes; or
(b) any reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or defect, cloud on
title or encumbrance affecting property.
"Make-Whole Premium" shall mean, as of any date of determination, in
connection with any purchase or sale of Functional Units requiring payment of a
Make-Whole Premium pursuant to the Operative Agreements (an "Early Payment"),
(A) with respect to each Functional Unit, the amount determined by the
Lessors to be equal to the greater of:
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<PAGE> 74
(i) the excess, if any, of
(a) the present value (determined using a discount
rate equal to the Reference Treasury Constant Yield plus 110
basis points) of the sum of (1) the amount of Allocable Rent
(exclusive of Rent accrued to the date of payment) that would
have been payable on each Payment Date with respect to the
period commencing on the date on which such Early Payment is
required to be paid and ending on the last day of fifth
Renewal Term if such Early Payment had not been made (and
assuming the exercise of all Renewal Options), and (2) the
amount of the Functional Unit Balance at the end of the fifth
Renewal Term if such Early Payment had not been made,
over
(b) the Functional Unit Balance being so prepaid; or
(ii) one percent (1%) of the Functional Unit Balance at such payment
date, prior to giving effect to such prepayment; and
(B) with respect to each Lease Supplement, the sum of the amounts
determined by the Lessors pursuant to the foregoing clause (A) for each
Functional Unit governed by such Lease Supplement.
"Mandatory Parts" shall have the meaning assigned to such term in
Section 5.5 of the Lease.
"Manufacturers" shall mean those manufacturers or vendors of Equipment
listed in Schedule III to the Participation Agreement or Schedule I to the
Delivery Date Notice.
"Merger" shall mean a transaction described in Section 6.1(a)(ii)(A)
of the Participation Agreement.
"Multiemployer Plan" shall have the meaning assigned to the term
"multiemployer plan" in Section 3(37) of ERISA.
"Notice of Partial Casualty" shall mean the notice given by Lessee to
Lessor in accordance with Section 6.2 of the Lease and shall include: (a) a
description of the item of Equipment suffering the Partial Casualty, (b) the
Purchase Price of such item of Equipment; and (c): (x) a description of the
remedial steps that Lessee will undertake (or cause to be undertaken) and the
time-frame in which such steps will be accomplished to repair and rebuild such
item of Equipment; or (y) if the item of
SX-13
<PAGE> 75
Equipment is to be replaced, a description of the Replacement Part and its
Purchase Price.
"Officer's Certificate" shall mean a certificate executed on behalf of
any entity by its President, one of its Vice Presidents, its Chief Financial
Officer, its Treasurer, its Assistant Treasurer or its Controller.
"Operative Agreement(s)" shall mean the Participation Agreement, the
Lease, the Sublease, the Bills of Sale and the Lease Supplements executed on
each Delivery Date.
"Outstanding Investment" of any Lessor as of any date of determination
shall mean the aggregate amount funded by such Lessor pursuant to Article II of
the Participation Agreement, reduced by the principal amount of all Basic Rent
and all Renewal Rent paid to such Lessor and all Reduction Amounts paid to such
Lessor.
"Partial Casualty" shall mean any loss, damage, destruction, taking by
eminent domain, loss of use or theft of any portion of a Functional Unit which
does not constitute a Casualty.
"Partial Casualty Proceeds" shall mean all payments from any Authority
or other Person, and all proceeds of any insurance, which are received as a
result of a Partial Casualty.
"Participant(s)" shall mean any or all of the parties to the
Participation Agreement including, without limitation, the Agent in both its
individual and agent capacity, and the successors and assigns thereof.
"Participation Agreement" shall mean the Participation Agreement,
dated as of April 29, 1994, entered into among the Lessee, the Sublessee, the
Lessors and the Agent.
"Part(s)" shall mean all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
that may from time to time be incorporated or installed in or attached to any
item of Equipment.
"Payment Date" shall mean each April 30, July 30, October 30 and
January 30 (or if any such day is not a Business Day, then the first day
thereafter which is a Business Day).
"Payment Default" shall have the meaning assigned to such term in
Section 8.2(d) of the Lease.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
SX-14
<PAGE> 76
"Pension Plan" shall mean, with respect to any Person, a "pension
plan" as such term is defined in section 3(2) of ERISA which is subject to
Title IV of ERISA and to which such Person may have any liability or contingent
liability, including, but not limited to, liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any time
during the preceding five years, or by reason or being deemed to be a
contributing sponsor under section 4069 of ERISA.
"Permitted Contest" shall mean actions taken by a Person to contest in
good faith, by appropriate proceedings initiated timely and diligently
prosecuted, the legality, validity or applicability to the Equipment or any
interest therein of any Person of: (a) any law, regulation, rule, judgment,
order, or other legal provision or judicial or administrative requirements; (b)
any term or condition of, or any revocation or amendment of, or other
proceeding relating to, any authorization or other consent, approval or other
action by any Authority; or (c) any Lien; provided that the initiation and
prosecution of such contest would not: (i) result in, or materially increase
the risk of, the imposition of any criminal liability on any Indemnitee; (ii)
materially and adversely affect the security interests created by the Lease or
the right, title or interest of the Agent or any Lessor in or to any of the
Equipment or the right of Agent to receive payment of Rent or the Lease Balance
or any interest therein; or (iii) materially and adversely affect the fair
market value, utility or remaining useful life of the Equipment or any interest
therein or the continued economic operation thereof; and provided further that
in any event adequate reserves in accordance with GAAP are maintained against
any adverse determination of such contest.
"Permitted Investments" shall mean (a) direct obligations of, or
obligations guaranteed by, the United States or any agency thereof (or any
mutual fund investing solely in any of the foregoing), (b) commercial paper
issued in the United States by any corporation (other than Lessee or its
subsidiaries or its Affiliates) and rated at least A-1 (by Standard & Poor's
Corporation) or P-1 (by Moody's Investors Service, Inc.), (c) certificates of
deposit issued by, or drafts accepted by, any bank or trust company the
short-term obligations of which (or of such Person's corporate parent) are
rated at least A-1 (by Standard & Poor's Corporation) or P-1 (by Moody's
Investors Service, Inc.) and (d) any other negotiable instrument guaranteed or
endorsed with full recourse by any such bank or trust company; provided that
all such obligations, commercial paper, certificates of deposit, drafts and
instruments are denominated in Dollars and the obligor thereon is located in
the United States, each such obligation, certificate of deposit, draft and
instrument matures within thirty days after the date of
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<PAGE> 77
investment and each item of such commercial paper matures within thirty days
after the date of investment.
"Permitted Lessor Liens" shall mean Lessor Liens: (a) for Taxes of
the Agent or a Lessor either not yet due or being challenged by a Permitted
Contest; (b) arising out of judgments or awards against the Agent or a Lessor
with respect to which at the time an appeal or proceeding for review is being
prosecuted by a Permitted Contest; and (c) arising out of Liens arising in the
ordinary course of business of the Agent or a Lessor for amounts the payment of
which is either not delinquent or is being contested by a Permitted Contest.
"Permitted Liens" shall mean: (i) any rights in favor of Lessors
under the Operative Agreements and any rights of any persons entitled to use of
the Collateral in accordance with Section 5.2 of the Lease; (ii) any Lien,
(including, without limitation, Liens of landlords, carriers, warehousemen,
mechanics or materialmen) in favor of any Person securing payment of the price
of goods or services provided in the ordinary course of business for amounts
the payment of which is not overdue or is being contested in good faith by
appropriate proceedings promptly initiated and diligently prosecuted, so long
as such proceedings do not involve any reasonable danger of sale, forfeiture or
loss of all or any material part of the Collateral and do not materially
adversely affect any Lien created in favor of Lessor under the Lease; (iii) any
Permitted Lessor Lien or any Lien arising out of any breach by Lessor of its
obligations under the Operative Agreements; (iv) any Lien for current taxes,
assessments or other governmental charges which are not delinquent or the
validity of which is being contested by a Permitted Contest; (v) attachments,
judgments and other similar Liens arising in connection with court proceedings,
provided the execution or other enforcement of such Liens is effectively stayed
and the claims secured hereby are being contested in good faith and by
appropriate proceedings; (vi) reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, zoning
and land use restrictions and other similar title exceptions or encumbrances
affecting real property that were not incurred in connection with the
incurrence of indebtedness, so long as such Liens do not involve a reasonable
danger of sale, forfeiture or loss of all or any material portion of the
Collateral and do not materially adversely affect any Lien created in favor of
Lessor under the Lease; and (vii) any Lien incurred in the ordinary course of
business to secure performance of statutory obligations.
"Person" shall mean any individual, partnership, corporation, trust,
unincorporated association or joint venture, a government or any department or
agency thereof or any other legal entity.
SX-16
<PAGE> 78
"Plan" shall mean an "employee benefit plan" as defined in section
3(3) of ERISA.
"Prior Debt Agreements" shall mean, collectively, the Credit Agreement
and the Indenture; provided, however, that for purposes of Sections 6.1(a)(ii),
6.1(a)(iii), 6.1(a)(iv)(B), and 6.1(a)(iv)(C)(5) of the Participation
Agreement, the Credit Agreement, as included in the term "Prior Debt
Agreements" shall mean the Credit Agreement as in effect from time to time and,
following the Expiration Date, the Credit Agreement as in effect on the
Expiration Date.
"Proceeds" shall have the meaning assigned to such term in Section
11.1(c)(2) of the Lease.
"Purchase Agreements" shall mean all now and hereafter existing
contracts, invoices or purchase orders to acquire Equipment.
"Purchase Option Exercise Amount" shall mean, on the last day of the
Initial Term and each Renewal Term, the aggregate of all Supplement Purchase
Option Exercise Amounts under all Lease Supplements.
"Purchase Price" shall mean (i) for any item of Equipment described in
Schedule II of the Participation Agreement, the Fair Market Value of such
Equipment as determined by the Appraisal and (ii) for any item of Equipment
described in Schedule III of the Participation Agreement, the invoice price for
such item of Equipment plus any Charges fairly attributable thereto and not
otherwise included in the invoice price.
"Recourse Deficiency Amount" shall mean, with respect to the exercise
of the Sale Option, the difference between (i) the Purchase Option Exercise
Amount at the end of any Renewal Term in which such Sale Option was elected and
(ii) the product of (A) 21.5% and (B) the Appraised Value of the Functional
Units subject to the Sale Option as of the first day of the Renewal Term in
which the Sale Option was elected.
"Reduction Amounts" shall mean any amounts paid by Lessee to Agent for
the benefit of Lessors for the purchase of any Equipment pursuant to Section
6.1 of the Lease. "Reduction Amounts" shall not include any Rent or any costs,
expenses or taxes to be paid by Lessee in connection with any such purchase,
sale or transfer.
"Reference Treasury Constant Yield" shall mean, relative to any
payment, the yield calculated with reference to the Statistical Release No.
H.15 (519) then most recently published by the Board of Governors of the
Federal Reserve System or any
SX-17
<PAGE> 79
successor thereto three Business Days prior to the date of such prepayment as
the yield of a hypothetical U.S. Treasury security with a remaining term equal
to the weighted average remaining term to maturity (rounded to the nearest
month) corresponding to the remaining scheduled terms, including the five
Renewal Terms, of the Lease. If no maturity exactly corresponds to the
weighted average remaining term to maturity of the remaining term, including
the five Renewal Terms, of the Lease, yields for two published maturities most
closely corresponding to such weighted average shall be selected in the
Statistical Release and the yield shall be interpolated or extrapolated from
such yields on a straight line basis, rounding in each period to the nearest
month.
"Related Person" shall mean, with respect to any Person, any trade or
business (whether or not incorporated) which, together with such person, is
under common control as described in Section 414 of the Code.
"Removable Part" shall have the meaning assigned to such term in
Section 5.5(a) of the Lease.
"Renewal Option" shall have the meaning assigned to such term in
Section 11.1(a) of the Lease.
"Renewal Rent" shall mean, with respect to the Lease, all payments due
and payable by Lessee under all Lease Supplements on each Payment Date
occurring during the applicable Renewal Term, as set forth on Schedule II to
such Lease Supplement.
"Renewal Term" shall have the meaning assigned to such term in Section
2.2 of the Lease.
"Rent" shall mean, with respect to either the Lease or any Lease
Supplement, Interim Rent, Basic Rent, and/or Renewal Rent, as the context may
require.
"Rental Expense" shall mean rental expense under any lease (other than
a lease for data processing or other office equipment used in the ordinary
course of business) having a term (including all renewal terms which are not at
the option of the lessee, whether or not exercised) extending more than three
(3) years from the date of its inception.
"Replaced Unit" shall have the meaning assigned to such term in
Section 5.4(b) of the Lease.
"Replacement Notice" shall mean a notice provided by the Lessee
pursuant to Section 4.3 of the Participation Agreement.
SX-18
<PAGE> 80
"Replacement Part" shall have the meaning assigned to such term in
Section 5.4(a) of the Lease.
"Replacement Unit" shall have the meaning assigned to such term in
Section 5.4(b) of the Lease.
"Reportable Event" shall mean a "reportable event" described in
Section 4043(b) of ERISA and the regulations thereunder.
"Required Lessors" shall mean, with respect to any approval, action,
waiver, direction, or consent, Lessors whose Outstanding Investments aggregate
at least a majority of the Lease Balance as of such date of determination;
provided, however, for purposes of instructing the Agent to provide Lessee with
a notice of an Event of Default other than for a Payment Default, then Required
Lessors shall mean Outstanding Investments aggregating twenty-five percent
(25%) or more of the Lease Balance as of such date of determination.
"Responsible Officer" of any Person shall mean: (i) in the case of
any business corporation, the chairman of the board of directors of such
corporation if such chairman is an officer of such corporation, the president,
any vice president or any assistant vice president of such corporation, the
secretary or any assistant secretary of such corporation or the treasurer or
any assistant treasurer of such corporation; (ii) in the case of any
partnership, a general partner (if such general partner is an individual), or a
Responsible Officer of a corporate general partner, of such partnership or the
general manager of such partnership or any assistant general manager of such
partnership; and (iii) in the case of any commercial bank or trust company, the
chairman or vice chairman of the board of directors or trustees of such bank or
trust company, the chairman or vice chairman of the executive committee of the
board of directors or trustees of such bank or trust company, the president,
any vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
any assistant trust officer of such bank or trust company, the controller or
any assistant controller of such bank or trust company, any executive or senior
or assistant or second vice president of such bank or trust company or any
other individual who is employed by such bank or trust company and customarily
performs functions similar to those performed by any of the other officers of
such bank or trust company referred to herein.
"Sale Option" shall have the meaning assigned to such term in Section
11.1(c)(1) of the Lease.
"Sale Recourse Amount" shall have the meaning assigned to such term in
Section 11.1(c)(2) of the Lease.
SX-19
<PAGE> 81
"Schedule X" shall mean this Schedule to the Participation Agreement.
"Seller" shall have the meaning assigned to such term in the Bill of
Sale.
"Site(s)" shall mean all of the land described in Schedule I to
Exhibit C to the Delivery Date Notice and any other land on which Eligible
Equipment is affixed.
"Specified Portion" shall mean, with respect to any Lease Supplement
as of any date of determination, the Supplement Balance of such Lease
Supplement at the immediately preceding Payment Date minus the Applicable
Percentage Amount of such Lease Supplement at such Payment Date.
"Sublessee" shall mean Tone Brothers, Inc., an Iowa corporation.
"Subsequent Delivery Date" shall mean each of the dates scheduled for
a Delivery Date Closing pursuant to a Delivery Date Notice occurring following
the Initial Delivery Date.
"Subsequent Delivery Date Closing" shall mean the Subsequent Delivery
Date on which a transaction contemplated in Section 3.1 of the Participation
Agreement is scheduled to be completed.
"Subsequent Delivery Date Notice" shall mean a Delivery Date Notice
relating to a Subsequent Delivery Date.
"Subsidiary" shall mean any corporation, association, partnership,
joint venture or other business entity more than 50% (by number of votes) of
the stock of any class or classes (or equivalent interests) of which is at the
time owned by the Lessee or Sublessee or by one or more Subsidiaries of the
Lessee or Sublessee, if the holders of the stock of such class or classes (or
equivalent interests) (a) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or Persons
performing similar functions) of such business entity, even though the right so
to vote has been suspended by the happening of such a contingency, or (b) at
the time entitled, as such holders, to vote for the election of a majority of
the directors (or Persons performing similar functions) of such business
entity, whether or not the right so to vote exists by reason of a happening of
a contingency.
"Substituted Item" shall have the meaning assigned to such term in
Section 5.4(a) of the Lease.
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<PAGE> 82
"Supplemental Rent" shall mean all amounts due and payable by the
Lessee under the Lease other than Interim Rent, Basic Rent and Renewal Rent.
"Supplement Balance" shall mean, with respect to any Lease Supplement
as of any date of determination, the aggregate Functional Unit Balances of all
of the Functional Units subject to such Lease Supplement.
"Supplement Purchase Option Exercise Amount" shall mean as to each
Lease Supplement, on the last day of the Initial Term and each Renewal Term,
the Functional Unit Balances of all Functional Units subject to the Lessee
Purchase Option, after taking into account any scheduled installment of Basic
or Renewal Rent payable pursuant to such Lease Supplement on or prior to such
date.
"Termination Date" shall mean the date the Lease Term including any
Renewal Term, ends pursuant to (a) Article VIII of the Lease relating to
termination as a result of an Event of Default, (b) Article X of the Lease
relating to early termination, (c) Section 11.1 of the Lease relating to the
exercise of the Lessee Purchase Option or Sale Option, or (d) with respect to
the Functional Units subject to the Sublease, Section 6.1(a)(iv) of the
Participation Agreement as provided in such Section.
"Total Commitment" shall mean $22,500,000, as reduced from time to
time by a Funding pursuant to the Participation Agreement.
"Transaction Costs" shall mean
(i) the reasonable fees and expenses of Mayer, Brown & Platt
and any local counsel incurred in connection with the negotiation,
execution and delivery of the term sheet, the commitment letters, the
Operative Agreements, and the transactions contemplated thereby
(including, without limitation, on each Funding and Delivery Date);
(ii) the reasonable allocated internal counsel fees of BA
Leasing & Capital Corporation incurred in connection with the
negotiation and drafting of the confidential memorandum dated January
1994 and the Operative Agreements;
(iii) the reasonable fees and expenses of the Appraiser,
environmental consultant and insurance consultant;
(iv) the fees, costs and expenses of the Agent;
SX-21
<PAGE> 83
(v) all costs of searching and perfecting a first priority
security interest in the Equipment; and
(vi) the arrangement fee of BA Leasing and Capital
Corporation.
"Transfer" shall mean a transaction described in Section 6.1(a)(ii)(B)
of the Participation Agreement.
"Unfunded Amount" shall have the meaning assigned to such term in
Section 3.4 of the Participation Agreement.
"Unused Commitment" shall mean for each Lessor the aggregate amount of
such Lessor's Commitment less such Lessor's Used Commitment.
"Used Commitment" shall mean for each Lessor that portion of such
Lessor's Commitment that has been transferred to Agent to be funded on a
Delivery Date.
"Uniform Commercial Code" shall mean the Uniform Commercial Code, as
in effect from time to time in any jurisdiction where any Equipment is located.
"Welfare Plan" shall mean, with respect to any Person, a "welfare
plan" as such term is defined in section 3(1) of ERISA to which such Person or
any Related Person to such Person may have any liability or contingent
liability.
SX-22
<PAGE> 84
SCHEDULE Y
FUNCTIONAL UNITS
<PAGE> 85
SCHEDULE Y
TO
PARTICIPATION AGREEMENT
A.
<TABLE>
<CAPTION>
Functional
Unit # Equipment Description
---------- --------------------------------
<S> <C>
1 Packaging Line #1 (5 lb.)
2 Packaging Line #3 [Aknkeny #11] (1 lb.)
3 Packaging Line #4 [Ankeny #8] (2 lb.)
4 Packaging Line #5 [Ankeny #10] (Hand Feed)
5 Packaging Line #6 (4 & 8 oz.)
6 Packaging Line #7 (1 lb.)
7 Packaging Line #8 (1 oz. Tube)
8 Packaging Line #9 (1 oz. Tube)
9 Pkgg Line #10 [A#12] (O.M. Bag Fill)
10 Packaging Line #11 (Mr. Pepper/Jollytime)
11 Packaging Line #12 (1 lb. Kraft/Rykoff)
12 Extract Food Service Packaging Line
13 Extract Retail Packaging Line
14 Packaging Line #2 [Future] (4 & 8 lb.)
15 Blending Equipment
16 Production & Distribution Support
17 Office & Building Support
18 Oil Production
19 Margarine Production
20 Receiving/Distribution
21 Injection Molding
22 Blow Molding
23 Straw
24 Mayonaisse Production
25 Cook Line/Dry Mix
26 Repro Line
27 Plastics
28 Packaging Line Equipment
29 Production & Distribution Support
30 Office & Building Support
31 Portland Location
32 San Francisco Location
</TABLE>
B. The Equipment described in this part B has not been appropriately designated
as Functional Units, and each Lessor shall have the right to reject any item
of Equipment which otherwise complies with the general categories set forth
below, in which case Lessee shall have the right to propose in lieu thereof
other Equipment (consisting solely of Functional Units) by providing an
amended Delivery Date Notice, and the originally proposed Delivery Date
shall not be delayed as a result of such amendment.
Equipment Description
---------------------------
Material handling equipment, pallet racks and
office furniture at Lessee's La Mirada, CA
distribution center, and
Manufacturing and processing equipment located
at Sublessee's Akeny, Iowa facility
<PAGE> 86
EXHIBIT A
TO
PARTICIPATION AGREEMENT
FORM OF LEASE
A-1
<PAGE> 87
EXHIBIT A
TO
PARTICIPATION AGREEMENT
FORM OF
LEASE INTENDED AS SECURITY
Dated as of April 29, 1994
among
RYKOFF-SEXTON, INC.,
as Lessee,
BA LEASING & CAPITAL CORPORATION,
not individually, but solely as Agent for the Lessors,
and
The Lessors Listed on
the Signature Pages Hereto
<PAGE> 88
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article I DELIVERY AND ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Acceptance and Lease of Equipment . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Acceptance Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Article II LEASE TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1. Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2. Lease Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Article III RENT; OTHER ECONOMIC PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1. Rent Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Place and Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3. Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Article IV WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1. Warranty Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2. Assignment of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Article V POSSESSION, ASSIGNMENT, USE AND MAINTENANCE OF EQUIPMENT . . . . . . . . . . . . 5
5.1. Restriction on Lessee's Possession and Use . . . . . . . . . . . . . . . . . . . 5
5.2. Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3. Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.4. Replacement and Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5. Alterations, Modifications and Additions; Removable Parts . . . . . . . . . . . . 9
5.6. Labeling of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.7. Inspection of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Article VI RISK OF LOSS; REPLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1. Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2. Partial Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3. Partial Casualty Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Article VII INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1. Required Coverages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2. Delivery of Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . 15
Article VIII DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.3. Additional Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.4. Proceeds of Sale; Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.5. Right to Perform Lessee's Agreements . . . . . . . . . . . . . . . . . . . . . . 22
Article IX RETURN OF EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Article X EARLY TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 89
<TABLE>
<S> <C> <C>
Article XI LEASE TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1. Lessee's Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2. Election of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.3. Sale Option Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.4. Payment of Excess Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.5. Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Article XII AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1. Appointment of Agent; Powers and Authorization to Take Certain Actions . . . . . . . . 28
12.2. Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.3. Action Upon Instructions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.5. Independent Credit Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.6. Refusal to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.7. Resignation or Removal of Agent; Appointment of Successor . . . . . . . . . . . . . . . 32
12.8. Separate Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.9. Termination of Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.10. Compensation of Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Article XIII OWNERSHIP, GRANT OF SECURITY INTEREST AND FURTHER ASSURANCES . . . . . . . . . . . . . 33
13.1. Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.2. Retention of Title or Proceeds in the Case of Default . . . . . . . . . . . . . . . . . 35
Article XIV EFFECT OF WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Article XV SURVIVAL OF COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Article XVI APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XVII EFFECT AND MODIFICATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XVIII NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XIX COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XX SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XXI SUCCESSORS AND ASSIGNS; MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
21.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
21.2. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Article XXII ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.1. Assignment by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.2. Lessor Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Article XXIII BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
<PAGE> 90
<TABLE>
<S> <C> <C>
Article XXIV JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Article XXV CAPTIONS; TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Article XXVI FINAL AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Article XXVII TIMELINESS OF PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Article XXVIII DISTRIBUTION AND APPLICATION OF RENTS AND OTHER PAYMENTS . . . . . . . . . . . . . . 41
28.1. Pro Rata Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
Schedule I - Equipment
Exhibit A - Form of Investors Letter
Exhibit B - Form of Lease Supplement
<PAGE> 91
LEASE INTENDED AS SECURITY
This LEASE INTENDED AS SECURITY (as amended, modified, restated or
supplemented from time to time, this Lease") dated as of April 29, 1994 (the
"Effective Date") is between Rykoff-Sexton, Inc., a Delaware corporation
("Lessee"), with its principal office at 761 Terminal Street, Los Angeles, CA
90021, BA Leasing & Capital Corporation, Pitney Bowes Credit Corporation and
Manufacturers Bank (collectively, the "Lessors" and each a "Lessor"), and BA
Leasing & Capital Corporation, a California corporation, not in its individual
capacity, but solely in its capacity as agent under this Lease ("Agent") for
the benefit of the Lessors.
WHEREAS, pursuant to the terms and conditions set forth herein and in
that certain Participation Agreement dated as of April 29, 1994 (the
"Participation Agreement"), among Lessee, Sublessee, the Lessors and Agent,
Lessors have agreed to purchase and thereafter lease the Equipment to Lessee
pursuant to this Lease.
AND WHEREAS, the Participation Agreement contemplates that, following
Lessee's execution and delivery of this Lease, Lessee will sublease a portion
of the Equipment to Sublessee pursuant to the terms of the Sublease;
AND WHEREAS, capitalized terms used but not otherwise defined herein
(including those used in the foregoing recitals) shall have the meanings
specified in Schedule X to the Participation Agreement, unless the context
otherwise requires.
AND WHEREAS, to secure Lessee's obligations under this Lease and the
other Operative Agreements, Lessee will grant to the Agent, for the benefit of
the Lessors, a security interest in the Collateral, including, without
limitation, the Equipment and the Sublease.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
Article I
DELIVERY AND ACCEPTANCE
Section 1.1. Acceptance and Lease of Equipment. Subject to each
Participant's satisfaction or waiver, as applicable, of the conditions set
forth in Articles II and III of the Participation Agreement, on each Delivery
Date and upon execution
<PAGE> 92
and delivery of a Lease Supplement covering all of the Equipment to be
purchased on such date, Lessors shall lease to the Lessee, and Lessee will
lease from the Lessors, on the terms and subject to the conditions in this
Lease and such Lease Supplement, the Equipment purchased by the Agent on behalf
of the Lessors on such Delivery Date.
Section 1.2. Acceptance Procedure. Lessors hereby authorize one
or more employees of Lessee to be designated by Lessee as the authorized
representative or representatives of Lessors to accept delivery of the
Equipment on each Delivery Date. Lessee hereby agrees that such acceptance of
delivery by such authorized representative or representatives and the execution
and delivery by Lessee on each Delivery Date of a Lease Supplement shall,
without further act, constitute the irrevocable acceptance by Lessee of the
Equipment which is the subject thereof for all purposes of this Lease and the
other Operative Agreements on the terms set forth therein and herein.
Article II
LEASE TERM
Section 2.1. Initial Term. The commencement of the term of this
Lease shall be on the Effective Date and shall continue until, but not
including, April 29, 1995 (the "Initial Term"), unless earlier terminated in
accordance with the provisions herein or extended pursuant to Section 2.2 and
Article XI.
Section 2.2. Lease Renewal. Lessee may elect to renew this Lease
for up to five successive one-year renewal terms (each, a "Renewal Term") as
provided in Article XI.
Article III
RENT; OTHER ECONOMIC PROVISIONS
Section 3.1. Rent Payments. On each Payment Date during the
Initial Term and each Renewal Term, Lessee shall pay to Agent for the benefit
of the Lessors the Interim Rent, Basic Rent or Renewal Rent, as applicable,
that has become due and payable pursuant to the terms of each Lease Supplement
entered into prior to such Payment Date. Scheduled installments of Basic Rent
and Renewal Rent may be adjusted pursuant to Section 6.1.
Section 3.2. Place and Manner of Payment. (a) Rent and all other
sums due Lessors hereunder shall be paid in immediately available funds to
Agent, for the benefit of the Lessors, at the Agent's Corporate Office, or at
such other office of Agent as it
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may from time to time specify to Lessee in a notice pursuant to this Lease.
All such payments shall be received by Agent not later than 11:00 a.m. San
Francisco time, on the date due; funds received after such time shall for all
purposes under the Operative Agreements be deemed to have been received by
Lessor on the next succeeding Business Day. Lessee shall pay to Agent for the
benefit of the Lessors, on demand, interest (i) with respect to any overdue
amount of Rent or Make-Whole Premium, at the rate per annum which is 2% above
the Interest Rate under the Lease Supplement relating to the Functional Unit in
respect of which such amount is due and (ii) with respect to any other payment
under this Lease that is not paid when due (without taking into account any
applicable grace period), at the rate which is 2% per annum above the Interest
Rate set forth in Schedule II to the Lease Supplement delivered on the Initial
Delivery Date, and (to the extent permitted by applicable law) interest from
the date due (not taking into account any grace period) until payment is made.
(b) Agent shall make all payments to Lessors required under this Lease
or the Participation Agreement on the date the Agent receives the applicable
payment from Lessee, so long as Agent has received such payment from Lessee not
later than 9:00 a.m. San Francisco time, and if Agent receives the applicable
payment from Lessee later than 9:00 a.m. San Francisco time, then Agent shall
make payment to the Lessors on the next succeeding Business Day.
Notwithstanding the foregoing, any such amounts may be held by the Agent
pending the Agent's reasonable, good faith determination of the Lessor or
Lessors entitled to such payment (and the portion thereof payable to each
Lessor), and shall be paid by the Agent to each Lessor entitled thereto
promptly upon making such determination by transferring such amounts to such
Lessors; provided, however, that if such determination is not made by the end
of the second Business Day following receipt by the Agent of the applicable
payment and the amount of such payment shall exceed, in the aggregate,
$100,000, the Agent shall, at the request of the Required Lessors, invest such
funds in Permitted Investments.
Section 3.3. Net Lease. This Lease is a net lease and Lessee's
obligation to pay all Rent, indemnity and other amounts payable hereunder shall
be absolute and unconditional under any and all circumstances and, without
limiting the generality of the foregoing, Lessee shall not be entitled to any
abatement or reduction of Rent or any setoff against Rent, indemnity or other
amount, whether arising by reason of any past, present or future claims of any
nature by Lessee against Agent or any Lessor, or otherwise. Except as
otherwise expressly provided herein, this Lease shall not terminate, nor shall
the obligations of Lessee be otherwise affected (a) by reason of any defect in,
damage to, or loss of possession or use, obsolescence or destruction, of any or
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all of the Equipment, however caused; or (b) by the taking or requisitioning of
any or all of the Equipment by condemnation or otherwise; or (c) by the
invalidity or unenforceability or lack of due authorization by Agent, Lessors
or Lessee or other infirmity of this Lease; or (d) by lack of power or
authority of Lessor to enter into this Lease; or (e) by the attachment of any
Lien of any third party to any item of Equipment; or (f) by any prohibition or
restriction of or interference with Lessee's use of any or all of the Equipment
by any Person; or (g) by the insolvency of or the commencement by or against
Lessee, Agent or any Lessor of any bankruptcy, reorganization or similar
proceeding; or (h) by any other cause, whether similar or dissimilar to the
foregoing, any present or future law to the contrary notwithstanding. It is
the intention of the parties that all Rent, indemnities and other amounts
payable by Lessee hereunder shall be payable in all events in the manner and at
the times herein provided unless Lessee's obligations in respect thereof have
been terminated or modified pursuant to the express provisions of this Lease.
To the extent permitted by applicable law, Lessee waives any and all rights
which it may now have or which may at any time be conferred upon it, by statute
or otherwise, to terminate, cancel, quit or surrender this Lease, in whole or
in part, except strictly in accordance with the express terms hereof. Each
rental, indemnity or other payment made by Lessee hereunder shall be final, and
Lessee shall not seek to recover (except as expressly provided in this Lease)
all or any part of such payment from Lessors or the Agent for any reason
whatsoever.
Article IV
WARRANTIES
Section 4.1. Warranty Disclaimer. LESSEE ACKNOWLEDGES AND AGREES
THAT: (a) THE EQUIPMENT IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY LESSEE; (b) LESSEE IS SATISFIED THAT THE SAME IS SUITABLE FOR ITS
PURPOSES; (c) NEITHER AGENT NOR ANY LESSOR IS A MANUFACTURER THEREOF OR A
DEALER IN PROPERTY OF SUCH KIND; AND (d) NEITHER AGENT NOR ANY LESSOR HAS MADE
OR SHALL BE DEEMED TO HAVE MADE: (i) ANY REPRESENTATION OR WARRANTY OR COVENANT
WITH RESPECT TO THE TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
CONDITION, QUALITY, DESCRIPTION, DURABILITY OR SUITABILITY OF ANY ITEM OF
EQUIPMENT IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES AND USES OF
LESSEE; OR (ii) ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO ANY ITEM OF EQUIPMENT, EXCEPT THAT EACH OF THE LESSORS
REPRESENTS AND WARRANTS, SEVERALLY AND NOT JOINTLY, THAT ON EACH DELIVERY DATE
IT SHALL HAVE RECEIVED AN UNDIVIDED INTEREST IN WHATEVER TITLE WAS CONVEYED BY
THE MANUFACTURERS OF THE EQUIPMENT DELIVERED ON SUCH DELIVERY DATE BY
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<PAGE> 95
SUCH MANUFACTURERS, FREE OF LESSOR LIENS CREATED BY SUCH LESSOR EXCEPT FOR
PERMITTED LESSOR LIENS AND LIENS CREATED PURSUANT TO THE OPERATIVE AGREEMENTS.
Section 4.2. Assignment of Warranties. Lessors assign to Lessee,
to the extent assignable, all of their interest, if any, in any warranties,
covenants and representations of any manufacturer, producer, vendor or maker of
any item of Equipment, provided that such assignment shall remain in effect
only so long as no Event of Default has occurred and is continuing, and
provided, further, that any action taken by Lessee by reason thereof shall be
at the expense of Lessee and shall be consistent with Lessee's obligations
pursuant to this Lease.
Article V
POSSESSION, ASSIGNMENT, USE AND
MAINTENANCE OF EQUIPMENT
Section 5.1. Restriction on Lessee's Possession and Use. Lessee
shall not (a) use, operate, maintain or store any Functional Unit, item of
Equipment or any portion thereof (i) except in accordance with Section 5.3; or
(ii) in violation of any applicable insurance policy or law or regulation of
any Authority; (b) abandon any item of Equipment; (c) except as permitted by
Section 5.2 and Section 6.1 of the Participation Agreement, sublease or assign,
without the prior written consent of Lessor, any item of Equipment or permit
the use thereof by anyone other than Lessee; (d) except as set forth in Section
5.2 and Section 6.1 of the Participation Agreement, sell, assign or transfer
any of its rights hereunder or in any item of Equipment, or directly or
indirectly create, incur or suffer to exist any Lien on any of its rights
hereunder or in any item of Equipment, except for Permitted Liens; or (e)
except in connection with any maintenance or repair thereof, permit any item of
Equipment or any Part relating to such item of Equipment to be located at any
location other than the location of such Equipment or Part as of the Delivery
Date applicable thereto and as set forth opposite such item of Equipment on
Schedule I of the applicable Lease Supplement. Lessee will defend the sale of
the Equipment by Lessee and Manufacturers to Agent, for the benefit of the
Lessors, against the claims or demands of all Persons.
Section 5.2. Sublease. Subject to Sections 6.1(a) and 6.2(a) of
the Participation Agreement, so long as no Event of Default has occurred and is
continuing, Lessee may sublease one or more Functional Units to a Subsidiary of
Lessee without the prior written consent of Lessors or Agent; provided that (i)
any such sublease shall automatically expire upon the expiration of the Lease
Term or any earlier termination of this Lease and shall
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<PAGE> 96
be expressly subject and subordinate to this Lease and the Liens created
hereby, (ii) the sublease agreement shall be in writing and shall expressly
prohibit any further assignment, sublease or transfer and (iii) all of Lessee's
rights, title and interest in, to and under the sublease shall be pledged by
Lessee to Lessors, as collateral for Lessee's obligations under the Operative
Agreements, by delivery of an executed copy upon the execution and delivery
thereof, marked as the sole original execution copy for Uniform Commercial Code
purposes, to the Agent, and Lessee shall, at its own cost and expense, do any
further act and execute, acknowledge, deliver, file, register and record any
further documents which the Agent or Lessors may reasonably request in order to
create, perfect, preserve and protect Agent's and Lessors' security interest in
the sublease. Lessee shall remain primarily liable hereunder for the
performance of all of the terms of this Lease to the same extent as if such
sublease had not been entered into.
Section 5.3. Maintenance. Lessee shall at its own cost and
expense and at all times during the term of this Lease (a) maintain, manage and
monitor the Equipment in compliance with all applicable requirements of any
law, Authority and/or insurance policies; (b) maintain the Equipment (or cause
the Equipment to be maintained) in as good operating order, repair, condition
and appearance as it was on the date such Equipment became subject to this
Lease (assuming that, as of such date, the Equipment was in good operating
order, repair, condition and appearance), ordinary wear and tear excepted; (c)
maintain, manage and monitor the Equipment in accordance with the terms of all
applicable contracts (including, without limitation, service contracts and
insurance contracts); (d) conduct all scheduled maintenance of the Equipment in
conformity with Lessee's past practices, and manufacturer's maintenance and
repair guidelines, for similar equipment (including, without limitation,
Lessee's maintenance program for such equipment); and (e) cause the Equipment
to continue to have at all times the capacity and functional ability to
perform, on a continuing basis (subject to normal interruption in the ordinary
course of business for maintenance, inspection, service, repair and testing)
and in commercial operation, the functions for which it was specifically
designed. Lessee shall in any event maintain the Equipment (or cause the
Equipment to be maintained) in at least as good a condition as comparable
equipment owned or leased by it or any of its Subsidiaries. Lessee will
maintain or cause to be maintained and shall permit the Agent and Lessors to
inspect any records, logs and other materials required by any governmental
authority having jurisdiction to be maintained or filed in respect of any items
of Equipment.
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Section 5.4. Replacement and Substitution.
(a) In the event that any Part which may from time to
time be incorporated or installed in or attached to any item of
Equipment, or any item of Equipment itself, becomes at any time worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason whatsoever
(unless such event constitutes a Casualty or Partial Casualty, in
which event the provisions of Section 6.1 or 6.2 hereof shall apply),
Lessee, at its own cost and expense, will promptly replace, or cause
to be replaced, such Part or item of Equipment (the "Substituted Item")
with a replacement Part or item of Equipment (a "Replacement Part").
In addition, Lessee may, at its own cost and expense, remove in the
ordinary course of maintenance, service, repair, overhaul or testing,
any Part, whether or not worn out, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, provided
that Lessee will, at its own cost and expense, replace such Part as
promptly as is commercially reasonable. All Replacement Parts shall
be free and clear of all Liens (other than Permitted Liens) and shall
be in as good an operating condition as, and shall have a value and
utility at least equal to, the Parts replaced, assuming such replaced
Parts and the Equipment were immediately prior to such replacement or
the event or events necessitating such replacement in the condition
and repair required to be maintained by the terms hereof. Any Part at
any time removed from any item of Equipment shall remain subject to
the interests of the Agent and the Lessors under the Operative
Agreements, no matter where located, until such time as such Part
shall be replaced by a Part which has been incorporated or installed
in or attached to such item of Equipment and which meets the
requirements for a Replacement Part specified above. Immediately upon
any Replacement Part becoming incorporated or installed in or attached
to any such item of Equipment as above provided, without further act
(i) title to the replaced Part shall thereupon vest in Lessee, free
and clear of all rights of the Lessors, and shall no longer be deemed
a Part hereunder, (ii) title to such Replacement Part shall thereupon
vest in the Lessors and (iii) such Replacement Part shall become
subject to this Lease and the security interest created hereunder and
be deemed part of such item of Equipment for all purposes hereof to
the same extent as the Parts incorporated or installed in or attached
to such item of Equipment on the date such item of Equipment became
subject to this Lease. No later than 45 days after the end of each
fiscal quarter of Lessee, Lessee shall deliver to Lessors a Bill of
Sale evidencing the conveyance by Lessee to the Lessors of all
Replacement Parts not previously evidenced by
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<PAGE> 98
a Bill of Sale and such other documents in respect of such Part or
Parts as the Required Lessors may reasonably request in order to
confirm that title to such Part or Parts has passed to Lessors, as
provided above. Each such Bill of Sale shall provide that each Lessor
is granted an undivided interest in such Replacement Parts equal to
its Lease Percentage as of the date of such transfer.
(b) In addition to the foregoing, Lessee shall have the option
at any time to replace any Functional Unit (a "Replaced Unit") with a
substitute Functional Unit (a "Replacement Unit"), subject to the
following conditions:
(i) any such Replacement Unit shall satisfy one of
the following conditions: (x) the Replacement Unit shall
consist of items of new equipment of identical manufacture and
model as the equipment comprising the Replaced Unit, or (y)
such Replacement Unit shall have a utility, an Appraised
Value, and an economic useful life at least equal to those of
the Replaced Unit immediately prior to such substitution,
assuming that the Replaced Unit was in the condition and
repair required to be maintained by the terms of this Lease,
and Lessee shall have provided to the Agent and each Lessor,
at Lessee's expense, an Appraisal satisfactory to Agent and
each Lessor in their sole and absolute discretion with respect
to the determination of such utility, Fair Market Value and
economic useful life or (z) such Replacement Unit shall
otherwise be acceptable to each of the Lessors in its
respective sole and absolute discretion;
(ii) Lessee shall have satisfied each of the
conditions set forth in Section 4.3 of the Participation
Agreement (other than subsection (b) thereof) with respect to
the proposed replacement; and
(iii) Lessee shall not remove the Replaced Unit from
the location set forth on Schedule I to the Delivery Date
Notice pursuant to which the Replaced Unit was delivered until
such time as it has executed all documents reasonably
requested by Agent or any Lessor to perfect the security
interest of the Agent, for the benefit of the Lessors, in the
Replacement Unit.
Any Replacement Unit substituted in accordance with this Section
5.4(b) shall thereafter be considered a Functional Unit for all
purposes of this Lease.
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(c) Lessee may request the replacement of an item of
Equipment (pursuant to the foregoing subsection (a)) or a Functional
Unit (pursuant to the foregoing subsection (b) by delivery of a
Replacement Notice in the manner described in Section 4.3 of the
Participation Agreement. Upon the satisfaction of the conditions
specified in such Section 4.3, each in form and substance satisfactory
to the Required Lessors, and the Replacement Part or Replacement Unit
becoming subject to this Lease and the security interest created
hereunder, Lessor shall execute and deliver to Lessee a bill of sale
(without representations or warranties, except that the Substituted
Item or Replaced Unit, as the case may be, is free and clear of all
Lessor Liens) and such other documents as may be required to release
the Substituted Item or Replaced Unit, as the case may be, from the
terms and scope of this Lease, in such form as may be reasonably
requested by Lessee and are in form and substance satisfactory to the
Lessors, all at Lessee's own cost and expense.
