<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
_________
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
-----
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 15, 1997
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
-----
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 001-10811
---------
SMART & FINAL INC.
(Exact name of registrant as specified in its charter)
Delaware No. 95-4079584
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4700 South Boyle Ave.
Los Angeles, California 90058
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (213) 589-1054
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 registrant had 22,184,639 shares of common stock outstanding as of JULY 24,
1997.
Number of Sequentially Numbered Pages:
Exhibit Index at Page: 15
================================================================================
<PAGE>
SMART & FINAL INC.
INDEX
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets 2
Unaudited Consolidated Statements of Income 3
Unaudited Consolidated Statements of Cash Flows 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
</TABLE>
PART II
OTHER INFORMATION
<TABLE>
<S> <C>
Item 1. Legal Proceedings 12
2. Changes in Securities 12
3. Defaults upon Senior Securities 12
4. Submission of Matters to a Vote of Security Holders 12
5. Other Information 13
6. Exhibits and Reports on Form 8-K 13
</TABLE>
1
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
SMART & FINAL INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 15, December 29,
1997 1996
ASSETS (Unaudited)
- ------ ------------ -------------
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 18,733 $ 16,795
Trade notes and accounts receivable, less
allowance for doubtful accounts of
$2,893 in 1997 and $2,568 in 1996 67,907 67,695
Inventories 124,010 125,721
Prepaid expenses 5,073 4,346
Deferred tax asset 6,134 6,134
--------- ---------
Total current assets 221,857 220,691
Property, plant and equipment:
Land 39,079 39,079
Buildings and improvements 34,364 34,364
Leasehold improvements 63,185 60,943
Fixtures and equipment 141,287 129,953
--------- ---------
277,915 264,339
Less - Accumulated depreciation and amortization 87,163 77,156
--------- ---------
Net property, plant and equipment 190,752 187,183
Assets under capital leases, net 4,816 671
Goodwill 15,006 10,162
Deferred tax asset 5,814 4,157
Other assets 19,325 18,560
--------- ---------
Total Assets $ 457,570 $ 441,424
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current maturities of long term debt $ 10,732 $ 10,356
Bank line of credit 23,000 17,000
Accounts payable 61,565 70,936
Payable to Parent and affiliates 11,392 8,759
Accrued salaries and wages 8,654 9,940
Workers' compensation reserve 2,600 2,600
Other accrued liabilities 22,898 21,855
--------- ---------
Total current liabilities 140,841 141,446
Long term liabilities:
Notes payable, net of current maturities 36,507 37,063
Bank debt 45,000 45,000
Obligations under capital leases 8,498 581
Other long term liabilities 2,812 -
Worker's compensation reserve, postretirement
and postemployment benefits 20,023 20,000
--------- ---------
Total long term liabilities 112,840 102,644
Minority interest 1,795 1,679
Stockholders' equity:
Preferred stock, $1 par value (authorized-
10,000,000 shares; no shares issued) - -
Common stock, $ .01 par value (authorized-
100,000,000 shares; 22,115,403 shares issued
and outstanding in 1997 and 21,976,406 in 1996) 221 220
Additional paid-in capital 137,198 140,371
Cumulative translation loss (835) (835)
Retained earnings 65,510 55,899
--------- ---------
Total stockholders' equity 202,094 195,655
--------- ---------
Total liabilities and stockholders' equity $ 457,570 $ 441,424
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE>
SMART & FINAL INC
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-four Weeks Ended
---------------------------- ---------------------------
June 15, June 16, June 15, June 16,
1997 1996 1997 1996
---------- ---------- ------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 334,948 $ 307,408 $ 641,932 $ 589,742
Cost of sales, buying and occupancy 285,250 260,726 547,647 502,630
---------- ---------- ---------- ----------
Gross margin 49,698 46,682 94,285 87,112
Operating and administrative expenses 37,177 36,020 72,004 68,617
---------- ---------- ---------- ----------
Income from operations 12,521 10,662 22,281 18,495
---------- ---------- ---------- ----------
Interest income and (expense):
Interest income 120 109 261 230
Interest expense (1,847) (827) (3,525) (1,550)
---------- ---------- ---------- ----------
(1,727) (718) (3,264) (1,320)
Income before provision for income taxes
and minority share of net income 10,794 9,944 19,017 17,175
Provision for income taxes 4,043 3,737 7,278 6,666
---------- ---------- ---------- ----------
6,751 6,207 11,739 10,509
Minority share of net income 10 48 116 155
---------- ---------- ---------- ----------
Income from consolidated subsidiaries 6,741 6,159 11,623 10,354
Equity earnings in unconsolidated subsidiary 100 109 200 109
---------- ---------- ---------- ----------
Net income $ 6,841 $ 6,268 $ 11,823 $ 10,463
========== ========== ========== ==========
Earnings per common share $ 0.30 $ 0.30 $ 0.52 $ 0.50
========== ========== ========== ==========
Dividend per common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
========== ========== ========== ==========
Weighted average common shares and
common share equivalents 22,763,837 21,244,861 22,793,111 21,156,589
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
SMART & FINAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
-----------------------
June 15, June 16,
1997 1996
---------- ----------
(Unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 11,823 $ 10,463
Adjustments to reconcile net income to net
cash provided by operating activities:
(Gain) loss on disposal of fixed assets (70) (20)
Depreciation and amortization 11,400 8,697
Minority share of net income 116 155
Equity (earnings) loss in unconsolidated subsidiary (200) (109)
(Increase) decrease in :
Trade notes and accounts receivable 1,357 (6,084)
Inventories 1,877 (929)
Prepaid expenses and other (727) (434)
Increase (decrease) in :
Accounts payable (9,768) 2,079
Payable to Parent and affiliates 2,633 (1,035)
Accrued liabilities (1,286) 502
Other liabilities 951 119
---------- ----------
Net cash provided by operating activities 18,106 13,404
---------- ----------
Cash Flows From Investing Activities:
Acquisition of property, plant and equipment (14,522) (16,906)
Proceeds from disposal of property, plant and equipment 184 50
Proceeds from redemption of municipal bonds - 225
Acquisition of municipal bonds - (325)
Acquisition of business (5,000) -
Other (1,216) (2,517)
---------- ----------
Net cash used in investing activities (20,554) (19,473)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 1,686 693
Bank credit line 6,000 6,325
Borrowings (payments) on notes payable (1,092) 144
Quarterly dividend paid (2,208) (2,027)
---------- ----------
Net cash provided by financing activities 4,386 5,135
---------- ----------
Increase (Decrease) in cash and cash equivalents 1,938 (934)
Cash and cash equivalents at beginning of period 16,795 15,415
---------- ----------
Cash and cash equivalents at end of period $ 18,733 $ 14,481
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
SMART & FINAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
Smart & Final Inc. (the "Company") is a Delaware corporation and is a 56.1
percent owned subsidiary of Casino USA, Inc. (the "Parent").
The consolidated balance sheet as of June 15, 1997, the consolidated
statements of income for the twelve and twenty-four weeks ended June 15, 1997,
and June 16, 1996, and cash flows for the twenty-four weeks ended June 15, 1997
and June 16, 1996 are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of these financial statements have been
included. Such adjustments consisted only of normal recurring items. Interim
results are not necessarily indicative of results for a full year.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Form 10-K statement for the year ended December 29, 1996.
(2) EARNINGS PER COMMON SHARE
Earnings per common share is based on weighted average outstanding common
shares which include the common stock equivalents related to employee stock
options and a stock purchase agreement.
The Company will adopt SFAS No. 128, "Earnings per share", which is
effective for financial statements ending after December 15, 1997. Basic
earnings per common share were computed by dividing net income by the weighted
average number of shares outstanding during the year. The Pro forma below
illustrates the effects of financial reporting under the provision of SFAS No.
128:
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-four Weeks Ended
------------------ -----------------------
June 15, June 16, June 15, June 16,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Amounts
- -----------------
Primary EPS as reported $0.30 $0.30 $0.52 $0.50
Effect of SFAS No. 128 $0.01 $0.01 $0.02 $0.02
----- ----- ----- -----
Pro forma basic EPS $0.31 $0.31 $0.54 $0.52
===== ===== ===== =====
</TABLE>
5
<PAGE>
(3) FISCAL YEARS
The Company's fiscal year ends on the Sunday closest to December 31. Each
fiscal year consists of twelve week periods in the first, second and fourth
quarters and a sixteen week period in the third quarter.
(4) DIVIDEND
On May 8, 1997, the Company declared a dividend of $0.05 per share to
stockholders of record at July 4, 1997. The dividend was paid on July 25,
1997.
(5) INCOME TAXES
Tax sharing payments for state income taxes made by the Company to the
Parent were $1,328,000 and $1,375,000 in the twenty-four weeks ended June 15,
1997 and June 16, 1996, respectively. The Company paid $1,375,000 and
$4,855,000 in federal income taxes in the twenty-four week period ended June 15,
1997 and June 16, 1996, respectively.
(6) LEGAL ACTIONS
The Company has been named as defendant in various legal actions arising in
the normal conduct of its business. In the opinion of management, after
consultation with counsel, none of these actions are expected to result in
significant liability to the Company.
(7) LEASES
Lease expense to third-party lessors is included in cost of sales and
buying and occupancy expense in the twelve and twenty-four week periods ended
June 15, 1997. Previously disclosed lease expense to affiliates, for the twelve
and twenty-four week periods ended June 16, 1996, has been reclassified to cost
of sales and buying and occupancy expense for comparability because the
properties which had been owned by affiliates were purchased by the Company on
December 29, 1996.
In conjunction with the real estate that was acquired at December 29, 1996,
from Casino USA and Casino Realty, the Company assumed certain capital and
operating leases. During the second quarter, the Company recorded capital lease
assets and related obligations at historical carryover basis of $4.4 million and
$8.5 million, respectively.
(8) ACQUISITION
On May 30, 1997, Port Stockton Food Distributors, Inc. acquired the assets
of the Davis Lay food service division of Mallard's Food Products, Inc., for
$5.0 million cash and a $0.5 million note.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis should be read in conjunction with the
accompanying consolidated financial statements and notes thereto and the
Company's Form 10-K statement for the year ended December 29, 1996.
SUMMARY.
Smart & Final Inc. (the "Company") reported net income of $6.8 million for
the twelve weeks ended June 15, 1997, compared to net income of $6.3 million for
the twelve weeks ended June 16, 1996.
For the twenty-four weeks ended June 15, 1997, the Company reported net
income of $11.8 million compared to a net income of $10.5 million for the
twenty-four weeks ended June 16, 1996.
Growth in earnings for the second quarter and first half of 1997 reflects
strong operating results which were offset in part by a new "Sliced Price/Right
Price" program introduced in Smart & Final stores late in the first quarter of
1997. The new price program reduced second quarter earnings per share by four
cents and earnings per share for the first half by six cents.
RESULTS OF OPERATIONS.
The following table shows for the periods indicated, certain consolidated
income statement data, expressed as a percentage of total sales.
<TABLE>
<CAPTION>
TWELVE WEEKS ENDED TWENTY-FOUR WEEKS ENDED
--------------------- -------------------------
JUNE 15, JUNE 16, JUNE 15, JUNE 16,
1997 1996 1997 1996
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Sales:
Store sales 74.5 % 78.0 % 73.7 % 76.5 %
Foodservice distribution sales 25.5 22.0 26.3 23.5
--------- --------- --------- ---------
Total Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales, buying and occupancy........... 85.2 84.8 85.3 85.2
----- ----- ----- -----
Gross Margin.................................. 14.8 15.2 14.7 14.8
Operating and administrative expenses........ 11.1 11.7 11.2 11.6
----- ----- ----- -----
Income from operations...................... 3.7 3.5 3.5 3.1
Interest expense, net of interest income...... (0.6) (0.3) (0.5) (0.3)
--------- --------- --------- ---------
Income before provision for income tax, and
minority share of net income................ 3.2 3.2 3.0 2.9
Provision for income taxes.................... 1.2 1.2 1.1 1.1
--------- --------- --------- ---------
2.0 2.0 1.8 1.8
Minority share of net income.................. - - - -
--------- --------- --------- ---------
Income from consolidated subsidiaries....... 2.0 2.0 1.8 1.8
Equity earnings in unconsolidated subsidiaries - - - -
--------- --------- --------- ---------
Net income.................................. 2.0 % 2.0 % 1.8 % 1.8 %
========= ========= ========= =========
</TABLE>
* Totals do not aggregate due to rounding.
7
<PAGE>
BACKGROUND.
The expansion of the Company's stores in 1996 and 1997 is shown in the
following table:
<TABLE>
<CAPTION>
TWO YEAR
QUARTER ENDED QUARTERS ENDED ENDED
-------------------- ---------------------- -----------
JUNE 15, JUNE 16, JUNE 15, JUNE 16, DECEMBER 29,
1997 1996 1997 1996 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
USA
Store count beginning 167 159 168 155 155
Stores opened:
In new markets - 3 - 7 12
In mature markets 1 - 2 - 1
---- ---- ---- ---- ----
Total 1 3 2 7 13
Relocations 3 - 3 2 6
Stores relocated/closed (3) - (5) (2) (6)
---- ---- ---- ---- ----
Store count ending 168 162 168 162 168
MEXICO
Store count beginning 5 3 5 3 3
New stores opened - - - - 2
---- ---- ---- ---- ----
Store count ending 5 3 5 3 5
---- ---- ---- ---- ----
Grand Total 173 165 173 165 173
==== ==== ==== ==== ====
</TABLE>
Mexico operations are not consolidated and are reported on the equity
basis.
Although new stores are important to the Company's continued growth and
profitability, each new store opening initially penalizes earnings because
stores are not immediately profitable. In recent years new stores opened in
existing market areas generally have achieved break even (after full allocation
of all corporate expenses) within the first six to eighteen months and new
stores opened in new market areas, which mature more slowly, generally have
achieved break even in approximately three years.
Each of the Company's fiscal years consists of twelve week periods in the
first, second and fourth quarters of the fiscal year and a sixteen week period
in the third quarter.
COMPARISON OF TWELVE WEEKS ENDED JUNE 15, 1997 WITH TWELVE WEEKS ENDED JUNE 16,
1996.
Sales. Second quarter 1997 sales were $334.9 million, up 9.0% from the
comparable 1996 period. Smart & Final Stores Corporation ("Smart & Final")
store sales increased 4.0%. Store sales increased as a result of the new store
openings and relocations in the United States which numbered nineteen in 1996
and five in the first half of 1997.
Comparable store sales for the second quarter of 1997 increased 2.1% over
the prior year period. Comparable customer transactions for the second quarter
increased 2.2% over the second quarter of 1996. Average comparable transaction
size decreased slightly from $32.18 to $32.14.
Foodservice distribution sales for the second quarter increased to $85.4
million, with strong growth at Port Stockton and moderate sales growth at Henry
Lee which has constrained distribution facilities. As a percentage of total
sales, foodservice distribution sales increased from 22.0% in the second quarter
of 1996 to 25.5% in the second quarter of 1997.
8
<PAGE>
Cost of Sales, Buying and Occupancy. These costs totaled $285.2 million in
the second quarter of 1997, up 9.4% from the second quarter of 1996. Costs
increased at a higher rate than the increase in sales due to the introduction of
the Sliced Price/Right Price program late in the first quarter of 1997 and due
to an increased mix of foodservice distribution sales which generate lower gross
margins than store sales, offset by lower occupancy costs which declined by
approximately $1.2 million as a result of the acquisition of operating
properties from an affiliated company late in 1996 (the "Real Estate
Transaction"). As a percentage of sales, these costs increased from 84.8% in the
second quarter of 1996 to 85.2% in the second quarter of the current year.
Gross Margin. Gross margin increased 6.5% from $46.7 million in the second
quarter of 1996 to $49.7 million in the second quarter of 1997. As a percentage
of sales, gross margin decreased from 15.2% of sales in the second quarter of
1996 to 14.8% of sales in the current quarter. Major factors in the lower gross
margin percentage were the new price program which caused a 0.6% of sales
reduction and the increased foodservice distribution sales mix which accounted
for a 0.2% decline, offset by the benefits of the Real Estate Transaction which
reduced occupancy costs and increased gross margin by 0.4% of sales.
Operating and Administrative Expenses. Operating and administrative
expenses for the second quarter of 1997 were $37.2 million, up $1.2 million or
3.2% from the second quarter of 1996. As a percentage of sales, these expenses
declined from 11.7% in the second quarter of 1996 to 11.1% in the current year
quarter. Approximately 0.2% of the reduction resulted from higher foodservice
distribution sales mix which operates at lower expense levels than store sales,
0.2% from vendor marketing rebates in support of the Sliced Price/Right Price
program, and 0.2% from rigorous expense controls.
Income from Operations. Income from operations was $12.5 million for the
second quarter of 1997, up 17.4% from $10.7 million in the second quarter of
1996. The increase is due to higher sales and gross margins accompanied by
moderate growth in expenses.
Interest Income and (Expense). Interest income and expense increased from
$0.7 million of expense in the second quarter of 1996 to $1.7 million of expense
in the second quarter of 1997. The increase is due to interest charges on the
$38.0 million of debt issued late in 1996 in connection with the Real Estate
Transaction and also due to higher levels of bank debt related to business
growth.
COMPARISON OF TWENTY-FOUR WEEKS ENDED JUNE 15, 1997 WITH TWENTY-FOUR WEEKS ENDED
JUNE 16, 1996.
Sales. First half 1997 sales were $641.9 million, up 8.8% from the
comparable 1996 period. Smart & Final store sales increased 4.9%. Store sales
increased as result of the twenty-four new and relocated stores opened since
1995. Comparable store sales increased 2.0% in the first half of 1997. Average
comparable transaction size declined slightly from $31.94 in the first half of
1996 to $31.85 in the first half of 1997.
Foodservice sales increased 21.5% to $168.6 million with strong sales
growth at Port Stockton and moderate growth at Henry Lee which has constrained
distribution capability. As a percentage of overall sales mix, foodservice
distribution sales accounted for 26.3% of total sales in the first half of 1997,
up from 23.5% of sales in the first half of 1996.
Cost of Sales, Buying and Occupancy. These costs totaled $547.6 million in
the first half of 1997, up 9.0% from the first half of 1996. Costs increased at
a higher rate than the increase in sales due to the introduction of the Sliced
Price/Right Price program late in the first quarter of 1997 and due to an
increased mix of foodservice distribution sales which generate lower gross
margins than store sales, offset by lower occupancy costs which declined by
approximately $2.5 million as a result of the acquisition of operating
properties from an affiliated company late in 1996. As a percentage of sales,
these costs increased from 85.2% in the first half of 1996 to 85.3% in the first
half of the current year.
Gross Margin. Gross margin increased 8.2% from $87.1 million in the first
half of 1996 to $94.3 million in the first half of 1997. As a percentage of
sales, gross margin decreased from 14.8% of sales in the first half of 1996 to
14.7% of sales in the first half of the current year. Major factors in the
lower gross margin percentage were the new price program which caused a 0.3% of
sales reduction and the increased foodservice distribution sales mix
9
<PAGE>
which accounted for a 0.2% decline, offset by the benefits of the Real Estate
Transaction which reduced occupancy costs and increased gross margin by 0.4% of
sales.
Operating and Administrative Expenses. Operating and administrative
expenses for the first half of 1997 were $72.0 million, up $3.4 million or 4.9%
from the first half of 1996. As a percentage of sales, these expenses declined
from 11.6% in the first half of 1996 to 11.2% in the first half of the current
year. Approximately 0.2% of the reduction resulted from higher foodservice
distribution sales mix which operates at lower expense levels than store sales,
0.1% from vendor marketing rebates in support of the new price program, and 0.2%
from rigorous expense controls.
Income from Operations. Income from operations was $22.3 million for the
first half of 1997, up 20.5% from $18.5 million in the first half of 1996. The
increase is due to higher sales and gross margins accompanied by moderate growth
in expenses.
Interest Income and (Expense). Interest income and expense increased from
$1.3 million of expense in the first half of 1996 to $3.3 million of expense in
the first half of 1997. The increase is due to interest charges on the $38.0
million of debt issued late in 1996 in connection with the Real Estate
Transaction and also due to higher levels of bank debt related to business
growth.
FINANCIAL CONDITION.
Cash and cash equivalents increased from $16.8 million at December 29,
1996, to $18.7 million at June 15, 1997. Cash provided by operating activities
for the twenty-four weeks ended June 15, 1997 was $18.1 million. Of the cash
used for investing activities, $14.5 million was spent on capital expenditures
for property, plant, and equipment and $5.0 million was spent by Port Stockton
to acquire the assets of a small produce distribution company in Northern
California. Cash used for payment of dividends was $2.2 million. Additional
cash was provided by a net increase of $4.9 million of borrowings under the
Company's bank credit line and $1.7 million of proceeds from issuance of common
stock.
Goodwill increased by $4.8 million as a result of the produce distributor
acquisition. Accounts payable declined by $9.3 million due to a $1.7 million
reduction in inventories, and due to normal timing differences in payment
cycles. Payable to Parent and affiliates increased as a result of cash advances
to the Company.
Stockholders' equity increased by $6.4 million from $195.7 million at
December 29, 1996 to $202.1 million at June 15, 1997 as a result of the $6.8
million net income for the first twenty-four weeks of 1997, and the $1.7 million
proceeds from the issuance of common stock, net of the quarterly cash dividends
of $2.2 million declared in the first two quarters of 1997.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's primary source of liquidity is cash flow from operations and
retained earnings. Cash provided by operating activities was $18.1 million in
the first half of 1997, up from $13.4 million in the comparable 1996 period.
At June 15, 1997, the Company had cash of $18.7 million, $202.1 million of
stockholders' equity, and $114.6 million of debt. The Company has $5.0 million
of availability under its $50.0 million bank credit line.
From time to time Smart & Final may publish forward-looking statements
about anticipated results. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that such forward-looking
statements are based upon internal estimates which are subject to change because
they reflect preliminary information and management assumptions, and that a
variety of factors could cause the Company's actual results and experience
10
<PAGE>
to differ materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements. The factors which could
cause actual results or outcomes to differ from such expectation include the
extent of the Company's success in (i) changing market conditions, (ii)
unforeseen costs and expenses, (iii) ability to attract new customers and retain
existing customers, and (iv) gain or losses from sales along with the
uncertainties and other factors, including unusually adverse weather conditions,
described from time to time in the Company's SEC filings and reports. This
report includes "forward-looking statements" including, without limitation,
statements as to the Company's liquidity and availability of capital resources.
The Company expects to be able to fund future acquisitions and other cash
requirements by a combination of available cash, cash from operations, lease
financing and other borrowings and proceeds from the issuance of equity
securities. The amount budgeted for capital expenditures is approximately $30.0
million for fiscal 1997.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not applicable.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of stockholders of the Company was held on May 9,
1997. At the meeting stockholders (1) elected four (4) directors of the
Company, (2) approved an amendment to the Company's Stock Incentive Plan to
increase the number of shares of the Company's common stock for which options
may be granted from 2,250,000 shares to 2,450,000 shares, (3) approved the
adoption of the Company's Long Term Equity Compensation Plan, and (4) ratified
the selection of Arthur Andersen LLP, independent public accountants, as
auditors for the Company for the year ending January 4, 1998.
The four (4) directors elected at the meeting are Robert J. Emmons, Antoine
Guichard, James S. Gold, and Christian P. Couvreux. The directors whose term of
office as a director continued after the meeting are Pierre B. Bouchut, Tim F.
Crull, Martin A. Lynch, Georges Plassat, Roger M. Laverty, III, David J.
McLaughlin, Ross E. Roeder, and Thomas G. Plaskett.
The votes cast for, against, or withheld, as well as the number of
abstention and broker non-votes for each nominee for office as a director were
as follows:
<TABLE>
<CAPTION>
VOTES
____________________________ Broker
Name of Nominee For Against Withheld Abstentions Non-Votes
- --------------- --- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Robert J. Emmons 20,506,603 - 278,262 - -
Antoine Guichard 19,931,512 - 853,353 - -
James S. Gold 20,507,753 - 277,112 - -
Christian P. Couvreux 20,505,509 - 279,356 - -
</TABLE>
The votes cast for, against, or withheld, as well as the number of
abstentions and broker non-votes for each matter voted upon in addition to the
election of directors were as follows:
<TABLE>
<CAPTION>
Votes Votes Votes Broker
Matter For Against Withheld Abstentions Non-Votes
- ------ ----- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
1. Amendment
of the Company's
Stock Incentive
Plan to increase 19,509,154 325,325 - 17,318 933,068
the number of
shares subject
thereto from
2,250,000 to
2,450,000
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Votes Votes Votes Broker
Matter For Against Withheld Abstentions Non-Votes
- ------ ----- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
2. Adoption of the
Company's Long
Term Equity 18,861,405 970,190 - 20,202 933,068
Compensation
Plan
3. Ratification
of Arthur
Andersen LLP,
as auditor for the 20,769,203 1,704 - 11,259 2,699
Company for the
year ending
January 4, 1998
</TABLE>
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Pages
- ------- ---------------------- -----
<S> <C> <C>
10.58 Omnibus Amendment, Direction and Consent No. 4 dated April 30, 1997
10.71 Participation Agreement dated as of April 7, 1997
10.72 Agency Agreement dated as of April 7, 1997
10.73 Lease Agreement dated as of April 7, 1997
10.74 Loan Agreement dated as of April 7, 1997
10.75 First Amendment and Restatement dated as of June 20, 1997,
to Participation Agreement dated December 15, 1994
10.76 First Amendment and Restatement dated as of June 20, 1997 to Agency
Agreement dated December 15, 1994
10.77 First Amendment and Restatement dated as of June 20, 1997 to Lease
Agreement dated December 15, 1994
10.78 First Amendment and Restatement dated as of June 20, 1997 to Loan
Agreement dated December 15, 1994
10.79 Asset Purchase Agreement dated as of May 30, 1997
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SMART & FINAL INC.
By:
Date: July 28, 1997 /s/ MARTIN A. LYNCH
______________________________________
Martin A. Lynch
Executive Vice President,
Principal Financial Officer, and
Principal Accounting Officer of the Company
14
<PAGE>
SMART & FINAL INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Pages
- ------ ---------------------- -----
<S> <C>
10.58 Omnibus Amendment, Direction and Consent No. 4 dated April 30, 1997
10.71 Participation Agreement dated as of April 7, 1997
10.72 Agency Agreement dated as of April 7, 1997
10.73 Lease Agreement dated as of April 7, 1997
10.74 Loan Agreement dated as of April 7, 1997
10.75 First Amendment and Restatement dated as of June 20, 1997, to
Participation Agreement dated December 15, 1994
10.76 First Amendment and Restatement dated as of June 20, 1997 to Agency
Agreement dated December 15, 1994
10.77 First Amendment and Restatement dated as of June 20, 1997 to Lease
Agreement dated December 15, 1994
10.78 First Amendment and Restatement dated as of June 20, 1997 to Loan
Agreement dated December 15, 1994
10.79 Asset Purchase Agreement dated as of May 30, 1997
27 Financial Data Schedule
</TABLE>
15
<PAGE>
OMNIBUS AMENDMENT, DIRECTION AND CONSENT NO.4
OMNIBUS AMENDMENT, DIRECTION AND CONSENT NO. 4, dated April 4, 1997, among
SMART & FINAL INC., a Delaware corporation (the "Lessee"), SMART & FINAL STORES
CORPORATION, a California corporation, and PORT STOCKTON FOOD DISTRIBUTORS,
INC., a California corporation (each a "Permitted Sublessee" and together, the
"Permitted Sublessees"), FLEET NATIONAL BANK, a national banking association,
not in its individual capacity but solely as the Owner Trustee under the Trust
Agreement (the "Lessor"), FIRST HAWAIIAN BANK, as holder of Series A Notes and
as holder of Series B Notes ("First Hawaiian"), CREDIT LYONNAIS LOS ANGELES
BRANCH, as holder of Series A Notes and Series B Notes ("CLLA"), BANK LEUMI LE-
ISRAEL B.M., as holder of Series A Notes and Series B Notes ("Bank Leumi")
and, together with First Hawaiian and CLLA, the "Lenders"), CREDIT LYONNAIS
LEASING CORP. as equity participant (the "Equity Participant"), and CREDIT
LYONNAIS NEW YORK BRANCH, a branch duly licensed under the laws of New York of
a banking corporation organized and existing under the laws of the Republic of
France, as agent for the Lenders (the "Agent").
RECITALS
WHEREAS, the Equity Participant and Shawmut Bank Connecticut, National
Association entered into a Trust Agreement, dated as of December 15, 1994;
WHEREAS, the Lessor and the Lessee entered into a Lease Agreement (the
"Lease Agreement"), dated as of December 15, 1994;
WHEREAS, the Lessor and the Lessee entered into an Agency Agreement
(the "Agency Agreement"), dated as of December 15, 1994;
WHEREAS, the Lessor, Credit Lyonnais Cayman Islands Branch and the
Agent entered into a Loan Agreement (the "Loan Agreement"), dated as of December
15, 1994;
WHEREAS, the Lessee, the Permitted Sublessees, the Lessor, the
Lenders, Credit Lyonnais Cayman Islands Branch, the Agent and the Equity
Participant entered into a Participation Agreement (the "Participation
Agreement"), dated as of December 15, 1994;
WHEREAS, the Transaction Documents were amended pursuant to (i) an
Omnibus Amendment, Direction and Consent among the Lessee, the Permitted
Sublessees, the Lessor, the Lenders, Credit Lyonnais Cayman Islands Branch, the
Equity Participant and the Agent, (ii) an Omnibus Amendment, Direction and
Consent No. 2 among the Lessee, the Permitted Sublessees, the Lessor, Credit
Lyonnais Cayman Islands Branch, the Lenders, the Equity Participant and the
Agent, and (iii) an Omnibus Amendment, Direction and Consent No. 3 among the
Lessee, the Permitted Sublessees, the Lessor, Credit Lyonnais Cayman Islands
Branch, the Lenders, the Equity Participant and the Agent;
WHEREAS, the parties hereto desire to further amend the Transaction
Documents as set forth herein;
<PAGE>
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto agree as follows:
Section 1. Capitalized terms used but not defined herein shall have
the meaning assigned thereto in the Participation Agreement.
Section 2. In accordance with Section 6.02 of the Trust Agreement,
the Equity Participant hereby instructs Fleet National Bank, formerly known as
Shawmut Bank Connecticut, National Association, to execute and delivery this
Omnibus Amendment, Direction and Consent No. 4 as Lessor.
Section 3. In accordance with the terms and conditions of the Loan
Agreement and the Participation Agreement, the Lenders and the Agent hereby
consent to the amendments set forth herein to the Transaction Documents.
Section 4. Section 1.06 of the Participation Agreement is hereby
amended by deleting such Section in its entirety and inserting the following:
SECTION 1.06. Fees Payable by Lessee. The Lessee shall pay to the
----------------------
Agent the Administration Fee on the initial Closing Date and each December
1 thereafter occurring during the Lease Term. The Lessee shall pay to the
Lenders and the Equity Participant a commitment fee for the period
beginning on the initial Closing Date and ending on May 31, 1997, equal to
0.20% per annum of the excess from time to time of $30,000,000 over the
Outstanding Property Cost. Such commitment fee shall be paid to the Agent,
quarterly in arrears on each Payment Date, for distribution to the parties
entitled thereto.
Section 5. Section 1.07 of the Participation Agreement is hereby
amended by deleting such Section in its entirety and inserting the following:
SECTION 1.07. Closing. Each closing (a "Closing") of (a) the
-------
acquisition of one or more Leased Premises by the Lessor, (b) the payment
of an Advance by the Lessor to the Lessee and, (c) in the case of the
initial closing, the execution and delivery of the Transaction Documents
and the payment to the Agent of the Arrangement Fee, shall take place at
the offices of Orrick, Herrington & Sutcliffe, 666 Fifth Avenue, New York,
New York at 12:00 noon, New York City time, on such date (the "Closing
Date") or in the case of the payment of an Advance (the "Advance Date") on
or before May 31, 1997, or, in the case of the initial Closing Date,
December 31, 1994, as the Lessee shall specify by not less than three
Business Days' written notice (the "Closing Notice") delivered to the
Lessor, each Lender, the Equity Participant and the Agent. The Closing
Notice shall set forth the aggregate Purchase Price of the Leased Premises
and the Lessor's Share of Improvement Cost funded with the funds advanced
to the Lessee and shall have attached thereto the fully completed form of
Lease Supplement which the Lessee contemplates will be executed and
delivered on the Closing Date or Advance Date, as the case may be.
2
<PAGE>
Section 6. The definition of the term "Completion Date" in the Agency
Agreement is hereby amended by deleting such term in its entirety and inserting
the following:
"Completion Date" shall mean, for the Improvements for any Leased
Premises, May 31, 1997, as the same may be extended by the Agent pursuant
to Section 4.10(a) of the Agency Agreement.
Section 7. Section 2(b) of the Lease Agreement is hereby amended by
deleting such clause in its entirety and inserting the following:
(b) The lease of each of the Leased Premises to the Lessee under this
Lease Agreement shall be evidenced by the execution and delivery to the Lessor
and the Lessee of a Lease Supplement. In addition, each Advance made by the
Lessor to the Lessee under the Agency Agreement shall be evidenced by a Lease
Supplement. With respect to each of the Leased Premises in the 1995 Tranche,
there shall be no more than 12 Closing Dates and Advance Dates, and no Closing
Date shall occur after December 31, 1995; provided that with respect to Leased
Premises the Purchase Price of which has been paid by the Lessor prior to
December 31, 1995, Advance Dates may occur after December 31, 1995 but may occur
no later than March 31, 1996; provided, further that with respect to the Leased
Premises located at 5925 E. Carson Street, Lakewood, California, Advance Dates
may occur after March 31, 1996 but may occur no later than May 20, 1996. With
respect to each of the Leased Premises in the 1996 Tranche, Advances Dates may
occur no later than May 31, 1997.
Section 8. This Omnibus Amendment, Direction and Consent No. 4 shall
be governed by and construed in accordance with the laws of the State of New
York without regard to principles of conflicts of law. All agreements herein of
the parties hereto shall bind any successors or assigns, whether so expressed or
not. In case any provision herein shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. This Omnibus Amendment, Direction
and Consent No. 4 may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the Lessee, the Permitted Sublessees, the Lessor,
the Lenders, the Equity Participant and the Agent have caused this Omnibus
Amendment, Direction and Consent No. 4 to be duly executed as of the day and
year first above written.
SMART & FINAL INC.,
as Lessee
By: /s/ Donald G. Alvarado
------------------------
Name: Donald G. Alvarado
Title:SR. V.P. AND SECRETARY
SMART & FINAL STORES CORPORATION,
as Permitted Sublessee
By: /s/ Donald G. Alvarado
------------------------
Name: Donald G. Alvarado
Title:SR. V.P. AND SECRETARY
PORT STOCKTON FOOD DISTRIBUTORS, INC.,
as Permitted Sublessee
By: /s/ Donald G. Alvarado
------------------------
Name: Donald G. Alvarado
Title:SECRETARY
FLEET NATIONAL BANK OF CONNECTICUT, not in its
individual capacity but solely as the Owner
Trustee under the Trust Agreement, as Lessor
By: /s/ Elizabeth C. Hammer
-----------------------
Name: Elizabeth C. Hammer
Title: Vice President
4
<PAGE>
FIRST HAWAIIAN BANK, as Series A Lender
and Series B Lender
By: /s/ Robert M. Wheeler, III
--------------------------
Name: Robert M. Wheeler, III
Title: Vice President
CREDIT LYONNAIS LOS ANGELES BRANCH,
as Series A Lender and Series B Lender
By: /s/ Dianne Scott
---------------------------------
Name: Dianne Scott
Title: Vice President and Branch Manager
BANK LEUMI LE-ISRAEL B.M., as Series A
Lender and Series B Lender
By: /s/ Jacques Delvoy
-----------------------------
Name: Jacques Delvoy
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH,
as Equity Participant and Agent
By: /s/ David C. Fink
----------------------------
Name: David C. Fink
Title: Vice President
5
<PAGE>
[Execution Copy]
PARTICIPATION AGREEMENT
by and among
FLEET NATIONAL BANK,
not in its individual capacity (except as expressly stated herein),
but solely as the Owner Trustee under the
Trust Agreement, as the Lessor,
THE LENDERS NAMED HEREIN,
CREDIT LYONNAIS NEW YORK BRANCH, as
Agent for the Lenders,
CREDIT LYONNAIS LEASING CORP., as Equity Participant
SMART & FINAL INC., as Lessee
and
THE SIGNIFICANT SUBLESSEES NAMED HEREIN
Dated as of April 16, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
SECTION 1.01. Delivery and Purchase of Leased Premises; Construction of Improvements............... 1
SECTION 1.02. Participation by the Equity Participant.............................................. 2
SECTION 1.03. Participation by the Lenders......................................................... 2
SECTION 1.04. The Lessee's Responsibilities........................................................ 2
SECTION 1.05. The Equity Participant's Instructions to the Lessor.................................. 2
SECTION 1.06. Fees Payable by Lessee............................................................... 3
SECTION 1.07. Closing.............................................................................. 3
ARTICLE II
Representations And Warranties....................................................... 3
SECTION 2.01. Representations and Warranties of the Lessee and the Significant Sublessees.......... 3
SECTION 2.02. Representations and Warranties of the Equity Participant............................. 8
SECTION 2.03. Representations and Warranties of the Lenders........................................ 9
SECTION 2.04. Representations and Warranties of Trust Company...................................... 11
ARTICLE III
Conditions............................................................ 12
SECTION 3.01. Conditions of the Lenders, the Equity Participant and the Lessor..................... 12
SECTION 3.02. Additional Conditions Precedent with Respect to Closing Dates for the Leased Premises 14
SECTION 3.03. Additional Conditions Precedent to Advances.......................................... 15
ARTICLE IV
Agreements............................................................. 16
SECTION 4.01. Basic Reporting Requirements of the Lessee and the Permitted Sublessees.............. 16
SECTION 4.02. Assumption of Risk and Indemnification............................................... 18
SECTION 4.03. Certain Covenants of the Lessee and the Significant Sublessees....................... 20
SECTION 4.04. Acknowledgment of Notice of Assignment............................................... 23
SECTION 4.05. Implementation of Assignment......................................................... 24
SECTION 4.06. Covenants of the Lenders............................................................. 25
SECTION 4.07. Withholding Taxes.................................................................... 26
SECTION 4.08. Replacement for Illegality, Burdensome Indemnity or Other Events..................... 27
ARTICLE V
Assignment Of The Lessor's Interest................................................. 27
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE VI
<S> <C> <C>
Miscellaneous............................................................ 28
SECTION 6.01. Payment of Transaction Expenses...................................................... 28
SECTION 6.02. Notices.............................................................................. 28
SECTION 6.03. Survival............................................................................. 28
SECTION 6.04. Holders of Notes..................................................................... 28
SECTION 6.05. Amendments and Waivers............................................................... 29
SECTION 6.06. Governing Law; Consent to Jurisdiction, Etc.......................................... 29
SECTION 6.07. Non-Recourse......................................................................... 30
SECTION 6.08. Invalidity of Provisions............................................................. 30
SECTION 6.09. Counterparts......................................................................... 30
SECTION 6.10. No Reliance.......................................................................... 30
SECTION 6.11. Confidentiality...................................................................... 30
SECTION 6.12. Interpretation....................................................................... 30
</TABLE>
ii
<PAGE>
PARTICIPATION AGREEMENT dated as of April 16, 1997, among SMART & FINAL
INC., a Delaware corporation (the "Lessee"), SMART & FINAL STORES CORPORATION, a
California corporation, and AMERICAN FOODSERVICE DISTRIBUTORS, a California
corporation (each a "Significant Sublessee" and together, the "Significant
Sublessees"), FLEET NATIONAL BANK, a national banking association, not in its
individual capacity (except as expressly stated herein) but solely as the Owner
Trustee under the Trust Agreement (the "Lessor"), the banks named on Schedule I
hereto as holders of the Notes (the "Lenders"), CREDIT LYONNAIS LEASING CORP., a
Delaware corporation, as the Equity Participant under the Trust Agreement (the
"Equity Participant") and CREDIT LYONNAIS, NEW YORK BRANCH, a branch duly
licensed under the laws of New York of a banking corporation organized and
existing under the laws of the Republic of France and as agent for the Lenders
(the "Agent"). Capitalized term used herein and not otherwise defined herein
shall have the respective meanings assigned thereto in the Definition Schedule
attached hereto as Exhibit A.
W I T N E S S E T H:
--------------------
WHEREAS, the Lessor and the Lessee propose to enter into a Lease Agreement,
dated as of the date hereof, whereby the Lessor will lease the Leased Premises
to the Lessee;
WHEREAS, the Lessee, as agent for the Lessor, intends to make certain
improvements to the Leased Premises in accordance with the Agency Agreement
between the Lessor and Lessee, and the Lessor has agreed to reimburse the Lessee
for the Improvement Costs relating to the Leased Premises as provided therein;
WHEREAS, in order to meet its obligations to reimburse the Lessee in
accordance with the Agency Agreement and to purchase the Leased Premises, the
Lessor will from time to time (i) receive loans from the Lenders in an amount
equal to 96% of the Property Cost as provided herein and (ii) receive a
contribution from the Equity Participant in an amount equal to 4% of the
Property Cost as provided herein; and
WHEREAS, the Notes will be secured by the Mortgage and Assignment
Agreements, between the Lessor and the Agent, relating to the Leased Premises;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound, the parties hereto hereby
agree as follows:
ARTICLE I
Commitments
-----------
SECTION 1.01. Delivery and Purchase of Leased Premises; Construction of
---------------------------------------------------------
Improvements. Subject to the terms and conditions hereof and in reliance upon
- ------------
the representations and warranties of the other parties hereto set forth herein
and in the other Transaction Documents, the Lessor shall purchase each Leased
Premises on the related Closing Date therefor for an amount equal to the
Purchase Price thereof and on each Advance Date the Lessor shall make an Advance
to the Lessee in an amount equal to the Lessor's Share of Improvement Cost
reimbursable on such Advance Date; provided each Advance or payment of Purchase
Price (other than the last such payment or advance) shall be in an amount of at
least
1
<PAGE>
$1,000,000; further provided no Advance or payment of Purchase Price shall be
------- --------
made if after giving effect thereto the Outstanding Property Cost shall exceed
$30,000,000.
SECTION 1.02. Participation by the Equity Participant. Subject to the
---------------------------------------
terms and conditions hereof and in reliance upon the representations and
warranties of the other parties hereto as set forth herein and in the other
Transaction Documents, the Equity Participant hereby agrees (a) on each Closing
Date and Advance Date to make an equity contribution to the Lessor equal to 4%
of the Purchase Price or Advance, as the case may be, which is payable by the
Lessor on such date; (b) on each Closing Date and Advance Date, to execute and
deliver the Transaction Documents to which it is a party and which it has not
theretofore executed and delivered.
SECTION 1.03. Participation by the Lenders. Subject to the terms and
----------------------------
conditions hereof and in reliance upon the representations and warranties of the
other parties hereto set forth herein and in the other Transaction Documents,
each Lender hereby agrees (a) on each Closing Date and Advance Date, to loan an
amount to the Lessor (not exceeding such Lender's maximum commitment, as set
forth in Schedule I attached hereto), equal to such Lender's pro rata share of
96% of the Purchase Price or Advance, as the case may be, which is payable by
Lessor on such date and (b) on the each Closing Date and Advance Date to execute
and deliver the Transaction Documents to which it is a party and which it has
not theretofore executed and delivered. The Lessee shall designate, from time to
time prior to the Completion Date, the interest rate (Base Rate, Eurodollar Rate
or LIBOR Rate, as applicable) for such loans, as permitted by the Loan
Agreement.
SECTION 1.04. The Lessee's Responsibilities. Subject to the terms and
-----------------------------
conditions hereof and in reliance upon the representations and warranties of the
Lessor, the Lenders and the Equity Participant set forth herein, the Lessee
hereby agrees (a) on each Closing Date, to transfer, or cause the transfer of,
title to one or more Leased Premises to the Lessor against payment of the
Property Cost thereof and subject each such Leased Premises to the Lease
Agreement by the execution and delivery of a Lease Supplement for such Leased
Premises, (b) on each Advance Date, to evidence the Advance made on such date by
the execution and delivery of a Lease Supplement for such Advance, (c) on each
Closing Date and Advance Date, to execute and deliver the Transaction Documents
to which it is a party and which it has not theretofore executed and delivered
and (d) to use its best efforts to cause each of the other conditions set forth
in Article III hereof to be satisfied.
SECTION 1.05. The Equity Participant's Instructions to the Lessor. The
---------------------------------------------------
Equity Participant agrees that upon each payment of its equity investment to the
Lessor in accordance with the terms of Section 1.02 hereof, and upon the verbal
authorization of the Equity Participant, the Lessor shall be authorized without
further act, authorization and direction by the Equity Participant to the
Lessor:
(a) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the
Lessor (who shall be an employee or employees, or agent or agents, of the
Lessee) to accept the conveyance of each of the Leased Premises on the
Closing Date thereof;
(b) to accept title to each of the Leased Premises from the vendor
thereof;
2
<PAGE>
(c) to execute a Lease Supplement for each of the Leased Premises and
for each Advance;
(d) to pay an amount equal to the Purchase Price for each Leased
Property to the vendor thereof as the purchase price therefor and the other
Persons entitled thereto on the related Closing Date and to pay to the
Lessee an amount equal to the Lessor's Share of Improvement Cost to the
Lessee under the Agency Agreement on each Advance Date; and
(e) to execute and deliver all such other instruments, documents or
certificates and take all such actions as are required to be executed or
delivered or taken by the Lessor on or prior to such Closing Date pursuant
to any Transaction Document.
SECTION 1.06. Fees Payable by Lessee. The Lessee shall pay to the Agent
----------------------
the Administration Fee on the initial Closing Date and each April 16 thereafter
occurring during the Lease Term. The Lessee shall pay to the Lenders and the
Equity Participant a commitment fee for the period beginning on the initial
Closing Date and ending on April 16, 1999, equal to 0.175% per annum of the
excess from time to time of $30,000,000 over the Outstanding Property Cost. Such
commitment fee shall be paid to the Agent, quarterly in arrears on each Payment
Date, for distribution to the parties entitled thereto.
SECTION 1.07. Closing. Each closing (a "Closing") of (a) the acquisition
-------
of one or more Leased Premises by the Lessor, (b) the payment of an Advance by
the Lessor to the Lessee and, (c) in the case of the initial closing, the
execution and delivery of the Transaction Documents and the payment to the Agent
of the Arrangement Fee, shall take place at the offices of Orrick, Herrington &
Sutcliffe LLP, 666 Fifth Avenue, New York, New York at 12:00 noon, New York City
time, on such date (the "Closing Date") or in the case of the payment of an
Advance (the "Advance Date") on or before April 16, 1999 or, in the case of the
initial Closing Date, April 16, 1997, in each such case as the Lessee shall
specify by not less than three Business Days' written notice (the "Closing
Notice") delivered to the Lessor, each Lender, the Equity Participant and the
Agent. The Closing Notice shall set forth the aggregate Purchase Price of the
Leased Premises and the Lessor's Share of Improvement Cost funded with the funds
advanced to the Lessee and shall have attached thereto the fully completed form
of Lease Supplement which the Lessee contemplates will be executed and delivered
on the Closing Date or Advance Date, as the case may be.
ARTICLE II
Representations And Warranties
------------------------------
SECTION 2.01. Representations and Warranties of the Lessee and the
----------------------------------------------------
Significant Sublessees. Each of the Lessee and the Significant Sublessees
- ----------------------
represents and warrants to the Trust Company, the Lessor, the Lenders, the
Equity Participant and the Agent that:
(a) The Lessee and the Significant Sublessees are each a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, and is qualified to do business in, and is in
good standing in, each state or other jurisdiction in which its ownership
or leasing of properties or the conduct of its business makes such
qualification necessary.
3
<PAGE>
(b) Each of the Lessee and the Significant Sublessees has the
corporate power and authority to execute and perform each Transaction
Document to which it is a party and to enter into and perform the
transactions contemplated by the Transaction Documents, and has duly and
legally authorized the transactions contemplated by the Transaction
Documents and the execution, delivery, compliance with and performance of
each such Transaction Document.
(c) Neither the execution and delivery of any Transaction Document by
the Lessee or the Permitted Sublessees, nor consummation by the Lessee or
the Permitted Sublessees of the transactions contemplated thereby, nor
performance of or compliance with the terms and conditions thereof by the
Lessee or the Permitted Sublessees, including the transfer of an interest
in the Leased Premises, the subjecting of the Leased Premises to the Lease
Agreement and the sublease of the Leased Premises to the Permitted
Sublessees:
(i) will be in contravention of, or will result in a violation or
breach of, any of the terms of the Lessee's or the Permitted
Sublessees' certificate or articles of incorporation or by-laws, or
(ii) will violate or constitute a breach in any material respect
of any provision of any existing applicable law, rule, regulation,
license, judgment, order or decree of any government, governmental
body or court having jurisdiction over the Lessee or the Permitted
Sublessees or any of their activities or properties, or any indenture,
agreement or other instrument to which the Lessee or the Permitted
Sublessees are a party, or by or under which the Lessee or any of the
Lessee's property is bound, or be in conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or instrument, or result in the
creation or imposition of any Lien upon any of the Lessee's or the
Permitted Sublessees' property or assets except as contemplated in the
Transaction Documents.
(d) Each Transaction Document (other than the Lease Supplements,
Sublease Supplements and the Memoranda of Lease) to which the Lessee and
either or both the Significant Sublessees is a party has been executed by
the duly authorized officer or officers of the Lessee and the Significant
Sublessees and delivered to the Lessor and constitutes, and when executed
by the duly authorized officer or officers of the Lessee and the
Significant Sublessees and delivered to the Lessor, and each Lease
Supplement, Sublease Supplement and Memorandum of Lease will constitute,
the legal, valid and binding obligations of the Lessee or the Permitted
Sublessees, as the case may be, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of equity
limiting the availability of equitable remedies.
(e) No Governmental Action is or will be necessary in connection with
the execution and delivery of any Transaction Document by the Lessee or the
Permitted Sublessees, nor the payment and performance by the Lessee or the
Permitted Sublessees of any or all of their respective obligations
thereunder, nor the transfer of any Leased Premises to the Lessor for the
purpose of subjecting the same to the Lease Agreement.
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(f) No mortgage, deed of trust or other Lien which now covers or
affects any property or interest therein of the Lessee or the Permitted
Sublessees, now attaches to the Leased Premises or part thereof or the
proceeds thereof, or any Transaction Document, in any manner which
adversely affects the Lessor's or Equity Participant's interest therein or
Agent's security interest therein.
(g) There is no litigation or other proceeding now pending or, to the
Lessee's or the Significant Sublessee' knowledge, threatened, against or
affecting the Lessee or the Significant Sublessees at law or in equity
before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality or arbitrator which if
adversely determined would affect or impair the interest of the Lessor or
the Equity Participant in the Leased Premises or the security interest of
the Agent therein, or which would have (a) a Material Adverse Effect on the
business, operations, condition (financial or otherwise) or prospects of
the Lessee, the Significant Sublessees and their consolidated subsidiaries,
taken as a whole, (b) a Material Adverse Effect on the ability of the
Lessee or the Significant Sublessees to perform or comply with any of the
terms and conditions of any Transaction Document, or (c) a Material Adverse
Effect on the legality, validity, bringing effect enforceability or
admissibility into evidence of any Transaction Document, or the ability of
the Lessor or any Lender to enforce any rights or remedies under or in
connection with any Transaction Document.
(h) (1) The audited consolidated balance sheet of the Lessee and its
Consolidated Subsidiaries as of December 31, 1996 and the related audited
consolidated profit and loss statement for the fiscal year, reported on by
Arthur Andersen LLP (as contained in the Lessee's report on Form 10-K for
the year ended December 31, 1996, copies of which have been filed with the
Securities and Exchange Commission, fairly present the consolidated
financial condition of the Lessee as of such dates and the profits and loss
for such years.
(2) Since December 31, 1996, there has been no material adverse change
in the business, financial position, results of operations or prospects of
the Lessee, the Significant Sublessees and their consolidated subsidiaries.
(i) The Lessee and the Permitted Sublessees will obtain and maintain
in full force and effect all licenses, certificates and permits (including
any applicable environmental permits) from such governmental and other
authorities necessary to (x) perform the Work or any other permitted
alterations, repairs, rebuilding or restoration of Leased Premises prior to
commencement thereof and (y) use and occupy any Leased Premises in
accordance with the provisions of the Lease Agreement upon completion of
the Work or other activity specified in clause (x) with respect to such
Leased Premise.
(j) The execution and delivery of each of the Transaction Documents
and the consummation of the transactions contemplated hereby will not
involve any transaction which is subject to the prohibitions of Section 406
of ERISA or in connection with a tax which could be imposed pursuant to
Section 4975 of the Code by virtue of the actions or status of the Lessee
or any Sublessee. The representation by the Lessee and the Significant
Sublessees in the preceding sentence are made in reliance upon and subject
to the accuracy of the representations of the Equity Participant and each
Lender in Sections 2.02(f) and 2.03(f) hereof as to the source of funds to
be used by them to
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acquire their interest in the Leased Premises or to purchase the Notes, as
the case may be.
(k) Except for the filing and recording of the Mortgage and Assignment
Agreements with respect to the Leased Premises, no further action,
including any Governmental Action or any filing or recording of any
document, is necessary or advisable in order to (1) establish the Lessor's
ownership of the Leased Premises and the Equity Participant's and each
Lender's interest in the Leased Premises, as against the Lessee or third
Persons in any applicable jurisdiction or (2) permit the Trust Company or
the Lessor to qualify to do business in the state in which any Leased
Premises is located, to permit the Trust Company or the Lessor to execute
and deliver any Transaction Document or to perform any of its duties
thereunder, or to own an interest in any Leased Premises.
(l) There has been no material damage to the Leased Premises, nor are
any condemnation or eminent domain proceedings pending, or to Lessee's and
the Significant Sublessees' actual knowledge, threatened with respect
thereto.
(m) None of the Lessee and the Significant Sublessees are an
"investment company" or a Person directly or indirectly "controlled" by or
acting on behalf of an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(n) The Lessee and the Significant Sublessees have not offered any
interest in the Leased Premises, the Lease Agreement, the Notes, or the
Lessee Obligations, or any other similar security for sale to, or solicited
offers to buy any thereof from, or otherwise approached or negotiated in
respect thereto with, any prospective purchaser, other than the Lessor and
not more than 15 other institutional investors, each of which was offered
an interest in the transactions contemplated by the Transaction Documents,
the Lessee Obligations or the Leased Premises at a private sale for
investment and each of which the Lessee and the Significant Sublessees had
grounds to believe and did believe, has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of such an investment.
(o) No written statement delivered to the Lessor, any Lender, the
Equity Participant or the Agent in connection with the negotiation of the
transactions contemplated in this Participation Agreement or any other
Transaction Document to which the Lessee or the Significant Sublessees is
or is to be a party contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained therein or
herein not misleading in any material respect. There is no fact peculiar to
the Lessee and the Significant Sublessees which is not disclosed in writing
which materially and adversely affects the Lessee's or Significant
Sublessees' ability, as the case maybe, to perform under this Participation
Agreement or any other Transaction Document to which the Lessee is a party.
(p) No Event of Default or Unmatured Event of Default by the Lessee or
the Permitted Sublessees has occurred and is continuing under this
Participation Agreement or any other Transaction Document to which any of
the Lessee or the Significant Sublessees is a party.
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(q) All insurance required by Section 10 of the Lease Agreement is in
effect and all premiums now due and payable in respect of such insurance
have been paid.
(r) The Lessee and the Significant Sublessees are not delinquent in
the payment of any and all license, documentation, recording and
registration fees, and all taxes including, without limitation, all net
income, gross income, gross receipts, sales, use, franchise, personal
property (tangible and intangible), real estate and stamp taxes), levies,
duties, assessments, fees, charges, governmental charges and withholdings
of any nature whatsoever, whether or not presently in existence, imposed by
any governmental or governmental body or any related interest or penalty
(except for taxes being contested in good faith and by appropriate
proceedings) and has not failed to file any required tax return, which
would result in a liability having a Material Adverse Effect.
(s) Each of the following statements is true: Neither a Reportable
Event nor an "accumulated funding deficiency" (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred during the
five-year period prior to the date on which this representation is made or
deemed made with respect to any Plan, and each Plan has complied in all
material respects with the applicable provisions of ERISA and the Code. No
termination of a Single Employer Plan has occurred, and no Lien in favor of
the PBGC or a Plan has arisen, during such five-year period. The present
value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits. Neither the Lessee, the Significant Sublessees nor any
Commonly Controlled Entity has had a complete or partial withdrawal from
any Multiemployer Plan, and neither the Lessee, the Significant Sublessees
nor any Commonly Controlled Entity would become subject to any liability
under ERISA if the Lessee, the Significant Sublessees or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans
as of the valuation date most closely preceding the date on which this
representation is made or deemed made. To the best knowledge of the Lessee
and the Significant Sublessees, no such Multiemployer Plan is in
reorganization within the meaning of Section 4241 of ERISA or insolvent
within the meaning of Section 4245 of ERISA. The present value (determined
using actuarial and other assumptions which are reasonable in respect of
the benefits provided and the employees participating) of the liability of
the Lessee, the Significant Sublessees and each Commonly Controlled Entity
for post retirement benefits to be provided to their current and former
employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under
all such Plans allocable to such benefits by an amount which would result
in a liability having a Material Adverse Effect.