Section 5.5. Alterations, Modifications and Additions; Removable
Parts.
(a) Except as provided in Section 5.4, Lessee shall not
remove, replace, modify, improve or alter (collectively, "alter") any
item of Equipment or affix or place any Part on any item of Equipment
if such alteration or addition would materially impair the originally
intended function or use or materially reduce the value of such item
of Equipment or the Functional Unit to which such item of Equipment
belongs, provided that Lessee, at its own cost and expense, will make,
or cause to be made any alteration or addition to or in respect of any
item of Equipment that may be necessary, from time to time, to comply
in all material respects with any applicable law, governmental rule or
regulation (including any Environmental Law) or any provision of any
insurance policy required to be maintained under Section 7.1 (any
Parts being used to comply with this provision shall be hereafter
referred to as "Mandatory Parts"); provided, however, that Lessee
shall be under no obligation to take such action so long as the
application of the applicable law, rule, regulation or provision is
being contested by Lessee pursuant to a Permitted Contest. Lessee
shall notify Agent and the Lessors in advance of any proposed
alteration of or addition to any item of Equipment if the cost of such
alteration or addition, in the aggregate, can reasonably be expected
to exceed $250,000, or if such advance notice is not practicable,
within 30 days after the completion of such alteration or addition.
All Parts affixed to or installed as a part on any item of Equipment,
excluding temporary
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replacements, shall thereupon become subject to the security interest
under this Lease.
(b) If no Event of Default shall exist, Lessee may remove, at
its own cost and expense, any Part at any time during the term of this
Lease (such Part, a "Removable Part") which (i) is in addition to, and
not in replacement of or substitution for, any Part originally
incorporated or installed in or attached to an item of Equipment on
the date such item became subject to this Lease or any Part in
replacement of or substitution for any such Part originally
incorporated or installed or attached to such Equipment, (ii) is not a
Mandatory Part and (iii) can be removed from any item of Equipment
without causing damage to such item of Equipment or diminishing or
impairing the value, utility or condition that such item of Equipment
would have had at such time had such addition not occurred, provided
that (x) such removal will not materially impair the value or use
which the item of Equipment would have had at such time had such Part
not been affixed to or placed on such Equipment, (y) such Part is not
necessary for the continued normal use of such item of Equipment and
(z) such removal would not cause the Functional Unit to which such
items of Equipment belong to no longer constitute a Functional Unit.
Lessee shall repair all damage to the item of Equipment resulting from
any alteration so as to restore any item of Equipment to the condition
in which it existed prior to such alteration (ordinary wear and tear
excepted). Lessors shall not have any obligation to pay for or to
reimburse Lessee for any alteration permitted by this Section 5.5.
Title to all Parts incorporated or installed in or attached or added to any
item of Equipment as the result of alterations, modifications or additions
under this Section 5.5, except Removable Parts, shall, without further act,
vest in Agent, for the benefit of the Lessors, in the manner provided in clause
(ii) of Section 5.4(a) and the other applicable provisions of Section 5.4 shall
apply with respect to such Parts. Title to any Removable Part shall not vest
in Agent, and upon the removal by Lessee of any Removable Part as provided
herein, such Removable Part shall no longer be deemed part of the item of
Equipment from which it was removed. Any Removable Part not removed by Lessee
as provided herein prior to the end of the Lease Term or applicable Renewal
Term shall become the property of Agent, for the benefit of the Lessors, at
such time.
Section 5.6. Labeling of Equipment. Lessee shall as soon as
practicable affix and keep throughout the Lease Term, including any Renewal
Terms, labels, plates or other markings, bearing the inscription "Security
Interest held by BA Leasing &
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Capital Corporation, as agent for the Lessors" upon a prominent place on each
item of Equipment reasonably susceptible to being so labeled.
Section 5.7. Inspection of Collateral. Agent, the Lessors and
each of their agents and representatives shall have the right at all reasonable
times, upon reasonable notice, to inspect any Collateral.
Article VI
RISK OF LOSS; REPLACEMENT
Section 6.1. Casualty. Upon a Casualty, Lessee shall give prompt
written notice thereof (a "Casualty Notice") to Agent and Lessors, which notice
shall specify whether Lessee will:
(a) repay the Functional Unit Balance for each Functional
Unit subject to such Casualty together with unpaid Accrued Supplement
Rent on each such Functional Unit Balance so prepaid to the date of
payment and the applicable Make-Whole Premium on each such Functional
Unit Balance so repaid. All such amounts shall be paid to Agent for
the benefit of the Lessors no later than the next scheduled Payment
Date occurring at least 30 days after such Casualty, but in no event
later than the Termination Date (such date being referred to as the
Casualty Settlement Date"); or
(b) replace pursuant to the provisions of Section 5.4(b)
hereof and Section 4.3 of the Participation Agreement each Functional
Unit with respect to which the Casualty has occurred; provided,
however, that upon the occurrence of an Event of Default or an event
which with the giving of notice and/or the passage of time could give
rise to an Event of Default, Lessee shall be obligated, at the option
of the Required Lessors, to make the payments referred to inclause (a)
above and shall not be entitled to exercise any right or election of
replacement as set forth in this clause (b).
All proceeds of any casualty insurance or condemnation proceeds
("Casualty Proceeds") paid to the Lessee or any of its Affiliates by reason of
a Casualty to a Functional Unit shall be deposited into a deposit account
established by Agent for the benefit of the Lessors (the "Deposit Account").
Any Casualty Proceeds paid to Agent with respect to a Functional Unit suffering
a Casualty shall also be deposited in the Deposit Account. Any monies in the
Deposit Account attributable to a Casualty shall be remitted promptly to Lessee
after either (i) Lessee's payment in full of the Functional Unit Balance
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together with the applicable Make-Whole Premium or (ii) Lessee's full
compliance with the conditions governing a Replacement Part, as applicable
pursuant to clause (a) or (b) above.
If Lessee has elected to pay the Functional Unit Balance and an amount
equal to the applicable Make-Whole Premium pursuant to clause (a) above, Lessee
shall continue to make all payments of Rent due hereunder in respect of the
Functional Unit or Units suffering a Casualty through the date the Functional
Unit Balance and the applicable Make-Whole Premium are paid. Upon payment of
each of the amounts required by Section 6.1(a), then all scheduled installments
of Rent, including installments of Renewal Rent, thereafter payable for the
remainder of the Lease Term in respect of the Lease Supplement applicable to
the Functional Unit or Units suffering the Casualty, and the portion of the
Purchase Option Exercise Amounts allocable to such Lease Supplement, shall be
re-calculated by the Agent in the manner specified in Section 3.1 of the
Participation Agreement, without taking into account the Purchase Price or
Functional Unit Balance of the Functional Unit suffering the Casualty.
Section 6.2. Partial Casualty. Upon any Partial Casualty with
respect to a Functional Unit, Lessee shall give to Agent and Lessors a Notice
of Partial Casualty. As soon as practicable after a Partial Casualty, Lessee
shall (a) repair and rebuild the affected portions of such Functional Unit (or
cause such affected portions to be repaired and rebuilt) to the condition
required to be maintained by Section 5.3 hereof, provided that the value and
functional capability of such Functional Unit, as restored, is at least
equivalent to the value and functional capability of such Functional Unit as in
effect immediately prior to the occurrence of such Partial Casualty or (b)
replace such affected items of Equipment with Replacement Parts pursuant to the
provisions of Section 5.4(a).
Section 6.3. Partial Casualty Proceeds. All Partial Casualty
Proceeds received by Lessee or any of its Affiliates as a result of a Partial
Casualty shall be promptly paid to Agent. Agent shall deposit such Partial
Casualty Proceeds into the Deposit Account and, so long as no Event of Default
or event which with the giving of notice and/or passage of time could give rise
to an Event of Default shall exist, Agent shall disburse such Partial Casualty
Proceeds with respect to a Functional Unit (or an item of Equipment
constituting part of such Functional Unit) suffering a Partial Casualty as
follows:
(a) to Lessee in reimbursement of the costs of repairing
and rebuilding the affected portions of such Functional Unit (or item
of Equipment constituting part of such Functional Unit) suffering a
Partial Casualty which the
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Lessee has chosen to repair and rebuild in accordance with Section
6.2; or
(b) upon a Replacement Part being duly substituted for
each item of Equipment having suffered a Partial Casualty, to Lessee
to the extent Partial Casualty Proceeds with respect to the
corresponding Substituted Item were deposited into the Deposit
Account.
Partial Casualty Proceeds held by Agent and to be distributed in
accordance with paragraph (a) of this Section 6.3 shall be disbursed by Agent
from the Deposit Account to Lessee from time to time (but no more frequently
than once per calendar month) to reimburse Lessee for the costs of repairing
and rebuilding the affected Functional Units as required under Section 6.2(a),
subject to such reasonable disbursement conditions as Agent may impose,
including presentation of invoices and other supporting documentation
reflecting such costs and delivery of Lien waivers; provided, however, that
Agent shall have no obligation to disburse any Partial Casualty Proceeds out of
the Deposit Account at any time that Agent, at the direction of the Required
Lessors, shall reasonably determine (i) that such Partial Casualty Proceeds are
not sufficient to repair and rebuild the affected Functional Units as required
by Section 6.2(a) (unless additional funds which are, in the sole discretion of
the Required Lessors, sufficient to so repair and rebuild the affected
Functional Units have been deposited in the Deposit Account) or (ii) that
Lessee is not diligently performing its obligations under Section 6.2.
Notwithstanding the foregoing provisions of this Section 6.3, and provided that
no Event of Default and no event which with the giving of notice and/or passage
of time could become an Event of Default shall exist, if the aggregate amount
of Partial Casualty Proceeds attributable to any Partial Casualty is $100,000
or less, Lessee may receive such Partial Casualty Proceeds directly, without
delivery to Agent, provided that such Partial Casualty Proceeds are applied in
accordance with the requirements of Section 6.2. In the event that Agent
receives Partial Casualty Proceeds in an amount that is less than $100,000 and
provided that no Event of Default and no event which with the giving of notice
and/or passage of time could become an Event of Default shall exist, Agent
shall promptly remit such funds to Lessee. Notwithstanding any Partial
Casualty, all of Lessee's obligations under this Lease (including its
obligation to make all payments of Rent as they become due) shall continue
unabated and in full force and effect as provided in this Lease.
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Article VII
INSURANCE
Section 7.1. Required Coverages. Lessee will keep the Equipment
insured by financially sound and reputable insurers against loss or damage,
with insurance of the kinds and in the amounts customarily maintained by
similar corporations engaged in similar operations in similar jurisdictions and
carry such other insurance as is usually carried by such corporations, provided
that in any event Lessee will maintain:
(a) Casualty Insurance -- insurance against risks of
direct physical loss or damage with respect to the Equipment
(including, without limitation, earthquake insurance) with deductibles
and in such minimum amounts as are consistent with industry standards;
provided, however, that at no time shall the amount of coverage, on a
replacement cost basis, be less than the sum of (x) the Lease Balance
and (y) an amount equal to the aggregate portion of the interest
component of Basic Rent or Renewal Rent to be accrued under all Lease
Supplements for 90 days following the date of determination;
(b) Public Liability Insurance -- combined single limit
insurance against claims for bodily injury, death or property damage
in an amount at least equal to $5,000,000 per occurrence with such
deductibles as are carried by similarly situated companies involved in
operating similar facilities and equipment; and
(c) Other Insurance -- such other insurance, including
comprehensive motor vehicle, worker's compensation and business
interruption insurance, in each case as generally carried by owners of
equipment similar to the Equipment and properties in the States of
California, Iowa and Oregon, in such amounts and against such risks as
are then customary for equipment and property similar in use.
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 rating of at least "10" or be otherwise acceptable to the Required
Lessors. Property/Casualty insurance maintained by Lessee shall name Agent,
for the benefit of the Lessors, as sole loss payee to the extent such claims
relate to items of Equipment subject to this Lease, and liability insurance
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maintained by Lessee shall name Agent, together with the Lessors, as additional
insureds. Each policy referred to in this Section 7.1 shall provide that (i)
it will not be cancelled or its limits reduced, or allowed to lapse without
renewal, except after not less than 30 days' written notice to Agent and the
Lessors, (ii) the interests of Agent and the Lessors shall not be invalidated
by any act or negligence of Lessee or any person having an interest in any item
of Equipment, (iii) such insurance is primary with respect to any other
insurance carried by or available to Agent and the Lessors, (iv) the insurer
shall waive any right of subrogation, setoff, counterclaim, or other deduction,
whether by attachment or otherwise, against Agent and the Lessors and (v) such
policy shall contain a cross-liability clause providing for coverage of Agent
and each Lessor as if separate policies had been issued to each of them.
Lessee will notify Agent and Lessors promptly of any policy cancellation,
reduction in policy limits, modification or amendment.
Section 7.2. Delivery of Insurance Certificates. On or before the
Initial Delivery Date and thereafter on each Subsequent Delivery Date, Lessee
shall deliver to Agent (with a copy to each Lessor) certificates of insurance
reasonably satisfactory to the Lessors evidencing the existence of all
insurance required to be maintained hereunder and setting forth the respective
coverages, limits of liability, carrier, policy number and period of coverage.
Thereafter, throughout the Lease Term, no sooner than 10 days before and no
later than on the last day of April (commencing in 1995), Lessee shall deliver
to Agent (with a copy to each Lessor) certificates of insurance evidencing that
all insurance required by Section 7.1 hereof to be maintained by Lessee with
respect to the Equipment subject to this Lease is in effect. With each such
certificate of insurance (other than certificates delivered in connection with
Delivery Date Closings) Lessee shall cause to be delivered a written report of
a firm of independent insurance brokers of nationally recognized standing,
stating that, in their opinion, such policy is in compliance with the
provisions of Section 7.1 hereof and is comparable in all material respects
with insurance carried by responsible owners and operators of equipment similar
to the Equipment.
Article VIII
DEFAULT
Section 8.1. Events of Default. The following shall constitute
events of default (each an "Event of Default") hereunder (whether any 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
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of any court or any order, rule or regulation of any administrative or
governmental body):
(a) any payment of Rent shall not be paid when due, or
any other payment payable by Lessee under any Operative Agreement
shall not be paid within ten (10) Business Days;
(b) any representation or warranty on the part of Lessee
contained in any Operative Agreement or in any certificate, letter or
other writing or instrument furnished or delivered to Agent or the
Lessors pursuant thereto shall at any time prove to have been
incorrect in any material respect when made, deemed made or
reaffirmed, as the case may be;
(c) Lessee shall default in the performance or observance
of any term, covenant, condition or agreement on its part to be
performed or observed underSections 5.1(c) or 5.1(d), Section 5.2,
Article XI, or Section 21.2 hereof;
(d) Lessee shall default in any material respect in the
performance or observance of any term, covenant, condition or
agreement on its part to be performed or observed under Section 7.1
hereof;
(e) Lessee shall default in any material respect in the
performance or observance of any other term, covenant, condition or
agreement on its part to be performed or observed hereunder or under
any other Operative Agreement (and not constituting an Event of
Default under any other clause of this Section 8.1), and such default
shall continue unremedied for a period of 30 days after the earlier to
occur of (i) written notice thereof by Agent or any Lessor to Lessee
or (ii) Lessee has Actual Knowledge thereof, provided that if such
failure cannot be remedied within such 30-day period and Lessee is
diligently proceeding, as determined in the absolute discretion of the
Required Lessors, to correct such failure of performance and such
failure of performance is capable of being remedied within a single
additional 30-day period, such period shall be extended for an
additional 30 days;
(f) (i) Lessee shall generally fail to pay, or admit in
writing its inability to pay, its debts as they become due, or shall
voluntarily commence any case or proceeding or file any petition under
any bankruptcy, insolvency or similar law seeking dissolution,
liquidation or reorganization or the appointment of a receiver, agent,
custodian or liquidator for itself or a substantial portion of its
property, assets or business or to effect a plan or other arrangement
with its creditors, or shall file any
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answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition filed against it in any
bankruptcy, insolvency or similar case or proceeding, or shall be
adjudicated bankrupt, or shall make a general assignment for the
benefit of creditors, or shall consent to, or acquiesce in the
appointment of, a receiver, agent, custodian or liquidator for itself
or a substantial portion of its property, assets or business or (ii)
corporate action shall be taken by Lessee for the purpose of
effectuating any of the foregoing;
(g) involuntary proceedings or an involuntary petition
shall be commenced or filed against Lessee under any bankruptcy,
insolvency or similar law or seeking the dissolution, liquidation or
reorganization of Lessee or the appointment of a receiver, agent,
custodian or liquidator for Lessee or of a substantial part of the
property, assets or business of Lessee, or any writ, judgment, warrant
of attachment, execution or similar process shall be issued or levied
against a substantial part of the property, assets or business of
Lessee, and such proceedings or petition shall not be dismissed or
stayed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within
60 days after commencement, filing or levy, as the case may be;
(h) a contribution failure occurs with respect to any
Pension Plan (other than a Multiemployer Plan) sufficient to give rise
to a lien under Section 302(f) of ERISA or Section 412(n) of the Code
with respect to any Pension Plan (other than a Multiemployer Plan) as
to which Lessee or any Related Person to Lessee may have any
liability, there shall exist an unfunded current liability (as defined
in 302(d)(8) of ERISA) with respect to any Pension Plan which unfunded
current liability is material to the consolidated financial condition
of Lessee and its consolidated subsidiaries taken as a whole, steps
are undertaken to terminate any Pension Plan, any Reportable Event
occurs with respect to a Pension Plan for which notice to the PBGC has
not been waived, any action is taken with respect to a Pension Plan
which could result in the requirement that Lessee or any Related
Person to Lessee furnish a bond or other security to the PBGC or such
Pension Plan, the occurrence of any event which could cause Lessee or
any Related Person to Lessee to incur any material liability, fine or
penalty with respect to any Pension Plan or any material increase in
liability with respect to any Pension Plan, or the occurrence of any
event that could result in any material increase in the liability (or
contingent liability) of Lessee or any Related Person to Lessee with
respect to post-retirement benefits under any Welfare Plan;
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(i) any Operative Agreement or the security interest
granted under this Lease shall (except in accordance with its terms),
in whole or in part, terminate, cease to be effective or cease to be
the legally valid, binding and enforceable obligation of Lessee, or
Lessee or any of its Subsidiaries shall, directly or indirectly,
contest in any manner in a court of competent jurisdiction the
effectiveness, validity, binding nature or enforceability thereof or
the security interest securing Lessee's obligations under the
Operative Agreements shall, in whole or in part, cease to be a
perfected first priority security interest;
(j) Lessee or any of its Subsidiaries shall fail to make
any payment when due in respect of any indebtedness (including,
without limitation, the indebtedness under the Prior Debt Agreements)
or any guarantee, installment purchase agreement or similar contingent
obligation, or as a result of an event of default, the maturity of an
indebtedness (including, without limitation, the indebtedness under
the Prior Debt Agreements) or contingent obligation has been
accelerated prior to its express maturity,provided that the aggregate
of all such defaulted payments and/or accelerations of principal
exceeds $5,000,000 or more;
(k) a judgment or judgments for the payment of money are
entered by a court or courts of competent jurisdiction against Lessee
or any of its Subsidiaries, and such judgment or judgments remain
undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all
such judgments exceeds $5,000,000; and
(l) Lessee or any of its "subsidiaries" (as defined in
the Credit Agreement) shall default after the Expiration Date in the
performance or observance of the covenants set forth in Sections 6.10,
6.11, 6.12, 6.13 or 6.14 of the Credit Agreement as these Sections are
in effect on the Expiration Date, it being understood that, for
purposes of thisSection 8.1(l), the aforementioned covenants and the
related definitions and ancillary provisions from the Credit Agreement
shall be incorporated by reference herein for the benefit of the
Lessors and Agent and shall be treated as having survived any
termination of the Credit Agreement so long as any obligation of
Lessee may be due and owing under any Operative Agreement.
Section 8.2. Remedies. If any Event of Default has occurred and
is continuing, Agent, on behalf of the Lessors as provided for in Article XII,
may exercise in any order one or
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more or all of the remedies set forth in this Section 8.2 (it being understood
that no remedy herein conferred is intended to be exclusive of any other remedy
or remedies, but each and every remedy shall be cumulative and shall be in
addition to every other remedy given herein or now or hereafter existing at law
or in equity or by statute, including without limitation any applicable Uniform
Commercial Code).
(a) Agent may proceed by appropriate court action or
actions, either at law or in equity, to enforce performance by Lessee
of the applicable covenants of this Lease or to recover damages for
the breach thereof.
(b) Agent (with the consent of the Required Lessors) may
by notice in writing to Lessee terminate this Lease, but Lessee shall
remain liable as hereinafter provided; and Agent may do any one or
more of the following, as instructed by the Required Lessors: (i)
declare the Lease Balance, all unpaid Accrued Rent, all other amounts
then due and payable by Lessee under this Lease and the other
Operative Agreements and an amount equal to the Aggregate Make-Whole
Premium to be immediately due and payable, and recover any other
damages and expenses (including the costs and expenses described in
Sections 7.1, 7.2 and 11.5 of the Participation Agreement) in addition
thereto which Lessor shall have sustained by reason of such Event of
Default, (ii) enforce the security interest given hereunder pursuant
to the Uniform Commercial Code or any other law, (iii) enter upon the
premises where any item of Equipment may be and either remove such
Equipment (or any portion thereof), with any damage to the
improvements upon which the Equipment may be attached to be borne by
Lessee, or take possession of the Equipment and (iv) require Lessee to
disassemble and return the Equipment as provided in Article IX hereof.
(c) Agent may require Lessee immediately to purchase the
Equipment for a purchase price equal to the sum of the Lease Balance,
all unpaid Accrued Rent, an amount equal to the Aggregate Make-Whole
Premium and all other amounts then due and payable under the Operative
Agreements.
(d) If an Event of Default set forth in Section 8.1(a) (a
"Payment Default") shall have occurred, any Lessor may declare the
Lease Balance immediately due and payable by giving written notice to
Agent, Lessee and each other Lessor, whereupon the unpaid Lease
Balance together with the Aggregate Make-Whole Premium, if any, and
all unpaid Accrued Rent shall become immediately due and payable
without further act or notice of any kind. If an Event of Default set
forth in Sections 8.1(f) or 8.1(g) (an "Insolvency Defaul") shall have
occurred, the unpaid Lease Balance
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together with the Aggregate Make-Whole Premium, if any, and all unpaid
Accrued Rent shall become immediately due and payable without further
act or notice of any kind. If an Event of Default other than an
Insolvency Default or a Payment Default shall have occurred and be
continuing, the Agent, with the consent of the Required Lessors, may
declare the Lease (and each Lease Supplement) to be terminated and all
payments thereunder to be due and payable immediately by giving
written notice to Agent, Lessee and each Lessor, whereupon the unpaid
Lease Balance together with the Aggregate Make-Whole Premium, if any,
and all unpaid Accrued Rent shall become immediately due and payable
without further act or notice of any kind. Nothing contained in this
Section 8.2 shall limit the application of Article XXVIII in
accordance with its terms.
Except for notices expressly otherwise provided for in the Operative
Agreements, Lessee hereby waives presentment, demand, protest and notice of any
kind including, without limitation, notices of default, notice of acceleration
and notice of intent to accelerate.
Section 8.3. Additional Remedies. In addition to the remedies set
forth in Section 8.2, if any Event of Default shall occur, Agent shall, if
instructed by the Required Lessors, sell the Collateral in one or more sales;
provided, Lessors shall have no liability to Lessee if they fail to instruct
Agent to conduct such a sale. Any Lessor or Agent may purchase all or any part
of the Collateral at such sale. Lessee acknowledges that sales for cash or on
credit to a wholesaler, retailer or user of such Collateral, at a public or
private auction, are all commercially reasonable. Any notice required by law
of intended disposition by Agent shall be deemed reasonable and properly given
if given at least 10 days before such disposition.
Section 8.4. Proceeds of Sale; Deficiency. All payments received
and amounts held or realized by Agent at any time when an Event of Default
shall have occurred and be continuing, as well as all payments or amounts then
held or thereafter received by Agent, shall be distributed forthwith upon
receipt by Agent in the following order of priority:
first: so much of such payments or amounts as shall be
required to pay the reasonable fees and compensation of Agent in
connection with acting as Agent not previously paid by Lessee shall be
distributed to Agent;
second: so much of such payments or amounts as shall be
required to reimburse first Agent and then any Lessor for any tax
(except as excluded pursuant to Section 8.1 of the Participation
Agreement), expense or other amount owed to
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Agent (in its capacity as Agent) or any Lessor in connection with the
collection or distribution of such payments or amounts to the extent
not previously reimbursed by Lessee (including, without limitation,
the expenses of any sale, taking or other proceeding, expenses in
connection with realizing on any of the Collateral, reasonable
attorneys' fees and expenses (including the allocated costs of
internal counsel), court costs and any other reasonable expenditures
incurred or reasonable expenditures or advances made by Agent (in its
capacity as Agent) or any Lessor in the protection, exercise or
enforcement of any right, power or remedy upon such Event of Default
whether pursuant to Section 8.2 or otherwise) shall be so applied by
Agent first to itself and then to Lessors; and in case the aggregate
amount so to be paid to the Lessors in accordance herewith shall be
insufficient to pay all such amounts as aforesaid, then ratably,
without priority of one such Person over the other, in the proportion
that the amount which would have been distributed to each such Person
pursuant to this provision but for such insufficiency bears to the
aggregate amount which would have been distributed to all Persons
except for such insufficiency;
third: (i) so much of such payments or amounts remaining as
shall be required to reimburse the then existing or prior Lessors for
payments or deposits pursuant to Article XII (to the extent not
previously reimbursed and to the extent not constituting an indemnity
paid or payable for an act constituting gross negligence or willful
misconduct) shall be distributed to the then existing or prior
Lessors, ratably, without priority of one over the other, in
accordance with the amount of the payments or deposits made by each
such then existing or prior Lessor pursuant to such Article XII; and
(ii) so much of such payments or amounts remaining as shall be
required to pay the then existing or prior Lessors the amounts payable
to them pursuant to the provisions of Section 8.5 hereof or Section
11.5 of the Participation Agreement and the amounts of all other
unpaid obligations then due and payable to them hereunder and under
the Participation Agreement (other than obligations covered by clause
fourth of this Section 8.4) shall be distributed to each Lessor
(including its predecessor holders thereof) entitled thereto; and in
case the aggregate amount so to be paid in accordance with clauses (i)
and (ii) above shall be insufficient to pay all such amounts as
aforesaid, then, ratably, without priority of one such Person over the
other, in the proportion that the amount which would have been
distributed to each such Person pursuant to this clause third but for
such insufficiency bears to the aggregate amount which would have
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been distributed to all such Persons pursuant to this clause third but
for such insufficiency;
fourth: so much of such payments or amounts remaining as
shall be required to pay in full each Lessor's Lease Percentage of the
aggregate unpaid Lease Balance, the Aggregate Make-Whole Premium, if
any, and all accrued but unpaid Accrued Rent (including, to the extent
permitted by applicable law, interest on interest) shall be
distributed to the Lessors, and in case the aggregate amount to be so
distributed shall be insufficient to pay the unpaid Lease Balance, the
Aggregate Make-Whole Premium, if any, and all accrued but unpaid
Accrued Rent in full all as aforesaid, then, ratably, without priority
of one over the other, in the proportions that each Lessor's Lease
Percentage of aggregate unpaid Lease Balance, the Aggregate Make-Whole
Premium, if any, then due and payable and all accrued but unpaid
Accrued Rent to the date of distribution bears to the aggregate unpaid
Lease Balance, the Aggregate Make-Whole Premium, if any, due and
payable and all accrued but unpaid Accrued Rent to the date of
distribution under the Lease; and
fifth: so much of such payments or amounts as shall remain
shall be distributed to Lessee.
Section 8.5. Right to Perform Lessee's Agreements. If Lessee
fails to perform any of its agreements contained herein or in any other
Operative Agreement, whether or not an Event of Default has occurred and is
continuing, Agent, upon written instructions from the Required Lessors and
receipt by Agent of indemnification satisfactory to it, may perform such
agreement and the fees and expenses incurred by Agent (or one or more Lessors)
in connection with such performance together with interest thereon shall be
payable by Lessee upon demand. Interest on fees and expenses so incurred by
Agent or one or more Lessors shall accrue at the rate provided in Section 3.2
for overdue payments.
Article IX
RETURN OF EQUIPMENT
If Agent, upon the instruction of the Required Lessors, shall
rightfully demand possession of the Equipment pursuant to this Lease, Lessee,
at its expense, shall forthwith disassemble, package to facilitate reassembly
and deliver exclusive possession of such Equipment to Agent at a location
designated by Agent, together with a copy of an inventory list of the Equipment
then subject to the Lease, all then current plans, specifications and
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operating, maintenance and repair manuals relating to the Equipment that have
been received or prepared by Lessee, appropriately protected and in the
condition required by Section 5.3 hereof, to Agent. In addition, if this Lease
has been terminated pursuant to Section 8.2, Lessee shall maintain the
Equipment in the condition required by Section 5.3, store the Equipment without
cost to the Agent or any Lessor and keep all of the Equipment insured in
accordance with Article VII for 90 days after redelivery thereof.
Article X
EARLY TERMINATION
If no Event of Default or event which with the giving of notice and/or
passage of time could become an Event of Default shall exist, on any Payment
Date after the first Renewal Term, Lessee may, at its option, by giving at
least 30 days advance written notice to Agent and the Lessors, purchase all,
but not less than all, of the Equipment for the sum of (i) all unpaid Accrued
Rent due and payable on or prior to such Payment Date, (ii) the Lease Balance
(after taking into account all payments actually made pursuant to clause (i)),
(iii) an amount equal to the Aggregate Make-Whole Premium, and (iv) all other
fees and expenses then due and payable pursuant to this Lease and the other
Operative Agreements. Upon the payment of such sums by Lessee in accordance
with the provisions of the preceding sentence, the obligation of Lessee to pay
Rent hereunder shall cease, the term of this Lease shall end on the date of
such payment and Agent shall execute and deliver to Lessee a bill of sale
(without representations or warranties, except that the Equipment is free and
clear of Lessor Liens) and such other documents as may be required to release
the Equipment from the terms and scope of this Lease, in such form as may be
reasonably requested by Lessee, all at Lessee's own cost and expense.
Article XI
LEASE TERMINATION
Section 11.1. Lessee's Options. Not later than 270 days prior to
the last day of the Initial Term, or of any Renewal Term then in effect
hereunder (other than the fifth Renewal Term in the case of paragraph (a)
below), Lessee shall by delivery of written notice to the Agent and Lessors,
exercise either the Renewal Option, on the one hand, or the Lessee Purchase
Option or the Sale Option, or a combination of both, on the other hand, all in
accordance with the terms set forth below:
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(a) Renew this Lease as to all of the Equipment for an
additional one year Renewal Term (the "Renewal Option") on the terms
and conditions set forth herein and in each Lease Supplement;
(b) Purchase for cash all or one or more Functional Units
then subject to this Lease on the last day of the Initial Term or
Renewal Term with respect to which such option is exercised (the
Lessee Purchase Option"). If Lessee elects to exercise the Lessee
Purchase Option with respect to all of the Functional Units then
subject to this Lease, Lessee shall pay to Agent, for the benefit of
the Lessors, the Purchase Option Exercise Amount, the Aggregate
Make-Whole Premium (provided such premium shall not be due if such
option is exercised at the end of the fifth Renewal Term) and any
other amounts then due and payable by Lessee under the Lease or any
other Operative Agreement. If Lessee elects to exercise the Lessee
Purchase Option with respect to Functional Units comprising less than
all of the Functional Units then subject to this Lease, (A) Lessee
shall pay to Agent, for the benefit of the Lessors, together with all
Rent then due and payable the sum of the following amounts:
(i) the applicable Make-Whole Premium with respect to
each Functional Unit subject to the Lessee Purchase Option
(provided such premium shall not be due if such option is
exercised at the end of the fifth Renewal Term), and
(ii) with respect to each Functional Unit subject to
the Lessee Purchase Option, the greater of (x) the Functional
Unit Balance of such Functional Unit to be purchased or (y)
the Appraised Value of such Functional Unit at the date of
purchase, provided that in no event shall Lessee be required
to pay to Agent an amount greater than the Lease Balance
(after application of Proceeds pursuant to subsection (c)
below) plus the applicable Make-Whole Premiums if due as
provided for above and any other amounts then due and payable
by Lessee under the Lease and (B) Lessee shall be deemed to
have elected the Sale Option (defined below) with respect to
all of the remaining Functional Units, provided, however that
if after the Lessee's election of the Lessee Purchase Option
the total Purchase Price of the remaining Functional Units
represents less than 20% of the total Purchase Price of all
Functional Units subject to the Lease immediately prior to the
purchases contemplated by Sections 11.1(b) and 11.1(c), Lessee
shall be treated as having made the Lessee Purchase Option
with respect to all of the Functional Units;
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(c) (1) Sell on behalf of Lessors on the Termination Date
for cash, to a purchaser or purchasers not in any way affiliated with
Lessee, the Functional Units not purchased by Lessee pursuant to the
Lessee Purchase Option (the Sale Option"); provided, howeve, that
Lessee may exercise the Sale Option only with respect to Functional
Units whose aggregate Purchase Price represents at least 20% of the
total Purchase Price of all Functional Units then subject to the
Lease. If Lessee elects the Sale Option with respect to Functional
Units comprising less than all of the Functional Units then subject to
this Lease, Lessee shall be deemed to have elected the Lessee Purchase
Option with respect to all of the remaining Functional Units.
(2) Simultaneously with dispositions pursuant to the
Sale Option, Lessee shall pay to Agent, for the benefit of the
Lessors, from the gross proceeds of such sales, without deductions or
expense reimbursements (the Proceeds"), the Lease Balance as of the
Termination Date (as determined after any payment of Rent due on such
date) plus the applicable Make-Whole Premiums (except that no
Make-Whole Premiums shall be payable by Lessee on Functional Units
sold pursuant to an exercise of the Sale Option with respect to the
second, fourth or fifth Renewal Term) and any other amounts then due
and payable under any of the Operative Agreements. If the Proceeds
exceed the sum of the Lease Balance as of the Termination Date, plus
applicable Make-Whole Premiums as of such date and any other payments
then due and payable under any of the Operative Agreements, Lessee
will retain the portion of the Proceeds in excess thereof. If the
Proceeds are less than the sum of the Lease Balance as of the
Termination Date plus applicable Make-Whole Premiums as of such date
and any other payments then due and payable under any of the Operative
Agreements, Lessee will pay or will cause to be paid to Agent, for the
benefit of the Lessors, on the Termination Date (i) the Proceeds and
(ii) from its own funds, the sum of any payments then due and payable
under any of the Operative Agreements, including any installments of
Rent then due and payable, applicable Make-Whole Premiums (except that
no Make-Whole Premiums shall be payable by Lessee on Functional Units
sold pursuant to an exercise of the Sale Option with respect to the
second, fourth or fifth Renewal Term) plus, at the option of the
Required Lessors, either (x) the Applicable Percentage Amount or (y)
the Recourse Deficiency Amount (the amount determined pursuant to this
clause (ii) shall be referred to as the "Sale Recourse Amount");
provided that in no event shall the Sale Recourse Amount exceed the
Lease Balance and the applicable Make-Whole Premiums, if required
above, after taking into account all payments of Rent and Proceeds.
Agent, upon instruction of
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the Required Lessors, shall exercise the option in the preceding
sentence by written notification to Lessee not later than ten Business
Days prior to the last day of the Lease Term. The obligation of
Lessee to pay the Sale Recourse Amount shall be a recourse obligation
of Lessee (and shall be in addition to any other recourse obligation
of Lessee under any other provision of the Operative Agreements) and
shall be payable on the date provided for in the preceding sentence.
The Sale Recourse Amount and all Proceeds paid to Agent for the direct
benefit of the Lessors shall be distributed in accordance withArticle
XXVIII.
Section 11.2. Election of Options. Lessee's election of any of the
foregoing options in Section 11.1 shall be irrevocable at the time made, but if
Lessee fails to make a timely election, Lessee will be deemed, in the case of
the Initial Term and each Renewal Term then in effect (other than the fifth
Renewal Term) to have irrevocably elected the Renewal Option and, in the case
of the fifth Renewal Term, Lessee will be deemed to have irrevocably elected
the Lessee Purchase Option with respect to all of the Functional Units then
subject to this Lease. In addition, if there exists an Event of Default at any
time after the Sale Option is properly elected, the Sale Option shall
automatically be revoked and Lessor shall be entitled to exercise all rights
and remedies provided in Article VIII. Lessee may not elect the Sale Option if
there exists on the date the election is made an Event of Default or an event
which with the giving of notice and/or passage of time could become an Event of
Default.
Section 11.3. Sale Option Procedures. If Lessee elects the Sale
Option, Lessee shall use its best commercial efforts to obtain the highest all
cash purchase price for the Functional Units subject to the Sale Option. All
costs related to such sale and delivery, including, without limitation, the
cost of sales agents, removal of such Equipment, delivery of documents and
Equipment, certification and testing of such Equipment in any location chosen
by the buyer or prospective buyer, legal costs, costs of notices, any
advertisement or other similar costs, or other information and of any parts,
configurations, repairs or modifications desired by a buyer or prospective
buyer shall be borne entirely by Lessee, without regard to whether such costs
were incurred by Agent, the Lessors, Lessee or any potentially qualified buyer.
Neither Agent nor Lessors shall have any responsibility for procuring any
purchaser. If, nevertheless, any Lessor, or Agent, at the direction of the
Required Lessors, undertakes any sales efforts, Lessee shall promptly reimburse
Agent or such Lessor for any charges, costs or expenses incurred in such
effort, including any allocated time charges, costs or expenses of internal
counsel or other attorneys' fees. Equipment subject to the Sale Option shall
be in the condition required by Section 5.3 hereof at the time of the sale.
Agent, at the
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direction of the Required Lessors, shall determine whether to accept the
highest all cash offer for the Equipment subject to the Sale Option. Any
purchaser or purchasers of the Equipment shall not in any way be affiliated
with Lessee. Pending the consummation of the Sale Option, Lessee shall at all
times maintain the Equipment in the condition required by Section 5.3, store
the Equipment without cost to the Lessors and keep all of the Equipment insured
in accordance with Article VII hereof.
Section 11.4. Payment of Excess Amounts. Following the application
of all amounts required pursuant to Section 11.2, if the Appraised Value of any
Functional Unit sold pursuant to the Sale Option (without taking into account
any removal costs) as of the Termination Date is in excess of the Proceeds
attributable to any such Functional Unit, Lessee shall promptly pay to Agent,
for the benefit of the Lessors, such excess.
Section 11.5. Appraisals. If Lessee gives notice of exercise of
the Sale Option with respect to one or more Functional Units, Agent (upon
direction from any Lessor) shall engage an appraiser of nationally recognized
standing reasonably acceptable to the Required Lessors, at Lessee's expense, to
determine (by appraisal methods satisfactory to Lessors holding at least 66.67%
of the Outstanding Investments in their sole and absolute discretion) the Fair
Market Value of the Equipment subject to the Sale Option as of (a) the first
day of any Renewal Term in which the Sale Option was elected, and (b) the
Termination Date. The Appraised Value determined pursuant to this Section 11.5
shall be applied in accordance with the provisions of this Article XI.
Article XII
AGENT
Section 12.1. Appointment of Agent; Powers and Authorization to
Take Certain Actions.
(a) Each Lessor irrevocably appoints and authorizes BA
Leasing & Capital Corporation to act as agent hereunder, with such
powers as are specifically delegated to Agent by the terms of this
Lease, together with such other powers as are reasonably incidental
thereto. Each Lessor authorizes and directs Agent to, and Agent
agrees for the benefit of the Lessors, that, on each Delivery Date it
will accept the documents described in Articles II and III of the
Participation Agreement. Agent accepts the agency hereby created
applicable to it and agrees to receive all payments and proceeds
pursuant to this Lease and disburse such payments or proceeds in
accordance with this Lease. Agent
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shall have no duties or responsibilities except those expressly set
forth in this Lease and the Participation Agreement. Agent shall not
be responsible to any Lessor (or to any other Person) (i) for any
recitals, statements, representations or warranties of any party
contained in this Lease, the Participation Agreement, or in any
certificate or other document referred to or provided for in, or
received by any of them under, this Lease or the other Operative
Agreements, other than the representations and warranties made by
Agent in Section 5.3 of the Participation Agreement, or (ii) for the
value, validity, effectiveness, genuineness, enforceability or
sufficiency of the Collateral or the title thereto (subject to the
Agent's obligations under Section 6.3 of the Participation Agreement)
or of this Lease or any other document referred to or provided for
herein or (iii) for any failure by Lessee, any Lessor or any other
third party (other than Agent) to perform any of its obligations
hereunder. Agent may employ agents, trustees or attorneys-in-fact,
may vest any of them with any property, title, right or power deemed
necessary for the purposes of such appointment and shall not be
responsible for the negligence or misconduct of any of them selected
by it with reasonable care. Neither Agent nor any of its directors,
officers, employees or agents shall be liable or responsible for any
action taken or omitted to be taken by it or them hereunder, or in
connection herewith, except for its or their own gross negligence or
willful misconduct.
(b) Agent shall not have any duty or obligation to
manage, control, use, operate, store, lease, sell, dispose of or
otherwise deal with any item of Equipment or this Lease, or to
otherwise take or refrain from taking any action under, or in
connection with, this Lease or any related document to which Agent is
a party, except as expressly provided by the terms hereof, and no
implied duties of any kind shall be read into this Lease against
Agent. The permissive right of Agent to take actions enumerated in
this Lease shall never be construed as a duty, unless Agent is
instructed or directed to exercise, perform or enforce one or more
rights by the Required Lessors (provided that Agent has received
indemnification reasonably satisfactory to it). Subject to Section
12.1(c) below, no provision of this Lease shall require Agent to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its obligations hereunder, or
in the exercise of any of its rights or powers hereunder. It is
understood and agreed that the duties of Agent are ministerial in
nature.
(c) Except as specifically provided herein, Agent is
acting hereunder solely as agent and, except as specifically
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provided herein, is not responsible to any party hereto in its
individual capacity, except with respect to any claim arising from
Agent's gross negligence or willful misconduct or any breach of a
representation or covenant made in its individual capacity.
(d) Agent may accept deposits from, lend money to and
otherwise deal with Lessee or any of its Affiliates with the same
rights as it would have if it were not the named Agent hereunder.
Section 12.2. Reliance. Agent may rely upon, and shall not be
bound or obligated to make any investigation into the facts or matters stated
in, any certificate, notice or other communication (including any communication
by telephone, telecopy, telex, telegram or cable) reasonably believed by it to
be genuine and correct and to have been made, signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by Agent with due care
(including any expert selected by Agent to aid Agent in any calculations
required in connection with its duties under this Lease).
Section 12.3. Action Upon Instructions Generally. Subject to
Sections 8.2(d), 12.4 and 12.6, upon written instructions of the Required
Lessors, Agent shall, on behalf of the Lessors, give such notice or direction,
exercise such right, remedy or power hereunder or in respect of any item of
Equipment, and give such consent or enter into such amendment to any document
to which it is a party as Agent as may be specified in such instructions.
Agent shall deliver to each Lessor a copy of each notice, report and
certificate received by Agent described in Article X and Sections 5.4, 5.5,
6.1, 6.2, 7.1, 7.2 and 11.1 hereof and Sections 6.1 and 6.2 of the
Participation Agreement. Agent shall have no obligation to investigate or
determine whether there has been an Event of Default or an event which with the
passage of time and/or the giving of notice could result in an Event of
Default. Agent shall not be deemed to have notice or knowledge of an Event of
Default or event which with the passage of time and/or the giving of notice
could result in an Event of Default unless a Responsible Officer of Agent is
notified in writing of such Event of Default or event which with the passage of
time and/or the giving of notice could result in an Event of Default, provided
that Agent shall be deemed to have been notified in writing of any failure of
Lessee to pay Rent in the amounts and at the times set forth in Article III.
If Agent receives notice of an Event of Default, Agent shall give prompt notice
thereof, at Lessee's expense, to each Lessor. Subject to Sections 8.2(d), 12.4
and 12.6 and Article XVII, Agent shall take action or refrain from taking
action with respect to such Event of Default as directed by the Required
Lessors; provided that, unless and
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until Agent receives such directions, Agent shall refrain from taking any
action with respect to such Event of Default. Prior to the date the Lease
Balance shall have become due and payable by acceleration pursuant to Section
8.2, Required Lessors may deliver written instructions to the Agent to waive,
and Agent shall waive pursuant thereto, any Event of Default and its
consequences; provided that in the absence of written instructions from all
Lessors, Agent shall not waive any (i) Payment Default or (ii) covenant or
provision which, under Section 10.1 of the Participation Agreement, cannot be
modified or amended without the consent of all Lessors. As to any matters not
expressly provided for by this Lease, Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Required Lessors and such instructions of the
Required Lessors and any action taken or failure to act pursuant thereto shall
be binding on each Lessor.
Section 12.4. Indemnification. Each Lessor shall reimburse and
hold Agent harmless, ratably in accordance with its Lease Percentage at the
time the indemnification is required to be given, (but only to the extent that
any such indemnified amounts have not in fact been paid to Agent by, or on
behalf of, the Lessee in accordance with Section 7.1 of the Participation
Agreement) from any and all claims, losses, damages, obligations, penalties,
liabilities, demands, suits, judgments, or causes of action, and all legal
proceedings, and any reasonable costs or expenses in connection therewith,
including allocated charges, costs and expenses of internal counsel of Agent
and all other reasonable attorneys' fees and expenses incurred by Agent, in any
way relating to or arising in any manner out of (i) this Lease or any other
Operative Agreement, the enforcement hereof or thereof or the consummation of
the transactions contemplated hereby or thereby, or (ii) instructions from the
Required Lessors (including, without limitation, the costs and expenses that
Lessee is obligated to and does not pay hereunder, but excluding normal
administrative costs and expenses incident to the performance by Agent of its
agency duties hereunder other than materially increased administrative costs
and expenses incurred as a result of an Event of Default), provided that no
Lessor shall be liable for any of the foregoing to the extent they arise from
(a) the gross negligence or willful misconduct of Agent, (b) the inaccuracy of
any representation or warranty or breach of any covenant given by Agent in
Section 5.3 or in Section 6.3 of the Participation Agreement or in this Lease,
(c) in the case of the Agent's handling of funds, the failure to act with the
same care as the Agent uses in handling its own funds or (d) any taxes, fees or
other charges payable by the Agent based on or measured by any fees,
commissions or compensation received by it for acting as Agent in connection
with the transactions contemplated by the Operative Agreements.
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Section 12.5. Independent Credit Investigation. Each Lessor by
entering into this Lease agrees that it has, independently and without reliance
on Agent or any other Lessor and based on such documents and information as it
has deemed appropriate, made its own credit analysis of Lessee and its own
decision to enter into this Lease and all related documents to which it is a
party and that it will, independently and without reliance upon Agent or any
other Lessor, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking action under this Lease and any related documents to which it is a
party. Agent shall not be required to keep itself informed as to the
performance or observance by Lessee of any other document referred to (directly
or indirectly) or provided for herein or to inspect the properties or books of
Lessee. Except for notices or statements which Agent is expressly required to
give under this Lease and for notices, reports and other documents and
information expressly required to be furnished to Agent alone (and not also to
each Lessor, it being understood that Agent shall forward copies of same to
each Lessor) hereunder or under any other Operative Agreement, Agent shall not
have any duty or responsibility to provide any Lessor with copies of notices or
with any credit or other information concerning the affairs, financial
condition or business of Lessee (or any of its affiliates) that may come into
the possession of Agent or any of its Affiliates.
Section 12.6. Refusal to Act. Except for notices and actions
expressly required of Agent hereunder and except for the performance of its
covenants in Section 6.3 of the Participation Agreement, Agent shall in all
cases be fully justified in failing or refusing to act unless (a) it is
indemnified to its reasonable satisfaction by the Lessors against any and all
liability and reasonable expense which may be incurred by it by reason of
taking or continuing to take any such action (provided that such indemnity
shall not be required to extend to liability or expense arising from Agent's
gross negligence or willful misconduct, it being understood that no action
taken, or not taken, by Agent in accordance with the instructions of the
Required Lessors shall be deemed to constitute gross negligence or willful
misconduct on its part) and (b) it is reasonably satisfied that such action is
not contrary to this Lease or any other Operative Agreement or to any
applicable law.
Section 12.7. Resignation or Removal of Agent; Appointment of
Successor. Subject to the appointment and acceptance of a successor Agent as
provided below, Agent may resign at any time by giving notice thereof to each
Lessor or may be removed at any time by written notice from the Required
Lessors. Upon any such resignation or removal, the Required Lessors at the
time of the resignation or removal shall have the right to appoint a
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successor Agent which shall be a financial institution having a combined
capital and surplus of not less than $100,000,000. If, within 30 calendar days
after the retiring Agent's giving of notice of resignation or receipt of a
written notice of removal, a successor Agent is not so appointed and does not
accept such appointment, then the retiring or removed Agent may appoint a
successor Agent and transfer to such successor Agent all rights and obligations
of the retiring Agent. Such successor Agent shall be a financial institution
having combined capital and surplus of not less than $100,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Agent and the
retiring or removed Agent shall be discharged from duties and obligations as
Agent thereafter arising hereunder and under any related document. If the
retiring Agent does not appoint a successor, any Lessor shall be entitled to
apply to a court of competent jurisdiction for such appointment, and such court
may thereupon appoint a successor to act until such time, if any, as a
successor shall have been appointed as above provided.
Section 12.8. Separate Agent. The Required Lessors may, and if
they fail to do so at any time when they are so required, Agent may, for the
purpose of meeting any legal requirements of any jurisdiction in which any item
of Equipment or Collateral may be located, appoint one or more individuals or
corporations either to act as co-agent jointly with Agent or to act as separate
agent of all or any part of the items of Equipment or Collateral or this Lease,
and vest in such individuals or corporations, in such capacity, such title to
the items of Equipment or Collateral or this Lease or any part thereof, and
such rights or duties as Agent may consider necessary or desirable. Agent
shall not be required to qualify to do business in any jurisdiction where it is
not now so qualified. Agent shall execute, acknowledge and deliver all such
instruments as may be required by any such co-agent or separate agent more
fully confirming such title, rights or duties to such co-agent or separate
agent. Upon the acceptance in writing of such appointment by any such co-agent
or separate agent, it or he shall be vested with such interest in the items of
Equipment or Collateral and this Lease or any part thereof, and with such
rights and duties, not inconsistent with the provisions of this Lease, as shall
be specified in the instrument of appointment, jointly with Agent (except
insofar as local law makes it necessary for any such co-agent or separate agent
to act alone), subject to all terms of this Lease. Any co-agent or separate
agent, to the fullest extent permitted by legal requirements of the relevant
jurisdiction, at any time, by an instrument in writing, shall constitute Agent
its attorney-in-fact and agent, with full power and authority to do all acts
and things and to
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exercise all discretion on its behalf and in its name. If any co-agent or
separate agent shall die, become incapable of acting, resign or be removed, the
interest in the items of Equipment or Collateral and this Lease and all rights
and duties of such co-agent or separate agent shall, so far as permitted by
law, vest in and be exercised by Agent, without the appointment of a successor
to such co-agent or separate agent.
Section 12.9. Termination of Agency. The agency created hereby
shall terminate upon the final disposition by Agent of all Collateral at any
time subject hereto and the final distribution by Agent of all monies or other
property or proceeds received pursuant to this Lease in accordance with Article
XXVIII, provided that at such time Lessee shall have complied fully with all
the terms hereof.
Section 12.10. Compensation of Agency. Lessee shall pay Agent its
reasonable and customary fees, costs and expenses for the performance of
Agent's obligations hereunder.
Article XIII
OWNERSHIP, GRANT OF SECURITY
INTEREST AND FURTHER ASSURANCES
Section 13.1. Grant of Security Interest. Title to the Equipment
shall remain in the Agent, for the benefit of the Lessors, as security for the
obligations of Lessee hereunder and under each of the other Operative
Agreements to which it is a party until such time as Lessee has fulfilled all
of its obligations hereunder and under such other Operative Agreements. Lessee
hereby assigns, grants and pledges to Agent, for the benefit of the Lessors, a
security interest in all of Lessee's right, title and interest, whether now or
hereafter existing or acquired, in the Collateral, to secure the payment and
performance of all obligations of Lessee now or hereafter existing under this
Lease or any other Operative Agreement. Lessee shall, at its own cost and
expense, do any further act and execute, acknowledge, deliver, file, register
and/or record any further documents which Agent or any Lessor may reasonably
request in order to protect its or their title to and perfected security
interest in the Collateral, subject to no Liens other than Permitted Liens, and
Agent's or Lessor's rights and benefits under this Lease. Lessee shall
promptly and duly execute and deliver to Agent, for the benefit of the Lessors,
such documents and assurances and take such further action as Agent or Lessors
may from time to time reasonably request in order to carry out more effectively
the intent and purpose of this Lease and the other Operative Agreements, to
establish and protect the rights and remedies created or intended to be created
in favor of
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Lessors and Agent hereunder and thereunder, and to establish, perfect and
maintain the right, title and interest of Agent or Lessors in and to the
Equipment, subject to no Lien other than Permitted Liens, or of such financing
statements, fixture filings, certificates of title or other documents with
respect hereto as Agent may from time to time reasonably request, and Lessee
agrees to execute and deliver promptly such of the foregoing financing
statements, fixture filings and certificates of title or other documents as may
require execution by Lessee. To the extent permitted by applicable laws,
Lessee hereby authorizes any such financing statements, fixture filings and
certificates of title to be filed without the necessity of the signature of
Lessee. Upon Lessee's request and at such time as all of the obligations of
Lessee under this Lease and any other Operative Agreement have been
indefeasibly paid or performed in full (other than Lessee's contingent
obligations, if any, under Articles VII and VIII of the Participation
Agreement), Agent shall, and Agent is hereby authorized by Lessors to act on
their behalf to, execute and deliver termination statements and other
appropriate documentation reasonably requested by Lessee, all at Lessee's own
cost and expense, to evidence Agent's release of Agent's security interest in
the Collateral. At such time, Agent shall execute and deliver to Lessee a bill
of sale (without representations or warranties except that the Equipment is
free and clear of Lessor Liens) for the Equipment. Notwithstanding the
foregoing, such release shall not relieve Lessee of its continuing obligations
under Articles VII, VIII, and XI of the Participation Agreement or any other
provision of an Operative Agreement which survives the termination hereof.
Section 13.2. Retention of Title or Proceeds in the Case of
Default. If Lessee would be entitled to any amount (including any Casualty
Proceeds or Partial Casualty Proceeds) or title to any item of Equipment
hereunder but for the existence of any Event of Default or event which with the
giving of notice and/or passage of time could become an Event of Default, Agent
shall, on behalf of the Lessors, hold such amount or item of Equipment as part
of the Collateral and shall be entitled to apply such amounts against any
amounts due hereunder, provided that Agent shall distribute such amount or
transfer such Equipment in accordance with the other terms of this Lease if and
when no Event of Default or event which with the giving of notice and/or
passage of time could become an Event of Default exists.
Article XIV
EFFECT OF WAIVER
No delay or omission to exercise any right, power or remedy accruing
to Lessors upon any breach or default of Lessee
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hereunder shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein or of or in any similar breach or default thereafter occurring, nor
shall any single or partial exercise of any right, power or remedy preclude
other or further exercise thereof, or the exercise of any other right, power or
remedy, nor shall any waiver of any single breach or default be deemed a waiver
of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of
Lessors of any breach or default under this Lease must be specifically set
forth in writing and must satisfy the requirements set forth in Article XVII
with respect to approval by Lessors.
Article XV
SURVIVAL OF COVENANTS
All claims pertaining to the representations, warranties and covenants
of Lessee under Articles II, III, IV, V, VI, VII, X, XI, XXI and XXII shall
survive the termination of this Lease to the extent such claims arose out of
events occurring or conditions existing prior to any such termination.
Article XVI
APPLICABLE LAW
THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF
CALIFORNIA, WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF.
Article XVII
EFFECT AND MODIFICATION OF LEASE
No variation, modification, amendment or waiver of this Lease,
including any schedules or exhibits hereto, shall be valid unless the same
shall be effected in accordance with Article X of the Participation Agreement.
Article XVIII
NOTICES
All notices, demands, requests, consents, approvals and other
instruments hereunder shall be in writing and shall be
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deemed to have been properly given if given as provided for in Section 11.4 of
the Participation Agreement.
Article XIX
COUNTERPARTS
This Lease has been executed in several counterparts. One counterpart
has been prominently marked "Counterpart No. 1--Agent's Original Copy." Only
the counterpart marked "Counterpart No. 1--Agent's Original Copy" shall
evidence a monetary obligation of Lessee or shall be deemed to be an original
or to be chattel paper for purposes of the Uniform Commercial Code, and such
copy shall be held by Agent, for the benefit of the Lessors.
Article XX
SEVERABILITY
Whenever possible, each provision of this Lease shall be interpreted
in such manner as to be effective and valid under applicable law; but if any
provision of this Lease shall be prohibited by or invalid under applicable 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 Lease.
Article XXI
SUCCESSORS AND ASSIGNS; MERGER
Section 21.1. Successors and Assigns. This Lease shall be binding
upon the parties hereto and, subject to Article XXII hereof, their respective
successors and assigns, and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
Section 21.2. Merger. Except as otherwise provided in Section
6.1(a)(ii) of the Participation Agreement, Lessee shall not consolidate with or
merge with or into any other corporation or entity, or permit any other
corporation or entity to consolidate with or merge with or into Lessee or any
subsidiary of Lessee.
36
<PAGE> 127
Article XXII
ASSIGNMENTS
Section 22.1. Assignment by Lessee. Lessee shall not sell, assign,
transfer or otherwise dispose of its rights or delegate its obligations under
this Lease to any other person, except as permitted or required by Section 5.2
or Section 6.1 of the Participation Agreement.
Section 22.2. Lessor Transfers. No Lessor shall assign, convey or
otherwise transfer (including pursuant to a participation) all or any portion
of its right, title or interest in, to or under any of the Operative
Agreements, any Collateral and its interest in the Equipment except that
without the prior written consent of the Agent or the Lessee (x) any bank or
similar financial or commercial lending institution may pledge its interest in
the ordinary course of its business without the consent of the Lessee or the
Agent; provided, that no transfer upon a foreclosure pursuant to such a pledge
may occur unless this Section (other than clause (x)) is complied with, (y) any
Lessor may transfer all or any portion of its interest to any other existing
Lessor and (z) any Lessor may transfer any or all of such right, title and
interest as provided in paragraph (a) or (b) below:
(a) Transfers to Affiliates. Subject to the satisfaction
of the conditions set forth in this Section 22.2, any Lessor may make
any such assignment, conveyance or transfer to any Affiliate if such
transferee's obligations under the Operative Agreements shall have
been unconditionally guaranteed by such Lessor by an instrument in
form and substance reasonably satisfactory to the Agent; provided that
the term of such Lessor's guarantee shall not be required to extend
past March 31, 1995.
(b) Transfers to Non-Affiliates. Subject to the
satisfaction of the conditions set forth in this Section 22.2, any
Lessor may make any such assignment, conveyance or transfer to any
entity which does not qualify as a transferee under the preceding
paragraph (a) if (x) (i) such entity has a consolidated net worth of
at least $100,000,000 as at the end of its most recent fiscal year, or
(ii) such transferee entity's obligations under the Operative
Agreements shall have been unconditionally guaranteed by the
transferor by an instrument in form and substance reasonably
satisfactory to the Lessee and the Agent or (iii) such transferee
entity's obligations under the Operative Agreements are
unconditionally guaranteed by an instrument in form and substance
reasonably satisfactory to the Required Lessors) by an entity
controlling such
37
<PAGE> 128
transferee entity, if such entity would qualify as a transferee entity
under clause (i) hereof and (y) the provisions of Section 22.2(d)
through (i) below are satisfied with respect to such transfer.
(c) Transfer with Consent. Any transfer to an entity
other than one satisfying the requirements set forth in paragraph (a)
or (b) of this Section 22.2 may only be made with the prior written
consent of the Lessee and the Required Lessors, which consent shall
not be unreasonably withheld or delayed.
(d) Required Notice and Effective Date. Any Lessor
desiring to effect a transfer of its interest hereunder shall give
written notice of each such proposed transfer to the Lessee, the Agent
and each other Lessor at least ten (10) days prior to such proposed
transfer, setting forth the name of such proposed transferee, the
percentage or interest to be retained by such Lessor, if any, and the
date on which such transfer is proposed to become effective. All
reasonable out-of-pocket costs incurred by the Agent in connection
with any such disposition by a Lessor under this Section 22.2 shall be
borne by such Lessor. In the event of a transfer under this Section
22.2, any expenses incurred by the transferee in connection with its
review of the Operative Agreements and its investigation of the
transactions contemplated thereby shall be borne by such transferee or
the relevant Lessor, as they may determine, but shall not be
considered costs and expenses which the Lessee is obligated to pay or
reimburse under Section 11.5 of the Participation Agreement.
(e) Assumption of Obligations. Any transferee pursuant
to this Section 22.2 shall have executed and delivered to the Agent a
letter in substantially the form of the Investors Letter attached
hereto as Exhibit A, and thereupon the obligations of the transferring
Lessor under the Operative Agreements shall be proportionately
released and reduced to the extent of such transfer. Upon any such
transfer as above provided, the transferee shall be deemed to be bound
by all obligations (whether or not yet accrued) under, and to have
become a party to, all Operative Agreements to which its transferor
was a party, shall be deemed the pertinent "Lessor" for all purposes
of the Operative Agreements and shall be deemed to have made that
portion of the payments pursuant to the Participation Agreement
previously made or deemed to have been made by the transferor
represented by the interest being conveyed; and each reference herein
and in the other Operative Agreements to the pertinent "Lessor" shall
thereafter be deemed a reference to the transferee, to the extent of
such transfer,
38
<PAGE> 129
for all purposes. Upon any such transfer, the Agent shall deliver to
each Lessor and the Lessee a new Schedule I to the Participation
Agreement, revised to reflect the relevant information for such new
Lessor and the Commitment of such new Lessor (and the revised
Commitment of the transferor Lessor if it shall not have transferred
its entire interest).
(f) Employee Benefit Plans. No Lessor may make any such
assignment, conveyance or transfer to or in connection with any
arrangement or understanding in any way involving any employee benefit
plan (or its related trust), as defined in Section 3(3) of ERISA, or
with the assets of any such plan (or its related trust), as defined in
Section 4975(e)(1) of the Code (other than a governmental plan, as
defined in Section 3(32) of ERISA), with respect to which the Lessee
or such Lessor or any of their Affiliates is a party in interest
within the meaning of ERISA or a "disqualified person" within the
meaning of the Code.
(g) Limitation on Transfers. Notwithstanding paragraphs
(a), (b) and (c) of this Section 22.2, any Lessor proposing to
transfer its interest may not make any such assignment, conveyance or
transfer at any time when there shall have occurred and be continuing
any material default of such Lessor to the Lessee under the
Participation Agreement.
(h) Amount of Commitment. No Lessor may make any such
assignment, conveyance or transfer if, as a consequence thereof, the
transferor (if such Lessor retains any part of its Commitment) or
transferee Lessor would have a Commitment (assuming for this purpose
no funding by such Lessor) of less than U.S. $2,000,000.
(i) Representations and Warranties. Notwithstanding
anything to the contrary set forth above, no Lessor may assign, convey
or transfer its interest to any Person, unless such Person shall have
delivered to the Agent and the Lessee a certificate confirming the
accuracy of the representations and warranties set forth in Section
5.2 of the Participation Agreement with respect to such Person (other
than as such representation or warranty relates to the execution and
delivery of Operative Agreements).
39
<PAGE> 130
Article XXIII
BROKERS
Neither the Lessee nor any Lessor has engaged or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker, finder, investment banker, agent or any
other like capacity in connection with this Lease or the transactions
contemplated hereby, except that Lessee has retained BA Leasing & Capital
Corporation as arranger in connection with the transactions contemplated hereby
and Lessee shall be responsible for, and shall indemnify, defend, and hold
Agent and each Lessor harmless from and against any and all claims,
liabilities, or demands by BA Leasing & Capital Corporation, in its capacity as
arranger in connection with the transactions contemplated hereby, for fees or
other entitlements with respect to this Lease or the transactions contemplated
hereby or by the Participation Agreement.
Article XXIV
JURY TRIAL
LESSEE WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS LEASE OR ANY RELATED DOCUMENT OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM
ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS LEASE OR ANY RELATED DOCUMENT
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
Article XXV
CAPTIONS; TABLE OF CONTENTS
Section captions and the table of contents used in this Lease
(including the schedules) are for convenience of reference only and shall not
affect the construction of this Lease.
Article XXVI
FINAL AGREEMENT
THIS LEASE, TOGETHER WITH THE OTHER OPERATIVE AGREEMENTS, REPRESENTS
THE ENTIRE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED BY THE LEASE AND THE OTHER OPERATIVE AGREEMENTS. THIS LEASE
CANNOT BE MODIFIED,
40
<PAGE> 131
SUPPLEMENTED, AMENDED, RESCINDED OR CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, EXCEPT BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
Article XXVII
TIMELINESS OF PERFORMANCE
The provisions of Articles VIII and XI pertaining to the delivery of
notice and the performance of certain events on dates required by Articles VIII
and XI are to be strictly adhered to by the parties hereto.
Article XXVIII
DISTRIBUTION AND APPLICATION OF
RENTS AND OTHER PAYMENTS
Section 28.1. Pro Rata Payment. Except as specifically provided
for at Section 8.4 of this Lease or Section 4.5 of the Participation Agreement,
all amounts of money received or realized by Agent pursuant to any Operative
Agreement which are to be distributed to the Lessors (other than
indemnification payments payable to any Lessor by Lessee under any Operative
Agreement and after payment of accrued fees, expenses and indemnification
payments payable to Agent in its capacity as Agent that have been due and
unpaid for 30 days or more) shall be distributed to each Lessor pro rata,
without preference or priority of any Lessor over another, in accordance with
the amounts due each Lessor at the time of such payment in respect of the types
of obligations described in the Section pursuant to which the distribution is
being made; provided, however, that in the case where the aggregate amount to
be so paid to the Lessors in accordance herewith shall be insufficient to pay
such amounts due to Lessors on such distribution, then such amount shall be
distributed ratably, without priority of one such Person over the other, in the
proportion that the amount which would have been distributed to each such
Person pursuant to this provision, but for such insufficiency, bears to the
aggregate amount which would have been distributed to all Persons except for
such insufficiency; and provided, further, with respect to Rent, that all
amounts shall be applied first to the interest component thereof and then to
the principal component.
[remainder of page intentionally left blank]
41
<PAGE> 132
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
<TABLE>
<S> <C>
RYKOFF-SEXTON, INC., BA LEASING & CAPITAL CORPORATION,
as Lessee not individually, but solely
as Agent
By___________________________ By____________________________
Name Printed:________________ Name Printed:_________________
Title:_______________________ Title:________________________
By____________________________
Name Printed:_________________
Title:________________________
LESSORS:
- - --------
PITNEY BOWES CREDIT BA LEASING & CAPITAL CORPORATION
CORPORATION
By____________________________ By____________________________
Name Printed:_________________ Name Printed:_________________
Title:________________________ Title:________________________
By____________________________ By____________________________
Name Printed:_________________ Name Printed:_________________
Title:________________________ Title:________________________
MANUFACTURERS BANK
By____________________________
Name Printed:_________________
Title:________________________
</TABLE>
42
<PAGE> 133
SCHEDULE I TO LEASE
Functional Unit ___
<TABLE>
<S> <C>
Equipment Location
- - --------- --------
</TABLE>
Functional Unit ___
<TABLE>
<S> <C>
Equipment Location
- - --------- --------
</TABLE>
Functional Unit ___
<TABLE>
<S> <C>
Equipment Location
- - --------- --------
</TABLE>
Functional Unit ___
<TABLE>
<S> <C>
Equipment Location
- - --------- --------
</TABLE>
<PAGE> 134
EXHIBIT A TO LEASE
FORM OF INVESTORS LETTER
Rykoff-Sexton, Inc.
[Address For Notice]
BA Leasing & Capital Corporation,
not individually, but solely as Agent
[Address For Notice]
Ladies and Gentlemen:
Capitalized terms used in this letter and not otherwise defined herein
shall have the meanings assigned thereto in that certain Participation
Agreement (the "Participation Agreement"), dated as of April ___, 1994, among
Rykoff-Sexton, Inc., a Delaware corporation, as Lessee, Tone Brothers, Inc., an
Iowa corporation, as Sublessee, certain institutions listed on Schedule I
thereto, and BA Leasing & Capital Corporation, a California corporation, as
Agent, unless the context otherwise requires. The undersigned has agreed to
purchase the interest of _____________ as a Lessor under the Participation
Agreement and the other Operative Agreements (as defined therein), representing
a Commitment of (amount) Dollars $(_________) (the "Interest"), and desires
that the Lessee execute and deliver to Agent and that Agent authenticate and
deliver to the undersigned and to each Lessor a new Schedule I to the
Participation Agreement evidencing the Commitment of the undersigned pursuant
to Section 22.2 of the Lease. The undersigned hereby represents and warrants
as of the date hereof to the addressees hereof as follows:
(a) The undersigned will be acquiring the Interest with
funds which constitute general account assets and not assets of any
separate account in which any employee benefit plan has any interest
or with assets allocated to an insurance company pooled separate
account as defined in ERISA Section 3(17) maintained by a Lessor which
satisfies the requirements of U.S. Department of Labor Prohibited
Transaction Class Exemption 90-1 with respect to the transactions
contemplated by the Lease in order for such transactions to be exempt
from the prohibitions of Section 406 of ERISA and Section 4975 of the
Code;
(b) The Interest is being acquired by the undersigned for
investment and not with a view to the resale or
<PAGE> 135
distribution of such Interest or any part thereof, but without
prejudice, however, to the right of the undersigned at all times to
sell or otherwise dispose of all or any part of such Interest under a
registration available under the Securities Act of 1933, as amended,
or under an exemption from such registration available under such Act,
it being understood that the disposition by the undersigned of the
Interest to be purchased by the undersigned shall, at all times,
remain entirely within its control;
(c) neither the undersigned nor any Person authorized to
act on its behalf has directly or indirectly offered to sell any
interests in the Collateral, the Interest or any security similar
thereto, to, or otherwise approved or negotiated with respect thereto
with, anyone other than the Lessors, and neither it nor any Person
authorized to act on its behalf will so offer or sell in violation of
Section 5 of the Securities Act of 1933, as amended, or securities or
blue sky law of any applicable jurisdiction; and
(d) the undersigned agrees to treat its Interest for
federal, state and local income and franchise tax purposes as
indebtedness of the Lessee.
The undersigned understands that the Interest has not been and will
not be registered or qualified under the Securities Act of 1933, as amended, or
any securities or "blue sky" laws of any jurisdiction and that no participant
has an obligation to effect such registration or otherwise assist in the
disposition of the Interest.
Very truly yours,
_______________________________
By:____________________________
Name Printed:__________________
Title:_________________________
2
<PAGE> 136
EXHIBIT B TO LEASE
FORM OF LEASE SUPPLEMENT (Rykoff-Sexton, Inc. Lease)
LEASE SUPPLEMENT (Rykoff-Sexton, Inc. Lease) dated
____________, 1994 (this "Lease Supplement") between RYKOFF-SEXTON, INC., a
Delaware corporation (the "Lessee"), BA Leasing & Capital Corporation,
Manufacturers Bank and Pitney Bowes Credit Corporation (the "Lessors") and BA
LEASING & CAPITAL CORPORATION, not in its individual capacity, but solely in
its capacity as Agent for the Lessors;
W I T N E S S E T H :
WHEREAS, the Lessee, the Lessors and the Agent have heretofore entered
into that certain Lease Intended as Security dated as of April 29, 1994 (the
"Lease"). Unless otherwise defined herein, capitalized terms used herein shall
have the meanings specified in the Lease; and
WHEREAS, the Lease provides for the execution and delivery of a Lease
Supplement on each Delivery Date substantially in the form hereof for the
purpose of confirming the acceptance and lease of certain Equipment, specifying
the Rent applicable to such Equipment and setting forth certain other matters,
all as required pursuant to the Lease;
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, the Agent, the Lessors and the Lessee hereby agree as
follows:
1. Inspection and Approval. The Lessee hereby acknowledges and
confirms that it has inspected and approved the Equipment set forth on Schedule
I hereto for all purposes of the Lease and the other Operative Documents and,
as between the Lessors and the Lessee, such Equipment complies in all material
respects with the specifications for such Equipment, is in good working order,
repair, condition and appearance, and without defect therein with respect to
design, manufacture, conditions, operation and fitness for use or in any other
respect, whether or not discoverable by Lessee as of the date hereof. Lessee
reaffirms, as to the Equipment set forth in Schedule I, each of the waivers,
acknowledgments and agreements of Lessee set forth in Section 4.1 of the Lease.
2. Delivery and Acceptance. The Lessors hereby confirm delivery and
lease to the Lessee, and the Lessee hereby confirms acceptance of delivery and
lease from the Lessors, under the
1
<PAGE> 137
Lease as hereby supplemented, of the Equipment listed on Schedule I hereto.
3. Functional Units. The Equipment set forth on Schedule I consists
of one or more of the Functional Units set forth or referred to on Schedule Y
to the Participation Agreement, provided that the Required Lessors may from
time to time, in their reasonable discretion, direct the Agent to allocate such
Equipment into different Functional Units so long as each Item of Equipment
subject to the Lease is at all times part of a Functional Unit.
4. Warranty. The Lessee hereby represents and warrants that no event
which would constitute a Casualty under the Lease has occurred with respect to
the Equipment set forth on Schedule I hereto as of the date hereof. Lessee
hereby reaffirms each of the representations and warranties set forth at
Section 5.1 of the Participation Agreement as if made on the date hereof,
including that the Equipment set forth on Schedule I hereto is free and clear
of all Liens other than Permitted Liens.
5. Term, Interim Period, Interest Rate and Supplement Balance. The
term of this Lease Supplement shall commence on the date hereof and end on the
Termination Date. The Interim Period, the Interest Rate, the Applicable
Percentage and the amount of Rent due on each Payment Date are set forth,
respectively, in the appropriate portions of Schedule II hereto. Schedule III
hereto sets forth the respective portion of each installment of Rent payable on
each Payment Date to be paid to each Lessor. Schedule IV hereto sets forth the
Functional Unit Balance of each Functional Unit as of each Payment Date.
6. Rent.
(a) On the last day of the Interim Period, Lessee shall pay to
Agent, for the benefit of the Lessors, the amount of the Interim Rent set forth
at Schedule II.
(b) On each Payment Date following the expiration of the Interim
Period during the Initial Term and during each Renewal Term, Lessee shall pay
to Agent, for the benefit of the Lessors, the amount of the Basic Rent and
Renewal Rent as set forth at Schedule II hereto.
7. Confirmation. The Lessee hereby confirms its agreement, in
accordance with the Lease as supplemented by this Lease Supplement, to pay Rent
to the Agent, for the benefit of the Lessors, for each Functional Unit leased
hereunder. Nothing herein shall reduce Lessee's obligation to make all other
payments required under the Lease, including those payments to be
-2-
<PAGE> 138
made on the last day of the Lease Term pursuant to Article XI of the Lease.
8. Incorporation into Lease. This Lease Supplement shall be construed
in connection with and as part of the Lease, and all terms, conditions and
covenants contained in the Lease, as supplemented by this Lease Supplement,
shall be and remain in full force and effect and shall govern the Equipment
described in Schedule I hereto.
9. References. Any and all notices, requests, certificates and other
instruments executed and delivered concurrently with or after the execution and
delivery of this Lease Supplement may refer to the "Lease Intended as Security,
dated as of April 29, 1994", or may identify the Lease in any other respect
without making specific reference to this Lease Supplement, but nevertheless
all such references shall be deemed to include this Lease Supplement, unless
the context shall otherwise require.
10. Counterparts. This Lease Supplement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together one and the same instrument.
11. Governing Law. This Lease Supplement shall be governed by and
construed in accordance with the laws and decisions of the State of California
without regard to principles of conflicts of laws.
-3-
<PAGE> 139
IN WITNESS WHEREOF, the Agent, Lessors and the Lessee have caused this
Lease Supplement to be duly executed and delivered on the day and year first
above written.
<TABLE>
<S> <C>
RYKOFF-SEXTON, INC., BA LEASING & CAPITAL CORPORATION,
as Lessee not individually, but solely
as Agent for the Lessors
By___________________________ By____________________________
Name Printed:________________ Name Printed:_________________
Title:_______________________ Title:________________________
By____________________________
Name Printed:_________________
Title:________________________
LESSORS:
- - --------
PITNEY BOWES CREDIT BA LEASING & CAPITAL CORPORATION
CORPORATION
By____________________________ By____________________________
Name Printed:_________________ Name Printed:_________________
Title:________________________ Title:________________________
By____________________________ By____________________________
Name Printed:_________________ Name Printed:_________________
Title:________________________ Title:________________________
MANUFACTURERS BANK
By____________________________
Name Printed:_________________
Title:________________________
</TABLE>
<PAGE> 140
SCHEDULE I
Items of Equipment Purchased by Lessors
and Subject to this Lease Supplement Purchase Price
Functional Unit ___
Functional Unit ___
Functional Unit ___
Functional Unit ___
<PAGE> 141
SCHEDULE II
Delivery Date: ____________
Sum of Purchase Prices*: $____________
Interest Rate: ____________
"Applicable Percentage" shall mean, with respect to the end of the
Initial Term and each Renewal Term, the percentage set forth below opposite
each such date:
<TABLE>
<CAPTION>
Supplement
End of Applicable Percentage Balance
------ --------------------- ----------
<S> <C> <C>
Initial Term ____% $_________
First Renewal Term ____% $_________
Second Renewal Term ____% $_________
Third Renewal Term ____% $_________
Fourth Renewal Term ____% $_________
Fifth Renewal Term ____% $_________
</TABLE>
A. Interim Rent: $____________
Interim Rent Payment Date: ____________**
B. Basic and Renewal Rent:
<TABLE>
<CAPTION>
Payment Principal Interest Total Rent
Date Component Component Installment
---- --------- --------- -----------
<S> <C> <C> <C>
Totals:
====== ========= ========= ===========
</TABLE>
__________________________________
*Total of Purchase Prices set forth on Schedule I to Lease Supplement.
**This will be the last day of the Interim Period, i.e. the last day of
the calendar quarter in which the Delivery Date occurs.
<PAGE> 142
SCHEDULE III
<TABLE>
<CAPTION>
Rent Total
Payment Rent
Date Payment BA Leasing Manufacturers Pitney
---- ------- ---------- ------------- ------
<S> <C> <C> <C> <C>
_________, 19__ $ $ $ $
_________, 19__ $ $ $ $
_________, 19__ $ $ $ $
</TABLE>
<PAGE> 143
SCHEDULE IV
<TABLE>
<CAPTION>
Functional Payment Functional
Unit No. Date Unit Balance
-------- ---- ------------
<S> <C> <C>
</TABLE>
<PAGE> 144
EXHIBIT B
TO
PARTICIPATION AGREEMENT
FORM OF SUBLEASE
B-1
<PAGE> 145
FORM OF SUBLEASE
SUBLEASE, dated as of April 29, 1994 between Rykoff-Sexton, Inc., a
Delaware corporation ("Sublessor"), and Tone Brothers, Inc., an Iowa
corporation ("Sublessee").
RECITALS
(A) Sublessor is Lessee under that certain Lease Intended as
Security, dated as of April 29, 1994 (as from time to time thereafter amended
or supplemented, the "Lease") with the Lessors listed on the signature pages
thereto and BA Leasing & Capital Corporation, not individually, but solely as
agent for the benefit of the Lessors ("Agent"). Unless otherwise defined
herein or the context hereof otherwise requires, terms which are defined or
defined by reference in the Lease shall have the same meanings when used herein
as such terms have therein, whether or not the Lease is then in effect.
(B) Sublessor desires to lease to Sublessee, and Sublessee desires
to lease from Sublessor, the items of equipment described on Schedule I hereto,
as from time to time hereafter amended ("Sublease Items").
Accordingly, the parties hereto agree as follows:
SECTION 1. LEASE. Sublessor leases to Sublessee and Sublessee leases
from Sublessor the Sublease Items described onSchedule I hereto, as such
description may from time to time be hereafter amended with the consent of
Assignee (as hereinafter defined).
SECTION 2. TERM. The term of this Sublease shall be concurrent with
the term of the Lease and termination of the Lease (including, without
limitation, termination pursuant to Article X thereof) shall constitute
automatic termination of this Sublease. Termination of the Lease with respect
to any but not all of the Sublease Items shall constitute automatic termination
of this Sublease only with respect to the Sublease Items no longer subject to
the Lease.
If Sublessor elects to exercise the Lessee Purchase Option as provided
in Section 11.1(b) of the Lease, Sublessor shall sell to Sublessee, and
Sublessee shall purchase from Sublessor, the Sublease Items subject thereto for
(i) the portion of the Purchase Option Exercise Amount, any applicable
Make-Whole Premiums and any other amounts then due and payable attributable to
such Sublease Items or, (ii) if less than all of the Equipment is subject to
such Lessee Purchase Option, the aggregate of the amounts that are required to
be paid by Sublessor to Agent under Section 11.1(b)(A) of the Lease
attributable to such Sublease
<PAGE> 146
Items. Such payment for such Sublease Items shall be made by Sublessee
concurrently upon Sublessor's payment to the Agent pursuant to Section
11.1(b)(A) of the Lease. Upon payment by the Sublessee for Sublease Items,
Sublessor shall execute and deliver to Sublessee a quitclaim bill of sale
(without representations or warranties) for such Sublease Items.
If Sublessor elects to exercise the Sale Option as provided in Section
11.1(c) of the Lease, Sublessee shall on the last day of the Lease Term permit
a purchaser of any Sublease Item to take possession thereof. Sublessee shall
pay to Sublessor an amount equal to the amount payable by Sublessor pursuant to
Section 11.1(c)(2)(ii) of the Lease attributable to the Sublease Items. Such
payment for the Sublease Items shall be made by Sublessee on the date that the
Section 11.1(c)(2)(ii) amount is payable by Sublessor to Lessor under the
Lease. If such purchaser cannot take possession of a Sublease Item on the last
day of the Lease Term, the Sublessee shall store such Sublease Item for a
reasonable period of time, but shall at all times comply with the last sentence
of Section 11.3 of the Lease.
SECTION 3. RENT. The rent and rental payment dates shall be as
agreed from time to time by Sublessor and Sublessee; provided, however, that if
Assignee is exercising its rights with respect to this Sublease or any Sublease
Items, rent shall be payable quarterly on the Sublease Items on each April 30,
July 30, October 30 and January 30 and shall be in an amount, with respect to
each Sublease Item, equal to that portion of the rental under the Lease and
applicable Lease Supplement attributable to such Sublease Item.
SECTION 4. WARRANTIES. NEITHER SUBLESSOR NOR ANY ASSIGNEE MAKES ANY
EXPRESS OR IMPLIED WARRANTY WHATSOEVER OF TITLE, MERCHANTABILITY, FITNESS FOR
ANY PURPOSE OR OTHERWISE REGARDING ANY SUBLEASE ITEM OR ANY PART THEREOF.
SECTION 5. LEASE. This Sublease is in all respects subject and
subordinate to the Lease (and each Lease Supplement governing any Sublease
Item) and the Liens created thereby. Without limiting the foregoing, if for
any reason Assignee shall exercise rights or remedies thereunder, such exercise
may include the termination hereof, notwithstanding, to the maximum extent
permitted by law, any right of Sublessee hereunder. Sublessee shall in all
respects comply with all of the terms and provisions of Article V of the Lease.
SECTION 6. ASSIGNMENT; SUBLEASE. Sublessor shall have the right to
assign, and has assigned to Agent concurrently with entering into this
Sublease, all or any part of its right, title and interest in and to this
Sublease and shall have the right to grant and has granted to Agent for the
benefit of the Lessors a
B-2
<PAGE> 147
security interest in the Sublease Items to the Agent (in this capacity,
"Assignee", which term shall also be deemed to refer to any successor or assign
of Agent in such capacity) pursuant to the Lease. Such assignment and grant
shall (i) be superior to Sublessee's rights hereunder; (ii) not relieve
Sublessor of any of its obligations hereunder; and (iii) not be construed to be
an assumption by Assignee of any obligations of Sublessor hereunder. Upon
written request of Assignee, Sublessee shall make all payments of rent directly
to Assignee, at such address as Assignee shall specify. Sublessee shall, upon
request, execute and deliver such instruments and take such other action as may
reasonably be requested to protect Sublessor's or Assignee's interests. This
Sublease shall not be amended, modified or waived without the consent of
Assignee. Sublessee acknowledges that this Sublease has been assigned, and a
security interest in the Sublease Items has been granted, to Agent under the
Lease. Sublessee shall not assign any right or interest in this Sublease.
Except as expressly provided in this Section 6, any further
assignment, sublease or transfer of the Sublease or of all or any portion of
the Sublease Items is prohibited.
SECTION 7. NOTICES. Notices shall be in writing and shall be deemed
to be given when delivered personally, by facsimile (and confirmed, which
confirmation may be mechanical) or otherwise actually received or five Business
Days after being sent, first class mail postage prepaid, and addressed to
Sublessor, Sublessee and Assignee at their respective addresses set forth on
Schedule II hereto, or at such other address as any such party from time to
time provides to the other parties in accordance with this Section 7.
SECTION 8. MISCELLANEOUS. This Sublease shall be governed by the
laws of the State of California, without regard to conflict of law principles.
Only one counterpart of this Sublease shall be marked as the sole original
execution copy hereof, and such counterpart shall be held by Assignee. Each of
Sublessor and Sublessee waives any right to trial by jury in any action or
proceeding with respect to this Sublease or any instrument, document or
agreement now or hereafter relating to this Sublease. If any provision hereof
shall be prohibited or invalid under applicable 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 Sublease. This Sublease shall be binding upon Sublessor and Sublessee and
shall inure to the benefit of Sublessor, Sublessee, Assignee and the successors
and assigns of Assignee.