(t) The facilities and properties owned, leased, or operated by the
Lessee, the Significant Sublessees or any of their Subsidiaries, including
the Leased Premises (the "Properties") do not to the knowledge of the
Lessee and Significant Sublessees contain, and have not previously
contained, any Hazardous Materials in amounts or concentrations which (i)
constitute or constituted a violation of, or (ii) could give rise to any
material liability under, any Environmental Laws.
(u) The Properties, all operations at the Properties, and the business
operated by the Lessee, the Significant Sublessees or any of their
Subsidiaries (the "Business") are
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and have been in compliance in all material respects with all applicable
Environmental Laws.
(v) Neither the Lessee, the Significant Sublessees nor any of their
Subsidiaries has received any notice of violation, alleged violation, non-
compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the
Properties or their business operations nor does the Lessee or the
Significant Sublessees, as the case may be, have knowledge that any such
notice will be received or is being threatened.
(w) Hazardous Materials have not been transported or disposed of from
the Properties in violation of, or in a manner or to a location which could
give rise to any material liability under, any Environmental Law, nor have
any Hazardous Materials been generated, treated, stored or disposed of at,
on or under any of the Properties in violation of, or in a manner that
could give rise to any material liability under, any applicable
Environmental Law.
(x) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Lessee or the Significant Sublessees,
threatened, under any Environmental Law to which the Lessee, the
Significant Sublessees or any of their Subsidiaries is or will be named as
a party with respect to the Properties or the their business operations nor
are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the
Properties or their business operations.
(y) There has been no release or threat of release of Hazardous
Materials at or from the Properties, or arising from or related to the
operations of the Lessee, the Significant Sublessees or any of their
Subsidiaries in connection with the Properties or otherwise in connection
with the Business, in violation of or in amounts or in a manner that would
give rise to any material liability under Environmental Laws.
(z) Each of the representations and warranties set forth in
subsections 2.01(u) through (y) above is to the knowledge of the Lessee and
Significant Sublessees true and correct in all material respects with
respect to each facility and property formerly owned, leased or operated by
the Lessee, the Significant Sublessees or any Subsidiary or former
Subsidiary.
SECTION 2.02. Representations and Warranties of the Equity Participant.
--------------------------------------------------------
The Equity Participant represents and warrants to each party hereto that:
(a) The Equity Participant is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has corporate power and authority to own its property and
to transact the business in which it is engaged or presently proposes to
engage.
(b) The Equity Participant has corporate power and authority to
execute, deliver, perform, and take all action contemplated by, each
Transaction Document to which it is a party, and all such action has been
duly and validly authorized by all necessary corporate proceedings on its
part.
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(c) This Participation Agreement has been duly and validly executed
and delivered by the Equity Participant and this Participation Agreement
constitutes, and each other Transaction Document to which the Equity
Participant is a party when executed and delivered by the Equity
Participant will constitute, the legal, valid and binding obligation of the
Equity Participant, enforceable against the Equity Participant in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws of general
application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies.
(d) No Governmental Action is or will be necessary in connection with
execution and delivery of this Participation Agreement or any other
Transaction Document by the Equity Participant, consummation by the Equity
Participant of the transactions contemplated hereby, or performance of or
compliance with the terms and conditions hereof or thereof by the Equity
Participant.
(e) Neither the execution and delivery of this Participation Agreement
or any other Transaction Document by the Equity Participant, nor
consummation by the Equity Participant of the transactions contemplated
hereby, nor performance of or compliance with the terms and conditions
hereof or thereof by the Equity Participant does or will:
(i) violate or conflict with any applicable law, rule, regulation,
license, judgment, order or decree of any government or governmental
body or court having jurisdiction over the Equity Participant, or
(ii) violate, conflict with or result in a breach of any term or
condition of, or constitute a default under, or result in (or give
rise to any right, contingent or otherwise, of any Person to cause)
any termination, cancellation, prepayment or acceleration of
performance of, or result in the creation or imposition of (or give
rise to any obligation, contingent or otherwise, to create or impose)
any Lien upon any property of the Equity Participant pursuant to, or
otherwise result in (or give rise to any right, contingent or
otherwise, of any Person to cause) any change in any right, power,
privilege, duty or obligation of the Equity Participant under or in
connection with,
(A) the articles of incorporation or by-laws (or other
constituent documents) of the Equity Participant, or
(B) any other agreement or instrument or arrangement to which
the Equity Participant is a party or by which it or any of its
properties (now owned or hereafter acquired) may be subject or
bound.
(f) No part of the funds used by such Equity Participant for the
contribution pursuant to Section 1.02 hereof constitutes, directly or
indirectly, assets in which any employee benefit plan (as defined in
Section 3 of ERISA) or its related trust has any interest. For the purposes
of this paragraph "assets" means "plan assets" as defined in Department of
Labor Regulations Section 2510.3-101.
SECTION 2.03. Representations and Warranties of the Lenders. Each Lender
---------------------------------------------
represents and warrants to each party hereto:
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(a) Such Lender is a bank duly organized, validly existing, and in
good standing under the laws of its organization and has the corporate
power and authority to own its property and to transact the business in
which it is engaged or presently proposes to engage.
(b) Such Lender has corporate power and authority to execute, deliver,
perform, and take all actions contemplated by, each Transaction Document to
which it is a party, and all such action has been duly and validly
authorized by all necessary corporate proceedings on its part.
(c) This Participation Agreement has been duly and validly executed
and delivered by such Lender and this Participation Agreement constitutes,
and each other Transaction Document to which such Lender is a party when
executed and delivered by such Lender will constitute, the legal, valid and
binding obligation of such Lender enforceable against such Lender in
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws of general
application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies.
(d) No Governmental Action is or will be necessary in connection with
the execution and delivery of this Participation Agreement or any other
Transaction Document by such Lender, consummation by such Lender of the
transactions contemplated hereby, or performance of or compliance with the
terms and conditions hereof or thereof by such Lender.
(e) Neither the execution and delivery of any Transaction Document by
such Lender, nor the consummation by such Lender of the transactions herein
or therein contemplated, nor performance of or compliance with the terms
and conditions hereof or thereof by such Lender does or will:
(i) violate or conflict with any applicable law, rule, regulation,
license, judgment, order or decree of any government or governmental
body or court having jurisdiction over the such Lender; or
(ii) violate, conflict with or result in a breach of any term or
condition of, or constitute a default under, or result in (or give
rise to any right, contingent or otherwise, of any Person to cause)
any termination, cancellation, prepayment or acceleration of
performance of, or result in the creation or imposition of (or give
rise to any obligation, contingent or otherwise, to create or impose)
any Lien upon any property of such Lender pursuant to, or otherwise
result in (or give rise to any right, contingent or otherwise, of any
Person to cause) any change in any right, power, privilege, duty or
obligation of such Lender under or in connection with,
(A) the articles of incorporation or by-laws (or other
constituent documents) of such Lender, or
(B) any agreement or instrument or arrangement to which such
Lender is a party or by which it or any of its properties (now
owned or hereafter acquired) may be subject or bound.
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(f) No part of the funds used by such Lender to pay the purchase price
of the Notes purchased by it pursuant to Section 1.03 hereof constitutes,
directly or indirectly, assets in which any employee benefit plan (as
defined in Section 3 of ERISA) or its related trust has any interest. For
the purposes of this paragraph "assets" means "plan assets" as defined in
Department of Labor Regulations Section 2510.3-101.
SECTION 2.04. Representations and Warranties of Trust Company. The Trust
-----------------------------------------------
Company, in its individual capacity, represents and warrants to each party
hereto that:
(a) The Trust Company is a national banking association duly
organized, validly existing and in good standing under the laws of the
United States and has the corporate power and authority to own its property
and to transact the business in which it is engaged or presently proposes
to engage.
(b) The Trust Company or the Lessor, as the case may be, has the
corporate power and authority to execute, deliver, perform, and take all
action contemplated by, each Transaction Document to which it is a party,
and all such action has been duly and validly authorized by all necessary
corporate proceedings on its part.
(c) Each Transaction Document has been duly and validly executed and
delivered by the Trust Company or the Lessor, as the case may be, and this
Participation Agreement and the Trust Agreement constitute, and each other
Transaction Document to which the Trust Company is a party when executed
and delivered by the Trust Company, will constitute, the legal, valid and
binding obligation of the Trust Company enforceable against the Trust
Company in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency or other similar laws of general
application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies.
(d) No Governmental Action under any law of the State of Connecticut
or any United States federal law regulating the banking, trust or fiduciary
powers of the Trust Company, is or will be necessary in connection with
execution and delivery of this Participation Agreement or any other
Transaction Document by the Trust Company or the Lessor, as the case may
be, consummation by the Trust Company or the Lessor, as the case may be, of
the transactions contemplated hereby, or performance of or compliance with
the terms and conditions hereof or thereof by the Trust Company or the
Lessor, as the case may be.
(e) Neither the execution and delivery of this Participation Agreement
or any other Transaction Document by the Trust Company or the Lessor, as
the case may be, nor consummation by the Lessor of the transactions
contemplated hereby, nor performance of or compliance with the terms and
conditions hereof or thereof by the Trust Company or the Lessor, as the
case may be, does or will:
(i) violate or conflict with any law of the State of Connecticut
or any federal law of the United States regulating the banking, trust
or fiduciary powers of the Trust Company, or
(ii) violate, conflict with or result in a breach of any term or
condition of, or constitute a default under, or result in (or give
rise to any right,
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contingent or otherwise, of any Person to cause) any termination,
cancellation, prepayment or acceleration of performance of, or result
in the creation or imposition of (or give rise to any obligation,
contingent or otherwise, to create or impose) any Lien upon any
property of the Trust Company or the Lessor pursuant to, or otherwise
result in (or give rise to any right, contingent or otherwise, of any
Person to cause) any change in any right, power, privilege, duty or
obligation of the Trust Company or the Lessor under or in connection
with,
(A) the articles of association or by-laws (or other
constituent documents) of the Trust Company, or
(B) any other agreement or instrument or arrangement to
which the Trust Company or the Lessor is a party or by which it
or any of its properties (now owned or hereafter acquired) may be
subject or bound.
(f) The Leased Premises are not, and upon the acquisition thereof by
the Lessor will not be, subject to any Liens or claims arising out of any
act or omission by the Trust Company or the Lessor not related to the
transactions contemplated hereby.
ARTICLE III
Conditions
----------
SECTION 3.01. Conditions of the Lenders, the Equity Participant and the Lessor.
----------------------------------------------------------------
The obligation of each Lender to advance funds with respect to the Notes and the
Equity Participant to make an equity contribution on each Closing Date or
Advance Date pursuant to Sections 1.02 and 1.03 hereof and of the Lessor to
acquire an interest in the Leased Premises on each Closing Date pursuant to
Section 1.01 hereof or to make and Advance, is subject to fulfillment on or
prior to such Closing Date or Advance Date, as the case may be, of the following
conditions:
(a) (i) The representations and warranties of each of the Lessee and
the Permitted Sublessees set forth in Section 2.01 hereof shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects on and as of the date of delivery of each
Lease Supplement and Sublease Supplement; and (ii) on such delivery date no
Event of Default or Unmatured Event of Default hereunder or under the Lease
Agreement or the Agency Agreement shall have occurred and be continuing.
(b) Since December 31, 1996, there shall not have occurred any
material adverse change in the financial condition of the Lessee, the
Significant Sublessees and their consolidated subsidiaries which would
materially adversely affect the ability of the Lessee and the Significant
Sublessees to pay or perform any the Lessee Obligations.
(c) The following Transaction Documents shall have been executed and
delivered by the parties thereto and shall remain in full force and effect
and each Lender, the Lessor and the Equity Participant shall have received
one fully executed copy of each:
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(i) this Participation Agreement;
(ii) the Lease Agreement and the Sublease Agreements, including
Lease Supplements and Sublease Supplements relating to each Advance
and the payment of Purchase Price to the Leased Premises;
(iii) a Mortgage and Assignment Agreement relating to each of the
Leased Premises;
(iv) the Loan Agreement;
(v) the Trust Agreement; and
(vi) the Agency Agreement.
(d) On or prior to the initial Closing Date, the Lessee and the
Significant Sublessees shall have furnished, insofar as each of them is
concerned, to the Lessor, each Lender and the Equity Participant:
(i) A copy of the resolutions of the board of directors of the
Lessee and the Significant Sublessees, certified as of the Closing
Date by the secretary or an assistant secretary of the Lessee or the
Significant Sublessees, as the case may be, duly authorizing the
execution, delivery and performance of the Transaction Documents to
which the Lessee and the Significant Sublessees are a party;
(ii) A certificate of the secretary or an assistant secretary of
the Lessee and the Significant Sublessees dated the Closing Date as to
(A) its certificate or articles of incorporation and by-laws (which
shall be attached thereto) and (B) the incumbency and signatures of
the Person or Persons authorized to execute the Transaction Documents
to which the Lessee and the Significant Sublessees are a party on
behalf of the Lessee or Significant Sublessees, as the case may be;
(iii) Certified copies of the certificate of incorporation of the
Lessee and the Significant Sublessees; a good standing certificate of
the Lessee and the Significant Sublessees, dated no later than five
(5) days from the initial Closing Date, from the states of Delaware,
California and Florida;
(iv) A favorable written opinion of counsel for the Lessee dated
the Closing Date in form and substance acceptable to the Lessor, each
Lender and the Equity Participant.
(e) on or prior the initial Closing Date each Lender shall have
received the Notes completed and duly executed as provided in the Loan
Agreement.
(f) All proceedings taken in connection with the Transaction Documents
and the transactions contemplated thereby shall be satisfactory to the
Lessor and each Lender and their respective counsel, and the Lessor and
each Lender shall have been furnished with original or certified copies of
such other documents and papers and with such
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opinions of counsel, as it may reasonably request in connection therewith,
all in form and substance satisfactory to the Lessor, each Lender, the
Equity Participant and such counsel.
SECTION 3.02. Additional Conditions Precedent with Respect to Closing
-------------------------------------------------------
Dates for the Leased Premises. The obligations of each Lender to advance funds
- -----------------------------
with respect to each Leased Premises and of the Equity Participant to make an
equity contribution pursuant to Section 1.02 hereof on each Closing Date shall
be subject to the following additional conditions:
(a) Each Leased Premises shall be free of all Liens, other than
Permitted Liens; and the Purchase Price plus Estimated Improvement Cost of
all Leased Premises will not exceed $30,000,000, and the number of Leased
Premises shall not exceed twenty stores and two distribution centers.
(b) The Lessee shall have provided evidence satisfactory to the Lessor
and the Agent of compliance with Section 2.01(i) hereof.
(c) On or prior to the Closing Date related to a Leased Premises, the
Lessee shall have delivered, or cause to be delivered at the Lessee's
expense:
(i) to the Lessor, the Agent and the Owner Trustee, a "Phase I"
environmental assessment of such Leased Premises performed by the
Environmental Consultant and, if indicated by the results of such
Phase I assessment, such additional environmental studies or
investigations as the Environmental Consultant or the Agent deem
desirable together with an initial report of the Environmental
Consultant based on the results of such environmental investigations,
as well as such other environmental assessment data as may be required
by the Agent, which in all respects shall be satisfactory to the Agent
in its sole discretion and as to which no Lender requesting a copy of
any such assessment shall have reasonably objected within 5 Business
Days after receipt of a copy of such assessment (the Agent shall
deliver a copy of each such assessment to any Lender requesting same);
(ii) to the Lessor and the Agent, the Initial Construction Plans
for such Leased Premises, an "as is" valuation as of the Closing Date
and an "as completed" valuation (the "Appraised Value") of such Leased
Premises by the Appraiser, which in all respects shall be satisfactory
to the Agent in its sole discretion (including an estimated cost for
each of such Leased Premises of not greater than 110% of the Appraised
Value thereof), which shall be prepared in accordance with FIRREA and
which shall render market values of the Leased Premises as of the
expected Completion Date, assuming that all requisite permits,
including without limitation a permanent certificate of occupancy,
have been issued;
(iii) to the Lessor and the Agent, a certificate from the Lessee's
insurance broker to the effect that the insurance specified in Section
10 of the Lease Agreement with respect to the Leased Premises is in
full force and effect pursuant to insurance policies issued to the
Lessee and that such policies otherwise fulfill the requirements of
such Section;
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(iv) to the Lessor, a duly executed and acknowledged (1) grant
deed or warranty deed, (2) Memorandum Lease and (3) Sublease and
Assignment, with respect to such Leased Premises, in recordable form
(with arrangements satisfactory to the Agent for the recording
thereof);
(v) to the Agent, on behalf of the Lenders, a duly executed and
acknowledged Mortgage and Assignment Agreement applicable to the
Leased Premises, in recordable form (with arrangements satisfactory to
the Agent for the recording thereof);
(vi) to the Lessor, an A.L.T.A. Extended Coverage Owner's Policy
of Title Insurance for such Leased Premises insuring Lessor's fee
simple title in and to such Leased Premises, subject only to such
matters as are approved by the Lessor, issued by a title insurer
satisfactory to the Lessor, with such reinsurance as is satisfactory
to Lessor, with such C.L.T.A. Endorsements (or their equivalents) as
Lessor may require (each, an "Owner's Policy");
(vii) to the Agent, on behalf of the Lenders, an A.L.T.A. Extended
Coverage Construction Loan Policy of Title Insurance in the full
amount of the Estimated Improvement Cost plus the Purchase Price of
such Leased Premises insuring Lessor's fee simple title in and to such
Leased Premises and that the Agent on behalf of the Lenders, holds a
first priority lien on such Leased Premises, subject only to such
matters as are approved by Lenders, issued by a title insurer
satisfactory to the Lessor, with such reinsurance as is satisfactory
to Lessor, and with C.L.T.A. Endorsements A and B, and Nos. 100,
103.7, 111.5, 111.10, 116, 116.1, 116.4, 116.7 (or their equivalents),
or other construction loan binder or endorsement as may be
satisfactory to the Agent, and such other C.L.T.A. Endorsements or
their equivalents as the Agent may require, and a tie-in endorsement
pertaining to the title policies covering the other Leased Premises
(each, a "Loan Policy");
(viii) to Lessor, the Agent, and the Lenders such other deeds,
quitclaim deeds, bills of sale, security agreements, financing
statements, subordination agreements, estoppel agreements, or other
materials, documents, instruments as may be required by the Lessor,
the Agent, or the Lenders in connection with the acquisition of, or
the creation, continuation, or perfection of a first lien on, the
Leased Premises (with arrangements satisfactory to the Agent for any
requirement for filing or recording thereof); and
(ix) to the Lessor and the Agent, evidence satisfactory to the
Lessor and each Lender of the completion of the recordings and filings
as may be necessary or, in the opinion of the Lessor or any Lender,
desirable or required to create or perfect the Lessor's ownership
interest in the Leased Premises.
SECTION 3.03. Additional Conditions Precedent to Advances. The obligation
-------------------------------------------
of each Lender to advance funds with respect to the Notes and of the Equity
Participant to make an equity contribution pursuant to Sections 1.02 and 1.03
hereof on each Advance Date pursuant hereto shall be subject to the conditions
specified in Section 3.01 hereof and the following additional conditions:
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(a) The Lessee shall have satisfied all conditions and requirements
under the Agency Agreement for reimbursement by the Lessor of the Lessor's
Share of Improvement Cost on such Advance Date;
(b) On or prior to the final Advance Date, with respect to each of the
Leased Premises, the reissuance by the title insurer of the applicable
Owner's Policy to the Lessor in form and substance acceptable to the
Lessor, together with such additional endorsements as the Lessor may
require (each, a "Final Owner's Policy"), and the applicable Loan Policy to
the Agent in form and substance acceptable to the Agent, together with an
additional C.L.T.A. Endorsement No. 122 (or its equivalent), and such other
endorsements as Agent may require (each, a "Final Loan Policy"); and
(c) To the extent required in connection with the issuance of the
[Final Owner's Policy and] the Final Loan Policy, a survey (each, a
"Survey") of the Leased Premises which certifies to the Agent, the Lessor,
the Lessee, and the title insurer that (a) the survey is prepared in
accordance with "Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys," jointly established and adopted by ALTA and ACSM in 1992,
meeting the accuracy requirements of an Urban Survey, as defined therein
and including items 1-4 (with land area shown in acres or square feet, as
appropriate) 6-11 and 13 of Table A thereof; (b) that the information shown
on the survey is true and correct as of the last revision date; (c) the
property description included in the Survey is identical to the property
description attached to the applicable Owner's Policy and Loan Policy, and
all recorded easements, set-backs and other matters of a similar nature
shown on the title commitment, whether burdening or benefitting the Land,
have been correctly platted and identified on the Survey; (d) all evidence
showing use of the surveyed land (the "Land") by occupants other than the
owner or lessees specifically identified in the Owner's Policy or the Loan
Policy is noted on the Survey; (e) all streets or roads adjoining the Land
are shown and the Land has access to and from a public roadway dedicated
and currently in use as such, as shown on the survey; (f) if the Land is
composed of several parcels, all interior lines, courses and distances are
correctly and fully set forth on the survey and there are no gaps or
unclosed interior lines; and (g) all evidence of easements or rights of way
benefiting the Land on or across adjoining land are indicated on the
survey.
ARTICLE IV
Agreements
----------
SECTION 4.01. Basic Reporting Requirements of the Lessee and the Permitted
------------------------------------------------------------
Sublessees. Each of the Lessee and the Significant Sublessees hereby covenant to
- ----------
the Lessor, each Lender, the Equity Participant and the Agent that each shall
furnish, insofar as each of them is concerned:
(a) As soon as available and in any event within 90 days after the end
of each fiscal year of the Lessee, an unqualified audit report certified by
Arthur Andersen LLP, or such other independent certified public accountants
reasonably acceptable to the Lessor and the Agent, prepared in accordance
with generally accepted accounting principles on a consolidated basis for
the Lessee and its Subsidiaries, including balance sheets as of the
16
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end of such period, related profit and loss statement, statements of
changes in stockholders equity, and a statement of cash flows.
(b) As soon as available and in any event within 60 days after the end
of each of the first three quarters of each fiscal year of the Lessee a
consolidated unaudited balance sheet as of the close of such period and a
consolidated profit and loss statement for the period from the beginning of
such fiscal year to the end of such quarter.
(c) Within three days after any Senior Financial Officer of the Lessee
or the Significant Sublessees, as the case may be, obtains knowledge of any
Event of Default under the Lease Agreement, if such Event of Default is
then continuing, a certificate of a Senior Financial Officer of the Lessee
or the Significant Sublessees, as the case may be, setting forth the
details thereof and the action which the Lessee or the Significant
Sublessees, as the case may be, are taking or propose to take with respect
thereto.
(d) Promptly upon the mailing thereof to the shareholders of the
Lessee, copies of all financial statements, reports and proxy statements so
mailed.
(e) Promptly upon the filing thereof, (i) in addition to the annual
statement and quarterly statements referred to in clauses (a) and (b)
above, copies of all other financial statements of the Lessee and (ii)
copies of all registration statements and reports on Forms 10-K, 10-Q and
8-K (or their equivalents), if any, which the Lessee shall have filed with
the Securities and Exchange Commission with respect to debt securities or
preferred or common stock issued by the Lessee, as the case may be.
(f) As soon as practicable and in any event within 60 days after the
close of each of the first three fiscal quarters of each fiscal year of
each of the Lessee and the Significant Sublessees, a certificate of a
Senior Financial Officer of the Lessee and the Significant Sublessees, as
the case may be, stating that, to the knowledge of such officer, no Event
of Default or Unmatured Event of Default under any of the Transaction
Documents has occurred and is continuing or, if any such Event of Default
or Unmatured Event of Default has occurred and is continuing, stating the
nature and period of existence thereof and the steps which the Lessee or
the Significant Sublessees, as the case may be, is taking to rectify the
same.
(g) As soon as practicable, and in any event within 120 days after the
close of each fiscal year of the Lessee and the Significant Sublessees, a
certificate signed on behalf of the Lessee and the Significant Sublessees
by a Senior Financial Officer of the Lessee stating:
(i) that the Leased Premises have been kept in good order and
repair or are then being repaired in accordance with Section 9 of the
Lease Agreement; and
(ii) that the Lessee and the Significant Sublessees have paid all
taxes to be due in respect of the Leased Premises;
Such certificate shall also cover each of the matters specified in Section
4.01(f) as to the final fiscal quarter of such fiscal year.
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(h) The Lessee and the Significant Sublessees shall also furnish to
the Lessor, each Lender, the Equity Participant and the Agent, such
additional information concerning the location, condition, use and
operation of the Leased Premises and the financial condition and operations
of the Lessee and the Significant Sublessees as such parties may reasonably
request from time to time.
SECTION 4.02. Assumption of Risk and Indemnification.
--------------------------------------
(a) The Lessee does hereby assume liability for, and does hereby agree
to indemnify, protect, save and keep harmless the Trust Company, the
Lessor, the Agent, the Equity Participant and each Lender and their
respective successors, assigns, representatives, directors, officers,
employees, agents and servants (each an "Indemnitee") on an after-tax basis
from and against, and does hereby agree to pay, when due, as Supplemental
Rent, any and all liabilities, obligations, losses, damages, penalties,
claims, actions, suits, costs, expenses and disbursements, including,
without limitation, legal fees and expenses, of whatsoever kind or nature,
whether foreseen or unforeseen, imposed upon, incurred by or with respect
to or asserted against any Leased Premises or any Indemnitee (other than
Taxes), in any way relating to or arising out of the entering into and
performance of the Transaction Documents including without limitation (i)
design, construction, assembly, manufacture, financing, mortgaging,
ownership, titling or retitling, lease, sublease, rental, use,
installation, abandonment, dismantling, possession, operation, condition,
repair, replacement, reconstruction, sale, transfer, return or other
disposition of any Leased Premises or any part of any thereof or interest
therein, including without limitation those in any way relating to or
arising out of or alleged to arise out of (A) loss or damage to any
property or death or injury to any Person, (B) any latent or other defects
whether or not discoverable by any Indemnitee, the Lessee or the Permitted
Sublessees, (C) any claim based on strict liability in tort, or (D) any
claim based upon any noncompliance with or violation of any Environmental
Laws, including without limitation all costs, fines and penalties arising
from any such violation or noncompliance, or from the failure to report to
any applicable governmental body any spills, discharges or maintenance of
Hazardous Materials, and including all costs and expenses of clean-up and
removal of spills and Hazardous Materials; or (ii) any action taken by the
Lessee or the Permitted Sublessees on behalf of the Lessor without
authority under the Transaction Documents or out of such failure to act
where silence implies acceptance, or any failure on the part of the Lessee
to perform or comply with any of the terms of any Transaction Document or
breach of any representation or warranty of the Lessee contained in any
Transaction Document or any document delivered pursuant thereto; provided,
however, that nothing in this Section 4.02 shall be construed so as to
require the Lessee to indemnify any Indemnitee for its own gross negligence
or willful misconduct or as to matters among the individual Lenders.
The Lessee shall be obligated under this Section 4.02 irrespective of
whether any Indemnitee shall also be indemnified with respect to the same
matter under any other agreement by any other Person. The Lessee shall
forthwith upon demand of any such Indemnitee reimburse such Indemnitee for
all indemnified liabilities incurred by it or shall pay and discharge such
liabilities directly. The Lessee shall be subrogated to an Indemnitee's
rights in any matter with respect to which the Lessee has actually
reimbursed such Indemnitee for amounts expended by it or has actually paid
such amounts directly pursuant to this Section 4.02. In case any action,
suit or proceeding is brought against any Indemnitee in connection with any
claim indemnified against
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hereunder, such Indemnitee will, promptly after receipt of notice of the
commencement of such action, suit or proceeding, notify the Lessee thereof,
enclosing a copy of all papers served upon such Indemnitee, but failure to
give such notice or to enclose such papers shall not relieve the Lessee
from any liability hereunder. If no Event of Default or Unmatured Event of
Default under any of the Transaction Documents shall have occurred and be
continuing, no Indemnitee will settle any such action, suit or proceeding
without the prior written consent of the Lessee (which will not be
unreasonably withheld) unless such Indemnitee waives its right to
indemnification in respect thereof. The Lessee may, and upon such
Indemnitee's request will, at the Lessee's expense, resist and defend such
action, suit or proceeding, or cause the same to be resisted or defended by
counsel selected by the Lessee and reasonably satisfactory to such
Indemnitee and in the event of any failure by the Lessee to do so, the
Lessee shall pay all costs and expenses (including, without limitation,
attorney's fees and expenses) incurred by such Indemnitee in connection
with such action, suit or proceeding.
(b) The Lessee agrees promptly to pay when due, and to indemnify and
hold each Indemnitee, harmless from, all license and registration fees and
all taxes, fees, levies, imposts, recording duties, charges or withholdings
of any nature whatsoever, together with any assessments, penalties, fines,
additions to tax or interest thereon (individually, a "Tax," and
collectively called "Taxes"), howsoever imposed (whether imposed upon any
Indemnitee, the Leased Premises or any part thereof or interest therein or
otherwise), by any federal, state or local government or taxing authority
in the United States, upon or with respect to, based upon or measured by:
(i) any Leased Premises or any part of any thereof or interest
therein;
(ii) the construction, acquisition, purchase, financing, mortgaging,
ownership, acceptance, rejection, delivery, leasing, subleasing,
insuring, inspection, registration, assembly, abandonment,
preparation, installment, possession, use, operation, return,
presence, storage, repair, transfer of title, modification,
rebuilding, imposition of any lien, sale or other disposition of any
Leased Premises or any part of any thereof or interest therein;
(iii) the payment of Basic Rent, Supplemental Rent (including, without
limitation, Termination Value) and other sums payable hereunder, the
rentals, receipts or earnings arising from the purchase, financing,
ownership, delivery, leasing, possession, use, operation, return,
transfer of title, sale or other disposition of any Leased Premises or
any part thereof or interest therein; or
(iv) this Participation Agreement the other Transaction Documents and
all documents or agreements executed and delivered in connection with
the purchase, improvement and leasing of the Leased Premises.
Notwithstanding the provisions of this Section 4.02(b), the Lessee shall
not be required to indemnify any Indemnitee in respect of any of the
following:
(x) U.S. federal income taxes imposed on the net income of such
Indemnitee; and
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(y) Taxes on or measured solely by net income (including franchise
taxes) imposed or assessed by any foreign, state or local government
or taxing authority.
The Lessee will indemnify each Indemnitee for the full amount of Taxes
(including, without limitation, any Taxes imposed by any jurisdiction on
amounts payable under this Section 4.02(b)) paid by such Indemnitee and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto.
(c) The Lessee agrees to pay, indemnify and hold harmless the Agent,
the Lessor and each Lender (which term includes holders of Notes) under the Loan
Agreement for any additional amounts due the Agent, the Lessor or any such
Lender pursuant to the provisions of Section 2.02(f), (g) or (h) of the Loan
Agreement or pursuant to the provisions of 2.05(d) of the Loan Agreement if the
loss or expense referred to therein has resulted from the Lessee having failed
to provide advance notice of a payment under the Lease Agreement in accordance
with any applicable notice provisions therein. The Lessee agrees to pay,
indemnify and hold harmless the Equity Participant pursuant to the preceding
sentence as if the Equity Participant were a Lender.
(d) This Section 4.02 shall become and be effective and in full force
and effect from the date of this Participation Agreement and shall remain in
effect notwithstanding the expiration or other termination of the Lease Term
insofar as it relates to an event or state of facts which occurred or existed or
which is alleged to have occurred or existed prior to such expiration or
termination.
(e) If, with respect to any holder of a Note, a condition arises or an
event occurs which would, or would upon the giving of notice, result in the
payment by the Lessee of any amounts pursuant to Section 4.02(b) or (c) hereof,
such holder promptly upon becoming aware of the same, shall notify the Lessee
(with a copy to the Agent) thereof and shall take such steps as may be
reasonable to it to mitigate the effects of such condition or event including
the designation of a different office for booking of the transactions
contemplated hereby or furnishing of the proper certificates under any
applicable tax laws, tax treaties and conventions, provided that such holder
shall be under no obligation to take any step that, in its good-faith opinion,
would be disadvantageous to it or result in its incurring any additional costs
in performing its obligations hereunder.
SECTION 4.03. Certain Covenants of the Lessee and the Significant
---------------------------------------------------
Sublessees. Each of the Lessee and the Significant Sublessees hereby covenant
- ----------
to the Lessor and each Lender that:
(a) Each of the Lessee and the Significant Sublessees shall permit
such Persons as the Lessor or Agent may designate to examine the Lessee's
or the Significant Sublessees', as the case may be, books and records
relating to the Leased Premises and take copies and extracts therefrom and
to discuss generally the affairs of the Lessee or the Significant
Sublessees, as the case may be, with its officers, employees and
independent accountants upon advance notice at such times and as often as
the Lessor or Agent may reasonably request. The Lessee and the Significant
Sublessees hereby authorize such officers, employees and independent
accountants so to discuss with the Lessor or the Agent the affairs of such
Person.
20
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(b) The Lessee shall not consolidate with or merge into another Person
or sell substantially all of its assets to another Person, unless, in the
case of a merger or consolidation, after giving effect to the transaction:
(i) no Event of Default or Unmatured Event of Default hereunder and under
the Lease Agreement shall have occurred and be continuing or would occur as
a result of such transaction; and (ii) the surviving corporation shall be
the Lessee.
(c) The Lessee and each Significant Sublessee shall not at any time
permit the Consolidated Tangible Net Worth of Lessee at any time to be less
than $100 million plus 50% of the net income earned in those fiscal
quarters for which net income is positive, and which end after January 1,
1995; provided that if the Lessee enters into a financing agreement after
--------
the date hereof containing a similar or comparable covenant with a higher
minimum, such higher minimum shall thereafter apply for the purposes of
this subsection.
(d) The Lessee and each Significant Sublessee shall not at any time
permit the ratio of (i) the Consolidated Indebtedness of Lessee to (ii) the
Consolidated Cash Flow of Lessee at any time to exceed 4.00 to 1.00;
provided that if Lessee enters into a financing agreement after the date
hereof containing a similar or comparable comment with a lower ratio, such
lower ratio shall thereafter apply for the purposes of this subsection.
(e) The Lessee shall ensure that, at all times, all obligations and
liabilities of the Lessee under the Lease Agreement and all obligations and
liabilities of each Significant Sublessee under each Permitted Sublease
will rank in right of payment either pari passu or senior to all other
Indebtedness of the Lessee or such Significant Sublessee, as the case may
be.
(f) Neither the Lessee nor any of its Subsidiaries will declare or
make any Restricted Payment; provided that the Lessee and any Subsidiary
--------
may declare and distribute dividends, if no Event of Default or Unmatured
Event of Default shall have occurred and be continuing or would occur as a
result of such transaction.
(g) The Lessee shall continue to own 100% of the equity stock of each
of the Significant Sublessees and it shall not decrease its ownership of
the equity stock of any other Permitted Sublessee which shall in any event
be no less than 51%.
(h) The Lessee shall maintain the property and liability insurance
required by Section 10 of the Lease Agreement.
(i) The Lessee and the Significant Sublessees shall keep proper books
of records and accounts in which full, true and correct entries in
conformity with U.S. generally accepted accounting principles consistently
applied and all applicable laws shall be complied with in its dealings and
transactions in relation to its business activities.
(j) The Lessee, the Significant Sublessees and their Subsidiaries each
will pay and discharge promptly when due:
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(1) all taxes, assessments and governmental charges and levies
imposed upon it, its income or profits or any of its properties,
before the same shall become delinquent; and
(2) all lawful claims of materialmen, mechanics, carriers,
warehousemen, landlords and other similar Persons for labor,
materials, supplies and rentals that, if unpaid, might by law become a
Lien (other than a Permitted Lien) upon any of its property;
provided, however, that no amount due with respect to clause (a) or clause
--------
(b) above need be paid while the same is being contested in good faith by
appropriate proceedings diligently conducted so long as (i) adequate
reserves shall have been established and maintained in accordance with
generally accepted accounting principles with respect thereto, (ii) title
of the Lessee or any Subsidiary, as the case may be, to the particular
property shall not be divested thereby, and (iii) the right of the Lessee
or such Subsidiary to use the particular property shall not be materially
adversely affected thereby. The Lessee and its Subsidiaries each will file
within the period prescribed by applicable law and regulations (including
any extensions legally provided for and validly obtained) all federal,
state and local tax returns and all other tax reports as required by
applicable law.
(k) The Lessee and the Significant Sublessees shall:
(1) comply with, and undertake all efforts to cause compliance by
all tenants and subtenants, if any, with, all applicable Environmental
Laws and obtain and comply with and maintain, and undertake all
efforts to cause all tenants and subtenants to obtain and comply with
and maintain, any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws.
(2) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with
all lawful orders and directives of all governmental authorities
regarding Environmental Laws.
(3) defend, indemnify and hold harmless each Indemnitee from and
against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature,
known or unknown, contingent or otherwise, arising out of, or in any
way relating to the asserted or established violation of,
noncompliance with or liability under, any Environmental Law
applicable to the operations (including, without limitation, disposal
activities) of the Lessee, the Permitted Sublessees or any of their
Subsidiaries or any property owned or leased at any time by the
Lessee, the Permitted Sublessees or any of its Subsidiaries, or any
orders, requirements or demands of governmental authorities related to
such operation or property, including, without limitation attorney's
and consultant's fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent that
any of the foregoing are found by a final and nonappealable decision
of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the party seeking indemnification
therefor. The
22
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agreements in this paragraph shall survive repayment of the Notes,
the Certificates and the payment of all other obligations, and are in
addition to, and not in limitation of, Section 4.02(a) hereof.
(l) The Lessee shall promptly give notice to the Lessor and the Agent
of:
(1) any (i) default or event of default under any contractual
obligation of the Lessee or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the Lessee or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, would have a Material Adverse Effect;
(2) any litigation or proceeding affecting the Lessee or any of
its Subsidiaries in which the amount involved is $5,000,000 or more
and not covered by insurance;
(3) the following events, as soon as possible and in any event
within 15 days after the Lessee knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of,
any Multiemployer Plan or (ii) the institution of proceedings or the
taking of any other action by the PBGC or the Lessee or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of,
any Plan;
(4) any development or event which would have a Material Adverse
Effect; and
(5) the following events, as soon as possible and in any event
within 15 days after the Lessee knows or has reason to know thereof:
(i) any condition, circumstance, occurrence or event that would result
in a material liability under Environmental Laws or would result in
the imposition of any Lien or other restriction on the title,
ownership or transferability of any Property; and (ii) any proposed
action to be taken by the Lessee or any Subsidiary that would subject
the Lessee or any Subsidiary to any material additional or different
requirements or liabilities under Environmental Law.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Senior Financial Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
SECTION 4.04. Acknowledgment of Notice of Assignment. The Lessee and each
--------------------------------------
Significant Sublessee acknowledges (a) notice of and recognizes the
contemporaneous and future assignments of the Lease Agreement and the Subsidiary
Subleases and all Basic Rent, Supplemental Rent and other amounts payable
thereunder (except for the Excluded Amounts), due and to become due thereunder
to the Lenders pursuant to the Mortgage and Assignment Agreements, (b) that with
respect to each Leased Premises, the Lessor on the related Closing Date will
grant a security interest (i) in the Lease Agreement, the Subsidiary Subleases
and all
23
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Basic Rent, Supplemental Rent and other amounts payable thereunder (except for
the Excluded Amounts) due and to become due thereunder in respect of such Leased
Premises and (ii) all its right title and interest in such Leased Premises, to
the Lenders and the Equity Participant pursuant to a Mortgage and Assignment
Agreement, and (c) receipt of an executed copy of the Loan Agreement and the
form of Mortgage and Assignment Agreement.
SECTION 4.05. Implementation of Assignment. As an inducement to the Lenders
----------------------------
and the Equity Participant to accept such assignment and to finance the Leased
Premises, the Lessee, each Significant Sublessee and the Lessor hereby agree:
(a) That the Basic Rent and all Supplemental Rent (other than the
Excluded Amounts) payable by the Lessee shall be paid directly to Agent or
(with respect to Supplemental Rent) upon its written order until the
indebtedness evidenced by the Notes shall have been discharged.
(b) No consent of the Lessee, the Significant Sublessees or the Lessor
is required for any assignment or other transfer by Agent of its rights,
obligations or interests arising under the Loan Agreement, this Agreement
and the Mortgage and Assignment Agreements (1) in connection with a
transfer of all such rights, obligations and interests (other than rights
to indemnification relating to events or conditions occurring or existing
prior to such transfer) to a replacement agent under the Loan Agreement
(including a successor by merger or consolidation to Credit Lyonnais New
York Branch), or (2) in connection with the enforcement by the Agent of
remedies under the Loan Agreement and the Mortgage and Assignment
Agreements, provided that any assignment or transfer under clause (1) shall
be contingent upon the assignee or transferee agreeing in writing with the
Lessee that it will be bound by the terms of Section 6.13 hereof. Each such
assignment or transfer pursuant to this Section 4.05(b) shall be subject to
the Lessee's rights under the Lease Agreement. Without limiting the
foregoing or any of the provisions of Section 5 of the Lease Agreement,
each of the Lessee and the Significant Sublessees further acknowledges and
agrees that the rights of Lenders in and to the sums payable by the Lessee
or each Significant Sublessee under any provision of the Lease Agreement or
the Subsidiary Subleases, as the case may be, shall not be subject to any
abatement whatsoever and shall not be subject to any defense, set-off,
counterclaim or recoupment whatsoever whether by reason of failure of or
defect in the Lessor's interest or any interruption from whatsoever cause
in the use, operation or possession of any Leased Premises any or part of
any thereof, or any damage to or loss or destruction of the Leased Premises
or part of any thereof, or by reason of any other indebtedness or
liability, howsoever and whenever arising, of the Lessor to the Lessee, the
Significant Sublessees or to any other Person or for any cause whatsoever,
it being the intent hereof that the Lessee shall be unconditionally and
absolutely obligated to pay directly to Agent all of the Basic Rent and
Supplemental Rent (except the Excluded Amounts, which, unless the Lessor
notifies the Lessee to the contrary, shall remain payable directly to the
Lessor) payable by the Lessee hereunder. Notwithstanding the assignment,
the Lessee, the Significant Sublessees and the Lessor acknowledge that all
obligations of the Lessor to the Lessee under the Lease Agreement shall be
enforceable by the Lessee against, and only against, the Lessor.
(c) Until the receipt of notice from Agent that the Notes and all
other amounts due the Lenders or the Agent in respect of the Leased
Premises or otherwise
24
<PAGE>
payable to any of them hereunder shall have been paid, to direct all
notices under the Lease Agreement to Agent at the address set forth on the
signature pages hereof.
(d) That, until the receipt of notice by Agent, as aforesaid, that the
Notes and all other amounts due the Lenders or the Agent in respect of the
Leased Premises or otherwise payable to any of them hereunder shall have
been paid, all rights of the Lessor under the Lease Agreement and the
Subsidiary Subleases shall be exercisable by the Agent, as assignee of the
Lessor, on behalf of the Lenders (but only to the extent provided by the
terms of the Mortgage and Assignment Agreements), and that such rights
shall not be subject to any set-off, counterclaim, recoupment or defense
alleged to be due by reason of any past, present or future claims against
the Lessor, Agent or any Lender or any other Person for any reason
whatsoever; nor, except as otherwise expressly provided in the Transaction
Documents, shall the obligations of the Lessee and the Significant
Subleases under the Transaction Documents be otherwise affected by the
invalidity or unenforceability or lack of due authorization of any
Transaction Document or any insolvency of or the bankruptcy, reorganization
or similar proceeding against the Lessor, or for any combination of the
foregoing.
(e) That, until the receipt of notice from Agent, that the Notes and
all other amounts due the Lenders or the Agent in respect of the Leased
Premises shall have been paid, it shall obtain the consent or approval of
Agent prior to taking any action for which the consent or approval of the
Lessor is required by the terms of the Lease Agreement or any of the other
Transaction Documents.
(f) That, until the receipt of notice from Agent that the Notes and
all other amounts due the Lenders or the Agent in respect of the Leased
Premises or otherwise payable to any of them hereunder shall have been paid
the Agent, as assignee of the Lessor, shall be entitled to enforce, for the
benefit of the Lenders all covenants and obligations to be performed by the
Lessee under the Lease Agreement and by the Significant Sublessees under
the Subsidiary Subleases as if named therein as "the Lessor", to the full
extent provided in the Lease Agreement, except to the extent the Lessee's
covenants and obligations relate to Excluded Amounts.
SECTION 4.06. Covenants of the Lenders. Each of the Lenders, and each
------------------------
subsequent holder of a Note by its acquisition thereof, agrees that:
(a) any transfer by it of the Notes shall be effected in a transaction
exempt from the requirements of section 5 of the Securities Act of 1933, as
amended;
(b) if any Lender shall receive (by voluntary payment, realization
upon security, set-off or from any other source) any amount on account of
the Notes, interest thereon, or any other obligation contemplated by the
Mortgage and Assignment Agreements or the other Transaction Documents to be
made by the Lessor or the Lessee, pro rata to the holders of the Notes of a
particular series or to another class of Lenders, in greater proportion
than any such amount received by any other Lender, then the Lender
receiving such proportionately greater payment shall notify each other
Lender and Agent of such receipt, and equitable adjustment will be made so
that, in effect, all such excess amounts will be shared ratably among all
of the Lenders;
25
<PAGE>
(c) each Lender hereby appoints Credit Lyonnais New York Branch, as
Agent in accordance with Section 7.01 of the Loan Agreement and agrees to
be bound by the Loan Agreement, including without limitation, Article VII
thereof and the Mortgage and Assignment Agreements; and
(d) each Lender agrees that it will not transfer or assign any
interest in any Note (including any participation or "blind" participation
in any Note) (1) in any way which involves public advertising of the
availability of or public solicitation of customers for any such interest,
(2) if, after giving effect to such transaction, there would be more than
six holders of interests (as registered owners or otherwise) in the Notes
or a holder would own Notes of a principal amount of less than $2.5
million, and (3) unless that Person acquiring such interest agrees in
writing with the Lessee to be bound by the terms of this Section 4.06(d)
and of Sections 4.08 and 6.12 hereof.
SECTION 4.07. Withholding Taxes.
-----------------
(a) Each Lender which is not a bank organized under the laws of the
United States of America or any state thereof shall deliver to the Agent
for delivery to the Lessee copies, completed and executed as required, of
Form 1001 or Form 4224, as applicable, in each case as promulgated pursuant
to the Code. Each such Lender represents and warrants to the Lessee that
the information contained in such Form will be accurate in all material
respects, and agrees to notify the Lessee of any required changes therein.
(b) The Lessee shall make all payments hereunder and under the other
Transaction Documents (whether of interest, fees or otherwise) free and
clear of, and without deduction for or on account of, any present or future
taxes, levies, imposts and assessments pursuant to the tax laws of the
United States of America or any state or commonwealth thereof, and all
interest, penalties and similar liabilities with respect thereto
(collectively, "Withholding Taxes"). If any Withholding Taxes are imposed,
the Lessee will pay the full amount thereof, together with any additional
amounts as may be necessary so that every net payment of any amount due
hereunder, after deducting or providing for any Withholding Taxes, will not
be less than the amount provided for herein. Each Lender agrees that it
will designate a different lending office if such designation will avoid
the need for, or reduce the amount of, any payment or withholding by the
Lessee provided above and, in the sole judgment of such Lender, will not be
otherwise disadvantageous to such Lender.
(c) If the Lessee shall pay any Withholding Taxes as provided in this
Section 4.07, or shall make any deduction or withholding from amounts
payable hereunder in respect of any Withholding Taxes, the Lessee shall
forward as soon as possible to the Agent official receipts or other
evidence acceptable to the Agent establishing payment, deduction or
withholding of such amounts.
(d) The Lessee promptly shall pay all taxes, assessments and other
governmental charges and governmental fees levied or assessed in connection
with the execution and delivery of Transaction Documents, and the
performance by the parties thereto of the transactions contemplated hereby
and thereby.
26
<PAGE>
SECTION 4.08 Replacement for Illegality, Burdensome Indemnity or Other
---------------------------------------------------------
Events. (a) If (i) the Notes held by any Lender must be converted into Base Rate
- ------
Notes pursuant to Section 2.02(d) of the Loan Agreement or (ii) the Lessee is
required to make payments under Section 4.02(b) or (c) hereof to a Lender and
such payments are in the Lessee's good faith determination unduly burdensome,
are (or are reasonably likely to be) continuing, and can be avoided if an
institutional investor or a banking institution other than such Lender held such
Lender's Notes, the Lessee may request that such Lender be replaced by an
institution reasonably acceptable to the Agent, in which event the affected
Lender shall as promptly as reasonably practicable transfer its Notes to the
designated institution pursuant to the terms of the Loan Agreement.
(b) The purchase price for any sale of Notes pursuant to this Section
4.08 shall be equal to 100% of the aggregate unpaid principal amount of the
Notes held by the selling Lender plus all accrued and unpaid interest thereon to
the date of purchase, plus all Supplemental Rent then due and owing to the
selling Lender.
(c) If, at the Lessee's request, a Lender is caused to be replaced
pursuant to this Section 4.08, such replaced Lender shall be reimbursed by the
Lessee, within fifteen (15) days after demand therefor, for any resulting loss
or expense incurred by such Lender including, without limitation, any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after such replacement, as such Lender
shall have determined and notified the Lessee, which determination shall be
conclusive.
ARTICLE V
Assignment Of The Lessor's Interest
-----------------------------------
In addition to the assignment to Agent as security for the Lessor's
Obligations, the Lessor agrees that it will not transfer or assign any of its
interest under the Transaction Documents (1) in any way which involves public
advertising of the availability of or public solicitation of customers for such
interest, (2) if, after giving effect to such transaction, there would be more
than one holder of such interest, or (3) unless the Person acquiring such
interest (x) assumes in writing delivered to Agent, the Lessee and each Lender
all of the obligations of the Lessor under each Transaction Document to which
the Lessor is a party, and (y) has received the Required Lender's Consent, which
consent will not be unreasonably withheld, provided that such consent will not
be required in connection with (i) a transfer required by law, (ii) a transfer
to a Person acquiring or holding all of the Notes or an Affiliate of such
Person, or (iii) to Credit Lyonnais or any Affiliate thereof, and further
provided that such consent of the Lessee shall not be required if an Event of
Default under the Lease Agreement has occurred and is continuing. Any transfer
under clause (ii) above shall be to a Person whose net worth is at least
$25,000,000, or to an Affiliate of such Person whose obligations are
unconditionally guaranteed by such Person.
27
<PAGE>
ARTICLE VI
Miscellaneous
-------------
SECTION 6.01. Payment of Transaction Expenses. Whether or not any Closing
-------------------------------
is consummated, the Lessee shall pay: (i) the expenses of the Trust Company, the
Lessor, the Equity Participant and the Agent party hereto, including fees and
expenses of their respective counsel in connection with the negotiation and
preparation of the Transaction Documents subject to the limitations thereon set
forth in the Commitment Letter; (ii) the expenses of the Trust Company, the
Lessor, the Lessee, Agent, the Equity Participant and each Lender, including
fees and expenses of their respective counsel, (a) in connection with any
amendments, supplements, waivers or consents required under a Transaction
Document (other than in connection with a transfer of interests by the Lessor,
Agent or Lender (at a time at which no Event of Default under the Lease
Agreement has occurred and is continuing) which transfer is not required under
any Transaction Document or requested by the Lessee) or (b) requested by the
Lessee or any Significant Sublessee in connection with any of the Transaction
Documents, any refinancing or refunding of the Notes or any instrument issued in
substitution or replacement therefor; (iii) all recording and filing fees, stamp
taxes and other recording or filing taxes in connection with the recordation,
filing or release of any Transaction Document or financing statement or any such
amendments, waivers and consents and in connection with any continuation
statements or other documents filed to maintain and protect the rights of the
parties under the Transaction Documents; and (iv) any fees and expenses incurred
by the Trust Company, the Lessor, the Equity Participant, the Agent or any
Lender in connection with the enforcement of the obligations of the Lessee or
the Lessor under the Transaction Documents, except that the Lessee shall have no
liability for enforcement expenses incurred by any party as a consequence of any
failure of the Lessor to perform any of its obligations under any Transaction
Document to which it is a party to the extent such non-performance was not a
consequence of the failure of the Lessee to perform any of its obligations under
any of the Transaction Documents.
SECTION 6.02. Notices. Any notices required or permitted hereunder or under
-------
any Transaction Document, or by Law in respect of any Transaction Document,
shall be in writing and shall be deemed given and effective when personally
delivered, or if sent by registered or certified mail, four Business Days after
date of delivery to the post office, or if sent by overnight delivery (express
mail or overnight courier), when received, or if sent by telex or telecopy, upon
receipt, in each case addressed to the Person required to receive the same at
the address stated on the signature pages hereof or in accordance with the last
unrevoked written direction from such Person to the other parties hereto.
SECTION 6.03. Survival; Entire Agreement. All covenants, agreements,
--------------------------
indemnities, representations, and warranties contained in this Participation
Agreement, or any other Transaction Document or any document, agreement, or
certificate delivered pursuant hereto or thereto shall survive the Closing and
the expiration or other termination of this Participation Agreement. This
Participation Agreement and the other agreements and documents referred to
herein constitute the final and entire expression of the agreement of the
parties with respect to the matters contemplated hereby.
SECTION 6.04. Holders of Notes. All representations, warranties,
----------------
covenants, and agreements contained herein shall be binding on, and shall inure
to the benefit of, any transferee of any Lender as holder of a Note or Notes.
Any request, notice, direction, consent, waiver or
28
<PAGE>
other instrument or action by any holder of a Note or Notes shall bind the
successors and assigns of such holder.
SECTION 6.05. Amendments and Waivers. The terms of this Participation
----------------------
Agreement shall not be waived, altered, modified, amended, supplemented, or
terminated in any manner whatsoever except by written instrument signed by the
parties hereto. The Lenders, the Agent and the Lessor will not without the prior
written consent of the Lessee amend Section 1.01, 2.02(d) through 2.02(h),
2.05(d) or 2.08 of the Loan Agreement or otherwise amend the Loan Agreement in a
way that would have the effect of an amendment of the term "Required Lenders'
Consent", as used in the Loan Agreement, insofar as such term is applicable to
the taking or refraining from taking of action under the Lease Agreement by the
Lessor or Agent as assignee of the Lessor. No Transaction Document may be
amended in a manner which would, in the good faith judgment of Agent, adversely
affect the rights of Agent or materially increase the duties of the Agent
without the prior written consent of the Agent.
SECTION 6.06. Governing Law; Consent to Jurisdiction, etc. (a) This
-------------------------------------------
Participation Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.
(b) By the execution and delivery of this Participation Agreement,
each of the Lessee, each Significant Sublessee, the Trust Company, the Lessor,
the Equity Participant, each Lender and the Agent irrevocably:
(i) agrees that any action, suit or proceeding arising out of or
relating to this Participation Agreement or any other Transaction Document
or any statement, course of conduct, act, omission or event occurring in
connection herewith or therewith (collectively, "Related Litigation") may
be brought in any state or federal court of competent jurisdiction sitting
in the Borough of Manhattan, State of New York, accepts and submits itself
to the non-exclusive jurisdiction of any such court, acknowledges the
competency of any such court, and agrees that any judgment in any such
Related Litigation in any such court shall be binding and conclusive upon
such party and its property;
(ii) waives any objection which it now has or may hereafter have
to the laying of venue of any such Related Litigation in any such court or
that any such Related Litigation brought in any such court was brought in
an inconvenient forum, and waives any right to object, with respect to any
such Related Litigation brought in any such court, that such court does not
have jurisdiction over such party;
(iii) consents and agrees to service of any summons, complaint or
other legal process in any such Related Litigation by registered or
certified United States mail, postage prepaid, to such party at the address
for notices referred to in Section 6.02 hereof, and consents and agrees
that such service shall constitute in every respect valid and effective
service (but nothing herein shall affect the validity or effectiveness of
process served in any other manner permitted by law); and
(iv) waives the right to trial by jury in any such Related
Litigation.
29
<PAGE>
SECTION 6.07. Non-Recourse. This Participation Agreement is solely a
------------
corporate obligation and no recourse shall be had in respect of any obligation,
covenant, or agreement of this Participation Agreement, or referred to herein,
against any stockholder, incorporator, director, or officer, as such, past,
present, and future, of the parties hereto by the enforcement of any assessment
or by any legal or equitable proceeding, by virtue of statute or otherwise.
SECTION 6.08. Invalidity of Provisions. Any provision of this
------------------------
Participation Agreement that may be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 6.09. Counterparts. This Participation Agreement may be executed
------------
in any number of counterparts and by the different parties hereto on separate
counterparts, all of which together shall constitute a single agreement.
SECTION 6.10. No Reliance. The Lessee hereby acknowledges that in
-----------
negotiating the terms of this Participation Agreement, the Lease Agreement and
the other Transaction Documents to which it is a party and all other related
agreements and documents, it has sought, obtained and relied exclusively upon
such accounting, actuarial, tax and legal advice from its own or other
independent sources as it has deemed necessary, and further acknowledges that
none of Equity Participant nor any Lender nor any of the Lessor's or Lender's
parent, subsidiaries, affiliates or personnel has represented or warranted the
legal, income, sales or other tax, economic, accounting, or other consequences
of the terms and provisions hereof and of the other related agreements and
documents.
SECTION 6.11. Confidentiality. Except as may be required by law, except as
---------------
contemplated by any of the Transaction Documents and except as may be necessary
in connection with the enforcement of the Transaction Documents following an
Event of Default under the Lease Agreement, each of the Lessor, Agent and each
Lender agrees to use its best efforts not to disclose the existence of the
transactions contemplated hereby, the Transaction Documents or any of the
parties thereto or to permit any data or information which is clearly marked
"confidential" and which relates to the Lessee or the business of the Lessee
(other than any data or information which is otherwise publicly available or
which is received by any such party in a capacity in which such party is not
bound by any restriction of a nature similar to that imposed by this Section
6.11), which data or information the Lessor, Agent or such Lender possesses due
to such party's relation to the transactions contemplated hereby, to be out of
such party's possession or the contents thereof to be divulged to any other
Person; provided, however, that such data or information may be disclosed to the
attorneys or accountants of the Lessor, Agent or such Lender and to any Person
empowered by law to examine the records of the Lessor, Agent or such Lender and
to any potential assignee of the Lessor, Agent or such Lender, which potential
assignee shall have, in each case, agreed with such party for the benefit of the
Lessee to comply with the terms of this Section 6.11.
SECTION 6.12. Interpretation. All covenants, representations and Events of
--------------
Default contained herein and in the Transaction Documents shall be given
independent effect, so that if any action or condition would violate any of such
covenants, would breach any of such representations or would constitute any of
such Events of Default, the fact that such action or condition would not violate
or breach another covenant or representation or constitute another
30
<PAGE>
Event of Default shall not avoid the violation of such covenant, representation
or Event of Default.
Unless the context of the relevant Transaction Document otherwise clearly
requires, references to the plural include the singular, the singular the plural
and the part the whole; "or" has the inclusive meaning represented by the phrase
"and/or"; and "property" includes all properties and assets of any kind or
nature, tangible or intangible, real, personal or mixed. References in any
Transaction Document to "determination" (and similar terms) by Lender include
good faith estimates by lender (in the case of quantitative determinations) and
good faith beliefs by Lender (in the case of qualitative determinations). The
words "hereof", "herein", "hereunder" and similar terms in an agreement refer to
the agreement as a whole and not to any particular provision of such agreement.
The section and other headings contained in an agreement and the Table of
Contents preceding an agreement are for reference purposes only and shall not
control or affect the construction of the agreement or the interpretation
thereof in any respect. References to sections of any statute or regulation
shall be construed also to refer to any successor sections.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
31
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
as Agent
By: /s/ David C. Fink
-----------------
Its: Vice President
--------------
Address for Payment Notices:
Credit Lyonnais New York
Attention: __________________________
1301 Avenue of the Americas
New York, New York 10019
Phone: (212) 261-7609
Telecopy: (212) 459-3258
Address for Credit Notices:
Credit Lyonnais New York
Attention: __________________________
1301 Avenue of the Americas
New York, New York 10019
Phone: (212) 261-7609
Telecopy: (212) 459-3258
Ref: Smart & Final (Equity Payments)
<PAGE>
CREDIT LYONNAIS LOS ANGELES BRANCH,
as Lender
By: /s/ Robert Ivosevich
--------------------
Its: Senior Vice President
---------------------
Address for Payment Notices:
Credit Lyonnais Los Angeles Branch
515 South Flower Street, Suite 2200
Los Angeles, California 90071
Phone: (213) 362-5954
Telecopy: (213) 623-3437
Telex: 6831990 CREDLAUW
Address for Credit Notices:
Credit Lyonnais Los Angeles Branch
Attention: __________________________
515 South Flower Street, Suite 2200
Los Angeles, California 90071
Phone: (213) 362-5954
Telecopy: (213) 623-3437
All payments on or in respect of the
Notes to be by bank wire transfer of
Federal Funds to Federal Reserve Bank of
New York
For account: Credit Lyonnais New York
ABA: 026008073
In favor of: Credit Lyonnais Cayman
Island Branch
Attention: Loan Servicing
Ref: Smart & Final
<PAGE>
BANQUE NATIONALE DE PARIS,
as Lender
By: C. Bettles
----------
Its: Sr. V.P. & Deputy Manager
--------------------------
By: J. L. Tourne
------------
Its: V.P. & Deputy Manager
---------------------
Address for Payment Notices:
Banque National de Paris
Treasury Department
180 Montgomery Street
San Francisco, CA 94104
Telephone: 415-956-2511
Telefax: 415-989-9041
Telex: 278900 BNPS UR
Attention: Don Hart - Vice President
With a copy to:
--------------
Banque Nationale de Paris
725 South Figueroa Street
Suite #2090
Los Angeles, CA 90017
Telephone: 213-488-9102
Telefax: 213-488-9602
Telex: 6734168 BNP LA
Attention: Jean Louis Tourne -
Vice President
Address for Credit Notices:
Banque Nationale de Paris
725 South Figueroa Street
Suite #2090
Los Angeles, CA 90017
Telephone: 213-488-9102
Telefax: 213-488-9602
Telex: 6734168 BNP LA
Attention: Jean Louis Tourne -
Vice President
All payments on or in respect of the Notes to
be by bank wire transfer of Federal Funds to
Federal Reserve Bank of San Francisco
<PAGE>
For account: Banque Nationale de Paris
ABA: 121027234
In favor of: BNP LOS ANGELES
/RFB/ PRINCIPAL PAYDOWN
(OR COMMITMENT FEE,
INTEREST PAYMENT OR ETC.)
/OBI/ BY ORDER: Smart &
-------
Final, Inc.
----------
Attn: PAGGIE WONG
<PAGE>
UNION BANK OF CALIFORNIA, N.A.,
as Lender
By: Dana C. Fenwick
---------------
Its: Vice President
--------------
Address for Payment Notices:
Union Bank of California
350 California Street, 6th Floor
San Francisco, CA 94104
Attention: Amy Lai
Telephone: 415-705-7146
Telecopier: 415-705-5093
Address for Credit Notices:
Union Bank of California, N.A.
350 California St., 11th Floor
San Francisco, CA 94104
Attention: Dana C. Fenwick
Title: Vice President
Telephone: 415-705-7504
Telecopier: 415-705-7085
Telephone: 415-705-7594
Telecopier: 415-705-5093
All payments on or in respect of the Notes to be by
bank wire transfer of Federal Funds to:
Union Bank of California, N.A.
192 Note Center Monterey Park
ABA# 122000496
A/C# 070196431
Attn: Commercial Loan Operations
Ref.: Smart & Final, Inc.
<PAGE>
CREDIT LYONNAIS LEASING CORP.,
as Equity Participant
By: L. M. Wertheim
--------------
Its: Vice President/Secretary
------------------------
Address for Payment Notices:
Credit Lyonnais New York
Attention: Ilysa Reich
1301 Avenue of the Americas
New York, New York 10019
Phone: (212) 261-7808
Telecopy: (212) 261-3448
Address for Credit Notices:
Credit Lyonnais New York
Attention: Ilysa Reich
1301 Avenue of the Americas
New York, New York 10019
Phone: (212) 261-7808
Telecopy: (212) 261-3448
All payments to the Equity Participant are to be
made by bank wire transfer of Federal Funds to
Federal Reserve Bank of New York
For account: Credit Lyonnais New York Branch
ABA: 026008073
In favor of: Credit Lyonnais Leasing Corp.
A/C No. 01-00983-0001-00-001
Attention: Loan Servicing
Ref: Smart & Final
(Equity Payments)]
<PAGE>
FLEET NATIONAL BANK, not in its individual
capacity, but solely as Owner Trustee under the
Trust Agreement, as the Lessor
By: Elizabeth C. Hammer
--------------------
Its: Vice President
--------------
Address for Notices:
777 Main Street
CTMO/0238
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
(Smart & Final Inc.
1997 Lease Financing)
Phone: (860) 986-2064
Telecopy: (860) 986-7920
SMART & FINAL INC.,
as Lessee
By: Donald G. Alvarado By: Martin A. Lynch
------------------ -------------
Its: Sr. Vice President Its: Executive Vice
------------------ -----------------
President
---------
Address for Notices:
4700 South Boyle Avenue
Los Angeles, California 90058
Attention: Martin A. Lynch
with a copy to: Donald G. Alvarado
Phone: (213) 589-9726
Telecopy: (213) 589-2074
<PAGE>
SMART & FINAL STORES CORPORATION,
as Significant Sublessee
By: Donald G. Alvarado By: Martin A. Lynch
------------------ ---------------
Its: Sr. Vice President Its: Executive Vice
------------------ --------------
President
---------
Address for Notices:
4700 South Boyle Avenue
Los Angeles, California 90058
Attention: Martin A. Lynch
with a copy to: Donald G. Alvarado
Phone: (213) 589-9726
Telecopy: (213) 589-2074
AMERICAN FOODSERVICE DISTRIBUTORS,
as Significant Sublessee
By: Donald G. Alvarado By: Martin A. Lynch
------------------ ---------------
Its: Vice President Its: Executive Vice
-------------- --------------
President
---------
Address for Notices:
4700 South Boyle Avenue
Los Angeles, California 90058
Attention: Martin A. Lynch
with a copy to: Donald G. Alvarado
Phone: (213) 589-9726
Telecopy: (213) 589-2074
<PAGE>
EXHIBIT A
TO THE PARTICIPATION AGREEMENT
DEFINITION SCHEDULE
-------------------
As used in the Participation Agreement to which this Definition Schedule is
Exhibit A and in each other Transaction Document, as defined below, the
following terms shall have the respective meanings assigned thereto and the
rules of construction set forth at the end of this Definition Schedule shall
apply:
"Adjusted Base Rate" shall have the meaning assigned thereto in Article I
of the Loan Agreement.
"Administration Fee" shall mean the annual fee set forth and identified as
such and the Commitment Letter.
"Advances" shall mean the reimbursement by the Lessor to the Lessee of the
Lessor's Share of Improvement Cost under the Agency Agreement, which
reimbursement shall be evidenced by the execution and delivery of a Lease
Supplement.
"Advance Date" shall have the meaning assigned thereto in Section 1.07 of
the Participation Agreement.
"Agency Agreement" shall mean the Agency Agreement, dated as of April 16,
1997, between the Lessor and the Construction Agent, relating to the Leased
Premises as the same may be amended from time to time.
"Affiliate" shall mean, with respect to any Person, another Person which
directly, or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person.
"Agent" shall mean Credit Lyonnais New York Branch, in its capacity as
Agent for the Lenders under the Loan Agreement and any successor appointed as
provided in Section 6.10 of the Loan Agreement.
"Appraised Value" shall have the meaning assigned thereto in Section
3.02(c)(ii) of the Participation Agreement.
"Appraiser" shall mean any independent MAI appraiser selected by the Agent
and reasonably acceptable to the Lessee.
"Arrangement Fee" shall mean the amount set forth and identified as such in
the Commitment Letter.
"Base Rate" means the interest rate per annum equal to the greater of (i)
the Federal Funds Rate plus 0.50% per annum and (ii) the interest rate per annum
announced from time to time by the Agent as its prime commercial lending rate.
Interest on an Base Rate Note shall be calculated on the basis of a year of 365
or 366 days, as the case may be, for the actual number of days elapsed in the
period during which it accrues and the Base Rate shall reflect any change in
such prime rate or the Federal Funds Rate,
A-1
<PAGE>
effective as of the opening of business on the day on which such change in such
prime rate or Federal Funds Rate becomes effective.
"Base Rate Note" means any Note when and to the extent that the interest
rate therefor is determined by reference to the Base Rate.
"Base Term" shall have the meaning assigned thereto in Section 3 of the
Lease Agreement.
"Basic Rent" shall mean the rent payable on each Payment Date during the
Lease Term pursuant to Section 4 of the Lease Agreement, and shall equal the sum
of a Principal Component and an Interest Component. The "Principal Component" on
any Payment Date shall be zero. The "Interest Component" on any Payment Date
equals the product of the Finance Rate for the related Payment Period and the
Outstanding Property Cost during such Payment Period, calculated using the same
day count convention as is applicable to the interest rate (LIBOR Rate
Eurodollar Rate or Base Rate, as applicable) on which the Finance Rate is based
for such period (or, in the case of a blended rate, to the extent that the
Finance Rate is based on each such interest rate). If it is necessary to
determine the Basic Rent due on a date other than a Payment Date, the Basic Rent
shall consist only of an "Interest Component" equal to the product of the
Finance Rate for the relevant period and the Outstanding Property Cost during
such period.
"Borrowing Date" shall have the meaning assigned thereto in Section
2.01(b).
"Business Day" shall mean any day, other than a Saturday, Sunday, on which
banking institutions are not authorized or obligated to close in New York City
or the city in which the corporate trust office of the Trust Company at which
the Trust Estate is administered is located; and, with respect to calculations
using the LIBOR Rate, dealings are carried on in the London interbank market.
"Certificate Balance" shall mean, as of any date, the unpaid principal
balance of the Equity Participant's investment in the Lessor, determined as if
the Equity Participant's equity contributions under for Section 1.02 of the
Participation Agreement were loans under the Loan Agreement (evidenced by Notes)
bearing interest at the Certificate Rate.
"Certificate Rate" shall mean interest calculated in an identical manner as
interest on the Notes is calculated, except that the interest rate determined by
reference to either of the LIBOR Rate or the Eurodollar Rate shall be the LIBOR
Rate or the Eurodollar Rate, as applicable, plus the margin specified in the
Commitment Letter.
"Change Order" shall have the meaning assigned thereto in Section 4.11 of
the Agency Agreement.
"Closing", "Closing Date" and "Closing Notice" shall have the meanings
specified in Section 1.07 of the Participation Agreement.
"Code" shall mean the Internal Revenue Code of 1986.
"Commitment Letter" shall mean the commitment letter of Credit Lyonnais to
the Lessee, dated January 30, 1997.
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with the Lessee within the meaning
of Section 4001 of ERISA or is part of a group which includes the Lessee and
which is treated as a single employer under Section 414 of the Code.
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<PAGE>
"Completion Certificate" shall have the meaning assigned thereto in Section
4.18 of the Agency Agreement.
"Completion Date" shall mean, for the Improvements for any Leased Premises,
the earlier of (i) the estimated completion date set forth in the Final
Construction Plans therefor plus one month or (ii) April 16, 1999, as the same
may be extended by the Agent pursuant to Section 4.10(a) of the Agency
Agreement.
"Consolidated Cash Flow" shall mean, as of any date and for any period, the
sum of consolidated net income (excluding non-cash unusual items and excluding
the effect of deferred taxes and minority interest in earnings for such period),
plus depreciation, amortization and lease expense (to the extent deducted in
- ----
determining net income) for such period.
"Consolidated Indebtedness" shall mean, as to any Person, (i) consolidated
capital lease obligations of such Person, the consolidated principal amount of
off balance sheet "synthetic" leases and eight times the amount of the
consolidated operating Lease expenses for the relevant period and (ii) other
consolidated indebtedness of such Person for borrowed money (whether by loan or
the issuance and sale of debt securities) or for the consolidated deferred
purchase or acquisition price of property or services other than accounts
payable (other than for borrowed money) incurred in the ordinary course of
business of such Person; without limiting the generality of the foregoing, such
term shall include all Indebtedness of others guaranteed by such Person.
"Consolidated Subsidiaries" shall mean, when used with reference to current
assets, current debt, current liabilities, debt, stockholder's equity or total
assets shall mean the aggregate of current assets, current debt, current
liabilities, debt, stockholder's equity or total assets, as the case may be, of
the Lessee and its Subsidiaries, after elimination all offsetting debits and
credits between the Lessee and its Subsidiaries and all other items required to
be eliminated in accordance with generally accepted accounting principles.
"Consolidated Tangible Net Worth" shall mean, as of the date of
determination thereof, the excess of total consolidated assets over total
consolidated liabilities, total consolidated assets and total consolidated
liabilities each to be determined as to both classification of items and amounts
in accordance with generally accepted accounting principles and excluding all
minority interests; provided, that there shall be excluded from total
consolidated assets (i) all assets which would be classified as intangible
assets under generally accepted accounting principles, including but not limited
to goodwill and deferred charges, (ii) cash set apart and held in a sinking or
other analogous fund established for the purpose of redemption or other
retirement of capital stock, (iii) applicable reserves, allowances and other
similar properly deductible items (other than those relating to net foreign
exchange losses which shall only be excluded to the extent such losses exceed $5
million in any fiscal year), and (iv) any revaluation or other write-up in book
value of assets.
"Construction Agent" shall mean Smart & Final Inc. as construction agent
under the Agency Agreement.
"Construction Plans" shall mean, with respect to each Leased Premises, the
detailed construction plans and specifications of a licensed architect or
engineer for the Improvements for such Leased Premises including the
construction budget, Estimated Improvement Cost and the estimated date that the
Improvements will be Substantially Complete, prepared by or on behalf of the
Construction Agent.
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<PAGE>
"Environmental Consultant" shall mean any independent environmental
consultant selected by the Agent and reasonably acceptable to the Lessee.
"Environmental Laws" shall mean any and all foreign, Federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any governmental authority or other requirements of law
(including common law) regulation, relating to or imposing liability or
standards of conduct concerning pollution or protection of the environment, or
worker health or safety, as now or may at any time hereafter be in effect.
"Environment Put Event" shall mean, with respect to any Leased Premises,
the occurrence of any of the following events:
(i) any representation or warranty contained in Section 2.01(u)
through (z) of the Participation Agreement, with respect to
such Leased Premises, shall not be true and correct as of such
date;
(ii) failure to observe any covenant contained in Section 4.03(j) of
the Participation Agreement with respect to such Leased
Premises; or
(iii) failure to comply with Section 4.08 of the Agency Agreement
with respect to such Leased Premises,
if the potential liability resulting therefrom to the Indemnitees (considered as
a group) exceeds $500,000 or is material but can not be estimated.
"Equity Participant" shall mean Credit Lyonnais Leasing Corp., in its
capacity as Equity Participant under the Participation Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Improvement Cost" shall mean, as of any date, with respect to a
Leased Premises, the Construction Agent's estimate of the Improvement Cost for
such Leased Premises as set forth in the Final Construction Plans, or if the
same have not been submitted, the Initial Construction Plans; provided, that the
total Estimated Improvement Cost of all Leased Premises shall in no event exceed
$30,000,000 less the aggregate amount of Purchase Price paid by the Lessor.
"Eurocurrency Reserve Requirement" means, for a LIBOR Note or a Eurodollar
Note and for any Payment Period therefor, the daily average of the stated
maximum rate (expressed as a percentage) at which reserves (including any
marginal, supplemental, or emergency reserves) are required to be maintained
during such Payment Period under Regulation D for member banks of the Federal
Reserve System in New York City with deposits exceeding five billion dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D) but
without benefit of credit or proration, exemptions, or offsets that might
otherwise be available from time to time under Regulation D. Without limiting
the effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect
any other reserves required by the Board of Governors of the Federal Reserve
System to be maintained by such member banks against (i) any category of
liabilities that includes deposits by reference to which the LIBOR Rate for
LIBOR Notes is to be determined; (ii) any category of extension of credit or
other assets that include loans bearing a LIBOR Rate; or (iii) any category of
liabilities that includes deposits by reference to which the Eurodollar Rate for
Eurodollar Notes is to be determined; or (iv) any category of extension of
credit or other assets that include loans bearing a Eurodollar Rate.
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<PAGE>
"Eurodollar Note" mean any Note when and to the extent that the interest
rate therefor is determined by reference to the Eurodollar Rate for a Eurodollar
Period.
"Eurodollar Period" means, with respect to any Payment Period, a period of
seven days to three-months for which the Eurodollar Rate is available; provided
that an Eurodollar Period shall not extend beyond the end of such Payment
Period.
"Eurodollar Rate" means, with respect to any Eurodollar Period, (i) the
rate of interest per annum (rounded upwards, if necessary, to the nearest 1/16
of 1%), which shall be the same for each day in a Eurodollar Period, determined
by the Agent (which shall include any banking affiliate of the Agent) on the
basis of the offered rates quoted to the Agent in the New York interbank market
for deposits in eurodollars having a term equal to such Eurodollar Period in an
amount equivalent to the then outstanding principal amount of the Notes,
determined as of the first day of such Eurodollar Period, divided by (ii) a
percentage equal to 100% minus the applicable Eurocurrency Reserve Requirement
-----
for such Eurodollar Period. Interest on any Eurodollar Note shall be calculated
on the basis of a year of 360 days for the actual number of days elapsed in the
period during which it accrues.
"Event of Default" and "Default" when referred to in connection with (a)
the Lease Agreement, shall mean any of the events described in Section 19 of
the Lease Agreement, (b) the Loan Agreement, any of the events described in
Section 5.01 of the Loan Agreement, (c) the Agency Agreement, shall mean any of
the events described in Section 5.01 of the Agency Agreement, and (d) the
Participation Agreement, the breach of any term, condition or covenant of the
Participation Agreement by any of the Lessee or the Significant Sublessees after
the passage of any relevant grace, use or notice period, and any of the events
described in clause (a), (c) or (d) of this definition.
"Event of Loss" shall mean, with respect to any Leased Premises (i) the
destruction, damage beyond repair, or rendition of such Leased Premises or any
substantial part thereof permanently unfit for normal use for any reason
whatsoever, (ii) the damage of Leased Premises having an estimated repair cost
thereof in excess of $500,000 or (iii) the condemnation, confiscation, seizure,
or requisition of use or title to such Leased Premises or any substantial part
thereof by any governmental authority under the power of eminent domain or
otherwise.
"Excluded Amounts" shall mean (i) all proceeds of liability, and, in the
case of any Leased Premises, property damage, insurance owing or payable to the
Lessor for its own account or in its individual capacity pursuant to any
insurance policies maintained under Section 10 of the Lease Agreement and (ii)
any indemnities or other amounts payable to or in favor of obligee for its own
account or in its individual capacity under Section 4.02 of the Participation
Agreement, and regardless of whether payable in a lump sum or as an addition to,
or increase in, Basic Rent.
"Fair Market Sales Value" shall mean, in respect of any Leased Premises,
the sale price thereof which would obtain in an arm's-length sale between an
informed and willing buyer and an informed and willing seller, in each case
under no compulsion to buy or sell, and the assumption that the Leased Premises
is in the condition required by Section 9 of the Lease Agreement.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (i) if such day is not a Business Day, the Federal Funds Rate
--------
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding
A-5
<PAGE>
Business Day, and (ii) if no such rate is so published on such next succeeding
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted by two or more federal funds brokers to Agent on such day on such
transactions as determined in good faith by the Agent.
"Final Construction Plans" shall mean, with respect to any Leased Premises,
the Final Construction Plans for such Leased Premises submitted to the Lessor
and the Agent at least 30 days prior to the commencement of construction of the
Improvements for such Leased Premises.
"Final Loan Policy" shall have the meaning assigned thereto in Section
3.03(c) of the Participation Agreement.
"Final Owner's Policy" shall have the meaning assigned thereto in Section
3.03(c) of the Participation Agreement.
"Finance Rate" shall mean, for any Payment Period, (i) if the LIBOR Rate or
the Eurodollar Rate is in effect under the Loan Agreement throughout such
Payment Period, the LIBOR Rate or the Eurodollar Rate in effect on the first day
of such Payment Period plus the sum per annum of (x) 96% of 0.50% plus (y) 4% of
the Certificate margin specified in the Commitment Letter; (ii) if the Base Rate
is in effect under the Loan Agreement throughout such Payment Period, the Base
Rate in effect from time to time during such Payment Period; (iii) if neither
the Base Rate nor the LIBOR Rate nor the Eurodollar Rate is exclusively in
effect under Loan Agreement during such Payment Period, a blended rate derived
from the outstanding principal amount of the Notes to which, the Base Rate and
either the LIBOR Rate or the Eurodollar Rate, as the case may be, respectively,
were applicable during such Payment Period, on the assumption that during such
Payment Period all LIBOR Notes and Eurodollar Notes bore interest at the rate
specified in clause (i) above; and (iv) under the circumstances and period
specified in Section 3(d) of the Lease Agreement, the Finance Rate shall be the
Late Payment Rate, instead of the rate specified in clauses (i) through (iii)
above.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
"Governmental Action" shall mean any consent or approval of, or any giving
of notice to, or any registration, filing or recording with, or any other action
in respect of, any Official Body.
"Hazardous Materials" shall mean any gasoline or petroleum (including crude
oil or any fraction thereof) or petroleum products of any other substances,
materials or wastes, regulated by or the source of potential liability under any
Environmental Law, including, without limitation, asbestos, polychlorinated
biphenyls and urea-formaldehyde insulation.
"Improvement Cost" shall mean the actual costs incurred by the Construction
Agent, as agent for the Lessor, with respect to the Improvements, in accordance
with the terms of the Agency Agreement, in performing or causing to be performed
the Work or otherwise in performance of the Construction Agent's obligations
hereunder; all Basic Rent paid under the Lease Agreement for the period ending
on April 16, 1999; and, transaction expenses paid by the Lessee in connection
with each Closing.
"Improvements" shall mean, for any Leased Premises, all improvements and
fixtures and all other tangible personal property described in the Final
Construction Plans for the construction of retail stores on such Leased
Premises, and now or hereafter placed on, affixed or appurtenant to, such Leased
Premises by the Construction Agent, as agent for the Lessor pursuant to the
terms of the Agency
A-6
<PAGE>
Agreement, together with any and all accessions, additions, improvements,
substitutions and replacements thereto or therefor.
"Income and Proceeds" shall have the meaning given to such term in Article
IV of the Loan Agreement.
"Indemnitee" shall have the meaning given to such term in Section 4.02(a)
of the Participation Agreement.
"Initial Construction Plans" shall mean, with respect to any Leased
Premises, the Construction Plans for such Leased Premises submitted to the
Lessor and the Agent on or prior to the Closing Date for such Leased Premises.
"Late Payment Rate" means the Base Rate plus 2.00% per annum.
"Lease Agreement" shall mean the Lease Agreement dated as of April 16, 1997
between the Lessor and the Lessee, including each Lease Supplement executed in
connection therewith, as the same may be amended from time to time in accordance
with the terms thereof.
"Lease Supplement" shall mean a Lease Supplement executed by the Lessor and
the Lessee in substantially the form attached as Exhibit A to the Lease
Agreement.
"Lease Term" shall have the meaning assigned thereto in Section 3 of the
Lease Agreement.
"Leased Premises" shall mean the fee simple interest in a parcel of
property or the ground lease relating to a parcel of real property which, in
either case, is located in the continental United States and made subject to the
Lease Agreement by the execution and delivery of a Lease Supplement, including
all buildings and improvements thereon at the related Closing Date or thereafter
and any accessions, additions, improvements, substitutions and replacements
thereto.
"Lender" and "Lenders" shall individually and collectively refer to the
banks named on Schedule I hereto.
"Lessee Obligations" shall mean all indebtedness and other obligations and
liabilities of the Lessee to the Lessor, Agent or any Lender from time to time
arising under or in connection with or related to or evidenced by or secured by
or under color of the Lease Agreement or any other Transaction Document, and all
extensions, renewals or refinancings thereof, whether such indebtedness,
obligations and liabilities are unsecured, joint or several, absolute or
continent, due or to become due, whether for payment or performance, now
existing or hereafter arising.
"Lessor" or "Owner Trustee" shall mean Fleet National Bank, a national
banking association, its successors and assigns not in its individual capacity
but solely as Owner Trustee under the Trust Agreement.
"Lessor Lien" shall mean any Lien on the Leased Premises or the Lease
Agreement to the extent resulting from (i) claims against, the Lessor, the Trust
Company, in its individual capacity, or the Equity Participant, not related to
the transactions contemplated by the Transaction Documents, (ii) any act or
omission of the Lessor, the Trust Company, in its
A-7
<PAGE>
individual capacity, or the Equity Participant, which is not related to the
transactions contemplated by the Transaction Documents or is in violation of any
of the terms of the Transaction Documents, (iii) claims against the Lessor, the
Trust Company, in its individual capacity, or the Equity Participant related to
Taxes which are excluded from the indemnification provided by Section 4.02(b) of
the Participation Agreement, or (iv) claims against the Lessor or the Equity
Participant arising out of the voluntary transfer by the Lessor or the Equity
Participant of its interest in the Leased Premises, the Lease Agreement or any
part thereof, other than a transfer pursuant to Section 14(b), 15, 16 or 20 of
the Lease Agreement.
"Lessor's Share of Improvement Cost" shall mean, as of any Advance Date,
the lesser of (i) the excess of 110% of the lesser of (x) Estimated Improvement
Cost or (y) the Appraised Value, as of such date for all Leased Premises over
the sum of the Construction Agent's estimate of the balance to complete the Work
for all Leased Premises as of such date (as set forth in the related Requisition
Certificate) plus the total Advances thereto previously made or (ii) the excess
of the total Improvement Cost as of such date (as set forth in the related
Requisition Certificate) over the Advances previously made by the Lessor.
"LIBOR Note" means any Note when and to the extent that the interest rate
therefor is determined by reference to the LIBOR Rate.
"LIBOR Rate" means, with respect to any Payment Period, (i) the rate of
interest per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%),
which shall be the same for each day in a LIBOR Note Payment Period, determined
by the Agent (which shall include any banking affiliate of the Agent) on the
basis of the offered rates per annum for deposits in United States dollars
quoted to the Agent in the London interbank market for United States dollar
deposits of a three month term in an amount equivalent to the then outstanding
principal amount of the Notes, determined as of 11:00 A.M., London time, two
London Business Days before the first London Business Day of such Payment
Period, divided by (ii) a percentage equal to 100% minus the applicable
-----
Eurocurrency Reserve Requirement for such Payment Period; interest on a LIBOR
Rate Note shall be calculated on the basis of a year of 360 days for the actual
number of days elapsed in the period during which it accrues.
"Lien" shall mean any mortgage, deed or trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sales or title
retention arrangement, and any assignment, deposit arrangement or lease intended
as, or having the effect of, security.
"Loan Agreement" shall mean the Loan Agreement dated as of April 16, 1997
among the Lessor, the Lenders and Agent as the same may be amended from time to
time in accordance with the terms thereof.
"Loan Policy" shall have the meaning assigned thereto in Section
3.02(c)(vii) of the Participation Agreement.
"London Business Day" shall mean a day for dealing in deposits in United
States dollars by and among banks in the London interbank market and which is
also a Business Day.
"Material Adverse Effect" shall mean, with respect to the Lessee, the
Permitted Sublessees or any Subsidiary of any thereof, (i) any material adverse
effect on the business, properties, conditions (financial or otherwise) or
operations, present or prospective, of the Lessee, the Permitted Subsidiaries or
their Subsidiaries since December 31, 1996, (ii) any material adverse effect on
the ability of the Lessee, the Permitted Sublessees or their Subsidiaries to
perform their respective obligations under any of the Transaction Documents, or
(iii) any material adverse effect on the legality, validity, binding effect or
enforceability of any of the Transaction Documents to which the Lessee or
Permitted Sublessees are a party, in each case as determined by the Agent.
A-8
<PAGE>
"Maturity Date of the Notes" shall mean April 16, 2002, or such later date
as consented to in writing by all the Lenders and the Equity Participant.
"Memorandum of Lease" shall mean each Memorandum of Lease, Lessee's
Estoppel, Subordination, Non-Disturbance and Attainment Agreement executed and
delivered by the Lessor, the Lessee and the Agreement in substantially the form
attached as Exhibit C to the Lease Agreement.
"Mortgage and Assignment Agreement" shall mean, with respect to any Leased
Premises located in California, each Deed of Trust with Assignment of Rents,
Security Agreement, and Fixture Filing between the Lessor and the Lessee and
each Memorandum of Lease, Lessee's Estoppel, Subordination, Non-Disturbance and
Attornment Agreement (California form); with respect to any Leased Premises
located in Florida, each Mortgage with Assignment of Rents and Security
Agreement between the Lessor and the Lessee and each Memorandum of Lease,
Lessee's Estoppel, Subordination, Non-Disturbance and Attornment Agreement
(Florida form) in the form attached hereto as Exhibit B, as same may be amended
from time to time in accordance with the terms thereof; and with respect to any
Leased Premises located in a state other than California or Florida such similar
agreements and instruments as are reasonably acceptable to the Agent and its
counsel.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA and covered by Title IV thereof, and to which the Lessee or
any Commonly Controlled Entity contributes or was obligated to contribute in the
immediately preceding five years.
"Notes" shall refer to the notes issued under the Loan Agreement.
"Official Body" shall mean any government or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Outstanding Property Cost" shall mean, as of any date, aggregate Property
Cost theretofore paid by the Lessor less the aggregate amount of Termination
Value payments received prior to such date by the Lessor and less the aggregate
amount of the principal component of Basic Rent theretofore received by the
Lessor.
"Owner's Policy" shall have the meaning assigned thereto in Section
3.02(c)(vi) of the Participation Agreement.
"Participation Agreement" shall mean the Participation Agreement, dated as
of April 16, 1997, among the Lessee, the Significant Sublessees named therein,
the Lessor, the Lenders named therein, the Equity Participant and the Agent, and
the schedules and exhibits thereto, as the same may be amended from time to time
in accordance with the terms thereof.
"Payment Date" shall mean the last day of each Payment Period.
"Payment Period" means, with respect to any Note, the period commencing on
the initial Closing Date and ending on July 16, 1997, and each of the subsequent
periods commencing on the last day of the immediately preceding period and
ending on the seventh day in the third calendar month thereafter; provided,
however, the Payment Period for the principal on any Note which is advanced
during a three-month Payment Period shall be from the date of such advance and
ending on the last day of such Payment Period; further, provided, however, that
all of the foregoing provisions shall be subject to the following:
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<PAGE>
(i) any Payment Period that would otherwise end after the last day of
the Lease Term shall end on such day; and
(ii) if a Payment Period would end on a day that is not a London
Business Day, such Payment Period shall be extended to the next London
Business Day unless such London Business Day would fall in the next
calendar month, in which event such Payment Period shall end on the
immediately preceding London Business Day.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Liens" shall mean (i) the respective rights of the Lessor and
the Lessee provided in the Lease Agreement and the Lien on the Leased Premises
in favor of the Agent created by the Mortgage and Assignment Agreement, (ii)
Liens for taxes not yet due or, so long as any Event of Default shall not have
occurred and remain continuing, which taxes are being contested in good faith by
appropriate proceedings diligently pursued and as to which taxes any appropriate
reserves required by generally accepted accounting principles have been made on
the books of the Lessee, (iii) inchoate supplier's, materialmen's, mechanics',
worker's, repairmen's, employees' or other like Liens arising in the ordinary
course of business and not yet due or, so long as no Event of Default shall have
occurred and remain continuing which Liens are being contested in good faith by
appropriate proceedings diligently pursued and as to which Liens appropriate
reserves required by generally accepted accounting principles have been made on
the books of obligor, (iv) the rights of sublessee expressly permitted under the
Lease Agreement and (v) Liens arising out of judgments against the Lessee which
are being appealed and, if an Event of Default or Unmatured Default under the
Lease Agreement shall then exist, have been fully bonded during appeal.
"Permitted Sublease" shall mean a sublease relating to the Leased Premises
between the Lessee and the Permitted Sublessees.
"Permitted Sublessees" shall mean the Significant Sublessees and each other
Subsidiary of the Lessee, of which the Lessee owns at least 51% of the equity
stock thereof.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated association, joint-venture, joint-stock company, Official Body or
any other entity.
"Plan" shall mean at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Lessee or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Properties" shall have the meaning assigned thereto in Section 2.01(t) of
the Participation Agreement.
"Property Cost" shall mean the aggregate amount of Purchase Price and
Advances paid by the Lessor.
"Purchase Price" shall mean, with respect to a Leased Premises, the
aggregate purchase price paid by the Lessor for such Leased Premises to the
vendor thereof and the other Persons entitled thereto, together with all closing
costs and expenses paid by the Lessor, as set forth on the related Lease
Supplement.
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<PAGE>
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as amended or supplemented from time to time. "Renewal Term"
shall mean the ten consecutive two-year terms succeeding the term of the then
current Renewal Term, if any, the first of which shall commence on the last day
of the Base Term and the remaining of which shall commence on the last day of
the then current Renewal Term, if any, and the last of which shall end on April
16, 2022.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which thirty day notice period
is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S)2615.
"Required Lenders' Consent" at a given time shall mean the direction to
Agent to take an action or omit to take an action made in writing by holders
representing at least (i) in the case of any direction to Agent to take any
action except as specified in (ii) below, 66 2/3% of the aggregate principal
amount of the Notes then outstanding and (ii) in the case of any instance
involving the reduction of the principal amount of or the extension of the time
scheduled for payment of principal of any Note or reduction of the rate of
interest or extension of the time for payment of interest borne by any Note or
the reduction or postponement of the date for payment of any other fees,
expenses, indemnities or amounts payable under any Note or to the holder
thereof, the holder of such Note.
"Requisition Certificate" shall have the meaning assigned thereto in
Section 3.02(a) of the Agency Agreement.
"Residual Guaranty Payment" shall mean, on any date, 86% of the Outstanding
Property Cost on such date.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Lessee's capital stock declared or authorized as such by the board
of directors of the Lessee (except dividends payable solely in shares of its
capital stock), (ii) any payment on account of the purchase, redemption,
retirement or acquisition of (a) any shares of the Lessee's common stock or (b)
any option, warrant or other right to acquire shares of the Lessee's capital
stock.
"Senior Financial Officer" shall mean the (i) president, the chief
financial officer and any executive vice-president of Lessee and (ii) treasurer
or vice president accounting of Smart & Final Stores Corp., and any other
official thereof authorized by Lessee.
"Significant Sublessees" shall mean each of Smart & Final Stores
Corporation and American Foodservice Distributors.
"Single Employer Plan" shall mean any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Sublease Supplement" shall mean a Sublease Supplement executed by the
Lessee and a Significant Sublessee in substantially the form attached as Exhibit
A to the Subsidiary Sublease.
"Subsidiary" of a Person at any time shall mean any corporation of which a
majority (by number of shares or number of votes) of any class of outstanding
capital stock normally entitled to vote for the election of one or more
directors (regardless of any contingency which does or may suspend or dilute the
voting rights of such class) is at such time owned directly or indirectly,
beneficially or of record, by such
A-11
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Person or one or more subsidiaries of such Person, and any trust of which a
majority of the beneficial interest is at such time owned indirectly or
indirectly, beneficially or of record, by such Person or one or more
Subsidiaries of such Person.
"Subsidiary Sublease" shall mean each Sublease and Assignment dated as of
April 16, 1997 between the Lessee and a Significant Sublessee, including each
Sublease Supplement executed in connection therewith, as the same may be amended
from time to time in accordance with the terms thereof, a copy of the form of
which is attached as Exhibit B to the Lease Agreement.
"Substantially Complete" shall mean, with respect to any Leased Premises,
that (a) the materials and equipment for the Improvements have been installed
thereon and are functional, (b) the electrical, lighting, heating and plumbing
systems have been installed and tested, (c) such Leased Premises and the
Improvements are ready for occupancy and use, (d) the Improvements have been
constructed in accordance with the Final Construction Plans for such Leased
Premises and (e) satisfaction of the conditions specified in Section 4.18 of the
Agency Agreement; provided, however, the following circumstances shall be
--------
disregarded if remedied, cured or resolved within 120 days thereafter:
(i) any redundant part or piece which is missing or inoperable which
does not affect the occupation or use of the Leased Premises or
Improvements;
(ii) any disputed contract issue which has been submitted for
arbitration or litigation;
(iii) any non-conforming item which has been agreed to be corrected
and the material placed on order which does not affect the occupation or
use of the Leased Premises or Improvements; or
(iv) any punchlist items which will not prevent use and occupancy of
the Leased Premises or Improvements.
"Supplemental Rent" shall mean all amounts, liabilities and obligations
which the Lessee assumes or agrees to pay under the Lease Agreement or any other
Transaction Document to the Lessor or others, including payments of Termination
Value and indemnities, but excluding Basic Rent.
"Survey" shall have the meaning assigned thereto in Section 3.03(d) of the
Participation Agreement.
"Taxes" shall have the meaning given such term in Section 4.02(b) of the
Participation Agreement.
"Termination Value" shall mean, as of any date, the Outstanding Property
Cost as of such date. The Termination Value for any Leased Premises shall be the
portion of the Termination Value allocable to such Leased Premises as calculated
by the Agent, which calculation absent manifest error shall be conclusive.
"Transaction Documents" shall mean the Lease Agreement, each Lease
Supplement, each Subsidiary Subleases, each Sublease Supplement, the Loan
Agreement, the Participation Agreement, the Mortgage and Assignment Agreements,
the Agency Agreement and the Notes.
"Trust Agreement" shall mean the Trust Agreement dated as of April 16,
1997, between the Equity Participant and the Trust Company.
A-12
<PAGE>
"Trust Company" shall mean Fleet National Bank, a national banking
association, and its successors and assigns.
"Trust Company Officer" means an officer in the corporate trust office of
the Trust Company at which the Trust Estate is administered.
"Trust Estate" shall mean all estate, right, title and interest of the
Lessor in and to the Leased Premises, the Trust Agreement, the Lease Agreement,
each Lease Supplement, each Subsidiary Sublease, each Sublease Supplement, the
Loan Agreement and including, without limitation, (i) all amounts of Basic Rent,
Supplemental Rent, including, without limitation Termination Value) and other
payments of any kind for or with respect to the Leased Premises or payable under
any of the foregoing and (ii) any or all payments or proceeds received by the
Owner Trustee after the termination of the Lease with respect to all or any part
of the Leased Premises as the result of the sale, lease or other disposition
thereof, but excluding in all cases Excluded Amounts;
"UCC" shall mean the Uniform Commercial Code of the applicable
jurisdiction.
"Unmatured Event of Default" shall mean an event, act or condition which
with notices or lapse of time or both would constitute an Event of Default.
"Work" means all items of work required by the Agency Agreement and the
applicable Final Construction Plans necessary to design, acquire, construct and
install the Improvements, provided that the Work shall not consist of more than
twenty stores and two distribution centers.
A-13
<PAGE>
EXHIBIT B
TO THE PARTICIPATION AGREEMENT
FORM OF MORTGAGE AND ASSIGNMENT AGREEMENT
B-1
<PAGE>
SCHEDULE I
TO THE PARTICIPATION AGREEMENT
LENDERS' COMMITMENT
<TABLE>
<CAPTION>
Maximum
Commitment %
---------- -
<S> <C> <C>
LENDERS
- -------
CREDIT LYONNAIS LOS ANGELES
BRANCH $ 9,300,000 32.2916667%
BANQUE NATIONALE DE PARIS $ 9,500,000 32.9861111%
CIBC INC. $ 5,000,000 17.3611111%
UNION BANK OF CALIFORNIA, N.A. $ 5,000,000 17.3611111%
TOTAL: $28,800,000 100.00%
=========== =======
</TABLE>
SI-1
<PAGE>
[Execution Copy]
AGENCY AGREEMENT
between
FLEET NATIONAL BANK,
not in its individual capacity but solely as Owner Trustee,
under the Trust Agreement, as the Lessor,
and
SMART & FINAL INC., as the Construction Agent
Dated as of April 16, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
ARTICLE I
Defined Terms................... 1
ARTICLE II
Agency...................... 1
SECTION 2.01. Appointment............................ 1
SECTION 2.02. Performance of and Payment for the Work 2
ARTICLE III
Lessor's Advances and Reimbursements... 2
SECTION 3.01. Lessor's Obligations................... 2
SECTION 3.02. Advances of Lessor's Share............. 3
ARTICLE IV
Performance of the Work........... 3
SECTION 4.01. Scope of Work.......................... 3
SECTION 4.02. Performance of Work.................... 3
SECTION 4.03. Permits................................ 4
SECTION 4.04. Competent Workforce.................... 4
SECTION 4.05. Compliance with Legal Requirements..... 4
SECTION 4.06. Labor.................................. 4
SECTION 4.07. Books and Records...................... 4
SECTION 4.08. Environmental Laws..................... 4
SECTION 4.09. Inspection Rights...................... 4
SECTION 4.10 Completion Date........................ 5
SECTION 4.11 Change Orders.......................... 5
SECTION 4.12 Independent Contractor Status.......... 5
SECTION 4.13 Removal of Liens....................... 6
SECTION 4.14 Standard of Work....................... 6
SECTION 4.15 Notice of Delay........................ 6
SECTION 4.16 Warranty of Title...................... 6
SECTION 4.17 Lease Agreement........................ 6
SECTION 4.18 Conditions of Completion............... 6
ARTICLE V
Defaults and Remedies........... 7
SECTION 5.01. Events of Default...................... 7
SECTION 5.02. Remedies............................... 8
SECTION 5.03. Costs of Enforcement................... 8
SECTION 5.04. Cumulative Remedies.................... 8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VI
<S> <C> <C>
Exculpation of Lessor........... 8
ARTICLE VII
Miscellaneous................ 9
SECTION 7.01. Governing Law; Waiver of Jury Trial.... 9
SECTION 7.02. Notices; Modification.................. 9
SECTION 7.03. Illegal Provision...................... 9
SECTION 7.04. Binding Effect......................... 9
SECTION 7.05. Counterparts........................... 10
SECTION 7.06. Headings............................... 10
SECTION 7.07. Time of Essence........................ 10
Exhibit A
REQUISITION CERTIFICATE.............. A-1
</TABLE>
ii
<PAGE>
AGENCY AGREEMENT dated as of April 16, 1997 between FLEET NATIONAL BANK, a
national banking association, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement (the "Lessor") and SMART & FINAL INC., a
Delaware corporation (the "Construction Agent").
W I T N E S S E T H:
-------------------
WHEREAS, the Construction Agent desires to design, acquire, construct and
install the Improvements on each Leased Premises, as agent for the Lessor, the
Lessor is appointing the Construction Agent as its agent to undertake such
design, acquisition, construction and installation, and the Lessor will own the
Improvements;
WHEREAS, the Construction Agent will fund the Improvement Cost with its own
funds and will be reimbursed by the Lessor therefor to the extent provided
herein;
WHEREAS, in order to meet its obligations to reimburse the Construction
Agent as provided herein and to purchase the Leased Premises, the Lessor will
(i) execute promissory notes in favor of the Lenders pursuant to the terms and
conditions of the Loan Agreement in a total amount equal to 96% of the Property
Cost and (ii) receive a contribution from the Equity Participant and Significant
Sublessees in an amount equal to 4% of the Property Cost; and
WHEREAS, the Lessor will lease each Leased Premises to Smart & Final Inc.,
as Lessee pursuant to the Lease Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
Defined Terms
-------------
All capitalized terms used and not defined herein shall have the respective
meanings ascribed thereto in Exhibit A to the Participation Agreement dated as
of April 16, 1997, among the parties hereto, Credit Lyonnais New York Branch, as
Agent, and the Lenders and Equity Participant named therein, as amended from
time to time.
ARTICLE II
Agency
SECTION 2.01 Appointment. Solely for the limited purposes hereinafter
-----------
set forth, the Lessor hereby designates the Construction
Agent as its agent, and the Construction Agent hereby accepts such appointment,
to design, acquire, construct, and install the Improvements, in each case in
accordance with the Final Construction Plans for each Leased Premises and
subject to the terms and conditions of this Agency Agreement, to pay for the
Improvement Cost from its own funds, to cause title to the same to be vested in
or otherwise conveyed to the Lessor, and otherwise to perform or cause to be
performed the Work. The Construction Agent shall have no authority to act for
or on behalf of the Lessor except with respect to the design, acquisition,
construction and installation of the Improvements and the performance of the
Work, and the performance of ministerial functions in connection with and
<PAGE>
in furtherance of the foregoing. The acceptance, or the failure to act where
silence implies such acceptance, by the Construction Agent on behalf of the
Lessor of any property or any contractual obligation with respect to which the
Construction Agent does not have authority to act on behalf of the Lessor as
described in this Agency Agreement shall be ineffective, ab initio, to create
in, or transfer to, the Lessor any legal or beneficial right or interest in such
property or any contractual obligation or to impose on the Lessor any liability,
obligation or responsibility with respect thereto. The Construction Agent shall
cause any agreement, contract, purchase order, or other writing entered into by
the Construction Agent purporting to be binding upon the Lessor to refer to the
Construction Agent as agent for the Lessor, and to provide that the Lessor shall
have no obligation for payment of any amount thereunder. The authority of the
Construction Agent hereunder shall terminate on the earliest to occur of (i)
completion of all of the Work (including all punchlist items) in accordance with
the terms and conditions of this Agency Agreement or (ii) termination of the
Construction Agent's authority pursuant to Section 5.02(a) hereof following
occurrence of an Event of Default. The termination of the Construction Agent's
authority hereunder shall not discharge the Construction Agent or limit in any
way the Construction Agent's liability hereunder with respect to obligations
arising out of this Agency Agreement and the Construction Agent's performance
hereunder, including, without limitation, with respect to the Construction
Agent's indemnification of the Indemnitee pursuant to the Participation
Agreement.
SECTION 2.02. Performance of and Payment for the Work. The Construction
---------------------------------------
Agent shall itself perform or caused to be performed by others the work in
accordance with the provisions of this Agency Agreement including, without
limitation, the provisions of Article IV, and shall cause the Improvements to be
Substantially Complete by the Completion Date. The Construction Agent shall pay
for the Improvement Cost using its own funds, subject to reimbursement by the
Lessor to the extent provided by Article III hereof. If, for any reason, the
Improvement Cost exceeds the Lessor's obligation to reimburse the Construction
Agent pursuant to Article III hereof, the Construction Agent shall, nonetheless,
be bound and required to fulfill its obligations hereunder and to pay such
excess Improvement Cost and all other costs in connection with the Work, and,
under no circumstances shall the insufficiency of the funds available to the
Construction Agent reduce or release the Construction Agent from any of its
obligations hereunder. The Lessor shall not be liable to the Construction Agent
for failure or delay in any aspect of the performance of the Work. Upon
delivery, installation, testing or completion of construction of any aspect of
the Work, as appropriate, the Construction Agent shall inspect such aspect of
the Work, and unless the Construction Agent objection to such aspect of the
Work, the Construction Agent shall be deemed to have accepted such aspect of the
Work and, as between the Lessor and the Construction Agent, but without waiving
any rights against contractors and vendors, the Construction Agent shall be
deemed to have agreed that such aspect of the Work is satisfactory to the
Construction Agent in all respects and suitable for its purposes.
ARTICLE III
Lessor's Advances and Reimbursements
------------------------------------
SECTION 3.01. Lessor's Obligations. Subject to the terms and conditions
--------------------
of the Participation Agreement and of this Agency Agreement, including
satisfaction of the applicable conditions set forth in Article III of the
Participation Agreement, on each Advance Date, the Lessor agrees to pay the
Lessor's Share of the Improvement Cost as of such Advance Date. Such
2
<PAGE>
payments of the Lessor's Share of the Improvement Cost shall be funded by the
Lessor solely from the sources specified in Sections 1.02 and 1.03 of the
Participation Agreement. Nothing contained in this Agency Agreement shall in any
way obligate the Lessor to pay any debt or meet any financial obligation of the
Construction Agent under this Agency Agreement or otherwise with respect to the
Work, except from monies actually received by the Lessor from said sources.
SECTION 3.02. Advances of Lessor's Share.
--------------------------
(a) Each Advance shall be made on an Advance Date, subject to receipt by
the Lessor and the Agent at least three Business Days prior thereto, of a
completed and executed Requisition Certificate in the form of Exhibit A hereto.
(b) Each Advance shall be in an amount set forth on the Requisition
Certificate and shall not be in excess of the lesser of (i) Lessor's Share of
Improvement Cost as of such date and (ii) $30,000,000 less the Outstanding
Property Cost as of such date. The final Advance on account of the Improvements
shall be made on or before the Completion Date; provided, however, if the Lessor
--------
and the Agent have consented to an extension of the Completion Date for a Leased
Premises, then, with the consent of the Lessor and the Agent, which may withhold
such consent for any or no reason, the final Advance may include funds
requisitioned in anticipation of Improvement Cost to be incurred in connection
with final completion of the Work after April 16, 1999.
(c) The Lessor shall make or cause to be made each Advance by wire
transfer to the account of the Construction Agent and in such manner as the
Construction Agent may designate in writing no later than ten days before the
applicable Advance Date. Any additional Advance that would otherwise be required
to be made on a day that is not a Business Day shall be made on the next
following Business Day.
ARTICLE IV
Performance of the Work
-----------------------
The Construction Agent shall design, acquire, construct, and install
the Improvements on the Leased Premises in accordance with the following:
SECTION 4.01. Scope of Work. The Construction Agent shall design,
-------------
acquire, construct, and install the Improvements and otherwise perform the Work
in accordance with the Final Construction Plans in a good and workman like
manner under the supervision of a licensed architect or engineer. For each
Leased Premises, the Initial Construction Plans for the Improvements for such
Leased Premises shall be delivered to the Lessor and the Agent prior to the
Closing Date for such Leased Premises and the Final Construction Plans for such
Improvements shall be delivered to the Lessor and the Agent on or prior to the
30th day preceding commencement of construction of such Improvements.
SECTION 4.02. Performance of Work. The Construction Agent shall be
-------------------
solely responsible for all means, methods and techniques in the performance of
the Work, and shall perform the Work or cause the Work to be performed in
accordance with the provisions of this Article IV. In furtherance, and not in
limitation of, Sections 9 and 14 of the Lease Agreement, the Construction Agent
shall promptly remedy damage or loss to any property referred to herein
3
<PAGE>
caused in whole or in part by the Construction Agent, any contractor, any
subcontractor, any vendor, or anyone directly or indirectly employed by any of
them, or by anyone for whose acts any of them is liable and, therefore, for
which the Construction Agent is responsible hereunder.
SECTION 4.03. Permits. The Construction Agent shall obtain and pay for
-------
any and all permits and bonds required to be obtained before commencement of the
Work and for all other permits, governmental fees, sales taxes and use taxes,
licenses and inspections necessary or, in the opinion of the Construction Agent,
desirable for the proper execution and completion of the Work as and when the
same are required to be obtained, and, upon the request of the Lessor or the
Agent, shall provide evidence thereof.
SECTION 4.04. Competent Workforce. The Construction Agent shall employ,
-------------------
or cause its contractor to employ, a competent project manager at all times
during the progress of the Work. The Construction Agent shall be responsible to
each Indemnitee for, and shall defend and shall hold each Indemnitee harmless
from and against, the acts and omissions of its employees, contractors and
subcontractors, their respective agents and employees and any other persons
performing any of the Work, all in accordance with Section 4.02 of the
Participation Agreement.
SECTION 4.05. Compliance with Legal Requirements. The Construction
----------------------------------
Agent shall perform the Work in accordance in all material respects with all
applicable laws, rules, regulations and licenses and shall give all notices
applicable thereto, and when completed, all buildings, structures, site
improvements and the like that are part of the Improvements shall be wholly
within applicable building restriction lines and will not violate in any
material respect applicable use or other restrictions, whether established in
prior conveyances, zoning laws, governmental regulations or otherwise.
SECTION 4.06. Labor. The Construction Agent and its contractors may
-----
employ open shop or union labor for performance of the Work. If the Construction
Agent or any contractor uses union labor, the Construction Agent shall comply,
or cause such contractor to comply with all union contract requirements,
including, without limitation, shop stewards, if required. In the event of a
stoppage, the Construction Agent shall make, or cause its contractor to make,
every reasonable effort to staff the performance of the Work properly.
SECTION 4.07. Books and Records. The Construction Agent shall at all
-----------------
times during the performance of the Work keep and maintain accurate books,
records and accounts showing all materials ordered and received and all
disbursements and accounts payable in connection with performance of the Work.
SECTION 4.08. Environmental Laws. The work shall be performed in
------------------
compliance in all material respects with all applicable Environmental Laws and
all necessary environment permits will be obtained and maintained in full force
and effect.
SECTION 4.09. Inspection Rights. The Construction Agent shall allow the
-----------------
Agent and the Lessor, (or their authorized agents) to enter each Leased Premises
to inspect the Improvements upon prior written request and during normal
business hours at a time reasonably approved by the Construction Agent, which
request and approval shall not be required in the event of an emergency or if an
Event of Default hereunder or under the Loan Agreement or Lease Agreement has
occurred and is continuing, for the purpose of inspecting the progress of the
Work and examining all books, accounts, plans, drawings and records with respect
thereto.
4
<PAGE>
Such entry and inspection shall be carried out in a manner that does not
unreasonably disrupt the Work. So long as no Event of Default has occurred and
is continuing hereunder or thereunder, such entry and inspection shall be made
no more frequently than quarterly and at the inspecting party's expense. While
any Event of Default is continuing hereunder or thereunder, such entry and
inspection may be made from time to time at the Construction Agent's expense.
SECTION 4.10 Completion Date.
---------------
(a) The Construction Agent shall cause the Improvements for such Leased
Premises and all portions of the Work associated therewith to be Substantially
Complete no later than Completion Date for such Improvements. So long as no
Event of Default or Unmatured Event of Default hereunder or under the Loan
Agreement or Lease Agreement shall have occurred and be continuing, in the event
that the Construction Agent determines that the Improvements for any Leased
Premises will not be Substantially Complete on or before the Completion Date
thereof, upon (i) the written request of the Construction Agent to the Lessor
and the Agent no later than the Completion Date and (ii) the written consent of
the Lessor and the Agent to such request, which consent may be withheld for any
or no reason, then the Completion Date shall be extended for a period of time so
designated by the Lessor and the Agent, but no later than July 16, 1999.