B-3
<PAGE> 148
SECTION 9. SECURITY INTEREST. Sublessee hereby grants a security
interest in the Sublease Items and proceeds thereof (the "Collateral") to
Sublessor to secure Sublessee's obligations under this Sublease. Sublessee
shall, at its own cost and expense, do any further act and execute,
acknowledge, deliver, file, register and/or record any further documents which
Sublessor (or Assignee) may reasonably request in order to protect its
perfected security interest in the Collateral.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as
of the date and year first above written.
<TABLE>
<S> <C>
TONE BROTHERS, INC. RYKOFF-SEXTON, INC.
By:________________________ By:__________________________
Name:______________________ Name:________________________
Title:_____________________ Title:_______________________
</TABLE>
B-4
<PAGE> 149
SCHEDULE I
SUBLEASE ITEMS
B-5
<PAGE> 150
SCHEDULE II
ADDRESSES FOR NOTICE
Sublessor:
Rykoff-Sexton, Inc.
761 Terminal Street
Los Angeles, CA 90021
Attn: Chief Financial Officer
with a copy to:
Maslon, Edelman, Borman & Brand
3300 Norwest Center
Minneapolis, MN 55402-4140
Attention: Terri Krivosha, Esq.
Sublessee:
Tone Brothers, Inc.
2301 Southeast Tones Drive
Ankeny, IA 50021-8888
Attn: President
with a copy to:
Maslon, Edelman, Borman & Brand
3300 Norwest Center
Minneapolis, MN 55402-4140
Attention: Terri Krivosha, Esq.
Agent/Assignee:
BA Leasing & Capital Corporation
Four Embarcadero Center, Suite 1200
San Francisco, California 94111
Attn: Contract Administration
B-6
<PAGE> 151
EXHIBIT C
TO
PARTICIPATION AGREEMENT
FORM OF DELIVERY DATE NOTICE
DELIVERY DATE NOTICE
(Date)
TO: BA Leasing & Capital Corporation, a California corporation,
not individually, but solely as Agent (the "Agent"), under
that certain Lease Intended as Security, dated as of April
29, 1994, among Rykoff-Sexton, Inc., a Delaware corporation
(the "Lessee"), the Lessors named therein, and Agent as
agent for the Lessors (all capitalized terms used herein
and not otherwise defined shall have the meaning assigned
to such term in the Lease, unless the context otherwise
requires).
FROM: Lessee
REGARDING: Delivery Date Closing
1. A Delivery Date Closing is scheduled for [specify a date no
earlier than 10 Business Days after receipt of notice] at the offices of Mayer,
Brown & Platt, 350 South Grand Avenue, 25th Floor, Los Angeles, CA 90071,
commencing at 9:00 a.m. [This Funding shall be the final Funding.]
2. The Functional Units to be acquired and accepted on such
date are identified on Schedule I hereto, all of which Functional Units were
previously identified on Schedule to the Participation Agreement.
3. The Purchase Agreements covering the Functional Units
identified on Schedule I hereto are attached as Schedule II hereto.
4. The aggregate Purchase Price for the items of Equipment to
be acquired is $____________, to be funded by each Lessor ratably in accordance
with its Commitment. The Purchase Price for each Functional Unit is listed on
Schedule I hereto.
5. The Purchase Price to be funded on the Delivery Date
Closing plus the Purchase Price of items previously funded in connection with
prior Delivery Date Closings is equal to or less than $22,500,000.
C-1
<PAGE> 152
6. The Functional Units identified on Schedule I hereto are
[to be] located at the Site(s) described on Schedule III hereto.
7. Payment for the items of Equipment to be acquired shall be
made by wire transfer to the following vendors:
<TABLE>
<CAPTION>
Name & Address
of Wire
Vendor Instructions Amount
-------------- ------------ ------
<S> <C>
1. _________
2. _________
3. _________
Total
=========
</TABLE>
Such amounts being hereby certified as due and owing to such vendors in payment
for such Equipment.
[The $___________ balance of the Purchase Price shall be sent by wire
transfer to the Lessee at the following account [Wire Instructions].]
RYKOFF-SEXTON, INC.
By:________________________________
Name Printed:______________________
Title:_____________________________
C-2
<PAGE> 153
Schedule I
to
Exhibit C
Equipment List
C-3
<PAGE> 154
Schedule II
to
Exhibit C
Copies of Purchase Agreements
(ATTACHED)
C-4
<PAGE> 155
Schedule III
to
Exhibit C
Site(s)
C-5
<PAGE> 156
EXHIBIT D
TO
PARTICIPATION AGREEMENT
FORM OF LESSEE'S AND SUBLESSEE'S OPINION OF COUNSEL
See opinion dated April __, 1994 addressed to Agent and the Lessors.
D-1
<PAGE> 157
EXHIBIT E
TO
PARTICIPATION AGREEMENT
FORM OF BILL OF SALE
BILL OF SALE
[Name of Manufacturer or Lessee, as the case may be] ("Seller"), is the
owner of the items (together with all repairs, parts, supplies, accessories,
equipment and devices affixed thereto or installed thereon, and all warranties,
covenants and representations of any manufacturer or vendor thereof, the "Items
of Equipment") of personal property described on Schedule I hereto;
Seller sells, grants, conveys, transfers and assigns title to the
Items of Equipment to BA Leasing & Capital Corporation (the "Agent") , as agent
for each of the persons listed below (the "Lessors"); and
Seller warrants to the Agent, the Lessors and their respective
successors and assigns that there is conveyed to the Agent, for the benefit of
the Lessors, good title to the Items of Equipment, free and clear of all liens,
security interests, claims, rights or encumbrances of others.
THIS BILL OF SALE shall be governed by the laws of California without
regard to conflict of law principles.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed
and delivered by one of its duly authorized officers this ____ day of
_________, 199_.
[NAME OF SELLER]
By: _________________________
Name Printed:_________________
Title:________________________
LESSORS:
___________________
___________________
___________________
___________________
E-1
<PAGE> 158
Schedule I
to
Bill of Sale
Equipment List
E-2
<PAGE> 1
EXHIBIT 10.16.1
THIS DOCUMENT IS NOT "COUNTERPART NO. 1 -
AGENT'S ORIGINAL COPY"
LEASE INTENDED AS SECURITY
Dated as of April 29, 1994
among
RYKOFF-SEXTON, INC.,
as Lessee,
BA LEASING & CAPITAL CORPORATION,
not individually, but solely as Agent for the Lessors,
and
The Lessors Listed on
the Signature Pages Hereto
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Article I DELIVERY AND ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Acceptance and Lease of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Acceptance Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Article II LEASE TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1. Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2. Lease Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Article III RENT; OTHER ECONOMIC PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1. Rent Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Place and Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3. Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Article IV WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1. Warranty Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2. Assignment of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Article V POSSESSION, ASSIGNMENT, USE AND MAINTENANCE OF EQUIPMENT . . . . . . . . . . . . . . . . . . . 5
5.1. Restriction on Lessee's Possession and Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2. Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3. Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.4. Replacement and Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5. Alterations, Modifications and Additions; Removable Parts . . . . . . . . . . . . . . . . . . . . . 9
5.6. Labeling of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.7. Inspection of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Article VI RISK OF LOSS; REPLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1. Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2. Partial Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3. Partial Casualty Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Article VII INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1. Required Coverages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2. Delivery of Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Article VIII DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.3. Additional Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.4. Proceeds of Sale; Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.5. Right to Perform Lessee's Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Article IX RETURN OF EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Article X EARLY TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Article XI LEASE TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1. Lessee's Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.2. Election of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.3. Sale Option Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.4. Payment of Excess Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.5. Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Article XII AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.1. Appointment of Agent; Powers and Authorization to Take Certain Actions . . . . . . . . . . . . . . 28
12.2. Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.3. Action Upon Instructions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.5. Independent Credit Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.6. Refusal to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.7. Resignation or Removal of Agent; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . 32
12.8. Separate Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.9. Termination of Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12.10. Compensation of Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Article XIII OWNERSHIP, GRANT OF SECURITY INTEREST AND FURTHER ASSURANCES . . . . . . . . . . . . . . . . . 33
13.1. Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13.2. Retention of Title or Proceeds in the Case of Default . . . . . . . . . . . . . . . . . . . . . . . 35
Article XIV EFFECT OF WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Article XV SURVIVAL OF COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Article XVI APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XVII EFFECT AND MODIFICATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XVIII NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XIX COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XX SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article XXI SUCCESSORS AND ASSIGNS; MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
21.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
21.2. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Article XXII ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.1. Assignment by Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22.2. Lessor Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Article XXIII BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Article XXIV JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Article XXV CAPTIONS; TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Article XXVI FINAL AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Article XXVII TIMELINESS OF PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Article XXVIII DISTRIBUTION AND APPLICATION OF RENTS AND OTHER PAYMENTS . . . . . . . . . . . . . . . . . . . 41
28.1. Pro Rata Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Schedule I - Equipment
Exhibit A - Form of Investors Letter
Exhibit B - Form of Lease Supplement
</TABLE>
<PAGE> 5
LEASE INTENDED AS SECURITY
This LEASE INTENDED AS SECURITY (as amended, modified, restated or
supplemented from time to time, this Lease") dated as of April 29, 1994 (the
"Effective Date") is between Rykoff-Sexton, Inc., a Delaware corporation
("Lessee"), with its principal office at 761 Terminal Street, Los Angeles, CA
90021, BA Leasing & Capital Corporation, Pitney Bowes Credit Corporation and
Manufacturers Bank (collectively, the "Lessors" and each a "Lessor"), and BA
Leasing & Capital Corporation, a California corporation, not in its individual
capacity, but solely in its capacity as agent under this Lease ("Agent") for
the benefit of the Lessors.
WHEREAS, pursuant to the terms and conditions set forth herein and in
that certain Participation Agreement dated as of April 29, 1994 (the
"Participation Agreement"), among Lessee, Sublessee, the Lessors and Agent,
Lessors have agreed to purchase and thereafter lease the Equipment to Lessee
pursuant to this Lease.
AND WHEREAS, the Participation Agreement contemplates that, following
Lessee's execution and delivery of this Lease, Lessee will sublease a portion
of the Equipment to Sublessee pursuant to the terms of the Sublease;
AND WHEREAS, capitalized terms used but not otherwise defined herein
(including those used in the foregoing recitals) shall have the meanings
specified in Schedule X to the Participation Agreement, unless the context
otherwise requires.
AND WHEREAS, to secure Lessee's obligations under this Lease and the
other Operative Agreements, Lessee will grant to the Agent, for the benefit of
the Lessors, a security interest in the Collateral, including, without
limitation, the Equipment and the Sublease.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
Article I
DELIVERY AND ACCEPTANCE
Section 1.1. Acceptance and Lease of Equipment. Subject to each
Participant's satisfaction or waiver, as applicable, of the conditions set
forth in Articles II and III of the Participation Agreement, on each Delivery
Date and upon execution
<PAGE> 6
and delivery of a Lease Supplement covering all of the Equipment to be
purchased on such date, Lessors shall lease to the Lessee, and Lessee will
lease from the Lessors, on the terms and subject to the conditions in this
Lease and such Lease Supplement, the Equipment purchased by the Agent on behalf
of the Lessors on such Delivery Date.
Section 1.2. Acceptance Procedure. Lessors hereby authorize one
or more employees of Lessee to be designated by Lessee as the authorized
representative or representatives of Lessors to accept delivery of the
Equipment on each Delivery Date. Lessee hereby agrees that such acceptance of
delivery by such authorized representative or representatives and the execution
and delivery by Lessee on each Delivery Date of a Lease Supplement shall,
without further act, constitute the irrevocable acceptance by Lessee of the
Equipment which is the subject thereof for all purposes of this Lease and the
other Operative Agreements on the terms set forth therein and herein.
Article II
LEASE TERM
Section 2.1. Initial Term. The commencement of the term of this
Lease shall be on the Effective Date and shall continue until, but not
including, April 29, 1995 (the "Initial Term"), unless earlier terminated in
accordance with the provisions herein or extended pursuant to Section 2.2 and
Article XI.
Section 2.2. Lease Renewal. Lessee may elect to renew this Lease
for up to five successive one-year renewal terms (each, a "Renewal Term") as
provided in Article XI.
Article III
RENT; OTHER ECONOMIC PROVISIONS
Section 3.1. Rent Payments. On each Payment Date during the
Initial Term and each Renewal Term, Lessee shall pay to Agent for the benefit
of the Lessors the Interim Rent, Basic Rent or Renewal Rent, as applicable,
that has become due and payable pursuant to the terms of each Lease Supplement
entered into prior to such Payment Date. Scheduled installments of Basic Rent
and Renewal Rent may be adjusted pursuant to Section 6.1.
Section 3.2. Place and Manner of Payment. (a) Rent and all other
sums due Lessors hereunder shall be paid in immediately available funds to
Agent, for the benefit of the Lessors, at the Agent's Corporate Office, or at
such other office of Agent as it
2
<PAGE> 7
may from time to time specify to Lessee in a notice pursuant to this Lease.
All such payments shall be received by Agent not later than 11:00 a.m. San
Francisco time, on the date due; funds received after such time shall for all
purposes under the Operative Agreements be deemed to have been received by
Lessor on the next succeeding Business Day. Lessee shall pay to Agent for the
benefit of the Lessors, on demand, interest (i) with respect to any overdue
amount of Rent or Make-Whole Premium, at the rate per annum which is 2% above
the Interest Rate under the Lease Supplement relating to the Functional Unit in
respect of which such amount is due and (ii) with respect to any other payment
under this Lease that is not paid when due (without taking into account any
applicable grace period), at the rate which is 2% per annum above the Interest
Rate set forth in Schedule II to the Lease Supplement delivered on the Initial
Delivery Date, and (to the extent permitted by applicable law) interest from
the date due (not taking into account any grace period) until payment is made.
(b) Agent shall make all payments to Lessors required under this Lease
or the Participation Agreement on the date the Agent receives the applicable
payment from Lessee, so long as Agent has received such payment from Lessee not
later than 9:00 a.m. San Francisco time, and if Agent receives the applicable
payment from Lessee later than 9:00 a.m. San Francisco time, then Agent shall
make payment to the Lessors on the next succeeding Business Day.
Notwithstanding the foregoing, any such amounts may be held by the Agent
pending the Agent's reasonable, good faith determination of the Lessor or
Lessors entitled to such payment (and the portion thereof payable to each
Lessor), and shall be paid by the Agent to each Lessor entitled thereto
promptly upon making such determination by transferring such amounts to such
Lessors; provided, however, that if such determination is not made by the end
of the second Business Day following receipt by the Agent of the applicable
payment and the amount of such payment shall exceed, in the aggregate,
$100,000, the Agent shall, at the request of the Required Lessors, invest such
funds in Permitted Investments.
Section 3.3. Net Lease. This Lease is a net lease and Lessee's
obligation to pay all Rent, indemnity and other amounts payable hereunder shall
be absolute and unconditional under any and all circumstances and, without
limiting the generality of the foregoing, Lessee shall not be entitled to any
abatement or reduction of Rent or any setoff against Rent, indemnity or other
amount, whether arising by reason of any past, present or future claims of any
nature by Lessee against Agent or any Lessor, or otherwise. Except as
otherwise expressly provided herein, this Lease shall not terminate, nor shall
the obligations of Lessee be otherwise affected (a) by reason of any defect in,
damage to, or loss of possession or use, obsolescence or destruction, of any or
3
<PAGE> 8
all of the Equipment, however caused; or (b) by the taking or requisitioning of
any or all of the Equipment by condemnation or otherwise; or (c) by the
invalidity or unenforceability or lack of due authorization by Agent, Lessors
or Lessee or other infirmity of this Lease; or (d) by lack of power or
authority of Lessor to enter into this Lease; or (e) by the attachment of any
Lien of any third party to any item of Equipment; or (f) by any prohibition or
restriction of or interference with Lessee's use of any or all of the Equipment
by any Person; or (g) by the insolvency of or the commencement by or against
Lessee, Agent or any Lessor of any bankruptcy, reorganization or similar
proceeding; or (h) by any other cause, whether similar or dissimilar to the
foregoing, any present or future law to the contrary notwithstanding. It is
the intention of the parties that all Rent, indemnities and other amounts
payable by Lessee hereunder shall be payable in all events in the manner and at
the times herein provided unless Lessee's obligations in respect thereof have
been terminated or modified pursuant to the express provisions of this Lease.
To the extent permitted by applicable law, Lessee waives any and all rights
which it may now have or which may at any time be conferred upon it, by statute
or otherwise, to terminate, cancel, quit or surrender this Lease, in whole or
in part, except strictly in accordance with the express terms hereof. Each
rental, indemnity or other payment made by Lessee hereunder shall be final, and
Lessee shall not seek to recover (except as expressly provided in this Lease)
all or any part of such payment from Lessors or the Agent for any reason
whatsoever.
Article IV
WARRANTIES
Section 4.1. Warranty Disclaimer. LESSEE ACKNOWLEDGES AND AGREES
THAT: (a) THE EQUIPMENT IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE
SELECTED BY LESSEE; (b) LESSEE IS SATISFIED THAT THE SAME IS SUITABLE FOR ITS
PURPOSES; (c) NEITHER AGENT NOR ANY LESSOR IS A MANUFACTURER THEREOF OR A
DEALER IN PROPERTY OF SUCH KIND; AND (d) NEITHER AGENT NOR ANY LESSOR HAS MADE
OR SHALL BE DEEMED TO HAVE MADE: (i) ANY REPRESENTATION OR WARRANTY OR COVENANT
WITH RESPECT TO THE TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
CONDITION, QUALITY, DESCRIPTION, DURABILITY OR SUITABILITY OF ANY ITEM OF
EQUIPMENT IN ANY RESPECT OR IN CONNECTION WITH OR FOR THE PURPOSES AND USES OF
LESSEE; OR (ii) ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO ANY ITEM OF EQUIPMENT, EXCEPT THAT EACH OF THE LESSORS
REPRESENTS AND WARRANTS, SEVERALLY AND NOT JOINTLY, THAT ON EACH DELIVERY DATE
IT SHALL HAVE RECEIVED AN UNDIVIDED INTEREST IN WHATEVER TITLE WAS CONVEYED BY
THE MANUFACTURERS OF THE EQUIPMENT DELIVERED ON SUCH DELIVERY DATE BY
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SUCH MANUFACTURERS, FREE OF LESSOR LIENS CREATED BY SUCH LESSOR EXCEPT FOR
PERMITTED LESSOR LIENS AND LIENS CREATED PURSUANT TO THE OPERATIVE AGREEMENTS.
Section 4.2. Assignment of Warranties. Lessors assign to Lessee,
to the extent assignable, all of their interest, if any, in any warranties,
covenants and representations of any manufacturer, producer, vendor or maker of
any item of Equipment, provided that such assignment shall remain in effect
only so long as no Event of Default has occurred and is continuing, and
provided, further, that any action taken by Lessee by reason thereof shall be
at the expense of Lessee and shall be consistent with Lessee's obligations
pursuant to this Lease.
Article V
POSSESSION, ASSIGNMENT, USE AND
MAINTENANCE OF EQUIPMENT
Section 5.1. Restriction on Lessee's Possession and Use. Lessee
shall not (a) use, operate, maintain or store any Functional Unit, item of
Equipment or any portion thereof (i) except in accordance with Section 5.3; or
(ii) in violation of any applicable insurance policy or law or regulation of
any Authority; (b) abandon any item of Equipment; (c) except as permitted by
Section 5.2 and Section 6.1 of the Participation Agreement, sublease or assign,
without the prior written consent of Lessor, any item of Equipment or permit
the use thereof by anyone other than Lessee; (d) except as set forth in Section
5.2 and Section 6.1 of the Participation Agreement, sell, assign or transfer
any of its rights hereunder or in any item of Equipment, or directly or
indirectly create, incur or suffer to exist any Lien on any of its rights
hereunder or in any item of Equipment, except for Permitted Liens; or (e)
except in connection with any maintenance or repair thereof, permit any item of
Equipment or any Part relating to such item of Equipment to be located at any
location other than the location of such Equipment or Part as of the Delivery
Date applicable thereto and as set forth opposite such item of Equipment on
Schedule I of the applicable Lease Supplement. Lessee will defend the sale of
the Equipment by Lessee and Manufacturers to Agent, for the benefit of the
Lessors, against the claims or demands of all Persons.
Section 5.2. Sublease. Subject to Sections 6.1(a) and 6.2(a) of
the Participation Agreement, so long as no Event of Default has occurred and is
continuing, Lessee may sublease one or more Functional Units to a Subsidiary of
Lessee without the prior written consent of Lessors or Agent; provided that (i)
any such sublease shall automatically expire upon the expiration of the Lease
Term or any earlier termination of this Lease and shall
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be expressly subject and subordinate to this Lease and the Liens created
hereby, (ii) the sublease agreement shall be in writing and shall expressly
prohibit any further assignment, sublease or transfer and (iii) all of Lessee's
rights, title and interest in, to and under the sublease shall be pledged by
Lessee to Lessors, as collateral for Lessee's obligations under the Operative
Agreements, by delivery of an executed copy upon the execution and delivery
thereof, marked as the sole original execution copy for Uniform Commercial Code
purposes, to the Agent, and Lessee shall, at its own cost and expense, do any
further act and execute, acknowledge, deliver, file, register and record any
further documents which the Agent or Lessors may reasonably request in order to
create, perfect, preserve and protect Agent's and Lessors' security interest in
the sublease. Lessee shall remain primarily liable hereunder for the
performance of all of the terms of this Lease to the same extent as if such
sublease had not been entered into.
Section 5.3. Maintenance. Lessee shall at its own cost and
expense and at all times during the term of this Lease (a) maintain, manage and
monitor the Equipment in compliance with all applicable requirements of any
law, Authority and/or insurance policies; (b) maintain the Equipment (or cause
the Equipment to be maintained) in as good operating order, repair, condition
and appearance as it was on the date such Equipment became subject to this
Lease (assuming that, as of such date, the Equipment was in good operating
order, repair, condition and appearance), ordinary wear and tear excepted; (c)
maintain, manage and monitor the Equipment in accordance with the terms of all
applicable contracts (including, without limitation, service contracts and
insurance contracts); (d) conduct all scheduled maintenance of the Equipment in
conformity with Lessee's past practices, and manufacturer's maintenance and
repair guidelines, for similar equipment (including, without limitation,
Lessee's maintenance program for such equipment); and (e) cause the Equipment
to continue to have at all times the capacity and functional ability to
perform, on a continuing basis (subject to normal interruption in the ordinary
course of business for maintenance, inspection, service, repair and testing)
and in commercial operation, the functions for which it was specifically
designed. Lessee shall in any event maintain the Equipment (or cause the
Equipment to be maintained) in at least as good a condition as comparable
equipment owned or leased by it or any of its Subsidiaries. Lessee will
maintain or cause to be maintained and shall permit the Agent and Lessors to
inspect any records, logs and other materials required by any governmental
authority having jurisdiction to be maintained or filed in respect of any items
of Equipment.
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Section 5.4. Replacement and Substitution.
(a) In the event that any Part which may from time to
time be incorporated or installed in or attached to any item of
Equipment, or any item of Equipment itself, becomes at any time worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason whatsoever
(unless such event constitutes a Casualty or Partial Casualty, in
which event the provisions of Section 6.1 or 6.2 hereof shall apply),
Lessee, at its own cost and expense, will promptly replace, or cause
to be replaced, such Part or item of Equipment (the Substituted Item")
with a replacement Part or item of Equipment (a "Replacement Part").
In addition, Lessee may, at its own cost and expense, remove in the
ordinary course of maintenance, service, repair, overhaul or testing,
any Part, whether or not worn out, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, provided
that Lessee will, at its own cost and expense, replace such Part as
promptly as is commercially reasonable. All Replacement Parts shall
be free and clear of all Liens (other than Permitted Liens) and shall
be in as good an operating condition as, and shall have a value and
utility at least equal to, the Parts replaced, assuming such replaced
Parts and the Equipment were immediately prior to such replacement or
the event or events necessitating such replacement in the condition
and repair required to be maintained by the terms hereof. Any Part at
any time removed from any item of Equipment shall remain subject to
the interests of the Agent and the Lessors under the Operative
Agreements, no matter where located, until such time as such Part
shall be replaced by a Part which has been incorporated or installed
in or attached to such item of Equipment and which meets the
requirements for a Replacement Part specified above. Immediately upon
any Replacement Part becoming incorporated or installed in or attached
to any such item of Equipment as above provided, without further act
(i) title to the replaced Part shall thereupon vest in Lessee, free
and clear of all rights of the Lessors, and shall no longer be deemed
a Part hereunder, (ii) title to such Replacement Part shall thereupon
vest in the Lessors and (iii) such Replacement Part shall become
subject to this Lease and the security interest created hereunder and
be deemed part of such item of Equipment for all purposes hereof to
the same extent as the Parts incorporated or installed in or attached
to such item of Equipment on the date such item of Equipment became
subject to this Lease. No later than 45 days after the end of each
fiscal quarter of Lessee, Lessee shall deliver to Lessors a Bill of
Sale evidencing the conveyance by Lessee to the Lessors of all
Replacement Parts not previously evidenced by
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a Bill of Sale and such other documents in respect of such Part or
Parts as the Required Lessors may reasonably request in order to
confirm that title to such Part or Parts has passed to Lessors, as
provided above. Each such Bill of Sale shall provide that each
Lessor is granted an undivided interest in such Replacement Parts
equal to its Lease Percentage as of the date of such transfer.
(b) In addition to the foregoing, Lessee shall have the option
at any time to replace any Functional Unit (a "Replaced Unit") with a
substitute Functional Unit (a "Replacement Unit"), subject to the
following conditions:
(i) any such Replacement Unit shall satisfy one of
the following conditions: (x) the Replacement Unit shall
consist of items of new equipment of identical manufacture and
model as the equipment comprising the Replaced Unit, or (y)
such Replacement Unit shall have a utility, an Appraised
Value, and an economic useful life at least equal to those of
the Replaced Unit immediately prior to such substitution,
assuming that the Replaced Unit was in the condition and
repair required to be maintained by the terms of this Lease,
and Lessee shall have provided to the Agent and each Lessor,
at Lessee's expense, an Appraisal satisfactory to Agent and
each Lessor in their sole and absolute discretion with respect
to the determination of such utility, Fair Market Value and
economic useful life or (z) such Replacement Unit shall
otherwise be acceptable to each of the Lessors in its
respective sole and absolute discretion;
(ii) Lessee shall have satisfied each of the
conditions set forth in Section 4.3 of the Participation
Agreement (other than subsection (b) thereof) with respect to
the proposed replacement; and
(iii) Lessee shall not remove the Replaced Unit from
the location set forth onSchedule I to the Delivery Date
Notice pursuant to which the Replaced Unit was delivered until
such time as it has executed all documents reasonably
requested by Agent or any Lessor to perfect the security
interest of the Agent, for the benefit of the Lessors, in the
Replacement Unit.
Any Replacement Unit substituted in accordance with this Section
5.4(b) shall thereafter be considered a Functional Unit for all
purposes of this Lease.
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(c) Lessee may request the replacement of an item of
Equipment (pursuant to the foregoing subsection (a)) or a Functional
Unit (pursuant to the foregoing subsection (b) by delivery of a
Replacement Notice in the manner described in Section 4.3 of the
Participation Agreement. Upon the satisfaction of the conditions
specified in such Section 4.3, each in form and substance satisfactory
to the Required Lessors, and the Replacement Part or Replacement Unit
becoming subject to this Lease and the security interest created
hereunder, Lessor shall execute and deliver to Lessee a bill of sale
(without representations or warranties, except that the Substituted
Item or Replaced Unit, as the case may be, is free and clear of all
Lessor Liens) and such other documents as may be required to release
the Substituted Item or Replaced Unit, as the case may be, from the
terms and scope of this Lease, in such form as may be reasonably
requested by Lessee and are in form and substance satisfactory to the
Lessors, all at Lessee's own cost and expense.
Section 5.5. Alterations, Modifications and Additions; Removable
Parts.
(a) Except as provided in Section 5.4, Lessee shall not
remove, replace, modify, improve or alter (collectively, "alter") any
item of Equipment or affix or place any Part on any item of Equipment
if such alteration or addition would materially impair the originally
intended function or use or materially reduce the value of such item
of Equipment or the Functional Unit to which such item of Equipment
belongs, provided that Lessee, at its own cost and expense, will make,
or cause to be made any alteration or addition to or in respect of any
item of Equipment that may be necessary, from time to time, to comply
in all material respects with any applicable law, governmental rule or
regulation (including any Environmental Law) or any provision of any
insurance policy required to be maintained under Section 7.1 (any
Parts being used to comply with this provision shall be hereafter
referred to as "Mandatory Parts"); provided, however, that Lessee
shall be under no obligation to take such action so long as the
application of the applicable law, rule, regulation or provision is
being contested by Lessee pursuant to a Permitted Contest. Lessee
shall notify Agent and the Lessors in advance of any proposed
alteration of or addition to any item of Equipment if the cost of such
alteration or addition, in the aggregate, can reasonably be expected
to exceed $250,000, or if such advance notice is not practicable,
within 30 days after the completion of such alteration or addition.
All Parts affixed to or installed as a part on any item of Equipment,
excluding temporary
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replacements, shall thereupon become subject to the security interest
under this Lease.
(b) If no Event of Default shall exist, Lessee may remove, at
its own cost and expense, any Part at any time during the term of this
Lease (such Part, a "Removable Part") which (i) is in addition to, and
not in replacement of or substitution for, any Part originally
incorporated or installed in or attached to an item of Equipment on
the date such item became subject to this Lease or any Part in
replacement of or substitution for any such Part originally
incorporated or installed or attached to such Equipment, (ii) is not a
Mandatory Part and (iii) can be removed from any item of Equipment
without causing damage to such item of Equipment or diminishing or
impairing the value, utility or condition that such item of Equipment
would have had at such time had such addition not occurred, provided
that (x) such removal will not materially impair the value or use
which the item of Equipment would have had at such time had such Part
not been affixed to or placed on such Equipment, (y) such Part is not
necessary for the continued normal use of such item of Equipment and
(z) such removal would not cause the Functional Unit to which such
items of Equipment belong to no longer constitute a Functional Unit.
Lessee shall repair all damage to the item of Equipment resulting from
any alteration so as to restore any item of Equipment to the condition
in which it existed prior to such alteration (ordinary wear and tear
excepted). Lessors shall not have any obligation to pay for or to
reimburse Lessee for any alteration permitted by this Section 5.5.
Title to all Parts incorporated or installed in or attached or added to any
item of Equipment as the result of alterations, modifications or additions
under this Section 5.5, except Removable Parts, shall, without further act,
vest in Agent, for the benefit of the Lessors, in the manner provided in clause
(ii) of Section 5.4(a) and the other applicable provisions of Section 5.4 shall
apply with respect to such Parts. Title to any Removable Part shall not vest
in Agent, and upon the removal by Lessee of any Removable Part as provided
herein, such Removable Part shall no longer be deemed part of the item of
Equipment from which it was removed. Any Removable Part not removed by Lessee
as provided herein prior to the end of the Lease Term or applicable Renewal
Term shall become the property of Agent, for the benefit of the Lessors, at
such time.
Section 5.6. Labeling of Equipment. Lessee shall as soon as
practicable affix and keep throughout the Lease Term, including any Renewal
Terms, labels, plates or other markings, bearing the inscription "Security
Interest held by BA Leasing &
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Capital Corporation, as agent for the Lessors" upon a prominent place on each
item of Equipment reasonably susceptible to being so labeled.
Section 5.7. Inspection of Collateral. Agent, the Lessors and
each of their agents and representatives shall have the right at all reasonable
times, upon reasonable notice, to inspect any Collateral.
Article VI
RISK OF LOSS; REPLACEMENT
Section 6.1. Casualty. Upon a Casualty, Lessee shall give prompt
written notice thereof (a "Casualty Notice") to Agent and Lessors, which notice
shall specify whether Lessee will:
(a) repay the Functional Unit Balance for each Functional
Unit subject to such Casualty together with unpaid Accrued Supplement
Rent on each such Functional Unit Balance so prepaid to the date of
payment and the applicable Make-Whole Premium on each such Functional
Unit Balance so repaid. All such amounts shall be paid to Agent for
the benefit of the Lessors no later than the next scheduled Payment
Date occurring at least 30 days after such Casualty, but in no event
later than the Termination Date (such date being referred to as the
Casualty Settlement Date"); or
(b) replace pursuant to the provisions of Section 5.4(b)
hereof and Section 4.3 of the Participation Agreement each Functional
Unit with respect to which the Casualty has occurred; provided,
however, that upon the occurrence of an Event of Default or an event
which with the giving of notice and/or the passage of time could give
rise to an Event of Default, Lessee shall be obligated, at the option
of the Required Lessors, to make the payments referred to in clause (a)
above and shall not be entitled to exercise any right or election of
replacement as set forth in this clause (b).
All proceeds of any casualty insurance or condemnation proceeds
("Casualty Proceeds") paid to the Lessee or any of its Affiliates by reason of
a Casualty to a Functional Unit shall be deposited into a deposit account
established by Agent for the benefit of the Lessors (the "Deposit Account").
Any Casualty Proceeds paid to Agent with respect to a Functional Unit suffering
a Casualty shall also be deposited in the Deposit Account. Any monies in the
Deposit Account attributable to a Casualty shall be remitted promptly to Lessee
after either (i) Lessee's payment in full of the Functional Unit Balance
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together with the applicable Make-Whole Premium or (ii) Lessee's full
compliance with the conditions governing a Replacement Part, as applicable
pursuant to clause (a) or (b) above.
If Lessee has elected to pay the Functional Unit Balance and an amount
equal to the applicable Make-Whole Premium pursuant to clause (a) above, Lessee
shall continue to make all payments of Rent due hereunder in respect of the
Functional Unit or Units suffering a Casualty through the date the Functional
Unit Balance and the applicable Make-Whole Premium are paid. Upon payment of
each of the amounts required by Section 6.1(a), then all scheduled installments
of Rent, including installments of Renewal Rent, thereafter payable for the
remainder of the Lease Term in respect of the Lease Supplement applicable to
the Functional Unit or Units suffering the Casualty, and the portion of the
Purchase Option Exercise Amounts allocable to such Lease Supplement, shall be
re-calculated by the Agent in the manner specified in Section 3.1 of the
Participation Agreement, without taking into account the Purchase Price or
Functional Unit Balance of the Functional Unit suffering the Casualty.
Section 6.2. Partial Casualty. Upon any Partial Casualty with
respect to a Functional Unit, Lessee shall give to Agent and Lessors a Notice
of Partial Casualty. As soon as practicable after a Partial Casualty, Lessee
shall (a) repair and rebuild the affected portions of such Functional Unit (or
cause such affected portions to be repaired and rebuilt) to the condition
required to be maintained by Section 5.3 hereof, provided that the value and
functional capability of such Functional Unit, as restored, is at least
equivalent to the value and functional capability of such Functional Unit as in
effect immediately prior to the occurrence of such Partial Casualty or (b)
replace such affected items of Equipment with Replacement Parts pursuant to the
provisions of Section 5.4(a).
Section 6.3. Partial Casualty Proceeds. All Partial Casualty
Proceeds received by Lessee or any of its Affiliates as a result of a Partial
Casualty shall be promptly paid to Agent. Agent shall deposit such Partial
Casualty Proceeds into the Deposit Account and, so long as no Event of Default
or event which with the giving of notice and/or passage of time could give rise
to an Event of Default shall exist, Agent shall disburse such Partial Casualty
Proceeds with respect to a Functional Unit (or an item of Equipment
constituting part of such Functional Unit) suffering a Partial Casualty as
follows:
(a) to Lessee in reimbursement of the costs of repairing
and rebuilding the affected portions of such Functional Unit (or item
of Equipment constituting part of such Functional Unit) suffering a
Partial Casualty which the
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Lessee has chosen to repair and rebuild in accordance with Section
6.2; or
(b) upon a Replacement Part being duly substituted for
each item of Equipment having suffered a Partial Casualty, to Lessee
to the extent Partial Casualty Proceeds with respect to the
corresponding Substituted Item were deposited into the Deposit
Account.
Partial Casualty Proceeds held by Agent and to be distributed in
accordance with paragraph (a) of this Section 6.3 shall be disbursed by Agent
from the Deposit Account to Lessee from time to time (but no more frequently
than once per calendar month) to reimburse Lessee for the costs of repairing
and rebuilding the affected Functional Units as required under Section 6.2(a),
subject to such reasonable disbursement conditions as Agent may impose,
including presentation of invoices and other supporting documentation
reflecting such costs and delivery of Lien waivers; provided, however, that
Agent shall have no obligation to disburse any Partial Casualty Proceeds out of
the Deposit Account at any time that Agent, at the direction of the Required
Lessors, shall reasonably determine (i) that such Partial Casualty Proceeds are
not sufficient to repair and rebuild the affected Functional Units as required
by Section 6.2(a) (unless additional funds which are, in the sole discretion of
the Required Lessors, sufficient to so repair and rebuild the affected
Functional Units have been deposited in the Deposit Account) or (ii) that
Lessee is not diligently performing its obligations under Section 6.2.
Notwithstanding the foregoing provisions of this Section 6.3, and provided that
no Event of Default and no event which with the giving of notice and/or passage
of time could become an Event of Default shall exist, if the aggregate amount
of Partial Casualty Proceeds attributable to any Partial Casualty is $100,000
or less, Lessee may receive such Partial Casualty Proceeds directly, without
delivery to Agent, provided that such Partial Casualty Proceeds are applied in
accordance with the requirements of Section 6.2. In the event that Agent
receives Partial Casualty Proceeds in an amount that is less than $100,000 and
provided that no Event of Default and no event which with the giving of notice
and/or passage of time could become an Event of Default shall exist, Agent
shall promptly remit such funds to Lessee. Notwithstanding any Partial
Casualty, all of Lessee's obligations under this Lease (including its
obligation to make all payments of Rent as they become due) shall continue
unabated and in full force and effect as provided in this Lease.
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Article VII
INSURANCE
Section 7.1. Required Coverages. Lessee will keep the Equipment
insured by financially sound and reputable insurers against loss or damage,
with insurance of the kinds and in the amounts customarily maintained by
similar corporations engaged in similar operations in similar jurisdictions and
carry such other insurance as is usually carried by such corporations, provided
that in any event Lessee will maintain:
(a) Casualty Insurance -- insurance against risks of
direct physical loss or damage with respect to the Equipment
(including, without limitation, earthquake insurance) with deductibles
and in such minimum amounts as are consistent with industry standards;
provided, however, that at no time shall the amount of coverage, on a
replacement cost basis, be less than the sum of (x) the Lease Balance
and (y) an amount equal to the aggregate portion of the interest
component of Basic Rent or Renewal Rent to be accrued under all Lease
Supplements for 90 days following the date of determination;
(b) Public Liability Insurance -- combined single limit
insurance against claims for bodily injury, death or property damage
in an amount at least equal to $5,000,000 per occurrence with such
deductibles as are carried by similarly situated companies involved in
operating similar facilities and equipment; and
(c) Other Insurance -- such other insurance, including
comprehensive motor vehicle, worker's compensation and business
interruption insurance, in each case as generally carried by owners of
equipment similar to the Equipment and properties in the States of
California, Iowa and Oregon, in such amounts and against such risks as
are then customary for equipment and property similar in use.
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 rating of at least "10" or be otherwise acceptable to the Required
Lessors. Property/Casualty insurance maintained by Lessee shall name Agent,
for the benefit of the Lessors, as sole loss payee to the extent such claims
relate to items of Equipment subject to this Lease, and liability insurance
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maintained by Lessee shall name Agent, together with the Lessors, as additional
insureds. Each policy referred to in this Section 7.1 shall provide that (i)
it will not be cancelled or its limits reduced, or allowed to lapse without
renewal, except after not less than 30 days' written notice to Agent and the
Lessors, (ii) the interests of Agent and the Lessors shall not be invalidated
by any act or negligence of Lessee or any person having an interest in any item
of Equipment, (iii) such insurance is primary with respect to any other
insurance carried by or available to Agent and the Lessors, (iv) the insurer
shall waive any right of subrogation, setoff, counterclaim, or other deduction,
whether by attachment or otherwise, against Agent and the Lessors and (v) such
policy shall contain a cross-liability clause providing for coverage of Agent
and each Lessor as if separate policies had been issued to each of them.
Lessee will notify Agent and Lessors promptly of any policy cancellation,
reduction in policy limits, modification or amendment.
Section 7.2. Delivery of Insurance Certificates. On or before the
Initial Delivery Date and thereafter on each Subsequent Delivery Date, Lessee
shall deliver to Agent (with a copy to each Lessor) certificates of insurance
reasonably satisfactory to the Lessors evidencing the existence of all
insurance required to be maintained hereunder and setting forth the respective
coverages, limits of liability, carrier, policy number and period of coverage.
Thereafter, throughout the Lease Term, no sooner than 10 days before and no
later than on the last day of April (commencing in 1995), Lessee shall deliver
to Agent (with a copy to each Lessor) certificates of insurance evidencing that
all insurance required by Section 7.1 hereof to be maintained by Lessee with
respect to the Equipment subject to this Lease is in effect. With each such
certificate of insurance (other than certificates delivered in connection with
Delivery Date Closings) Lessee shall cause to be delivered a written report of
a firm of independent insurance brokers of nationally recognized standing,
stating that, in their opinion, such policy is in compliance with the
provisions of Section 7.1 hereof and is comparable in all material respects
with insurance carried by responsible owners and operators of equipment similar
to the Equipment.