(b) If (i) the Improvements for any Leased Premises are not Substantially
Complete by the Completion Date thereof, (ii) if the Completion Certificate and
other documents specified in Section 4.18 hereof have not been delivered for any
Leased Premises by the Completion Date or (iii) if the actual Property Cost for
any Leased Premises set forth in the Completion Certificate is greater than the
lesser of (x) 110% of the Estimated Improvement Cost plus the Purchase Price
thereof or (y) 110% of the Appraised Value then, without limitation to Lessor's
rights in Article V, the Lessor may elect to require the Lessee to sell such
Leased Premises as provided in Section 16 of the Lease Agreement and pay the
Lessor the amounts specified in said Section 16 of the Lease Agreement as if the
date specified by the Lessor were the last day of the Lease Term for such Leased
Premises.
(c) Within 120 days after the date on which the Improvements are
Substantially Complete, the Construction Agent shall cause to be completed all
punchlist items and other aspects of the Work contemplated by the definition of
"Substantially Complete".
SECTION 4.11 Change Orders. Except as otherwise specifically set forth
-------------
herein, without invalidating this Agency Agreement, the Construction Agent may
order changes in the Work within the general scope of this Agency Agreement
consisting of additions, deletions or other revisions that the Construction
Agent deems necessary or desirable that do not adversely affect the soundness,
structural integrity, value, utility, operation or useful life of any
Improvements (any such change, a "Change Order"). All Change Orders shall be
performed under the applicable conditions of this Agency Agreement. On or before
the Completion Date, the Construction Agent shall deliver to the Lessor and to
the Agent copies of all supplements to, and amendments and modifications of, the
Final Construction Plans reflecting all Change Orders. No Change Order shall be
deemed to extend the Completion Date or modify the Estimated Improvement Cost,
nor shall the implementation of any Change Order constitute evidence of any
party's consent to such extension, unless the Lessor and the Construction Agent
have expressly agreed that the Completion Date is so extended pursuant to
Section 4.10 hereof.
SECTION 4.12 Independent Contractor Status. The Construction Agent
-----------------------------
recognizes that despite its designation as the Lessor's agent hereunder, it is
engaged as an
5
<PAGE>
independent contractor hereunder and acknowledges that Lessor shall not have any
responsibility to provide any benefits normally associated with employee status.
The Construction Agent, in accordance with its status as an independent
contractor, covenants and agrees that it will conduct itself in a manner
consistent with such status, that it will neither hold itself out as, nor claim
to be an officer, director, partner or employee of the Lessor or the Agent by
reason hereof, and that it shall not by reason hereof make any claim, demand or
application to or for any right or privilege applicable to an officer, director,
partner or employee of the Lessor or the Agent.
SECTION 4.13 Removal of Liens. If any notices of contract, statements
----------------
of claim with respect to unpaid costs for the performance of the work or
mechanics, or materialmen's liens (collectively, "Mechanics' Liens") are filed
against any Leased Premises, or any portion of any thereof, by any vendor or
agent of the Construction Agent or any employee, contractor or subcontractor
with respect to the Work, the Construction Agent agrees to promptly, and in any
event prior to the next Advance Date, to cause such Mechanic's Lien to be
removed or bonded against at its sole cost and expense as of such date.
SECTION 4.14 Standard of Work. The Construction Agent warrants to the
----------------
Lessor that all materials shall be new (except as otherwise set forth in the
Final Construction Plans) and of good quality and all Work shall be of good and
workmanlike quality, and in conformance with the requirements of the Final
Construction Plans and as set forth in this Agency Agreement.
SECTION 4.15 Notice of Delay. The Construction Agent shall give the
---------------
Lessor and the Construction Agent prompt written notice of interruption of the
performance of the Work that may interfere with its ability to complete any
Improvements by the applicable Completion Date.
SECTION 4.16 Warranty of Title. The Construction Agent represents and
-----------------
warrants to and covenants with the Lessor that the Lessor has and shall have
good title to the Leased Premises, subject only to the Permitted Liens, and
that, except for the Lessor Liens, the Construction Agent shall warrant and
defend the same to the Lessor against the claims and demands of all Persons.
SECTION 4.17 Lease Agreement. The provisions of the Lease Agreement
---------------
shall be fully applicable to the Construction Agent, as agent hereunder, and the
Construction Agent shall comply with all the terms and conditions thereof.
SECTION 4.18 Conditions of Completion. As a condition precedent to
------------------------
consideration of the Improvements as being Substantially Complete and as a
condition of satisfaction of the Construction Agent's obligations under Section
4.10(a) hereof, the Construction Agent shall deliver or cause to be delivered to
the Lessor all of the following items which must be satisfactory in form and
substance to the Lessor and the Agent:
(a) Final lien waivers with respect to the Improvements from any
contractor or subcontractor performing construction or installation
services for any of the Improvements establishing that all work and labor
performed and materials furnished through such date has been paid for in
full, or a bond or other assurance of payment with respect thereto or a
certificate as to the non-existence of any liens as contemplated by the
form of Requisition Certificate attached hereto as Exhibit A;
6
<PAGE>
(b) All necessary consents, licenses, authorizations and approvals of
municipal or other state or federal governmental authorities having
jurisdiction over the Improvements have been obtained (including without
limitation environmental permits, but, excluding certificates of occupancy
which the Construction Agent has applied for and is diligently
prosecuting);
(c) An officer's certificate (the "Completion Certificate") that the
Improvements are Substantially Complete and no Event of Default hereunder
has occurred and is continuing and setting forth the actual Improvement
Cost thereof; and
(d) A certificate of a licensed architect or engineer selected by the
Agent, subject to the Construction Agent's reasonable approval (the cost of
whom shall be paid by the Construction Agent), to the effect that the
Improvements are Substantially Complete.
ARTICLE V
Defaults and Remedies
---------------------
SECTION 5.01. Events of Default. Any of the following shall constitute
-----------------
an Event of Default by the Construction Agent under this Agency Agreement:
(a) If the Construction Agent defaults in making payment of any sum
payable hereunder and such default continues for five Business Days of such
default;
(b) If, as of the time when the same shall have been made, any
representation or warranty of the Construction Agent set forth herein or in any
consent, notice, certificate, demand, request or other instrument delivered by
the Construction Agent in connection with or pursuant to this Agency Agreement,
any other Transaction Document to which it is a party or the transactions
contemplated hereby or thereby shall prove to have been incorrect or untrue in
any material respect when made;
(c) If the Construction Agent fails to cause the Improvements to be
Substantially Complete in accordance with the Final Plans by the Completion Date
for a cost not greater than 110% of the Appraised Value, or if the Construction
Agent otherwise fails to satisfy conditions (i), (ii) or (iii) of Section
4.10(b) hereof; or
(d) If the Construction Agent shall fail to cause any Mechanic's Lien to
be removed or bonded against in accordance with Section 4.13 hereof, or fail to
maintain the insurance required by Section 4.17 hereof;
(e) If the Construction Agent defaults in the performance in any other
covenant, agreement, or obligation on the part of the Construction Agent to be
performed under this Agency Agreement, and such default continues for a period
of thirty (30) days after notice thereof; provided, however, that in the case of
a default that can with reasonable diligence be remedied by the Construction
Agent, but not within a period of thirty (30) days, if the Construction Agent
shall promptly commence to remedy the default and thereafter shall prosecute the
cure of such default with reasonable diligence, the period of time after
obtaining such notice of default within which to remedy the default shall be
extended for such period as may be
7
<PAGE>
reasonable to remedy the same with all reasonable diligence, up to a maximum
period of 90 days after notice of such default; and
(f) An Event of Default, as defined in any of the other Transaction
Documents, by the Construction Agent shall have occurred and be continuing under
any of the Transaction Documents.
SECTION 5.02. Remedies. After the occurrence of any Event of Default
--------
hereunder, the Lessor shall have all rights and remedies available at law and in
equity and without limiting the generality of the foregoing, may elect to
exercise any or all of the following remedies which shall be cumulative and not
exclusive:
(a) Terminate the Construction Agent's authority and all of the
Construction Agent's rights and privileges under this Agency Agreement;
(b) Exercise all rights and remedies of the Lessor under any or all of the
Transaction Documents;
(c) Demand immediate payment of all sums due hereunder together with
interest thereon at the Late Payment Rate until paid;
(d) Specifically enforce the Construction Agent's obligations pursuant to
Article IV hereof;
(e) Recover from the Construction Agent all other damages and expenses
that the Lessor may have sustained by reason of the Event of Default, including,
without limitation, reasonable attorneys' fees and expenses, which damages and
expenses shall be paid by the Construction Agent as they are incurred by the
Lessor, together with interest thereon at the Late Payment Rate until paid.
SECTION 5.03. Costs of Enforcement. If an action shall be brought by
--------------------
the Lessor for the enforcement of any provision of this Agency Agreement, the
Construction Agent shall pay to the Lessor all costs and other expenses that may
become payable as a result thereof, including, without limitation, reasonable
attorneys' fees and expenses.
SECTION 5.04. Cumulative Remedies. No right or remedy herein conferred
-------------------
upon or reserved to the Lessor is intended to be exclusive of any other right or
remedy and every right and remedy shall be cumulative and in addition to any
other legal or equitable right or remedy given hereunder, or at any time
existing. The failure of the Lessor to insist upon the strict performance of any
provision or to exercise any option, right, power or remedy contained in this
Agency Agreement shall not be construed as a waiver or a relinquishment thereof
for the future.
ARTICLE VI
Exculpation of Lessor
---------------------
Anything in this Agency Agreement to the contrary notwithstanding, except
with respect to the Lessor Liens attributable to the Lessor and the Lessor's
gross negligence, willful misconduct or fraud, no recourse or relief shall be
had under any rule of law or equity, statute
8
<PAGE>
or constitution, or by enforcement of any assessments, penalties, damages,
judgments, or otherwise, for liability arising from this or the other
Transaction Documents (whether by breach of any obligation, monetary or
nonmonetary on the part of the Lessor) against the Lessor personally or against
any officer, member, director, or representative of the Lessor, including any
predecessor or successor of the Lessor, it being expressly understood and agreed
that any liability or obligation of the Lessor under this Agency Agreement is
chargeable to and compensable solely and exclusively from the Lessor's interest,
if any, in and to the Leased Premises, and any funds or proceeds (including
rights to funds and proceeds) in possession of the Lessor in any manner derived
from the Lessor's rights or interests under the Transaction Documents, and any
claim of liability other than the foregoing is hereby expressly waived by the
Construction Agent and by any Person claiming by, through or under the
Construction Agent.
ARTICLE VII
Miscellaneous
-------------
SECTION 7.01. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGENCY
-----------------------------------
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK. IN CONNECTION WITH THIS AGENCY AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS, PURSUANT TO SECTION
6.06 OF THE PARTICIPATION AGREEMENT, THE CONSTRUCTION AGENT HAS AGREED TO THE
NONEXCLUSIVE PERSONAL JURISDICTION OF AND VENUE IN THE STATE COURTS OF THE STATE
OF NEW YORK, COUNTY OF NEW YORK, AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND WAIVED THE RIGHT TO TRIAL BY JURY.
SECTION 7.02. Notices; Modification.
---------------------
(a) Any notices required or permitted hereunder or under any Transaction
Document, or by Law in respect of any Transaction Document, shall be in writing
and shall be deemed given and effective when personally delivered, or if sent by
registered or certified mail, four Business Days after date of delivery to the
post office, or if sent by overnight delivery (express mail or overnight
courier), when received, or if sent by telex or telecopy, upon receipt, in each
case addressed to the Person required to receive the same at the address stated
on the signature pages of the Participation Agreement or in accordance with the
last unrevoked written direction from such Person to the other parties hereto.
(b) The terms of this Agency Agreement shall not be waived, altered,
modified, amended, supplemented, or terminated in any manner whatsoever except
by written instrument signed by the parties hereto.
SECTION 7.03. Illegal Provision. If any provision herein contained
-----------------
shall be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, and this Agency Agreement shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein.
SECTION 7.04. Binding Effect. The covenants, conditions and agreements
--------------
herein contained shall bind, and the benefits and advantages shall inure to, the
respective heirs, executors, administrators, successors and assigns of the
parties hereto. With respect to provisions of the provisions in this Agency
Agreement that by their terms are expressly for the benefit of
9
<PAGE>
any of the Indemnified Parties, such Persons shall be third party beneficiaries
of this Agency Agreement and shall be entitled to enforce such provisions.
Pursuant to the Mortgage and Assignment Agreements, the Agent, for the benefit
of the Lenders and the Equity Participant shall have the right to and enforce
any right or remedy available to the Lessor hereunder or under any other
Transaction Document (without the need for any further written assignment).
Whenever used, the singular shall include the plural, the plural include the
singular and the use of any gender shall include all genders.
SECTION 7.05. Counterparts. This Agency Agreement may be executed in
------------
any number of counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same instrument.
SECTION 7.06. Headings. The headings to the various sections of this
--------
Agency Agreement have been inserted for the convenience of reference only and
shall not limit or otherwise affect any of the terms hereof.
SECTION 7.07. Time of Essence. Time is of the essence of this Agency
---------------
Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the undersigned set their hands under seal as of the
day and year first above written.
FLEET NATIONAL BANK,
not in its individual capacity but solely
as Owner Trustee under the Trust
Agreement
By: /s/ Elizabeth C. Hammer
-----------------------
Name: Elizabeth C. Hammer
Title: Vice President
SMART & FINAL INC.,
as Construction Agent
By: /s/ Martin Lynch
----------------
Name: Martin Lynch
Title: Executive Vice President
By: /s/ Donald G. Alvarado
----------------------
Name: Donald G. Alvarado
Title: Senior Vice President
<PAGE>
Exhibit A
REQUISITION CERTIFICATE
Dated: As of [Advance Date]
Capitalized terms used herein without definition have the meanings set
forth in the Participation Agreement dated as of April 16, 1997 between Lessor
(as defined therein) and Smart & Final Inc. and certain other parties.
The undersigned hereby certifies to the Lessor, the Lenders, the Equity
Participant and the Agent that:
SECTION 1. SUMMARY TO DATE:
The following is a summary of previous the Advances to date and the
Advances requested by this Requisition and their relation to the Estimated Cost
of Improvements.
The Construction Agent shall provide a Separate Summary for each Leased
Premises and a combined summary of all Leased Premises.
(a) The lesser of (x) 110% of the
Estimated Improvement Cost plus the Purchase
Price or (y) 110% of the Appraised Value
(based on Final Construction Plans)
for each Leased Premise $__________
(b) Advances and Purchase Price heretofore paid $__________
(c) Balance to complete the Improvements-*/ $__________
(d) Improvement Cost to date (aggregate $__________
Improvement Cost certified in Section 2 of
this and prior Requisition Certificates)
and Purchase Price heretofore paid
(e) Amount of Improvement Cost which is $__________
unreimbursed [(d)-(b)]
(f) Lessor's Share of Improvement Cost $__________
[lesser of (i) (a)-(b)-(c) or (ii) (e)]
(g) Advance requested $__________
Total $__________
- --------------------
- -*/ Estimated by Construction Agent as of the date of this Requisition.
A-1
<PAGE>
Section 2. The Advance requested pursuant to this Requisition
Certificate is to be made on account of costs which are a part of Improvement
Cost as of the date hereof. None of these costs have been included as
Improvement Cost on a prior Requisition Certificate. These costs are as set
forth below.
DESCRIPTION OF ITEM REQUESTED AMOUNT FOR
OR EXPENSE ITEM OR EXPENSE
SEE ATTACHED SCHEDULE
[Itemized by each Leased Premises]
Section 3. All conditions for Advances of Lessor's Share of
Improvement Cost set forth in Section 3.02 of the Agency Agreement and in
Section 2(a) of the Lease Agreement have been satisfied.
Section 4. The Improvement Cost as of the date hereof is as set forth
in Section 1(d) above, and if the Improvement Cost plus the balance to complete
Improvements (as set forth in Section 1(c) above) exceeds the aggregate
Estimated Improvement Cost, the Construction Agent has paid in full the excess.
Section 5. No changes have been made in any respect to the Final
Construction Plans, except those changes that the Construction Agent deems
necessary or desirable that do not adversely affect the current soundness,
structural integrity, value, utility, operation or useful life of the
Improvements.
Section 6. All permits, etc. specified in Section 4.03 of the Agency
Agreement remain in full force and effect.
Section 7. The Construction Agent represents and warrants that the
Construction Agent is not (a) in default of any obligations to the Lessor under
any of the Transaction Documents and (b) in default to any subcontractors,
workmen or materialmen in connection with the Improvements as of the date
hereof. The Leased Premises are free of any lien other than Permitted
Encumbrances.
Section 8. All other funds disbursed by the Lessor under prior
Requisition Certificates have been expended for the purposes for which they were
requisitioned.
Section 9. As of the date of this Requisition Certificate, the dollar
amount shown in Section 1 above for the "Balance to complete" represents, in the
Construction Agent's best judgment, a correct statement of the total additional
dollar amount required to pay all Improvement Cost which will be incurred in
completion of the Improvements.
A-2
<PAGE>
Section 10. This Requisition Certificate is being submitted to induce
the Lessor to make an Advance pursuant to the Participation Agreement relative
to the Improvements which are the subject matter of this Requisition
Certificate, and it is intended that the Lessor, the Lenders, the Equity
Participant and the Agent shall rely upon the same.
IN WITNESS WHEREOF, this Certificate has been executed as of the date set
forth above.
SMART & FINAL INC.,
as Construction Agent
By:______________________________________
Name:
Title:
A-3
<PAGE>
[Execution Copy]
LEASE AGREEMENT
DATED AS OF APRIL 16, 1997
BETWEEN
FLEET NATIONAL BANK,
not in its individual capacity,
but solely as Owner Trustee
under the Trust Agreement, as the Lessor,
SMART & FINAL INC., as the Lessee
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
SECTION 1. Definitions................................................. 1
SECTION 2. Lease of Leased Premises.................................... 1
SECTION 3. Term........................................................ 2
SECTION 4. Rent........................................................ 2
SECTION 5. Net Lease Agreement......................................... 3
SECTION 6. Use of Leased Premises...................................... 4
SECTION 7. Compliance with Laws........................................ 4
SECTION 8. Property Taxes and Assessments.............................. 5
SECTION 9. Maintenance and Repair of Property; Alterations............. 5
SECTION 10. Insurance................................................... 6
SECTION 11. Assignment and Subletting................................... 8
SECTION 12. Liens....................................................... 10
SECTION 13. Certain Personal Property................................... 10
SECTION 14. Loss, Damage or Destruction................................. 11
SECTION 15. Lessee's Rights of Purchase and Renewal; Purchase Obligation 12
SECTION 16. Sale of Leased Premises..................................... 12
SECTION 17. Late Charges................................................ 13
SECTION 18. No Warranties............................................... 14
SECTION 19. Events of Default........................................... 14
SECTION 20. Remedies Upon Default....................................... 16
SECTION 21. Certain Waivers............................................. 21
SECTION 22. Memorandum of Lease......................................... 23
SECTION 23. Lessor's Right to Perform for the Lessee.................... 23
SECTION 24. Notices..................................................... 23
SECTION 25. Nature of Transaction....................................... 23
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 26. Operating Lease............................................. 24
SECTION 27. Governing Law; Waiver of Jury Trial......................... 24
SECTION 28. Miscellaneous............................................... 24
</TABLE>
ii
<PAGE>
LEASE AGREEMENT dated as of April 16, 1997 between FLEET NATIONAL BANK, a
national banking association, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement (the "Lessor") and SMART & FINAL INC., a
Delaware corporation (the "Lessee").
SECTION 1. Definitions. All capitalized terms used and not defined herein
-----------
shall have the respective meanings ascribed thereto in Exhibit A to the
Participation Agreement dated as of April 16, 1997, among the parties hereto,
Credit Lyonnais New York Branch, as Agent, and the Lenders, Equity Participant
and the Significant Sublessees named therein, as amended from time to time.
The words "this Lease Agreement", "herein", "hereunder", "hereof" or other
like words mean and include this Lease Agreement, each Lease Supplement, and
each amendment and supplement hereto and thereto.
SECTION 2. Lease of Leased Premises.
------------------------
(a) Subject to the terms and conditions hereof, the Lessor agrees to lease to
the Lessee any and all of the Leased Premises for the Lease Term. The Lessor
shall not be obligated to acquire any Leased Premises for lease hereunder
unless:
(i) the Purchase Price plus the Estimated Improvement Cost of such Leased
Premises and all other Leased Premises leased hereunder does not exceed
$30,000,000;
(ii) the Lessee causes the conveyance of title to such Leased Premises to
the Lessor as provided in Section 3.02 of the Participation Agreement;
(iii) at the time any such Leased Premises is to be leased hereunder,
there exists no Event of Default or Unmatured Event of Default; and
(iv) the other terms and conditions hereof and of the Participation
Agreement including without limitation the terms and conditions of Article
III thereof are satisfied.
(b) The lease of each of the Leased Premises to the Lessee under this Lease
Agreement shall be evidenced by the execution and delivery by the Lessor and the
Lessee of a Lease Supplement. In addition, each Advance made by the Lessor to
the Lessee under the Agency Agreement shall be evidenced by a Lease Supplement.
No Closing Date shall occur after April 16, 1999.
(c) Execution by the Lessee of a Lease Supplement shall constitute (i) in the
case of a Lease Supplement evidencing the lease of Leased Premises, (x)
acknowledgment by the Lessee that possession of the Leased Premises specified
therein has been delivered to the Lessee in good condition and has been accepted
for lease hereunder by the Lessee as of the Closing Date, and (y) acknowledgment
by the Lessee that the Leased Premises specified therein are subject to all of
the covenants, terms and conditions of this Lease Agreement and such Lease
Supplement, or (ii) in the case of a Lease Supplement evidencing an Advance
under the Agency Agreement, (x) acknowledgment by the Lessee that all the Work
performed and Improvements constructed to date are a part of the Leased Premises
and subject to the Lease Agreement and (y) acknowledgment that the amount of
such Advance shall be added to, and become a part of, the Outstanding Property
Cost on such Advance Date.
(d) So long as the Lessee pays the Basic Rent, any Supplemental Rent and any
other sums payable hereunder as the same become due and fully complies with all
of the terms of this
<PAGE>
Lease Agreement and the other Transaction Documents and fully performs its
obligations hereunder and thereunder, and so long as no Event of Default has
occurred and is continuing, the Lessor covenants that, subject to the terms of
this Lease Agreement and the other Transaction Documents, neither the Lessor nor
anyone claiming by, through or under the Lessor shall interfere with the
Lessee's peaceful and quiet enjoyment of the Leased Premises (except in respect
of claims which the Lessee is obligated to indemnify any Indemnified Party
pursuant to Section 4.02 of the Participation Agreement and claims arising from
encumbrances on any Leased Premises existing on the Closing Date thereof). No
failure by the Lessor to comply with the foregoing covenant shall give the
Lessee any right to cancel or terminate this Lease Agreement or to abate, reduce
or make a deduction from or offset against the Basic Rent, Supplemental Rent or
any other amount payable under this Lease Agreement, or to fail to perform any
other obligation of Lessee hereunder.
SECTION 3. Term.
----
(a) The "Base Term" for the Leased Premises described in a Lease Supplement
shall commence on the Closing Date set forth in such Lease Supplement, which (as
described in the Participation Agreement) is the date on which such Leased
Premises is accepted for lease hereunder by the Lessee, and shall continue until
April 16, 2002, unless terminated earlier pursuant to Section 14, 15, 16 or 20
hereof.
(b) Subject to conditions set forth in Section 15(b) hereof, each "Renewal
Term" shall be for a period of two (2) years and shall commence on the first day
following the last day of the Base Term (in the case of the first Renewal Term)
or the last day of the preceding Renewal Term (in the case of subsequent Renewal
Terms), unless terminated earlier pursuant to Section 14, 15, 16 or 20 hereof.
(c) The "Lease Term" shall consist of the Base Term and all Renewal Terms;
provided, however, that the Lease Term shall not, in any event, extend beyond
- --------
the first to occur of (i) April 16, 2022 and (ii) the Maturity Date of the
Notes.
(d) If the Lessee remains in possession of the Leased Premises after the
expiration of the Lease Term, such continued possession shall, if rent is paid
by the Lessee and accepted by the Lessor, create a month-to-month tenancy on the
terms and conditions herein specified but at a Basic Rent equal to the Basic
Rent that would have been payable during the period of the hold-over had the
Lessee exercised its right to extend the Lease Term for the Renewal Term
immediately following the expiration of the Lease Term except that the Finance
Rate used in calculating the Basic Rent shall be the Late Payment Rate, and said
tenancy may be terminated at any time by either party by 30 days' prior written
notice to the other party.
SECTION 4. Rent.
----
(a) The Lessee hereby agrees to pay to the Lessor on each Payment Date during
the Lease Term the Basic Rent due on such date.
(b) The Lessee also agrees to pay to the Lessor, or to whomsoever shall be
entitled thereto as expressly provided herein or in the Participation Agreement,
all Supplemental Rent, promptly as the same shall become due and owing, or if no
due date is specified, upon demand by the Lessor, and in the event of any
failure on the part of the Lessee so to pay any such Supplemental Rent hereunder
the Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent.
2
<PAGE>
(c) Until the indebtedness evidenced by the Notes shall have been fully paid
and discharged, all payments (other than Excluded Amounts) required to be made
by the Lessee to the Lessor hereunder shall be made to the Agent, by wire
transfer of federal or other immediately available funds no later than 11:00
a.m. New York City time and identifying each payment in such manner and payable
to such account of the Agent as provided in Section 4.05 and the signature pages
of the Participation Agreement. Thereafter, all payments required to be made by
the Lessee to the Lessor hereunder shall be paid to the Lessor in such manner as
the Lessor has reasonably requested. All Excluded Amounts shall be paid
directly to the Person entitled thereto as specified in the preceding sentence.
Time is of the essence in connection with the payment of Basic Rent,
Supplemental Rent and all other payments hereunder.
SECTION 5. Net Lease Agreement. The lease of the Leased Premises hereunder is
-------------------
a net lease and the Lessee shall pay all costs and expenses of every character,
whether foreseen or unforeseen, ordinary or extraordinary or structural or
nonstructural, in connection with the use, operation, maintenance, repair and
reconstruction of the Leased Premises. Notwithstanding any other provision of
this Lease Agreement, it is intended that Basic Rent and Supplemental Rent shall
be paid without notice, demand, counterclaim, setoff, deduction or defense and
without abatement, suspension, deferment, diminution or reduction. The
obligations and liabilities of the Lessee hereunder shall in no way be released,
discharged or otherwise affected (except as may be expressly provided herein)
for any reason, including, without limitation: (a) any defect in the condition,
quality or fitness for use of the Leased Premises or any portion thereof; (b)
any damage to, removal, abandonment, salvage, loss or destruction of or any
requisition, condemnation, taking of, or the occurrence of any Event of Loss
with respect to the Leased Premises or any portion thereof; (c) any restriction,
prevention or curtailment of or interference with any use of the Leased Premises
or any part thereof, whether as a result of force majeure or otherwise; (d) any
defect in or any Lien on the title to the Leased Premises or any part thereof;
(e) any change, waiver, extension, indulgence or other action or omission in
respect of any obligation or liability of the Lessee, the Lessor or any other
Person; (f) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to the Lessee, the
Lessor or any other Person, or any action taken with respect to this Lease
Agreement by any trustee or receiver of the Lessee, the Lessor or any other
Person, or by any court; (g) any claim that the Lessee has or may have against
the Lessor or any other Person; (h) any failure on the part of the Lessor, the
Equity Participant, any Lender or the Agent to perform or comply with any of the
terms hereof or of any other Transaction Documents; (i) any invalidity or
unenforceability or disaffirmance of this Lease Agreement or any provision
hereof or any of the other Transaction Documents or any provision of any
thereof; (j) any change in the tax or other laws of the United States, any state
or any political subdivision of any thereof; (k) any assignment, novation,
merger, consolidation, sale or transfer of assets, leasing or other similar
transaction of or affecting either the Lessee, whether with or without the
approval of the Lessor or any other Person; (l) any acts or circumstances that
may constitute a foreclosure under this Lease Agreement; or (m) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing, whether
or not either the Lessee shall have notice or knowledge of any of the foregoing.
This Lease Agreement shall be noncancellable by the Lessee and, except as
expressly provided herein, the Lessee, to the extent permitted by law, waives
all rights now or hereafter conferred by statute or otherwise to quit, terminate
or surrender this Lease Agreement or to any diminution or reduction of Rent or
Supplemental Rent payable by the Lessee hereunder. Except as expressly provided
herein, all payments by the Lessee shall be final and the Lessee shall not seek
to recover any such payment or any part thereof for any reason whatsoever.
Except as otherwise expressly provided herein or in other Transaction Documents,
the Lessee shall pay to the parties respectively entitled thereto, as
Supplemental Rent, all utility charges, taxes, insurance premiums, operating
charges, repair and maintenance charges and any other costs and expenses that
may accrue or become due and payable during the Lease Term relating to any
Leased Premises or any buildings, improvements, fixtures, machinery, equipment
or personal property
3
<PAGE>
now or hereafter constituting a part thereof, or arising from the construction,
management, maintenance, preservation or operation of, or from any use,
occupancy or activity conducted in, on or about any Leased Premises and any
buildings, improvements, fixtures, machinery, equipment or personal property now
or hereafter constituting a part thereof.
SECTION 6. Use of Leased Premises.
----------------------
The Lessee shall be permitted to use the Leased Premises for any lawful uses,
subject, however, to applicable zoning ordinances, applicable laws and any
governmental rules and regulations now in effect or hereafter adopted by any
governmental authority having or asserting jurisdiction, and such conditions,
restrictions and other encumbrances, if any, to which the Leased Premises are
subject at the time of execution and delivery of the Lease Supplement applicable
thereto. The Lessee shall not use or occupy or permit any Leased Premises to be
used or occupied, nor do or permit anything to be done in or on any Leased
Premises or any part thereof, in a manner that would in any way violate any
certificate of occupancy affecting such Leased Premises or make void or voidable
any insurance then in force with respect thereto, or that may make it impossible
to obtain fire or other insurance thereon required to be furnished hereunder by
the Lessee, or that will cause or be likely to cause structural injury to such
Leased Premises, or that will constitute a public or private nuisance or waste.
Nothing contained in this Lease Agreement and no action or inaction by the
Lessor shall be deemed or construed to mean that the Lessor has granted to the
Lessee any right, power or permission to do any act or to make any agreement
that may create, give rise to, or be the foundation for, any right, title,
interest, lien, charge or other encumbrance upon the estate of the Lessor in the
Leased Premises.
SECTION 7. Compliance with Laws.
--------------------
(a) The Lessee shall, throughout the Lease Term, and at the Lessee's cost and
expense, promptly comply, or cause compliance (including, without limitation, in
connection with the making of any required alterations, repairs or improvements
to the Leased Premises): (i) with all applicable laws, rules, regulations,
licenses, judgments, orders or decrees of any government, governmental body or
court having jurisdiction over the Lessee or the Leased Premises, and (ii) with
any agreements, contracts, easements and restrictions affecting any Leased
Premises or any part thereof or the ownership, occupancy or use thereof existing
on the Closing Date for such Leased Premises or hereafter created by the Lessee,
or consented to or requested by the Lessee. In furtherance, and not in
limitation of, the preceding sentence, the Lessee will comply with all
Environmental Laws governing each Leased Premises.
(b) No abatement, diminution or reduction in Basic or Supplemental Rent or any
other charges required to be paid by the Lessee pursuant hereto shall be claimed
by or allowed to the Lessee for any inconvenience or interruption, cessation, or
loss of business caused directly or indirectly, by any present or future laws or
regulations, or by priorities, rationing or curtailment of labor or materials,
or by war, civil commotion, strikes or riots, or any manner or thing resulting
therefrom, or by any other cause or causes beyond the control of the Lessor or
the Lessee, nor shall this Lease Agreement be affected by any such causes; and
no diminution in the amount of the space used by the Lessee caused by legally
required changes in the construction, equipment, fixtures, motors, machinery,
operation or use of any Leased Premises shall entitle the Lessee to any
abatement, diminution or reduction of the Basic Rent or any other charges
required to be paid by the Lessee pursuant to this Lease Agreement.
4
<PAGE>
SECTION 8. Property Taxes and Assessments.
------------------------------
(a) The Lessee shall pay when due and shall be obligated for all real estate
taxes and assessments assessed against any Leased Premises or any part of any
thereof. Such real estate taxes and assessments shall be hereinafter referred
to as "Real Estate Taxes." Real Estate Taxes shall also include any tax,
assessment, charge or fee in substitution for or in addition to such real estate
taxes or assessments, and a tax on rents in substitution for or in addition to
such real estate taxes or assessments, but shall not include any Taxes specified
in clauses (x) or (y) of Section 4.02(b) of the Participation Agreement. The
Lessee agrees to pay all such Real Estate Taxes on the Leased Premises on or
before the due date for payment of such Real Estate Taxes.
(b) The Lessee shall have the right to contest the amount or validity of the
Real Estate Taxes which the Lessee is required to pay hereunder, and for that
purpose, the Lessee shall have the right to file in the name of the Lessor all
such protests or petitions and to institute and prosecute such proceedings as
the Lessee may deem necessary for the purpose of such contest. The Lessee shall
pay the cost of prosecuting such contest. If payment is necessary in order to
avoid penalties or interest accruing thereon the Lessee must pay such Real
Estate Taxes prior to such protest or proceeding. Any refund of any Real Estate
Taxes paid by the Lessee shall be the property of the Lessee, and the Lessor
agrees to pay the same to the Lessee promptly in the event payment thereof is
initially made to the Lessor.
(c) The Lessee shall pay promptly when due all personal property taxes
assessed during the Lease Term upon the Lessee's fixtures, furnishing, equipment
and stock in trade or upon the Lessee's leasehold interest under this Lease
Agreement or upon any other personal property situated in or upon the Leased
Premises.
SECTION 9. Maintenance and Repair of Property; Alterations.
-----------------------------------------------
(a) The Lessee shall, at all times during the Lease Term, at its own cost and
expense and without any cost or expense to the Lessor, preserve and maintain the
Leased Premises (including parking areas, access drives and landscaping) in good
condition and repair consistent with industry standards, subject to ordinary
physical depreciation and wear and tear, but in no event shall such standards be
lower than the standards followed by the Lessee for the maintenance and repair
of similar property owned by the Lessee, which obligation shall include, without
limitation, the maintenance and repair of both the exterior and interior of the
Leased Premises, structural components, roof membrane, interior and exterior
surfaces, window and door glass, plumbing, heating, ventilation, and air
conditioning systems and equipment, and electrical systems and equipment. The
foregoing undertaking to maintain the Leased Premises in good condition and
repair shall apply regardless of the cause necessitating repair and regardless
of whether the Lessee has possession of the Leased Premises, and as between the
Lessor and the Lessee, all risks of damage to the Leased Premises are assumed by
the Lessee.
(b) The Lessee may, at its own cost and expense, make additions to, and
alterations of, the Leased Premises, provided that (i) the then appraised value
of any Leased Premises shall not be decreased thereby, (ii) such work shall be
expeditiously completed in a good and workman like manner under the supervision
of a licensed architect or engineer in accordance with plans and specifications
and cost estimates prepared by such architect or engineer and in compliance with
all applicable laws, rules, regulations, licenses (including all notice
requirements thereof), (iii) no structural alteration shall be made unless the
Lessor's prior written consent shall have been obtained, which consent will not
be unreasonably withheld or delayed, and (iv) no material improvements shall be
demolished or material additions, alterations or improvements added unless the
Lessor's prior written consent shall have been obtained, which consent will not
be unreasonably withheld or delayed. If the estimated cost of any single or
connected series of such
5
<PAGE>
additions, alterations or improvements exceeds $1,000,000 (other than the
Improvements made pursuant to the Agency Agreement), the Lessee will (x) give
the Lessor and the Agent advance notice thereof, (y) provide the Lessor and the
Agent for its review preliminary and final plans and specifications and any
material amendments thereto, and (z) use only reputable general contractors and
subcontractors, licensed to the extent required by the provisions of applicable
law. All such additions, alterations and improvements shall be and remain the
property of the Lessor, shall be deemed part of the Leased Premises and shall be
subject to this Lease Agreement.
SECTION 10. Insurance.
---------
(a) The Lessee will maintain the following insurance in respect of each of the
Leased Premises in each case in amounts and with carriers acceptable to the
Lessor and the Agent:
(i) property insurance against all risks of direct physical loss,
including loss by fire, lightning, windstorm (if commercially reasonable to
obtain), hail, explosion, riot and civil commotion, aircraft and vehicles,
smoke, flood (if commercially reasonable to obtain), earthquake (if
commercially reasonable to obtain) and other risks which at the time are
included under usual and customary extended coverage endorsements in amounts
sufficient to prevent the Lessor and the Lessee from becoming a co-insurer of
any loss, but in any event not less than the actual replacement value of the
buildings and improvements on the Leased Premises or the Termination Value,
whichever is greater; provided, however that any deductible under such
-------- -------
insurance policies shall not be in excess of an amount acceptable to Lessor
and the Agent and, provided further, that the Lessee may provide for property
-------- -------
insurance against such claims under a blanket property insurance policy of at
least $100,000,000 coverage per occurrence and $100,000,000 aggregate per
annum covering all Premises owned, leased or occupied by the Lessee including
the Leased Premises;
(ii) commercial general liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Leased
Premises, and any claims arising out of the ownership, operation, maintenance,
condition and use of the Leased Premises, in the minimum amount of $50,000,000
in respect of personal injury or death to any one person, in the minimum
amount of $50,000,000 in respect of any one accident and in the minimum amount
of $10,000,000 in respect of property damage; provided, however, that the
-------- -------
Lessee may provide for commercial general liability insurance against such
claims under an umbrella liability policy;
(iii) to the extent required by the law of the state in which the Leased
Premises are located, worker's compensation insurance, including employer's
liability, disability and similar insurance; and
(iv) prior to the date that the Work is Substantially Complete builder's
risk insurance on a completed value, nonreporting basis for the Estimated
Improvement Cost and worker's compensation insurance as required by applicable
law and regulations; provided, however, that any deductible amounts exceeding
-------- -------
$25,000 under the builder's risk policy shall be subject to the approval of
the Lessor and the Agent.
Notwithstanding the foregoing, the Lessee shall at all times comply with any
provisions of applicable law affecting any Leased Premises regarding insurance
that are more stringent than the foregoing provisions. All insurance shall be
written or substantially underwritten by companies of nationally recognized
financial standing, which are legally qualified to issue such insurance.
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(b) Every such policy shall:
(i) designate (except in the case of workers' compensation insurance and
employer liability insurance) the Lessor, the Trust Company, each Lender, the
Equity Participant and the Agent as additional insureds as their interests may
appear and the Lessor as sole loss payee;
(ii) provide (except for workers' compensation, public and employer
liability insurance) that all insurance proceeds shall be payable to the
Lessor;
(iii) provide that there shall be no recourse to the Lessor, the Trust
Company, the Equity Participant, any Lender or the Agent for the payment of
premiums or commissions or (if such policies provide for the payment thereof)
additional premiums or assessments;
(iv) provide that such insurance shall be primary insurance without any
right of contribution from any other insurance carried by the Lessor, the
Trust Company, the Equity Participant, each Lender or the Agent, and that all
provisions thereof, except the limits of liability (which shall be applicable
to all insurers as a group) and liability for premiums (which shall be solely
a liability of the Lessee), shall operate in the same manner as if there were
a separate policy covering each insured;
(v) provide that the Lessor and the Agent will be furnished with at least
30 days' advance written notice of any material change or cancellation or
expiration or non-renewal of coverage, and that such material change,
cancellation or expiration shall not be effective as to the Lessor, the Equity
Participant, any Lender or the Agent prior to the expiration of such period
after notice to the Agent and the Lessor;
(vi) waive any right of subrogation of the insurers thereunder against the
Lessor, the Equity Participant, each Lender or the Agent, and any right of the
insurers to any setoff or counterclaim or any other deduction, whether by
attachment or otherwise, with respect to any liability of any such person
insured under such policy;
(vii) provide that any losses recovered under the insurance described in
this Section 10 shall not be invalidated notwithstanding (A) any act, failure
to act or negligence or violation of warranties, declarations, or conditions
contained in such policy by any named insured or owner of the property, (B)
the occupation or use of any Leased Premises for purposes more hazardous than
permitted by the terms thereof, (C) any foreclosure or other action or
proceeding or notice of sale relating to the property or (D) any change in
title or ownership of the property; and
(viii) Within 120 days after the end of each calendar year, the Lessee
shall deliver to the Lessor, the Equity Participant and the Agent (i) a list
prepared as of the last day of such year describing all insurance maintained
in accordance with this Section 10 (and in particular describing risks insured
against, coverage, amounts, deductibles, the identity of insurers and
expiration dates) and (ii) an officer's certificate of the Lessee, confirmed
by an insurance certificate of the respective insurers, to the effect that all
premiums due under such policies have been paid in full and that such
insurance meets all requirements of this Section 10.
(c) The Lessee will deliver to the Lessor, the Equity Participant, or the
Agent, promptly upon any request therefor, (i) the originals or copies certified
by the insurer of all policies evidencing all insurance required to be
maintained under this Section 10 and (ii) evidence
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as to the payment of all premiums due thereon; provided, however, that the
-------- -------
Lessor, the Equity Participant, any Lender or the Agent shall not be deemed by
reason of their respective custody of such policies to have knowledge of the
contents thereof. The Lessee will use its best efforts to deliver to the Lessor,
the Equity Participant and the Agent, a new policy or certificate evidencing
such new policy as replacement for any expiring policy at least 30 days prior to
the date of such expiration, but in any event the Lessee shall so deliver such
policy or certificate prior to the date of such expiration.
(d) In addition to the foregoing, if the Lessee shall be in default in respect
of its obligations to obtain insurance pursuant to this Section 10, the Lessor
or the Agent shall have the right (but not the obligation), and without, in any
way, limiting or otherwise modifying any other rights or remedies of the Lessor
or the Agent under this Lease Agreement by reason of such default or otherwise,
to obtain such insurance at the expense of the Lessee and, in such event, the
Lessee shall reimburse the Lessor or the Agent, as the case may be, upon demand
for the cost thereof, together with interest thereon at the Late Payment Rate.
(e) The Lessee hereby irrevocably assigns to the Lessor any compensation or
insurance proceeds to which the Lessee may become entitled by reason of the
Lessee's interest in the Leased Premises if any Leased Premises or any part
thereof is damaged or destroyed by fire or other casualty. If any Leased
Premises or any part of any thereof is damaged or destroyed by fire or other
casualty, and if the estimated cost of rebuilding, replacing or repairing the
same exceeds $500,000, the Lessee promptly shall notify the Lessor and the Agent
thereof. Subject to the next sentence, Lessee shall negotiate, prosecute and
adjust any claim for any compensation or insurance payment on account of any
such damage or destruction and may unilaterally settle any such negotiation,
prosecution or adjustment, but the Lessor shall be entitled to participate in
any such negotiation, prosecution and adjustment. If Net Casualty Proceeds (as
hereinafter defined) are reasonably expected to exceed $500,000, the Lessee
shall not settle such negotiation, prosecution or adjustment without the consent
of the Lessor. Any compensation or insurance payment shall be paid to and held
in trust in a separate account and applied in accordance with this Lease
Agreement by the Agent. All amounts paid in connection with any such damage or
destruction shall be applied pursuant to Section 14 hereof and all such amounts
paid or payable in connection therewith (minus the expenses of collecting such
amounts) are herein called the "Net Casualty Proceeds". The Lessee shall pay
all reasonable costs and expenses in connection with each such negotiation,
prosecution and adjustment for which costs and expenses the Lessee shall be
reimbursed out of any compensation or insurance payment received.
SECTION 11. Assignment and Subletting.
-------------------------
(a) The Lessee shall sublease each of the Leased Premises to one of the
Permitted Sublessees which will use such Leased Premises in its business. The
Lessee shall effectively assign to the Lessor (and the Lessor, in turn, will
assign to the Agent for the benefit of the Lenders and the Equity Participant)
each such sublease and all Basic Rent and Supplemental Rent and any other
amounts payable thereunder. Each Permitted Sublessee shall enter into a
Sublease in the form attached hereto as Exhibit B (a "Subsidiary Sublease") with
the Lessee on or prior to the first sublease of any Leased Premises to such
Permitted Sublessee. The sublease of each Leased Premises thereunder by the
Lessee to a Subsidiary Sublessee shall be evidenced by the execution and
delivery of a Sublease Supplement for such Leased Premises.
(b) If a Permitted Sublessee or other transferee defaults under this Lease
Agreement, the Lessor may proceed directly against the Lessee without pursuing
remedies against the transferee. The Lessor's acceptance of rent from any other
Person is not waiver of any provision of this Section 11.
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(c) No portion of the Leased Premises or of the Lessee's interest in this
Lease Agreement may be acquired by any other Person other than the Permitted
Sublessees as provided in Section 11(a) hereof, whether by sale, assignment,
mortgage, sublease, transfer, operation of law, or act of the Lessee, without
the Lessor's prior written consent, which may be withheld in the Lessor's sole
discretion; provided, however, that to the extent, but only to the extent, that
applicable law prohibits the Lessor from withholding such consent in its sole
discretion, the following shall apply:
(i) No portion of the Leased Premises or of the Lessee's interest in this
Lease Agreement may be acquired by any other Person other than the Permitted
Sublessees, whether by sale, assignment, mortgage, sublease, transfer,
operation of law, or act of the Lessee, without the Lessor's prior written
consent, except as provided in clause (ii) below. The Lessor has the right to
grant or withhold its consent as provided in clause (ii) below.
Notwithstanding anything to the contrary set forth in Section 12 hereof, any
attempted transfer without consent shall be void and shall constitute a non-
curable breach of this Lease. Should the Lessee desire to sublease or assign
this Lease Agreement for all or a portion of the Leased Premises, the Lessee
shall first give the Lessor 60 days prior written notice of its intent to
offer all or a portion of any Leased Premises for sublease or assignment,
which notice shall be given before offering such Leased Premises for sublease
or assignment.
(ii) The Lessee's request for consent to any transfer described in Section
11(c)(i) hereof shall set forth in writing the details of the proposed
transfer, including the name, business and financial condition of the
prospective transferee, financial details of the proposed transfer (e.g., the
term of and the rent and security deposit payable under any proposed
assignment or sublease), and any other information the Lessor deems relevant.
The Lessor shall have the right to withhold consent, if reasonable, or to
grant consent, based on the following factors: (i) the business of the
proposed assignee or subtenant and the proposed use of the Leased Premises;
(ii) the net worth and financial reputation of the proposed assignee or
subtenant; (iii) the Lessee's compliance with all of its obligations under the
Lease Agreement; and (iv) such other factors as the Lessor may reasonably deem
relevant. If the Lessor objects to a proposed assignment solely because of the
net worth and/or financial reputation of the proposed assignee, the Lessee may
nonetheless sublease (but not assign), all or a portion of the Leased Premises
to the proposed transferee, but only on the other terms of the proposed
transfer. In the event of any proposed sublease or assignment, the Lessee
shall submit such financial and related information concerning the proposed
sublessee or assignee as the Lessor shall require in its sole discretion, and
the Lessor shall have a reasonable period of time to complete its review of
such information from the date the Lessee delivers to the Lessor a complete
submittal of all such information responsive to the Lessor's request.
(d) Any assignment or sublease of any Leased Premises made pursuant to clause
(c) above shall be expressly subject and subordinate to all the terms and
conditions of this Lease Agreement (including without limitation, the rights of
the Lessor and the Agent to enforce remedies under Section 19 hereof), and any
such assignment or sublease shall not in any manner whatsoever relieve the
Lessee from any obligations under this Lease Agreement (it being understood and
agreed that the Lessee shall remain primarily liable for such obligations
notwithstanding any such assignment or sublease) and all other Transaction
Documents to which each is a party, such liability to be unconditional
irrespective of any circumstances whatsoever which might constitute a legal or
equitable discharge or defense of a surety or guarantor, and the Lessee hereby
waives any rights they may now have or hereafter acquire to avoid any such
obligations by reason of such assignment or sublease or any circumstances
arising from such
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assignment or sublease. Any such assignment or sublease shall be evidenced by a
written instrument executed by the Lessee and the assignee or sublessee, as the
case may be, which written instrument shall be in form and substance acceptable
to the Lessor and the Agent (a "Sublease"). The Lessee agrees to deliver notice
of any such Sublease to the Lessor, together with an execution copy of such
assignment or sublease. The Lessee agrees to indemnify and hold the Lessor, the
Agent and the Lenders harmless against any and all reasonable out-of-pocket
expenses, claims, demands and liabilities, of whatever nature, relating to or in
any way arising out of any such sublease, including, without limitation, all
reasonable out-of-pocket costs, damages, charges, attorneys' fees and expenses
arising out of or necessitated by assertion of any such claim or demand with
regard to such assignment or sublease. Any sublease or assignment entered into
in violation of this Section shall be void.
(e) In addition to the assignment of this Lease Agreement under the Mortgage
and Assignment Agreements, to which the Lessee hereby consents, the Lessor may,
subject to the Mortgage and Assignment Agreements, assign its interest under
this Lease Agreement as provided in the other Transaction Documents. If the
Lessor assigns its interest under this Lease Agreement together with fee title
to the Leased Premises, the Lessor shall be relieved of any and all future
obligations and liabilities under this Lease Agreement accruing from and after
the date of such conveyance, and the Lessee shall deliver to the Lessor a
written release so stating, provided that any assignee or successor of the
Lessor shall provide the Lessee with a written assumption agreement for the
benefit of the Lessee and the Lessor whereby such assignee or successor assumes
and agrees to punctually perform all of the obligations and liabilities of the
Lessor hereunder.
SECTION 12. Liens. The Lessee will not directly or indirectly create, incur,
-----
assume or suffer to exist any Lien on or with respect to any Leased Premises or
any part of any thereof, or interest therein, or this Lease Agreement or any of
the Lessor's or the Lessee's interests hereunder, except any Permitted Lien. The
Lessee, at its own expense, will promptly pay, satisfy and otherwise take such
actions as may be necessary to keep this Lease Agreement and the Leased Premises
free and clear of, and to duly discharge or eliminate or bond in a manner
reasonably satisfactory to the Lessor and the Agent, any such Lien not excepted
above if the same shall arise at any time. The Lessee will notify the Lessor and
Agent in writing promptly upon a Senior Financial Officer becoming aware of any
Lien (other than any Permitted Lien) that shall attach to any Leased Premises or
any part thereof or interest therein, and of the full particulars thereof.
SECTION 13. Certain Personal Property. Any equipment, signs and other movable
-------------------------
property installed in or attached to the Leased Premises by and at the expense
of the Lessee shall remain the property of the Lessee, and upon request the
Lessor agrees to disclaim any interest in said property. The Lessee may finance
or refinance the purchase price of all or any part of its furnishings, equipment
and signs and in connection therewith may grant security interests in and liens
upon such items, provided that no Liens may be granted or placed upon the
--------
Lessor's fee interest in the Leased Premises. The Lessor agrees to execute and
deliver such subordination or waivers of lien as the Lessee or its respective
equipment lenders may reasonably request with respect to such furnishings,
equipment and signs in connection with any such financing or refinancing. The
Lessee shall have the right, prior to the expiration of the Lease Term, to
remove any and all of its trade fixtures, equipment and other movable property
which it may have stored, attached to, or installed in the Leased Premises;
provided, however, that the Lessee may not remove any fixtures (except trade
- -------- -------
fixtures) or other items which cannot be removed without causing structural
damage to the Leased Premises, and the Lessee will repair any and all damage to
the Leased Premises occasioned by such removal.
10
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SECTION 14. Loss, Damage or Destruction.
---------------------------
(a) The Lessee hereby assumes all risk of loss, damage, taking, destruction,
confiscation, requisition or commandeering, partial or complete, of the Leased
Premises or any part thereof or of any interest therein, however caused or
occasioned, such risk to be borne by the Lessee with respect to the Leased
Premises. No occurrence specified in the preceding sentence nor the resulting
loss of use of any Leased Premises (including without limitation any period
while such Leased Premises is being repaired, replaced or rebuilt) shall impair,
in whole or in part, any obligation of the Lessee under this Lease Agreement,
including, without limitation, the obligation to pay Basic Rent and Supplemental
Rent, and this Lease Agreement shall continue in full force and effect with
respect to any Leased Premises suffering any such occurrence unless and until
the lease of such Leased Premises hereunder is terminated pursuant to subsection
(b) below. If such occurrence does not constitute an Event of Loss, then the
Lessee promptly will commence and diligently will proceed to rebuild, repair or
replace any damage caused by such occurrence in conformity to Section 9(b)
hereof to its condition immediately prior to such occurrence and any insurance
proceeds received by the Lessor shall in connection therewith promptly be paid
to the Lessee, provided no Event of Default has occurred and is continuing.
--------
(b) Upon an Event of Loss with respect to any Leased Premises, the Lessee
shall give the Lessor and the Agent prompt notice thereof. Except as provided
in subsection (c) below, on the Payment Date next following more than 45 days
after an Event of Loss with respect to any Leased Premises, the Lessee shall
purchase such Leased Premises for a purchase price equal to the Termination
Value of such Leased Premises. Upon receipt by the Lessor of the purchase
price, the Basic Rent due on such date, any Supplemental Rent and all other
amounts then due and owing hereunder, the Lessor shall transfer title to such
Leased Premises (together with any claim for unpaid insurance proceeds or
condemnation award) by a quit-claim deed to the Lessee, on an as-is basis,
without any warranty of any kind (other than the absence of Lessor Liens) by, or
recourse of any kind to, the Lessor. Any insurance proceeds or condemnation
award received by the Lessor shall be retained by the Lessor and applied to said
payment of the purchase price of such Leased Premises.
(c) If any Leased Premises subject to an Event of Loss can be fully repaired
and restored to the condition thereof immediately prior to such Event of Loss
within one year of the Payment Date next following the occurrence of such Event
of Loss (the "Restoration Date"), in lieu of the application described in
subsection (b) above, the Lessee on 30 days' written notice to the Lessor may
elect to repair and reconstruct such Leased Premises to its condition
immediately prior to such Event of Loss (assuming compliance by the Lessee with
the terms and conditions of this Lease Agreement and the other Transaction
Documents). If the Lessee so elects, it shall, at its own cost and expense,
promptly commence and diligently proceed to rebuild, replace or repair the
damage to such Leased Premises caused by such Event of Loss in conformity with
requirements of Section 9(b) hereof so as to restore the Leased Premises to the
fair market value and to the condition thereof immediately prior to such Event
of Loss. Prior to any such rebuilding, the Lessor and the Lessee shall agree on
the maximum cost of such rebuilding (the "Casualty Restoration Cost"); the
Casualty Restoration Cost shall be paid first out of Lessee's own funds to the
extent that the Casualty Restoration Cost exceeds the amount of the Net Casualty
Proceeds. After such expenditure, and so long as no Event of Default has
occurred and is continuing hereunder, the Lessee shall be entitled to receive
the Net Casualty Proceeds, but only against a certification (made no more
frequently than once each month) describing the work for which the Lessee is
requesting payment and the cost incurred by the Lessee in connection therewith
and stating that the Lessee has not theretofore received payment for such work.
Any Net Casualty Proceeds remaining after final payment has been made for such
work shall be paid to the Lessee and if the cost of the work required to be made
by the Lessee pursuant
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to this subsection exceeds the amount of such Net Casualty Proceeds, the
deficiency shall be paid by the Lessee. If such Leased Premises are not restored
or reconstructed to their condition prior to such Event of Loss prior to the
Restoration Date, then the Lessee shall purchase such Leased Premises on the
next following Payment Date in accordance with subsection (b) above.
SECTION 15. Lessee's Rights of Purchase and Renewal; Purchase
-------------------------------------------------
Obligation.
----------
(a) So long as no Event of Default has occurred and is continuing, commencing
April 16, 1999, the Lessee shall have the right, upon 90 days' prior written
notice to the Lessor, to purchase all, but not less than all, of the Leased
Premises at the end of any Payment Period for an amount equal to the Termination
Value on such date. Upon receipt by the Lessor of said purchase price, the
Basic Rent due on such date, any Supplemental Rent and all other amounts then
due and owing hereunder, the Lessor shall transfer title to the Leased Premises,
by quit-claim deeds, to the Lessee, on an as-is basis without any warranty of
any kind (other than the absence of Lessor Liens) by, or any recourse of any
kind to, the Lessor. In the event that the Lessee fails, for any reason, to
exercise the sale option provided by Section 16 at least 360 days prior to the
end of the Lease Term, the Lessee shall be deemed to exercise the purchase
option provided by this Section 15(a) to purchase all the Leased Premises at the
end of the Lease Term for an amount equal to the Termination Value on such date.