Article VIII
DEFAULT
Section 8.1. Events of Default. The following shall constitute
events of default (each an "Event of Default") hereunder (whether any 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
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of any court or any order, rule or regulation of any administrative or
governmental body):
(a) any payment of Rent shall not be paid when due, or
any other payment payable by Lessee under any Operative Agreement
shall not be paid within ten (10) Business Days;
(b) any representation or warranty on the part of Lessee
contained in any Operative Agreement or in any certificate, letter or
other writing or instrument furnished or delivered to Agent or the
Lessors pursuant thereto shall at any time prove to have been
incorrect in any material respect when made, deemed made or
reaffirmed, as the case may be;
(c) Lessee shall default in the performance or observance
of any term, covenant, condition or agreement on its part to be
performed or observed underSections 5.1(c) or 5.1(d), Section 5.2,
Article XI, or Section 21.2 hereof;
(d) Lessee shall default in any material respect in the
performance or observance of any term, covenant, condition or
agreement on its part to be performed or observed under Section 7.1
hereof;
(e) Lessee shall default in any material respect in the
performance or observance of any other term, covenant, condition or
agreement on its part to be performed or observed hereunder or under
any other Operative Agreement (and not constituting an Event of
Default under any other clause of this Section 8.1), and such default
shall continue unremedied for a period of 30 days after the earlier to
occur of (i) written notice thereof by Agent or any Lessor to Lessee
or (ii) Lessee has Actual Knowledge thereof, provided that if such
failure cannot be remedied within such 30-day period and Lessee is
diligently proceeding, as determined in the absolute discretion of the
Required Lessors, to correct such failure of performance and such
failure of performance is capable of being remedied within a single
additional 30-day period, such period shall be extended for an
additional 30 days;
(f) (i) Lessee shall generally fail to pay, or admit in
writing its inability to pay, its debts as they become due, or shall
voluntarily commence any case or proceeding or file any petition under
any bankruptcy, insolvency or similar law seeking dissolution,
liquidation or reorganization or the appointment of a receiver, agent,
custodian or liquidator for itself or a substantial portion of its
property, assets or business or to effect a plan or other arrangement
with its creditors, or shall file any
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answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition filed against it in any
bankruptcy, insolvency or similar case or proceeding, or shall be
adjudicated bankrupt, or shall make a general assignment for the
benefit of creditors, or shall consent to, or acquiesce in the
appointment of, a receiver, agent, custodian or liquidator for itself
or a substantial portion of its property, assets or business or (ii)
corporate action shall be taken by Lessee for the purpose of
effectuating any of the foregoing;
(g) involuntary proceedings or an involuntary petition
shall be commenced or filed against Lessee under any bankruptcy,
insolvency or similar law or seeking the dissolution, liquidation or
reorganization of Lessee or the appointment of a receiver, agent,
custodian or liquidator for Lessee or of a substantial part of the
property, assets or business of Lessee, or any writ, judgment, warrant
of attachment, execution or similar process shall be issued or levied
against a substantial part of the property, assets or business of
Lessee, and such proceedings or petition shall not be dismissed or
stayed, or such writ, judgment, warrant of attachment, execution or
similar process shall not be released, vacated or fully bonded within
60 days after commencement, filing or levy, as the case may be;
(h) a contribution failure occurs with respect to any
Pension Plan (other than a Multiemployer Plan) sufficient to give rise
to a lien under Section 302(f) of ERISA or Section 412(n) of the Code
with respect to any Pension Plan (other than a Multiemployer Plan) as
to which Lessee or any Related Person to Lessee may have any
liability, there shall exist an unfunded current liability (as defined
in 302(d)(8) of ERISA) with respect to any Pension Plan which unfunded
current liability is material to the consolidated financial condition
of Lessee and its consolidated subsidiaries taken as a whole, steps
are undertaken to terminate any Pension Plan, any Reportable Event
occurs with respect to a Pension Plan for which notice to the PBGC has
not been waived, any action is taken with respect to a Pension Plan
which could result in the requirement that Lessee or any Related
Person to Lessee furnish a bond or other security to the PBGC or such
Pension Plan, the occurrence of any event which could cause Lessee or
any Related Person to Lessee to incur any material liability, fine or
penalty with respect to any Pension Plan or any material increase in
liability with respect to any Pension Plan, or the occurrence of any
event that could result in any material increase in the liability (or
contingent liability) of Lessee or any Related Person to Lessee with
respect to post-retirement benefits under any Welfare Plan;
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(i) any Operative Agreement or the security interest
granted under this Lease shall (except in accordance with its terms),
in whole or in part, terminate, cease to be effective or cease to be
the legally valid, binding and enforceable obligation of Lessee, or
Lessee or any of its Subsidiaries shall, directly or indirectly,
contest in any manner in a court of competent jurisdiction the
effectiveness, validity, binding nature or enforceability thereof or
the security interest securing Lessee's obligations under the
Operative Agreements shall, in whole or in part, cease to be a
perfected first priority security interest;
(j) Lessee or any of its Subsidiaries shall fail to make
any payment when due in respect of any indebtedness (including,
without limitation, the indebtedness under the Prior Debt Agreements)
or any guarantee, installment purchase agreement or similar contingent
obligation, or as a result of an event of default, the maturity of an
indebtedness (including, without limitation, the indebtedness under
the Prior Debt Agreements) or contingent obligation has been
accelerated prior to its express maturity, provided that the aggregate
of all such defaulted payments and/or accelerations of principal
exceeds $5,000,000 or more;
(k) a judgment or judgments for the payment of money are
entered by a court or courts of competent jurisdiction against Lessee
or any of its Subsidiaries, and such judgment or judgments remain
undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all
such judgments exceeds $5,000,000; and
(l) Lessee or any of its "subsidiaries" (as defined in
the Credit Agreement) shall default after the Expiration Date in the
performance or observance of the covenants set forth in Sections 6.10,
6.11, 6.12, 6.13 or 6.14 of the Credit Agreement as these Sections are
in effect on the Expiration Date, it being understood that, for
purposes of thisSection 8.1(l), the aforementioned covenants and the
related definitions and ancillary provisions from the Credit Agreement
shall be incorporated by reference herein for the benefit of the
Lessors and Agent and shall be treated as having survived any
termination of the Credit Agreement so long as any obligation of
Lessee may be due and owing under any Operative Agreement.
Section 8.2. Remedies. If any Event of Default has occurred and
is continuing, Agent, on behalf of the Lessors as provided for in Article XII,
may exercise in any order one or
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more or all of the remedies set forth in this Section 8.2 (it being understood
that no remedy herein conferred is intended to be exclusive of any other remedy
or remedies, but each and every remedy shall be cumulative and shall be in
addition to every other remedy given herein or now or hereafter existing at law
or in equity or by statute, including without limitation any applicable Uniform
Commercial Code).
(a) Agent may proceed by appropriate court action or
actions, either at law or in equity, to enforce performance by Lessee
of the applicable covenants of this Lease or to recover damages for
the breach thereof.
(b) Agent (with the consent of the Required Lessors) may
by notice in writing to Lessee terminate this Lease, but Lessee shall
remain liable as hereinafter provided; and Agent may do any one or
more of the following, as instructed by the Required Lessors: (i)
declare the Lease Balance, all unpaid Accrued Rent, all other amounts
then due and payable by Lessee under this Lease and the other
Operative Agreements and an amount equal to the Aggregate Make-Whole
Premium to be immediately due and payable, and recover any other
damages and expenses (including the costs and expenses described in
Sections 7.1, 7.2 and 11.5 of the Participation Agreement) in addition
thereto which Lessor shall have sustained by reason of such Event of
Default, (ii) enforce the security interest given hereunder pursuant
to the Uniform Commercial Code or any other law, (iii) enter upon the
premises where any item of Equipment may be and either remove such
Equipment (or any portion thereof), with any damage to the
improvements upon which the Equipment may be attached to be borne by
Lessee, or take possession of the Equipment and (iv) require Lessee to
disassemble and return the Equipment as provided in Article IX hereof.
(c) Agent may require Lessee immediately to purchase the
Equipment for a purchase price equal to the sum of the Lease Balance,
all unpaid Accrued Rent, an amount equal to the Aggregate Make-Whole
Premium and all other amounts then due and payable under the Operative
Agreements.
(d) If an Event of Default set forth in Section 8.1(a) (a
"Payment Default") shall have occurred, any Lessor may declare the
Lease Balance immediately due and payable by giving written notice to
Agent, Lessee and each other Lessor, whereupon the unpaid Lease
Balance together with the Aggregate Make-Whole Premium, if any, and
all unpaid Accrued Rent shall become immediately due and payable
without further act or notice of any kind. If an Event of Default set
forth in Sections 8.1(f) or 8.1(g) (an "Insolvency Defaul") shall have
occurred, the unpaid Lease Balance
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together with the Aggregate Make-Whole Premium, if any, and all unpaid
Accrued Rent shall become immediately due and payable without further
act or notice of any kind. If an Event of Default other than an
Insolvency Default or a Payment Default shall have occurred and be
continuing, the Agent, with the consent of the Required Lessors, may
declare the Lease (and each Lease Supplement) to be terminated and all
payments thereunder to be due and payable immediately by giving
written notice to Agent, Lessee and each Lessor, whereupon the unpaid
Lease Balance together with the Aggregate Make-Whole Premium, if any,
and all unpaid Accrued Rent shall become immediately due and payable
without further act or notice of any kind. Nothing contained in this
Section 8.2 shall limit the application of Article XXVIII in
accordance with its terms.
Except for notices expressly otherwise provided for in the Operative
Agreements, Lessee hereby waives presentment, demand, protest and notice of any
kind including, without limitation, notices of default, notice of acceleration
and notice of intent to accelerate.
Section 8.3. Additional Remedies. In addition to the remedies set
forth in Section 8.2, if any Event of Default shall occur, Agent shall, if
instructed by the Required Lessors, sell the Collateral in one or more sales;
provided, Lessors shall have no liability to Lessee if they fail to instruct
Agent to conduct such a sale. Any Lessor or Agent may purchase all or any part
of the Collateral at such sale. Lessee acknowledges that sales for cash or on
credit to a wholesaler, retailer or user of such Collateral, at a public or
private auction, are all commercially reasonable. Any notice required by law
of intended disposition by Agent shall be deemed reasonable and properly given
if given at least 10 days before such disposition.
Section 8.4. Proceeds of Sale; Deficiency. All payments received
and amounts held or realized by Agent at any time when an Event of Default
shall have occurred and be continuing, as well as all payments or amounts then
held or thereafter received by Agent, shall be distributed forthwith upon
receipt by Agent in the following order of priority:
first: so much of such payments or amounts as shall be
required to pay the reasonable fees and compensation of Agent in
connection with acting as Agent not previously paid by Lessee shall be
distributed to Agent;
second: so much of such payments or amounts as shall be
required to reimburse first Agent and then any Lessor for any tax
(except as excluded pursuant to Section 8.1 of the Participation
Agreement), expense or other amount owed to
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Agent (in its capacity as Agent) or any Lessor in connection with the
collection or distribution of such payments or amounts to the extent
not previously reimbursed by Lessee (including, without limitation,
the expenses of any sale, taking or other proceeding, expenses in
connection with realizing on any of the Collateral, reasonable
attorneys' fees and expenses (including the allocated costs of
internal counsel), court costs and any other reasonable expenditures
incurred or reasonable expenditures or advances made by Agent (in its
capacity as Agent) or any Lessor in the protection, exercise or
enforcement of any right, power or remedy upon such Event of Default
whether pursuant to Section 8.2 or otherwise) shall be so applied by
Agent first to itself and then to Lessors; and in case the aggregate
amount so to be paid to the Lessors in accordance herewith shall be
insufficient to pay all such amounts as aforesaid, then ratably,
without priority of one such Person over the other, in the proportion
that the amount which would have been distributed to each such Person
pursuant to this provision but for such insufficiency bears to the
aggregate amount which would have been distributed to all Persons
except for such insufficiency;
third: (i) so much of such payments or amounts remaining as
shall be required to reimburse the then existing or prior Lessors for
payments or deposits pursuant to Article XII (to the extent not
previously reimbursed and to the extent not constituting an indemnity
paid or payable for an act constituting gross negligence or willful
misconduct) shall be distributed to the then existing or prior
Lessors, ratably, without priority of one over the other, in
accordance with the amount of the payments or deposits made by each
such then existing or prior Lessor pursuant to such Article XII; and
(ii) so much of such payments or amounts remaining as shall be
required to pay the then existing or prior Lessors the amounts payable
to them pursuant to the provisions of Section 8.5 hereof or Section
11.5 of the Participation Agreement and the amounts of all other
unpaid obligations then due and payable to them hereunder and under
the Participation Agreement (other than obligations covered by clause
fourth of this Section 8.4) shall be distributed to each Lessor
(including its predecessor holders thereof) entitled thereto; and in
case the aggregate amount so to be paid in accordance with clauses (i)
and (ii) above shall be insufficient to pay all such amounts as
aforesaid, then, ratably, without priority of one such Person over the
other, in the proportion that the amount which would have been
distributed to each such Person pursuant to thisclause third but for
such insufficiency bears to the aggregate amount which would have
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been distributed to all such Persons pursuant to this clause third but
for such insufficiency;
fourth: so much of such payments or amounts remaining as
shall be required to pay in full each Lessor's Lease Percentage of the
aggregate unpaid Lease Balance, the Aggregate Make-Whole Premium, if
any, and all accrued but unpaid Accrued Rent (including, to the extent
permitted by applicable law, interest on interest) shall be
distributed to the Lessors, and in case the aggregate amount to be so
distributed shall be insufficient to pay the unpaid Lease Balance, the
Aggregate Make-Whole Premium, if any, and all accrued but unpaid
Accrued Rent in full all as aforesaid, then, ratably, without priority
of one over the other, in the proportions that each Lessor's Lease
Percentage of aggregate unpaid Lease Balance, the Aggregate Make-Whole
Premium, if any, then due and payable and all accrued but unpaid
Accrued Rent to the date of distribution bears to the aggregate unpaid
Lease Balance, the Aggregate Make-Whole Premium, if any, due and
payable and all accrued but unpaid Accrued Rent to the date of
distribution under the Lease; and
fifth: so much of such payments or amounts as shall remain
shall be distributed to Lessee.
Section 8.5. Right to Perform Lessee's Agreements. If Lessee
fails to perform any of its agreements contained herein or in any other
Operative Agreement, whether or not an Event of Default has occurred and is
continuing, Agent, upon written instructions from the Required Lessors and
receipt by Agent of indemnification satisfactory to it, may perform such
agreement and the fees and expenses incurred by Agent (or one or more Lessors)
in connection with such performance together with interest thereon shall be
payable by Lessee upon demand. Interest on fees and expenses so incurred by
Agent or one or more Lessors shall accrue at the rate provided in Section 3.2
for overdue payments.
Article IX
RETURN OF EQUIPMENT
If Agent, upon the instruction of the Required Lessors, shall
rightfully demand possession of the Equipment pursuant to this Lease, Lessee,
at its expense, shall forthwith disassemble, package to facilitate reassembly
and deliver exclusive possession of such Equipment to Agent at a location
designated by Agent, together with a copy of an inventory list of the Equipment
then subject to the Lease, all then current plans, specifications and
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operating, maintenance and repair manuals relating to the Equipment that have
been received or prepared by Lessee, appropriately protected and in the
condition required by Section 5.3 hereof, to Agent. In addition, if this Lease
has been terminated pursuant to Section 8.2, Lessee shall maintain the
Equipment in the condition required by Section 5.3, store the Equipment without
cost to the Agent or any Lessor and keep all of the Equipment insured in
accordance with Article VII for 90 days after redelivery thereof.
Article X
EARLY TERMINATION
If no Event of Default or event which with the giving of notice and/or
passage of time could become an Event of Default shall exist, on any Payment
Date after the first Renewal Term, Lessee may, at its option, by giving at
least 30 days advance written notice to Agent and the Lessors, purchase all,
but not less than all, of the Equipment for the sum of (i) all unpaid Accrued
Rent due and payable on or prior to such Payment Date, (ii) the Lease Balance
(after taking into account all payments actually made pursuant to clause (i)),
(iii) an amount equal to the Aggregate Make-Whole Premium, and (iv) all other
fees and expenses then due and payable pursuant to this Lease and the other
Operative Agreements. Upon the payment of such sums by Lessee in accordance
with the provisions of the preceding sentence, the obligation of Lessee to pay
Rent hereunder shall cease, the term of this Lease shall end on the date of
such payment and Agent shall execute and deliver to Lessee a bill of sale
(without representations or warranties, except that the Equipment is free and
clear of Lessor Liens) and such other documents as may be required to release
the Equipment from the terms and scope of this Lease, in such form as may be
reasonably requested by Lessee, all at Lessee's own cost and expense.
Article XI
LEASE TERMINATION
Section 11.1. Lessee's Options. Not later than 270 days prior to
the last day of the Initial Term, or of any Renewal Term then in effect
hereunder (other than the fifth Renewal Term in the case of paragraph (a)
below), Lessee shall by delivery of written notice to the Agent and Lessors,
exercise either the Renewal Option, on the one hand, or the Lessee Purchase
Option or the Sale Option, or a combination of both, on the other hand, all in
accordance with the terms set forth below:
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(a) Renew this Lease as to all of the Equipment for an
additional one year Renewal Term (the "Renewal Option") on the terms
and conditions set forth herein and in each Lease Supplement;
(b) Purchase for cash all or one or more Functional Units
then subject to this Lease on the last day of the Initial Term or
Renewal Term with respect to which such option is exercised (the
Lessee Purchase Option"). If Lessee elects to exercise the Lessee
Purchase Option with respect to all of the Functional Units then
subject to this Lease, Lessee shall pay to Agent, for the benefit of
the Lessors, the Purchase Option Exercise Amount, the Aggregate
Make-Whole Premium (provided such premium shall not be due if such
option is exercised at the end of the fifth Renewal Term) and any
other amounts then due and payable by Lessee under the Lease or any
other Operative Agreement. If Lessee elects to exercise the Lessee
Purchase Option with respect to Functional Units comprising less than
all of the Functional Units then subject to this Lease, (A) Lessee
shall pay to Agent, for the benefit of the Lessors, together with all
Rent then due and payable the sum of the following amounts:
(i) the applicable Make-Whole Premium with respect to
each Functional Unit subject to the Lessee Purchase Option
(provided such premium shall not be due if such option is
exercised at the end of the fifth Renewal Term), and
(ii) with respect to each Functional Unit subject to
the Lessee Purchase Option, the greater of (x) the Functional
Unit Balance of such Functional Unit to be purchased or (y)
the Appraised Value of such Functional Unit at the date of
purchase, provided that in no event shall Lessee be required
to pay to Agent an amount greater than the Lease Balance
(after application of Proceeds pursuant to subsection (c)
below) plus the applicable Make-Whole Premiums if due as
provided for above and any other amounts then due and payable
by Lessee under the Lease and (B) Lessee shall be deemed to
have elected the Sale Option (defined below) with respect to
all of the remaining Functional Units, provided, however that
if after the Lessee's election of the Lessee Purchase Option
the total Purchase Price of the remaining Functional Units
represents less than 20% of the total Purchase Price of all
Functional Units subject to the Lease immediately prior to the
purchases contemplated by Sections 11.1(b) and 11.1(c), Lessee
shall be treated as having made the Lessee Purchase Option
with respect to all of the Functional Units;
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(c) (1) Sell on behalf of Lessors on the Termination Date
for cash, to a purchaser or purchasers not in any way affiliated with
Lessee, the Functional Units not purchased by Lessee pursuant to the
Lessee Purchase Option (the Sale Option"); provided, however, that
Lessee may exercise the Sale Option only with respect to Functional
Units whose aggregate Purchase Price represents at least 20% of the
total Purchase Price of all Functional Units then subject to the
Lease. If Lessee elects the Sale Option with respect to Functional
Units comprising less than all of the Functional Units then subject to
this Lease, Lessee shall be deemed to have elected the Lessee Purchase
Option with respect to all of the remaining Functional Units.
(2) Simultaneously with dispositions pursuant to the
Sale Option, Lessee shall pay to Agent, for the benefit of the
Lessors, from the gross proceeds of such sales, without deductions or
expense reimbursements (the Proceeds"), the Lease Balance as of the
Termination Date (as determined after any payment of Rent due on such
date) plus the applicable Make-Whole Premiums (except that no
Make-Whole Premiums shall be payable by Lessee on Functional Units
sold pursuant to an exercise of the Sale Option with respect to the
second, fourth or fifth Renewal Term) and any other amounts then due
and payable under any of the Operative Agreements. If the Proceeds
exceed the sum of the Lease Balance as of the Termination Date, plus
applicable Make-Whole Premiums as of such date and any other payments
then due and payable under any of the Operative Agreements, Lessee
will retain the portion of the Proceeds in excess thereof. If the
Proceeds are less than the sum of the Lease Balance as of the
Termination Date plus applicable Make-Whole Premiums as of such date
and any other payments then due and payable under any of the Operative
Agreements, Lessee will pay or will cause to be paid to Agent, for the
benefit of the Lessors, on the Termination Date (i) the Proceeds and
(ii) from its own funds, the sum of any payments then due and payable
under any of the Operative Agreements, including any installments of
Rent then due and payable, applicable Make-Whole Premiums (except that
no Make-Whole Premiums shall be payable by Lessee on Functional Units
sold pursuant to an exercise of the Sale Option with respect to the
second, fourth or fifth Renewal Term) plus, at the option of the
Required Lessors, either (x) the Applicable Percentage Amount or (y)
the Recourse Deficiency Amount (the amount determined pursuant to this
clause (ii) shall be referred to as the "Sale Recourse Amount");
provided that in no event shall the Sale Recourse Amount exceed the
Lease Balance and the applicable Make-Whole Premiums, if required
above, after taking into account all payments of Rent and Proceeds.
Agent, upon instruction of
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the Required Lessors, shall exercise the option in the preceding
sentence by written notification to Lessee not later than ten Business
Days prior to the last day of the Lease Term. The obligation of
Lessee to pay the Sale Recourse Amount shall be a recourse obligation
of Lessee (and shall be in addition to any other recourse obligation
of Lessee under any other provision of the Operative Agreements) and
shall be payable on the date provided for in the preceding sentence.
The Sale Recourse Amount and all Proceeds paid to Agent for the direct
benefit of the Lessors shall be distributed in accordance with Article
XXVIII.
Section 11.2. Election of Options. Lessee's election of any of the
foregoing options in Section 11.1 shall be irrevocable at the time made, but if
Lessee fails to make a timely election, Lessee will be deemed, in the case of
the Initial Term and each Renewal Term then in effect (other than the fifth
Renewal Term) to have irrevocably elected the Renewal Option and, in the case
of the fifth Renewal Term, Lessee will be deemed to have irrevocably elected
the Lessee Purchase Option with respect to all of the Functional Units then
subject to this Lease. In addition, if there exists an Event of Default at any
time after the Sale Option is properly elected, the Sale Option shall
automatically be revoked and Lessor shall be entitled to exercise all rights
and remedies provided in Article VIII. Lessee may not elect the Sale Option if
there exists on the date the election is made an Event of Default or an event
which with the giving of notice and/or passage of time could become an Event of
Default.
Section 11.3. Sale Option Procedures. If Lessee elects the Sale
Option, Lessee shall use its best commercial efforts to obtain the highest all
cash purchase price for the Functional Units subject to the Sale Option. All
costs related to such sale and delivery, including, without limitation, the
cost of sales agents, removal of such Equipment, delivery of documents and
Equipment, certification and testing of such Equipment in any location chosen
by the buyer or prospective buyer, legal costs, costs of notices, any
advertisement or other similar costs, or other information and of any parts,
configurations, repairs or modifications desired by a buyer or prospective
buyer shall be borne entirely by Lessee, without regard to whether such costs
were incurred by Agent, the Lessors, Lessee or any potentially qualified buyer.
Neither Agent nor Lessors shall have any responsibility for procuring any
purchaser. If, nevertheless, any Lessor, or Agent, at the direction of the
Required Lessors, undertakes any sales efforts, Lessee shall promptly reimburse
Agent or such Lessor for any charges, costs or expenses incurred in such
effort, including any allocated time charges, costs or expenses of internal
counsel or other attorneys' fees. Equipment subject to the Sale Option shall
be in the condition required by Section 5.3 hereof at the time of the sale.
Agent, at the
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direction of the Required Lessors, shall determine whether to accept the
highest all cash offer for the Equipment subject to the Sale Option. Any
purchaser or purchasers of the Equipment shall not in any way be affiliated
with Lessee. Pending the consummation of the Sale Option, Lessee shall at all
times maintain the Equipment in the condition required by Section 5.3, store
the Equipment without cost to the Lessors and keep all of the Equipment insured
in accordance with Article VII hereof.
Section 11.4. Payment of Excess Amounts. Following the application
of all amounts required pursuant to Section 11.2, if the Appraised Value of any
Functional Unit sold pursuant to the Sale Option (without taking into account
any removal costs) as of the Termination Date is in excess of the Proceeds
attributable to any such Functional Unit, Lessee shall promptly pay to Agent,
for the benefit of the Lessors, such excess.
Section 11.5. Appraisals. If Lessee gives notice of exercise of
the Sale Option with respect to one or more Functional Units, Agent (upon
direction from any Lessor) shall engage an appraiser of nationally recognized
standing reasonably acceptable to the Required Lessors, at Lessee's expense, to
determine (by appraisal methods satisfactory to Lessors holding at least 66.67%
of the Outstanding Investments in their sole and absolute discretion) the Fair
Market Value of the Equipment subject to the Sale Option as of (a) the first
day of any Renewal Term in which the Sale Option was elected, and (b) the
Termination Date. The Appraised Value determined pursuant to this Section 11.5
shall be applied in accordance with the provisions of this Article XI.
Article XII
AGENT
Section 12.1. Appointment of Agent; Powers and Authorization to
Take Certain Actions.
(a) Each Lessor irrevocably appoints and authorizes BA
Leasing & Capital Corporation to act as agent hereunder, with such
powers as are specifically delegated to Agent by the terms of this
Lease, together with such other powers as are reasonably incidental
thereto. Each Lessor authorizes and directs Agent to, and Agent
agrees for the benefit of the Lessors, that, on each Delivery Date it
will accept the documents described in Articles II and III of the
Participation Agreement. Agent accepts the agency hereby created
applicable to it and agrees to receive all payments and proceeds
pursuant to this Lease and disburse such payments or proceeds in
accordance with this Lease. Agent
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shall have no duties or responsibilities except those expressly set
forth in this Lease and the Participation Agreement. Agent shall not
be responsible to any Lessor (or to any other Person) (i) for any
recitals, statements, representations or warranties of any party
contained in this Lease, the Participation Agreement, or in any
certificate or other document referred to or provided for in, or
received by any of them under, this Lease or the other Operative
Agreements, other than the representations and warranties made by
Agent in Section 5.3 of the Participation Agreement, or (ii) for the
value, validity, effectiveness, genuineness, enforceability or
sufficiency of the Collateral or the title thereto (subject to the
Agent's obligations under Section 6.3 of the Participation Agreement)
or of this Lease or any other document referred to or provided for
herein or (iii) for any failure by Lessee, any Lessor or any other
third party (other than Agent) to perform any of its obligations
hereunder. Agent may employ agents, trustees or attorneys-in-fact,
may vest any of them with any property, title, right or power deemed
necessary for the purposes of such appointment and shall not be
responsible for the negligence or misconduct of any of them selected
by it with reasonable care. Neither Agent nor any of its directors,
officers, employees or agents shall be liable or responsible for any
action taken or omitted to be taken by it or them hereunder, or in
connection herewith, except for its or their own gross negligence or
willful misconduct.
(b) Agent shall not have any duty or obligation to
manage, control, use, operate, store, lease, sell, dispose of or
otherwise deal with any item of Equipment or this Lease, or to
otherwise take or refrain from taking any action under, or in
connection with, this Lease or any related document to which Agent is
a party, except as expressly provided by the terms hereof, and no
implied duties of any kind shall be read into this Lease against
Agent. The permissive right of Agent to take actions enumerated in
this Lease shall never be construed as a duty, unless Agent is
instructed or directed to exercise, perform or enforce one or more
rights by the Required Lessors (provided that Agent has received
indemnification reasonably satisfactory to it). Subject to Section
12.1(c) below, no provision of this Lease shall require Agent to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its obligations hereunder, or
in the exercise of any of its rights or powers hereunder. It is
understood and agreed that the duties of Agent are ministerial in
nature.
(c) Except as specifically provided herein, Agent is
acting hereunder solely as agent and, except as specifically
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provided herein, is not responsible to any party hereto in its
individual capacity, except with respect to any claim arising from
Agent's gross negligence or willful misconduct or any breach of a
representation or covenant made in its individual capacity.
(d) Agent may accept deposits from, lend money to and
otherwise deal with Lessee or any of its Affiliates with the same
rights as it would have if it were not the named Agent hereunder.
Section 12.2. Reliance. Agent may rely upon, and shall not be
bound or obligated to make any investigation into the facts or matters stated
in, any certificate, notice or other communication (including any communication
by telephone, telecopy, telex, telegram or cable) reasonably believed by it to
be genuine and correct and to have been made, signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by Agent with due care
(including any expert selected by Agent to aid Agent in any calculations
required in connection with its duties under this Lease).
Section 12.3. Action Upon Instructions Generally. Subject to
Sections 8.2(d), 12.4 and 12.6, upon written instructions of the Required
Lessors, Agent shall, on behalf of the Lessors, give such notice or direction,
exercise such right, remedy or power hereunder or in respect of any item of
Equipment, and give such consent or enter into such amendment to any document
to which it is a party as Agent as may be specified in such instructions.
Agent shall deliver to each Lessor a copy of each notice, report and
certificate received by Agent described in Article X and Sections 5.4, 5.5,
6.1, 6.2, 7.1, 7.2 and 11.1 hereof and Sections 6.1 and 6.2 of the
Participation Agreement. Agent shall have no obligation to investigate or
determine whether there has been an Event of Default or an event which with the
passage of time and/or the giving of notice could result in an Event of
Default. Agent shall not be deemed to have notice or knowledge of an Event of
Default or event which with the passage of time and/or the giving of notice
could result in an Event of Default unless a Responsible Officer of Agent is
notified in writing of such Event of Default or event which with the passage of
time and/or the giving of notice could result in an Event of Default, provided
that Agent shall be deemed to have been notified in writing of any failure of
Lessee to pay Rent in the amounts and at the times set forth in Article III.
If Agent receives notice of an Event of Default, Agent shall give prompt notice
thereof, at Lessee's expense, to each Lessor. Subject to Sections 8.2(d), 12.4
and 12.6 and Article XVII, Agent shall take action or refrain from taking
action with respect to such Event of Default as directed by the Required
Lessors; provided that, unless and
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until Agent receives such directions, Agent shall refrain from taking any
action with respect to such Event of Default. Prior to the date the Lease
Balance shall have become due and payable by acceleration pursuant to Section
8.2, Required Lessors may deliver written instructions to the Agent to waive,
and Agent shall waive pursuant thereto, any Event of Default and its
consequences; provided that in the absence of written instructions from all
Lessors, Agent shall not waive any (i) Payment Default or (ii) covenant or
provision which, under Section 10.1 of the Participation Agreement, cannot be
modified or amended without the consent of all Lessors. As to any matters not
expressly provided for by this Lease, Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Required Lessors and such instructions of the
Required Lessors and any action taken or failure to act pursuant thereto shall
be binding on each Lessor.
Section 12.4. Indemnification. Each Lessor shall reimburse and
hold Agent harmless, ratably in accordance with its Lease Percentage at the
time the indemnification is required to be given, (but only to the extent that
any such indemnified amounts have not in fact been paid to Agent by, or on
behalf of, the Lessee in accordance with Section 7.1 of the Participation
Agreement) from any and all claims, losses, damages, obligations, penalties,
liabilities, demands, suits, judgments, or causes of action, and all legal
proceedings, and any reasonable costs or expenses in connection therewith,
including allocated charges, costs and expenses of internal counsel of Agent
and all other reasonable attorneys' fees and expenses incurred by Agent, in any
way relating to or arising in any manner out of (i) this Lease or any other
Operative Agreement, the enforcement hereof or thereof or the consummation of
the transactions contemplated hereby or thereby, or (ii) instructions from the
Required Lessors (including, without limitation, the costs and expenses that
Lessee is obligated to and does not pay hereunder, but excluding normal
administrative costs and expenses incident to the performance by Agent of its
agency duties hereunder other than materially increased administrative costs
and expenses incurred as a result of an Event of Default), provided that no
Lessor shall be liable for any of the foregoing to the extent they arise from
(a) the gross negligence or willful misconduct of Agent, (b) the inaccuracy of
any representation or warranty or breach of any covenant given by Agent in
Section 5.3 or in Section 6.3 of the Participation Agreement or in this Lease,
(c) in the case of the Agent's handling of funds, the failure to act with the
same care as the Agent uses in handling its own funds or (d) any taxes, fees or
other charges payable by the Agent based on or measured by any fees,
commissions or compensation received by it for acting as Agent in connection
with the transactions contemplated by the Operative Agreements.
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Section 12.5. Independent Credit Investigation. Each Lessor by
entering into this Lease agrees that it has, independently and without reliance
on Agent or any other Lessor and based on such documents and information as it
has deemed appropriate, made its own credit analysis of Lessee and its own
decision to enter into this Lease and all related documents to which it is a
party and that it will, independently and without reliance upon Agent or any
other Lessor, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking action under this Lease and any related documents to which it is a
party. Agent shall not be required to keep itself informed as to the
performance or observance by Lessee of any other document referred to (directly
or indirectly) or provided for herein or to inspect the properties or books of
Lessee. Except for notices or statements which Agent is expressly required to
give under this Lease and for notices, reports and other documents and
information expressly required to be furnished to Agent alone (and not also to
each Lessor, it being understood that Agent shall forward copies of same to
each Lessor) hereunder or under any other Operative Agreement, Agent shall not
have any duty or responsibility to provide any Lessor with copies of notices or
with any credit or other information concerning the affairs, financial
condition or business of Lessee (or any of its affiliates) that may come into
the possession of Agent or any of its Affiliates.
Section 12.6. Refusal to Act. Except for notices and actions
expressly required of Agent hereunder and except for the performance of its
covenants in Section 6.3 of the Participation Agreement, Agent shall in all
cases be fully justified in failing or refusing to act unless (a) it is
indemnified to its reasonable satisfaction by the Lessors against any and all
liability and reasonable expense which may be incurred by it by reason of
taking or continuing to take any such action (provided that such indemnity
shall not be required to extend to liability or expense arising from Agent's
gross negligence or willful misconduct, it being understood that no action
taken, or not taken, by Agent in accordance with the instructions of the
Required Lessors shall be deemed to constitute gross negligence or willful
misconduct on its part) and (b) it is reasonably satisfied that such action is
not contrary to this Lease or any other Operative Agreement or to any
applicable law.
Section 12.7. Resignation or Removal of Agent; Appointment of
Successor. Subject to the appointment and acceptance of a successor Agent as
provided below, Agent may resign at any time by giving notice thereof to each
Lessor or may be removed at any time by written notice from the Required
Lessors. Upon any such resignation or removal, the Required Lessors at the
time of the resignation or removal shall have the right to appoint a
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successor Agent which shall be a financial institution having a combined
capital and surplus of not less than $100,000,000. If, within 30 calendar days
after the retiring Agent's giving of notice of resignation or receipt of a
written notice of removal, a successor Agent is not so appointed and does not
accept such appointment, then the retiring or removed Agent may appoint a
successor Agent and transfer to such successor Agent all rights and obligations
of the retiring Agent. Such successor Agent shall be a financial institution
having combined capital and surplus of not less than $100,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Agent and the
retiring or removed Agent shall be discharged from duties and obligations as
Agent thereafter arising hereunder and under any related document. If the
retiring Agent does not appoint a successor, any Lessor shall be entitled to
apply to a court of competent jurisdiction for such appointment, and such court
may thereupon appoint a successor to act until such time, if any, as a
successor shall have been appointed as above provided.
Section 12.8. Separate Agent. The Required Lessors may, and if
they fail to do so at any time when they are so required, Agent may, for the
purpose of meeting any legal requirements of any jurisdiction in which any item
of Equipment or Collateral may be located, appoint one or more individuals or
corporations either to act as co-agent jointly with Agent or to act as separate
agent of all or any part of the items of Equipment or Collateral or this Lease,
and vest in such individuals or corporations, in such capacity, such title to
the items of Equipment or Collateral or this Lease or any part thereof, and
such rights or duties as Agent may consider necessary or desirable. Agent
shall not be required to qualify to do business in any jurisdiction where it is
not now so qualified. Agent shall execute, acknowledge and deliver all such
instruments as may be required by any such co-agent or separate agent more
fully confirming such title, rights or duties to such co-agent or separate
agent. Upon the acceptance in writing of such appointment by any such co-agent
or separate agent, it or he shall be vested with such interest in the items of
Equipment or Collateral and this Lease or any part thereof, and with such
rights and duties, not inconsistent with the provisions of this Lease, as shall
be specified in the instrument of appointment, jointly with Agent (except
insofar as local law makes it necessary for any such co-agent or separate agent
to act alone), subject to all terms of this Lease. Any co-agent or separate
agent, to the fullest extent permitted by legal requirements of the relevant
jurisdiction, at any time, by an instrument in writing, shall constitute Agent
its attorney-in-fact and agent, with full power and authority to do all acts
and things and to
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exercise all discretion on its behalf and in its name. If any co-agent or
separate agent shall die, become incapable of acting, resign or be removed, the
interest in the items of Equipment or Collateral and this Lease and all rights
and duties of such co-agent or separate agent shall, so far as permitted by
law, vest in and be exercised by Agent, without the appointment of a successor
to such co-agent or separate agent.
Section 12.9. Termination of Agency. The agency created hereby
shall terminate upon the final disposition by Agent of all Collateral at any
time subject hereto and the final distribution by Agent of all monies or other
property or proceeds received pursuant to this Lease in accordance with Article
XXVIII, provided that at such time Lessee shall have complied fully with all
the terms hereof.
Section 12.10. Compensation of Agency. Lessee shall pay Agent its
reasonable and customary fees, costs and expenses for the performance of
Agent's obligations hereunder.
Article XIII
OWNERSHIP, GRANT OF SECURITY
INTEREST AND FURTHER ASSURANCES
Section 13.1. Grant of Security Interest. Title to the Equipment
shall remain in the Agent, for the benefit of the Lessors, as security for the
obligations of Lessee hereunder and under each of the other Operative
Agreements to which it is a party until such time as Lessee has fulfilled all
of its obligations hereunder and under such other Operative Agreements. Lessee
hereby assigns, grants and pledges to Agent, for the benefit of the Lessors, a
security interest in all of Lessee's right, title and interest, whether now or
hereafter existing or acquired, in the Collateral, to secure the payment and
performance of all obligations of Lessee now or hereafter existing under this
Lease or any other Operative Agreement. Lessee shall, at its own cost and
expense, do any further act and execute, acknowledge, deliver, file, register
and/or record any further documents which Agent or any Lessor may reasonably
request in order to protect its or their title to and perfected security
interest in the Collateral, subject to no Liens other than Permitted Liens, and
Agent's or Lessor's rights and benefits under this Lease. Lessee shall
promptly and duly execute and deliver to Agent, for the benefit of the Lessors,
such documents and assurances and take such further action as Agent or Lessors
may from time to time reasonably request in order to carry out more effectively
the intent and purpose of this Lease and the other Operative Agreements, to
establish and protect the rights and remedies created or intended to be created
in favor of
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Lessors and Agent hereunder and thereunder, and to establish, perfect and
maintain the right, title and interest of Agent or Lessors in and to the
Equipment, subject to no Lien other than Permitted Liens, or of such financing
statements, fixture filings, certificates of title or other documents with
respect hereto as Agent may from time to time reasonably request, and Lessee
agrees to execute and deliver promptly such of the foregoing financing
statements, fixture filings and certificates of title or other documents as may
require execution by Lessee. To the extent permitted by applicable laws,
Lessee hereby authorizes any such financing statements, fixture filings and
certificates of title to be filed without the necessity of the signature of
Lessee. Upon Lessee's request and at such time as all of the obligations of
Lessee under this Lease and any other Operative Agreement have been
indefeasibly paid or performed in full (other than Lessee's contingent
obligations, if any, under Articles VII and VIII of the Participation
Agreement), Agent shall, and Agent is hereby authorized by Lessors to act on
their behalf to, execute and deliver termination statements and other
appropriate documentation reasonably requested by Lessee, all at Lessee's own
cost and expense, to evidence Agent's release of Agent's security interest in
the Collateral. At such time, Agent shall execute and deliver to Lessee a bill
of sale (without representations or warranties except that the Equipment is
free and clear of Lessor Liens) for the Equipment. Notwithstanding the
foregoing, such release shall not relieve Lessee of its continuing obligations
under Articles VII, VIII, and XI of the Participation Agreement or any other
provision of an Operative Agreement which survives the termination hereof.
Section 13.2. Retention of Title or Proceeds in the Case of
Default. If Lessee would be entitled to any amount (including any Casualty
Proceeds or Partial Casualty Proceeds) or title to any item of Equipment
hereunder but for the existence of any Event of Default or event which with the
giving of notice and/or passage of time could become an Event of Default, Agent
shall, on behalf of the Lessors, hold such amount or item of Equipment as part
of the Collateral and shall be entitled to apply such amounts against any
amounts due hereunder, provided that Agent shall distribute such amount or
transfer such Equipment in accordance with the other terms of this Lease if and
when no Event of Default or event which with the giving of notice and/or
passage of time could become an Event of Default exists.
Article XIV
EFFECT OF WAIVER
No delay or omission to exercise any right, power or remedy accruing
to Lessors upon any breach or default of Lessee
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hereunder shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein or of or in any similar breach or default thereafter occurring, nor
shall any single or partial exercise of any right, power or remedy preclude
other or further exercise thereof, or the exercise of any other right, power or
remedy, nor shall any waiver of any single breach or default be deemed a waiver
of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of
Lessors of any breach or default under this Lease must be specifically set
forth in writing and must satisfy the requirements set forth in Article XVII
with respect to approval by Lessors.
Article XV
SURVIVAL OF COVENANTS
All claims pertaining to the representations, warranties and covenants
of Lessee under Articles II, III, IV, V, VI, VII, X, XI, XXI and XXII shall
survive the termination of this Lease to the extent such claims arose out of
events occurring or conditions existing prior to any such termination.
Article XVI
APPLICABLE LAW
THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF
CALIFORNIA, WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF.
Article XVII
EFFECT AND MODIFICATION OF LEASE
No variation, modification, amendment or waiver of this Lease,
including any schedules or exhibits hereto, shall be valid unless the same
shall be effected in accordance with Article X of the Participation Agreement.
Article XVIII
NOTICES
All notices, demands, requests, consents, approvals and other
instruments hereunder shall be in writing and shall be
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deemed to have been properly given if given as provided for in Section 11.4 of
the Participation Agreement.
Article XIX
COUNTERPARTS
This Lease has been executed in several counterparts. One counterpart
has been prominently marked "Counterpart No. 1 -- Agent's Original Copy." Only
the counterpart marked "Counterpart No. 1 -- Agent's Original Copy" shall
evidence a monetary obligation of Lessee or shall be deemed to be an original
or to be chattel paper for purposes of the Uniform Commercial Code, and such
copy shall be held by Agent, for the benefit of the Lessors.
Article XX
SEVERABILITY
Whenever possible, each provision of this Lease shall be interpreted
in such manner as to be effective and valid under applicable law; but if any
provision of this Lease shall be prohibited by or invalid under applicable 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 Lease.
Article XXI
SUCCESSORS AND ASSIGNS; MERGER
Section 21.1. Successors and Assigns. This Lease shall be binding
upon the parties hereto and, subject to Article XXII hereof, their respective
successors and assigns, and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
Section 21.2. Merger. Except as otherwise provided in Section
6.1(a)(ii) of the Participation Agreement, Lessee shall not consolidate with or
merge with or into any other corporation or entity, or permit any other
corporation or entity to consolidate with or merge with or into Lessee or any
subsidiary of Lessee.
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Article XXII
ASSIGNMENTS
Section 22.1. Assignment by Lessee. Lessee shall not sell, assign,
transfer or otherwise dispose of its rights or delegate its obligations under
this Lease to any other person, except as permitted or required by Section 5.2
or Section 6.1 of the Participation Agreement.
Section 22.2. Lessor Transfers. No Lessor shall assign, convey or
otherwise transfer (including pursuant to a participation) all or any portion
of its right, title or interest in, to or under any of the Operative
Agreements, any Collateral and its interest in the Equipment except that
without the prior written consent of the Agent or the Lessee (x) any bank or
similar financial or commercial lending institution may pledge its interest in
the ordinary course of its business without the consent of the Lessee or the
Agent; provided, that no transfer upon a foreclosure pursuant to such a pledge
may occur unless this Section (other than clause (x)) is complied with, (y) any
Lessor may transfer all or any portion of its interest to any other existing
Lessor and (z) any Lessor may transfer any or all of such right, title and
interest as provided in paragraph (a) or (b) below:
(a) Transfers to Affiliates. Subject to the satisfaction
of the conditions set forth in this Section 22.2, any Lessor may make
any such assignment, conveyance or transfer to any Affiliate if such
transferee's obligations under the Operative Agreements shall have
been unconditionally guaranteed by such Lessor by an instrument in
form and substance reasonably satisfactory to the Agent; provided that
the term of such Lessor's guarantee shall not be required to extend
past March 31, 1995.