(b) If (i) no Event of Default shall have occurred and be continuing and (ii)
this Lease Agreement shall not have been earlier terminated, the Lessee may, by
irrevocable written notice to the Lessor and the Agent not more than 90 days and
not less than 75 days prior to April 16, 1999, request that the Lease Term of
all, but not less then all, of the Leased Premises be extended for a two-year
period (a "Renewal Term") and thereafter Lessee may on the same basis request up
to ten of such two-year extensions, each such request by irrevocable written
notice to the Lessor and the Agent not more than 90 days and not less than 75
days prior to the date which is three years prior to the then end of the Lease
Term; provided that no Renewal Term shall extend beyond the first to occur of
April 16, 2022 and the Maturity Date of the Notes. Such request shall be
granted only if each of the Lenders, in their sole discretion, shall by notice
to the Lessee and the Agent not later than 30 days prior to the date which is
three years prior to the then end of the Lease Term, consent to such extension;
provided that in no event shall the Lease Term be extended without the written
consent of all Lenders except to the extent alternative financing acceptable to
all parties is obtained. Except as otherwise provided herein each extension of
this Lease Agreement shall be on the same terms and conditions for the Base
Term.
(c) If an Environmental Put Event occurs with respect to any Leased Premises,
then, upon written notice to the Lessee, the Lessor may require the Lessee to
purchase such Leased Premises on the next Payment Date which occurs at least 15
days after the date of such notice for a purchase price equal to the Termination
Value of such Leased Premises on such date. Upon receipt by the Lessor of said
purchase price, the Basic Rent due on such date, any Supplemental Rent and all
other amounts then due and owing hereunder, the Lessor shall transfer title to
such Leased Premises, by quit-claim deed, to the Lessee, on an as-is basis
without any warranty of any kind (other than the absence of Lessor Liens) by, or
any recourse of any kind to, the Lessor.
SECTION 16. Sale of Leased Premises.
-----------------------
(a) If (i) no Event of Default shall have occurred and be continuing and (ii)
this Lease Agreement shall not have been earlier terminated, the Lessee may, by
irrevocable written notice to the Lessor and the Agent not more than 390 days
and not less than 360 prior to the end of the Lease Term, elect to cause all,
but not less than all, of the Lease Premises then owned by the Lessor hereunder
to be sold as follows:
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(i) on the last day of the Lease Term the Lessee shall pay the Lessor the
Basic Rent then due and any Supplemental Rent and all other amounts then due
and owning hereunder plus the Residual Guaranty Payment as of such date; and
(ii) at, or prior to, the end of the Lease Term, the Lessee shall vacate
the Leased Premises and arrange for the sale of the Leased Premises to one or
more buyers unrelated to the Lessee or its Affiliates prior to the end of the
Lease Term, as the agent of the Lessor, and receipt by the Lessor of the sale
proceeds thereof (the Lessee shall pay all expenses of sale) on or before the
last day of the Lease Term; provided that the Lessor may designate itself or a
third party as sales agent to sell the Leased Premises instead of or in
addition to the Lessee. Lessee will use its best efforts to sell the Leased
Property for its Fair Market Sales Value.
All above payments shall be made on the date the sale proceeds are due and
payable to the Lessor. Each of the Leased Premises shall be in substantially
the same physical and operating condition as when such Leased Premises were
Substantially Complete, capable of being occupied by a third party and otherwise
in full compliance with the terms and conditions hereof. Prior to the sale of
the Leased Premises pursuant to this Section, at the request of the Lessor, the
Lessee will provide (at its own cost and expense) a current "Phase I"
environmental assessment of each Leased Premise performed by the Environmental
Consultant, the results of which must be satisfactory to the Lessor and each of
the Lenders.
(b) Upon receipt by the Lessor of such sale proceeds, the Basic Rent due on
the last day of the Lease Term, any Supplemental Rent and all other amounts then
due and owing hereunder, the Lessor shall transfer title to the Leased Premises
to the purchasers designated by the Lessee on an as-is basis, without any
warranty of any kind (other than the absence of Lessor Liens) by, or any
recourse of any kind to, the Lessor; and, provided no Event of Default or
Default shall exist and be continuing, if the sum of (i) such aggregate net
proceeds of sale for all the Leased Premises plus (ii) the Residual Guaranty
Payment is greater than the Termination Value on such date, the Lessor shall pay
to the Lessee the amount by which such sum exceeds such Termination Value. If
such aggregate net proceeds of sale are less than the excess of the Termination
Value over the Residual Guaranty Payment on such date, in addition to the other
amounts specified above, the Lessee shall pay to the Lessor an amount equal to
the additional amount, if any, not greater than such deficiency, by which such
sale price is less than the Fair Market Sales Value as a consequence of any
failure by the Lessee to maintain or repair the Leased Premises as provided by
Sections 9 or 14 hereof.
The Lessor shall have no obligation to make any payment required of it under
this paragraph (b) above until the Lessor shall have received the sale proceeds,
Residual Guaranty Payment, Basic Rent, any Supplemental Rent and all other
amounts then due and owing hereunder.
(c) The provisions of Sections 15 and 16 hereof are of the essence of this
Lease Agreement, and time is of the essence for any payment and performance of
the obligations of the Lessee set forth therein.
SECTION 17. Late Charges. The Lessee shall pay to the Lessor, upon demand, to
------------
the extent permitted by applicable law, interest on any installment of Basic
Rents not paid when due, and on any Supplemental Rent or other amount payable
under this Lease Agreement which is not paid when due, for any period for which
any of the same is overdue (without regard to any grace period) at a rate equal
to the Late Payment Rate so long as an Event of Default has not occurred. Upon
the occurrence and during the continuance of an Event of Default or in respect
of any payments made under Section 3(d) hereof, the Basic Rent shall be
calculated using a Late
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Payment Rate instead of the Finance Rate and overdue Basic Rent shall bear
interest at the Late Payment Rate. Payments under this Section 17 are due and
payable on demand.
SECTION 18. No Warranties. THE LEASED PREMISES ARE LEASED ON AN AS-IS BASIS
-------------
AND EXCEPT AS PROVIDED IN SECTION 2(d) HEREOF THE LESSOR EXPRESSLY DISCLAIMS AND
MAKES NO REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED, AS TO THE
DESIGN, CONDITION, QUALITY, CAPACITY, MERCHANTABILITY, DURABILITY, SUITABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE OF, OR ANY OTHER MATTER CONCERNING, THE
LEASED PREMISES AND THE DESIGN OR CONDITION OF THE LEASED PREMISES. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THE LESSOR SHALL NOT BE LIABLE OR
RESPONSIBLE FOR ANY DEFECTS, EITHER PATENT OR LATENT (WHETHER OR NOT
DISCOVERABLE BY THE LESSEE), IN THE LEASED PREMISES, OR FOR ANY DIRECT OR
INDIRECT DAMAGE TO PERSONS OR LEASED PREMISES RESULTING THEREFROM, OR FOR THE
LESSEE'S LOSS OF USE OF THE LEASED PREMISES OR FOR ANY INTERRUPTION IN THE
LESSEE'S BUSINESS CAUSED BY THE LESSEE'S INABILITY TO USE THE LEASED PREMISES
FOR ANY REASON WHATSOEVER. THE LESSEE HEREBY WAIVES ANY CLAIM (INCLUDING ANY
CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR INFRINGEMENT) IT MIGHT
HAVE AGAINST THE LESSOR FOR ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR
CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY THE LEASED PREMISES OR BY THE
LESSEE'S LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER. During the Lease Term
and so long and only so long as an Event of Default shall not have occurred and
be continuing, the Lessor authorizes the Lessee, at the Lessee's expense, to
assert for the Lessor's account, all rights and powers of the Lessor under any
contractor's, manufacturer's, vendor's or warranty on the Leased Premises or any
part thereof; provided, however, that the Lessee shall indemnify, protect, save,
defend and hold harmless the Lessor from and against any and all claims, and all
costs, expenses, damages, losses and liabilities incurred or suffered by the
Lessor in connection therewith, as a result of, or incident to, any action by
the Lessee pursuant to the foregoing authorization.
SECTION 19. Events of Default. Each of the following shall be deemed an Event
-----------------
of Default:
(a) Failure of the Lessee to pay Basic Rent for more than 3 days after
such payment is due pursuant to Section 4 hereof, or failure of the Lessee to
pay Supplemental Rent or any other amount payable by the Lessee hereunder for
more than 10 days after such payment is due; or
(b) Failure to maintain the insurance required by Section 10 hereof or
default in the performance of the covenant contained in Section 10(c)
hereof; or
(c) Default in the performance of any other obligation or covenant of the
Lessee pursuant to this Lease Agreement and the continuance of such default
for 10 days after written notice to the Lessee by the Lessor; or
(d) The occurrence of an Event of Default under the Participation
Agreement or the Agency Agreement; or
(e) The entry of a decree or order for relief in respect of the Lessee by
a court having jurisdiction in the premises in an involuntary case under the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law or
appointing a receiver, liquidator, assignee,
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custodian, trustee, sequestrator (or similar official) of the Lessee or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order unstayed and in
effect for a period of 30 consecutive days; or
(f) The suspension or discontinuance of the Lessee's business operations,
its insolvency (however evidenced) or its admission of insolvency or
bankruptcy, or the seeking by it of reorganization or relief or the
commencement by the Lessee of a voluntary case under the federal bankruptcy
laws, as now or hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or other similar law, or the consent by it to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Lessee or
of any substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the failure of the Lessee generally to pay
its debts as such debts become due, or the taking of corporate action by the
Lessee in furtherance of any such action; or
(g) A default or event of default, the effect of which is to permit the
lender or lenders of any instrument, or a trustee or agent on behalf of such
lender or lenders, to cause the indebtedness evidenced by such instrument to
become due prior to its stated maturity shall occur under the provisions of
any instrument evidencing indebtedness for borrowed money of the Lessee or any
Affiliate thereof (or under the provisions of any agreement pursuant to which
such instrument was issued) or any obligation of the Lessee or any Affiliate
thereof for the payment of such indebtedness shall become or be declared to be
due and payable prior to its stated maturity, or shall not be paid when due;
or
(h) Any representation or warranty made by the Lessee in this Lease
Agreement any other Transaction Document or any document contemplated hereby
or thereby proves to be false or inaccurate in any material respect; or
(i) A final judgment or judgments entered by a court of competent
jurisdiction for the payment of money in excess of $5,000,000 in the aggregate
(excluding any insured portions) shall be rendered against the Lessee and
shall remain in force undischarged, unstayed or unbonded for a period of more
than 60 days; or
(j) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived, shall exist with respect to any Plan or any
Lien in favor of the PBGC or a Plan shall arise on the assets of the Lessee or
any Affiliate thereof, (iii) a Reportable Event shall occur with respect to,
or proceedings shall commence to have a trustee appointed, or a trustee shall
be appointed, to administer or to terminate, any single employer plan, which
Reportable Event or commencement of proceedings or appointment of a trustee
is, in the reasonable opinion of the Lessor, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any single
employer plan shall terminate for purposes of Title IV of ERISA, or (v) the
Lessee or any Affiliate thereof shall, or in the reasonable opinion of the
Lessor is likely to, incur any liability in connection with a withdrawal from,
or the insolvency or reorganization of, a multiemployer Plan; and in each case
in clauses (i) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could reasonably be expected to have
a Material Adverse Effect.
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SECTION 20. Remedies Upon Default.
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(a) Upon the occurrence of any Event of Default and at any time thereafter so
long as the same shall be continuing, the Lessor may exercise one or more of the
following remedies as the Lessor in its sole discretion shall elect:
(i) The Lessor shall have the right to terminate this Lease Agreement upon
written notice to the Lessee. Whether or not the Lease Agreement shall have
been terminated, the Lessor shall have the right to reenter and repossess the
Leased Premises or any thereof and the right to remove all persons and
property therefrom by summary proceedings, ejectment, any other legal action
or in any lawful manner the Lessor determines to be necessary or desirable.
The Lessor shall be under no liability by reason of any such reentry,
repossession or removal. No such reentry, repossession or removal shall be
construed as an election by the Lessor to terminate this Lease Agreement
unless a notice of such termination is given to the Lessee pursuant to this
Section or unless such termination is decreed by a court.
(ii) The Lessor may demand, by written notice to the Lessee specifying a
purchase date, that the Lessee purchase the Leased Premises from the Lessor,
and the Lessee shall purchase the Leased Premises from the Lessor, on the
purchase date specified in such notice (on an as is basis, without any
warranty of any kind (other than the absence of Lessor Liens) by, or any
recourse of any kind to the Lessor, as liquidated damages for loss of bargain
and not as a penalty (in lieu of the Basic Rent and Supplemental Rent due
after the payment date specified in such notice)), for a price equal to (x)
the Termination Value on such date plus (y) any unpaid Basic Rent accrued and
unpaid through the payment date specified in such notice (together with
interest thereon at the Late Payment Rate from the payment date specified in
such notice to the date of actual payment) and any Supplemental Rent or other
amounts due and unpaid.
(iii) If the Lessee defaults under Section 20(a)(ii) hereof, upon 15 days'
written notice to the Lessee of the date, time and place of any proposed sale
(which notice the Lessee agrees is reasonable) and subject to any requirements
of applicable law, sell in good faith and in a commercially reasonable manner,
all or any part of the Leased Premises or its interest therein, at public or
private sale, as the Lessor may determine, or otherwise dispose of, in good
faith and in a commercially reasonable manner, all or any part of the Leased
Premises or its interest therein, as the Lessor may determine, in each case
free and clear of any rights of the Lessee and without any duty to account to
the Lessee with respect to such action or inaction or for any proceeds with
respect thereto (except to the extent required under Section 20(b)(iii)
hereof, in the event that the Lessor elects to exercise its right under
Section 20(a)(iii) hereof, in which event the Lessee's obligation to pay Basic
Rent hereunder for periods commencing after the date of such sale shall be
terminated or proportionately reduced, as the case may be (except to the
extent that Basic Rent is to be included in the computation under Section
20(a)(i) or (ii) hereof, if the Lessor shall elect to exercise its right
thereunder)).
(iv) If the Lessor shall have sold the entire Leased Premises or its
entire interest therein pursuant to Section 20(a)(iii) hereof, the Lessor may
demand that the Lessee pay to the Lessor and the Lessee shall pay to the
Lessor on the date of such sale, as liquidated damages for loss of a bargain
and not a penalty (in lieu of Basic Rent due for any period commencing after
the date of such sale), any accrued and unpaid Basic Rent through the date of
such sale, plus the amount by which the amount required to be paid by the
Lessee under Section 20(a)(ii) hereof determined as of such purchase date
exceeds the amount obtained pursuant to Section 20(a)(iii) hereof and any
Supplemental
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Rent due and unpaid as of the date of actual payment (together with interest
thereon at the Late Payment Rate from the payment date specified in such
notice to the date of actual payment and any Supplemental Rent due and
unpaid).
(V) THE LESSOR AND THE LESSEE AGREE AND ACKNOWLEDGE THAT IT WOULD BE
IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE ACTUAL DAMAGES WHICH THE
LESSOR WOULD SUFFER IN THE EVENT THAT THE LESSEE DEFAULTS AND FAILS TO
COMPLETE THE PURCHASE OF THE LEASED PREMISES IN ACCORDANCE WITH THE TERMS OF
THIS LEASE AGREEMENT INCLUDING SECTION 20(B)(I) AND (II) HEREOF. THE PARTIES
HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT THE
LESSOR WOULD SUFFER IN THE EVENT OF THE LESSEE'S DEFAULT AND FAILURE TO
COMPLETE THE PURCHASE OF THE LEASED PREMISES IS AND SHALL BE AN AMOUNT EQUAL
TO THE DAMAGES SET FORTH IN CONFORMANCE WITH SECTION 20(A)(II) AND SECTION
20(A)(IV) HEREOF.
(vi) No termination of the Lease Term pursuant to this Section, by
operation of law, or otherwise, and no reentry, repossession or removal
pursuant to this Section or otherwise, and no reletting of the Leased Premises
pursuant to this Section or otherwise, shall relieve the Lessee of its
liabilities and obligations under this Lease Agreement all of which shall
survive such termination, reentry, repossession, removal or reletting.
(vii) Additionally, the Lessor may exercise any other right or remedy
which may be available to it under applicable law or common practice,
including, without limitation, proceeding by appropriate court action to
enforce the terms hereof or to recover damages for the breach hereof or to
rescind this Lease Agreement.
(b) This Section 20(b) shall be in addition to each and every right and remedy
granted to the Lessor hereunder, and shall apply to the extent, but only to the
extent, that either (i) a court of competent jurisdiction determines that the
laws of the State of California or of the State of Florida must be applied, or
(ii) the Lessor determines in its sole discretion that it is necessary to apply
the procedural laws of the State of California or of the State of Florida, as
the case may be, in order for the Lessor to fully and effectively exercise its
rights and remedies hereunder, in which event, upon the occurrence of any Lease
Event of Default and at any time thereafter, the Lessor may exercise one or more
of the following remedies as the Lessor in its sole discretion shall elect:
(i) Whether or not the Lease Agreement shall have been terminated, to
reenter and repossess the Leased Premises or any thereof and the right to
remove all persons and property therefrom by summary proceedings, ejectment,
any other legal action or in any lawful manner the Lessor determines to be
necessary or desirable. The Lessor shall be under no liability by reason of
any such reentry, repossession or removal. No such reentry, repossession or
removal shall be construed as an election by the Lessor to terminate this
Lease Agreement unless a notice of such termination is given to the Lessee
pursuant to this Section 20 or unless such termination is decreed by a court.
(ii) In the event of any termination of the Lease Term pursuant to this
Section or as permitted by law, the Lessee shall quit and surrender the Leased
Premises to the Lessor, and the Lessor may without further notice enter upon,
reenter, possess and repossess the same by summary proceedings, ejectment or
otherwise, and again have, repossess and enjoy the same as if this Lease
Agreement had not been made, and in any
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such event neither the Lessee nor any Person claiming through or under the
Lessee by virtue of any law or an order of any court shall be entitled to
possession or to remain in possession of the Leased Premises but shall
forthwith quit and surrender the Leased Premises, and the Lessor shall,
notwithstanding any other provision of this Lease Agreement and in lieu of all
other claims for damages on account of such termination, be entitled to
recover from the Lessee the aggregate of all amounts the Lessor is permitted
to recover from the Lessee, including:
(1) the worth at the time of award, as computed below, of the unpaid
rent (including, without limitation, Basic Rent and Supplemental Rent
(other than Termination Value)) which had been earned at the time of
termination of this Lease Agreement;
(2) the worth at the time of award of the amount by which the unpaid
rent (including, without limitation, Basic Rent and Supplemental Rent
(other than Termination Value)) which would have been earned after the
time of termination of this Lease Agreement until the time of award
exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided;
(3) the worth at the time of award of the amount by which the unpaid
rent (including, without limitation, Basic Rent and Supplemental Rent
(other than Termination Value)) for the balance of the term after the time
of award exceeds the amount of such rental loss for said balance of the
term that the Lessee proves could be reasonably avoided; and
(4) any other amount necessary to compensate the Lessor for all the
detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease Agreement or which in the ordinary course of
things would be likely to result therefrom; including without limitation
any loss or damage arising out of the failure of the Lessor to receive the
benefit of the performance by the Lessee of any obligation to purchase the
Leased Premises under the provisions of this Lease Agreement. The Lessee
acknowledges and agrees that, in reliance upon this Lease Agreement and
the Lessee's covenants and agreements hereunder and the creditworthiness
and financial condition of the Lessee, the Lessor has entered into certain
special transactions to finance the costs of developing the Leased
Premises and constructing the Improvements on the Leased Premises and, in
connection with such financing transactions, Lessor has incurred and will
continue to incur indebtedness and liabilities under and pursuant to the
Loan Agreement, and the other Transaction Documents. The Lessee
acknowledges and agrees that an Event of Default will cause the Lessor
substantial damage and detriment due to its obligations and liabilities
under the Loan Agreement, and the other Transaction Documents and that
such obligations and liabilities of the Lessor will be accelerated and
materially altered and increased by an Event of Default. Accordingly, in
order to compensate the Lessor for all detriment proximately caused by the
Lessee's failure to perform its obligations under this Lease, the Lessor
shall be permitted to recover from the Lessee all amounts payable under
the Lease Agreement inasmuch as such amounts equal the amounts payable by
the Lessor under or pursuant to the Loan Agreement as a result of an Event
of Default hereunder and a substantially proportionate amount in respect
of the investment of the Equity Participant.
The "worth at the time of award" of the amounts referred to in the
foregoing Sections 20(b)(ii)(1) and (2) shall be computed by allowing
interest at
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the Late Payment Rate on each rental installment from the date the same
was due hereunder to the time of award. The "worth at the time of award"
of the amount referred to in the foregoing Section 20(b)(ii)(3) shall be
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of the award plus one percent
(1%). As used herein, the term "time of award" shall mean either (A) the
date upon which the Lessee pays to the Lessor the amount recoverable by
the Lessor as hereinabove set forth or (B) the date of entry of any
determination, order or judgment of any court, other legally constituted
body, or any arbitrator(s), determining the amount recoverable, whichever
first occurs. If the time of award is determined under clause (B) of the
preceding sentence, then the amount recoverable by the Lessor hereunder
shall bear interest from the time of award until paid at the Default Rate
(or at the highest rate permitted by applicable law, whichever is less).
Nothing herein contained shall limit or prejudice the right of the Lessor,
and the Lessor is hereby expressly granted the right, in any bankruptcy or
reorganization or insolvency proceedings, to prove for and obtain as
damages by reason of such termination, an amount equal to the maximum
allowed by any statute or rule of law whether such amount shall be greater
or less than the amounts referred to above.
THE LESSOR AND THE LESSEE AGREE AND ACKNOWLEDGE THAT IT WOULD BE
IMPRACTICAL AND EXTREMELY DIFFICULT TO FIX THE ACTUAL AMOUNT OF ALL
DAMAGES WHICH THE LESSOR WOULD SUFFER IN THE EVENT OF THE LESSEE'S DEFAULT
AND FAILURE TO PERFORM ITS OBLIGATIONS IN ACCORDANCE WITH THE TERMS OF
THIS LEASE AGREEMENT. THE PARTIES HEREBY AGREE THAT A REASONABLE ESTIMATE
OF THE OTHER AMOUNTS NECESSARY TO COMPENSATE THE LESSOR FOR ALL THE
DETRIMENT THAT THE LESSOR WOULD SUFFER IN THE EVENT OF THE LESSEE'S
DEFAULT IS AN AMOUNT DETERMINED AT THE TIME OF THE AWARD EQUAL TO THE SUM
OF (A) THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES THEN OUTSTANDING PLUS
(B) INTEREST ACCRUED ON THE AMOUNT THEN OUTSTANDING TO THE DATE OF ACTUAL
PAYMENT PLUS (C) THE CERTIFICATE BALANCE THEN OUTSTANDING PLUS THE
CERTIFICATE RATE ACCRUED THEREON TO THE DATE OF ACTUAL PAYMENT PLUS (D) A
PREMIUM EQUAL TO THE MAKE-WHOLE AMOUNT LESS THE SUM OF THE AMOUNTS AWARDED
TO THE LESSOR UNDER CLAUSES (1), (2) AND (3) OF THIS SECTION 20(B)(II) AND
THE LESSEE SHALL PAY TO THE LESSOR AND THE LESSOR SHALL BE ENTITLED TO
RECOVER FROM THE LESSEE SUCH AMOUNT AS LIQUIDATED DAMAGES AND NOT AS A
PENALTY.
(iii) In addition to the other rights and remedies set forth herein, the
Lessor shall have the right to continue this Lease Agreement in effect and, as
permitted by Section 1951.4 of the California Civil Code (with respect to any
Leased Premises located in California), to enforce, by suit or otherwise, all
covenants and conditions hereof to be performed or complied with by the Lessee
and exercise all of the Lessor's rights and remedies under this Lease
Agreement, including, without limitation, the right to recover Basic Rent from
the Lessee as it becomes due under this Lease Agreement, even though the
Lessee has breached this Lease Agreement and abandoned the Leased Premises.
Acts of maintenance or preservation, or efforts by the Lessor or on the
Lessor's behalf to relet
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the Leased Premises, or the appointment of a receiver upon the initiative of
the Lessor to protect the Lessor's interest under this Lease Agreement shall
not constitute a termination of the Lessee's right to possession of the Leased
Premises; provided, however, that the foregoing enumeration shall not be
construed as in any way limiting the actions the Lessor may take without
terminating the Lessee's right to possession. In furtherance of the rights
hereby granted to the Lessor, and to the extent permitted by law, the Lessee
hereby appoints the Lessor as its agent and attorney-in-fact, which
appointment shall be deemed to be coupled with an interest and is irrevocable,
with power of substitution, to enter the Leased Premises upon an Event of
Default hereunder and remove therefrom all persons and property (with the
right to store such property on the Leased Premises in a public warehouse or
elsewhere at the cost and risk and for the account of the Lessee) and to alter
the Leased Premises in such manner as the Lessor may deem necessary or
advisable so as to put the Leased Premises in good order and to make the same
rentable and from time to time sublet the Leased Premises or any part thereof
for such term or terms whether or not extending beyond the then current term
of this Lease Agreement (but such sublease may provide for a new and
successive lease to commence immediately upon the termination of this Lease),
at such rentals and upon such other terms as the Lessor in its sole discretion
may deem advisable, and with the right to make alterations and repairs to the
Leased Premises; and the Lessee agrees to pay to the Lessor on demand all
reasonable expenses incurred by the Lessor in such subletting, and in
altering, repairing and putting the Leased Premises in good order and
condition, and in reletting the same, including fees of attorneys and
architects, and all other reasonable expenses or commissions; provided that
the Lessor will not sublet the Leased Premises without first giving the Lessee
thirty (30) days after the Event of Default to sublet the Leased Premises or
assign this Lease Agreement on the Lessee's own initiative in accordance with
the provisions of this Lease Agreement governing assignment and subletting.
The Lessor shall be the Lessee's agent and representative on the Leased
Premises in respect of all matters arising under or in connection with any
such sublease made for the Lessee by the Lessor. Under each such sublease, the
Lessee shall retain the right to enter upon and use the Leased Premises,
subject to the terms and conditions of such sublease and the rights of the
sublessee thereunder. The Lessee further agree to pay to the Lessor, following
the date of such subletting, to and including the date provided in this Lease
Agreement for the expiration of the Lease Term, the sums of money which would
have been payable by the Lessee as Basic Rent and Supplemental Rent, deducting
only the net amount of rent, if any, which the Lessor shall actually receive
(after deducting from the gross receipts the expenses, costs and payments of
the Lessor which in accordance with the terms of this Lease Agreement would
have been borne by the Lessee) in the meantime from and by any such subletting
of the Leased Premises, and the Lessee hereby agrees to remain liable for all
sums otherwise payable by the Lessee under this Lease, including, but not
limited to, the expenses of the Lessor aforesaid, as well as for any
deficiency aforesaid. The Lessor shall have the right from time to time to
begin and maintain successive actions or other legal proceedings against the
Lessee for the recovery of such deficiency, expenses or damages or for a sum
equal to any installments of Basic Rent or Supplemental Rent and other sums
payable hereunder, and to recover the same upon the liability of the Lessee
herein provided, which liability it is expressly covenanted shall survive the
commencement or determination of any action to secure possession of the Leased
Premises. Nothing herein contained shall be deemed to require the Lessor to
wait to begin such action or other legal proceedings until the date when this
Lease Agreement would have expired had there been no such Event of Default.
Notwithstanding any such subletting, pursuant to the terms hereof, the Lessor
shall retain the right to and may at any time thereafter elect to terminate
this Lease Agreement or the Lessee's right to possession of the Leased
Premises for any previous breach which remains uncured or for any subsequent
breach by giving the Lessee written notice thereof
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as herein provided, and in such event the Lessee shall forfeit any rights or
interest under any such sublease and thereafter the obligations of any such
sublessee shall run directly to the Lessor for its own account. Upon
application by the Lessor, a receiver may be appointed to take possession of
the Leased Premises, exercise all rights granted to the Lessor as agent and
attorney-in-fact for the Lessees set forth in this Section 20(b)(iii) and
apply any rentals collected from the Leased Premises as hereinabove provided.
No taking of possession of the Leased Premises or other act by the Lessor as
the agent and attorney-in-fact for the Lessee pursuant to the foregoing
provisions, nor any subletting by the Lessor for the Lessee pursuant to the
foregoing provisions, nor any such appointment of a receiver shall constitute
or be construed as an election by the Lessor to terminate this Lease Agreement
or the Lessee's right to possession of the Leased Premises unless a written
notice of such intention be given to the Lessee.
(c) In addition to each and every other provision of this Section 20, the
Lessee shall be liable for all costs and expenses, including reasonable
attorney's fees, incurred by the Lessor or Agent by reason of the occurrence of
any Event of Default or the exercise of the Lessor's remedies with respect
thereto. No remedy referred to in this Section is intended to be exclusive, but
each shall be cumulative and in addition to any other remedy referred to above
or otherwise available to the Lessor at law or in equity; and the exercise or
beginning of exercise by the Lessor of any one or more of such remedies shall
not constitute the exclusive election of such remedies and shall not preclude
the simultaneous or later exercise by the Lessor of any or all of such other
remedies under this Lease Agreement. No express or implied waiver by the Lessor
of any Event of Default shall in any way be, or be construed to be, a waiver of
any future or subsequent Event of Default. To the extent permitted by
applicable law, the Lessee hereby waives any rights now or hereafter conferred
by statute or otherwise which may require the Lessor to sell, lease or otherwise
use the Leased Premises in mitigation of the Lessor's damages as set forth in
this Section or which may otherwise limit or modify any of the Lessor's rights
and remedies in this Section.
SECTION 21. Certain Waivers. (a) To the extent this Lease Agreement is
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interpreted to be a guarantee of the Notes, the Lessee hereby expressly waives:
(i) notice of the acceptance by the Lessee of this Lease Agreement and the
other Transaction Documents;
(ii) notice of the existence or creation or non-payment of all or any of
the obligations under this Lease Agreement or the other Transaction Documents;
(iii) presentment, demand, notice of dishonor, protest, notice of protest
and all other notices whatsoever;
(iv) all diligence in collection or protection of or realization upon the
obligations under this Lease Agreement or the other Transaction Documents or
any thereof, any obligation hereunder or any security for or guaranty of any
of the foregoing;
(v) any right to direct or affect the manner or timing of either the
Agent's or a Lender's enforcement of its rights or remedies;
(vi) any defense, right of set-off or other claim whatsoever (other than
payment in full and performance in full of all of the obligations under this
Lease Agreement or under any other Transaction Documents in accordance with
the terms hereof or thereof) that the Lessee or any third party may or might
have to the payment or performance of the obligations under the Transaction
Documents;
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(vii) any and all benefits and defenses to or discharges of liability that
may arise from any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, or similar proceeding with
respect to the Lessor or the Lessee;
(viii) any and all defenses which would otherwise arise upon the
occurrence of any Event of Default hereunder or under any other Transaction
Document, or upon the taking of any action by the Agent or the Lenders
permitted hereunder or thereunder;
(ix) any defense, right of set-off, claim or counterclaim whatsoever
(other than payment and performance in full of all of the obligations under
this Lease Agreement or the other Transaction Documents in accordance with the
terms hereof or thereof and the documents securing those obligations), and any
and all other rights, benefits, protections and other defenses which the
Lessee may have, now or at any time hereafter, to full payment or performance
of the obligations pursuant to the terms of this Lease Agreement and the other
Transaction Documents, including, without limitation, under California Civil
Code Sections 2809, 2810, 2819, 2821, 2845, 2849, 2850 and 2855, and
California Code of Civil Procedure Sections 580a, 580b and 580d, and all
successor sections;
(x) any and all defenses against any claim by the Agent or any Lender
following the Agent's or any Lender's nonjudicial foreclosure of any Mortgage
securing the obligations under this Lease Agreement or the other Transaction
Documents, including, but not limited to, the defense that would otherwise
have been available to the Lessee by virtue of the Agent's or any Lender's
nonjudicial foreclosure of such Mortgage having destroyed the right to pursue
a deficiency against the Lessor, to which the Lessee would have otherwise been
subrogated, in accordance with California Civil Code Section 580(d), or any
subsequent enactments, modifications, and recodifications thereof; and
(xi) all other principles or provisions of Law, if any, that conflict with
the terms of this Lease Agreement or the other Transaction Documents,
including, without limitation, the effect of any circumstances that may or
might constitute a legal or equitable discharge of a guarantor or surety.
(b) In addition to the specific waivers set forth in this Section 21, the
Lessee does hereby waive and shall have no right of subrogation, reimbursement,
exoneration, contribution or indemnity against the Lessor or any other Person
for any reason, including but not limited to, by reason of any payments made or
acts performed by the Lessee in compliance with the obligations of the Lessee
hereunder or any actions taken by the Agent or any Lender pursuant to this Lease
Agreement or pursuant to the other Transaction Documents.
(c) Nothing contained in this Lease Agreement or the other Transaction
Documents shall prevent the Agent or any Lender from suing to collect on the
obligations under this Lease Agreement or the other Transaction Documents or
from exercising concurrently or successively any rights available to it at law
or in equity or under any of the Transaction Documents, and that the exercise of
any of the aforesaid rights shall not constitute a legal or equitable discharge
of the Lessee. The Lessee hereby authorizes and empowers the Agent or any
Lender to exercise, in its sole discretion, any rights and remedies, or any
combination thereof, which may then be available, since it is the intent and
purpose of the Lessee that the obligations hereunder shall be absolute,
independent, and unconditional under any and all circumstances. Notwithstanding
any foreclosure of the lien of any deed of trust or security agreement with
respect to any or all of any real or personal property secured thereby, whether
by the exercise of the power of sale contained
22
<PAGE>
therein, by an action for judicial foreclosure, or by the acceptance of a deed
or possession of any other collateral in lieu of foreclosure, the Lessee shall
remain bound under this Lease Agreement and the other Transaction Documents.
SECTION 22. Memorandum of Lease.
-------------------
This Lease Agreement shall not be recorded, but a Memorandum of Lease, in the
form attached hereto as Exhibit C, shall be executed and acknowledged by the
parties and recorded by the Lessee, at its own expense, in the county where the
Leased Premises are located as soon as reasonably possible after full execution
and delivery of this Lease.
SECTION 23. Lessor's Right to Perform for the Lessee. If the Lessee fails to
----------------------------------------
pay any Supplemental Rent or fails to perform or comply with any of its
agreements contained herein, the Lessor may itself, after notice to the Lessee,
make such payment or perform or comply with such agreement, and the amount of
such payment and the amount of the reasonable expenses of the Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the rate
specified in Section 17 hereof, shall, if not paid by the Lessee to the Lessor
on demand, be deemed a Supplemental Payment hereunder; provided, however, that
-------- -------
no such payment, performance or compliance by the Lessor shall be deemed to cure
any Event of Default hereunder.
SECTION 24. Notices. All notices provided for or required under the terms and
-------
provisions hereof shall be given in the manner provided for and the addresses
specified in Section 6.02 of the Participation Agreement.
SECTION 25. Nature of Transaction.
---------------------
(a) It is the intention of the parties that for federal, state and local
income or franchise tax, bankruptcy (including the substantive law upon which
bankruptcy proceedings are based), real estate and Uniform Commercial Code
purposes:
(i) this overall transaction constitutes a loan by the Lenders and Equity
Participant to Lessee and preserves beneficial ownership in the Leased
Premises in Lessee, and obligations of Lessee to pay Basic Rent shall be
treated as payments of interest; and
(ii) the Mortgage and the Assignment Agreements create liens and security
interests in the Leased Premises in favor of Agent for the benefit of the
Lenders and Equity Participant.
Accordingly, and notwithstanding any provision of this Lease to the contrary,
the parties hereto agree and declare that: (i) the transactions contemplated by
this Lease are intended to have a dual, rather than single form, as evidenced by
the statements set forth in Section 26 hereof, and (ii) all references in the
Transaction Documents to the "lease" of the Leased Premises which fail to
reference such dual form do so as a matter of convenience only and do not
reflect the intent of the parties hereto as to the true characterization of such
arrangements. Notwithstanding the intentions of the parties set forth above,
Lessee acknowledges and agrees that none of Agent, any Lender, the Equity
Participant or their representatives have made any representations or warranties
concerning the tax, accounting or legal characteristics of the Transaction
Documents and that Lessee has obtained and relied upon such tax, accounting and
legal advice from its own experts concerning the Transaction Documents as it
deems appropriate.
23
<PAGE>
(b) Specifically, without limiting the generality of paragraph (a) of this
Section 25, the Lessor and the Lessee intend and agree that with respect to the
nature of the transactions evidenced by this Lease in the context of the
exercise of remedies under the Transaction Documents, including, without
limitation, in the case of any insolvency or receivership proceedings or a
petition under the United States bankruptcy laws or any other applicable
insolvency laws or statute of the United States of America or any state thereof
affecting the Lessee, the Lessor, any Lender or the Equity Participant or any
enforcement or collection actions, the transactions evidenced by this Lease are
loans made by the Equity Participant and the Lenders as unrelated third party
lenders to the Lessee secured by the Leased Premises pursuant to the Mortgage
and Assignment Agreements.
(c) The Lessor agrees that it will not file any federal, state or local income
tax returns during the Lease Term that are inconsistent with the treatment of
the Lessee as owner of the Leased Premises for federal, state and local income
tax purposes. The Lessee agrees to file all applicable state and local property
returns, reports, forms and notices with respect to the Leased Premises during
the Lease Term consistent with the treatment of the Lessee as the owner of the
Leased Premises for state and local property tax purposes.
SECTION 26. Operating Lease. Notwithstanding the provisions of Section 25
---------------
hereof, the Lessor and the Lessee hereby declare that it is their mutual intent
that for accounting purposes this Lease Agreement be an operating lease (for
purposes of FASB Statement 13) and not an instrument or evidence of
indebtedness, and that the relationship between the Lessor and the Lessee under
this Lease Agreement shall always be that of lessor and lessee only.
SECTION 27. Governing Law; Waiver of Jury Trial
-----------------------------------
THIS LEASE AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT WITH
--------
RESPECT TO THE LEASED PREMISES LOCATED IN A STATE OTHER THAN NEW YORK, THE LAWS
OF SUCH STATE SHALL APPLY TO THE EXTENT, BUT ONLY TO THE EXTENT, THAT EITHER (I)
A COURT OF COMPETENT JURISDICTION DETERMINES THAT THE LAWS OF SUCH STATE MUST BE
APPLIED, OR (II) THE LESSOR DETERMINES IN ITS SOLE DISCRETION THAT IT IS
NECESSARY TO APPLY THE PROCEDURAL LAWS OF SUCH STATE IN ORDER FOR THE LESSOR TO
FULLY AND EFFECTIVELY EXERCISE ITS RIGHTS AND REMEDIES HEREUNDER. PURSUANT TO
SECTION 6.06(B) OF THE PARTICIPATION AGREEMENT, THE LESSEE HAS AGREED TO THE
NONEXCLUSIVE PERSONAL JURISDICTION OF AND VENUE IN THE STATE COURTS OF THE STATE
OF NEW YORK, COUNTY OF NEW YORK, AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND TO WAIVE THE RIGHT TO A JURY TRIAL IN
CONNECTION WITH THIS LEASE AGREEMENT AND OTHER MATTERS ARISING OUT OF THE
TRANSACTION DOCUMENTS.
SECTION 28. Miscellaneous.
-------------
(a) The Lessee will promptly execute and deliver all further instruments and
documents and take all further action that may be necessary in order to give
effect to the provisions of this Lease Agreement and the other Transaction
Documents. The Lessee, at its own cost and expense, will take all such actions
as may be reasonably requested by the Lessor, the Agent, or any Lender, in order
to establish, preserve and perfect (a) the Lessor's good and marketable title to
the Leased Premises and the Lessor's rights under this Lease Agreement and the
other Transaction Documents, and (b) the first and prior perfected Lien of the
Agent in the Leased Premises and this Loan Agreement, including, without
limitation, procuring, executing and delivering from time to time any
endorsements, assignments, financing statements, deeds of trust and other
writings reasonably deemed necessary or appropriate by the Lessor or the Agent.
24
<PAGE>
(b) All rights and obligations under this Lease Agreement shall bind, and
inure to the benefit of, the parties hereto and their successors and permitted
assigns.
(c) If any term or provision of this Lease Agreement or the application
thereof to any person or circumstances shall to any extent be invalid and
unenforceable, the remainder of this Lease Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease Agreement shall be valid and shall be enforced to the
extent permitted by law.
(d) The failure of a party to insist upon a strict performance of any of the
terms, conditions and covenants herein shall not be deemed a waiver of any
rights or remedies that said party may have, and shall not be deemed a waiver of
any subsequent breach or default in the terms, conditions and covenants herein
contained.
(e) No change in the provisions of this Lease Agreement shall be effective
unless made in writing and signed by the Lessor and the Lessee.
(f) The headings preceding the text of sections of this Lease Agreement are
for convenience only and shall not modify or affect the substantive provisions
of this Lease.
(g) There are no oral, verbal, or other agreements (unless attached hereto or
specifically referred to herein) which modify or affect this Lease. This Lease
Agreement supersedes any and all prior agreements executed by or on behalf of
the parties hereto regarding the Leased Premises.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement to be
duly executed by their duly authorized officers as of the date first written
above.
FLEET NATIONAL BANK,
not in its individual capacity
but solely as Owner Trustee
under the Trust Agreement
By: /s/ Elizabeth C. Hammer
-------------------------
ELIZABETH C. HAMMER
Vice President
SMART & FINAL INC.
By:
--------------------------
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement to be
duly executed by their duly authorized officers as of the date first written
above.
FLEET NATIONAL BANK,
not in its individual capacity
but solely as Owner Trustee
under the Trust Agreement
By: /s/ Elizabeth C. Hammer
-------------------------
ELIZABETH C. HAMMER
Vice President
SMART & FINAL INC.
By: /s/ Martin Lynch
------------------
Executive Vice President
By: /s/ Donald G. Alvarado
------------------------
Senior Vice President
27
<PAGE>
EXHIBIT A
TO LEASE AGREEMENT
FORM OF LEASE SUPPLEMENT
A-1
<PAGE>
EXHIBIT 10.74
LOAN AGREEMENT
among
FLEET NATIONAL BANK,
not in its individual capacity but solely as
Owner Trustee under the Trust Agreement, as the Lessor,
THE LENDERS NAMED HEREIN,
and
CREDIT LYONNAIS NEW YORK BRANCH,
as the Agent
Dated as of April 16, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<C> <S> <C>
ARTICLE I
Definitions
ARTICLE II
Notes
2.01. Loans.................................................................. 3
2.02. Characteristics of all Notes........................................... 4
2.03. Characteristics of Series A Notes...................................... 7
2.04. Prepayment of Notes.................................................... 7
2.05. Register, Transfer, and Exchange of Notes.............................. 8
2.06. Application of Payments Prior to an Event of Default................... 9
-------
2.07. Amendments of Lease Agreement; the Lessor Actions...................... 9
2.08. Investment of Funds.................................................... 9
ARTICLE III
Covenants of the Lessor
ARTICLE IV
Limitation of Liability
ARTICLE V
Events of Default; Remedies
5.01. Events of Default....................................................... 11
5.02. Specific Remedies....................................................... 12
5.03. Application of Proceeds................................................. 13
5.04. Rescission.............................................................. 13
5.05. Rights and Remedies Cumulative; No Waiver............................... 13
5.06. Restoration of Rights and Remedies...................................... 14
5.07. Compliance with Law..................................................... 14
ARTICLE VI
Agent
6.01. Appointment............................................................. 14
6.02. Delegation of Duties.................................................... 14
6.03. Nature of Duties; Independent Credit Investigation...................... 14
6.04. Actions in Discretion of the Agent; Required Lenders' Consent........... 15
6.05. Exculpatory Provisions.................................................. 15
6.06. Reimbursement and Indemnification....................................... 15
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
6.07. Reliance by the Agent............................................ 15
6.08. Individual Capacity.............................................. 16
6.09. Holders of Notes................................................. 16
6.10. Successors....................................................... 16
6.11. Distributions to the Lenders..................................... 16
ARTICLE VII
Miscellaneous
7.01. Notices........................................................... 16
7.02. Survival.......................................................... 17
7.03. Amendments and Waivers............................................ 17
7.04. Entire Agreement.................................................. 17
7.05. Governing Law..................................................... 17
7.06. Non-Recourse To Certain Parties................................... 17
7.07. Invalidity of Provisions.......................................... 17
7.08. Counterparts...................................................... 17
7.09. Effectiveness..................................................... 17
7.10. Headings.......................................................... 17
7.11. Holders of Notes.................................................. 17
7.12. Successors and Assigns............................................ 18
</TABLE>
ii
<PAGE>
LOAN AGREEMENT dated as of April 16, 1997 among FLEET NATIONAL BANK, a
national banking association, not in its individual capacity but solely as the
Owner Trustee under the Trust Agreement (the "Lessor"), the banks named on
Schedule I hereto, together with their successors and registered assigns, as
holder of the Notes (the "Lenders"), and CREDIT LYONNAIS NEW YORK BRANCH, a
branch duly licensed under the laws of New York of a banking corporation
organized and existing under the laws of the Republic of France, as agent for
the Lenders (the "Agent").
W I T N E S S E T H:
--------------------
WHEREAS, the Lessor will finance the cost of certain property and acquire
an interest therein pursuant to the Lease Agreement (the "Lease Agreement")
dated as of the date hereof between the Lessor and Smart & Final Inc., a
Delaware corporation (the "Lessee"), together with the Lease Supplements
executed and delivered in connection therewith, as the same may be amended or
supplemented from time to time;
WHEREAS, in order to finance the cost of such property, the Lessor will
execute in favor of (i) the Lenders one or more non-recourse promissory notes
substantially in the form of Annex A hereto (collectively, the "Notes") pursuant
to the terms hereof and of the Participation Agreement dated as of the date
hereof among the Lessee, the Lessor, the Significant Sublessees named therein,
the Equity Participant, the Agent and the Lenders, as the same may be amended or
supplemented from time to time (the "Participation Agreement");
WHEREAS, pursuant to the Mortgage and Assignment Agreements, the interests
of the Lessor in, inter alia, the Leased Premises, the Lease Agreement and
----------
certain obligations of the Lessee thereunder are to be assigned and granted to
and retained by Agent, as agent for the Lenders, as security for the obligations
of the Lessor hereunder and under the Notes and as agent for the Equity
Participant to secure its interest in the Lessor.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE I
---------
Definitions
-----------
Capitalized terms used but not defined herein shall have the respective
meanings assigned thereto in the Definition Schedule attached as Exhibit A to
the Participation Agreement.
ARTICLE II
----------
Notes
-----
2.01. Loans.
------
(a) General. The Lenders hereby severally agree, on the terms and subject
-------
to the conditions set forth in this Loan Agreement and the other Transaction
Documents, to make loans to the Lessor on each Closing Date and Advance Date.
The Lessor's obligation to repay the loans
<PAGE>
hereunder shall be evidenced by its non-recourse promissory notes, referred to
as the Notes, executed in favor of the Lenders, respectively, as more fully
described below.
(b) Procedure for Borrowings. The Lessor may borrow pursuant to this
------------------------
Article II by giving the Agent not less than three Business Days' notice, by
1:00 p.m. New York time, of its request for loans hereunder. Such notice shall
specify (i) the date of the proposed borrowing (the "Borrowing Date"), (ii) the
aggregate principal amount of loans, (iii) whether the loans are to bear
interest at a Base Rate, Eurodollar Rate or LIBOR Rate, and (iv) if the loans
are to bear interest at a Eurodollar Rate, the term of the interest period
therefor.
Upon receipt of any such notice from the Lessor and on such date of
receipt, the Agent shall forthwith give notice to each Lender of the substance
thereof. Not later than 12:00 noon, New York time, on the Borrowing Date
specified in such notice, each Lender shall make available to the Agent in
immediately available funds at the office of the Agent at 1301 Avenue of the
Americas, New York, New York 10019, such Lender's pro rata share of the
requested loans.
Upon receipt by the Agent of all such funds and upon satisfaction of the
conditions set forth in this Article II, the Agent shall disburse to the Lessor
the loan requested in such notice. The Agent may, but shall not be required to,
advance on behalf of any such Lender such Lender's pro rata share of the loans
on a Borrowing Date unless such Lender shall have notified the Agent prior to
the Borrowing Date that it does not intend to make available its pro rata share
of such loans on such date. If the Agent makes such advance, the Agent shall be
entitled to recover such amount on demand from the Lender on whose behalf such
advance was made. Until such amount is repaid to the Agent by such Lender or the
Lessor such advance shall be deemed for all purposes to be a loan made by the
Agent. If the Agent recovers such amount from such Lender, the Agent shall be
entitled to recover from the Lender interest on the amount advanced by it for
each day such amount is made available at a rate per annum equal to the
customary rate set by the Agent for the correction of errors among banks for the
first three Business Days and, thereafter, at the applicable rate on the loans
made on the Borrowing Date. If the Agent recovers such amount from the Lessor,
the Agent shall be entitled to recover from the Lessor interest on the amount
advanced by it for each day such amount is made available at a rate per annum
equal to the customary rate set by the Agent for the correction of errors among
banks for the first Business Days and, thereafter at the applicable rate on the
loans made on the Borrowing Date.
2.02. Characteristics of all Notes.
----------------------------
(a) General. The Notes (i) shall be dated as of the initial Closing Date
-------
under the Participation Agreement, (ii) shall entitle the holders thereof to
payments of interest on the outstanding principal amount thereof for each day
during each Payment Period applicable thereto from the date thereof and (iii) as
provided in Section 2.06 hereof, shall be exchangeable for an equal aggregate
principal amount of Notes of like tenor. Unless sooner paid, by reason of
acceleration or otherwise, the entire unpaid principal balance of the Notes,
together with interest accrued thereon, shall be due and payable on the Maturity
Date. Except as otherwise provided in paragraphs (d) and (e) below, borrowings
evidenced by the Notes shall consist of (i) for the period beginning on the
initial Closing Date and ending on the last day of the Payment Period next
following the Completion Date, one or more (but not greater than four) of the
following: Base Rate Notes, Eurodollar Notes and LIBOR Notes (the LIBOR Notes
being available only for a full Payment Period of three months), and (ii)
thereafter, consecutive LIBOR Notes having Payment Periods of three months.
2
<PAGE>
(b) Interest. So long as no Event of Default has occurred and is
--------
continuing, the Lessor shall pay interest to the Lenders on the outstanding and
unpaid principal amount of the Notes at a rate per annum as follows:
(i) For each LIBOR Note at a rate equal to the LIBOR Rate plus 0.50%
per annum for the period;
(ii) For each Eurodollar Note, at a rate equal to the Eurodollar Rate
plus 0.50% per annum; and
(iii) For a Base Rate Note, at a rate equal to the Base Rate.
Interest on all Notes shall be paid on the last day of each Payment Period by
wire transfer of federal funds or other immediately available funds to the Agent
at the times and in the manner as set forth under Section 2.02(c) hereof. In
computing interest on any Note, the first date of the Payment Period shall be
included and the date of payment shall be excluded. Except in the case of an
Event of Default, any amounts under the Notes not paid when due shall bear
additional interest at the Late Payment Rate for the period for which the same
shall be overdue. Upon the occurrence and during the continuance of an Event of
Default, the Lessor shall pay interest on the outstanding and unpaid principal
of the Notes and on all overdue payments of interest on such Notes at the Late
Payment Rate. Payments of interest at the Late Payment Rate are due and payable
on demand.
(c) Method of Payment. The Lessor shall make each payment of principal and
-----------------
interest under this Loan Agreement not later than 11 A.M., New York City time,
on the day when due to the Agent by wire transfer of federal funds or other
immediately available funds, identifying each payment in such manner and payable
to such account of Agent as provided on the signature pages of the Participation
Agreement. The Agent will promptly thereafter distribute to each registered
holder of Notes its ratable share of each such payment received by the Agent for
the account of such holders at such place as has been provided to Agent in
writing, to be applied with and subject to the terms of this Loan Agreement,
including, without limitation, Section 2.05 hereof. Unless the Agent shall have
received notice from the Lessor prior to the date on which any payment is due
from the Lessor to one or more of the holders of Notes hereunder that the Lessor
will not make such payment in full, the Agent may assume that the Lessor has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each holder of Notes
on such due date an amount equal to the amount then due such holder of Notes
from the Lessor. If and to the extent that the Lessor shall not have so made
such payment, each holder of Notes shall repay to the Agent forthwith on demand
such amount distributed to such holder of Notes together with interest thereon,
for each day from the date such amount is distributed to such holder of Notes
until the date such holder of Notes pays such amount to the Agent, at the
Federal Funds Rate.
(d) Illegality. Notwithstanding any other provision in this Loan
----------
Agreement, if on any date on which the LIBOR Rate or Eurodollar Rate would
otherwise be set, any Lender determines that any applicable law, rule, or
regulation, or any change therein, or any change in the interpretation or
administration thereof by, or any guideline of, any governmental authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender with any request or
directive (whether or not having the force of law) of any such authority,
central bank, or comparable agency shall make it unlawful or impracticable for
any Lender to maintain or fund its respective LIBOR Notes or Eurodollar Notes in
good faith, then upon notice of such event to the Lessor by such Lender, as the
case may be, the affected Notes held by Lender shall
3
<PAGE>
thereafter consist of, and shall be converted into Base Rate Notes either (i) on
the last day of the then-current Payment Period applicable to such LIBOR Notes
or Eurodollar Notes if such Lender may lawfully continue to maintain and fund
such LIBOR Notes or Eurodollar Notes to such day or (ii) immediately if such
Lender shall determine it may not lawfully continue to maintain and fund such
LIBOR Notes or Eurodollar Notes to such day, and shall remain Base Rate Notes
until such time that such Lender notifies the Lessor that the circumstances
giving rise to such conversion no longer exist.
(e) Disaster. Notwithstanding any other provision of this Agreement, if
--------
on any date on which the LIBOR Rate or Eurodollar Rate would otherwise be set,
the Agent (in the case of clauses (i), or (ii) below) or any Lender, including
any subsequent holder of a Note, (in the case of clause (iii) below) shall have
determined in good faith (which determination shall be conclusive) that (i)
adequate and reasonable means do not exist for ascertaining the LIBOR Rate or
Eurodollar Rate, (ii) a contingency has occurred which materially and adversely
affects the interbank Eurodollar market, or (iii) the effective cost to lenders
of funding loans from funds obtained in the London interbank market shall exceed
the LIBOR Rate or Eurodollar Rate; then, and in any such event, the Agent or
such Lender, as the case may be, may notify the Lessor of such determination.
Upon such date as shall be specified in such notice (which shall not be earlier
than the date such notice is given) the affected Notes shall be converted to
Base Rate Notes on the last day of the then-current Payment Period applicable
thereto until such time that the Agent or Lender, as the case may be, notifies
the Lessor that the circumstances giving rise to such conversion no longer
exist.
(f) Increased Cost. The Lessor shall pay to the Lenders from time to time
--------------
such amounts as any Lender may determine to be necessary to compensate such
Lender for any costs incurred by such Lender which such Lender determines are
attributable to its funding or maintaining the Notes held by it hereunder, or
any reduction in any amount receivable by such Lender under this Loan Agreement
in respect of any Note (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any change
after the date of this Loan Agreement in U.S. federal, state, municipal, or
foreign laws or regulations (including Regulation D), or the adoption or making
after such date of any interpretations, directives, or requirements applying to
a class of banks including any Lender or under any U.S. federal, state,
municipal, or any foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof ("Regulatory Change"), which: (i)
imposes or modifies any reserve, special deposit, compulsory loan, or similar
requirements relating to any extensions of credit or commitments to extend
credit or other assets of (funded or contingent), or any deposits with or the
liabilities of, such Lender (including any of such liabilities or any deposits
referred to in the definition of LIBOR Rate or Eurodollar Rate, as applicable);
or (ii) imposes any other condition affecting this Loan Agreement or the
extension of credit hereunder. Each Lender will notify the Lessor of any event
occurring after the date of this Loan Agreement which will entitle such Lender
to compensation pursuant to this paragraph as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation.
Determinations by such Lender for purposes of this paragraph of the effect of
any Regulatory Change on its costs of funding or maintaining the Notes or on
amounts receivable by it in respect of Notes, and of the additional amounts
required to compensate such Lender in respect of any Additional Costs, shall be
conclusive, provided that such determinations are made on a reasonable basis.
(g) Capital. In the event any Lender determines that (i) the adoption of
-------
any applicable law, rule or regulation regarding capital adequacy, or any change
therein, (ii) compliance with any interpretation by any judicial,
administrative, or other governmental or central bank or comparable agency
charged with the interpretation or administration of any such law, rule or
regulation or (iii) compliance by such Lender with any guideline or request from
any such central
4
<PAGE>
bank, government authority or comparable agency (whether or not having the force
of law) has or would have the effect of requiring an increase in the amount of
capital required or expected to be maintained by such Lender, or any person
controlling such Lender, and such Lender determines (taking into consideration
such Lender's policies with respect to capital adequacy) that such increase is
based upon its obligations hereunder, and other similar obligations, the Lessor
shall pay to such Lender such additional amount as shall be certified by such
Lender to be the amount allocable to such Lender's obligations to the Lessor
hereunder. The Lender will notify the Lessor of any event occurring after the
date of this Loan Agreement that will entitle such Lender to compensation
pursuant to this paragraph as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation. Determinations by such
Lender for purposes of this paragraph of the effect of any increase in the
amount of capital required to be maintained by such Lender or any person
controlling the Lender, and of the amount allocable to such Lender's obligations
to the Lessor hereunder shall be conclusive, provided that such determinations
are made on a reasonable basis.
(h) Funding Loss Indemnification. The Lessor shall pay to the Agent, upon
----------------------------
the request of the Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Agent) to compensate it for any loss, cost, or expense
incurred as a result of any payment of a LIBOR Note or Eurodollar Note on a date
other than the last day of the Payment Period for such Note including, but not
limited to, acceleration of the Notes by the Agent hereunder.
2.03. Characteristics of Notes. The Notes shall be in the stated
------------------------
aggregate principal amount of $28,800,000.00 (which shall represent the amount
of the maximum commitment of the Lenders), shall be in registered form, in
substantially the form set forth in Annex A hereto, with blanks appropriately
filled in, shall bear interest at such rate, be payable as to principal and
interest on such date or dates, and shall contain such other terms and
provisions as shall be set forth herein and in the form set forth in Annex A.
The unpaid principal balance of the Notes shall be repaid on April 16, 2002.
2.04. Prepayment of Notes. The Lessor shall not be permitted to prepay
-------------------
the Notes except as set forth below.
(a) Mandatory Prepayment on Termination of Lease Agreement. Upon the sale
------------------------------------------------------
of the Leased Premises pursuant to Section 15(a) or 16 of the Lease Agreement,
the Lessor shall on the last day of the Lease Term under the Lease Agreement
prepay the Notes in whole in an amount equal to the unpaid principal amount
thereof, together with all interest accrued thereon and any other amounts due
and payable to the Lenders under the Loan Agreement, and no amounts (including
sales proceeds) shall be distributed to the Equity Participant until all amounts
due and owing under the Notes have been paid in full.
(b) Mandatory Prepayment Upon Event of Loss or Certain Purchases of Leased
----------------------------------------------------------------------
Premises. Upon the occurrence of an Event of Loss with respect to some or all of
- --------
the Leased Premises for which payment of Termination Value is due under Section
14(b) of the Lease Agreement or upon the purchase of any Leased Premises
pursuant to Section 15(c) of the Lease Agreement or pursuant to Section 4.10(b)
of the Agency Agreement, the Lessor shall, on the next date for which an
installment of principal is due on the Notes, prepay a principal amount of
Notes, together with interest accrued thereon, equal to 96% of the amount of the
payment of Termination Value in respect of such Event of Loss or purchase, as
the case may be, and any other amounts due and payable to the Lenders under the
Loan Agreement, and no amounts (including payments of Termination Value) shall
5
<PAGE>
be distributed to the Equity Participant until all amounts due and owing under
the Notes have been paid in full.
(c) Notice. Upon receipt by the Agent of notice from the Lessor or the
------
Lessee of an event which shall result in a prepayment of the Notes, specifying
the principal amount of Notes to be prepaid, such principal amount of Notes,
together with accrued interest thereon, shall become due, with any other amounts
set forth in Section 2.04(d), on the date specified in the notice which in any
event shall be the last day of a Payment Period. Such notice shall be given to
Agent no later than five (5) London Business Days prior to the date of the
payment specified. In the event of any partial prepayment of the principal
amount of any Note pursuant to this Loan Agreement, the amount of each payment
of such Note becoming due, with any other amounts set forth in Section 2.04(d),
after application of such prepayment shall be adjusted by an appropriate
amendment to the payment schedules attached to each Note so that the principal
paid on each date for an installment of principal shall bear the same proportion
to the original amount payable on such date as the total unpaid balance bears to
the original balance unpaid on such date but for such prepayment and that, upon
the due payment of all payments thereafter, the entire unpaid principal amount
of and interest on such Note shall have been paid in full.
(d) Payment of Certain Sums. In each case under this Section 2.04, if the
-----------------------
Lessor makes a prepayment, the Lenders shall be reimbursed on the date specified
in Section 2.04(c) or upon demand for any resulting loss or expense incurred by
such Lenders including, without limitation, any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after any such prepayment as such Lender shall have
determined and notified the Lessor, which determination shall be conclusive
provided it is made on a reasonable basis.
2.05. Register, Transfer, and Exchange of Notes.
-----------------------------------------
(a) Register. The Lessor shall maintain a register for the purpose of
--------
registration, and registration of transfer and exchange, of Notes, in which
shall be entered the names and addresses of the holders of such Notes and
particulars of the Notes held by them, respectively. The Lessor and Agent may
deem and treat the registered holder of any Note as the absolute owner of such
Note for the purpose of receiving payment of all amounts payable with respect to
such Note and for all other purposes.
(b) Transfer; Exchange. Subject to the restrictions on assignability of
------------------
Notes contained in the Participation Agreement, a holder of any Note intending
to presentment to the Lessor duly endorsed for transfer by, or accompanied by a
written instrument of transfer duly executed by, the registered holder of such
Note, together with the written request of such registered holder and evidence
satisfactory to the Agent that such transfer complies with the applicable
provisions of the Participation Agreement, for the issuance of a new Note or
Notes, specifying the denomination or denominations of the same, the name and
address of the new registered holder or holders, and the information required in
order that the Agent may make wire transfer of payments on such Notes to or for
the account of such new holder or holders. Promptly upon such presentation, the
Lessor shall execute, authenticate and deliver such new Note or Notes, in the
principal amount equal to the unpaid principal amount or amounts of such Note or
Notes so surrendered, having the same terms and dated the same date as the Notes
so surrendered, in such denomination or denominations and registered in the name
or names of the transferee specified in the written request. The Lessor shall
make a notation on each transferred or exchanged Note of the amount of all
payments of principal and interest theretofore made, or the date to which such
payments have been made, on the Note so transferred or exchanged. Prompt
6
<PAGE>
notice of the foregoing shall be delivered by the Lessor to Agent. The holder of
the transferred or exchanged Note shall, at the time such transfer or exchange,
pay the Agent an administrative fee of $3,000 for each such transfer or
exchange.
(c) Replacement. If any Note shall be destroyed, mutilated, lost, or
-----------
stolen, the Lessor shall, upon the written request of the registered holder of
such Note, execute and deliver in replacement thereof a new Note, payable in the
same original principal amount and dated the same date as the Note so destroyed,
mutilated, lost, or stolen. The Lessor may make a notation on each new Note of
the amount of all payments of principal and interest theretofore made, or the
date to which such payments have been made, on the Note so destroyed, mutilated,
lost or stolen. Prompt notice of the foregoing shall be delivered by the Lessor
to the Agent. If the Note being replaced has been mutilated, such Note shall be
delivered to the Lessor and shall be cancelled by it. If the Note being replaced
has been destroyed, lost, or stolen, the registered holder of such Note shall
furnish to the Lessor such indemnity agreement or bond as shall be reasonably
satisfactory to it together with evidence satisfactory to the Lessor of the
destruction, loss or theft of such Note and of the ownership thereof. If the
registered holder of such destroyed, lost, or stolen Note is a party to the
Participation Agreement or an Affiliate of any such Person, the written
statement of such party shall be sufficient proof of such destruction, loss or
theft and an indemnity agreement of such party signed by a duly authorized
officer thereof delivered to the Lessor shall be sufficient security and
indemnity.
2.06. Application of Payments Prior to an Event of Default. Prior
-----------------------------------------------------
to the occurrence of an Event of Default described in Section 5.01, the Agent
shall apply all Basic Rent, Supplemental Rent (other than Supplemental Rent
payable to the Agent or any Lender for reimbursement for its own account for
expenses or indemnities under Section 2.02(f), (g) or (h) hereof or payable
under the Lease Agreement or the Participation Agreement or pursuant to any
insurance policies maintained under Section 10 of the Lease Agreement) and
payments of Termination Value under the Lease Agreement to the payment of
principal and interest on the Notes ratably in accordance with the amount due
thereon without priority of any Notes over any other Notes.
2.07. Amendments of Lease Agreement; the Lessor Actions. The Lessor shall
-------------------------------------------------
be entitled to receive, and the Agent agrees to send to the Lessor, copies of
all notices, demands, consents, approvals and waivers which may, from time to
time, be given or granted by the Agent to the Lessee pursuant to the provisions
of the Lease Agreement. Prior to the time that the Notes and other amount due
hereunder have been discharged, Agent and the Lenders shall be entitled to
receive, and the Lessor agrees to send to the Agent and the Lenders, copies of
all notices, demands, consents, approvals and waivers which may, from time to
time, be given or granted by the Lessor to the Lessee or received by the Lessor
from the Lessee pursuant to the provisions of the Lease Agreement; provided,
--------
that without the prior consent of each Lender and the Agent, the Lessor shall
not:
(a) modify or waive any provision of any Transaction Document
requiring the Required Lender's Consent or release any collateral (except
as otherwise specifically provided in any Transaction Document);
(b) reduce the amount or change the time of payment of any amount of
principal owing or interest owing or payable on any Note;
(c) modify, amend, waive or supplement any of the provisions of
Sections 15, 16, 19 and 20 of the Lease;
7
<PAGE>
(d) reduce, modify, amend or waive any indemnities in favor of any
Lender or Agent;
(e) reduce the amount or change the time of payment of Rent,
Termination Value or Supplemental Rent;
(f) consent to any assignment of the Lease releasing the Lessee from
its obligations to pay Rent, Termination Value or Supplemental Rent or
changing the absolute and unconditional character of such obligations; or
(g) permit the creation of any Lien on the Trust Estate or any part
thereof except as contemplated by the Transaction Documents, or deprive any
Lender of the benefit of the security interest and lien secured by the
Trust Estate.
2.08. Investment of Funds. The Agent shall hold all moneys received by it
-------------------
hereunder as to which no immediate application thereof is provided, and shall
invest such moneys in U.S. Treasury securities having maturities of no greater
than one year or in the commercial paper of any issuer rated in the highest
rating category by both Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group. The earnings from any such investments, less the Agent's expenses
incurred in making such investments and any losses therefrom, shall be for the
account of the Person or Persons ultimately entitled to receive such moneys.
ARTICLE III
-----------
Covenants of the Lessor
-----------------------
The Lessor hereby covenants and agrees as follows:
(a) Payment of Principal and Interest. The Lessor shall duly and
---------------------------------
punctually pay (or cause to be paid) to Agent the principal of and interest
on the Notes in accordance with the terms thereof and this Loan Agreement
when such payments shall become due, including, but not limited to,
mandatory prepayments hereunder;
(b) Liens. The Trust Estate shall be and shall remain free and clear
-----
of the Lessor Liens and the Lessor shall take such action as may be
necessary to discharge any the Lessor Liens;
(c) Lease and Other Obligations. The Lessor shall faithfully abide by,
---------------------------
perform and discharge each and every obligation, covenant and agreement
that the Lease Agreement and the Participation Agreement provide are to be
performed by the Lessor; the Lessor shall upon the prior written request of
the Agent, at the expense of the Lenders to the extent not paid or
reimbursed by the Lessee, enforce any or all of its rights as the Lessor
under the Lease Agreement and the Participation Agreement; without the
Required Lenders' Consent, the Lessor shall not anticipate the rents under
the Lease Agreement or waive, excuse, condone, forgive or in any manner
release or discharge the Lessee thereunder of or from the obligations,
covenants, conditions and agreements to be performed by the Lessee that are
intended to satisfy the Lessor obligations or to preserve and protect the
interest of Lenders in the Lease Agreement and the Leased Premises,
including, without limitation, the obligation to make payments in the
manner and at the time and place specified in the Lease Agreement, or
8
<PAGE>
enter into any agreement or take any action the result of which would be to
amend, modify or terminate the Lease Agreement or the obligations of the
Lessee thereunder;
(d) Transfers. The Lessor shall not sell, assign or transfer its
---------
rights under this Loan Agreement or in or to the Trust Estate, except as
may be permitted by the express provisions of Article V of the
Participation Agreement;
(e) Lease Termination Remedies. Unless and until the Notes and all
--------------------------
other obligations of the Lease hereunder have been discharged, the Lessor,
without the consent of each of the Lenders, shall not terminate the Lease
Agreement, or otherwise exercise the remedies available under the Lease
Agreement against the Lessee or the Leased Premises; and
(f) Defaults. The Lessor shall promptly notify the Lenders of any
--------
Event of Default hereunder or under the Lease Agreement of which the Lessor
shall have knowledge.
ARTICLE IV
----------
Limitation of Liability
-----------------------
Notwithstanding anything in this Loan Agreement or any Mortgage and
Assignment Agreement to the contrary, the liability of the Lessor for all
payments to be made under and pursuant to the Notes, hereunder and thereunder
and the performance of all other obligations hereunder and under any other
Transaction Document shall not exceed an amount equal to, and shall be payable
only out of, the Income and Proceeds from the Trust Estate. As used herein the
term "Income and Proceeds from the Trust Estate" shall mean
(i) if an Event of Default shall have occurred and while it shall be
continuing so much of the following amounts as are indefeasibly received by
the Lessor or Agent or Lenders as assignee of the Lessor at any time after
the occurrence of such Event of Default and during the continuance thereof:
(A) all payments and any other sums due and to become due under the Lease
Agreement except Excluded Amounts, and (B) any and all other payments or
proceeds received pursuant to the Lease Agreement or for or with respect to
the Trust Estate as the result of the sale, lease or other disposition
thereof, after deducting all costs and expenses of such sale, lease or
other disposition; and
(ii) at any other time only that portion of the amounts referred to in
the foregoing clause (i) or otherwise payable to the Lessor pursuant to the
Lease Agreement as are indefeasibly received by the Lessor, the Agent or
the Lenders as assignee of the Lessor and as shall equal the payments
specified in clause (a) of Article III hereof due and payable by the Lessor
on the date such amounts so received were required to be paid pursuant to
the Lease Agreement or as shall equal any other payments (including
payments in respect of loss or destruction of the Leased Premises and early
termination of the Lease Agreement) then due and payable under this Loan
Agreement.
The Lessor shall not be liable for any deficiency arising out of the sale by the
Lessor of all or any portion the Leased Premises pursuant to the Lease Agreement
and the Lenders agree to look only to the Trust Estate and the rights of the
Lessor against the Lessee under the Lease Agreement and the Participation
Agreement for the amount of such deficiency. Each Lender agrees that if it
obtains a judgment against the Lessor for an amount in excess of the amounts
payable by the Lessor pursuant to
9
<PAGE>
the limitations set forth in this Article IV, it will, accordingly, limit its
execution of such judgment to such amount and it will not bring suit against the
Lessor for any sums in addition to the amounts payable by the Lessor pursuant to
said limitations (or obtain a judgment, order or decree against the Lessor for
any relief other than the payment of money) except as may be required by
applicable rules of procedure to enforce against the Trust Estate and the Lessee
(rather than against the Lessor personally), by appropriate proceedings against
obligee at law or in equity or otherwise, the obligation to make the payments
due to such Lender under the Notes and this Loan Agreement. Nothing contained
herein limiting the liability of the Lessor shall derogate from the right of the
Agent on behalf of the Lenders to proceed against the Trust Estate or the Lessee
(to the extent of the Lessor's rights against the Lessee under the Lease
Agreement and the Participation Agreement) as provided for herein or in the
Mortgage and Assignment Agreements for the full unpaid principal amount of the
Notes and interest thereon, or to proceed against the Lessor for damages and
exercise other remedies for breach of the covenants of this Loan Agreement
(subject to the aforesaid limitations) or the inaccuracy of the representations
and warranties of the Lessor contained herein or in the Participation Agreement.
ARTICLE V
---------
Events of Default; Remedies
---------------------------
5.01. Events of Default. If any of the following events (each such
-----------------
event being hereinafter referred to as an "Event of Default") shall have
occurred (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary) and be continuing:
(a) failure to pay principal or interest or make any mandatory
prepayment of principal on the Notes when due (except to the extent
attributable to any failure of Agent to pay any amount due to holders of
Notes on account of interest pursuant to Section 2.02(c) hereof) and such
failure shall continue unremedied for three (3) Business Days; or
(b) an "Event of Default" under the Lease Agreement shall have
occurred and be continuing; or
(c) the Lessor shall become insolvent or bankrupt or make an
assignment for the benefit of creditors or consent to the appointment of a
trustee or receiver; or a trustee or a receiver shall be appointed for the
Lessor or for a substantial part of the Lessor's property without the
Lessor's consent and shall not be dismissed within a period of ninety (90)
days; or bankruptcy, reorganization or insolvency proceedings shall be
instituted by or against the Lessor and, if instituted against the Lessor,
shall not be dismissed for a period of thirty (30) days; or
(d) the Lessor shall fail to observe any covenant contained in clause
(c) or (d) of Article III hereof and such failure shall continue for a
period of ten days after written notice thereof;
then, the Agent, upon receipt of the Required Lenders' Consent shall, by notice
to the Lessor and the Lessee, declare the unpaid principal amount of the Notes,
interest accrued thereon and all other amounts owing by the Lessor hereunder,
under the Notes or under any other Transaction Document to be immediately due
and payable without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived, and an action therefor shall
immediately accrue;
10
<PAGE>
provided, however, that in the event of an actual or deemed entry of an order
- --------
for relief with respect to the Lessor under the Federal Bankruptcy Code, (x) the
obligation of any Lender to make loans hereunder shall automatically terminate
and (y) the Notes, all interest thereon and all other amounts payable hereunder
shall automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Lessor; the Agent shall, upon receipt of the Required Lenders' Consent, be
entitled and empowered to institute such action or proceedings at law or in
equity for the collection of any amounts due and unpaid as shall be consistent
with such Required Lenders' Consent, and may prosecute any such action or
proceedings to judgment or final decree, and may enforce any such judgment or
final decree against the Lessor and collect in the manner provided by law out of
the Trust Estate, wherever situated, the moneys adjudged or decreed to be
payable (subject to the provisions of Article IV hereof).
5.02. Specific Remedies. Upon the occurrence and during the continuance
-----------------
of an Event of Default, the Agent may, and upon receipt of the Required Lenders'
Consent and indemnification reasonably satisfactory to the Agent, shall:
(i) take any and all action available to a creditor to recover from
the Lessor (subject to the limited recourse provisions contained herein and
in the Notes) all amounts then due and payable by the Lessor under the
Notes or otherwise to each Lender; or
(ii) exercise any and all of the rights remedies available to it
against the Trust Estate under the Mortgage and Assignment Agreements; or
(iii) subject to the rights of the Lessee under the Lease Agreement,
exercise, as assignee of the Lessor any and all of the rights and remedies
of the Lessor under the Lease Agreement;
provided, however, that if the only Event of Default which has occurred and is
- -------- -------
continuing hereunder is an Event of Default described in Section 5.01(b) hereof
or any other Event of Default which has resulted from an Event of Default
described in Section 5.01(b) hereof (such Events of Default called "the Lessee
Defaults"), the Agent shall be entitled to exercise a right or remedy hereunder
only if it concurrently pursues, to the extent it has not already done so and is
then entitled to do so hereunder and under the Lease Agreement and is not then
stayed against the Lessee or otherwise prevented from doing so by operation of
law, one or more remedies available to the Agent as assignee of the Lessor's
interest in the Lease Agreement.
Written notice shall be given by the Agent to the Lessor of any election by
the Agent to retain the Trust Estate.
5.03. Application of Proceeds. If an Event of Default shall have occurred
-----------------------
and be continuing and the Agent shall exercise any of the powers conferred upon
it by Sections 5.01 and 5.02 hereof, all payments made by the Lessor to the
Agent hereunder after such Event of Default, and the proceeds of any judgment
collected hereunder from the Lessor by the Agent, and the proceeds of every sale
by the Agent of any of the Trust Estate, together with any other sums which may
then be held or obtained by the Agent or the Lenders under any of the provisions
hereof or any other Transaction Document, shall be applied by the Agent to the
payment in the following order of priority: (i) of all proper charges, expenses
(including without limitation all reasonable attorney's fees) or advances made
or incurred by the Lenders or the Agent or, in the case of an Lessee Default,
the Lessor in the exercise of the Lenders', the Agent's or the Lessor's remedies
hereunder or under any other Transaction Document, (ii) of the interest then due
on the Notes, ratably and without
11
<PAGE>
priority of any Notes over any other Notes, with interest on overdue interest at
the Late Payment Rate to the extent legally enforceable, and (iii) of the
principal of all outstanding Notes, without priority as aforesaid, with interest
thereon at the Late Payment Rate to the extent legally enforceable from the
first date on which such principal was due and not paid, whether such Notes
shall have then matured by their terms or not.
If after applying as aforesaid the sums of money realized by the Agent on
behalf of Lenders there shall remain a surplus in the possession of the Agent,
such surplus shall be paid to the Lessor.
5.04. Rescission. If, at any time after the outstanding principal
----------
amount of the Notes shall have become due and payable by acceleration pursuant
to Section 5.01 hereof, no judgment for any amount so becoming due shall have
been entered and the Collateral has not been sold or otherwise disposed of in
the exercise of remedies hereunder, (i) all amounts of principal and interest on
the Notes which have become due otherwise than pursuant to Section 5.01 hereof,
together with interest on all such overdue principal and, to the extent
permitted by law, interest at the Late Payment Rate and an amount sufficient to
cover all costs and expenses of collection of Agent and the Lenders shall have
been paid in full and (ii) every other Event of Default shall have been cured or
waived, then the Agent may, with the Required Lenders' Consent, and by notice to
the Lessor and the Lessee, rescind and annul such acceleration and any related
declaration of acceleration under the Lease Agreement and their related
consequences, but no such rescission and annulment shall extend to or affect any
subsequent Event of Default hereunder or under the Lease Agreement or impair any
right consequent thereon.
5.05. Rights and Remedies Cumulative; No Waiver. Each and every right,
-----------------------------------------
power and remedy herein specifically given to the Agent or any or all of the
Lenders under this Loan Agreement shall be cumulative and shall be in addition
to every other right, power and remedy herein specifically given or now or
hereafter existing at Law, in equity or by statute, and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by the Agent, and the exercise or the beginning of the exercise of any
power or remedy shall not be construed to be a waiver of the right to exercise
at the same time or thereafter any other right, power or remedy. No delay or
omission by the Agent or the Lenders in the exercise of any right, remedy or
power or in the pursuance of any remedy shall impair any such right, power or
remedy or be construed to be a waiver of any default on the part of the Lessor
or the Lessee or to be an acquiescence therein. No waiver in respect of any
Event of Default shall extend to any subsequent or other Event of Default.
5.06. Restoration of Rights and Remedies. In case the Lenders shall
----------------------------------
have directed the Agent to proceed to enforce any right, power or remedy under
this Loan Agreement by foreclosure, entry or otherwise, and such proceedings
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Agent or the Lenders, then and in every such case
the Lessor, the Agent and the Lenders shall be restored to their former
positions and rights hereunder with respect to the Trust Estate, and all rights,
remedies, and powers of the Agent and the Lenders shall continue as if no such
proceedings had been taken.
5.07. Compliance with Law. The foregoing provisions of this Article V
-------------------
are subject in all respects to all mandatory legal requirements at the time in
force and applicable.
12
<PAGE>
ARTICLE VI
----------
Agent
-----
6.01. Appointment. The Lenders hereby appoint Credit Lyonnais New York
-----------
Branch to act as the Agent as herein specified for the Lenders hereunder. Each
of the Lenders by its execution and delivery of the Participation Agreement
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note shall be deemed irrevocably to authorize, the Agent to take such action on
its behalf under the provisions of this Loan Agreement and any other Transaction
Document, or other instruments and agreements referred to herein or therein, and
to exercise such powers and to perform such duties hereunder and thereunder, as
are specifically delegated to or required of the Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental thereto. Credit
Lyonnais New York Branch agrees to act as the Agent on behalf of the Lenders to
the extent provided in this Loan Agreement.
6.02. Delegation of Duties. The Agent may perform any of its duties
--------------------
hereunder by or through agents or employees and shall be entitled to rely on the
advice of independent counsel concerning all matters pertaining to its duties
hereunder and thereunder.
6.03. Nature of Duties; Independent Credit Investigation. The Agent shall
--------------------------------------------------
have no duties or responsibilities except those expressly set forth in this Loan
Agreement and the Participation Agreement. The duties of the Agent shall be
mechanical and administrative in nature. The Agent shall not have by reason of
this Loan Agreement or any Transaction Document a fiduciary relationship in
respect of any Lender and nothing in this Loan Agreement or any Transaction
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Loan Agreement or any
Transaction Document except as expressly set forth herein or therein. Each
Lender expressly acknowledges (i) that the Agent has not made any
representations or warranties to it and that no act by the Agent hereafter taken
shall be deemed to constitute any representation or warranty by the Agent to any
Lender; (ii) that it has made and will make its own independent investigation of
the financial condition and affairs, and its own appraisal of the
creditworthiness of the Lessor and the Lessee, in connection with this Loan
Agreement; (iii) that it has made its own independent investigation of the legal
matters relating to this Loan Agreement, the Transaction Documents and the Notes
to be issued to it hereunder; and (iv) that the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any the
Lender with any information, except for notices, reports or other information,
if any, expressly required to be furnished to the Lenders by the Agent
hereunder.
6.04. Actions in Discretion of the Agent; Required Lenders' Consent.
-------------------------------------------------------------
The Agent agrees, upon receipt of the Required Lenders' Consent and indemnity
reasonably satisfactory to it, to take any action of the type specified therein
so long as the same is not inconsistent with the other Transaction Documents.
The Agent shall take, or refrain from taking, such action hereunder in
accordance with the Required Lenders' Consents. In the absence of receipt of the
Required Lenders' Consent, the Agent shall take no action and shall not be
subject to any liability, penalty, cost or expense for such inaction. Any action
taken or failure to act pursuant to such Required Lenders' Consent shall be
binding on the Lenders and on all holders of Notes. No Lender shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the Required Lenders'
Consent, or in the absence of the Required Lenders' Consent, in the absolute
discretion of Agent, subject to the provisions of Section 6.05 hereof.
13
<PAGE>
6.05. Exculpatory Provisions. Neither the Agent nor any of its directors,
----------------------
officers, employees or agents shall be liable to any Lender for any action taken
or omitted to be taken by it hereunder or under the Notes or Transaction
Documents, or in connection herewith or therewith, unless caused by its own
gross negligence or willful misconduct. In performing its functions and duties
hereunder on behalf of Lenders, the Agent shall exercise the same care which it
would exercise in dealing with loans for its own account, but it shall not (i)
be responsible in any manner to any of the Lenders for the effectiveness,
enforceability, genuineness, validity or the due execution of this Loan
Agreement, the Transaction Documents or any of the Notes, or for any recital,
representation, warranty, document, certificate, report or statement herein or
therein made or furnished under or in connection with this Loan Agreement or
(ii) be under any obligation to any of the Lenders to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions
hereof or thereof on the part of the Lessor, the Lessee or any other Person, or
the financial condition of the same or the existence or possible existence of
any Event of Default or Unmatured Event of Default.
6.06. Reimbursement and Indemnification. Each holder of Notes shall
---------------------------------
reimburse and indemnify the Agent to the extent not reimbursed by the Lessee
(and without limiting the obligation of the Lessee), ratably in the proportion
which the sum of the principal balance of Notes then held by such holder bears
to the sum of the then outstanding principal balance of the Notes, for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent, in its capacity as such, in any way relating to or arising out of this
Loan Agreement, the Transaction Documents, the Notes or any action taken or
omitted by the Agent hereunder or thereunder, provided, that no holder shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the
extent that the same result from the Agent's gross negligence or willful
misconduct.
6.07. Reliance by the Agent. The Agent shall be entitled to rely upon
---------------------
any writing, telegram, telex or teletype message, resolution, notice, consent,
certificate, letter, cablegram, statement, order or other document or
conversation by telephone or otherwise believed by it to be genuine and correct
and to have been signed, sent or made by the proper party or parties, and upon
opinions of counsel and other professional advisers selected by the Agent.
Subject to Section 6.05 hereof, the Agent shall be fully justified in failing or
refusing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
6.08. Individual Capacity. With respect to this Loan Agreement and the
-------------------
Notes held by it, Credit Lyonnais, as a Lender shall have the same rights and
powers hereunder as any other holder of a Note and may exercise the same as
though it were not the Agent, and the term, "Lenders" shall, unless the context
hereof otherwise indicates, include Credit Lyonnais in its individual capacity.
6.09. Holders of Notes. The Agent may deem and treat the payee of
----------------
any Note as the owner of such Note for all purposes hereof unless and until
written notice of the assignment or transfer thereof shall have been filed with
the Agent in accordance with Section 2.06 hereof. Any request, authority or
consent of any party who at the time of making such request or giving such
authority or consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
14
<PAGE>
6.10. Successors. The Agent may resign at any time by giving written
----------
notice thereof to the Lenders. Upon any such resignation, the holders of the
Notes, by execution and delivery of a Required Lenders' Consent, shall agree
upon a successor Agent. If no successor Agent shall have been so agreed upon and
appointed, and shall have accepted such appointment, within 30 days after the
retiring Agent's giving of notice of resignation, then the retiring Agent, any
holder of a Note or the Lessor may petition (or in the absence of such petition,
the Lessee may petition) a court of competent jurisdiction to appoint a
successor Agent which shall be a commercial bank organized under the Laws of the
United States of America or any state thereof, having a combined capital and
surplus of at least $250,000,000. Upon the acceptance by a successor Agent of
its appointment as Agent hereunder, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties under
this Loan Agreement. After any retiring Agent's resignation hereunder as the
Agent, the provisions of this Article VI shall inure to its benefit as to any
actions taken or omitted by it while it was the Agent under this Loan Agreement.
6.11. Distributions to the Lenders. The Agent agrees that all sums paid
----------------------------
by the Lessee to the Agent under any Transaction Document for distribution to
the holders of Notes pursuant hereto, and any other proceeds of the Collateral
or any portion thereof (i) shall, until paid to the holders of Notes in
accordance with the provisions hereof, be held by the Agent for the benefit of
the holders of Notes, and (ii) if received by the Agent prior to 12:00 Noon, New
York City Time, shall be disbursed to holders of Notes no later than 4:00 P.M.
on the same Business Day, and if received by the Agent after 12:00 Noon, New
York City Time, shall be disbursed to holders of Notes no later than 4:00 P.M.
on the next succeeding Business Day.
ARTICLE VII
-----------
Miscellaneous
-------------
7.01. Notices. Any notice required or permitted under this Loan Agreement,
-------
or by law in respect of this Loan Agreement, shall be in writing and shall be
deemed effective, when personally delivered or if sent by registered or
certified mail, three Business Days after the date of delivery to the post
office, or if sent by overnight delivery (express mail or overnight courier),
when received, or if sent by telex or telecopy, upon receipt, in each case
addressed to the Person required to receive the same at the address stated on
the signature pages of the Participation Agreement or in accordance with the
last unrevoked written direction from such Person to the other parties hereto.
7.02. Survival. All covenants, agreements, indemnities, representations,
--------
and warranties contained in this Loan Agreement, or any document, agreement, or
certificate delivered pursuant hereto shall survive the expiration or other
termination of this Loan Agreement.
7.03. Amendments and Waivers. The terms of this Loan Agreement shall
----------------------
not be waived, altered, modified, amended, supplemented, or terminated in
any manner whatsoever except by written instrument signed by the Lessor and the
Agent following receipt of the Required Lenders' Consent; provided, however,
that no such amendment shall revise or delete Sections 2.06, 2.07, 5.03 hereof
or this Section 7.03 without the prior written consent of the holders of a
majority in principal amount of the Notes.
15
<PAGE>
7.04. Entire Agreement. This Loan Agreement and the other agreements and
----------------
documents referred to herein constitute the final and entire expression of the
agreement of the parties with respect to the matters contemplated hereby.
7.05. Governing Law. This Loan Agreement shall be governed by, and
-------------
construed in accordance with, the Laws of the State of New York.
7.06. Non-Recourse To Certain Parties. This Loan Agreement is solely
-------------------------------
a corporate obligation and no recourse shall be had in respect of any
obligation, covenant, or agreement of this Loan Agreement, or referred to
herein, against any stockholder, incorporator, director, or officer, as such,
past, present, and future, of the parties hereto by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of statute or
otherwise.
7.07. Invalidity of Provisions. Any provision of this Loan Agreement
------------------------
which may be prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
7.08. Counterparts. This Loan Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, all
of which together shall constitute a single agreement.
7.09. Effectiveness. Although this Loan Agreement is dated as of the date
-------------
first above written for convenience, the actual dates of execution hereof by the
parties hereto are respectively the dates set forth under the signatures hereto,
and this agreement shall be effective on the latest of such dates.
7.10. Headings. Any headings or captions preceding the individual sections
--------
hereof are intended solely for the convenience of the parties and shall not
alter or vary the meaning, construction or effect of this Loan Agreement.
7.11. Holders of Notes. All representations, warranties, covenants, and
----------------
agreements contained herein shall be binding on, and shall inure
to the benefit of, each Lender and any registered transferee of any Lender as
holder of a Note or Notes. Any request, notice, direction, consent, waiver or
other instrument or action by any holder of a Note or Notes shall bind the
successor and assigns of such holder.
7.12. Successors and Assigns. The provisions of this Loan Agreement shall
----------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, subject to Section 2.05 hereof and the
provisions of the Participation Agreement.
16
<PAGE>
IN WITNESS WHEREOF the parties hereto have each caused this Loan Agreement
to be duly executed by their respective officers thereunto duly authorized.
FLEET NATIONAL BANK,
not in its individual capacity (except as
expressly stated above) but solely as Owner
Trustee under the Trust Agreement
By: /s/ Elizabeth C. Hammer
-----------------------
Elizabeth C. Hammer
Vice President
Date:
-----------------------
CREDIT LYONNAIS NEW YORK BRANCH,
as Agent
By: /s/ David Fink
-----------------------
David Fink
Vice President
Date:
-----------------------
CREDIT LYONNAIS LOS ANGELES
BRANCH, as Lender
By: /s/ Dianne M. Scott
-----------------------
Dianne M. Scott
Vice President and Manager
Date:
-----------------------
UNION BANK OF CALIFORNIA, N.A.,
as Lender
By: /s/ Dana C. Fenwick
-----------------------
Dana C. Fenwick
Its: Vice President
-----------------------
CIBC INC., as Lender
By: /s/ Daniel H. Hom
-----------------------
Daniel H. Hom
Its: Director, CIBC Wood Gundy
Securities Corp. AS AGENT
<PAGE>
BANQUE NATIONALE DE PARIS,
as Lender
By: /s/ C. Bettles
-----------------------
C. Bettles
Its: Sr. V..P. & Manager
-----------------------
By: /s/ J. L. Tourne
-----------------------
J. L. Tourne
Its: V.P. & Deputy Manager
-----------------------
<PAGE>
THE STATED PRINCIPAL AMOUNT OF THIS NOTE REPRESENTS
THE MAXIMUM AMOUNT THEREOF PAYABLE TO THE HOLDER
HEREOF AND MAY NOT CORRESPOND TO THE ACTUAL UNPAID
PRINCIPAL BALANCE HEREOF.
THE AMOUNT OF THE UNPAID PRINCIPAL BALANCE AT ANY
TIME MAY BE OBTAINED FROM THE OWNER TRUSTEE.
FLEET NATIONAL BANK,
not in its individual capacity but solely as Owner Trustee
under Trust Agreement dated as of April 16, 1997
NON-RECOURSE PROMISSORY NOTE DUE APRIL 16, 2002
New York, N.Y.
$__________ April 16, 1997
FOR VALUE RECEIVED, the undersigned, not in its individual capacity but
solely as Owner Trustee (herein in such capacity called the "Owner Trustee")
under that certain Trust Agreement dated as of April 16, 1997, between the
Equity Participant named therein and FLEET NATIONAL BANK ("the Lessor"), hereby
promises to pay, to the order of [CREDIT LYONNAIS LOS ANGELES BRANCH]
(hereinafter together with any other holder hereof referred to as the "Holder"),
the maximum principal amount of $__________ in lawful money of the United States
and in immediately available funds. Interest shall accrue from the date of this
Note on the outstanding principal amount hereof in accordance with the Loan
Agreement and shall be payable on such dates and in such amounts as determined
in accordance with the Loan Agreement. Unless sooner paid, by reason of
acceleration or otherwise, the entire unpaid balance of this Note, together with
interest accrued thereon, shall be due and payable on April 16, 2002. All such
payments of principal and interest shall be made to such place or places and to
such account or accounts as Holder shall direct by written notice to the Lessor.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Loan Agreement dated as of April 16, 1997 between the Lessor,
the Lenders named therein, and Credit Lyonnais New York Branch as the Agent (the
"Loan Agreement") as to which reference is hereby made for a statement of the
terms, conditions and covenants under which the indebtedness evidenced hereby
was and will be made and is to be repaid, including, among others, those related
to the acceleration of the indebtedness represented hereby upon the occurrence
of an Event of Default or the mandatory prepayment of any of the indebtedness
represented hereby as provided in the Loan Agreement. This Note is not subject
to prepayment except as provided in the Loan Agreement. All capitalized terms
used herein and not defined herein shall have the respective meanings ascribed
thereto in the Loan Agreement.
This Note is secured by Trust Estate as provided in the Loan Agreement and
Mortgage and Assignment Agreements.
This Note is a non-recourse obligation of the Owner Trustee, and all
payments of principal and interest to be made by the Owner Trustee on this Note
shall be made only from the Income and Proceeds from the Trust Estate. The
Holder hereof, by its acceptance of this Note, agrees that it will
<PAGE>
look solely to the Income and Proceeds from the Trust Estate to the extent
available for distribution to the Holder hereof and that the Lessor shall not be
personally liable to the Holder hereof for any amounts payable under this Note
or, except as expressly provided in the Loan Agreement, for any liability under
the Loan Agreement or the other Transaction Documents.
This Note is a registered Note and may be transferred only by registration
of transfer as provided in Section 2.05 of the Loan Agreement. THIS NOTE IS ALSO
SUBJECT TO ADDITIONAL TRANSFER RESTRICTIONS SET FORTH IN THE PARTICIPATION
AGREEMENT DEFINED IN THE SECOND "WHEREAS" CLAUSE OF THE LOAN AGREEMENT.
To the extent permitted by applicable law, the Lessor waives notice,
presentment, and demand.
This Note shall be governed by the laws of the State of New York without
giving effect to the principles of conflicts of law.
FLEET NATIONAL BANK,
not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement
By:
-----------------------
A-2
<PAGE>
[Execution Copy]
FIRST AMENDMENT AND RESTATEMENT
Dated as of June 20, 1997
TO
PARTICIPATION AGREEMENT
Dated as of December 15, 1994
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<CAPTION>
<S> <C> <C>
Commitments............................................. 2
-----------
SECTION 1.01 Delivery and Purchase of Leased Premises; Construction
------------------------------------------------------
of Improvements............................................................. 2
---------------
SECTION 1.02 Participation by the Equity Participant......................... 2
---------------------------------------
SECTION 1.03 Participation by the Lenders.................................... 2
----------------------------
SECTION 1.04 The Lessee's Responsibilities................................... 2
-----------------------------
SECTION 1.05 The Equity Participant's Instructions to the Lessor............. 2
---------------------------------------------------
SECTION 1.06 Fees Payable by Lessee.......................................... 3
----------------------
SECTION 1.07 Closing......................................................... 3
-------
ARTICLE II
Representations And Warranties.......................... 3
------------------------------
SECTION 2.01 Representations and Warranties of the Lessee and the
----------------------------------------------------
Permitted Sublessees........................................................ 3
--------------------
SECTION 2.02 Representations and Warranties of the Equity Participant........ 9
--------------------------------------------------------
SECTION 2.03 Representations and Warranties of the Lenders................... 10
---------------------------------------------
SECTION 2.04 Representations and Warranties of Trust Company................. 11
-----------------------------------------------
ARTICLE III
Conditions.............................................. 12
----------
SECTION 3.01 Conditions of the Lenders, the Equity Participant and the
---------------------------------------------------------
Lessor...................................................................... 12
------
SECTION 3.02 Additional Conditions Precedent with Respect to Closing
-------------------------------------------------------
Dates for the Leased Premises............................................... 14
-----------------------------
SECTION 3.03. Additional Conditions Precedent to Advances..................... 16
--------------------------------------------
ARTICLE IIIA
CERTAIN TRANSFERS OCCURRING IN CONNECTION WITH
THE EFFECTIVE DATE;
CONDITIONS PRECEDENT TO THE EFFECTIVE DATE................................ 17
SECTION 3.01A Certain Transfers Occurring in Connection with the
--------------------------------------------------
Effective Date.............................................................. 17
--------------
SECTION 3.02A Conditions Precedent to the Effective Date...................... 17
------------------------------------------
</TABLE>
i
<PAGE>
ARTICLE IV
<TABLE>
<CAPTION>
<S> <C> <C>
Agreements.............................................. 18
----------
SECTION 4.01 Basic Reporting Requirements of the Lessee and the
--------------------------------------------------
Permitted Sublessees........................................................ 18
--------------------
SECTION 4.02 Assumption of Risk and Indemnification.......................... 19
--------------------------------------
SECTION 4.03 Certain Covenants of the Lessee and the Permitted
-------------------------------------------------
Sublessees.................................................................. 22
----------
SECTION 4.04 Acknowledgment of Notice of Assignment.......................... 25
--------------------------------------
SECTION 4.05 Implementation of Assignment.................................... 26
----------------------------
SECTION 4.06 Covenants of the Lenders........................................ 27
------------------------
SECTION 4.07 Withholding Taxes............................................... 28
-----------------
SECTION 4.08 Replacement for Illegality, Burdensome Indemnity or............. 29
---------------------------------------------------
Other Events.
------------
ARTICLE V
Assignment Of The Lessor's Interest............................. 29
-----------------------------------
ARTICLE VI
Miscellaneous........................................... 30
-------------
SECTION 6.01 Payment of Transaction Expenses................................. 30
-------------------------------
SECTION 6.02 Notices......................................................... 30
-------
SECTION 6.03 Survival;Entire Agreement....................................... 30
-------------------------
SECTION 6.04 Holders of Notes................................................ 31
----------------
SECTION 6.05 Amendments and Waivers.......................................... 31
----------------------
SECTION 6.06 Governing Law; Consent to Jurisdiction, Etc..................... 31
-------------------------------------------
SECTION 6.07 Non-Recourse.................................................... 32
------------
SECTION 6.08 Invalidity of Provisions........................................ 32
------------------------
SECTION 6.09 Counterparts.................................................... 32
------------
SECTION 6.10. No Reliance..................................................... 32
-----------
SECTION 6.11. Confidentiality................................................. 32
---------------
SECTION 6.12. Interpretation.................................................. 33
--------------
</TABLE>
ii
<PAGE>
FIRST AMENDMENT AND RESTATEMENT, dated as of June 20, 1997, to the
PARTICIPATION AGREEMENT (the "Original Participation Agreement"), dated as of
December 15, 1994, among SMART & FINAL INC., a Delaware corporation (the
"Lessee"), SMART & FINAL STORES CORPORATION, a California corporation, and PORT
STOCKTON FOOD DISTRIBUTORS, INC., a California corporation (each a "Permitted
Sublessee" and together, the "Permitted Sublessees"), FLEET NATIONAL BANK (as
successor to SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION), a national banking
association, not in its individual capacity (except as expressly stated herein)
but solely as the Owner Trustee under the Trust Agreement (the "Lessor"), CREDIT
LYONNAIS LOS ANGELES BRANCH, a branch duly licensed under the laws of the Cayman
Islands of a banking corporation organized and existing under the laws of the
Republic of France; BANK LEUMI LE-ISRAEL, B.M., a banking corporation organized
and existing under the laws of Israel, The FUJI BANK, LIMITED, LOS ANGELES
AGENCY, an agency duly licensed under the laws of The State of California of a
banking corporation organized and existing under the laws of Japan; THE
INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY, an agency duly licensed
under the laws of The State of California of a banking corporation organized and
existing under the laws of Japan; and VIA BANQUE, a banking corporation
organized and existing under the laws of the Republic of France (each of the
foregoing holding Series A Notes, being in such capacity a "Series A Lender";
and each of the foregoing holding Series B Notes, being in such capacity a
"Series B Lender"); CREDIT LYONNAIS LEASING CORP., as the Equity Participant
under the Trust Agreement (the "Equity Participant") and CREDIT LYONNAIS NEW
YORK BRANCH, a branch duly licensed under the laws of New York of a banking
corporation organized and existing under the laws of the Republic of France, as
agent for the Lenders (the "Agent"). Capitalized term used herein and not
otherwise defined herein shall have the respective meanings assigned thereto in
the Definition Schedule attached hereto as Exhibit A.
PRELIMINARY STATEMENTS
As of the date hereof, all of the Advances contemplated under the Original
Participation Agreement have been fully funded.
On the date hereof, the additional financial institutions signing below are
becoming Series A and Series B Lenders; First Hawaiian Bank is ceasing to be a
Series A Lender and a Series B Lender; and Credit Lyonnais Los Angeles Branch is
reducing its proportionate share of the facility in order to accommodate such
additional financial institutions. Bank Leumi Le-Israel, which became a party
to the Original Participation Agreement pursuant to an assignment and
assumption, is continuing its participation as a Series A Lender and a Series B
Lender.
In connection with the events referred to in the preceding two paragraphs,
the parties hereto are amending and restating the Original Participation
Agreement (and certain of the other documentation entered into in connection
therewith).
The parties hereto hereby agree that the Original Participation Agreement
is amended and restated to read in its entirety as follows:
1
<PAGE>
ARTICLE I
Commitments
-----------
SECTION 1.01 Delivery and Purchase of Leased Premises; Construction of
---------------------------------------------------------
Improvements. Subject to the terms and conditions hereof and in reliance upon
- ------------
the representations and warranties of the other parties hereto set forth herein
and in the other Transaction Documents, the Lessor has purchased each Leased
Premises on the related Closing Date therefor for an amount equal to the
Purchase Price thereof and on each Advance Date the Lessor made an Advance to
the Lessee in an amount equal to the Lessor's Share of Improvement Cost
reimbursable on such Advance Date.
SECTION 1.02 Participation by the Equity Participant. Subject to the
---------------------------------------
terms and conditions hereof and in reliance upon the representations and
warranties of the other parties hereto as set forth herein and in the other
Transaction Documents, the Equity Participant (a) made on each Closing Date and
Advance Date an equity contribution to the Lessor equal to 3% of the Purchase
Price or Advance, as the case may be, which is payable by the Lessor on such
date; (b) on each Closing Date and Advance Date, executed and delivered the
Transaction Documents to which it is a party and which it has not theretofore
executed and delivered.
SECTION 1.03 Participation by the Lenders. Subject to the terms and
----------------------------
conditions hereof and in reliance upon the representations and warranties of the
other parties hereto set forth herein and in the other Transaction Documents,
each Lender (including for this reference their respective predecessors) (a) on
each Closing Date and Advance Date, lent an amount to the Lessor (not exceeding
such Lender's maximum commitment, as set forth in Schedule I attached hereto),
equal to, in the case of the Series A Lender, such Lender's pro rata share of
84.28% of the Purchase Price or Advance, as the case may be, and, in the case of
the Series B Lender, such Lender's pro rata share of 12.72% of such Purchase
Price or Advance, as the case may be, in each case which is payable by Lessor on
such date and (b) on the each Closing Date and Advance Date executed and
delivered the Transaction Documents to which it is a party and which it has not
theretofore executed and delivered.
SECTION 1.04 The Lessee's Responsibilities. Subject to the terms and
-----------------------------
conditions hereof and in reliance upon the representations and warranties of the
Lessor, the Lenders and the Equity Participant set forth herein, the Lessee (a)
on each Closing Date, transferred, or caused the transfer of, title to one or
more Leased Premises to the Lessor against payment of the Property Cost thereof
and subject each such Leased Premises to the Lease Agreement by the execution
and delivery of a Lease Supplement for such Leased Premises, (b) on each Advance
Date, to evidence the Advance made on such date executed and delivered a Lease
Supplement for such Advance, and (c) on each Closing Date and Advance Date,
executed and delivered the Transaction Documents to which it is a party and
which it has not theretofore executed and delivered.
SECTION 1.05 The Equity Participant's Instructions to the Lessor.
---------------------------------------------------
The Equity Participant agrees that upon its payment of its equity investment to
the Lessor in accordance with the terms of Section 1.02 hereof, and upon the
verbal authorization of the
2
<PAGE>
Equity Participant, the Lessor was authorized without further act, authorization
and direction by the Equity Participant to the Lessor:
(a) to the extent not previously accomplished by a prior authorization, to
authorize a representative or representatives of the Lessor (who shall be an
employee or employees, or agent or agents, of the Lessee) to accept the
conveyance of each of the Leased Premises on the Closing Date thereof;
(b) to accept title to each of the Leased Premises from the vendor
thereof;
(c) to execute a Lease Supplement for each of the Leased Premises and for
each Advance;
(d) to pay an amount equal to the Purchase Price for each Leased Property
to the vendor thereof as the purchase price therefor and the other Persons
entitled thereto on the related Closing Date and to pay to the Lessee an amount
equal to the Lessor's Share of Improvement Cost to the Lessee under the Agency
Agreement on each Advance Date; and
(e) to execute and deliver all such other instruments, documents or
certificates and take all such actions as are required to be executed or
delivered or taken by the Lessor on or prior to such Closing Date pursuant to
any Transaction Document.
SECTION 1.06 Fees Payable by Lessee. The Lessee shall pay to the
----------------------
Agent the Administration Fee on the initial Closing Date and each December 1
thereafter occurring during the Lease Term. The Lessee shall pay to the Lenders
and the Equity Participant a commitment fee for the period beginning on the
initial Closing Date and ending on May 31, 1997, equal to 0.20% per annum of the
excess from time to time of $30,000,000 over the Outstanding Property Cost.
Such commitment fee shall be paid to the Agent, quarterly in arrears on each
Payment Date, for distribution to the parties entitled thereto.
SECTION 1.07 Closing. Each closing (a "Closing") of (a) the
-------
acquisition of one or more Leased Premises by the Lessor, (b) the payment of an
Advance by the Lessor to the Lessee and, (c) in the case of the initial closing,
the execution and delivery of the Transaction Documents and the payment to the
Agent of the Arrangement Fee, took place at the offices of Orrick, Herrington &
Sutcliffe,, New York, New York. All Advances being fully funded, no further
Advances are available under any of the Transaction Documents.
ARTICLE II
Representations And Warranties
------------------------------
SECTION 2.01 Representations and Warranties of the Lessee and the
----------------------------------------------------
Permitted Sublessees. Each of the Lessee and the Permitted Sublessees represents
- --------------------
and warrants to the Trust Company, the Lessor, the Lenders, the Equity
Participant and the Agent that:
3
<PAGE>
(a) The Lessees and the Permitted Sublessees are each a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and is qualified to do business in, and is in good standing
in, each state or other jurisdiction in which its ownership or leasing of
properties or the conduct of its business makes such qualification necessary.
(b) Each of the Lessee and the Permitted Sublessees has the corporate
power and authority to execute and perform each Transaction Document to which it
is a party and to enter into and perform the transactions contemplated by the
Transaction Documents, and has duly and legally authorized the transactions
contemplated by the Transaction Documents and the execution, delivery,
compliance with and performance of each such Transaction Document.
(c) Neither the execution and delivery of any Transaction Document by the
Lessee or the Permitted Sublessees, nor consummation by the Lessee or the
Permitted Sublessees of the transactions contemplated thereby, nor performance
of or compliance with the terms and conditions thereof by the Lessee or the
Permitted Sublessees, including the transfer of an interest in the Leased
Premises, the subjecting of the Leased Premises to the Lease Agreement and the
sublease of the Leased Premises to the Permitted Sublessees:
(i) will be in contravention of, or will result in a violation or
breach of, any of the terms of the Lessee's or the Permitted Sublessees'
certificate or articles of incorporation or by-laws, or
(ii) will violate or constitute a breach of any provision of any
existing applicable law, rule, regulation, license, judgment, order or
decree of any government, governmental body or court having jurisdiction
over the Lessee or the Permitted Sublessees or any of their activities or
properties , or any indenture, agreement or other instrument to which the
Lessee or the Permitted Sublessees are a party, or by or under which the
Lessee or any of the Lessee's property is bound, or be in conflict with,
result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or instrument, or
result in the creation or imposition of any Lien upon any of the Lessee's
or the Permitted Sublessees' property or assets except as contemplated in
the Transaction Documents.
(d) Each Transaction Document (other than the Lease Supplements, Sublease
Supplements and the Memoranda of Lease) to which the Lessee and either or both
the Permitted Sublessees is a party has been executed by the duly authorized
officer or officers of the Lessee and the Permitted Sublessees and delivered to
the Lessor and constitutes, and when executed by the duly authorized officer or
officers of the Lessee and the Permitted Sublessees and delivered to the Lessor,
and each Lease Supplement, Sublease Supplement and Memorandum of Lease will
constitute, the legal, valid and binding obligations of the Lessee or the
Permitted Sublessees, as the case may be, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of equity limiting the
availability of equitable remedies.
4
<PAGE>
(e) No Governmental Action is or will be necessary in connection with the
execution and delivery of any Transaction Document by the Lessee or the
Permitted Sublessees, nor the payment and performance by the Lessee or the
Permitted Sublessees of any or all of their respective obligations thereunder,
nor the transfer of any Leased Premises to the Lessor for the purpose of
subjecting the same to the Lease Agreement.
(f) No mortgage, deed of trust or other Lien which now covers or affects
any property or interest therein of the Lessee or the Permitted Sublessees, now
attaches to the Leased Premises or part thereof or the proceeds thereof, or any
Transaction Document, in any manner which adversely affects the Lessor's or
Equity Participant's interest therein or Agent's security interest therein.
(g) There is no litigation or other proceeding now pending or, to the
Lessee's or the Permitted Sublessee' knowledge, threatened, against or affecting
the Lessee or the Permitted Sublessees at law or in equity before any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality or arbitrator which if adversely determined would
affect or impair the interest of the Lessor or the Equity Participant in the
Leased Premises or the security interest of the Agent therein, or which would
have (a) a Material Adverse Effect on the business, operations, condition
(financial or otherwise) or prospects of the Lessee, the Permitted Sublessees
and their consolidated subsidiaries, taken as a whole, (b) a Material Adverse
Effect on the ability of the Lessee or the Permitted Sublessees to perform or
comply with any of the terms and conditions of any Transaction Document, or (c)
a Material Adverse Effect on the legality, validity, bringing effect
enforceability or admissibility into evidence of any Transaction Document, or
the ability of the Lessor or any Lender to enforce any rights or remedies under
or in connection with any Transaction Document.
(h) (1) The audited consolidated balance sheet of the Lessee and its
Consolidated Subsidiaries as of January 2, 1994 and the related audited
consolidated profit and loss statement for the fiscal year, reported on by
Arthur Andersen & Co. (as contained in the Lessee's annual report for the year
ended January 2, 1994), copies of which have been delivered to the Lessor, each
Lender the Equity Participant and the Agent, fairly present the consolidated
financial condition of the Lessee as of such dates and the profits and loss for
such years.
(2) The consolidated unaudited balance sheet of the Lessee and its
Consolidated Subsidiaries as of October 9, 1994 and the related
consolidated profit and loss statement for the period since the beginning
of such fiscal year, a copy of which has been delivered to the Lessor and
each Lender, the Equity Participant and the Agent (subject to year-end
accounting and actuarial adjustments) fairly present the consolidated
financial condition of the Lessee as of such date and the profit and loss
for such period.
(3) Since January 2, 1994, there has been no material adverse change
in the business, financial position, results of operations or prospects of
the Lessee, the Permitted Sublessees and their consolidated subsidiaries
not reflected in the financial statements of the Lessee referred to in
clause (2) of this Section 2.01(h).
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(i) The Lessee and the Permitted Sublessees will obtain and maintain in
full force and effect all licenses, certificates and permits (including any
applicable environmental permits) from such governmental and other authorities
necessary to (x) perform the Work or any other permitted alterations, repairs,
rebuilding or restoration of Leased Premises prior to commencement thereof and
(y) use and occupy any Leased Premises in accordance with the provisions of the
Lease Agreement upon completion of the Work or other activity specified in
clause (x) with respect to such Leased Premise.
(j) The execution and delivery of each of the Transaction Documents and
the consummation of the transactions contemplated hereby will not involve any
transaction which is subject to the prohibitions of Section 406 of ERISA or in
connection with a tax which could be imposed pursuant to Section 4975 of the
Code by virtue of the actions or status of the Lessee or any Sublessee. The
representation by the Lessee and the Permitted Sublessees in the preceding
sentence are made in reliance upon and subject to the accuracy of the
representations of the Equity Participant and each Lender in Sections 2.02(f)
and 2.03(f) hereof as to the source of funds to be used by them to acquire their
interest in the Leased Premises or to purchase the Notes, as the case may be.
(k) Except for the filing and recording of the Mortgage and Assignment
Agreements with respect to the Leased Premises, no further action, including any
Governmental Action or any filing or recording of any document, is necessary or
advisable in order to (1) establish the Lessor's ownership of the Leased
Premises and the Equity Participant's and each Lender's interest in the Leased
Premises, as against the Lessee or third Persons in any applicable jurisdiction
or (2) permit the Trust Company or the Lessor to qualify to do business in the
state in which any Leased Premises is located, to permit the Trust Company or
the Lessor to execute and deliver any Transaction Document or to perform any of
its duties thereunder, or to own an interest in any Leased Premises.