(b) Transfers to Non-Affiliates. Subject to the
satisfaction of the conditions set forth in this Section 22.2, any
Lessor may make any such assignment, conveyance or transfer to any
entity which does not qualify as a transferee under the preceding
paragraph (a) if (x) (i) such entity has a consolidated net worth of
at least $100,000,000 as at the end of its most recent fiscal year, or
(ii) such transferee entity's obligations under the Operative
Agreements shall have been unconditionally guaranteed by the
transferor by an instrument in form and substance reasonably
satisfactory to the Lessee and the Agent or (iii) such transferee
entity's obligations under the Operative Agreements are
unconditionally guaranteed by an instrument in form and substance
reasonably satisfactory to the Required Lessors) by an entity
controlling such
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transferee entity, if such entity would qualify as a transferee entity
under clause (i) hereof and (y) the provisions of Section 22.2(d)
through (i) below are satisfied with respect to such transfer.
(c) Transfer with Consent. Any transfer to an entity
other than one satisfying the requirements set forth in paragraph (a)
or (b) of this Section 22.2 may only be made with the prior written
consent of the Lessee and the Required Lessors, which consent shall
not be unreasonably withheld or delayed.
(d) Required Notice and Effective Date. Any Lessor
desiring to effect a transfer of its interest hereunder shall give
written notice of each such proposed transfer to the Lessee, the Agent
and each other Lessor at least ten (10) days prior to such proposed
transfer, setting forth the name of such proposed transferee, the
percentage or interest to be retained by such Lessor, if any, and the
date on which such transfer is proposed to become effective. All
reasonable out-of-pocket costs incurred by the Agent in connection
with any such disposition by a Lessor under this Section 22.2 shall be
borne by such Lessor. In the event of a transfer under this Section
22.2, any expenses incurred by the transferee in connection with its
review of the Operative Agreements and its investigation of the
transactions contemplated thereby shall be borne by such transferee or
the relevant Lessor, as they may determine, but shall not be
considered costs and expenses which the Lessee is obligated to pay or
reimburse under Section 11.5 of the Participation Agreement.
(e) Assumption of Obligations. Any transferee pursuant
to this Section 22.2 shall have executed and delivered to the Agent a
letter in substantially the form of the Investors Letter attached
hereto as Exhibit A, and thereupon the obligations of the transferring
Lessor under the Operative Agreements shall be proportionately
released and reduced to the extent of such transfer. Upon any such
transfer as above provided, the transferee shall be deemed to be bound
by all obligations (whether or not yet accrued) under, and to have
become a party to, all Operative Agreements to which its transferor
was a party, shall be deemed the pertinent "Lessor" for all purposes
of the Operative Agreements and shall be deemed to have made that
portion of the payments pursuant to the Participation Agreement
previously made or deemed to have been made by the transferor
represented by the interest being conveyed; and each reference herein
and in the other Operative Agreements to the pertinent "Lessor" shall
thereafter be deemed a reference to the transferee, to the extent of
such transfer,
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for all purposes. Upon any such transfer, the Agent shall deliver to
each Lessor and the Lessee a new Schedule I to the Participation
Agreement, revised to reflect the relevant information for such new
Lessor and the Commitment of such new Lessor (and the revised
Commitment of the transferor Lessor if it shall not have transferred
its entire interest).
(f) Employee Benefit Plans. No Lessor may make any such
assignment, conveyance or transfer to or in connection with any
arrangement or understanding in any way involving any employee benefit
plan (or its related trust), as defined in Section 3(3) of ERISA, or
with the assets of any such plan (or its related trust), as defined in
Section 4975(e)(1) of the Code (other than a governmental plan, as
defined in Section 3(32) of ERISA), with respect to which the Lessee
or such Lessor or any of their Affiliates is a party in interest
within the meaning of ERISA or a "disqualified person" within the
meaning of the Code.
(g) Limitation on Transfers. Notwithstanding paragraphs
(a), (b) and (c) of this Section 22.2, any Lessor proposing to
transfer its interest may not make any such assignment, conveyance or
transfer at any time when there shall have occurred and be continuing
any material default of such Lessor to the Lessee under the
Participation Agreement.
(h) Amount of Commitment. No Lessor may make any such
assignment, conveyance or transfer if, as a consequence thereof, the
transferor (if such Lessor retains any part of its Commitment) or
transferee Lessor would have a Commitment (assuming for this purpose
no funding by such Lessor) of less than U.S. $2,000,000.
(i) Representations and Warranties. Notwithstanding
anything to the contrary set forth above, no Lessor may assign, convey
or transfer its interest to any Person, unless such Person shall have
delivered to the Agent and the Lessee a certificate confirming the
accuracy of the representations and warranties set forth in Section
5.2 of the Participation Agreement with respect to such Person (other
than as such representation or warranty relates to the execution and
delivery of Operative Agreements).
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Article XXIII
BROKERS
Neither the Lessee nor any Lessor has engaged or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker, finder, investment banker, agent or any
other like capacity in connection with this Lease or the transactions
contemplated hereby, except that Lessee has retained BA Leasing & Capital
Corporation as arranger in connection with the transactions contemplated hereby
and Lessee shall be responsible for, and shall indemnify, defend, and hold
Agent and each Lessor harmless from and against any and all claims,
liabilities, or demands by BA Leasing & Capital Corporation, in its capacity as
arranger in connection with the transactions contemplated hereby, for fees or
other entitlements with respect to this Lease or the transactions contemplated
hereby or by the Participation Agreement.
Article XXIV
JURY TRIAL
LESSEE WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS LEASE OR ANY RELATED DOCUMENT OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY
IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM
ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS LEASE OR ANY RELATED DOCUMENT
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
Article XXV
CAPTIONS; TABLE OF CONTENTS
Section captions and the table of contents used in this Lease
(including the schedules) are for convenience of reference only and shall not
affect the construction of this Lease.
Article XXVI
FINAL AGREEMENT
THIS LEASE, TOGETHER WITH THE OTHER OPERATIVE AGREEMENTS, REPRESENTS
THE ENTIRE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED BY THE LEASE AND THE OTHER OPERATIVE AGREEMENTS. THIS LEASE
CANNOT BE MODIFIED,
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SUPPLEMENTED, AMENDED, RESCINDED OR CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, EXCEPT BY AN
INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
Article XXVII
TIMELINESS OF PERFORMANCE
The provisions of Articles VIII and XI pertaining to the delivery of
notice and the performance of certain events on dates required by Articles VIII
and XI are to be strictly adhered to by the parties hereto.
Article XXVIII
DISTRIBUTION AND APPLICATION OF
RENTS AND OTHER PAYMENTS
Section 28.1. Pro Rata Payment. Except as specifically provided
for at Section 8.4 of this Lease or Section 4.5 of the Participation Agreement,
all amounts of money received or realized by Agent pursuant to any Operative
Agreement which are to be distributed to the Lessors (other than
indemnification payments payable to any Lessor by Lessee under any Operative
Agreement and after payment of accrued fees, expenses and indemnification
payments payable to Agent in its capacity as Agent that have been due and
unpaid for 30 days or more) shall be distributed to each Lessor pro rata,
without preference or priority of any Lessor over another, in accordance with
the amounts due each Lessor at the time of such payment in respect of the types
of obligations described in the Section pursuant to which the distribution is
being made; provided, however, that in the case where the aggregate amount to
be so paid to the Lessors in accordance herewith shall be insufficient to pay
such amounts due to Lessors on such distribution, then such amount shall be
distributed ratably, without priority of one such Person over the other, in the
proportion that the amount which would have been distributed to each such
Person pursuant to this provision, but for such insufficiency, bears to the
aggregate amount which would have been distributed to all Persons except for
such insufficiency; and provided, further, with respect to Rent, that all
amounts shall be applied first to the interest component thereof and then to
the principal component.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Lease
as of the day and year first above written.
<TABLE>
<S> <C>
RYKOFF-SEXTON, INC., BA LEASING & CAPITAL CORPORATION,
as Lessee not individually, but solely
as Agent
By VICTOR B. CHAVEZ By CHERYL J. EMERSON
Name Printed: Victor B. Chavez Name Printed: Cheryl J. Emerson
Title: Vice-Pres. & Chief Acctg. Officer Title: Asst. Vice Pres.
By CHRISTINE BENNETT
Name Printed: Christine Bennett
Title: Asst. Vice Pres.
LESSORS:
- - --------
PITNEY BOWES CREDIT BA LEASING & CAPITAL CORPORATION
CORPORATION
By RUSSELL D. PIPER By CHERYL J. EMERSON
Name Printed: Russell D. Piper Name Printed: Cheryl J. Emerson
Title: Region Credit Manager Title: Asst. Vice Pres.
By CHRISTINE BENNETT
Name Printed: Christine Bennett
Title: Asst. Vice Pres.
MANUFACTURERS BANK
By MIKE TOOMEY
Name Printed: Mike Toomey
Title: Vice President
</TABLE>
<PAGE> 47
SCHEDULE I
TO
LEASE
A.
<TABLE>
<CAPTION>
Functional
Unit # Equipment Description
------ ---------------------
<S> <C>
1 Packaging Line #1 (5 lb.)
2 Packaging Line #3 [Ankeny #11] (1 lb.)
3 Packaging Line #4 [Ankeny #8] (2 lb.)
4 Packaging Line #5 [Ankeny #10] (Hand Feed)
5 Packaging Line #6 (4 & 8 oz.)
6 Packaging Line #7 (1 lb.)
7 Packaging Line #8 (1 oz. Tube)
8 Packaging Line #9 (1 oz. Tube)
9 Pkgg Line #10 [A#12] (O.M. Bag Fill)
10 Packaging Line #11 (Mr. Pepper/Jollytime)
11 Packaging Line #12 (1 lb. Kraft/Rykoff)
12 Extract Food Service Packaging Line
13 Extract Retail Packaging Line
14 Packaging Line #2 [Future] (4 & 8 lb.)
15 Blending Equipment
16 Production & Distribution Support
17 Office & Building Support
18 Oil Production
19 Margarine Production
20 Receiving/Distribution
21 Injection Molding
22 Blow Molding
23 Straw
24 Mayonaisse Production
25 Cook Line/Dry Mix
26 Repro Line
27 Plastics
28 Packaging Line Equipment
29 Production & Distribution Support
30 Office & Building Support
31 Portland Location
32 San Francisco Location
</TABLE>
B. The Equipment described in this part B has not been appropriately
designated as Functional Units, and each Lessor shall have the right to
reject any item of Equipment which otherwise complies with the general
categories set forth below, in which case Lessee shall have the right to
propose in lieu thereof other Equipment (consisting solely of Functional
Units) by providing an amended Delivery Date Notice, and the originally
proposed Delivery Date shall not be delayed as a result of such amendment.
Equipment Description
---------------------
Material handling equipment, pallet racks and
office furniture at Lessee's La Mirada, CA
distribution center, and
Manufacturing and processing equipment located
at Sublessee's Ankeny, Iowa facility
<PAGE> 48
EXHIBIT A TO LEASE
FORM OF INVESTORS LETTER
Rykoff-Sexton, Inc.
[Address For Notice]
BA Leasing & Capital Corporation,
not individually, but solely as Agent
[Address For Notice]
Ladies and Gentlemen:
Capitalized terms used in this letter and not otherwise defined herein
shall have the meanings assigned thereto in that certain Participation
Agreement (the "Participation Agreement"), dated as of April ___, 1994, among
Rykoff-Sexton, Inc., a Delaware corporation, as Lessee, Tone Brothers, Inc., an
Iowa corporation, as Sublessee, certain institutions listed on Schedule I
thereto, and BA Leasing & Capital Corporation, a California corporation, as
Agent, unless the context otherwise requires. The undersigned has agreed to
purchase the interest of _____________ as a Lessor under the Participation
Agreement and the other Operative Agreements (as defined therein), representing
a Commitment of (amount) Dollars $(_________) (the "Interest"), and desires
that the Lessee execute and deliver to Agent and that Agent authenticate and
deliver to the undersigned and to each Lessor a new Schedule I to the
Participation Agreement evidencing the Commitment of the undersigned pursuant
to Section 22.2 of the Lease. The undersigned hereby represents and warrants
as of the date hereof to the addressees hereof as follows:
(a) The undersigned will be acquiring the Interest with
funds which constitute general account assets and not assets of any
separate account in which any employee benefit plan has any interest
or with assets allocated to an insurance company pooled separate
account as defined in ERISA Section 3(17) maintained by a Lessor which
satisfies the requirements of U.S. Department of Labor Prohibited
Transaction Class Exemption 90-1 with respect to the transactions
contemplated by the Lease in order for such transactions to be exempt
from the prohibitions of Section 406 of ERISA and Section 4975 of the
Code;
(b) The Interest is being acquired by the undersigned for
investment and not with a view to the resale or
<PAGE> 49
distribution of such Interest or any part thereof, but without
prejudice, however, to the right of the undersigned at all times to
sell or otherwise dispose of all or any part of such Interest under a
registration available under the Securities Act of 1933, as amended,
or under an exemption from such registration available under such Act,
it being understood that the disposition by the undersigned of the
Interest to be purchased by the undersigned shall, at all times,
remain entirely within its control;
(c) neither the undersigned nor any Person authorized to
act on its behalf has directly or indirectly offered to sell any
interests in the Collateral, the Interest or any security similar
thereto, to, or otherwise approved or negotiated with respect thereto
with, anyone other than the Lessors, and neither it nor any Person
authorized to act on its behalf will so offer or sell in violation of
Section 5 of the Securities Act of 1933, as amended, or securities or
blue sky law of any applicable jurisdiction; and
(d) the undersigned agrees to treat its Interest for
federal, state and local income and franchise tax purposes as
indebtedness of the Lessee.
The undersigned understands that the Interest has not been and will
not be registered or qualified under the Securities Act of 1933, as amended, or
any securities or "blue sky" laws of any jurisdiction and that no participant
has an obligation to effect such registration or otherwise assist in the
disposition of the Interest.
Very truly yours,
_______________________________
By:____________________________
Name Printed:__________________
Title:_________________________
2
<PAGE> 50
EXHIBIT B TO LEASE
FORM OF LEASE SUPPLEMENT (Rykoff-Sexton, Inc. Lease)
LEASE SUPPLEMENT (Rykoff-Sexton, Inc. Lease) dated
____________, 1994 (this "Lease Supplement") between RYKOFF-SEXTON, INC., a
Delaware corporation (the "Lessee"), BA Leasing & Capital Corporation,
Manufacturers Bank and Pitney Bowes Credit Corporation (the "Lessors") and BA
LEASING & CAPITAL CORPORATION, not in its individual capacity, but solely in
its capacity as Agent for the Lessors;
W I T N E S S E T H :
WHEREAS, the Lessee, the Lessors and the Agent have heretofore entered
into that certain Lease Intended as Security dated as of April 29, 1994 (the
"Lease"). Unless otherwise defined herein, capitalized terms used herein shall
have the meanings specified in the Lease; and
WHEREAS, the Lease provides for the execution and delivery of a Lease
Supplement on each Delivery Date substantially in the form hereof for the
purpose of confirming the acceptance and lease of certain Equipment, specifying
the Rent applicable to such Equipment and setting forth certain other matters,
all as required pursuant to the Lease;
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, the Agent, the Lessors and the Lessee hereby agree as
follows:
1. Inspection and Approval. The Lessee hereby acknowledges and
confirms that it has inspected and approved the Equipment set forth on Schedule
I hereto for all purposes of the Lease and the other Operative Documents and,
as between the Lessors and the Lessee, such Equipment complies in all material
respects with the specifications for such Equipment, is in good working order,
repair, condition and appearance, and without defect therein with respect to
design, manufacture, conditions, operation and fitness for use or in any other
respect, whether or not discoverable by Lessee as of the date hereof. Lessee
reaffirms, as to the Equipment set forth in Schedule I, each of the waivers,
acknowledgments and agreements of Lessee set forth in Section 4.1 of the Lease.
2. Delivery and Acceptance. The Lessors hereby confirm delivery and
lease to the Lessee, and the Lessee hereby confirms acceptance of delivery and
lease from the Lessors, under the
1
<PAGE> 51
Lease as hereby supplemented, of the Equipment listed on Schedule I hereto.
3. Functional Units. The Equipment set forth on Schedule I consists
of one or more of the Functional Units set forth or referred to on Schedule Y
to the Participation Agreement, provided that the Required Lessors may from
time to time, in their reasonable discretion, direct the Agent to allocate such
Equipment into different Functional Units so long as each Item of Equipment
subject to the Lease is at all times part of a Functional Unit.
4. Warranty. The Lessee hereby represents and warrants that no event
which would constitute a Casualty under the Lease has occurred with respect to
the Equipment set forth on Schedule I hereto as of the date hereof. Lessee
hereby reaffirms each of the representations and warranties set forth at
Section 5.1 of the Participation Agreement as if made on the date hereof,
including that the Equipment set forth on Schedule I hereto is free and clear
of all Liens other than Permitted Liens.
5. Term, Interim Period, Interest Rate and Supplement Balance. The
term of this Lease Supplement shall commence on the date hereof and end on the
Termination Date. The Interim Period, the Interest Rate, the Applicable
Percentage and the amount of Rent due on each Payment Date are set forth,
respectively, in the appropriate portions of Schedule II hereto. Schedule III
hereto sets forth the respective portion of each installment of Rent payable on
each Payment Date to be paid to each Lessor. Schedule IV hereto sets forth the
Functional Unit Balance of each Functional Unit as of each Payment Date.
6. Rent.
(a) On the last day of the Interim Period, Lessee shall pay to
Agent, for the benefit of the Lessors, the amount of the Interim Rent set forth
at Schedule II.
(b) On each Payment Date following the expiration of the Interim
Period during the Initial Term and during each Renewal Term, Lessee shall pay
to Agent, for the benefit of the Lessors, the amount of the Basic Rent and
Renewal Rent as set forth at Schedule II hereto.
7. Confirmation. The Lessee hereby confirms its agreement, in
accordance with the Lease as supplemented by this Lease Supplement, to pay Rent
to the Agent, for the benefit of the Lessors, for each Functional Unit leased
hereunder. Nothing herein shall reduce Lessee's obligation to make all other
payments required under the Lease, including those payments to be
-2-
<PAGE> 52
made on the last day of the Lease Term pursuant to Article XI of the Lease.
8. Incorporation into Lease. This Lease Supplement shall be construed
in connection with and as part of the Lease, and all terms, conditions and
covenants contained in the Lease, as supplemented by this Lease Supplement,
shall be and remain in full force and effect and shall govern the Equipment
described in Schedule I hereto.
9. References. Any and all notices, requests, certificates and other
instruments executed and delivered concurrently with or after the execution and
delivery of this Lease Supplement may refer to the "Lease Intended as Security,
dated as of April 29, 1994", or may identify the Lease in any other respect
without making specific reference to this Lease Supplement, but nevertheless
all such references shall be deemed to include this Lease Supplement, unless
the context shall otherwise require.
10. Counterparts. This Lease Supplement may be executed in any
number of counterparts, each executed counterpart constituting an original but
all together one and the same instrument.
11. Governing Law. This Lease Supplement shall be governed by and
construed in accordance with the laws and decisions of the State of California
without regard to principles of conflicts of laws.
-3-
<PAGE> 53
IN WITNESS WHEREOF, the Agent, Lessors and the Lessee have caused this
Lease Supplement to be duly executed and delivered on the day and year first
above written.
<TABLE>
<S> <C>
RYKOFF-SEXTON, INC., BA LEASING & CAPITAL CORPORATION,
as Lessee not individually, but solely
as Agent for the Lessors
By___________________________ By____________________________
Name Printed:________________ Name Printed:_________________
Title:_______________________ Title:________________________
By____________________________
Name Printed:_________________
Title:________________________
LESSORS:
- - --------
PITNEY BOWES CREDIT BA LEASING & CAPITAL CORPORATION
CORPORATION
By____________________________ By____________________________
Name Printed:_________________ Name Printed:_________________
Title:________________________ Title:________________________
By____________________________ By____________________________
Name Printed:_________________ Name Printed:_________________
Title:________________________ Title:________________________
MANUFACTURERS BANK
By____________________________
Name Printed:_________________
Title:________________________
</TABLE>
<PAGE> 54
SCHEDULE I
Items of Equipment Purchased by Lessors
and Subject to this Lease Supplement Purchase Price
Functional Unit ___
Functional Unit ___
Functional Unit ___
Functional Unit ___
<PAGE> 55
SCHEDULE II
Delivery Date: ____________
Sum of Purchase Prices*: $____________
Interest Rate: ____________
"Applicable Percentage" shall mean, with respect to the end of the
Initial Term and each Renewal Term, the percentage set forth below opposite
each such date:
<TABLE>
<CAPTION>
Supplement
End of Applicable Percentage Balance
------ --------------------- ----------
<S> <C> <C>
Initial Term ______% $_________
First Renewal Term ______% $_________
Second Renewal Term ______% $_________
Third Renewal Term ______% $_________
Fourth Renewal Term ______% $_________
Fifth Renewal Term ______% $_________
</TABLE>
A. Interim Rent: $____________
Interim Rent Payment Date: ____________**
B. Basic and Renewal Rent:
<TABLE>
<CAPTION>
Payment Principal Interest Total Rent
Date Component Component Installment
---- --------- --------- -----------
<S> <C> <C> <C>
Totals:
========= ========= ===========
</TABLE>
__________________________________
*Total of Purchase Prices set forth on Schedule I to Lease Supplement.
**This will be the last day of the Interim Period, i.e. the last day of the
calendar quarter in which the Delivery Date occurs.
<PAGE> 56
SCHEDULE III
<TABLE>
<CAPTION>
Rent Total
Payment Rent
Date Payment BA Leasing Manufacturers Pitney
---- ------- ---------- ------------- ------
<S> <C> <C> <C> <C>
_________, 19__ $ $ $ $
_________, 19__ $ $ $ $
_________, 19__ $ $ $ $
</TABLE>
<PAGE> 57
SCHEDULE IV
<TABLE>
<CAPTION>
Functional Payment Functional
Unit No. Date Unit Balance
-------- ---- ------------
<S> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.16.2
THIS DOCUMENT IS NOT "COUNTERPART
NO. 1 - SUBLESSOR'S ORIGINAL COPY"
SUBLEASE
SUBLEASE, dated as of April 29, 1994 between Rykoff-Sexton, Inc., a
Delaware corporation ("Sublessor"), and Tone Brothers, Inc., an Iowa
corporation ("Sublessee").
RECITALS
(A) Sublessor is Lessee under that certain Lease Intended as
Security, dated as of April 29, 1994 (as from time to time thereafter amended
or supplemented, the "Lease") with the Lessors listed on the signature pages
thereto and BA Leasing & Capital Corporation, not individually, but solely as
agent for the benefit of the Lessors ("Agent"). Unless otherwise defined
herein or the context hereof otherwise requires, terms which are defined or
defined by reference in the Lease shall have the same meanings when used herein
as such terms have therein, whether or not the Lease is then in effect.
(B) Sublessor desires to lease to Sublessee, and Sublessee desires
to lease from Sublessor, the items of equipment described on Schedule I hereto,
as from time to time hereafter amended ("Sublease Items").
Accordingly, the parties hereto agree as follows:
SECTION 1. LEASE. Sublessor leases to Sublessee and Sublessee leases
from Sublessor the Sublease Items described on Schedule I hereto, as such
description may from time to time be hereafter amended with the consent of
Assignee (as hereinafter defined).
SECTION 2. TERM. The term of this Sublease shall be concurrent with
the term of the Lease and termination of the Lease (including, without
limitation, termination pursuant to Article X thereof) shall constitute
automatic termination of this Sublease. Termination of the Lease with respect
to any but not all of the Sublease Items shall constitute automatic termination
of this Sublease only with respect to the Sublease Items no longer subject to
the Lease.
If Sublessor elects to exercise the Lessee Purchase Option as provided
inSection 11.1(b) of the Lease, Sublessor shall sell to Sublessee, and
Sublessee shall purchase from Sublessor, the Sublease Items subject thereto for
(i) the portion of the Purchase Option Exercise Amount, any applicable
Make-Whole Premiums and any other amounts then due and payable attributable to
such Sublease Items or, (ii) if less than all of the Equipment is subject to
such Lessee Purchase Option, the aggregate of the amounts that are required to
be paid by Sublessor to Agent under Section 11.1(b)(A) of the Lease
attributable to such Sublease
<PAGE> 2
Items. Such payment for such Sublease Items shall be made by Sublessee
concurrently upon Sublessor's payment to the Agent pursuant to Section
11.1(b)(A) of the Lease. Upon payment by the Sublessee for Sublease Items,
Sublessor shall execute and deliver to Sublessee a quitclaim bill of sale
(without representations or warranties) for such Sublease Items.
If Sublessor elects to exercise the Sale Option as provided inSection
11.1(c) of the Lease, Sublessee shall on the last day of the Lease Term permit
a purchaser of any Sublease Item to take possession thereof. Sublessee shall
pay to Sublessor an amount equal to the amount payable by Sublessor pursuant to
Section 11.1(c)(2)(ii) of the Lease attributable to the Sublease Items. Such
payment for the Sublease Items shall be made by Sublessee on the date that the
Section 11.1(c)(2)(ii) amount is payable by Sublessor to Lessor under the
Lease. If such purchaser cannot take possession of a Sublease Item on the last
day of the Lease Term, the Sublessee shall store such Sublease Item for a
reasonable period of time, but shall at all times comply with the last sentence
of Section 11.3 of the Lease.
SECTION 3. RENT. The rent and rental payment dates shall be as
agreed from time to time by Sublessor and Sublessee; provided, however, that if
Assignee is exercising its rights with respect to this Sublease or any Sublease
Items, rent shall be payable quarterly on the Sublease Items on each April 30,
July 30, October 30 and January 30 and shall be in an amount, with respect to
each Sublease Item, equal to that portion of the rental under the Lease and
applicable Lease Supplement attributable to such Sublease Item.
SECTION 4. WARRANTIES. NEITHER SUBLESSOR NOR ANY ASSIGNEE MAKES ANY
EXPRESS OR IMPLIED WARRANTY WHATSOEVER OF TITLE, MERCHANTABILITY, FITNESS FOR
ANY PURPOSE OR OTHERWISE REGARDING ANY SUBLEASE ITEM OR ANY PART THEREOF.
SECTION 5. LEASE. This Sublease is in all respects subject and
subordinate to the Lease (and each Lease Supplement governing any Sublease
Item) and the Liens created thereby. Without limiting the foregoing, if for
any reason Assignee shall exercise rights or remedies thereunder, such exercise
may include the termination hereof, notwithstanding, to the maximum extent
permitted by law, any right of Sublessee hereunder. Sublessee shall in all
respects comply with all of the terms and provisions of Article V of the Lease.
SECTION 6. ASSIGNMENT; SUBLEASE. Sublessor shall have the right to
assign, and has assigned to Agent concurrently with entering into this
Sublease, all or any part of its right, title and interest in and to this
Sublease and shall have the right to grant and has granted to Agent for the
benefit of the Lessors a
-2-
<PAGE> 3
security interest in the Sublease Items to the Agent (in this capacity,
"Assignee", which term shall also be deemed to refer to any successor or assign
of Agent in such capacity) pursuant to the Lease. Such assignment and grant
shall (i) be superior to Sublessee's rights hereunder; (ii) not relieve
Sublessor of any of its obligations hereunder; and (iii) not be construed to be
an assumption by Assignee of any obligations of Sublessor hereunder. Upon
written request of Assignee, Sublessee shall make all payments of rent directly
to Assignee, at such address as Assignee shall specify. Sublessee shall, upon
request, execute and deliver such instruments and take such other action as may
reasonably be requested to protect Sublessor's or Assignee's interests. This
Sublease shall not be amended, modified or waived without the consent of
Assignee. Sublessee acknowledges that this Sublease has been assigned, and a
security interest in the Sublease Items has been granted, to Agent under the
Lease. Sublessee shall not assign any right or interest in this Sublease.
Except as expressly provided in this Section 6, any further
assignment, sublease or transfer of the Sublease or of all or any portion of
the Sublease Items is prohibited.
SECTION 7. NOTICES. Notices shall be in writing and shall be deemed
to be given when delivered personally, by facsimile (and confirmed, which
confirmation may be mechanical) or otherwise actually received or five Business
Days after being sent, first class mail postage prepaid, and addressed to
Sublessor, Sublessee and Assignee at their respective addresses set forth on
Schedule II hereto, or at such other address as any such party from time to
time provides to the other parties in accordance with this Section 7.
SECTION 8. MISCELLANEOUS. This Sublease shall be governed by the
laws of the State of California, without regard to conflict of law principles.
Only one counterpart of this Sublease shall be marked as the sole original
execution copy hereof, and such counterpart shall be held by Assignee. Each of
Sublessor and Sublessee waives any right to trial by jury in any action or
proceeding with respect to this Sublease or any instrument, document or
agreement now or hereafter relating to this Sublease. If any provision hereof
shall be prohibited or invalid under applicable 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 Sublease. This Sublease shall be binding upon Sublessor and Sublessee and
shall inure to the benefit of Sublessor, Sublessee, Assignee and the successors
and assigns of Assignee.
-3-
<PAGE> 4
SECTION 9. SECURITY INTEREST. Sublessee hereby grants a security
interest in the Sublease Items and proceeds thereof (the "Collateral") to
Sublessor to secure Sublessee's obligations under this Sublease. Sublessee
shall, at its own cost and expense, do any further act and execute,
acknowledge, deliver, file, register and/or record any further documents which
Sublessor (or Assignee) may reasonably request in order to protect its
perfected security interest in the Collateral.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as
of the date and year first above written.
<TABLE>
<S> <C>
TONE BROTHERS, INC. RYKOFF-SEXTON, INC.
By: GARTH B. THOMAS By: VICTOR B. CHAVEZ
Name: Garth B. Thomas Name: Victor B. Chavez
Title: V.P. Finance Title: V.P.-Chief Accounting Officer
</TABLE>
<PAGE> 6
SCHEDULE I
TO
SUBLEASE
<TABLE>
<CAPTION>
Functional
Unit # Equipment Description
- - ---------- ---------------------
<S> <C>
1 Packaging Line #1 (5 lb.)
2 Packaging Line #3 [Ankeny #11] (1 lb.)
3 Packaging Line #4 [Ankeny #8] (2 lb.)
4 Packaging Line #5 [Ankeny #10] (Hand Feed)
5 Packaging Line #6 (4 & 8 oz.)
6 Packaging Line #7 (1 lb.)
7 Packaging Line #8 (1 oz. Tube)
8 Packaging Line #9 (1 oz. Tube)
9 Pkkg Line #10 [A#12] (O.M. Bag Fill)
10 Packaging Line #11 (Mr. Pepper/Jollytime)
11 Packaging Line #12 (1 lb. Kraft/Rykoff)
12 Extract Food Service Packaging Line
13 Extract Retail Packaging Line
14 Packaging Line #2 [Future] (4 & 8 lb.)
15 Blending Equipment
16 Production & Distribution Support
17 Office & Building Support
</TABLE>
<PAGE> 1
EXHIBIT 10.17
June 20, 1994
HAND DELIVERED
Harold E. Feather
Dear Harold:
As a follow up to our meeting of May 3rd and 4th, I am confirming the
agreement between you and Rykoff-Sexton, Inc. (the "Company") concerning your
employment.
You will be employed by the Company as Executive Vice
President-Corporate Planning on a full time basis until December 31, 1998, with
an annual salary of not less than $275,000 and an annual car allowance of
$7200. You will be eligible to participate in the Company's employee benefit,
stock option, and incentive plans, subject to the terms and conditions of such
plans, as the same may be changed from time to time (the "Plans"). You will
continue to participate in the Senior Executive Incentive Plan ("SEIP") at your
current level of thirty-five percent (35%) unless the Company's Chief Executive
Officer determines that your performance requires an adjustment to be made to
your level of participation or the SEIP is modified or eliminated.
If, prior to December 31, 1998, your employment is terminated by you
for any reason, or your employment is terminated by the Company on account of
your death, disability or "Cause" as defined in that certain Change of Control
Agreement between you and the Company dated December 11, 1989 ("Cause"), no
further salary payments will be made to you.
If, prior to December 31, 1998, your employment is terminated by the
Company for any reason other than your death, disability, or Cause, your salary
will be paid to you through December 31, 1998, provided that you do not
directly or indirectly engage in any activity which competes with the Company.
<PAGE> 2
If, prior to December 31, 1998, your employment is terminated by you
or the Company for any reason, no further car allowance payments will be made
to you and your eligibility to continue to participate in the Company's Plans
will be governed by the terms of the Plans and applicable law.
If you remain employed by the Company until December 31, 1998, you
will become an "at-will" employee of the Company at that time. This means that
your employment after December 31, 1998 will have no specific or definite term
and that either you or the Company may terminate the relationship at any time
with or without cause and with or without notice.
This letter agreement is to be governed by the substantive laws of the
State of Illinois applicable to contracts to be performed wholly within that
state. If this letter agreement accurately reflects our understanding, please
sign and return a copy to the Company.
Very truly yours,
/s/ Mark Van Stekelenburg
-------------------------
Mark Van Stekelenburg
President and Chief Executive Officer
Agreed and Accepted
/s/ Harold E. Feather
- - ---------------------
Harold E. Feather
<PAGE> 1
EXHIBIT 10.18
EMPLOYMENT AGREEMENT
BETWEEN
RYKOFF-SEXTON, INC.
AND
MARK VAN STEKELENBURG
(EFFECTIVE AS OF JULY 20, 1994)
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as
of the 20th day of July, 1994, by and between RYKOFF-SEXTON, INC., a Delaware
corporation (the "Company"), and MARK VAN STEKELENBURG, a California resident
(the "Executive").
WHEREAS, the Executive has been serving as the President and
Chief Executive Officer of the Company since December, 1992;
WHEREAS, the Company desires to continue to employ the
Executive upon the terms and conditions specified in this Agreement and the
Executive desires to remain in the employ of the Company upon such terms and
conditions; and
WHEREAS, the Company and the Executive desire to set forth in
a written agreement certain of the terms and conditions of Executive's
employment with the Company;
NOW, THEREFORE, in consideration of the promises and of the
mutual covenants herein contained, it is agreed as follows:
1. Employment. The Company hereby agrees to continue to
employ the Executive and the Executive hereby agrees to remain in the employ of
the Company upon the terms and conditions herein set forth.
2. Term. Employment shall be for a term commencing on
the date hereof and, subject to termination under Section 8, expiring five (5)
years from the date hereof. Notwithstanding the previous sentence, this
Agreement and the employment of the Executive shall be automatically renewed
(subject to Section 8) for successive one-year periods upon the terms and
conditions set forth herein, commencing on the fifth anniversary of the date of
this Agreement, and on each anniversary date thereafter, unless either party to
this Agreement gives the other party written notice (in accordance with Section
16) of such party's intention to terminate this Agreement and the employment of
the Executive at least twelve months prior to the end of such initial or
extended term. For purposes of this Agreement, any reference to the "term" of
this Agreement shall include the original term and any extension thereof.
3. Duties of the Executive. The Executive shall serve
as the President and Chief Executive Officer of the Company, subject to the
pleasure of the Company's Board of Directors (the "Board"), and shall otherwise
be assigned only executive policy and management duties. The Executive shall
devote substantially all of his normal working time and his best efforts, full
attention and energies to the business of the Company, the responsibilities
provided for the President and Chief Executive Officer in the Company's Bylaws,
and such other
1
<PAGE> 3
related duties and responsibilities as may from time to time be reasonably
prescribed by the Board. Notwithstanding the foregoing and with the advance
approval of the Board, which approval may be withheld for any reason, the
Executive may serve on the boards of directors of unrelated companies and may
devote reasonable time to fulfilling his responsibilities as a member of such
boards. The Company shall use its best efforts to cause the Executive to be
elected as a member of its Board throughout the term of this Agreement and
shall include him in the management slate for election as a director at every
stockholders' meeting at which his term as a director would otherwise expire.
4. Compensation.
(a) During the term of this Agreement, the
Company shall pay to the Executive a base salary of not less than $450,000 per
annum, which base salary may be increased (but not decreased) from time to time
by the Board in its sole discretion, payable at the times and in the manner
consistent with the Company's general policies regarding compensation of
executive employees. Such base salary shall include any salary reduction
contributions to (i) any Company-sponsored plan that includes a
cash-or-deferred arrangement under Section 401(k) of the Internal Revenue Code
of 1986, as amended (the "Code"), (ii) any other plan of deferred compensation
sponsored by the Company, or (iii) any Company-sponsored "cafeteria plan" under
Code Section 125. The Board may from time to time authorize such additional
compensation to the Executive, in cash or in property, as the Board may
determine in its sole discretion to be appropriate.
(b) If the Board authorizes cash incentive
compensation under the Senior Executive Incentive Plan or such other management
incentive program or arrangement approved by the Board, the Executive shall be
eligible to participate in such plan, program or arrangement under the terms
and conditions applicable to executive and management employees; provided
however, that the potential annual incentive amount for the Executive as
determined by the Board shall be not less than 50% of the Executive's annual
base salary.
(c) If the Board authorizes grants under the
Company's employee stock option plans in effect from time to time, the
Executive shall participate in any such award in accordance with the award
schedules and other terms and conditions of such plans as approved by the
Board.
5. Executive Benefits.
(a) In addition to the compensation described in
Section 4, the Company shall make available to the Executive, subject to the
terms and conditions of the applicable plans, including without limitation the
eligibility rules, participation for the Executive and his eligible dependents
in the following Company-sponsored employee benefit plans or any successor
plans adopted by the Company: (i) Basic Life Insurance;
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(ii) Supplemental Life Insurance; (iii) Basic Accidental Death and
Dismemberment Insurance ("AD&D"); (iv) Supplemental AD&D; (v) Business Travel
Accident Insurance; (vi) Short-term Disability Insurance; (vii) Long-term
Disability Insurance; (viii) Medical and Dental Plan; (ix) the Rykoff-Sexton,
Inc. Pension Plan (the "Qualified Pension Plan"); and (x) the Rykoff-Sexton,
Inc. Value Plan; notwithstanding the foregoing, the Company reserves the right
to amend or terminate each of the foregoing plans at any time. The level of
coverage and benefit options available now and hereafter to the Executive under
the foregoing plans shall be the usual and customary benefits offered by the
Company to other executive and management employees of the Company.
(b) The Company shall make available to the
Executive and his eligible dependents, subject to generally applicable plan
eligibility rules, such other usual and customary benefits now or hereafter
offered by the Company to other employees of the Company, and such other
benefits and perquisites as may be made available by the Board to the Executive
or generally to other executive and management employees of the Company.
(c) The Executive shall be provided with
retirement benefits under that certain Supplemental Executive Retirement Plan
for Mark Van Stekelenburg (the "Supplemental Retirement Plan"), the form of
which is attached hereto as Exhibit A, subject to all of the terms and
conditions thereof.
(d) In addition to any life insurance coverage
made available to the Executive under Section 5(a), the Company shall continue
to provide to the Executive, as the owner of the contract (or, alternatively,
to his designee, as the owner) a term life insurance contract on the
Executive's life in an amount not less than one million dollars ($1,000,000)
and to reimburse the Executive, on an after-tax basis, for the cost of such
insurance.
6. Expenses. The Company shall also pay or reimburse
the Executive for reasonable and necessary expenses incurred by the Executive
in connection with his duties on behalf of the Company in accordance with the
general policies of the Company.
7. Place of Performance. In connection with his
employment by the Company, the Executive shall be based at the principal
executive offices of the Company, except for travel reasonably required for
Company business.
8. Termination.
(a) Involuntary Termination. The Executive's
employment hereunder may be terminated by the Company for any reason by written
notice as provided in Section 16. The Executive's Disability (as defined
herein) during the term of the Agreement shall constitute an involuntary
termination of
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employment hereunder, unless the Board expressly extends such employment for a
specified time thereafter. The Executive will be treated for purposes of this
Agreement as having been involuntarily terminated by the Company if the
Executive terminates his employment with the Company under the following
circumstances: (i) the Company has breached any material provision of this
Agreement and within 30 days after notice thereof from the Executive, the
Company fails to cure such breach; (ii) at any time after the Company has
notified the Executive pursuant to Section 2 hereof that the Company intends to
terminate the Agreement and the Executive's employment (rather than allow the
Agreement to automatically renew); (iii) a successor or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company fails to assume
liability under the Agreement or the Supplemental Retirement Plan; (iv) the
Executive fails to be elected to the Board; (v) the Board fails to appoint the
Executive as President and Chief Executive Officer; or (vi) the Board's
consistent failure, after appropriate efforts by the parties, to approve the
Executive's bona fide strategic plan as presented from time to time such that a
reasonable executive would conclude that the parties hold irreconcilable
differences in vision and direction for the Company.
(b) Voluntary Termination. The Executive may
voluntarily terminate the Agreement (including without limitation by retirement
under the terms of the Supplemental Retirement Plan) at any time by notice to
the Company as provided in Section 16. The Executive's death during the term
of the Agreement shall constitute a voluntary termination of employment for
purposes of eligibility for Termination Payments and Benefits as provided in
Section 9.
(c) Subject to Section 9 and any benefit
continuation requirements of applicable laws, in the event the Executive's
employment hereunder is voluntarily or involuntarily terminated for any reason
whatsoever, the compensation and benefits obligations of the Company under
Sections 4 and 5 shall cease as of the effective date of such termination,
except for any compensation and benefits earned or accrued but unpaid through
such date.
9. Termination Payments and Benefits. If the
Executive's employment hereunder is involuntarily terminated by the Company
other than for Cause (as defined herein) prior to the end of the term of this
Agreement, then the Company shall be obligated to pay to the Executive certain
termination payments and make available certain benefits during the termination
payment period, as follows:
(a) Termination Payment Period. Termination
payments shall be made for two years.
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(b) Calculation of Termination Payments.
Subject to subsections (f) and (h), termination payments
calculated on an annual basis shall equal the sum of (i) the
Executive's highest annual base salary during the three-year
period prior to the Executive's termination plus (ii) the
Executive's average annual cash incentive compensation award,
including without limitation any award under the Senior
Executive Incentive Program or any successor plan thereto,
during the three-year period prior to the Executive's
termination.
(c) Method of Payment. Termination payments
shall be paid to the Executive in accordance with the
Company's regular payroll schedule. If the Executive should
die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid
to the Executive's surviving spouse, or, if she is not then
living, in accordance with the Executive's Beneficiary
Designation under Section 14.01 of the Qualified Pension Plan
or, if the Executive fails to name such a Beneficiary or the
named Beneficiary predeceases him, in accordance with the
order of priority in Section 14.02 of the Qualified Pension
Plan.