(l) There has been no material damage to the Leased Premises, nor are any
condemnation or eminent domain proceedings pending, or to Lessee's and the
Permitted Sublessees' actual knowledge, threatened with respect thereto.
(m) None of the Lessee and the Permitted Sublessees are an "investment
company" or a Person directly or indirectly "controlled" by or acting on behalf
of an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(n) The Lessee and the Permitted Sublessees have not offered any interest
in the Leased Premises, the Lease Agreement, the Notes, or the Lessee
Obligations, or any other similar security for sale to, or solicited offers to
buy any thereof from, or otherwise approached or negotiated in respect thereto
with, any prospective purchaser, other than the Lessor and not more than 15
other institutional investors, each of which was offered an interest in the
transactions contemplated by the Transaction Documents, the Lessee Obligations
or the Leased Premises at a private sale for investment and each of which the
Lessee and the Permitted Sublessees had grounds to believe and did believe, has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of such an investment.
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(o) No written statement delivered to the Lessor, any Lender, the Equity
Participant or the Agent in connection with the negotiation of the transactions
contemplated in this Participation Agreement or any other Transaction Document
to which the Lessee or the Permitted Sublessees is or is to be a party contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained therein or herein not misleading in any material
respect. There is no fact peculiar to the Lessee and the Permitted Sublessees
which is not disclosed in writing which materially and adversely affects the
Lessee's or Permitted Sublessees' ability, as the case maybe, to perform under
this Participation Agreement or any other Transaction Document to which the
Lessee is a party.
(p) No Event of Default or Unmatured Event of Default by the Lessee or the
Permitted Sublessees has occurred and is continuing under this Participation
Agreement or any other Transaction Document to which any of the Lessee or the
Permitted Sublessees is a party.
(q) All insurance required by Section 10 of the Lease Agreement is in
effect and all premiums now due and payable in respect of such insurance have
been paid.
(r) The Lessee and the Permitted Sublessees are not delinquent in the
payment of any and all license, documentation, recording and registration fees,
and all taxes including, without limitation, all net income, gross income,
gross receipts, sales, use, franchise, personal property (tangible and
intangible), real estate and stamp taxes), levies, duties, assessments, fees,
charges, governmental charges and withholdings of any nature whatsoever, whether
or not presently in existence, imposed by any governmental or governmental body
or any related interest or penalty (except for taxes being contested in good
faith and by appropriate proceedings) and has not failed to file any required
tax return.
(s) Each of the following statements is true: Neither a Reportable Event
nor an "accumulated funding deficiency" (within the meaning of Section 412 of
the Code or Section 302 of ERISA) has occurred during the five-year period prior
to the date on which this representation is made or deemed made with respect to
any Plan, and each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. No termination of a Single
Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has
arisen, during such five-year period. The present value of all accrued benefits
under each Single Employer Plan (based on those assumptions used to fund such
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits. Neither the Lessee, the Permitted
Sublessees nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan, and neither the Lessee, the Permitted
Sublessees nor any Commonly Controlled Entity would become subject to any
liability under ERISA if the Lessee, the Permitted Sublessees or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. To the best knowledge of the Lessee and
the Permitted Sublessees, no such Multiemployer Plan is in reorganization within
the meaning of Section 4241 of ERISA or insolvent within the meaning of Section
4245 of ERISA. The present value (determined using actuarial and other
assumptions which are reasonable in respect of the benefits provided and the
employees participating) of the liability of the Lessee, the
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Permitted Sublessees and each Commonly Controlled Entity for post retirement
benefits to be provided to their current and former employees under Plans which
are welfare benefit plans (as defined in Section 3(1) of ERISA) does not, in the
aggregate, exceed the assets under all such Plans allocable to such benefits by
an amount which would result in a liability having a Material Adverse Effect.
(t) The facilities and properties owned, leased, or operated by the
Lessee, the Permitted Sublessees or any of their Subsidiaries, including the
Leased Premises (the "Properties") do not contain, and have not previously
contained, any Hazardous Materials in amounts or concentrations which (i)
constitute or constituted a violation of, or (ii) could give rise to any
material liability under, any Environmental Laws.
(u) The Properties, all operations at the Properties, and the business
operated by the Lessee, the Permitted Sublessees or any of their Subsidiaries
(the "Business") are and have been in compliance in all material respects with
all applicable Environmental Laws.
(v) Neither the Lessee, the Permitted Sublessees nor any of their
Subsidiaries has received any notice of violation, alleged violation, non-
compliance, liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties or their
business operations nor does the Lessee or the Permitted Sublessees, as the case
may be, have knowledge that any such notice will be received or is being
threatened.
(w) Hazardous Materials have not been transported or disposed of from the
Properties in violation of, or in a manner or to a location which could give
rise to any material liability under, any Environmental Law, nor have any
Hazardous Materials been generated, treated, stored or disposed of at, on or
under any of the Properties in violation of, or in a manner that could give rise
to any material liability under, any applicable Environmental Law.
(x) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Lessee or the Permitted Sublessees,
threatened, under any Environmental Law to which the Lessee, the Permitted
Sublessees or any of their Subsidiaries is or will be named as a party with
respect to the Properties or the their business operations nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or their business operations.
(y) There has been no release or threat of release of Hazardous Materials
at or from the Properties, or arising from or related to the operations of the
Lessee, the Permitted Sublessees or any of their Subsidiaries in connection with
the Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that would give rise to any material liability under
Environmental Laws.
(z) Each of the representations and warranties set forth in subsections
2.01(u) through (z) above is true and correct in all material respects with
respect to each facility and property formerly owned, leased or operated by the
Lessee, the Permitted Sublessees or any Subsidiary or former Subsidiary.
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SECTION 2.02 Representations and Warranties of the Equity
--------------------------------------------
Participant. The Equity Participant represents and warrants to each party hereto
- -----------
that:
(a) The Equity Participant is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has corporate power and authority to own its property and to
transact the business in which it is engaged or presently proposes to engage.
(b) The Equity Participant has corporate power and authority to execute,
deliver, perform, and take all action contemplated by, each Transaction Document
to which it is a party, and all such action has been duly and validly authorized
by all necessary corporate proceedings on its part.
(c) This Participation Agreement has been duly and validly executed and
delivered by the Equity Participant and this Participation Agreement
constitutes, and each other Transaction Document to which the Equity Participant
is a party when executed and delivered by the Equity Participant will
constitute, the legal, valid and binding obligation of the Equity Participant,
enforceable against the Equity Participant in accordance with its terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors'
rights or by general principles of equity limiting the availability of equitable
remedies.
(d) No Governmental Action is or will be necessary in connection with
execution and delivery of this Participation Agreement or any other Transaction
Document by the Equity Participant, consummation by the Equity Participant of
the transactions contemplated hereby, or performance of or compliance with the
terms and conditions hereof or thereof by the Equity Participant.
(e) Neither the execution and delivery of this Participation Agreement or
any other Transaction Document by the Equity Participant, nor consummation by
the Equity Participant of the transactions contemplated hereby, nor performance
of or compliance with the terms and conditions hereof or thereof by the Equity
Participant does or will:
(i) violate or conflict with any applicable law, rule, regulation,
license, judgment, order or decree of any government or governmental body
or court having jurisdiction over the Equity Participant, or
(ii) violate, conflict with or result in a breach of any term or
condition of, or constitute a default under, or result in (or give rise to
any right, contingent or otherwise, of any Person to cause) any
termination, cancellation, prepayment or acceleration of performance of, or
result in the creation or imposition of (or give rise to any obligation,
contingent or otherwise, to create or impose) any Lien upon any property of
the Equity Participant pursuant to, or otherwise result in (or give rise to
any right, contingent or otherwise, of any Person to cause) any change in
any right, power, privilege, duty or obligation of the Equity Participant
under or in connection with,
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(A) the articles of incorporation or by-laws (or other constituent
documents) of the Equity Participant, or
(B) any other agreement or instrument or arrangement to which the
Equity Participant is a party or by which it or any of its properties (now
owned or hereafter acquired) may be subject or bound.
(f) No part of the funds used by such Equity Participant for the
contribution pursuant to Section 1.02 hereof constitutes, directly or
indirectly, assets in which any employee benefit plan (as defined in Section 3
of ERISA) or its related trust has any interest. For the purposes of this
paragraph "assets" means "plan assets" as defined in Department of Labor
Regulations Section 2510.3-101.
SECTION 2.03 Representations and Warranties of the Lenders. Each
---------------------------------------------
Lender represents and warrants to each party hereto:
(a) Such Lender is a bank duly organized, validly existing, and in good
standing under the laws of its organization and has the corporate power and
authority to own its property and to transact the business in which it is
engaged or presently proposes to engage.
(b) Such Lender has corporate power and authority to execute, deliver,
perform, and take all actions contemplated by, each Transaction Document to
which it is a party, and all such action has been duly and validly authorized by
all necessary corporate proceedings on its part.
(c) This Participation Agreement has been duly and validly executed and
delivered by such Lender and this Participation Agreement constitutes, and each
other Transaction Document to which such Lender is a party when executed and
delivered by such Lender will constitute, the legal, valid and binding
obligation of such Lender enforceable against such Lender in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of equity limiting the
availability of equitable remedies.
(d) No Governmental Action is or will be necessary in connection with the
execution and delivery of this Participation Agreement or any other Transaction
Document by such Lender, consummation by such Lender of the transactions
contemplated hereby, or performance of or compliance with the terms and
conditions hereof or thereof by such Lender.
(e) Neither the execution and delivery of any Transaction Document by such
Lender, nor the consummation by such Lender of the transactions herein or
therein contemplated, nor performance of or compliance with the terms and
conditions hereof or thereof by such Lender does or will:
(i) violate or conflict with any applicable law, rule, regulation,
license, judgment, order or decree of any government or governmental body
or court having jurisdiction over the such Lender; or
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(ii) violate, conflict with or result in a breach of any term or
condition of, or constitute a default under, or result in (or give rise to
any right, contingent or otherwise, of any Person to cause) any
termination, cancellation, prepayment or acceleration of performance of, or
result in the creation or imposition of (or give rise to any obligation,
contingent or otherwise, to create or impose) any Lien upon any property of
such Lender pursuant to, or otherwise result in (or give rise to any right,
contingent or otherwise, of any Person to cause) any change in any right,
power, privilege, duty or obligation of such Lender under or in connection
with,
(A) the articles of incorporation or by-laws (or other
constituent documents) of such Lender, or
(B) any agreement or instrument or arrangement to which such
Lender is a party or by which it or any of its properties (now owned
or hereafter acquired) may be subject or bound.
(f) No part of the funds used by such Lender to pay the purchase price of
the Notes purchased by it pursuant to Section 1.03 hereof constitutes, directly
or indirectly, assets in which any employee benefit plan (as defined in Section
3 of ERISA) or its related trust has any interest. For the purposes of this
paragraph "assets" means "plan assets" as defined in Department of Labor
Regulations Section 2510.3-101.
SECTION 2.04 Representations and Warranties of Trust Company. The Trust
-----------------------------------------------
Company, in its individual capacity, represents and warrants to each party
hereto that:
(a) The Trust Company is a national banking association duly organized,
validly existing and in good standing under the laws of the United States and
has the corporate power and authority to own its property and to transact the
business in which it is engaged or presently proposes to engage.
(b) The Trust Company or the Lessor, as the case may be, has the corporate
power and authority to execute, deliver, perform, and take all action
contemplated by, each Transaction Document to which it is a party, and all such
action has been duly and validly authorized by all necessary corporate
proceedings on its part.
(c) Each Transaction Document has been duly and validly executed and
delivered by the Trust Company or the Lessor, as the case may be, and this
Participation Agreement and the Trust Agreement constitute, and each other
Transaction Document to which the Trust Company is a party when executed and
delivered by the Trust Company, will constitute, the legal, valid and binding
obligation of the Trust Company enforceable against the Trust Company in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights or by general principles of equity limiting
the availability of equitable remedies.
(d) No Governmental Action under any law of the State of Connecticut or
any United States federal law regulating the banking, trust or fiduciary powers
of the Trust Company, is or
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will be necessary in connection with execution and delivery of this
Participation Agreement or any other Transaction Document by the Trust Company
or the Lessor, as the case may be, consummation by the Trust Company or the
Lessor, as the case may be, of the transactions contemplated hereby, or
performance of or compliance with the terms and conditions hereof or thereof by
the Trust Company or the Lessor, as the case may be.
(e) Neither the execution and delivery of this Participation Agreement or
any other Transaction Document by the Trust Company or the Lessor, as the case
may be, nor consummation by the Lessor of the transactions contemplated hereby,
nor performance of or compliance with the terms and conditions hereof or thereof
by the Trust Company or the Lessor, as the case may be, does or will:
(i) violate or conflict with any law of the State of Connecticut or
any federal law of the United States regulating the banking, trust or
fiduciary powers of the Trust Company, or
(ii) violate, conflict with or result in a breach of any term or
condition of, or constitute a default under, or result in (or give rise to
any right, contingent or otherwise, of any Person to cause) any
termination, cancellation, prepayment or acceleration of performance of, or
result in the creation or imposition of (or give rise to any obligation,
contingent or otherwise, to create or impose) any Lien upon any property of
the Trust Company or the Lessor pursuant to, or otherwise result in (or
give rise to any right, contingent or otherwise, of any Person to cause)
any change in any right, power, privilege, duty or obligation of the Trust
Company or the Lessor under or in connection with,
(A) the articles of association or by-laws (or other constituent
documents) of the Trust Company, or
(B) any other agreement or instrument or arrangement to which
the Trust Company or the Lessor is a party or by which it or any of
its properties (now owned or hereafter acquired) may be subject or
bound.
(f) The Leased Premises are not, and upon the acquisition thereof by the
Lessor will not be, subject to any Liens or claims arising out of any act or
omission by the Trust Company or the Lessor not related to the transactions
contemplated hereby.
ARTICLE III
Conditions
----------
SECTION 3.01 Conditions of the Lenders, the Equity Participant and
-----------------------------------------------------
the Lessor. All Advances under the Facility have been made. The obligation of
- ----------
each Lender to advance funds with respect to the Notes and the Equity
Participant to make an equity contribution on each Closing Date or Advance Date
pursuant to Sections 1.02 and 1.03 hereof
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and of the Lessor to acquire an interest in the Leased Premises on each Closing
Date pursuant to Section 1.01 hereof or to make and Advance, was subject to
fulfillment on or prior to such Closing Date or Advance Date, as the case may
be, of the following conditions:
(a) (i) The representations and warranties of each of the Lessee and the
Permitted Sublessees set forth in Section 2.01 hereof shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects on and as of the date of delivery of each Lease Supplement and
Sublease Supplement; and (ii) on such delivery date no Event of Default or
Unmatured Event of Default hereunder or under the Lease Agreement or the Agency
Agreement shall have occurred and be continuing.
(b) Since January 2, 1994, there shall not have occurred any material
adverse change in the financial condition of the Lessee, the Permitted
Sublessees and their consolidated subsidiaries which would materially adversely
affect the ability of the Lessee and the Permitted Sublessees to pay or perform
any the Lessee Obligations.
(c) The following Transaction Documents shall have been executed and
delivered by the parties thereto and shall remain in full force and effect and
each Lender, the Lessor and the Equity Participant shall have received one fully
executed copy of each:
(i) this Participation Agreement;
(ii) the Lease Agreement and the Sublease Agreements, including Lease
Supplements and Sublease Supplements relating to each Advance and the
payment of Purchase Price to the Leased Premises;
(iii) a Mortgage and Assignment Agreement relating to each of the
Leased Premises;
(iv) the Loan Agreement;
(v) the Trust Agreement; and
(vi) the Agency Agreement.
(d) On or prior to the initial Closing Date, the Lessee and the Permitted
Sublessees shall have furnished, insofar as each of them is concerned, to the
Lessor, each Lender and the Equity Participant:
(e) A copy of the resolutions of the board of directors of the Lessee and
the Permitted Sublessees, certified as of the Closing Date by the secretary or
an assistant secretary of the Lessee or the Permitted Sublessees, as the case
maybe, duly authorizing the execution, delivery and performance of the
Transaction Documents to which the Lessee and the Permitted Sublessees are a
party;
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(f) A certificate of the secretary or an assistant secretary of the Lessee
and the Permitted Sublessees dated the Closing Date as to (A) its certificate or
articles of incorporation and by-laws (which shall be attached thereto) and (B)
the incumbency and signatures of the Person or Persons authorized to execute the
Transaction Documents to which the Lessee and the Permitted Sublessees are a
party on behalf of the Lessee or Permitted Sublessees, as the case may be;
(g) Certified copies of the certificate of incorporation of the Lessee and
the Permitted Sublessees; a good standing certificate of the Lessee and the
Permitted Sublessees, dated no later than five (5) days from the initial Closing
Date, from the states of Delaware, California and Florida;
(h) A favorable written opinion of counsel for the Lessee dated the
Closing Date in form and substance acceptable to the Lessor, each Lender and the
Equity Participant.
(i) on or prior the initial Closing Date each Lender shall have received
the Notes completed and duly executed as provided in the Loan Agreement.
(j) All proceedings taken in connection with the Transaction Documents and
the transactions contemplated thereby shall be satisfactory to the Lessor and
each Lender and their respective counsel, and the Lessor and each Lender shall
have been furnished with original or certified copies of such other documents
and papers and with such opinions of counsel, as it may reasonably request in
connection therewith, all in form and substance satisfactory to the Lessor, each
Lender, the Equity Participant and such counsel.
SECTION 3.02 Additional Conditions Precedent with Respect to Closing
-------------------------------------------------------
Dates for the Leased Premises. All Advances under the Facility have been made.
- -----------------------------
The obligations of each Lender to advance funds with respect to each Leased
Premises and of the Equity Participant to make an equity contribution pursuant
to Section 1.02 hereof on each Closing Date was subject to the following
additional conditions:
(a) Each Leased Premises shall be free of all Liens, other than Permitted
Liens; and the Purchase Price plus Estimated Improvement Cost of all Leased
Premises will not exceed $30,000,000.
(b) The Lessee shall have provided evidence satisfactory to the Lessor and
the Agent of compliance with Section 2.01(i) hereof.
(c) On or prior to the Closing Date related to a Leased Premises, the
Lessee shall have delivered, or cause to be delivered at the Lessee's expense:
(i) to the Lessor and the Agent, a "Phase I" environmental assessment of
such Leased Premises performed by the Environmental Consultant and, if indicated
by the results of such Phase I assessment, such additional environmental studies
or investigations as the Environmental Consultant or the Agent deem desirable
together with an initial report of the Environmental Consultant based on the
results of such environmental investigations, as well as such other
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environmental assessment data as may be required by the Agent, which in all
respects shall be satisfactory to the Agent in its sole discretion;
(ii) to the Lessor and the Agent, the Initial Construction Plans for such
Leased Premises an "as is" valuation as of the Closing Date and an "as
completed" valuation (the "Appraised Value") of such Leased Premises by the
Appraiser, which in all respects shall be satisfactory to the Agent in its sole
discretion (including an estimated cost for each of such Leased Premises of not
greater than the Appraised Value thereof), which shall be prepared in accordance
with FIRREA, assuming that all requisite permits, including without limitation a
permanent certificate of occupancy, have been issued;
(iii) to the Lessor and the Agent, a certificate from the Lessee's
insurance broker to the effect that the insurance specified in Section 10 of the
Lease Agreement with respect to the Leased Premises is in full force and effect
pursuant to insurance policies issued to the Lessee and that such policies
otherwise fulfill the requirements of such Section;
(iv) to the Lessor, a duly executed and acknowledged (1) grant deed or
warranty deed, (2) Memorandum Lease and (3) Sublease and Assignment, with
respect to such Leased Premises, in recordable form (with arrangements
satisfactory to the Agent for the recording thereof);
(v) to the Agent, on behalf of the Lenders, a duly executed and
acknowledged Mortgage and Assignment Agreement applicable to the Leased
Premises, in recordable form (with arrangements satisfactory to the Agent for
the recording thereof);
(vi) to the Lessor, an A.L.T.A. Extended Coverage Owner's Policy of Title
Insurance for such Leased Premises insuring Lessor's fee simple title in and to
such Leased Premises, subject only to such matters as are approved by the
Lessor, issued by a title insurer satisfactory to the Lessor, with such
reinsurance as is satisfactory to Lessor, with such C.L.T.A. Endorsements (or
their equivalents) as Lessor may require (each, an "Owner's Policy");
(vii) to the Agent, on behalf of the Lenders, an A.L.T.A. Extended
Coverage Construction Loan Policy of Title Insurance in the full amount of the
Estimated Improvement Cost plus the Purchase Price of such Leased Premises
insuring Lessor's fee simple title in and to such Leased Premises and that the
Agent on behalf of the Lenders, holds a first priority lien on such Leased
Premises, subject only to such matters as are approved by Lenders, issued by a
title insurer satisfactory to the Lessor, with such reinsurance as is
satisfactory to Lessor, and with C.L.T.A. Endorsements A and B, and Nos. 100,
103.7, 111.5, 111.10, 116, 116.1, 116.4, 116.7 (or their equivalents), or other
construction loan binder or endorsement as may be satisfactory to the Agent, and
such other C.L.T.A. Endorsements or their equivalents as the Agent may require,
and a tie-in endorsement pertaining to the title policies covering the other
Leased Premises (each, a "Loan Policy");
(viii) to Lessor, the Agent, and the Lenders such other deeds, quitclaim
deeds, bills of sale, security agreements, financing statements, subordination
agreements, estoppel agreements, or other materials, documents, instruments as
may be required by the Lessor, the Agent, or the Lenders in connection with the
acquisition of, or the creation, continuation, or perfection of a
15
<PAGE>
first lien on, the Leased Premises (with arrangements satisfactory to the Agent
for any requirement for filing or recording thereof); and
(ix) to the Lessor and the Agent, evidence satisfactory to the Lessor and
each Lender of the completion of the recordings and filings as may be necessary
or, in the opinion of the Lessor or any Lender, desirable or required to create
or perfect the Lessor's ownership interest in the Leased Premises.
SECTION 3.03. Additional Conditions Precedent to Advances All Advances
-------------------------------------------
under the Facility have been made. The obligation of each Lender to advance
funds with respect to the Notes and of the Equity Participant to make an equity
contribution pursuant to Sections 1.02 and 1.03 hereof on each Advance Date
pursuant hereto was subject to the conditions specified in Section 3.01 hereof
and the following additional conditions:
(a) The Lessee shall have satisfied all conditions and requirements under
the Agency Agreement for reimbursement by the Lessor of the Lessor's Share of
Improvement Cost on such Advance Date;
(b) On or prior to the final Advance Date, with respect to each of the
Leased Premises, the reissuance by the title insurer of the applicable Owner's
Policy to the Lessor in form and substance acceptable to the Lessor, together
with such additional endorsements as the Lessor may require (each, a "Final
Owner's Policy"), and the applicable Loan Policy to the Agent in form and
substance acceptable to the Agent, together with an additional C.L.T.A.
Endorsement No. 122 (or its equivalent), and such other endorsements as Agent
may require (each, a "Final Loan Policy"); and
(c) To the extent required in connection with the issuance of the [Final
Owner's Policy and] the Final Loan Policy, a survey (each, a "Survey") of the
Leased Premises which certifies to the Agent, the Lessor, the Lessee, and the
title insurer that (a) the survey is prepared in accordance with "Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys," jointly
established and adopted by ALTA and ACSM in 1992, meeting the accuracy
requirements of an Urban Survey, as defined therein and including items 1-4
(with land area shown in acres or square feet, as appropriate) 6-11 and 13 of
Table A thereof; (b) that the information shown on the survey is true and
correct as of the last revision date; (c) the property description included in
the Survey is identical to the property description attached to the applicable
Owner's Policy and Loan Policy, and all recorded easements, set-backs and other
matters of a similar nature shown on the title commitment, whether burdening or
benefitting the Land, have been correctly platted and identified on the Survey;
(d) all evidence showing use of the surveyed land (the "Land") by occupants
other than the owner or lessees specifically identified in the Owner's Policy or
the Loan Policy is noted on the Survey; (e) all streets or roads adjoining the
Land are shown and the Land has access to and from a public roadway dedicated
and currently in use as such, as shown on the survey; (f) if the Land is
composed of several parcels, all interior lines, calls and distances are
correctly and fully set forth on the survey and there are no gaps or unclosed
interior lines; and (g) all evidence of easements or rights of way benefiting
the Land on or across adjoining land are indicated on the survey.
16
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ARTICLE IIIA
CERTAIN TRANSFERS OCCURRING IN CONNECTION WITH
THE EFFECTIVE DATE;
CONDITIONS PRECEDENT TO THE EFFECTIVE DATE
SECTION 3.01A Certain Transfers Occurring in Connection with the
--------------------------------------------------
Effective Date. (a) Prior to the Effective Date, Shawmut Bank Connecticut
- ---------------
National Association changed its name to Fleet National Bank ("Fleet").
-----
(b) Immediately prior to the Effective Date (as defined below), First
Hawaiian Bank is transferring its Notes and all of its rights in the Transaction
Documents to Credit Lyonnais Los Angeles Branch ("CLLB"). Each party hereto
----
consents and agrees to such transfer.
(c) Upon the Effective Date, the following transfers will automatically
occur, and each party hereto consents and agrees to such transfers (and agrees
to execute any documentation reasonably requested to evidence such transfers or
such consent):
(i) Credit Lyonnais New York Branch is transferring to Credit
Lyonnais Leasing Corp., and Credit Lyonnais Leasing Corp. is accepting, all
of the rights and obligations of the sole Equity Participant; and
(ii) CLLB is transferring to The Fuji Bank Limited, Los Angeles
Agency ("Fuji"), and Fuji is accepting and assuming, a 17.1821306% portion
----
of the Series A Notes and a 17.1821305% portion of the Series B Notes and
of the other rights and obligations of CLLB under the Transaction
Documents; and Fuji is paying CLLB $5,000,000 in the aggregate as
consideration therefor;
(iii) CLLB is transferring to The Industrial Bank of Japan Limited,
Los Angeles Agency ("IBJ"), and IBJ is accepting and assuming, a
---
17.1821306% portion of the Series A Notes and a 17.1821305% portion of the
Series B Notes and of the other rights and obligations of CLLB under the
Transaction Documents; and IBJ is paying CLLB $5,000,000 in the aggregate
as consideration therefor; and
(iv) CLLB is transferring to Via Banque ("VIA"), and VIA is accepting
---
and assuming, a 17.1821306% portion of the Series A Notes and a 17.1821305%
portion of the Series B Notes and of the other rights and obligations of
CLLB under the Transaction Documents; and VIA is paying CLLB $5,000,000 in
the aggregate as consideration therefor
SECTION 3.02A Conditions Precedent to the Effective Date. This
------------------------------------------
Agreement shall become effective on the date (the "Effective Date") on which the
--------------
following have been accomplished:
17
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(i) this Agreement and the related amendment and restatements to the
Lease Agreement, the Agency Agreement and the Loan Agreement shall have
been executed and delivered by the parties thereto;
(ii) the Notes outstanding prior to the Effective Date shall all have
been delivered to the Agent and shall have been marked canceled,
simultaneously with the issuance of new Notes as contemplated by this
Agreement;
(iii) the assignments referred to in Section 3.01A (b) shall have been
consummated;
(iv) each Lender and the Agent shall have received an opinion from
counsel to the Lessee in substantially the form of the opinion rendered in
connection with the Original Agreement, except that references therein to
agreements shall refer to the versions thereof giving effect to this
Agreement; and
(v) each Lender and the Agent shall have received such other
documents, opinions and certificates as any Lender shall have reasonably
requested as least 5 Business Days prior to the Effective Date.
ARTICLE IV
Agreements
----------
SECTION 4.01 Basic Reporting Requirements of the Lessee and the
--------------------------------------------------
Permitted Sublessees. Each of the Lessee and the Permitted Sublessees hereby
- --------------------
covenant to the Lessor, each Lender, the Equity Participant and the Agent that
each shall furnish, insofar as each of them is concerned:
(a) As soon as available and in any event within 90 days after the end of
each fiscal year of the Lessee, an unqualified audit report certified by Arthur
Andersen & Co., or such other independent certified public accountants
reasonably acceptable to the Lessor and the Agent, prepared in accordance with
generally accepted accounting principles on a consolidated basis for the Lessee
and its Subsidiaries, including balance sheets as of the end of such period,
related profit and loss statement, statements of changes in stockholders equity,
and a statement of cash flows.
(b) As soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of the Lessee a
consolidated unaudited balance sheet as of the close of such period and a
consolidated profit and loss statement for the period from the beginning of such
fiscal year to the end of such quarter.
(c) Within three days after any Senior Financial Officer of the Lessee or
the Permitted Sublessees, as the case may be, obtains knowledge of any Event of
Default under the Lease Agreement, if such Event of Default is then continuing,
a certificate of a Senior Financial
18
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Officer of the Lessee or the Permitted Sublessees, as the case may be, setting
forth the details thereof and the action which the Lessee or the Permitted
Sublessees, as the case may be, are taking or propose to take with respect
thereto.
(d) Promptly upon the mailing thereof to the shareholders of the Lessee,
copies of all financial statements, reports and proxy statements so mailed.
(e) Promptly upon the filing thereof, (i) in addition to the annual
statement and quarterly statements referred to in clauses (a) and (b) above,
copies of all other financial statements of the Lessee and (ii) copies of all
registration statements and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents), if any, which the Lessee shall have filed with the Securities and
Exchange Commission with respect to debt securities or preferred or common stock
issued by the Lessee, as the case may be.
(f) As soon as practicable and in any event within 60 days after the close
of each of the first three fiscal quarters of each fiscal year of each of the
Lessee and the Permitted Sublessees, a certificate of a Senior Financial Officer
of the Lessee and the Permitted Sublessees, as the case may be, stating that, to
the knowledge of such officer, no Event of Default or Unmatured Event of Default
under any of the Transaction Documents has occurred and is continuing or, if any
such Event of Default or Unmatured Event of Default has occurred and is
continuing, stating the nature and period of existence thereof and the steps
which the Lessee or the Permitted Sublessees, as the case may be, is taking to
rectify the same.
(g) As soon as practicable, and in any event within 120 days after the
close of each fiscal year of the Lessee and the Permitted Sublessees, a
certificate signed on behalf of the Lessee and the Permitted Sublessees by a
Senior Financial Officer of the Lessee stating:
(i) that the Leased Premises have been kept in good order and repair
or are then being repaired in accordance with Section 9 of the Lease
Agreement; and
(ii) that the Lessee and the Permitted Sublessees have paid all taxes
to be due in respect of the Leased Premises;
Such certificate shall also cover each of the matters specified in Section
4.01(f) as to the final fiscal quarter of such fiscal year.
(h) The Lessee and the Permitted Sublessees shall also furnish to the
Lessor, each Lender, the Equity Participant and the Agent, such additional
information concerning the location, condition, use and operation of the Leased
Premises and the financial condition and operations of the Lessee and the
Permitted Sublessees as such parties may reasonably request from time to time.
SECTION 4.02 Assumption of Risk and Indemnification.
--------------------------------------
(a) The Lessee does hereby assume liability for, and does hereby agree to
indemnify, protect, save and keep harmless the Trust Company, the Lessor, the
Agent, the Equity
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Participant and each Lender and their respective successors, assigns,
representatives, directors, officers, employees, agents and servants (each an
"Indemnitee") on an after-tax basis from and against, and does hereby agree to
pay, when due, as Supplemental Rent, any and all liabilities, obligations,
losses, damages, penalties, claims, actions, suits, costs, expenses and
disbursements, including, without limitation, legal fees and expenses, of
whatsoever kind or nature, whether foreseen or unforeseen, imposed upon,
incurred by or with respect to or asserted against any Leased Premises or any
Indemnitee (other than Taxes), in any way relating to or arising out of the
entering into and performance of the Transaction Documents including without
limitation (i) design, construction, assembly, manufacture, financing,
mortgaging, ownership, titling or retitling, lease, sublease, rental, use,
installation, abandonment, dismantling, possession, operation, condition,
repair, replacement, reconstruction, sale, transfer, return or other disposition
of any Leased Premises or any part of any thereof or interest therein, including
without limitation those in any way relating to or arising out of or alleged to
arise out of (A) loss or damage to any property or death or injury to any
Person, (B) any latent or other defects whether or not discoverable by any
Indemnitee, the Lessee or the Permitted Sublessees, (C) any claim based on
strict liability in tort, or (D) any claim based upon any noncompliance with or
violation of any Environmental Laws, including without limitation all costs,
fines and penalties arising from any such violation or noncompliance, or from
the failure to report to any applicable governmental body any spills, discharges
or maintenance of Hazardous Materials, and including all costs and expenses of
clean-up and removal of spills and Hazardous Materials; or (ii) any action taken
by the Lessee or the Permitted Sublessees on behalf of the Lessor without
authority under the Transaction Documents or out of such failure to act where
silence implies acceptance, or any failure on the part of the Lessee to perform
or comply with any of the terms of any Transaction Document or breach of any
representation or warranty of the Lessee contained in any Transaction Document
or any document delivered pursuant thereto; provided, however, that nothing in
this Section 4.02 shall be construed so as to require the Lessee to indemnify
any Indemnitee for its own gross negligence or willful misconduct or as to
matters among the individual Lenders.
The Lessee shall be obligated under this Section 4.02 irrespective of
whether any Indemnitee shall also be indemnified with respect to the same matter
under any other agreement by any other Person. The Lessee shall forthwith upon
demand of any such Indemnitee reimburse such Indemnitee for all indemnified
liabilities incurred by it or shall pay and discharge such liabilities directly.
The Lessee shall be subrogated to an Indemnitee's rights in any matter with
respect to which the Lessee has actually reimbursed such Indemnitee for amounts
expended by it or has actually paid such amounts directly pursuant to this
Section 4.02. In case any action, suit or proceeding is brought against any
Indemnitee in connection with any claim indemnified against hereunder, such
Indemnitee will, promptly after receipt of notice of the commencement of such
action, suit or proceeding, notify the Lessee thereof, enclosing a copy of all
papers served upon such Indemnitee, but failure to give such notice or to
enclose such papers shall not relieve the Lessee from any liability hereunder.
If no Event of Default or Unmatured Event of Default under any of the
Transaction Documents shall have occurred and be continuing, no Indemnitee will
settle any such action, suit or proceeding without the prior written consent of
the Lessee (which will not be unreasonably withheld) unless such Indemnitee
waives its right to indemnification in respect thereof. The Lessee may, and
upon such Indemnitee's request will, at the Lessee's expense, resist and defend
such action, suit or proceeding, or cause the same to
20
<PAGE>
be resisted or defended by counsel selected by the Lessee and reasonably
satisfactory to such Indemnitee and in the event of any failure by the Lessee to
do so, the Lessee shall pay all costs and expenses (including, without
limitation, attorney's fees and expenses) incurred by such Indemnitee in
connection with such action, suit or proceeding.
(b) The Lessee agrees promptly to pay when due, and to indemnify and hold
each Indemnitee, harmless from, all license and registration fees and all taxes,
fees, levies, imposts, recording duties, charges or withholdings of any nature
whatsoever, together with any assessments, penalties, fines, additions to tax or
interest thereon (individually, a "Tax," and collectively called "Taxes"),
howsoever imposed (whether imposed upon any Indemnitee, the Leased Premises or
any part thereof or interest therein or otherwise), by any federal, state or
local government or taxing authority in the United States, upon or with respect
to, based upon or measured by:
(i) any Leased Premises or any part of any thereof or interest
therein;
(ii) the construction, acquisition, purchase, financing, mortgaging,
ownership, acceptance, rejection, delivery, leasing, subleasing, insuring,
inspection, registration, assembly, abandonment, preparation, installment,
possession, use, operation, return, presence, storage, repair, transfer of
title, modification, rebuilding, imposition of any lien, sale or other
disposition of any Leased Premises or any part of any thereof or interest
therein;
(iii) the payment of Basic Rent, Supplemental Rent (including,
without limitation, Termination Value) and other sums payable hereunder,
the rentals, receipts or earnings arising from the purchase, financing,
ownership, delivery, leasing, possession, use, operation, return, transfer
of title, sale or other disposition of any Leased Premises or any part
thereof or interest therein; or
(iv) this Participation Agreement the other Transaction Documents and
all documents or agreements executed and delivered in connection with the
purchase, improvement and leasing of the Leased Premises.
Notwithstanding the provisions of this Section 4.02(b), the Lessee shall not be
required to indemnify any Indemnitee in respect of any of the following:
(x) U.S. federal income taxes imposed on the net income of such
Indemnitee; and
(y) Taxes on or measured solely by net income (including franchise
taxes) imposed or assessed by any foreign, state or local government or
taxing authority.
The Lessee will indemnify each Indemnitee for the full amount of Taxes
(including, without limitation, any Taxes imposed by any jurisdiction on amounts
payable under this Section 4.02(b)) paid by such Indemnitee and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto.
21
<PAGE>
(c) The Lessee agrees to pay, indemnify and hold harmless the Agent,
the Lessor and each Lender (which term includes holders of Notes) under the Loan
Agreement for any additional amounts due the Agent, the Lessor or any such
Lender pursuant to the provisions of Section 2.02(f), (g) or (h) of the Loan
Agreement or pursuant to the provisions of 2.05(d) of the Loan Agreement if the
loss or expense referred to therein has resulted from the Lessee having failed
to provide advance notice of a payment under the Lease Agreement in accordance
with any applicable notice provisions therein. The Lessee agrees to pay,
indemnify and hold harmless the Equity Participant pursuant to the preceding
sentence as if the Equity Participant were a Lender.
(d) This Section 4.02 shall become and be effective and in full force
and effect from the date of this Participation Agreement and shall remain in
effect notwithstanding the expiration or other termination of the Lease Term
insofar as it relates to an event or state of facts which occurred or existed or
which is alleged to have occurred or existed prior to such expiration or
termination.
(e) If, with respect to any holder of a Note, a condition arises or
an event occurs which would, or would upon the giving of notice, result in the
payment by the Lessee of any amounts pursuant to Section 4.02(b) or (c) hereof,
such holder promptly upon becoming aware of the same, shall notify the Lessee
(with a copy to the Agent) thereof and shall take such steps as may be
reasonable to it to mitigate the effects of such condition or event including
the designation of a different office for booking of the transactions
contemplated hereby or furnishing of the proper certificates under any
applicable tax laws, tax treaties and conventions, provided that such holder
shall be under no obligation to take any step that, in its good-faith opinion,
would be disadvantageous to it or result in its incurring any additional costs
in performing its obligations hereunder.
SECTION 4.03 Certain Covenants of the Lessee and the Permitted
-------------------------------------------------
Sublessees Each of the Lessee and the Permitted Sublessees hereby covenant to
- ----------
the Lessor and each Lender that:
(a) Each of the Lessee and the Permitted Sublessees shall permit such
Persons as the Lessor or Agent may designate to examine the Lessee's or the
Permitted Sublessees', as the case may be, books and records relating to the
Leased Premises and take copies and extracts therefrom and to discuss generally
the affairs of the Lessee or the Permitted Sublessees, as the case may be, with
its officers, employees and independent accountants upon advance notice at such
times and as often as the Lessor or Agent may reasonably request. The Lessee
and the Permitted Sublessees hereby authorize such officers, employees and
independent accountants so to discuss with the Lessor or the Agent the affairs
of such Person.
(b) (I) The Lessee shall not consolidate with or merge into another Person
or sell substantially all of its assets to another Person, unless, in the case
of a merger or consolidation, after giving effect to the transaction: (i) no
Event of Default or Unmatured Event of Default hereunder and under the Lease
Agreement shall have occurred and be continuing or would occur as a result of
such transaction; and (ii) the surviving corporation shall be the Lessee.
22
<PAGE>
(II) Each Permitted Sublessee shall not consolidate or merge into another
Person or sell substantially all of its assets to another Person, or take any
action to liquidate, wind up or dissolve its corporate existence (or suffer any
liquidation or dissolution), unless (i) the Permitted Sublessee remains the
surviving entity after such transaction; (ii) the Tangible Net Worth of the
Permitted Sublessee immediately after such event is no less than (a) in the case
of Smart & Final Stores Corporation, $15 million; and (b) in the case of Port
Stockton Food Distributors, Inc., $3 million below the Tangible Net Worth of
such Permitted Sublessee immediately prior to the transaction, and (i) the
Lessee and each Permitted Sublessee shall each remain in compliance with the
covenants set forth in this Section 4.03 and no Event of Default or Unmatured
Event of Default shall have occurred and be continuing or would occur as a
result of such transaction.
(c) The Lessee and each Permitted Sublessee shall not at any time permit
the Consolidated Tangible Net Worth of Lessee at any time to be less than $100
million plus 50% of the net income earned in those fiscal quarters for which net
income is positive, and which end after January 1, 1995; provided that if the
--------
Lessee enters into a financing agreement after the date hereof containing a
similar or comparable covenant with a higher minimum, such higher minimum shall
thereafter apply for the purposes of this subsection.
(d) The Lessee and each Permitted Sublessee shall not at any time permit
the ratio of (i) the Consolidated Indebtedness of Lessee to (ii) the
Consolidated Cash Flow of Lessee at any time to exceed 4.00 to 1.00; provided
that if Lessee enters into a financing agreement after the date hereof
containing a similar or comparable covenant with a lower ratio, such lower ratio
shall thereafter apply for the purposes of this subsection.
(e) The Lessee shall ensure that, at all times, all obligations and
liabilities of the Lessee under the Lease Agreement and all obligations and
liabilities of each Permitted Sublessee under each Permitted Sublease will rank
in right of payment either pari passu or senior to all other Indebtedness of the
Lessee or such Permitted Sublessee, as the case may be.
(f) Neither the Lessee nor any of its Subsidiaries will declare or make
any Restricted Payment; provided that the Lessee and any Subsidiary may declare
--------
and distribute dividends, if no Event of Default or Unmatured Event of Default
shall have occurred and be continuing or would occur as a result of such
transaction.
(g) The Lessee shall continue to own 100% of the equity stock of each of
the Permitted Sublessees.
(h) The Lessee shall maintain the property and liability insurance
required by Section 10 of the Lease Agreement.
(i) The Lessee and the Permitted Sublessees shall keep proper books of
records and accounts in which full, true and correct entries in conformity with
U.S. generally accepted accounting principles consistently applied and all
applicable laws shall be complied with in its dealings and transactions in
relation to its business activities.
23
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(j) The Lessee, the Permitted Sublessees and their Subsidiaries each will
pay and discharge promptly when due:
(1) all taxes, assessments and governmental charges and levies imposed
upon it, its income or profits or any of its properties, before the same shall
become delinquent; and
(2) all lawful claims of materialmen, mechanics, carriers, warehousemen,
landlords and other similar Persons for labor, materials, supplies and rentals
that, if unpaid, might by law become a Lien (other than a Permitted Lien) upon
any of its property;
provided, however, that no amount due with respect to clause (a) or clause (b)
- --------
above need be paid while the same is being contested in good faith by
appropriate proceedings diligently conducted so long as (i) adequate reserves
shall have been established and maintained in accordance with generally accepted
accounting principles with respect thereto, (ii) title of the Lessee or any
Subsidiary, as the case may be, to the particular property shall not be divested
thereby, and (iii) the right of the Lessee or such Subsidiary to use the
particular property shall not be materially adversely affected thereby. The
Lessee and its Subsidiaries each will file within the period prescribed by
applicable law and regulations (including any extensions legally provided for
and validly obtained) all federal, state and local tax returns and all other tax
reports as required by applicable law.
(k) The Lessee and the Permitted Sublessees shall:
(1) comply with, and undertake all efforts to cause compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply with and maintain, and undertake all efforts to cause all
tenants and subtenants to obtain and comply with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws.
(2) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all
lawful orders and directives of all governmental authorities regarding
Environmental Laws.
(3) defend, indemnify and hold harmless each Indemnitee from and
against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, known
or unknown, contingent or otherwise, arising out of, or in any way relating
to the asserted or established violation of, noncompliance with or
liability under, any Environmental Law applicable to the operations
(including, without limitation, disposal activities) of the Lessee, the
Permitted Sublessees or any of their Subsidiaries or any property owned or
leased at any time by the Lessee, the Permitted Sublessees or any of its
Subsidiaries, or any orders, requirements or demands of governmental
authorities related to such operation or property, including, without
limitation attorney's and consultant's fees, investigation and laboratory
fees, response costs, court costs and litigation expenses, except to the
extent that any of the foregoing are found by a final and nonappealable
decision of a court of
24
<PAGE>
competent jurisdiction to have resulted from the gross negligence or
willful misconduct of the party seeking indemnification therefor. The
agreements in this paragraph shall survive repayment of the Notes, the
Certificates and the payment of all other obligations, and are in addition
to, and not in limitation of, Section 4.02(a) hereof.
(l) The Lessee shall promptly give notice to the Lessor and the Agent of:
(1) any (i) default or event of default under any contractual obligation
of the Lessee or any of its Subsidiaries or (ii) litigation, investigation or
proceeding which may exist at any time between the Lessee or any of its
Subsidiaries and any Governmental Authority, which in either case, if not cured
or if adversely determined, as the case may be, would have a Material Adverse
Effect;
(2) any litigation or proceeding affecting the Lessee or any of its
Subsidiaries in which the amount involved is $5,000,000 or more and not covered
by insurance;
(3) the following events, as soon as possible and in any event within 15
days after the Lessee knows or has reason to know thereof: (i) the occurrence
or expected occurrence of any Reportable Event with respect to any Plan, a
failure to make any required contribution to a Plan, the creation of any Lien in
favor of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution
of proceedings or the taking of any other action by the PBGC or the Lessee or
any Commonly Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan;
(4) any development or event which would have a Material Adverse Effect;
and
(5) the following events, as soon as possible and in any event within 15
days after the Lessee knows or has reason to know thereof: (i) any condition,
circumstance, occurrence or event that would result in a material liability
under Environmental Laws or would result in the imposition of any Lien or other
restriction on the title, ownership or transferability of any Property; and (ii)
any proposed action to be taken by the Lessee or any Subsidiary that would
subject the Lessee or any Subsidiary to any material additional or different
requirements or liabilities under Environmental Law.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Senior Financial Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto.
SECTION 4.04 Acknowledgment of Notice of Assignment. The Lessee and
--------------------------------------
each Permitted Sublessee acknowledges (a) notice of and recognizes the
contemporaneous and future assignments of the Lease Agreement and the Subsidiary
Subleases and all Basic Rent, Supplemental Rent and other amounts payable
thereunder (except for the Excluded Amounts), due and to become due thereunder
to the Lenders pursuant to the Mortgage and Assignment Agreements, (b) that with
respect to each Leased Premises, the Lessor on the related Closing Date will
grant a security interest (i) in the Lease Agreement, the Subsidiary Subleases
and all
25
<PAGE>
Basic Rent, Supplemental Rent and other amounts payable thereunder (except for
the Excluded Amounts) due and to become due thereunder in respect of such Leased
Premises and (ii) all its right title and interest in such Leased Premises, to
the Lenders and the Equity Participant pursuant to a Mortgage and Assignment
Agreement, and (c) receipt of an executed copy of the Loan Agreement and the
form of Mortgage and Assignment Agreement.
SECTION 4.05 Implementation of Assignment. As an inducement to the
----------------------------
Lenders and the Equity Participant to accept such assignment and to finance the
Leased Premises, the Lessee, each Permitted Sublessee and the Lessor hereby
agree:
(a) That the Basic Rent and all Supplemental Rent (other than the Excluded
Amounts) payable by the Lessee shall be paid directly to Agent or (with respect
to Supplemental Rent) upon its written order until the indebtedness evidenced by
the Notes shall have been discharged.
(b) No consent of the Lessee, the Permitted Sublessees or the Lessor is
required for any assignment or other transfer by Agent of its rights,
obligations or interests arising under the Loan Agreement, this Agreement and
the Mortgage and Assignment Agreements (1) in connection with a transfer of all
such rights, obligations and interests (other than rights to indemnification
relating to events or conditions occurring or existing prior to such transfer)
to a replacement agent under the Loan Agreement (including a successor by merger
or consolidation to Credit Lyonnais New York Branch), or (2) in connection with
the enforcement by the Agent of remedies under the Loan Agreement and the
Mortgage and Assignment Agreements, provided that any assignment or transfer
under clause (1) shall be contingent upon the assignee or transferee agreeing in
writing with the Lessee that it will be bound by the terms of Section 6.13
hereof. Each such assignment or transfer pursuant to this Section 4.05(b) shall
be subject to the Lessee's rights under the Lease Agreement. Without limiting
the foregoing or any of the provisions of Section 5 of the Lease Agreement, each
of the Lessee and the Permitted Sublessees further acknowledges and agrees that
the rights of Lenders in and to the sums payable by the Lessee or each Permitted
Sublessee under any provision of the Lease Agreement or the Subsidiary
Subleases, as the case may be, shall not be subject to any abatement whatsoever
and shall not be subject to any defense, set-off, counterclaim or recoupment
whatsoever whether by reason of failure of or defect in the Lessor's interest or
any interruption from whatsoever cause in the use, operation or possession of
any Leased Premises any or part of any thereof, or any damage to or loss or
destruction of the Leased Premises or part of any thereof, or by reason of any
other indebtedness or liability, howsoever and whenever arising, of the Lessor
to the Lessee, the Permitted Sublessees or to any other Person or for any cause
whatsoever, it being the intent hereof that the Lessee shall be unconditionally
and absolutely obligated to pay directly to Agent all of the Basic Rent and
Supplemental Rent (except the Excluded Amounts, which, unless the Lessor
notifies the Lessee to the contrary, shall remain payable directly to the
Lessor) payable by the Lessee hereunder. Notwithstanding the assignment, the
Lessee, the Permitted Sublessees and the Lessor acknowledge that all obligations
of the Lessor to the Lessee under the Lease Agreement shall be enforceable by
the Lessee against, and only against, the Lessor.
(c) Until the receipt of notice from Agent that the Notes and all other
amounts due the Lenders or the Agent in respect of the Leased Premises or
otherwise payable to any of them
26
<PAGE>
hereunder shall have been paid, to direct all notices under the Lease Agreement
to Agent at the address set forth on the signature pages hereof.
(d) That, until the receipt of notice by Agent, as aforesaid, that the
Notes and all other amounts due the Lenders or the Agent in respect of the
Leased Premises or otherwise payable to any of them hereunder shall have been
paid, all rights of the Lessor under the Lease Agreement and the Subsidiary
Subleases shall be exercisable by the Agent, as assignee of the Lessor, on
behalf of the Lenders (but only to the extent provided by the terms of the
Mortgage and Assignment Agreements), and that such rights shall not be subject
to any set-off, counterclaim, recoupment or defense alleged to be due by reason
of any past, present or future claims against the Lessor, Agent or any Lender or
any other Person for any reason whatsoever; nor, except as otherwise expressly
provided in the Transaction Documents, shall the obligations of the Lessee and
the Permitted Subleases under the Transaction Documents be otherwise affected by
the invalidity or unenforceability or lack of due authorization of any
Transaction Document or any insolvency of or the bankruptcy, reorganization or
similar proceeding against the Lessor, or for any combination of the foregoing.
(e) That, until the receipt of notice from Agent, that the Notes and all
other amounts due the Lenders or the Agent in respect of the Leased Premises
shall have been paid, it shall obtain the consent or approval of Agent prior to
taking any action for which the consent or approval of the Lessor is required by
the terms of the Lease Agreement or any of the other Transaction Documents.
(f) That, until the receipt of notice from Agent that the Notes and all
other amounts due the Lenders or the Agent in respect of the Leased Premises or
otherwise payable to any of them hereunder shall have been paid the Agent, as
assignee of the Lessor, shall be entitled to enforce, for the benefit of the
Lenders all covenants and obligations to be performed by the Lessee under the
Lease Agreement and by the Permitted Sublessees under the Subsidiary Subleases
as if named therein as "the Lessor", to the full extent provided in the Lease
Agreement, except to the extent the Lessee's covenants and obligations relate to
Excluded Amounts.
SECTION 4.06 Covenants of the Lenders. Each of the Lenders, and each
------------------------
subsequent holder of a Note by its acquisition thereof, agrees that:
(a) any transfer by it of the Notes shall be effected in a transaction
exempt from the requirements of section 5 of the Securities Act of 1933, as
amended;
(b) if any Lender shall receive (by voluntary payment, realization upon
security, set-off or from any other source) any amount on account of the Notes,
interest thereon, or any other obligation contemplated by the Mortgage and
Assignment Agreements or the other Transaction Documents to be made by the
Lessor or the Lessee, pro rata to the holders of the Notes of a particular
series or to another class of Lenders, in greater proportion than any such
amount received by any other Lender, then the Lender receiving such
proportionately greater payment shall notify each other Lender and Agent of such
receipt, and equitable adjustment will
27
<PAGE>
be made so that, in effect, all such excess amounts will be shared ratably among
all of the Lenders;
(c) each Lender hereby appoints Credit Lyonnais New York Branch, as Agent
in accordance with Section 7.01 of the Loan Agreement and agrees to be bound by
the Loan Agreement, including without limitation, Article VII thereof and the
Mortgage and Assignment Agreements; and
(d) each Lender agrees that it will not transfer or assign any interest in
any Note (including any participation or "blind" participation in any Note) (1)
in any way which involves public advertising of the availability of or public
solicitation of customers for any such interest, (2) if, after giving effect to
such transaction, there would be more than six holders of interests (as
registered owners or otherwise) in the Series A Notes or more than six holders
of interests (as registered owners or otherwise) of the Series B Note or a
holder would own Notes of a principal amount of less than $2.5 million, and (3)
unless that Person acquiring such interest agrees in writing with the Lessee to
be bound by the terms of this Section 4.06(d) and of Sections 4.08 and 6.12
hereof.
SECTION 4.07 Withholding Taxes.
-----------------
(a) Each Lender which is not a bank organized under the laws of the United
States of America or any state thereof shall deliver to the Agent for delivery
to the Lessee copies, completed and executed as required, of Form 1001 or Form
4224, as applicable, in each case as promulgated pursuant to the Code. Each
such Lender represents and warrants to the Lessee that the information contained
in such Form will be accurate in all material respects, and agrees to notify the
Lessee of any required changes therein.
(b) The Lessee shall make all payments hereunder and under the other
Transaction Documents (whether of interest, fees or otherwise) free and clear
of, and without deduction for or on account of, any present or future taxes,
levies, imposts and assessments pursuant to the tax laws of the United States of
America or any state or commonwealth thereof, and all interest, penalties and
similar liabilities with respect thereto (collectively, "Withholding Taxes").
If any Withholding Taxes are imposed, the Lessee will pay the full amount
thereof, together with any additional amounts as may be necessary so that every
net payment of any amount due hereunder, after deducting or providing for any
Withholding Taxes, will not be less than the amount provided for herein. Each
Lender agrees that it will designate a different lending office if such
designation will avoid the need for, or reduce the amount of, any payment or
withholding by the Lessee provided above and, in the sole judgment of such
Lender, will not be otherwise disadvantageous to such Lender.
(c) If the Lessee shall pay any Withholding Taxes as provided in this
Section 4.07, or shall make any deduction or withholding from amounts payable
hereunder in respect of any Withholding Taxes, the Lessee shall forward as soon
as possible to the Agent official receipts or other evidence acceptable to the
Agent establishing payment, deduction or withholding of such amounts.
28
<PAGE>
(d) The Lessee promptly shall pay all taxes, assessments and other
governmental charges and governmental fees levied or assessed in connection with
the execution and delivery of Transaction Documents, and the performance by the
parties thereto of the transactions contemplated hereby and thereby.
SECTION 4.08 Replacement for Illegality, Burdensome Indemnity or
---------------------------------------------------
Other Events. (a) If (i) the Notes held by any Lender must be converted into
- ------------
Base Rate Notes pursuant to Section 2.02(d) of the Loan Agreement or (ii) the
Lessee is required to make payments under Section 4.02(b) or (c) hereof to a
Lender and such payments are in the Lessee's good faith determination unduly
burdensome, are (or are reasonably likely to be) continuing, and can be avoided
if an institutional investor or a banking institution other than such Lender
held such Lender's Notes, the Lessee may request that such Lender be replaced by
an institution reasonably acceptable to the Agent, in which event the affected
Lender shall as promptly as reasonably practicable transfer its Notes to the
designated institution pursuant to the terms of the Loan Agreement.
(b) The purchase price for any sale of Notes pursuant to this Section
4.08 shall be equal to 100% of the aggregate unpaid principal amount of the
Notes held by the selling Lender plus all accrued and unpaid interest thereon to
the date of purchase, plus all Supplemental Rent then due and owing to the
selling Lender.
(c) If, at the Lessee's request, a Lender is caused to be replaced
pursuant to this Section 4.08, such replaced Lender shall be reimbursed by the
Lessee, within fifteen (15) days after demand therefor, for any resulting loss
or expense incurred by such Lender including, without limitation, any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after such replacement, as such Lender
shall have determined and notified the Lessee, which determination shall be
conclusive.