(d) Benefits. Notwithstanding any provision to
the contrary in any option agreement or in any plan, (i) all
of the Executive's outstanding stock options shall immediately
become exercisable upon involuntary termination of the
Executive, and (ii) the Executive shall be credited with two
additional Years of Service under the Supplemental Retirement
Plan; provided, however, that this sentence shall not apply in
the case of an involuntary termination of the Executive's
employment that occurs after the fifth anniversary of the date
of this Agreement.
During the termination payment period as set
forth above in subsection (a), the Company shall use its best
efforts to maintain in full force and effect for the continued
benefit of the Executive all employee welfare benefit plans
and perquisite programs in which the Executive was entitled to
participate immediately prior to the Executive's termination
or shall arrange to make available to the Executive benefits
substantially similar to those which the Executive would
otherwise have been entitled to receive if his employment had
not been terminated. Such welfare benefits shall be provided
to the Executive on the same terms and conditions (including
employee contributions toward the premium payments) under
which the Executive was entitled to participate immediately
prior to his termination. The Company does not guarantee a
favorable tax consequence to the Executive for
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continued coverage and benefits under the Company-sponsored
plans nor will it indemnify the Executive for such results
except with respect to the life insurance plan made available
by the Board under Section 5(d).
Notwithstanding the foregoing, with respect
to the Executive's continued coverage under the Company's
Medical and Dental plan, or a successor plan, pursuant to this
provision, the Executive's "qualifying event" for purposes of
the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") shall be his date of termination from the Company.
Any termination payments hereunder shall not
be taken into account for purposes of any retirement plan or
other benefit plan sponsored by the Company (including the
Supplemental Retirement Plan), except as otherwise expressly
required by such plans or applicable law.
(e) Termination for Cause. For purposes of this
Agreement, "Cause" shall mean
(i) the willful and continued failure by
the Executive to substantially perform his
duties hereunder (other than any such failure
resulting from the Executive's incapacity due
to physical or mental illness), after demand
for substantial performance is delivered by
the Company that specifically identifies the
manner in which the Company believes the
Executive has not substantially performed his
duties,
(ii) the willful engaging by the
Executive in misconduct which is materially
injurious to the Company, monetarily or
otherwise, or
(iii) the material breach of the
Confidentiality and Nonsolicitation Agreement
set forth in Section 10.
No act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by
him not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Cause without (x)
reasonable notice to the Executive setting forth the reasons
for the Company's intention to terminate for Cause, (y) an
opportunity for the Executive, together with his counsel, to
be heard before the Board, and (z) delivery
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to the Executive of a written notice of termination from the
Board finding that in the good faith opinion of the Board,
the Executive was guilty of conduct set forth above in
clause (i), (ii) or (iii) hereof, and specifying the
particulars thereof in detail.
(f) Effect of Change in Control Agreement. If
the Executive also becomes entitled to receive severance
payments under the terms of the Amended and Restated Change in
Control Agreement between the Company and the Executive, dated
as of October 12, 1993 (the "Change in Control Agreement"),
then the Executive's termination payments under this Agreement
shall be reduced by the amount of severance payments payable
in any given year under Section 3(B) of the Change in Control
Agreement.
(g) Disability Defined. "Disability" shall mean
the Executive's incapacity due to physical or mental illness
to substantially perform his duties on a full-time basis for
six (6) consecutive months and within thirty (30) days after a
notice of termination is thereafter given by the Company the
Executive shall not have returned to the full-time performance
of the Executive's duties; provided, however, if the Executive
shall not agree with a determination to terminate him because
of Disability, the question of the Executive's disability
shall be subject to the certification of a qualified medical
doctor agreed to by the Company and the Executive or, in the
event of the Executive's incapacity to designate a doctor, the
Executive's legal representative. In the absence of agreement
between the Company and the Executive, each party shall
nominate a qualified medical doctor and the two doctors shall
select a third doctor, who shall make the determination as to
Disability.
(h) Effect of Long-Term Disability. If the
Executive also becomes entitled to receive benefits under an
insured long-term disability insurance plan ("LTD Plan") now
or hereafter paid for by the Company, then the Executive's
termination benefits under this Agreement (calculated on a
monthly basis) shall be reduced by the amount of the benefits
paid under such LTD Plan. No such reduction shall be made for
benefits paid to the Executive under a personal disability
income plan or such other disability income plan paid for by
the Executive, whether or not the plan was obtained through a
group-sponsored or Company-related program.
(i) No Obligation to Mitigate. The Executive is
under no obligation to mitigate damages or the amount of any
payment provided for hereunder by seeking other employment or
otherwise; provided, however, that the
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Executive's coverage under the Company's welfare benefit plans
will terminate when the Executive becomes covered under any
employee benefit plan made available by another employer and
covering the same type of benefits. The Executive shall notify
the Company within thirty (30) days after the commencement of
any such benefits.
(j) Forfeiture. Notwithstanding the foregoing,
any right of the Executive to receive termination payments and
benefits hereunder shall be forfeited to the extent of any
amounts payable after any breach of Section 10 or Section 11
by the Executive.
10. Confidentiality and Nonsolicitation Agreement.
(a) The Executive acknowledges that in the course
of his employment by the Company, he will or may have access to and become
informed of confidential and secret information which is a competitive asset of
the Company ("Confidential Information"), including, without limitation, (i)
the terms of any agreement between the Company and any employee, customer or
supplier, (ii) pricing strategy, (iii) merchandising and marketing methods,
(iv) product development ideas and strategies, (v) personnel training and
development programs, (vi) financial results, (vii) strategic plans and
demographic analyses, (viii) proprietary computer and systems software, and
(ix) any non-public information concerning the Company, its employees,
suppliers or customers. The Executive agrees that he will keep all
Confidential Information in strict confidence during the term of his employment
by the Company and thereafter and will never directly or indirectly make known,
divulge, reveal, furnish, make available, or use any Confidential Information
(except in the course of his regular authorized duties on behalf of the
Company). The Executive agrees that the obligations of confidentiality
hereunder shall survive termination of his employment at the Company regardless
of any actual or alleged breach by the Company of this Agreement, until and
unless any such Confidential Information shall have become, through no fault of
the Executive, generally known to the public or the Executive is required by
law to make disclosure (after giving the Company notice and an opportunity to
contest such requirement). The Executive's obligations under this Section 10
are in addition to, and not in limitation of or preemption of, all other
obligations of confidentiality which the Executive may have to the Company
under general legal or equitable principles.
(b) Except in the ordinary course of the
Company's business, the Executive has not made, nor shall at any time following
the date of this Agreement, make or cause to be made, any copies, pictures,
duplicates, facsimiles or other reproductions or recordings or any abstracts or
summaries including or reflecting Confidential Information. All such documents
and other property furnished to the Executive by the Company or otherwise
acquired or developed by the Company shall
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at all times be the property of the Company. Upon termination of the
Executive's employment by the Company, the Executive will return to the Company
any such documents or other property of the Company which are in the
possession, custody or control of the Executive.
(c) Without the prior written consent of the
Company (which may be withheld for any reason or no reason), except in the
ordinary course of the Company's business, the Executive shall not at any time
following the date of this Agreement use for the benefit or purposes of the
Executive or for the benefit or purposes of any other person, firm,
partnership, association, trust, venture, corporation or business organization,
entity or enterprise engaged in the "Restricted Business" (as herein defined),
or disclose in any manner to any person, firm, partnership, association, trust,
venture, corporation or business organization, entity or enterprise engaged in
the Restricted Business, any Confidential Information. "Restricted Business"
means any business or division of a business which consists of the
manufacturing or sale, for distribution to customers that are primarily
restaurants, cafes, bars, hotels, schools, colleges and other institutions (as
the word "institution" is customarily defined in the wholesale grocery
business) of (i) processed or bulk food and other groceries; (ii) restaurant
and commercial kitchen supplies (such as paper products, janitorial supplies,
consumable stores and supplies of every kind and nature); and (iii) restaurant
and commercial kitchen equipment (such as cookware, appliances, glassware,
dinnerware, smallwares and similar items), and likewise includes any business
of a kind in whole or in part similar to that heretofore engaged in by the
Company or any of its subsidiaries.
(d) In the event of the Executive's voluntary or
involuntary termination of employment at the Company, the Executive agrees that
he will not in any capacity, on his own behalf or on behalf of any other firm,
person or entity, undertake or assist in the solicitation of any employee of
the Company, including, but not limited to, solicitation of any employee to
terminate his or her employment with the Company.
(e) The Executive acknowledges and agrees that a
violation of the foregoing provisions of this Section 10 (referred to
collectively as the Confidentiality and Nonsolicitation Agreement) that results
in material detriment to the Company would cause irreparable harm to the
Company, and that the Company's remedy at law for any such violation would be
inadequate. In recognition of the foregoing, the Executive agrees that, in
addition to any other relief afforded by law or this Agreement, including
damages sustained by a breach of this Agreement and any forfeitures under
Section 9, and without any necessity or proof of actual damages, the Company
shall have the right to enforce this Agreement by specific remedies, which
shall include, among other things, temporary and permanent injunctions, it
being the understanding of the undersigned parties hereto that
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damages, the forfeitures described above and injunctions shall all be proper
modes of relief and are not to be considered as alternative remedies.
11. Post-termination Assistance. The Executive agrees
that after his employment with the Company has terminated he will provide, upon
reasonable notice, such information and assistance to the Company as may
reasonably be requested by the Company in connection with any litigation in
which it or any of its affiliates is or may become a party; provided, however,
that the Company agrees to reimburse the Executive for any related expenses,
including travel expenses.
12. Arbitration. Any dispute between the Executive and
the Company under this Agreement shall be resolved (except as provided below)
through informal arbitration by an arbitrator selected under the rules of the
American Arbitration Association (located in Los Angeles, California) and the
arbitration shall be conducted in that location under the rules of said
Association. Each party shall each be entitled to present evidence and
argument to the arbitrator. The arbitrator shall have the right only to
interpret and apply the provisions of this Agreement and may not change any of
its provisions. The arbitrator shall permit reasonable pre-hearing discovery
of facts, to the extent necessary to establish a claim or a defense to a claim,
subject to supervision by the arbitrator. The determination of the arbitrator
shall be conclusive and binding upon the parties and judgment upon the same may
be entered in any court having jurisdiction thereof. The arbitrator shall give
written notice to the parties stating his or their determination, and shall
furnish to each party a signed copy of such determination. The expenses of
arbitration shall be borne equally by the Executive and the Company or as the
arbitrator shall otherwise equitably determine.
Notwithstanding the foregoing, the Company shall not be
required to seek or participate in arbitration regarding any breach of the
Executive's Confidentiality and Nonsolicitation Agreement contained in Section
10, but may pursue its remedies for such breach in a court of competent
jurisdiction in Los Angeles, California.
13. Agreement. This Agreement supersedes any and all
other Agreements, either oral or in writing, between the parties hereto with
respect to the subject matter hereof and contains all of the covenants and
agreements between the parties with respect to such subject matter. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or other agreements, orally or otherwise, have been made by any party, or
anyone acting on behalf of any party, pertaining to the subject matter hereof,
which are not embodied herein, and that no other agreement, statement, or
promise pertaining to the subject matter hereof that is not contained in this
Agreement shall be valid or binding on either party.
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14. Withholding of Taxes. The Company may withhold from
any amounts payable under this Agreement all federal, state, city or other
taxes as the Company is required to withhold pursuant to any law or government
regulation or ruling.
15. Successors and Binding Agreement.
(a) The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation, reorganization
or otherwise) to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent the Company would be required to perform if no such
succession had taken place. This Agreement will be binding upon and inure to
the benefit of the Company and any successor to the Company, including without
limitation any persons acquiring directly or indirectly all or substantially
all of the business or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the "Company" for the purposes of this Agreement), but will not
otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of
and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign,
transfer or delegate this Agreement or any rights or obligations hereunder
except as expressly provided in Sections 15(a) and 15(b). Without limiting the
generality or effect of the foregoing, the Executive's right to receive
payments hereunder will not be assignable, transferable or delegable, whether
by pledge, creation of a security interest, or otherwise, other than by a
transfer by Executive's will or by the laws of descent and distribution and, in
the event of any attempted assignment or transfer contrary to this Section
15(c), the Company shall have no liability to pay any amount so attempted to be
assigned, transferred or delegated.
16. Notices. For all purposes of this Agreement, all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof confirmed), or five
business days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, or three business days after
having been sent by a nationally recognized overnight courier service such as
Federal Express, UPS, or Purolator, addressed to the Company (to the attention
of the Secretary of the Company) at its principal executive office
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and to the Executive at his principal residence, or to such other address as
any party may have furnished to the other in writing and in accordance
herewith, except that notices of changes of address shall be effective only
upon receipt.
17. Governing Law. The validity, interpretation,
construction and performance of this Agreement will be governed by and
construed in accordance with the substantive laws of the State of California,
without giving effect to the principles of conflict of laws of such State.
18. Validity. If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement
and the application of such provision to any other person or circumstances
will not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid or legal.
19. Survival of Provisions. Notwithstanding any other
provision of this Agreement, the parties' respective rights and obligations
under Sections 9, 10, 11 and 12 will survive any termination or expiration of
this Agreement or the termination of the Executive's employment for any reason
whatsoever.
20. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by
such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Unless otherwise
noted, references to "Sections" are to sections of this Agreement. The
captions used in this Agreement are designed for convenient reference only and
are not to be used for the purpose of interpreting any provision of this
Agreement.
21. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an
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original but all of which together will constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereof have executed this
Agreement as of the day and year first written.
RYKOFF-SEXTON, INC.
By: /s/ RICHARD J. MARTIN
----------------------------
Richard J. Martin
Its: Senior Vice President -
Chief Financial Officer
ATTEST: COMPANY
/s/ NEIL I. SELL /s/ MARK VAN STEKELENBURG
- - -------------------------- ---------------------------
Neil I. Sell, Secretary Mark Van Stekelenburg
EXECUTIVE
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EXHIBIT 10.19
RYKOFF-SEXTON, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR MARK VAN STEKELENBURG
(EFFECTIVE AS OF JULY 20, 1994)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Article 1. The Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Establishment . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1.1 "Actuarial Equivalent" . . . . . . . . . . . . . . . 1
2.1.2 "Affiliate" . . . . . . . . . . . . . . . . . . . . . 1
2.1.3 "Annuity Starting Date" . . . . . . . . . . . . . . . 1
2.1.4 "Base Compensation" . . . . . . . . . . . . . . . . . 1
2.1.5 "Benefit Percentage" . . . . . . . . . . . . . . . . 2
2.1.6 "Code" . . . . . . . . . . . . . . . . . . . . . . . 2
2.1.7 "Committee" . . . . . . . . . . . . . . . . . . . . . 2
2.1.8 "Disability" . . . . . . . . . . . . . . . . . . . . 2
2.1.9 "Early Retirement Date" . . . . . . . . . . . . . . . 2
2.1.10 "Effective Date" . . . . . . . . . . . . . . . . . . 2
2.1.11 "Employer" . . . . . . . . . . . . . . . . . . . . . 2
2.1.12 "Employment Agreement" . . . . . . . . . . . . . . . 2
2.1.13 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . 2
2.1.14 "Final Average Earnings" . . . . . . . . . . . . . . 2
2.1.15 "Normal Retirement Age" . . . . . . . . . . . . . . . 3
2.1.16 "Participant" . . . . . . . . . . . . . . . . . . . . 3
2.1.17 "Plan" . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.18 "Qualified Pension Plan" . . . . . . . . . . . . . . 3
2.1.19 "Surviving Spouse . . . . . . . . . . . . . . . . . . 3
2.1.20 "Termination of Employment" . . . . . . . . . . . . . 3
2.1.21 "Year of Service" . . . . . . . . . . . . . . . . . . 3
2.2 Gender and Number . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3. PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Termination of Participation . . . . . . . . . . . . . . . . . 3
ARTICLE 4. RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Normal Retirement Benefits . . . . . . . . . . . . . . . . . . 4
4.2 Benefits Upon Early Retirement . . . . . . . . . . . . . . . . 4
4.3 Disability Benefits . . . . . . . . . . . . . . . . . . . . . 4
4.4 Deferred Vested Benefits . . . . . . . . . . . . . . . . . . . 5
4.5 Social Security Reduction . . . . . . . . . . . . . . . . . . 5
4.6 Benefits upon Reemployment . . . . . . . . . . . . . . . . . . 5
ARTICLE 5. SURVIVOR BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Death Prior to Retirement . . . . . . . . . . . . . . . . . . 6
5.2 Death After Commencement of Benefits . . . . . . . . . . . . . 6
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 6. CLAIMS AND REVIEW PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Review Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 7. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.2 Powers of the Committee . . . . . . . . . . . . . . . . . . . . . . 7
7.3 Actions of the Committee . . . . . . . . . . . . . . . . . . . . . . 8
7.4 Delegation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.5 Reports and Records . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 8. AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1 Procedures for Amending Plan . . . . . . . . . . . . . . . . . . . . 8
8.2 Termination of Plan . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1 No Guaranty of Employment . . . . . . . . . . . . . . . . . . . . . 9
9.2 Financing of Benefits . . . . . . . . . . . . . . . . . . . . . . . 9
9.3 Non-Alienation . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.5 Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.6 Form of Communication . . . . . . . . . . . . . . . . . . . . . . . 10
9.7 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.9 Binding Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.11 Facility of Payment . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
ii
<PAGE> 4
ARTICLE 1. THE PLAN
1.1 Establishment. RYKOFF-SEXTON, INC. (the "Employer"), hereby
establishes, effective as of July 20, 1994, a supplemental deferred
compensation plan for the benefit of Mark Van Stekelenburg (the "Participant"),
who is currently the President and Chief Executive Officer of the Employer.
This Plan shall be known as the RYKOFF-SEXTON, INC. SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN FOR MARK VAN STEKELENBURG (the "Plan").
1.2 Purpose. The purpose of the Plan is to encourage the
Participant's continued interest in the Employer's success and to enhance his
security by providing him with additional retirement and survivor benefits that
will supplement his benefits under the Employer's Qualified Pension Plan.
The Plan is intended to provide benefits for a "management or
highly compensated" employee within the meaning of Sections 201, 301 and 401 of
ERISA, and therefore to be exempt from the provisions of Parts 2, 3 and 4 of
Title I of ERISA. Accordingly, in the event that it is determined by a court
of competent jurisdiction that the Plan constitutes an employee pension benefit
plan within the meaning of Section 3(2) of ERISA, which is not so exempt, the
Plan shall thereafter be modified and operated and administered in such a
manner as to comply with the provisions of Parts 2, 3 and 4 of Title I of
ERISA, or if the Plan cannot be so modified or operated, the Plan shall
terminate in accordance with Article 8 and no further benefits shall accrue
hereunder.
ARTICLE 2. DEFINITIONS
2.1 Definitions. Whenever used in the Plan, the following words
and phrases shall have the respective meanings set forth below unless the
context plainly requires a different meaning. When the defined meaning is
intended, the term is capitalized.
2.1.1 "Actuarial Equivalent" means a benefit of equal value
computed by using the applicable actuarial assumptions and factors stated for
the applicable purpose in the Qualified Pension Plan, as in effect on the
effective date of a determination.
2.1.2 "Affiliate" means John Sexton & Co., Tone Brothers,
Inc. or any other business entity that is owned by the Employer or a member of
a "related group" (as that term is defined in the Qualified Pension Plan) with
the Employer.
2.1.3 "Annuity Starting Date" means that term as defined in
Article X of the Qualified Pension Plan, except that Annuity Starting Date
shall relate to the commencement of benefits under this Plan.
2.1.4 "Base Compensation" means the total annual base
salary paid by the Employer to or on behalf of the
1
<PAGE> 5
Participant, including any salary reduction contributions to (a) any
Employer-sponsored plan that includes a cash-or-deferred arrangement under Code
Section 401(k), (b) any other plan of deferred compensation sponsored by the
Employer, or (c) any Employer-sponsored "cafeteria plan" under Code Section
125.
Base Compensation shall not take into account any reimbursed
expenses, benefits paid under any Employer-sponsored welfare benefit plan,
credits or benefits under any plan of deferred compensation (including this
Plan) attributable to Employer contributions, any additional cash incentive
compensation under the Senior Executive Incentive Plan or such other management
incentive program or arrangement approved by the Board, compensation payable in
a form other than cash or any termination payments under the Employment
Agreement.
2.1.5 "Benefit Percentage" means sixty percent (60%),
reduced by three percent (3%) for each Year of Service of the Participant less
than twenty (20), determined as of the date of the Participant's Termination of
Employment.
2.1.6 "Code" means the Internal Revenue Code of 1986, as it
has been and may be amended from time to time.
2.1.7 "Committee" means the Advisory Committee from time to
time appointed by the Board of Directors of the Employer pursuant to its
Qualified Pension Plan. The Committee shall be this Plan's named fiduciary.
2.1.8 "Disability" shall have the meaning set forth in the
Employment Agreement.
2.1.9 "Early Retirement Date" means the date on which the
Participant has both attained age fifty-five (55) and completed five (5) Years
of Service with the Employer; provided, however, that he has not attained
Normal Retirement Age.
2.1.10 "Effective Date" means July 20, 1994, with respect to
this Plan.
2.1.11 "Employer" means Rykoff-Sexton, Inc., a Delaware
corporation.
2.1.12 "Employment Agreement" means the written employment
agreement between the Employer and the Participant dated as of July 20, 1994,
and any written modifications to such agreement agreed to by the parties from
time to time.
2.1.13 "ERISA" means the Employee Retirement Income Security
Act of 1974, as it has been and may be amended from time to time.
2.1.14 "Final Average Earnings" means the Participant's
aggregate Base Compensation plus any cash incentive compensation paid by the
Employer during the thirty-six (36)
2
<PAGE> 6
consecutive complete months ending on or immediately before the date of the
Participant's Termination of Employment, divided by the number three (3).
2.1.15 "Normal Retirement Age" means age sixty (60).
2.1.16 "Participant" means Mark Van Stekelenburg, an
executive employee of the Employer.
2.1.17 "Plan" means the "Rykoff-Sexton, Inc. Supplemental
Executive Retirement Plan for Mark Van Stekelenburg", as set forth herein and
as amended or restated from time to time.
2.1.18 "Qualified Pension Plan" means the Rykoff-Sexton,
Inc. Pension Plan, as amended or restated from time to time, which is a defined
benefit pension plan sponsored by the Employer and is intended to be qualified
under Code Section 401(a).
2.1.19 "Surviving Spouse" means the Participant's surviving
spouse to whom he has been continuously married for at least one (1) year prior
to the date of his death.
2.1.20 "Termination of Employment" means the Participant's
ceasing to be employed by the Employer or any Affiliate for any reason
whatsoever, voluntary or involuntary, other than by reason of his death or an
approved leave of absence.
2.1.21 "Year of Service" means a "Year of Vesting Service,"
as defined in the Qualified Pension Plan including a Year of Service with any
Affiliate and all Years of Service earned by the Participant as an employee of
the Employer or an Affiliate before and after the Effective Date.
2.2 Gender and Number. Except as otherwise clearly indicated by
context, masculine terminology used herein also includes the feminine and
neuter, and terms used in the singular may also include the plural.
ARTICLE 3. PARTICIPATION
3.1 Eligibility. The Participant shall automatically commence
participation in the Plan as of the Effective Date; provided, however, that
unless the Participant is credited with five (5) Years of Service, no benefit
shall be payable to him; and provided further, however, regardless of the
Participant's Years of Service, in the event of his death a benefit shall be
payable to his Surviving Spouse under the Plan.
3.2 Termination of Participation. Participation in the Plan shall
continue as long as the Participant is eligible to receive benefits under the
Plan.
3
<PAGE> 7
ARTICLE 4. RETIREMENT BENEFITS
4.1 Normal Retirement Benefits.
(a) If the Participant's Termination of Employment occurs on
or after the date on which he has attained Normal Retirement Age and has
completed five (5) Years of Service, the Employer shall pay to the Participant,
in monthly payments, an annual benefit equal to: (i) the product of (I) the
Participant's Final Average Earnings multiplied by (II) his Benefit Percentage;
reduced by (ii) the accrued benefit the Participant would be entitled to
receive on an annual basis under the Qualified Pension Plan, assuming the
Participant elected to commence receiving a straight life annuity form of
benefit under the Qualified Pension Plan, as of the Annuity Starting Date for
commencement of his benefits under this Plan.
(b) Payments under this Section 4.1 shall commence on the
first day of the month coincident with or next following the Participant's
Termination of Employment and shall continue on the first day of each month
thereafter during the Participant's lifetime, unless the Participant is
reemployed by the Employer or an Affiliate.
4.2 Benefits Upon Early Retirement.
(a) If the Participant's Termination of Employment occurs
before he attains Normal Retirement Age, but on or after the date on which he
has reached his Early Retirement Date, the Employer shall pay to the
Participant a benefit equal to the retirement benefit payable at Normal
Retirement Age under Section 4.1, determined as of the date of his Termination
of Employment, and reduced by one-half of one percent (0.5%) for each month
that the date of commencement of benefits under this paragraph 4.2 precedes the
Participant's attainment of his Normal Retirement Age.
(b) Payments under this Section 4.2 shall commence on the
first day of the month coincident with or next following the Participant's
Termination of Employment and shall continue on the first day of each month
thereafter during the Participant's lifetime, unless the Participant is
reemployed by the Employer or an Affiliate.
4.3 Disability Benefits.
(a) If the Participant's Termination of Employment is caused
by his Disability and occurs after his completion of one (1) but less than ten
(10) Years of Service, the Employer shall pay to the Participant a benefit
equal to the retirement benefit described in Section 4.1, determined (i) as of
the date of his Termination of Employment, (ii) by using a Benefit Percentage
equal to thirty percent (30%), and (iii) without any reduction for early
commencement of benefits.
4
<PAGE> 8
(b) If the Participant's Termination of Employment is caused
by his Disability and occurs on or after the Participant has been credited with
ten (10) or more Years of Service, the Employer shall pay to the Participant a
benefit equal to the retirement benefit described in Section 4.1, determined
(i) as of the date of his Termination of Employment, and (ii) without any
reduction for early commencement of benefits.
(c) Payments under this Section 4.3 shall commence on the
first day of the month coincident with or next following the end of the salary
continuation period for the Participant under any noninsured salary
continuation plan or arrangement payable upon the Participant's Disability
either provided by the Employer or included in the Employment Agreement, and
shall continue on the first day of each month thereafter for the Participant's
lifetime, unless the Participant is reemployed by the Employer or an Affiliate.
4.4 Deferred Vested Benefits.
(a) If the Participant's Termination of Employment occurs
prior to his Early Retirement Date, but after he has completed five (5) Years
of Service, he shall receive a deferred retirement benefit commencing
immediately after his Early Retirement Date, equal to the Actuarial Equivalent
of his retirement benefit payable at Normal Retirement Age under Section 4.1,
determined as of the date of his Termination of Employment.
(b) Payments under this Section 4.4 shall commence on the
first day of the month coincident with or next following the Participant's
Early Retirement Date and shall continue on the first day of each month
thereafter during the Participant's lifetime, unless the Participant is
reemployed by the Employer or an Affiliate.
4.5 Social Security Reduction. Benefits payable to the Participant
under Sections 4.1, 4.2, 4.3 and 4.4 shall be reduced by the amount of
unreduced primary (not family) annual retirement benefits under the United
States Social Security Act that the Participant is paid ("Social Security
benefits").
4.6 Benefits upon Reemployment. If the Participant is reemployed
by the Employer or an Affiliate, any benefits in pay status shall be
discontinued until the Participant again terminates employment. If a
Participant receives a benefit under the Plan and again becomes a Participant,
his retirement benefit on his subsequent Termination of Employment shall be
reduced by the Actuarial Equivalent of the payments previously made to him.
5
<PAGE> 9
ARTICLE 5. SURVIVOR BENEFITS
5.1 Death Prior to Retirement. If the Participant dies prior to
his Annuity Starting Date, his Surviving Spouse (if any) shall be eligible for
survivor benefits from the Employer. Such benefits shall be payable monthly by
the Employer until the Surviving Spouses's death. The Surviving Spouse benefit
under this provision shall equal sixty percent (60%) of the Participant's
retirement benefit payable at Normal Retirement Age under Section 4.1
determined (a) as if the Participant had a Termination of Employment upon his
death, and (b) without a reduction for the Participant's accrued benefit under
the Qualified Pension Plan. Pre-retirement survivor payments under this Plan
will be reduced by the monthly survivor benefit actually paid to the Surviving
Spouse under the Qualified Pension Plan.
5.2 Death After Commencement of Benefits. If the Participant dies
after his Annuity Starting Date, the Employer shall pay to the Participant's
Surviving Spouse (if any) post-retirement survivor benefits. Such benefits
shall be payable monthly by the Employer until the Surviving Spouse's death.
The Surviving Spouse benefit shall equal sixty percent (60%) of the retirement
benefit received by the Participant pursuant to the applicable provision of
this Plan; provided, however, that, for purposes of this provision, the
Participant's retirement benefit shall not be reduced by his accrued benefit
under the Qualified Pension Plan. Post-retirement survivor benefit payments
under this Plan will be reduced by the monthly guaranteed payments or survivor
benefits actually paid to the Surviving Spouse under the Qualified Pension
Plan.
ARTICLE 6. CLAIMS AND REVIEW PROCEDURE
6.1 Claims Procedure. If the Participant or, in the event of his
death, his Surviving Spouse (either hereinafter referred to as the "Claimant")
is not for any reason paid all or a portion of an expected benefit under this
Plan he or she may file a claim with the Committee. The Committee shall notify
the Claimant, within ninety (90) days of receipt of the claim, of the
Committee's allowance or denial of the claim. The notice of the Committee's
decision shall be in writing, signed by the Claimant, sent by mail to the
Claimant's last known address and, if a denial of all or a portion of the
claim, shall set forth:
(a) the specific reasons for the denial;
(b) specific reference to the provisions of the Plan on
which the denial is based;
(c) if applicable, a description of any additional
information or material necessary to perfect the claim, and an
explanation of why it is needed; and
6
<PAGE> 10
(d) an explanation of the Plan's claims review procedure,
including the names of members of the Committee and the name and
address of the Committee member to whom any petition for review should
be directed.
If the Committee determines that special circumstances require
additional time to make a decision, the Committee shall notify the Claimant
(within the 90-day period for the Committee's response) of the circumstances
and the date by which a decision is expected, and may extend the response
period for up to an added 90-day period.
6.2 Review Procedure. If a Claimant is determined by the Committee
to be ineligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to appeal the Committee's determination by filing a petition for
review with the Committee within sixty (60) days after receipt of the notice of
decision issued by the Committee. The petition shall be in writing signed by
the Claimant and shall state the specific reasons why the Claimant believes he
or she is entitled to benefits or to greater or different benefits.
Within sixty (60) days after receipt by the Committee of the
petition, the Committee shall afford the Claimant (and an authorized
representative, if any) an opportunity to present his or her position to the
Committee orally or in writing, and the Claimant (or an authorized
representative) shall have the right to review the pertinent documents. The
Committee shall notify the Claimant of its decision in writing within the
60-day period, stating specifically the basis of its decision (written in a
manner calculated to be understood by the Claimant) and the specific provisions
of the Plan on which the decision is based. If, because of the need for a
hearing, the 60-day period is not sufficient, the decision may be deferred for
up to another 60-day period at the election of the Committee, but notice of
this deferral shall be given to the Claimant.
ARTICLE 7. ADMINISTRATION
7.1 Administration. Except as otherwise provided herein, the Plan
shall be administered by the Committee. The Employer shall bear all costs of
the Plan.
7.2 Powers of the Committee. The Committee shall have sole
authority over administration of the Plan and all powers necessary to
administer the Plan, including, without limitation, authority and powers:
(a) to construe and interpret the provisions of the Plan;
(b) to establish rules for the administration of the Plan
and to prescribe any forms required to administer the Plan; and
7
<PAGE> 11
(c) to determine the Participant's eligibility for
benefits under the Plan and the amount of benefits payable to the
Participant or, in the event of his death, his Surviving Spouse (if
any).
7.3 Actions of the Committee. All determinations, interpretations,
rules, and decisions of the Committee shall be conclusive and binding upon all
persons having or claiming to have any interest or right under the Plan.
7.4 Delegation. The Committee shall have the power to delegate
specific duties and responsibilities to officers or other employees of the
Employer or other individuals or entities. Any delegation by the Committee may
allow further delegations by the individual or entity to whom the delegation is
made. Any delegation by the Committee may be rescinded at any time. Each
person or entity to whom a duty or responsibility has been delegated shall be
responsible for the exercise of such duty or responsibility and shall not be
responsible for any act or failure to act of any other person or entity.
7.5 Reports and Records. The Committee and those to whom they have
delegated duties under the Plan shall keep records of all their proceedings and
actions and shall maintain books of account, records and other data as shall be
necessary for the proper administration of the Plan and for compliance with
applicable law.
ARTICLE 8. AMENDMENT AND TERMINATION
8.1 Procedures for Amending Plan.
(a) The Employer may not amend, suspend or terminate the
Plan, in full or in part, at any time without the written consent of the
Participant. Any action to amend, suspend or terminate the Plan may only be
taken by resolution of the Board of Directors of the Employer.
(b) No amendment, suspension or Plan termination after
the death of the Participant, shall adversely affect the rights of the
Surviving Spouse who is then entitled to receive payments under the Plan as a
result of the previous occurrence of the Participant's death.
(c) Any amendment, suspension or termination documents
shall be filed with the Plan documents, and written notice thereof given the
Participant or, in the event of his death, his Surviving Spouse.
8.2 Termination of Plan. In the event of Plan termination, the
Employer may elect to accelerate payments of the Actuarial Equivalent value of
all plan benefits previously accrued (whether or not commenced) either in a
cash lump sum payable within sixty (60) days from the Plan termination date or,
in the sole discretion of the Employer, in sixty (60) equal monthly
8
<PAGE> 12
installments commencing within that 60-day period, with interest at the
Actuarial Equivalent rate applicable to Qualified Pension Plan termination
payments, compounded annually.
ARTICLE 9. MISCELLANEOUS
9.1 No Guaranty of Employment. The adoption and maintenance of
the Plan shall not be deemed to be a contract of employment between the
Employer and the Participant. Nothing contained herein shall give the
Participant the right to be retained in the employ of the Employer or to
interfere with the right of the Employer to discharge the Participant at any
time, nor shall it give the Employer the right to require the Participant to
remain in its employ or to interfere with the Participant's right to terminate
employment at any time.
9.2 Financing of Benefits. Benefits payable under the Plan to the
Participant or, in the event of his death, to his Surviving Spouse shall be
paid by the Employer from its general assets. The rights of the Participant,
or his Surviving Spouse, to benefits under the Plan shall be solely those of an
unsecured creditor of the Employer.
(a) The Employer in its discretion may apply for and
procure as owner and for its own benefit, insurance on the life of the
Participant, in such amounts and in such forms as the Employer may choose. The
Participant shall have no interest whatsoever in any such policy or policies,
but at the request of the Employer shall submit to medical examinations and
supply such information and execute such documents as may be required by the
insurance company or companies to whom the Employer has applied for insurance.
Any insurance policy on the life of the Participant or other assets acquired by
or held by the Employer (whether or not held in trust) shall not be deemed to
be held as security for the performance of the Plan obligations of the Employer
but shall be, and remain, a general, unpledged, and unrestricted asset of the
Employer.
(b) The Employer may establish a trust to facilitate
management of any life insurance or other assets which may be used to pay Plan
benefits, but the assets of any such trust shall remain subject to the claims
of the Employer's general creditors, and neither the Participant, nor his
Surviving Spouse or estate, shall have the right to any of such assets, except
in their capacity as unsecured general creditors of the Employer. To the
extent that any of the benefits accrued for the Participant under this Plan are
paid to the Participant or his Surviving Spouse by the trustee of such a trust,
the Employer's obligation to pay that portion of the Participant's benefits
under this Plan shall be discharged to the extent of the trustee's payment.
9.3 Non-Alienation. No benefit payable at any time under this Plan
shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, attachment or encumbrance of any kind.
9
<PAGE> 13
9.4 Taxes. The Employer shall deduct, from all payments to be made
hereunder, all applicable federal and state taxes required by law to be
withheld from the payments.
9.5 Applicable Laws. The Plan and all rights hereunder shall be
governed by and construed according to the laws of the State of California,
except to the extent such laws are preempted by the laws of the United States
of America.
9.6 Form of Communication. Any election, application, claim,
notice or other communication required or permitted to be made by the
Participant or, in the event of his death, his Surviving Spouse to the
Committee shall be made in writing and in such form as the Committee shall
prescribe. Such communication shall be effective upon mailing, if sent by
first class mall, postage pre-paid, and addressed to the Employer's principal
offices at Los Angeles, California, to the attention of the "Pension Advisory
Committee" or one of its members.
9.7 Captions. The captions at the head of the Articles and
Sections of this Plan are designed for convenient reference only and are not to
be used for the purpose of interpreting any provision of this Plan.
9.8 Severability. The invalidity of any portion of this Plan shall
not invalidate the remainder thereof, and in any such case the remainder shall
continue in full force and effect, to the extent that any purposes of the Plan
may still be carried out.
9.9 Binding Agreement. The provisions of this Plan shall be
binding upon the Participant, his Surviving Spouse and his, her and their heirs
and personal representatives.
9.10 Successors. The Employer shall require any successor (whether
direct or indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business and/or assets of the
Employer expressly to assume and to agree to perform this Plan in the same
manner and to the same extent the Employer would be required to perform if no
such succession had taken place. This Plan shall be binding upon and inure to
the benefit of the Employer and any successor of or to the Employer, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business and/or assets of the Employer whether by
sale, merger, consolidation, reorganization or otherwise (and such successor
shall thereafter be deemed the "Employer" for the purposes of this Plan), and
the heirs, beneficiaries, executors and administrators of the Participant.
9.11 Facility of Payment. Whenever and as often as Participant or, in
the event of his death, his Surviving Spouse entitled to payments hereunder
shall be under a legal disability or, in the sole judgment of the Committee,
shall otherwise be unable to apply such payments to his own best interests and
10
<PAGE> 14
advantage, the Committee in the exercise of its discretion may direct all or
any portion of such payments to be made in any one or more of the following
ways: (a) directly to him; (b) to his legal guardian or conservator; or (c) to
his spouse or to any other person, to be expended for his benefit; and the
decision of the Committee, shall in each case be final and binding upon all
persons in interest.
IN WITNESS WHEREOF, and pursuant to a duly adopted resolution of the
Employer's Board of Directors, the Employer has caused this instrument to be
executed by its duly authorized officers as of the Effective Date.
Attest: RYKOFF-SEXTON, INC.
/s/ NEIL I. SELL By: /s/ RICHARD J. MARTIN
- - ------------------------ ------------------------------
Neil I. Sell, Secretary Richard J. Martin
Its: Senior Vice President -
Chief Financial Officer
11
<PAGE> 1
EXHIBIT 13
INCORPORATION OF 1994 ANNUAL REPORT
TO SHAREHOLDERS
-----------------------------------
D I V I D E N D R E C O R D
At its meeting of March 8, 1993, the Board of Directors suspended the payment
of dividends. In fiscal 1993, cash dividends per share for the first three
quarters were $.15, $.10 and $.075, respectively. For each quarter in 1992,
cash dividends per share were $.15.
S T O C K P R I C E D A T A
Market Price of Common Stock
The following table sets forth the closing high and low market prices per share
of Rykoff-Sexton, Inc.'s common stock. The Company's common stock is listed on
the New York Stock Exchange (Symbol RYK).
<TABLE>
<CAPTION>
Fiscal Year 1994 1993 1992
- - ----------- ---------------- ---------------- ----------------
Low High Low High Low High
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
First quarter 13 3/4 16 1/8 15 3/4 18 5/8 18 22 7/8
Second quarter 15 5/8 18 5/8 15 19 1/2 18 5/8 23 7/8
Third quarter 18 1/4 22 1/4 14 3/8 17 7/8 17 20 3/8
Fourth quarter 18 3/8 22 13 3/4 17 7/8 17 1/2 21 1/8
------ ------ ------ ------ ------ ------
</TABLE>
The Company estimates that there are approximately 4,300 shareholders,
including those through nominees, as of June 1994.
2
<PAGE> 2
EXHIBIT 13
TEN YEAR SUMMARY OF OPERATIONS AND FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Fiscal Year 1994 1993 1992
(Dollars in thousands, except per share data) (52 WEEKS) (52 weeks) (53 weeks)
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $1,524,672 $1,488,072 $1,519,010
Gross profit 347,295 344,195 365,377
Warehouse, selling, general and administrative expenses 321,682 331,023 337,651
Interest expense 13,239 13,442 11,050
Income (loss) before provision (benefit) for income taxes,
extraordinary item and change in accounting (5) 12,374 (31,270) 16,676
Provision (benefit) for income taxes
Federal (1) 3,886 (10,162) 5,157
State 1,126 (1,416) 1,513
Income (loss) before extraordinary item and change
in accounting (5) 7,362 (19,692) 10,006
Net income (loss) (5) (6) 5,918 (18,960) 10,006
Earnings (loss) per share (2)
Income (loss) before extraordinary item and change
in accounting (5) $ .63 $ (1.69) $ .86
Net income (loss) (5) (6) .51 (1.63) .86
Cash dividends -- 3,771 6,951
Cash dividends per share (3) $ -- $ .325 $ .60
Average shares outstanding (2) 11,681 11,606 11,617
---------- ---------- ----------
Total assets $ 486,679 $ 461,394 $ 482,556
Working capital 159,931 150,505 163,234
Current ratio 2.1:1 2.1:1 2.2:1
Long-term debt (4) 151,227 144,669 139,333
Shareholders' equity 173,307 166,704 189,703
Shareholders' equity per share (2) $ 14.89 $ 14.38 $ 16.36
Common shares outstanding (2) 11,637 11,592 11,598
========== ========== ==========
</TABLE>
(1) Investment tax credits and other tax credits have been recorded as
reductions of the provision for income taxes. In the 10-year period ended April
30, 1994, such credits approximated $893,000 in 1986 and $822,000 in 1985. No
significant amounts were available in 1994 to 1987.
(2) Adjusted to reflect a stock split in the form of 25% stock dividend
distributed on January 16, 1989. When convertible subordinated debentures were
outstanding, fully diluted earnings per share were $.90 in 1987, $.97 in 1986
and $1.26 in 1985.
6
<PAGE> 3
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks) (52 weeks)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$1,461,620 $1,407,093 $1,295,547 $1,143,275 $1,081,648 $1,037,272 $ 852,951
350,961 343,220 308,503 278,021 261,009 245,133 201,442
318,645 313,826 266,980 240,798 232,582 218,924 171,792
9,279 10,571 7,174 9,018 11,920 10,425 8,606
23,037 18,823 34,349 29,222 16,507 15,784 21,044
7,120 5,818 10,406 9,644 6,759 5,668 7,984
2,094 1,712 3,322 3,214 1,747 1,465 1,851
13,823 11,293 20,621 16,364 8,001 8,651 11,209
13,823 11,293 20,621 16,364 8,001 8,651 11,209
$ 1.19 $ .96 $ 1.75 $ 1.53 $ .92 $ .99 $ 1.43
1.19 .96 1.75 1.53 .92 .99 1.43
6,968 7,069 6,740 5,655 4,166 3,986 3,235
$ .60 $ .60 $ .572 $ .512 $ .48 $ .46 $ .40
11,612 11,791 11,788 10,697 8,743 8,725 7,810
---------- ---------- ---------- ---------- ---------- ---------- ---------
$ 405,236 $ 406,609 $ 397,969 $ 325,762 $ 307,175 $ 301,724 $ 225,157
165,441 171,506 176,526 165,902 154,475 143,293 103,843
2.4:1 2.6:1 2.8:1 3.2:1 3.3:1 2.9:1 2.7:1
91,028 107,201 110,866 77,777 138,339 131,253 73,999
185,863 180,422 178,605 163,863 94,463 90,560 85,799
$ 16.08 $ 15.49 $ 15.13 $ 13.92 $ 10.88 $ 10.44 $ 9.91
11,560 11,649 11,808 11,770 8,681 8,674 8,654
---------- ---------- ---------- ---------- ---------- ---------- --------
</TABLE>
(3) The cash dividends per share amounts have been adjusted to give effect to
the 25% stock dividend discussed in note (2). The cash dividends per share,
based on the number of shares outstanding as of the dates of the cash
dividends, were $.64 for 1988, $.60 for 1987, $.575 for 1986 and $.50 for 1985.
(4) Included in long-term debt are convertible subordinated debentures in the
amount of $60,000,000 in 1987, 1986 and 1985, and obligations under capital
leases of $944,000, $1,340,000, $1,744,000, $2,129,000, $2,791,000, and
$3,501,000 for 1990, 1989, 1988, 1987, 1986 and 1985, respectively.
(5) For 1993, this item includes a one-time pretax restructuring charge of $31
million.
(6) For 1994, this item includes the write-off of deferred finance costs of
$2,447,000 ($1,444,000, net of income tax benefit of $1,003,000 or $.12 per
share); for 1993, the cumulative effect of a change in accounting for income
taxes for $732,000 or $.06 per share; and, for 1992, a provision for litigation
settlement of $4,350,000 ($2,610,000, net of income tax benefit of $1,740,000
or $.23 per share).
7
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's discussion and analysis of the Company's results of operations
and financial condition includes the accompanying consolidated financial
statements and notes thereto and the following additional information.
Results of Operations
For the fiscal year ended April 30, 1994, the Company's sales were $1.525
billion, an increase of $36.6 million or 2.5% over the prior year. This sales
growth resulted from the introduction of new product lines and new sales and
marketing programs, and was achieved despite the closure of several inefficient
operations, and the adverse effects of the Los Angeles earthquake and severe
winter weather in the Midwest and East. For the fiscal year ended May 1, 1993,
sales declined $30.9 million or 2.0% from fiscal 1992. This decrease was due to
the effect of an additional week of operations in fiscal 1992, elimination of a
few selected customer accounts, closure of five small operations and continued
weak market conditions, particularly in California where the Company has a high
concentration of business. Inflation was approximately 1.0% in fiscal 1994 and
was not a significant factor in fiscal 1993; however, sales in fiscal 1992
reflected overall price deflation of approximately 2.0%.
The gross profit margin for fiscal 1994 declined to 22.8% from 23.1% in
fiscal 1993 primarily because of the introduction of new product lines, changes
in customer mix and aggressive new sales and marketing programs. The gross
profit margin for fiscal 1993 declined to 23.1% from 24.1% in fiscal 1992
because of customer and product mix changes, as well as lower prices that were
due, in part, to the competitive environment.
Warehouse, selling, general and administrative expenses decreased $9.3
million or 2.8% to $321.7 million in fiscal 1994 from fiscal 1993, primarily
because of the Company's progress in containing costs and improving operating
efficiencies under its Project RESULTS program. For fiscal 1993, warehouse,
selling, general and administrative expenses decreased $6.6 million or 2.0% to
$331.0 million from fiscal 1992. This decrease reflected the effect of the
extra week of operations and a non-recurring charge of $4.3 million related to
the settlement of litigation in fiscal 1992, which is more fully described in
Note 12 to the accompanying consolidated financial statements. In fiscal 1993,
an additional provision of $1.4 million was recorded primarily for bad debts on
two large accounts that filed for bankruptcy protection. After excluding the
effects of the additional provision of $1.4 million in fiscal 1993, the extra
week of operations and the litigation settlement in fiscal 1992, the Company's
operating expenses for fiscal years 1993 and 1992 were comparable. As a
percentage of sales, the Company's operating expenses decreased to 21.1% in
fiscal 1994 from 22.2% in fiscal 1993 and 1992.
Interest expense for fiscal years 1994 and 1993 was comparable at $13.2
million and $13.4 million, respectively. In fiscal 1993, interest expense
increased by $2.4 million from 1992 due to increased interest rates associated
with the sale of $100 million of 8.60% senior notes in April 1992 and increased
borrowings during the year.
In fiscal 1993, the Company provided for a one-time restructuring charge of
$31.0 million for a business reorganization. This charge included provisions
for facility closures, relocation of distribution centers into more efficient
facilities, consolidation of the Company's two distribution divisions,
workforce reductions and the implementation of new warehouse and transportation
systems throughout the Company. Management believes that these changes, which
have been part of the Company's Project RESULTS program, will improve the
Company's operating performance, although there can be no assurances that these
changes will have such an effect. On an ongoing basis, management also
considers strategic acquisitions and divestitures.
8
<PAGE> 5
Effective May 2, 1992, the Company adopted SFAS 109 "Accounting for Income
Taxes," which is more fully described in Note 1 to the accompanying financial
statements. The effective income tax rate for fiscal 1994 was 40.5% as compared
to the effective income tax benefit rate of 37.0% in fiscal 1993, and the
effective tax rate of 40.0% in fiscal 1992. The 1993 effective tax benefit rate
was impacted by valuation allowances which were established to reflect the
expected effect on income taxes of the one-time restructuring charge. The
cumulative positive effect of the change in the method of accounting for income
taxes for fiscal 1993 was $732,000, or $.06 per share.
Income before extraordinary item and change in accounting rose to $7.4
million in fiscal 1994 from a loss of $19.7 million in fiscal 1993. This
improvement resulted from the sales gains and operating expense reductions that
were achieved in fiscal 1994 and also reflects the impact of the restructuring
charge in the prior year. For fiscal 1993, the $19.7 million loss before the
change in accounting for income taxes represented a decrease of $29.7 million
from fiscal 1992, which was due primarily to the one-time restructuring charge
and reduced gross profit margins.
The extraordinary item in fiscal 1994 of $1.4 million, net of tax benefit,
resulted from the write-off of deferred finance costs associated with early
retirement of the Company's 8.60% senior notes and its outstanding senior
indebtedness under a prior bank credit facility as more fully described in Note
2 to the accompanying consolidated financial statements.
Liquidity and Capital Resources
Cash provided by operating activities in fiscal 1994 was $31.2 million as
compared to $41.0 million in fiscal 1993. This decrease was due mainly to cash
expended for the previously provided restructuring charge. Additionally,
increases in net income, accounts payable, accruals and deferred taxes did not
fully offset increases in accounts receivable and inventories.
For fiscal 1994 and 1993, cash flows used in investing activities consisted
of capital expenditures of $37.5 million and $29.4 million, respectively. The
increase in fiscal 1994 is due primarily to expenditures for the construction
of the new manufacturing plant for Tone Brothers, Inc. In April 1994, the
Company also entered into an equipment sale and leaseback arrangement with
various lessors, which generated proceeds of $16.1 million.
The Company borrows on a regular basis in order to fund its ongoing
operations. In November 1993, the Company issued $130 million principal amount
of 8 7/8% Senior Subordinated Notes (the "8 7/8% Notes") and concurrently
obtained from a bank, a new $100 million credit line and $15 million letter of
credit facility, which was subsequently increased to $20 million (the "Credit
Facility"). The proceeds from the issuance of the 8 7/8% Notes, together with
borrowings under the Credit Facility, were used to retire $128.1 million
principal amount of 8.60% senior notes and outstanding senior indebtedness
under the prior bank credit facility. In fiscal 1993, the Company used cash
from operations, together with borrowings of $15.0 million under its credit
line, to make principal payments of $9.7 million on certain of its 8.60% senior
notes and other long-term debt, to repay short-term borrowings of $20.0 million
and to pay dividends of $3.8 million.
Working capital was $159.9 million with a current ratio of 2.1:1 at April
30, 1994 as compared to working capital of $150.5 million with a current ratio
of 2.1:1 at May 1, 1993. On April 30, 1994, current assets were approximately
63% of the total assets of the Company.
The Company plans to relocate its Los Angeles distribution branch to a new
facility in fiscal 1995. The cost of this new facility is estimated to be $45.0
million. The Company is considering various alternatives for financing this
facility, but is initially funding the construction under its Credit Facility.
At its meeting of March 8, 1993, the Board of Directors suspended the
payment of dividends on the Company's common stock. The last quarterly cash
dividend in the third quarter of fiscal year 1993 was $.075 per share. Under
the Credit Facility, the Company is restricted from declaring dividends in
excess of 10% of Consolidated Net Earnings, as defined, in fiscal 1994. In
fiscal 1995 and beyond, it cannot declare dividends in any fiscal year in
excess of the sum of Consolidated Net Earnings Available for Restricted
Payments, plus the Fixed Charge Coverage Amount, as defined.
9
<PAGE> 6
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended APRIL 30, May 1, May 2,
1994 1993 1992
(Dollars in thousands, except per share data) (52 WEEKS) (52 weeks) (53 weeks)
---------- ---------- ----------
<S> <C> <C> <C>
Net sales $1,524,672 $1,488,072 $1,519,010
Cost of sales 1,177,377 1,143,877 1,153,633
---------- ---------- ----------
Gross profit 347,295 344,195 365,377
Warehouse, selling, general and administrative expenses 321,682 331,023 337,651
Restructuring costs -- 31,000 --
---------- ---------- ----------
Income (loss) from operations 25,613 (17,828) 27,726
Interest expense 13,239 13,442 11,050
---------- ---------- ----------
Income (loss) before provision (benefit) for income
taxes, extraordinary item and change in accounting 12,374 (31,270) 16,676
Provision (benefit) for income taxes 5,012 (11,578) 6,670
---------- ---------- ----------
Income (loss) before extraordinary item and change
in accounting 7,362 (19,692) 10,006
Extraordinary item, net of income taxes (1,444) -- --
Cumulative effect of change in accounting for income taxes -- 732 --
---------- ---------- ----------
Net income (loss) $ 5,918 $ (18,960) $ 10,006
---------- ---------- ----------
Earnings per share
Income (loss) before extraordinary item and change
in accounting $ .63 $ (1.69) $ .86
Extraordinary item (.12) -- --
Change in accounting for income taxes -- .06 --
---------- ---------- ----------
Net income (loss) $ .51 $ (1.63) $ .86
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
10
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended APRIL 30, May 1, May 2,
1994 1993 1992
(Dollars in thousands) (52 WEEKS) (52 weeks) (53 weeks)
- - ---------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 5,918 $(18,960) $ 10,006
Adjustments to reconcile net income to net cash
provided by operating activities
Extraordinary item 1,444 -- --
Cumulative effect of change in accounting for
income taxes -- (732) --
Noncash restructuring costs -- 18,250 --
Depreciation and amortization 23,678 23,422 23,511
Increase (decrease) in deferred income taxes 912 (6,619) 511
Changes in assets and liabilities
(Increase) decrease in accounts receivable (10,683) 8,812 (6,985)
(Increase) decrease in inventories (8,359) 13,101 (8,658)
(Increase) in prepaid expenses (994) (5,878) (1,767)
Increase in accounts payable and accrued liabilities 19,313 9,633 5,142
--------- -------- ---------
Net cash provided by operating activities 31,229 41,029 21,760
--------- -------- ---------
Cash flows used in investing activities
Capital expenditures (37,497) (29,387) (78,374)
Proceeds from sale and leaseback transaction 16,078 -- --
--------- -------- ---------
Net cash (used) in investing activities (21,419) (29,387) (78,374)
--------- -------- ---------
Cash flows from financing activities
Increase under credit line 6,000 15,000 70,000
Principal payments of long-term debt (282) (320) (122,173)
Issuance of 8 7/8% Senior Subordinated Notes 128,943 -- --
Issuance (repayment) of 8.60% Senior Notes (137,500) (9,375) 100,000
Proceeds from (repayment of) short-term borrowings -- (20,000) 20,000
Payment of finance costs (6,000) -- --
Issuance of common stock 685 17 786
Dividends paid -- (3,771) (6,951)
Purchase of treasury stock -- (285) (1)
--------- -------- ---------
Net cash provided (used) in financing activities (8,154) (18,734) 61,661
--------- -------- ---------
Net increase (decrease) in cash and cash equivalents 1,656 (7,092) 5,047
Cash and cash equivalents at beginning of year 7,605 14,697 9,650
--------- -------- ---------
Cash and cash equivalents at end of year $ 9,261 $ 7,605 $ 14,697
========= ======== =========
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 9,629 $ 13,681 $ 10,713
Income taxes 1,916 1,670 6,777
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
11
<PAGE> 8
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, May 1,
(Dollars in thousands) 1994 1993
-------- --------
Assets
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 9,261 $ 7,605
Accounts receivable, less reserves of $3,744 in 1994
and $4,373 in 1993 146,132 135,449
Inventories 131,009 122,650
Prepaid expenses 18,620 15,724
-------- --------
Total current assets 305,022 281,428
-------- --------
Property, Plant and Equipment, at Cost
Land, buildings and improvements 131,686 116,389
Transportation equipment 43,804 45,178
Office, warehouse and manufacturing equipment 119,716 122,851
-------- --------
295,206 284,418
Less: accumulated depreciation and amortization 136,269 126,076
-------- --------
158,937 158,342
-------- --------
Other Assets, net 22,720 21,624
-------- --------
Total $486,679 $461,394
======== ========
APRIL 30, May 1,
1994 1993
-------- --------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 95,848 $ 80,547
Accrued payroll 11,411 10,664
Accrued liabilities 37,533 30,048
Current portion of long-term debt 299 9,664
-------- --------
Total current liabilities 145,091 130,923
-------- --------
Non-Current Liabilities
Long-term debt, less current portion 151,227 144,669
Deferred income taxes 7,320 4,848
Other long-term liabilities 9,734 14,250
-------- --------
Shareholders' Equity
Preferred stock, $.10 par value
Authorized - 10,000,000 shares; Outstanding - none -- --
Common stock, $.10 par value
Authorized - 20,000,000 shares; Outstanding - 11,637,460
shares in 1994 and 11,591,545 shares in 1993 1,194 1,189
Additional paid-in capital 92,008 91,327
Retained earnings 84,726 78,808
-------- --------
177,928 171,324
Less: treasury stock, at cost 4,621 4,620
-------- --------
173,307 166,704
-------- --------
Total $486,679 $461,394
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
12
<PAGE> 9
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------
Number of Additional Treasury Retained
(Dollars in thousands) Shares Amount Paid-in-capital Stock Earnings
---------- ------- --------------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, April 27, 1991 11,560,297 $1,184 $90,801 $(4,606) $ 98,484
Net income -- -- -- -- 10,006
Cash dividends ($.60 per share) -- -- -- -- (6,951)
Stock options exercised 39,663 4 782 -- --
Treasury stock purchased (2,000) -- -- (1) --
---------- ------ ------- ------- --------
Balance, May 2, 1992 11,597,960 1,188 91,583 (4,607) 101,539
Net loss -- -- -- -- (18,960)
Cash dividends ($.325 per share) -- -- -- -- (3,771)
Stock options exercised 3,585 1 16 -- --
Treasury stock purchased (10,000) -- (272) (13) --
---------- ------ ------- ------- --------
Balance, May 1, 1993 11,591,545 1,189 91,327 (4,620) 78,808
Net income -- -- -- -- 5,918
Stock options exercised 46,315 5 681 -- --
Treasury stock purchased (400) -- -- (1) --
---------- ------ ------- ------- --------
Balance, April 30, 1994 11,637,460 $1,194 $92,008 $(4,621) $ 84,726
========== ====== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Line of Business
The Company manufactures and distributes food and related non-food products to
various establishments in the foodservice industry.
Principles of Consolidation
The consolidated financial statements include the accounts of Rykoff-Sexton,
Inc. and its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to April 30. The fiscal
year ended May 2, 1992 consisted of 53 weeks; all other fiscal years presented
contain 52 weeks.
Earnings Per Share
Earnings per share of common stock has been computed based on the weighted
average number of shares of common stock outstanding and diluted common share
equivalents. The shares used in such calculations were 11,680,948 in 1994,
11,605,750 in 1993 and 11,617,435 in 1992.
Inventories
Inventories are priced at the lower of cost (first-in, first-out) or market,
and include the cost of purchased merchandise and, for manufactured goods, the
cost of material, labor and factory overhead.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
APRIL 30, May 1,
(Dollars in thousands) 1994 1993
--------- --------
<S> <C> <C>
Finished goods $119,711 $110,618
Raw materials 11,298 12,032
-------- --------
$131,009 $122,650
======== ========
</TABLE>
Depreciation, Amortization, Retirement and Maintenance Policies
Depreciation is provided using the straight-line method, based upon the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements 15 to 40 years
Leasehold improvements Life of lease
Transportation equipment 3 to 8 years
Office, warehouse and manufacturing equipment 3 to 15 years
Software development costs 5 years
</TABLE>
Cost of normal maintenance and repairs are charged to expense when incurred.
Replacements or betterments of properties are capitalized. When assets are
retired or otherwise disposed of, their cost and the applicable accumulated
depreciation and amortization are removed from the accounts, and the resulting
gain or loss is reflected in income.
Other Assets
Other assets are amortized on the straight-line method over the following
periods:
<TABLE>
<S> <C>
Excess of cost over assets acquired 40 years
Noncompetition and consulting agreements Term of agreement
Leasehold interests Life of lease
Deferred finance costs Life of note
Placement allowances 1 to 3 years
</TABLE>
Accumulated amortization of other assets was $10,420,000 and $16,259,000 as of
April 30, 1994 and May 1, 1993, respectively.
14
<PAGE> 11
Income Taxes
The Company changed its method of accounting for income taxes from the deferred
method to the liability method required by "Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes," effective May 3,
1992. Income taxes for fiscal year 1992 have not been restated for this change.
Under SFAS 109, a deferred tax liability or asset is recognized for the
estimated future tax effects attributable to temporary differences and
carryforwards. The measurement of deferred income tax assets is adjusted by a
valuation reserve, if necessary, so that the net tax benefits are recognized
only to the extent that they will be realized.
The cumulative effect of adopting SFAS 109 as of May 3, 1992 was to increase
net income by $732,000 and has been recorded in the accompanying consolidated
statement of operations.
Deferred income taxes result from temporary differences in the recognition of
revenue and expense items for tax and financial statement purposes.
Statement of Cash Flows
The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
Deferred Gain on Lease Transaction
The difference between the proceeds received and the net book value of assets
sold is amortized over the term of the lease. In fiscal 1994, a deferred gain
of $2,734,000 is included in the balance sheet under other long-term
liabilities.
Capitalized Interest
The Company capitalizes interest costs as part of the cost of major asset
construction projects. Capitalized interest was $964,000 in 1994 and $247,000
in 1993. No amounts were capitalized in 1992.
2. EXTRAORDINARY ITEM
In November 1993, the Company refinanced its long-term debt through the
issuance of $130 million principal amount of 8 7/8% Senior Subordinated Notes.
The proceeds, together with borrowings under its new bank credit line, were
used to retire $128.1 million principal amount of 8.60% Senior Notes and
outstanding senior indebtedness under the prior bank credit facility. See Note
4 for further details. The early retirement of the 8.60% Senior Notes and the
outstanding senior indebtedness under the prior bank credit facility resulted
in an extraordinary item of $1.4 million, net of tax benefit of $1.0 million,
associated with the write-off of deferred finance costs.
3. RESTRUCTURING COSTS
During 1993, the Company recorded a restructuring charge of $31,000,000, or, on
an after tax basis, of $19,530,000 or $1.68 per share. This charge was
established to provide for a business reorganization which included facility
closures, relocation of distribution centers into more efficient facilities,
elimination of redundancies between the Company's two principal operating
divisions, workforce reductions and the use of modern technology in warehousing
and transportation.
4. LONG-TERM DEBT AND BORROWING ARRANGEMENTS
The long-term debt of the Company as of April 30, 1994 and May 1, 1993 is
summarized as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993
- - ---------------------- -------- --------
<S> <C> <C>
8 7/8% Senior subordinated notes due in 2003,
net of unamortized discount of $1,024 $128,976 $ --
8.60% Senior notes due in 2002 -- 100,000
8.60% Senior notes due in 1996 -- 37,500
Bank credit agreement 21,000 15,000
Mortgage notes 1,189 1,280
Other 361 553
-------- --------
Total debt 151,526 154,333
Less-current portion 299 9,664
-------- --------
Long-term debt, less current portion $151,227 $144,669
======== ========
</TABLE>
15
<PAGE> 12
In November 1993, the Company issued $130 million principal amount of 8 7/8%
Senior Subordinated Notes (the "8 7/8% Notes") due November 1, 2003 with
interest payable semiannually commencing May 1, 1994. The 8 7/8% Notes were
sold at a discount for an aggregate price of $128.9 million. Provisions of the
8 7/8% Notes include, without limitation, restrictions of liens, indebtedness,
asset sales, and dividends and other restricted payments. The 8 7/8% Notes are
redeemable at the option of the Company, in whole or in part, at 104.44% of
their principal amount beginning November 1998, and thereafter at prices
declining annually to 100% on and after November 2001. In addition, upon the
occurrence of an event that constitutes a Change of Control (as defined in the
indenture for such notes), each holder of the 8 7/8% Notes may require the
Company to repurchase all or a portion of such holder's 8 7/8% Notes at a
purchase price equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of the repurchase. The 8 7/8%
Notes are not subject to any sinking fund requirements.
Concurrently with the sale of the 8 7/8% Notes, the Company obtained a $100
million credit line expiring on August 31, 1996 and a $15 million letter of
credit facility expiring on August 31, 1994 from its bank (the "Credit
Facility"). The letter of credit facility was subsequently increased to $20
million of which $4 million was available as of April 30, 1994. Under the
Credit Facility, the credit line is unsecured and bears interest based on the
bank's reference rate, the interbank offshore rate, certificate of deposit rate
or fixed rate at the option of the Company. The provisions of the Credit
Facility include, without limitation, restrictions on secured indebtedness,
asset sales, acquisitions or mergers and dividends. Under the Credit Facility,
the Company is also required to meet certain financial tests which include,
without limitation, those relating to the maintenance of a minimum net worth,
minimum net tangible assets, a minimum fixed charge coverage ratio, a minimum
tangible assets to funded debt ratio and a minimum current ratio (each as
defined in the Credit Facility). In addition to customary provisions relating
to events of default, the Credit Facility provides that an event of default
will occur upon a Change of Control (as defined in the indenture for the 8 7/8%
Notes).
The proceeds from the issuance of the 8 7/8% Notes, together with borrowings
under the Credit Facility, were used to retire $128.1 million principal amount
of 8.60% Senior Notes and outstanding senior indebtedness under the prior bank
credit facility.
Scheduled aggregate annual payments of long-term debt are $299,000 for 1995,
$190,000 for 1996, $21,043,000 for 1997, $47,000 for 1998, $52,000 for 1999 and
$130,919,000 thereafter.
Based on the borrowing rates currently available to the Company for debt with
similar terms and maturities, the fair value of long-term debt is $144,100,000
as of April 30, 1994.
5. LEASE ARRANGEMENTS
The Company leases a substantial portion of its operating facilities and
transportation equipment under long-term operating leases. Rental expense under
operating leases for 1994, 1993 and 1992 was $19,930,000, $19,661,000 and
$19,413,000, respectively. The approximate minimum future rentals are payable
as follows:
<TABLE>
<CAPTION>
Fiscal Year (Dollars in thousands)
- - ----------- --------------------
<S> <C>
1995 $ 18,636
1996 16,061
1997 14,848
1998 12,004
1999 10,015
Thereafter 46,832
--------
Total minimum lease payments $118,396
========
</TABLE>
6. INCOME TAXES
Effective May 3, 1992, the Company adopted "Statement of Financial Accounting
Standards No. 109." Refer to Note 1, Accounting Policies, for a discussion of
the effect of adopting this statement. In 1993, a restructuring charge was
recorded. For tax purposes, this charge will become deductible when paid. A
valuation allowance of $657,000 has been recognized to offset the deferred tax
asset.
16
<PAGE> 13
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
APRIL 30, May 1,
(Dollars in thousands) 1994 1993
- - ---------------------- --------- ------
<S> <C> <C>
Deferred tax assets:
Restructuring charges $ 8,980 $ 11,477
Self-insurance reserves 2,792 2,230
Allowance for bad debts 1,430 1,723
Accrued vacation pay 1,470 1,491
Food bank contributions 1,216 --
Other 1,342 500
Valuation allowance (657) (861)
-------- --------
Total deferred tax assets 16,573 16,560
-------- --------
Deferred tax liabilities:
Accelerated depreciation (11,180) (10,968)
Other (1,611) (1,240)
-------- --------
Total deferred tax liabilities (12,791) (12,208)
-------- --------
Net deferred tax asset $ 3,782 $ 4,352
======== ========
</TABLE>
In fiscal 1994, the net deferred tax asset is comprised of $11,102,000 in
prepaids and deferred income taxes of $7,320,000. In fiscal 1993, the net
deferred tax asset is comprised of $9,200,000 in prepaids and deferred income
taxes of $4,848,000.
The provision (benefit) for income taxes before extraordinary item and
accounting change consists of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
------- -------- ------
<S> <C> <C> <C>
Current tax expense (benefit)
Federal $ 3,208 $ (770) $5,054
State 892 339 2,013
------- -------- ------
4,100 (431) 7,067
Deferred tax expense (benefit)
Restructuring charges, net 3,002 (10,616) --
Accelerated depreciation (50) 414 394
Fringe benefits (1,110) (254) (832)
Other, net (930) (691) 41
------- -------- ------
$ 5,012 $(11,578) $6,670
======= ======== ======
</TABLE>
The difference between the Federal income tax rate of 34.0% and the actual
effective tax rate of 40.5% for fiscal 1994, 37.0% for fiscal 1993 and 40.0%
for fiscal 1992 is due to state taxes, net of the Federal tax benefit and the
effect of the valuation allowance in 1994 and 1993 discussed above.
7. STOCK OPTION PLANS
The 1988 Stock Option and Compensation Plan (the "1988 Plan") authorizes the
issuance of up to 1,125,000 shares of common stock. The 1988 Plan authorizes
the issuance of various stock incentives to officers and employees, including
options, stock appreciation rights, stock awards, restricted stock, performance
shares and cash awards. Stock options allow for the purchase of common stock at
prices determined by the Stock Option Committee except for incentive stock
options, which must be purchased at prices not less than the fair market value
at the date of grant. These options expire 10 years from the date of grant and
are exercisable as defined by the Stock Option Committee.
Stock appreciation rights (SARs), which may be issued in conjunction with the
grant of options, permit the optionee to receive shares of stock, cash or a
combination of shares and cash measured by the difference between the option
price and the market value of the stock on the date of exercise. Upon exercise
of an SAR, the option is canceled. As of April 30, 1994, there were 39,064 SARs
outstanding.
17
<PAGE> 14
Restricted stock grants for 42,475 shares, 6,000 shares and 36,500 shares, in
1994, 1993 and 1992, respectively, were issued under the 1988 Plan. All of
these shares vest ratably over a four-year period from their respective grant
dates, except that with respect to the fiscal 1994 restricted stock grants,
39,475 shares will vest in full four years from their respective grant dates.
Deferred compensation equivalent to the difference between the market value at
date of grant and the option price was charged to additional paid-in-capital
and is being amortized to compensation expense over the vesting period. The
amounts amortized in fiscal 1994, 1993 and 1992 were $319,000, $394,000 and
$467,000, respectively.
In fiscal 1994 and 1993, the Stock Option Committee awarded converging stock
options of 60,000 and 300,000, respectively, to certain key members of
management under the 1988 Plan at a purchase price of $35 per share. In fiscal
year 1993, 100,000 of these options were canceled and 260,000 options were
outstanding as of April 30, 1994. During the first five years of the options'
ten-year term, the purchase price will be subject to reductions for each year
that the company attains predetermined performance objectives. If the market
price of the Company's common stock and the purchase price of the options
converge during such first five years, the options will become immediately
exercisable in full and the final purchase price will be set at the converging
price for the remainder of the options' term. If the market price and the
purchase price have not converged by the fifth anniversary of the grant date,
the final purchase price of the options for the remainder of their term will be
established at the purchase price in effect on the fifth anniversary. In such
event, the options shall become exercisable in cumulative installments of 25%
each year commencing on the sixth anniversary of the grant date. With respect
to the 60,000 converging stock options granted in fiscal 1994, for purposes of
determining the purchase price and certain other provisions, these options are
deemed to have the same grant date as the converging stock options granted in
fiscal 1993.
In addition to the 1988 Plan, the Company's 1980 Stock Option Plan (the "1980
Plan") authorized awards of stock options and stock appreciation rights;
options expire 10 years from the date of grant and no further grants may be
made under the 1980 Plan. The Company also maintains the 1993 Director Stock
Option plan (the "1993 Director Plan") and the 1989 Director Stock Option Plan
(the "1989 Director Plan") which authorizes the issuance of up to 100,000 and
50,000 shares of common stock, respectively. Under the 1993 Director Plan, each
director who is not a full-time officer or employee of the Company will receive
annually a non-qualified option to purchase 1,000 shares of common stock. Under
the 1989 Director Plan, each director who is not a full-time officer or
employee of the Company is eligible to receive a non-qualified stock option in
lieu of a portion of such director's compensation for each plan year. Options
under both plans expire 10 years from the date of grant.
During fiscal 1994, 1993 and 1992, the price range of options and grants
exercised was $1.00 to $16.125 per share and the price of restricted shares
purchased was $1.00 per share. As of April 30, 1994, the exercise price of
options and grants outstanding under all the Company's stock option plans
ranged from $1.00 to $35.00. Changes in the number of shares under all such
stock option plans are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- -------
<S> <C> <C> <C>
Outstanding at beginning of year 889,791 527,359 437,546
Granted 276,448 603,380 138,270
Exercised (46,315) (3,585) (39,663)
Canceled and SARs exercised (94,950) (237,363) (8,794)
--------- -------- -------
Outstanding at year end 1,024,974 889,791 527,359
========= ======= =======
Exercisable at end of year 407,701 288,911 350,877
========= ======= =======
Available for grant at end of year 255,603 403,476 893,925
========= ======= =======
</TABLE>
8. PENSION AND PROFIT SHARING PLANS
The Company maintains non-contributory pension plans for its salaried,
commissioned and certain of its hourly employees. Under the plans, the Company
is required to make annual contributions that are determined by the plans'
consulting actuary, using participant data that is supplied by the Company. It
is the Company's policy to fund pension costs currently. Pension benefits are
based on length of service and either a percentage of final average annual
compensation or a dollar amount for each year of service.
18
<PAGE> 15
Net pension expense for fiscal 1994, 1993 and 1992 are included in the
following components:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993 1992
- - ---------------------- ------- ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 4,079 $ 3,858 $ 3,666
Interest cost on projected benefit obligation 4,094 3,704 3,393
Actual return on plan assets (4,674) (5,509) (4,731)
Net amortization and deferral 238 1,871 1,803
------- ------- -------
Net pension expense $ 3,737 $ 3,924 $ 4,131
======= ======= =======
</TABLE>
The following table reconciles the pension plans' funded status to accrued
expense as of April 30, 1994 and May 1, 1993:
<TABLE>
<CAPTION>
(Dollars in thousands) 1994 1993
- - ---------------------- -------- -------
<S> <C> <C>
Market value of plan assets in equities and bonds $47,630 $47,484
------- -------
Actuarial present value of accumulated benefits:
Vested 34,686 34,935
Non-vested 2,483 2,523
Additional benefits based on estimated future salary levels 11,148 11,863
------- -------
Projected benefit obligation 48,317 49,321
------- -------
Plan assets (less than) projected benefit obligation (687) (1,837)
Unrecognized net obligation to be amortized over 10 years 1,749 2,253
Unrecognized net (gain) loss (2,429) (1,990)
------- -------
Accrued pension liability $(1,367) $(1,574)
======= =======
</TABLE>
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligations were 8 percent and 6 percent, respectively. The expected long-term
rate of return on assets was 10 percent.
A subsidiary has a defined contribution profit sharing plan covering
substantially all of its employees. The charge to operations totaled $456,000,
$1,451,000 and $1,257,000 for fiscal 1994, 1993 and 1992, respectively.
For collectively bargained, multi-employer pension plans, contributions are
made in accordance with negotiated labor contracts and generally are based on
the number of hours worked. With the passage of the Multi-Employer Pension Plan
Amendments Act of 1980 (the "Act"), the Company may, under certain
circumstances become subject to liabilities in excess of contributions made
under collective bargaining agreements. Generally, these liabilities are
contingent upon the termination, withdrawal, or partial withdrawal from the
plans. The Company has not taken any action to terminate, withdraw or partially
withdraw from these plans which would result in any material liability. Under
the Act, liabilities would be based upon the Company's proportional share of
each plan's unfunded vested benefits which have been estimated by the trustees
of the funds to be approximately $4,200,000. The amount of accumulated benefits
and net assets of such plans is not currently available to the Company. Total
contributions charged to expense under all pension plans were $5,325,000,
$5,583,000 and $5,338,000 in fiscal 1994, 1993 and 1992, respectively.
The Company maintains an employees' savings and profit sharing plan under
Section 401(k) of the Internal Revenue Code for employees meeting certain age
and service requirements (the "Plan"). In fiscal 1994, the Plan was amended
to provide for a matching contribution by the Company. The Company's
contribution is determined based on established performance objectives and is
made in common stock in an amount equal to twenty-five percent (25%) of the
first four percent (4%) of the participant's deferral contributions made during
the Plan year. No matching contribution was made by the Company in fiscal 1994.
9. COMMITMENTS AND CONTINGENCIES
The Company has change in control agreements with various officers which
provide, among other things, that if, within two years after a change in
control (as defined), the Company terminates the employment of the officer,
other than for disability or cause, or if the officer elects to terminate his
employment for good reason (as defined), the officer will receive 2.99 times
the sum of his base salary plus the amount that would otherwise be earned under
any executive compensation plan.
19
<PAGE> 16
The Company or its subsidiaries are defendants in a number of cases currently
in litigation or potential claims encountered in the normal course of business
which are being vigorously defended. In the opinion of management, the
resolution of these matters will not have a material effect on the Company's
financial position or results of operations.
10. PREFERRED STOCK PURCHASE RIGHTS
At April 30, 1994, there were outstanding 11,637,460 rights to purchase Series
A Junior Participating Preferred Stock. The rights were issued as a dividend on
December 18, 1986 and, as a result of the 25 percent stock dividend paid in
January 1989, each outstanding share of common stock is entitled to 0.8 rights.
Each right entitles the holder to purchase from the Company a unit (one
two-hundredth of a share) of Series A Junior Participating Preferred Stock,
$.10 par value, at $100 per unit subject to adjustment. The rights are not
exercisable or transferable apart from the common stock until 10 days after a
person or group has acquired 25 percent or more, or makes a tender offer for 30
percent or more, of the Company's common stock. Each right will entitle the
holder, under certain circumstances (a merger, acquisition of 25 percent or
more of common stock of the Company by an acquiring person, self-dealing
transactions by an acquiring person, or sale of 50 percent or more of the
Company's assets or earning power), to acquire, at half the value, either
common stock of the Company, a combination of cash, other property, common
stock or other securities of the Company, or common stock of the acquiring
person. Any such event would also result in any rights owned beneficially by
the acquiring person or its affiliates becoming null and void. The rights
expire December 18, 1996 and are redeemable prior to the time an acquiring
person acquires 25 percent or more of the Company's common stock at one cent
per right. At April 30, 1994, 50,000 shares of Series A Junior Participating
Preferred Stock were authorized but unissued and were reserved for issuance
upon exercise of the rights.
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited results of operations by quarter for each of the two years in the
period ended April 30, 1994 are summarized below:
<TABLE>
<CAPTION>
1994
(Dollars in thousands except per share data) FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $366,391 $390,792 $372,747 $394,742
Cost of sales 280,424 298,757 288,613 309,583
Income before extraordinary item 1,136 3,784 360 2,082
Net income 1,136 2,340 360 2,082
-------- -------- -------- --------
Earnings per share before extraordinary item $ .10 $ .32 $ .03 $ .18
Earnings per share .10 .20 .03 .18
======== ======== ======== ========
<CAPTION>
1993
(Dollars in thousands except per share data) First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $371,548 $393,066 $360,043 $363,415
Cost of sales 285,433 300,901 277,490 280,053
Income (loss) before extraordinary item
and change in accounting (131) 2,559 (22,449) 329
Net income (loss) 601 2,559 (22,449) 329
-------- -------- -------- --------
Earnings (loss) per share before extraordinary
item and change in accounting $ (.01) $ .22 $ (1.93) $ .03
Earnings (loss) per share .05 .22 (1.93) .03
======== ======== ======== ========
</TABLE>
12. RESTATEMENT
In September 1991, the Board of Directors approved a settlement of a securities
class action lawsuit filed against the Company and certain officers and
directors in February 1990. The settlement was originally recorded as an
extraordinary item in the second quarter of the Company's financial statements
for the 53 weeks ended May 2, 1992 (fiscal 1992), and reduced income by
$2,610,000, net of the income tax benefit of $1,740,000, or $.23 per share. The
fiscal 1992 financial statements have been restated to include the gross
settlement cost of $4,350,000 as a component of warehouse, selling, general and
administrative expenses. The fiscal 1992 provision for income taxes has also
been restated to reflect the income tax benefit of the litigation settlement.
There were no changes to the fiscal 1992 net income or earnings per share
amounts as a result of this restatement.
20
<PAGE> 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Rykoff-Sexton, Inc.:
We have audited the accompanying consolidated balance sheets of Rykoff-Sexton,
Inc. (a Delaware corporation) and subsidiaries as of April 30, 1994 and May 1,
1993, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three fiscal years in the period ending
April 30, 1994. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Rykoff-Sexton, Inc. and
subsidiaries as of April 30, 1994 and May 1, 1993, and the results of their
operations and their cash flows for each of the three fiscal years in the
period ended April 30, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for income taxes in 1993.
ARTHUR ANDERSEN & CO.
Los Angeles, California
June 10, 1994.
21
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
RYKOFF-SEXTON, INC., a Delaware corporation (the "Company"), hereby constitutes
and appoints MARK VAN STEKELENBURG, RICHARD J. MARTIN and VICTOR B. CHAVEZ
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him and on his behalf and in his name, place
and stead, in any and all capacities, to sign, execute and file the Annual
Report of the Company on Form 10-K for the year ended April 30, 1994 to be
filed pursuant to Section 13 or 15(d) of the Securities and Exchange Act of
1934, including any amendment or amendments, with all exhibits and any and all
documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every thing requisite and necessary to be
done in and about the premises in order to execute the same as fully to all
intents and purposes as he, himself, might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
each of them, may lawfully do or could cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has caused this Power of Attorney
to be executed this 21st day of July, 1994.
By: /s/ R. BURT GOOKIN
------------------
R. BURT GOOKIN
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
RYKOFF-SEXTON, INC., a Delaware corporation (the "Company"), hereby constitutes
and appoints MARK VAN STEKELENBURG, RICHARD J. MARTIN and VICTOR B. CHAVEZ
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him and on his behalf and in his name, place
and stead, in any and all capacities, to sign, execute and file the Annual
Report of the Company on Form 10-K for the year ended April 30, 1994 to be
filed pursuant to Section 13 or 15(d) of the Securities and Exchange Act of
1934, including any amendment or amendments, with all exhibits and any and all
documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every thing requisite and necessary to be
done in and about the premises in order to execute the same as fully to all
intents and purposes as he, himself, might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
each of them, may lawfully do or could cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has caused this Power of Attorney
to be executed this 25th day of July, 1994.
By: /s/ JAMES I. MASLON
-------------------
JAMES I. MASLON
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
RYKOFF-SEXTON, INC., a Delaware corporation (the "Company"), hereby constitutes
and appoints MARK VAN STEKELENBURG, RICHARD J. MARTIN and VICTOR B. CHAVEZ
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him and on his behalf and in his name, place
and stead, in any and all capacities, to sign, execute and file the Annual
Report of the Company on Form 10-K for the year ended April 30, 1994 to be
filed pursuant to Section 13 or 15(d) of the Securities and Exchange Act of
1934, including any amendment or amendments, with all exhibits and any and all
documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every thing requisite and necessary to be
done in and about the premises in order to execute the same as fully to all
intents and purposes as he, himself, might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
each of them, may lawfully do or could cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has caused this Power of Attorney
to be executed this 21st day of July, 1994.
By: /s/ JAMES P. MISCOLL
--------------------
JAMES P. MISCOLL
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
RYKOFF-SEXTON, INC., a Delaware corporation (the "Company"), hereby constitutes
and appoints MARK VAN STEKELENBURG, RICHARD J. MARTIN and VICTOR B. CHAVEZ
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him and on his behalf and in his name, place
and stead, in any and all capacities, to sign, execute and file the Annual
Report of the Company on Form 10-K for the year ended April 30, 1994 to be
filed pursuant to Section 13 or 15(d) of the Securities and Exchange Act of
1934, including any amendment or amendments, with all exhibits and any and all
documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every thing requisite and necessary to be
done in and about the premises in order to execute the same as fully to all
intents and purposes as he, himself, might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
each of them, may lawfully do or could cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has caused this Power of Attorney
to be executed this 21st day of July, 1994.
By: /s/ NEIL I. SELL
-----------------
NEIL I. SELL
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
RYKOFF-SEXTON, INC., a Delaware corporation (the "Company"), hereby constitutes
and appoints MARK VAN STEKELENBURG, RICHARD J. MARTIN and VICTOR B. CHAVEZ
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him and on his behalf and in his name, place
and stead, in any and all capacities, to sign, execute and file the Annual
Report of the Company on Form 10-K for the year ended April 30, 1994 to be
filed pursuant to Section 13 or 15(d) of the Securities and Exchange Act of
1934, including any amendment or amendments, with all exhibits and any and all
documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every thing requisite and necessary to be
done in and about the premises in order to execute the same as fully to all
intents and purposes as he, himself, might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
each of them, may lawfully do or could cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has caused this Power of Attorney
to be executed this 21st day of July, 1994.
By: /s/ BERNARD SWEET
-----------------
BERNARD SWEET
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
RYKOFF-SEXTON, INC., a Delaware corporation (the "Company"), hereby constitutes
and appoints MARK VAN STEKELENBURG, RICHARD J. MARTIN and VICTOR B. CHAVEZ
(with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him and on his behalf and in his name, place
and stead, in any and all capacities, to sign, execute and file the Annual
Report of the Company on Form 10-K for the year ended April 30, 1994 to be
filed pursuant to Section 13 or 15(d) of the Securities and Exchange Act of
1934, including any amendment or amendments, with all exhibits and any and all
documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every thing requisite and necessary to be
done in and about the premises in order to execute the same as fully to all
intents and purposes as he, himself, might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
each of them, may lawfully do or could cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has caused this Power of Attorney
to be executed this 21st day of July, 1994.
By: /s/ ROBERT G. ZELLER
--------------------
ROBERT G. ZELLER