ARTICLE V
Assignment Of The Lessor's Interest
-----------------------------------
In addition to the assignment to Agent as security for the Lessor's
Obligations, the Lessor agrees that it will not transfer or assign any of its
interest under the Transaction Documents (1) in any way which involves public
advertising of the availability of or public solicitation of customers for such
interest, (2) if, after giving effect to such transaction, there would be more
than one holder of such interest, or (3) unless the Person acquiring such
interest (x) assumes in writing delivered to Agent, the Lessee and each Lender
all of the obligations of the Lessor under each Transaction Document to which
the Lessor is a party, and (y) has received the Required Lender's Consent, which
consent will not be unreasonably withheld, provided that such consent will not
be required in connection with (i) a transfer required by law, (ii) a transfer
to a Person acquiring or holding all of the Series B Notes or an Affiliate of
such Person, or (iii) to Credit Lyonnais or any Affiliate thereof, and further
provided that such consent of the Lessee shall not be required if an Event of
Default under the Lease Agreement has occurred and is continuing. Any transfer
under clause (ii) above shall be to a Person whose
29
<PAGE>
net worth is at least $25,000,000, or to an Affiliate of such Person whose
obligations are unconditionally guaranteed by such Person.
ARTICLE VI
Miscellaneous
-------------
SECTION 6.01 Payment of Transaction Expenses. Whether or not any
-------------------------------
Closing is consummated, the Lessee shall pay: (i) the expenses of the Trust
Company, the Lessor, the Equity Participant, the Agent and the Lenders party
hereto, including fees and expenses of their respective counsel in connection
with the negotiation and preparation of the Transaction Documents subject to the
limitations thereon set forth in the Commitment Letter; (ii) the expenses of the
Trust Company, the Lessor, the Lessee, Agent, the Equity Participant and each
Lender, including fees and expenses of their respective counsel, (a) in
connection with any amendments, supplements (subject to, prior to January 1,
1996, the limitations set forth in the Commitment Letter), waivers or consents
required under a Transaction Document (other than in connection with a transfer
of interests by the Lessor, Agent or Lender (at a time at which no Event of
Default under the Lease Agreement has occurred and is continuing) which transfer
is not required under any Transaction Document or requested by the Lessee) or
(b) requested by the Lessee or any Permitted Sublessee in connection with any of
the Transaction Documents, any refinancing or refunding of the Notes or any
instrument issued in substitution or replacement therefor; (iii) all recording
and filing fees, stamp taxes and other recording or filing taxes in connection
with the recordation, filing or release of any Transaction Document or financing
statement or any such amendments, waivers and consents and in connection with
any continuation statements or other documents filed to maintain and protect the
rights of the parties under the Transaction Documents; and (iv) any fees and
expenses incurred by the Trust Company, the Lessor, the Equity Participant, the
Agent or any Lender in connection with the enforcement of the obligations of the
Lessee or the Lessor under the Transaction Documents, except that the Lessee
shall have no liability for enforcement expenses incurred by any party as a
consequence of any failure of the Lessor to perform any of its obligations under
any Transaction Document to which it is a party to the extent such non-
performance was not a consequence of the failure of the Lessee to perform any of
its obligations under any of the Transaction Documents.
SECTION 6.02 Notices. Any notices required or permitted hereunder or
-------
under any Transaction Document, or by Law in respect of any Transaction
Document, shall be in writing and shall be deemed given and effective when
personally delivered, or if sent by registered or certified mail, four Business
Days after date of delivery to the post office, or if sent by overnight delivery
(express mail or overnight courier), when received, or if sent by telex or
telecopy, upon receipt, in each case addressed to the Person required to receive
the same at the address stated on the signature pages hereof or in accordance
with the last unrevoked written direction from such Person to the other parties
hereto.
SECTION 6.03 Survival; Entire Agreement. All covenants, agreements,
--------------------------
indemnities, representations, and warranties contained in this Participation
Agreement, or any
30
<PAGE>
other Transaction Document or any document, agreement, or certificate delivered
pursuant hereto or thereto shall survive the Closing and the expiration or other
termination of this Participation Agreement. This Participation Agreement and
the other agreements and documents referred to herein constitute the final and
entire expression of the agreement of the parties with respect to the matters
contemplated hereby.
SECTION 6.04 Holders of Notes. All representations, warranties,
----------------
covenants, and agreements contained herein shall be binding on, and shall inure
to the benefit of, any transferee of the Series A Lender or the Series B Lender
as holder of a Note or Notes. Any request, notice, direction, consent, waiver
or other instrument or action by any holder of a Note or Notes shall bind the
successors and assigns of such holder.
SECTION 6.05 Amendments and Waivers. The terms of this Participation
----------------------
Agreement shall not be waived, altered, modified, amended, supplemented, or
terminated in any manner whatsoever except by written instrument signed by the
parties hereto. The Lenders, the Agent and the Lessor will not without the
prior written consent of the Lessee amend Section 1.01, 2.02(d) through 2.02(h),
2.05(d) or 2.08 of the Loan Agreement or otherwise amend the Loan Agreement in a
way that would have the effect of an amendment of the term "Required Lenders'
Consent", as used in the Loan Agreement, insofar as such term is applicable to
the taking or refraining from taking of action under the Lease Agreement by the
Lessor or Agent as assignee of the Lessor. No Transaction Document may be
amended in a manner which would, in the good faith judgment of Agent, adversely
affect the rights of Agent or materially increase the duties of the Agent
without the prior written consent of the Agent.
SECTION 6.06 Governing Law; Consent to Jurisdiction, Etc. (a) This
-------------------------------------------
Participation Agreement and each other Transaction Document shall be governed
by, and construed in accordance with, the laws of the State of New York.
(b) By the execution and delivery of this Participation Agreement,
each of the Lessee, each Permitted Sublessee, the Trust Company, the Lessor, the
Equity Participant, each Lender and the Agent irrevocably:
(i) agrees that any action, suit or proceeding arising out of or
relating to this Participation Agreement or any other Transaction Document or
any statement, course of conduct, act, omission or event occurring in connection
herewith or therewith (collectively, "Related Litigation") may be brought in any
state or federal court of competent jurisdiction sitting in the Borough of
Manhattan, State of New York, accepts and submits itself to the non-exclusive
jurisdiction of any such court, acknowledges the competency of any such court,
and agrees that any judgment in any such Related Litigation in any such court
shall be binding and conclusive upon such party and its property;
(ii) waives any objection which it now has or may hereafter have to
the laying of venue of any such Related Litigation in any such court or that any
such Related Litigation brought in any such court was brought in an inconvenient
forum, and waives any right to object, with respect to any such Related
Litigation brought in any such court, that such court does not have jurisdiction
over such party;
31
<PAGE>
(iii) consents and agrees to service of any summons, complaint or
other legal process in any such Related Litigation by registered or certified
United States mail, postage prepaid, to such party at the address for notices
referred to in Section 6.02 hereof, and consents and agrees that such service
shall constitute in every respect valid and effective service (but nothing
herein shall affect the validity or effectiveness of process served in any other
manner permitted by law); and
(iv) waives the right to trial by jury in any such Related
Litigation.
SECTION 6.07 Non-Recourse. This Participation Agreement is solely a
------------
corporate obligation and no recourse shall be had in respect of any obligation,
covenant, or agreement of this Participation Agreement, or referred to herein,
against any stockholder, incorporator, director, or officer, as such, past,
present, and future, of the parties hereto by the enforcement of any assessment
or by any legal or equitable proceeding, by virtue of statute or otherwise.
SECTION 6.08 Invalidity of Provisions. Any provision of this
------------------------
Participation Agreement that may be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 6.09 Counterparts. This Participation Agreement may be
------------
executed in any number of counterparts and by the different parties hereto on
separate counterparts, all of which together shall constitute a single
agreement.
SECTION 6.10. No Reliance. The Lessee hereby acknowledges that in
-----------
negotiating the terms of this Participation Agreement, the Lease Agreement and
the other Transaction Documents to which it is a party and all other related
agreements and documents, it has sought, obtained and relied exclusively upon
such accounting, actuarial, tax and legal advice from its own or other
independent sources as it has deemed necessary, and further acknowledges that
none of Equity Participant nor any Lender nor any of the Lessor's or Lender's
parent, subsidiaries, affiliates or personnel has represented or warranted the
legal, income, sales or other tax, economic, accounting, or other consequences
of the terms and provisions hereof and of the other related agreements and
documents.
SECTION 6.11. Confidentiality. Except as may be required by law,
---------------
except as contemplated by any of the Transaction Documents and except as may be
necessary in connection with the enforcement of the Transaction Documents
following an Event of Default under the Lease Agreement, each of the Lessor,
Agent and each Lender agrees to use its best efforts not to disclose the
existence of the transactions contemplated hereby, the Transaction Documents or
any of the parties thereto or to permit any data or information which is clearly
marked "confidential" and which relates to the Lessee or the business of the
Lessee (other than any data or information which is otherwise publicly available
or which is received by any such party in a capacity in which such party is not
bound by any restriction of a nature similar to that imposed by this Section
6.11), which data or information the Lessor, Agent or such Lender
32
<PAGE>
possesses due to such party's relation to the transactions contemplated hereby,
to be out of such party's possession or the contents thereof to be divulged to
any other Person; provided, however, that such data or information may be
disclosed to the attorneys or accountants of the Lessor, Agent or such Lender
and to any Person empowered by law to examine the records of the Lessor, Agent
or such Lender and to any potential assignee of the Lessor, Agent or such
Lender, which potential assignee shall have, in each case, agreed with such
party for the benefit of the Lessee to comply with the terms of this Section
6.11.
SECTION 6.12. Interpretation All covenants, representations and
--------------
Events of Default contained herein and in the Transaction Documents shall be
given independent effect, so that if any action or condition would violate any
of such covenants, would breach any of such representations or would constitute
any of such Events of Default, the fact that such action or condition would not
violate or breach another covenant or representation or constitute another Event
of Default shall not avoid the violation of such covenant, representation or
Event of Default.
Unless the context of the relevant Transaction Document otherwise
clearly requires, references to the plural include the singular, the singular
the plural and the part the whole; "or" has the inclusive meaning represented by
the phrase "and/or"; and "property" includes all properties and assets of any
kind or nature, tangible or intangible, real, personal or mixed. References in
any Transaction Document to "determination" (and similar terms) by Lender
include good faith estimates by lender (in the case of quantitative
determinations) and good faith beliefs by Lender (in the case of qualitative
determinations). The words "hereof", "herein", "hereunder" and similar terms in
an agreement refer to the agreement as a whole and not to any particular
provision of such agreement. The section and other headings contained in an
agreement and the Table of Contents preceding an agreement are for reference
purposes only and shall not control or affect the construction of the agreement
or the interpretation thereof in any respect. References to sections of any
statute or regulation shall be construed also to refer to any successor
sections.
All references in any Transaction Document to the Participation
Agreement shall be deemed to refer to this Agreement (as from time to time
amended, supplemented or modified), whether or not the provisions of such
Transaction Document expressly so specify.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
33
<PAGE>
CREDIT LYONNAIS LOS ANGELES BRANCH,
as Series A Lender and Series B Lender
By: /s/ Dianne M. Scott
-------------------
Its: Vice President and Manager
Address for Payment Notices:
Credit Lyonnais Los Angeles Branch
515 South Flower Street, Suite 2200
Los Angeles, California 90071
Phone: (213) 362-5954
Telecopy: (213) 623-3437
Telex: 6831990 CREDLAUW
Address for Credit Notices:
Credit Lyonnais Los Angeles Branch
Attention: Eric Dulot, Vice President
515 South Flower Street, Suite 2200
Los Angeles, California 90071
Phone: (213) 362-5954
Telecopy: (213) 623-3437
All payments on or in respect of the Notes to be by
bank wire transfer of Federal Funds to Federal Reserve
Bank of New York
For account: Credit Lyonnais New York
ABA: 026008073
In favor of: Credit Lyonnais Los Angeles Branch
Attention: Loan Servicing
Ref: Smart & Final
(Series A or Series B Notes)
<PAGE>
THE FUJI BANK, LIMITED,
LOS ANGELES AGENCY
as a Series A Lender and Series B Lender
By: /s/ Hirotoshi Naito
-------------------
Its: Joint General Manager
Address: 333 South Hope St., 39th Floor
Los Angeles, CA 90071
Phone: 213-253-4163
Telecopy: 213-253-4198
Telex:
<PAGE>
BANK LEUMI LE-ISRAEL B.M.,
By: /s/ Jacques Delvoy
------------------
Its: Vice President
Address: 8383 Wilshire Blvd., Suite 400
Beverly Hills, CA 90211
Phone: 213-966-4747
Telecopy: 213-655-5933
Telex:
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED
LOS ANGELES AGENCY
By: /s/ Shusai Nagai
----------------
Its: General Manager
Address: 350 South Grand Avenue, Suite 1600
Los Angeles, CA 90071
Phone: 213-893-6443
Telecopy: 213-488-9840
Telex:
<PAGE>
VIA BANQUE, S.A.
By: /s/ Christel Prot
-----------------
Its: Sous-Directeur
Address: 10 Rue Volney BP 27 75061
Paris, France
Phone: 011-33-1-49.26.26.26
Telecopy: 011-33-1-49.26.29.29
Telex:
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
as Agent
By: /s/ David Fink
--------------
Its: Vice President
Address for Payment Notices:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Phone: (212) 261-7609
Telecopy: (212) 459-3258
Telex: __________
Address for Credit Notices:
Credit Lyonnais New York Branch
Attention: _________
1301 Avenue of the Americas
New York, New York 10019
Phone: (212) 261-7609
<PAGE>
PORT STOCKTON FOOD DISTRIBUTORS, INC.,
as Permitted Sublessee
By: /s/ Donald G. Alvarado
----------------------
Its: Secretary
Address for Notices:
4700 South Boyle Avenue
Los Angeles, California 90058
Attention: Martin A. Lynch
with a copy to: Donald G. Alvarado
Phone: (213) 589-9726
Telecopy: (213) 589-2074
<PAGE>
SMART & FINAL STORES CORPORATION,
as Permitted Sublessee
By: /s/ Richard Phegley
-------------------
Its: Vice President, Treasurer
Address for Notices:
4700 South Boyle Avenue
Los Angeles, California 90058
Attention: Martin A. Lynch
with a copy to: Donald G. Alvarado
Phone: (213) 589-9726
Telecopy: (213) 589-2074
<PAGE>
SMART & FINAL INC.,
as Lessee
By: /s/ Donald G. Alvarado
----------------------
Its: Sr. V.P. Law/Development
Address for Notices:
4700 South Boyle Avenue
Los Angeles, California 90058
Attention: Martin A. Lynch
with a copy to: Donald G. Alvarado
Phone: (213) 589-9726
Telecopy: (213) 589-2074
<PAGE>
FLEET NATIONAL BANK
not in its individual capacity, but solely as Owner Trustee
under the Trust Agreement, as the Lessor
By: /s/ E.C. Hammer
---------------
Its: Vice President
Address for Notices:
777 Main Street
CTM0/0238
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
(Smart & Final Inc.
1994 Lease Financing)
Phone: (860) 986-2064
Telecopy: (860) 986-7920
<PAGE>
CREDIT LYONNAIS LEASING CORP.,
as Equity Participant
By: /s/ L.M. Wertheim
-----------------
Its: Vice President/Secretary
Address for Payment Notices:
Credit Lyonnais New York
Attention: Ilysa Reich
1301 Avenue of the Americas
New York, New York 10019
Phone: (212) 261-7808
Telecopy: (212) 261-3448
Address for Credit Notices:
Credit Lyonnais New York
Attention: Ilysa Reich
1301 Avenue of the Americas
New York, New York 10019
Phone: (212) 261-7808
Telecopy: (212) 261-3448
All payments to the Equity Participant are to be made by
bank wire transfer of Federal Funds to Federal Reserve Bank of
New York
For account: Credit Lyonnais New York Branch
ABA: 026008073
In favor of: Credit Lyonnais Leasing Corp.
A/C No. 01-00983-0001-00-001
Attention: Loan Servicing
Ref: Smart & Final (Equity Payments)]
<PAGE>
EXHIBIT A
TO THE PARTICIPATION AGREEMENT
DEFINITION SCHEDULE
-------------------
As used in the Participation Agreement to which this Definition Schedule is
Exhibit A and in each other Transaction Document, as defined below, the
following terms shall have the respective meanings assigned thereto and the
rules of construction set forth at the end of this Definition Schedule shall
apply:
"Administration Fee" shall mean the annual fee set forth and identified as
such and the Commitment Letter.
"Advances" shall mean the reimbursement by the Lessor to the Lessee of the
Lessor's Share of Improvement Cost under the Agency Agreement, which
reimbursement shall be evidenced by the execution and delivery of a Lease
Supplement.
"Advance Date" shall have the meaning assigned thereto in Section 1.07 of
the Participation Agreement.
"Agency Agreement" shall mean the First Amendment and Restatement, dated as
of June 20, 1997, to the Agency Agreement, dated as of December 15, 1994,
between the Lessor and the Lessee, relating to the Leased Premises as the same
may be amended from time to time.
"Affiliate" shall mean, with respect to any Person, another Person which
directly, or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person.
"Agent" shall mean Credit Lyonnais New York Branch, in its capacity as
Agent for the Lenders under the Loan Agreement and any successor appointed as
provided in Section 6.10 of the Loan Agreement.
"Appraised Value" shall have the meaning assigned thereto in Section
3.02(c)(ii) of the Participation Agreement.
"Appraiser" shall mean any independent MAI appraiser selected by the Agent
and reasonably acceptable to the Lessee.
"Arrangement Fee" shall mean the amount set forth and identified as such in
the Commitment Letter.
45
<PAGE>
"Base Rate" means the interest rate per annum equal to the greater of (i)
the Federal Funds Rate plus 0.50% per annum and (ii) the interest rate per annum
announced from time to time by the Agent as its prime commercial lending rate.
Interest on an Base Rate Note shall be calculated on the basis of a year of 365
or 366 days, as the case may be, for the actual number of days elapsed in the
period during which it accrues and the Base Rate shall reflect any change in
such prime rate or the Federal Funds Rate, effective as of the opening of
business on the day on which such change in such prime rate or Federal Funds
Rate becomes effective.
"Base Rate Note" means any Note when and to the extent that the interest
rate therefor is determined by reference to the Base Rate.
"Base Term" shall have the meaning assigned thereto in Section 3 of the
Lease Agreement.
"Basic Rent" shall mean the rent payable on each Payment Date during the
Lease Term pursuant to Section 4 of the Lease Agreement, and shall equal the sum
of a Principal Component and an Interest Component. The "Principal Component" on
any Payment Date shall on or prior to December 31, 2000 shall be zero and
thereafter shall equal the amount set forth opposite such date on Schedule 2
hereto. The "Interest Component" on any Payment Date equals the product of the
Finance Rate for the related Payment Period and the Outstanding Property Cost
during such Payment Period, calculated using the same day count convention as is
applicable to the interest rate (LIBOR Rate Eurodollar Rate or Base Rate, as
applicable) on which the Finance Rate is based for such period (or, in the case
of a blended rate, to the extent that the Finance Rate is based on each such
interest rate). If it is necessary to determine the Basic Rent due on a date
other than a Payment Date, the Basic Rent shall consist only of an "Interest
Component" equal to the product of the Finance Rate for the relevant period and
the Outstanding Property Cost during such period.
"Business Day" shall mean any day, other than a Saturday, Sunday, on which
banking institutions are not authorized or obligated to close in New York City
or the city in which the principal office of the Trust Company is located; and,
with respect to calculations using the LIBOR Rate, dealings are carried on in
the London interbank market.
"Certificate Balance" shall mean, as of any date, the unpaid principal
balance of the Equity Participant's investment in the Lessor, determined as if
the Equity Participant's equity contributions under for Section 1.02 of the
Participation Agreement were loans under the Loan Agreement (evidenced by Notes)
bearing interest at the Certificate Rate.
"Certificate Rate" shall mean interest calculated in an identical manner as
interest on the Notes is calculated, except that the interest rate determined by
reference to either of the LIBOR Rate or the Eurodollar Rate shall be the LIBOR
Rate or the Eurodollar
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Rate, as applicable, plus 1.75% per annum through December 31, 1999, and the
--- -----
LIBOR Rate or the Eurodollar Rate, as applicable, plus 2.00% per annum
--- -----
thereafter.
"Change Order" shall have the meaning assigned thereto in Section 4.11 of
the Agency Agreement.
"Closing", "Closing Date" and "Closing Notice" shall have the meanings
specified in Section 1.07 of the Participation Agreement.
"Code" shall mean the Internal Revenue Code of 1986.
"Commitment Letter" shall mean the commitment letter of Credit Lyonnais to
the Lessee, dated November 29, 1994.
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with the Lessee within the meaning
of Section 4001 of ERISA or is part of a group which includes the Lessee and
which is treated as a single employer under Section 414 of the Code.
"Completion Certificate" shall have the meaning assigned thereto in Section
4.18 of the Agency Agreement.
"Completion Date" shall mean, for the Improvements for any Leased Premises,
the earlier of (i) the estimated completion date set forth in the Final
Construction Plans therefor plus one month or (ii) May 31, 1997.
"Consolidated Cash Flow" shall mean, as of any date and for any period, the
sum of consolidated net income (excluding non-cash unusual items and excluding
the effect of deferred taxes and minority interest in earnings for such period),
plus depreciation, amortization and lease expense (to the extent deducted in
- ----
determining net income) for such period.
"Consolidated Indebtedness" shall mean, as to any Person, (i) consolidated
capital lease obligations of such Person, the consolidated principal amount of
off balance sheet "synthetic" leases and eight times the amount of the
consolidated operating Lease expenses for the relevant period and (ii) other
consolidated indebtedness of such Person for borrowed money (whether by loan or
the issuance and sale of debt securities) or for the consolidated deferred
purchase or acquisition price of property or services other than accounts
payable (other than for borrowed money) incurred in the ordinary course of
business of such Person; without limiting the generality of the foregoing, such
term shall include all Indebtedness of others guaranteed by such Person.
"Consolidated Subsidiaries" shall mean, when used with reference to current
assets, current debt, current liabilities, debt, stockholder's equity or total
assets shall mean the aggregate of current assets, current debt, current
liabilities, debt, stockholder's equity or total assets, as the case may be, of
the Lessee and its Subsidiaries, after
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elimination all offsetting debits and credits between the Lessee and its
Subsidiaries and all other items required to be eliminated in accordance with
generally accepted accounting principles.
"Consolidated Tangible Net Worth" shall mean, as of the date of
determination thereof, the excess of total consolidated assets over total
consolidated liabilities, total consolidated assets and total consolidated
liabilities each to be determined as to both classification of items and amounts
in accordance with generally accepted accounting principles and excluding all
minority interests; provided, that there shall be excluded from total
consolidated assets (i) all assets which would be classified as intangible
assets under generally accepted accounting principles, including but not limited
to goodwill and deferred charges, (ii) cash set apart and held in a sinking or
other analogous fund established for the purpose of redemption or other
retirement of capital stock, (iii) applicable reserves, allowances and other
similar properly deductible items (other than those relating to net foreign
exchange losses which shall only be excluded to the extent such losses exceed $5
million in any fiscal year), and (iv) any revaluation or other write-up in book
value of assets.
"Construction Agent" shall mean Smart & Final Inc. as construction agent
under the Agency Agreement.
"Construction Plans" shall mean, with respect to each Leased Premises, the
detailed construction plans and specifications of a licensed architect or
engineer for the Improvements for such Leased Premises including the
construction budget, Estimated Improvement Cost and the estimated date that the
Improvements will be Substantially Complete, prepared by or on behalf of the
Construction Agent.
"Distribution Center" shall mean the Leased Premises located at 4343 East
Fremont Street, Stockton, California.
"Environmental Consultant" shall mean any independent environmental
consultant selected by the Agent and reasonably acceptable to the Lessee.
"Environmental Laws" shall mean any and all foreign, Federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any governmental authority or other requirements of law
(including common law) regulation, relating to or imposing liability or
standards of conduct concerning pollution or protection of the environment, or
worker health or safety, as now or may at any time hereafter be in effect.
"Environment Put Event" shall mean, with respect to any Leased Premises,
the occurrence of any of the following events:
(i) any representation or warranty contained in Section 2.01(u) through
(z) of the Participation Agreement, with respect to such Leased Premises,
shall not be true and correct as of such date;
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(ii) failure to observe any covenant contained in Section 4.03(j) of the
Participation Agreement with respect to such Leased Premises; or
(iii) failure to comply with Section 4.08 of the Agency Agreement with
respect to such Leased Premises,
if the potential liability resulting therefrom to the Indemnitees (considered as
a group) exceeds $500,000 or is material but can not be estimated.
"Equity Participant" shall mean Credit Lyonnais Leasing Corp., in its
capacity as Equity Participant under the Participation Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Improvement Cost" shall mean, as of any date, with respect to a
Leased Premises, the Construction Agent's estimate of the Improvement Cost for
such Leased Premises as set forth in the Final Construction Plans, or if the
same have not been submitted, the Initial Construction Plans; provided, that the
total Estimated Improvement Cost of all Leased Premises shall in no event exceed
$30,000,000 less the aggregate amount of Purchase Price paid by the Lessor.
"Eurocurrency Reserve Requirement" means, for a LIBOR Note or a Eurodollar
Note and for any Payment Period therefor, the daily average of the stated
maximum rate (expressed as a percentage) at which reserves (including any
marginal, supplemental, or emergency reserves) are required to be maintained
during such Payment Period under Regulation D for member banks of the Federal
Reserve System in New York City with deposits exceeding five billion dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D) but
without benefit of credit or proration, exemptions, or offsets that might
otherwise be available from time to time under Regulation D. Without limiting
the effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect
any other reserves required by the Board of Governors of the Federal Reserve
System to be maintained by such member banks against (i) any category of
liabilities that includes deposits by reference to which the LIBOR Rate for
LIBOR Notes is to be determined; (ii) any category of extension of credit or
other assets that include loans bearing a LIBOR Rate; or (iii) any category of
liabilities that includes deposits by reference to which the Eurodollar Rate for
Eurodollar Notes is to be determined; or (iv) any category of extension of
credit or other assets that include loans bearing a Eurodollar Rate.
"Eurodollar Note", "Eurodollar Series A Note" and "Eurodollar Series B
Note" mean any Note when and to the extent that the interest rate therefor is
determined by reference to the Eurodollar Rate for a Eurodollar Period.
"Eurodollar Period" means, with respect to any Payment Period, a period of
seven days to three-months for which the Eurodollar Rate is available; provided
that an Eurodollar Period shall not extend beyond the end of such Payment
Period.
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"Eurodollar Rate" means, with respect to any Eurodollar Period, (i) the
rate of interest per annum (rounded upwards, if necessary, to the nearest 1/16
of 1%), which shall be the same for each day in a Eurodollar Period, determined
by the Agent (which shall include any banking affiliate of the Agent) on the
basis of the offered rates quoted to the Agent in the New York interbank market
for deposits in eurodollars having a term equal to such Eurodollar Period in an
amount equivalent to the then outstanding principal amount of the Notes,
determined as of the first day of such Eurodollar Period, divided by (ii) a
percentage equal to 100% minus the applicable Eurocurrency Reserve Requirement
-----
for such Eurodollar Period. Interest on any Eurodollar Note shall be calculated
on the basis of a year of 360 days for the actual number of days elapsed in the
period during which it accrues.
"Eurodollar Note", "Eurodollar Series A Note" and "Eurodollar Series B
Note" shall have the meanings assigned thereto in Article I of the Loan
Agreement.
"Eurodollar Rate" shall have the meaning assigned thereto in Article I of
the Loan Agreement.
"Event of Default" and Default" when referred to in connection with (a) the
Lease Agreement, shall mean any of the events described in Section 19 of the
Lease Agreement, (b) the Loan Agreement, any of the events described in Section
5.01 of the Loan Agreement, (c) the Agency Agreement, shall mean any of the
events described in Section 5.01 of the Agency Agreement, and (d) the
Participation Agreement, the breach of any term, condition or covenant of the
Participation Agreement by any of the Lessee or any Permitted Sublessee after
the passage of any relevant grace, use or notice period, and any of the events
described in clause (a), (c) or (d) of this definition.
"Event of Loss" shall mean, with respect to any Leased Premises (i) the
destruction, damage beyond repair, or rendition of such Leased Premises or any
substantial part thereof permanently unfit for normal use for any reason
whatsoever, (ii) the damage of Leased Premises having an estimated repair cost
thereof in excess of $500,000 (or, in the case of the Distribution Center,
$3,000,000) or (iii) the condemnation, confiscation, seizure, or requisition of
use or title to such Leased Premises or any substantial part thereof by any
governmental authority under the power of eminent domain or otherwise.
"Excluded Amounts" shall mean (i) all proceeds of liability, and, in the
case of any Leased Premises, property damage, insurance owing or payable to the
Lessor for its own account or in its individual capacity pursuant to any
insurance policies maintained under Section 10 of the Lease Agreement and (ii)
any indemnities or other amounts payable to or in favor of obligee for its own
account or in its individual capacity under Section 4.02 of the Participation
Agreement, and regardless of whether payable in a lump sum or as an addition to,
or increase in, Basic Rent.
"Fair Market Sales Value" shall mean, in respect of any Leased Premises,
the sale price thereof which would obtain in an arm's-length sale between an
informed and
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willing buyer and an informed and willing seller, in each case under no
compulsion to buy or sell, and the assumption that the Leased Premises is in the
condition required by Section 9 of the Lease Agreement.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (i) if such day is not a Business Day, the Federal Funds Rate
--------
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (ii) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate quoted by two or more federal
funds brokers to Agent on such day on such transactions as determined in good
faith by the Agent.
"Final Construction Plans" shall mean, with respect to any Leased Premises,
the Final Construction Plans for such Leased Premises submitted to the Lessor
and the Agent at least 30 days prior to the commencement of construction of the
Improvements for such Leased Premises.
"Final Loan Policy" shall have the meaning assigned thereto in Section
3.03(c) of the Participation Agreement.
"Final Construction Plans" shall mean, with respect to any Leased Premises,
the Final Construction Plans for such Leased Premises submitted to the Lessor
and the Agent at least 30 days prior to the commencement of construction of the
Improvements for such Leased Premises.
"Final Owner's Policy" shall have the meaning assigned thereto in Section
3.03(c) of the Participation Agreement.
"Finance Rate" shall mean, for any Payment Period, (i) if the LIBOR Rate or
the Eurodollar Rate is in effect under the Loan Agreement throughout such
Payment Period, the LIBOR Rate or the Eurodollar Rate in effect on the first day
of such Payment Period plus 0.56930% per annum though December 31, 1999 and
thereafter, 0.86144% per annum through March 31, 2001 and thereafter, 0.86208%
per annum through June 30, 2001 and thereafter, 0.86275% per annum through
September 30, 2001 and thereafter, 0.86342% per annum; (ii) if the Base Rate is
in effect under the Loan Agreement throughout such Payment Period, the Base Rate
in effect from time to time during such Payment Period; (iii) if neither the
Base Rate nor the LIBOR Rate nor the Eurodollar Rate is exclusively in effect
under Loan Agreement during such Payment Period, a blended rate derived from the
outstanding principal amount of the Notes to which, the Base Rate and either the
LIBOR Rate or the Eurodollar Rate, as the case may be, respectively, were
applicable during such Payment Period, on the assumption that during such
Payment Period all LIBOR Notes and Eurodollar Notes bore interest at the rate
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specified in clause (i) above; and (iv) under the circumstances and period
specified in Section 3(d) of the Lease Agreement, the Finance Rate shall be the
Late Payment Rate, instead of the rate specified in clauses (i) through (iii)
above.
"FIRREA" shall mean the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended.
"Governmental Action" shall mean any consent or approval of, or any giving
of notice to, or any registration, filing or recording with, or any other action
in respect of, any Official Body.
"Hazardous Materials" shall mean any gasoline or petroleum (including crude
oil or any fraction thereof) or petroleum products of any other substances,
materials or wastes, regulated by or the source of potential liability under any
Environmental Law, including, without limitation, asbestos, polychlorinated
biphenyls and urea-formaldehyde insulation.
"Improvements" shall mean, for any Leased Premises, all improvements and
fixtures and all other tangible personal property described in the Final
Construction Plans for the construction of retail stores (other in the case of
the Distribution Center) on such Leased Premises, and now or hereafter placed
on, affixed or appurtenant to, such Leased Premises by the Lessee, as agent for
the Lessor pursuant to the terms hereof, together with any and all accessions,
additions, improvements, substitutions and replacements thereto or therefor.
"Improvement Cost" shall mean the actual costs incurred by the Lessee, as
agent for the Lessor, with respect to the Improvements, in accordance with the
terms hereof, in performing or causing to be performed the Work or otherwise in
performance of the Lessee's obligations hereunder; and, all Basic Rent paid
under the Lease Agreement for the period ending on May 31, 1997.
"Indebtedness" shall mean, as to any Person, capital lease obligations of
such Person and other indebtedness of such Person for borrowed money (whether by
loan or the issuance and sale of debt securities) or for the deferred purchase
or acquisition price of property or services other than accounts payable (other
than for borrowed money) incurred in the ordinary course of business of such
Person; without limiting the generality of the foregoing, such term shall
include all Indebtedness of others guaranteed by such Person.
"Indemnitee" shall have the meaning given to such term in Section 4.02(a)
of the Participation Agreement.
"Initial Construction Plans" shall mean, with respect to any Leased
Premises, the Construction Plans for such Leased Premises submitted to the
Lessor and the Agent on or prior to the Closing Date for such Leased Premises.
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"Land" shall have the meaning assigned thereto in Section 3.03(c) of the
Participation Agreement.
"Late Payment Rate" means the Base Rate plus 2.00% per annum.
"Lease Agreement" shall mean the First Amendment and Restatement, dated as
of June 20, 1997,to the Lease Agreement dated as of December 15, 1994, between
the Lessor and the Lessee, including each Lease Supplement executed in
connection therewith, as the same may be amended from time to time in accordance
with the terms thereof.
"Lease Supplement" shall mean a Lease Supplement executed by the Lessor and
the Lessee in substantially the form attached as Exhibit A to the Lease
Agreement.
"Lease Term" shall have the meaning assigned thereto in Section 3 of the
Lease Agreement.
"Leased Premises" shall mean the fee simple interest in a parcel of
property or the ground lease relating to a parcel of real property which, in
either case, is made subject to the Lease Agreement by the execution and
delivery of a Lease Supplement, including all buildings and improvements thereon
at the related Closing Date or thereafter and any accessions, additions,
improvements, substitutions and replacements thereto.
"Lender" and "Lenders" shall individually and collectively refer to the
Series A Lenders and the Series B Lenders.
"Lessee Obligations" shall mean all indebtedness and other obligations and
liabilities of the Lessee to the Lessor, Agent or any Lender from time to time
arising under or in connection with or related to or evidenced by or secured by
or under color of the Lease Agreement or any other Transaction Document, and all
extensions, renewals or refinancings thereof, whether such indebtedness,
obligations and liabilities are unsecured, joint or several, absolute or
continent, due or to become due, whether for payment or performance, now
existing or hereafter arising.
"Lessor" or "Owner Trustee" shall mean Shawmut Bank Connecticut, National
Association, a national banking association, its successors and assigns not in
its individual capacity but solely as Owner Trustee under the Trust Agreement.
"Lessor Lien" shall mean any Lien on the Leased Premises or the Lease
Agreement to the extent resulting from (i) claims against, the Lessor, the Trust
Company, in its individual capacity, or the Equity Participant, not related to
the transactions contemplated by the Transaction Documents, (ii) any act or
omission of the Lessor, the Trust Company, in its individual capacity, or the
Equity Participant, which is not related to the transactions contemplated by the
Transaction Documents or is in violation of any of the terms of the Transaction
Documents, (iii) claims against the Lessor, the Trust Company, in its individual
capacity, or the Equity Participant related
53
<PAGE>
to Taxes which are excluded from the indemnification provided by Section 4.02(b)
of the Participation Agreement, or (iv) claims against the Lessor or the Equity
Participant arising out of the voluntary transfer by the Lessor or the Equity
Participant of its interest in the Leased Premises, the Lease Agreement or any
part thereof, other than a transfer pursuant to Section 14(b), 15, 16 or 20 of
the Lease Agreement.
"Lessor's Share of Improvement Cost" shall mean, as of any Advance Date,
the lesser of (i) the excess of the Estimated Improvement Cost as of such date
for all Leased Premises over the sum of the Lessee's estimate of the balance to
complete the Work for all Leased Premises as of such date (as set forth in the
related Requisition Certificate) plus the total Advances thereto previously made
or (ii) the excess of the total Improvement Cost as of such date (as set forth
in the related Requisition Certificate) over the Advances previously made by the
Lessor.
"LIBOR Note", "LIBOR Series A Note" and "LIBOR Series B Note" mean any Note
when and to the extent that the interest rate therefor is determined by
reference to the LIBOR Rate.
"LIBOR Rate" means, with respect to any Payment Period, (i) the rate of
interest per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%),
which shall be the same for each day in a LIBOR Note Payment Period, determined
by the Agent (which shall include any banking affiliate of the Agent) on the
basis of the offered rates per annum for deposits in United States dollars
quoted to the Agent in the London interbank market for United States dollar
deposits of a three month term in an amount equivalent to the then outstanding
principal amount of the Notes, determined as of 11:00 A.M., London time, two
London Business Days before the first London Business Day of such Payment
Period, divided by (ii) a percentage equal to 100% minus the applicable
-----
Eurocurrency Reserve Requirement for such Payment Period; interest on a LIBOR
Rate Note shall be calculated on the basis of a year of 360 days for the actual
number of days elapsed in the period during which it accrues.
"Lien" shall mean any mortgage, deed or trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sales or title
retention arrangement, and any assignment, deposit arrangement or lease intended
as, or having the effect of, security.
"Loan Agreement" shall mean the First Amendment and Restatement, dated as
of June 20, 1997, to the Loan Agreement dated as of December 15, 1994 among the
Lessor, the Lenders and Agent as the same may be amended from time to time in
accordance with the terms thereof.
"Loan Policy" shall have the meaning assigned thereto in Section
3.02(c)(vii) of the Participation Agreement.
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"London Business Day" shall mean a day for dealing in deposits in United
States dollars by and among banks in the London interbank market and which is
also a Business Day.
"Material Adverse Effect" shall mean, with respect to the Lessee, the
Permitted Sublessees or any Subsidiary of any thereof, (i) any material adverse
effect on the business, properties, conditions (financial or otherwise) or
operations, present or prospective, of the Lessee, the Permitted Subsidiaries or
their Subsidiaries since March 31, 1997, (ii) any material adverse effect on the
ability of the Lessee, the Permitted Sublessees or their Subsidiaries to perform
their respective obligations under any of the Transaction Documents, or (iii)
any material adverse effect on the legality, validity, binding effect or
enforceability of any of the Transaction Documents to which the Lessee or
Permitted Sublessees are a party, in each case as determined by the Agent.
"Maturity Date" means, with respect to any of the Notes, December 31, 2001,
or such later date as consented to in writing by all the Lenders and the Equity
Participant.
"Memorandum of Lease" shall mean each Memorandum of Lease, Lessee's
Estoppel, Subordination, Non-Disturbance and Attainment Agreement executed and
delivered by the Lessor, the Lessee and the Agreement in substantially the form
attached as Exhibit C to the Lease Agreement.
"Mortgage and Assignment Agreement" shall mean, with respect to any Leased
Premises located in California, each Deed of Trust with Assignment of Rents,
Security Agreement, and Fixture Filing between the Lessor and the Lessee and
each Memorandum of Lease, Lessee's Estoppel, Subordination, Non-Disturbance and
Attornment Agreement (California form), and with respect to any Leased Property
located in Florida, each Mortgage with Assignment of Rents and Security
Agreement between the Lessor and the Lessee and each Memorandum of Lease,
Lessee's Estoppel, Subordination, Non-Disturbance and Attornment Agreement
(Florida form) in the form attached hereto as Exhibit B, as same may be amended
from time to time in accordance with the terms thereof; and with respect to any
Leased Premises located in a state other than California or Florida such similar
agreements and instruments as are reasonably acceptable to the Agent and its
counsel.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA and covered by Title IV thereof, and to which the Lessee or
any Commonly Controlled Entity contributes or was obligated to contribute in the
immediately preceding five years.
"Notes" shall collectively refer to the Series A Notes and the Series B
Notes issued under the Loan Agreement.
"Official Body" shall mean any government or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of
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either, or any court, tribunal, grand jury or arbitrator, in each case whether
foreign or domestic.
"Outstanding Property Cost" shall mean, as of any date, aggregate Property
Cost theretofore paid by the Lessor less the aggregate amount of Termination
Value payments received prior to such date by the Lessor and less the aggregate
amount of the Principal Component of Basic Rent theretofore received by the
Lessor.
"Owner's Policy" shall have the meaning assigned thereto in Section
3.02(c)(vi) of the Participation Agreement.
"Participation Agreement" shall mean the First Amendment and Restatement,
dated as of June , 1997, to the Participation Agreement, dated as of December
15, 1994, among the Lessee, the Lessor, the Series A Lender, the Series B
Lender, the Equity Participant and the Agent, and the schedules and exhibits
thereto, as the same may be amended from time to time in accordance with the
terms thereof.
"Payment Date" shall mean the last day of each Payment Period.
"Payment Period" means, with respect to any Note, the period commencing on
the initial Closing Date and ending on December 31, 1994, the period commencing
on December 31, 1994, and ending on March 31, 1995, and each of the twenty-seven
(27) subsequent periods commencing on the last day of the immediately preceding
period and ending on the numerically corresponding day in the third calendar
month thereafter, except that each such period that commences on the last London
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last London Business Day of the appropriate subsequent calendar
month; provided, however, the Payment Period for the principal on any Note which
is advanced during a three- month Payment Period shall be from the date of such
advance and ending on the last day of such Payment Period; further, provided,
however, that all of the foregoing provisions shall be subject to the following:
(i) any Payment Period that would otherwise end after the last day of the
Lease Term shall end on such day; and
(ii) if a Payment Period would end on a day that is not a London Business
Day, such Payment Period shall be extended to the next London Business Day
unless such London Business Day would fall in the next calendar month, in which
event such Payment Period shall end on the immediately preceding London Business
Day.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Liens" shall mean (i) the respective rights of the Lessor and
the Lessee provided in the Lease Agreement and the Lien on the Leased Premises
in favor of the
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Agent created by the Mortgage and Assignment Agreement, (ii) Liens for taxes not
yet due or, so long as any Event of Default shall not have occurred and remain
continuing, which taxes are being contested in good faith by appropriate
proceedings diligently pursued and as to which taxes any appropriate reserves
required by generally accepted accounting principles have been made on the books
of the Lessee, (iii) inchoate supplier's, materialmen's, mechanics', worker's,
repairmen's, employees' or other like Liens arising in the ordinary course of
business and not yet due or, so long as no Event of Default shall have occurred
and remain continuing which Liens are being contested in good faith by
appropriate proceedings diligently pursued and as to which Liens appropriate
reserves required by generally accepted accounting principles have been made on
the books of obligor, (iv) the rights of sublessee expressly permitted under the
Lease Agreement and (v) Liens arising out of judgments against the Lessee which
are being appealed and, if an Event of Default or Unmatured Default under the
Lease Agreement shall then exist, have been fully bonded during appeal.
"Permitted Sublease" shall mean a sublease relating to the Leased Premises
between the Lessee and the Permitted Sublessees.
"Permitted Sublessees" shall mean each of Smart & Final Stores Corporation
and Port Stockton Food Distributors, Inc.
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated association, joint-venture, joint-stock company, Official Body or
any other entity.
"Plan" shall mean at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Lessee or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Properties" shall have the meaning assigned thereto in Section 2.01(t) of
the Participation Agreement.
"Property Cost" shall mean the aggregate amount of Purchase Price and
Advances paid by the Lessor.
"Purchase Price" shall mean, with respect to a Leased Premises, the
aggregate purchase price paid by the Lessor for such Leased Premises to the
vendor thereof and the other Persons entitled thereto, together with all closing
costs and expenses paid by the Lessor, as set forth on the related Lease
Supplement.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as amended or supplemented from time to time.
"Renewal Term" shall mean the twenty-six consecutive one-year terms
succeeding the term of the then current Renewal Term, if any, the first of which
shall commence on the last
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day of the Base Term and the remaining of which shall commence on the last day
of the then current Renewal Term, if any, and the last of which shall end on
December 31, 2024.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which thirty day notice period
is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S)2615.
"Required Lenders' Consent" at a given time shall mean the direction to
Agent to take an action or omit to take an action made in writing by holders
representing at least (i) in the case of any direction to Agent to take any
action except as specified in (ii) below, 66 2/3% of the aggregate principal
amount of the Notes then outstanding and (ii) in the case of any instance
involving the reduction of the principal amount of or the extension of the time
scheduled for payment of principal of any Note or reduction of the rate of
interest or extension of the time for payment of interest borne by any Note or
the reduction or postponement of the date for payment of any other fees,
expenses, indemnities or amounts payable under any Note or to the holder
thereof, the holder of such Note.
"Requisition Certificate" shall have the meaning assigned thereto in
Section 3.02(a) of the Agency Agreement.
"Residual Guaranty Payment" shall mean 84.28% of the Outstanding Property
Cost on December 31, 2000.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Lessee's capital stock declared or authorized as such by the board
of directors of the Lessee (except dividends payable solely in shares of its
capital stock), (ii) any payment on account of the purchase, redemption,
retirement or acquisition of (a) any shares of the Lessee's common stock or (b)
any option, warrant or other right to acquire shares of the Lessee's capital
stock.
"Senior Financial Officer" shall mean the president, the chief financial
officer, any executive vice-president and the comptroller or controller of the
Lessee.
"Series A Lender" shall have the meaning assigned thereto in the Loan
Agreement.
"Series A Notes" shall have the meaning assigned thereto in the Loan
Agreement.
"Series B Lender" shall have the meaning assigned thereto in the Loan
Agreement.
"Series B Notes" shall have the meaning assigned thereto in the Loan
Agreement.
"Single Employer Plan" shall mean any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
58
<PAGE>
"Sublease Supplement" shall mean a Sublease Supplement executed by the
Lessee and a Permitted Sublessee in substantially the form attached as Exhibit A
to the Subsidiary Sublease.
"Subsidiary" of a Person at any time shall mean any corporation of which a
majority (by number of shares or number of votes) of any class of outstanding
capital stock normally entitled to vote for the election of one or more
directors (regardless of any contingency which does or may suspend or dilute the
voting rights of such class) is at such time owned directly or indirectly,
beneficially or of record, by such Person or one or more subsidiaries of such
Person, and any trust of which a majority of the beneficial interest is at such
time owned indirectly or indirectly, beneficially or of record, by such Person
or one or more Subsidiaries of such Person.
"Subsidiary Sublease" shall mean each Sublease and Assignment dated as of
December 15, 1994 between the Lessee and a Permitted Sublessee, including each
Sublease Supplement executed in connection therewith, as the same may be amended
from time to time in accordance with the terms thereof, a copy of the form of
which is attached as Exhibit B to the Lease Agreement.
"Substantially Complete" shall mean, with respect to any Leased Premises,
that (a) the materials and equipment for the Improvements have been installed
thereon and are functional, (b) the electrical, lighting, heating and plumbing
systems have been installed and tested, (c) such Leased Premises and the
Improvements are ready for occupancy and use, (d) the Improvements have been
constructed in accordance with the Final Construction Plans for such Leased
Premises and (e) satisfaction of the conditions specified in Section 4.18
hereof; provided, however, the following circumstances shall be disregarded if
--------
remedied, cured or resolved within 120 days thereafter:
(i) any redundant part or piece which is missing or inoperable
which does not affect the occupation or use of the Leased Premises or
Improvements;
(ii) any disputed contract issue which has been submitted for
arbitration or litigation;
(iii) any non-conforming item which has been agreed to be
corrected and the material placed on order which does not affect the
occupation or use of the Leased Premises or Improvements; or
(iv) any punchlist items which will not prevent use and
occupancy of the Leased Premises or Improvements.
"Supplemental Rent" shall mean all amounts, liabilities and obligations
which the Lessee assumes or agrees to pay under the Lease Agreement or any other
Transaction Document to the Lessor or others, including payments of Termination
Value and indemnities, but excluding Basic Rent.
"Survey" shall have the meaning assigned thereto in Section 3.03(d) of the
Participation Agreement.
59
<PAGE>
"Tangible Net Worth" means, with respect to any Person, the common
stockholders' equity of such Person; minus the following (to the extent
-----
reflected in determining such common stockholders' equity): (i) all write-ups
subsequent to the date hereof in the book value of any asset owned by such
Person, (ii) all investments in Persons other than wholly-owned consolidated
Subsidiaries of such Person minus the following (to the extent reflected in
-----
determining such common stockholders' equity): (i) all write-ups subsequent to
the date hereof in the book value of any asset owned by of such Person, (ii) all
investments in Persons other than wholly-owned consolidated Subsidiaries of
such Person and (iii) all unamortized debt discount and expense, unamortized
deferred charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, organization or developmental expenses and other intangible items,
all determined in accordance with generally accepted accounting principles and
(iii) all unamortized debt discount and expense, unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade names, copyrights,
organization or developmental expenses and other intangible items, all
determined in accordance with generally accepted accounting principles.
"Taxes" shall have the meaning given such term in Section 4.02(b) of the
Participation Agreement.
"Termination Value" shall mean, as of any date, the Outstanding Property
Cost as of such date. The Termination Value for any Leased Premises shall be
the portion of the Termination Value allocable to such Leased Premises as
calculated by the Agent, which calculation absent manifest error shall be
conclusive.
"Transaction Documents" shall mean the Lease Agreement, each Lease
Supplement, each Subsidiary Subleases, each Sublease Supplement, the Loan
Agreement, the Participation Agreement, the Mortgage and Assignment Agreements,
the Agency Agreement and the Notes.
"Trust Agreement" shall mean the Trust Agreement dated as of December 15,
1994, between the Equity Participant and the Trust Company.
"Trust Company" shall mean Fleet National Bank (as successor to Shawmut
Bank Connecticut, National Association), a national banking association, and its
successors and assigns.
"Trust Company Officer" means an officer in the corporate trust office of
the Trust Company at which the Trust Estate is administered.
"Trust Estate" shall mean all estate, right, title and interest of the
Lessor in and to the Leased Premises, the Trust Agreement, the Lease Agreement,
each Lease Supplement, each Subsidiary Sublease, each Sublease Supplement, the
Loan Agreement and including, without limitation, (i) all amounts of Basic Rent,
Supplemental Rent, including, without limitation Termination Value) and other
payments of any kind for or with respect to the Leased Premises or payable under
any of the foregoing and (ii) any or all payments or proceeds received by the
Owner Trustee after the termination of the Lease with respect to all or any part
of the Leased
60
<PAGE>
Premises as the result of the sale, lease or other disposition thereof, but
excluding in all cases Excluded Amounts;
"UCC" shall mean the Uniform Commercial Code of the applicable
jurisdiction.
"Unmatured Event of Default" shall mean an event, act or condition which
with notices or lapse of time or both would constitute an Event of Default.
"Unmatured Event of Default" shall mean an event, act or condition which
with notice or lapse of time or both would constitute an Event of Default.
"Work" means all items of work required by the Agency Agreement and the
applicable Final Construction Plans necessary to design, acquire, construct and
install the Improvements, provided that the Work shall not consist of more than
twenty stores and two distribution centers.
61
<PAGE>
EXHIBIT B
TO THE PARTICIPATION AGREEMENT
FORM OF MORTGAGE AND ASSIGNMENT AGREEMENT
THE FORM OF MORTGAGE FROM THE ORIGINAL PARTICIPATION AGREEMENT IS INCORPORATED
HEREIN BY REFERENCE.
62
<PAGE>
SCHEDULE 1
TO THE PARTICIPATION AGREEMENT
LENDERS' COMMITMENTS
ALL ADVANCES HAVE BEEN FULLY FUNDED.
CL (Equity Portion) $900,000 (C Note)
<TABLE>
<CAPTION>
A NOTE B NOTE TOTAL "A" PERCENT "B" PERCENT
<S> <C> <C> <C> <C> <C>
Credit Lyonnais $ 7,906,680.40 $1,193,319.60 $ 9,100,000.00 31.2714776% 31.2714780%
Via Banque $ 4,344,329.90 $ 655,670.10 $ 5,000,000.00 17.1821306% 17.1821305%
Bank Leumi $ 4,344,329.90 $ 655,670.10 $ 5,000,000.00 17.1821306% 17.1821305%
Fuji Bank $ 4,344,329.90 $ 655,670.10 $ 5,000,000.00 17.1821306% 17.1821305%
IBJ $ 4,344,329.90 $ 655,670.10 $ 5,000,000.00 17.1821306% 17.1821305%
$25,284,000.00 $3,816,000.00 $29,100,000.00 100.000000% 100,000000%
</TABLE>
63
<PAGE>
SCHEDULE 2
TO THE PARTICIPATION AGREEMENT
SCHEDULE OF PRINCIPAL COMPONENT OF BASIC RENT/1/
Payment Date Principal Component Percentage
------------ ------------------------------
On or before
December 31, 2000 0%
March 31, 2001 1.042%
June 30, 2001 1.042%
September 30, 2001 1.042%
December 31, 2001 Remaining principal balance
- -----------------------
/1/ The Principal Component for any date is the percentage set forth opposite
such date multiplied by the excess of the Outstanding Property Cost on December
31, 2000 over any Termination Value payments made after December 31, 2000.
64
<PAGE>
[Execution Copy]
FIRST AMENDMENT AND RESTATEMENT
Dated as of June 20, 1997
TO
AGENCY AGREEMENT
Dated as of December 15, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Defined Terms............................................ 1
ARTICLE II
Agency................................................ 1
SECTION 2.01 Appointment............................................................ 1
SECTION 2.02 Performance of and Payment for the Work................................ 2
ARTICLE III
Lessor's Advances and Reimbursements...................... 2
SECTION 3.01 Lessor's Obligations.................................................. 2
SECTION 3.02 Advances of Lessor's Share............................................ 3
ARTICLE IV
Performance of the Work.................................. 3
SECTION 4.01 Scope of Work......................................................... 3
SECTION 4.02 Performance of Work................................................... 4
SECTION 4.03 Permits............................................................... 4
SECTION 4.04 Competent Workforce................................................... 4
SECTION 4.05 Compliance with Legal Requirements.................................... 4
SECTION 4.06 Labor................................................................. 4
SECTION 4.07 Books and Records..................................................... 4
SECTION 4.08 Environmental Laws.................................................... 5
SECTION 4.09 Inspection Rights..................................................... 5
SECTION 4.10 Completion Date....................................................... 5
SECTION 4.11 Change Orders......................................................... 6
SECTION 4.12 Independent Contractor Status......................................... 6
SECTION 4.13 Removal of Liens...................................................... 6
SECTION 4.14 Standard of Work...................................................... 6
SECTION 4.15 Notice of Delay....................................................... 7
SECTION 4.16 Warranty of Title..................................................... 7
SECTION 4.17 Lease Agreement....................................................... 7
SECTION 4.18 Conditions of Completion.............................................. 7
ARTICLE V
Defaults and Remedies................................ 8
SECTION 5.01 Events of Default.................................................... 8
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 5.02 Remedies............................................................. 8
SECTION 5.03 Costs of Enforcement................................................. 9
SECTION 5.04 Cumulative Remedies.................................................. 9
ARTICLE VI
Exculpation of Lessor................................... 9
ARTICLE VII
Miscellaneous....................................... 10
SECTION 7.01 Governing Law; Etc.................................................. 10
SECTION 7.02 Notices; Modification............................................... 10
SECTION 7.03 Illegal Provision................................................... 10
SECTION 7.04 Binding Effect...................................................... 10
SECTION 7.05 Counterparts........................................................ 11
SECTION 7.06 Headings............................................................ 11
SECTION 7.07 Time of Essence..................................................... 11
</TABLE>
Exhibit A
REQUISITION CERTIFICATE A-1
ii
<PAGE>
FIRST AMENDMENT AND RESTATEMENT, dated as of June 20, 1997, to AGENCY
AGREEMENT (the "Original Agency Agreement"), dated as of December 15, 1994,
between FLEET NATIONAL BANK (as successor to Shawmut Bank Connecticut, National
Association,) a national banking association, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement (the "Lessor") and SMART &
FINAL INC., a Delaware corporation (the "Construction Agent").
The parties hereto hereby agree that the Original Agency Agreement is
amended and restated to read in its entirety as follows:
ARTICLE I
Defined Terms
-------------
Capitalized terms used herein and not otherwise defined in Article I of this
Agency Agreement shall have the respective meanings set forth in the Definition
Schedule attached as Exhibit A to the Participation Agreement, which Definition
Schedule is hereby made a part hereof for all purposes.
ARTICLE II
Agency
------
SECTION 2.01 Appointment. Solely for the limited purposes
-----------
hereinafter set forth, the Lessor hereby designates the Construction Agent as
its agent, and the Construction Agent hereby accepts such appointment, to
design, acquire, construct, and install the Improvements, in each case in
accordance with the Final Construction Plans for each Leased Premises and
subject to the terms and conditions of this Agency Agreement, to pay for the
Improvement Cost from its own funds, to cause title to the same to be vested in
or otherwise conveyed to the Lessor, and otherwise to perform or cause to be
performed the Work. The Construction Agent shall have no authority to act for
or on behalf of the Lessor except with respect to the design, acquisition,
construction and installation of the Improvements and the performance of the
Work, and the performance of ministerial functions in connection with and in
furtherance of the foregoing. The acceptance, or the failure to act where
silence implies such acceptance, by the Construction Agent on behalf of the
Lessor of any property or any contractual obligation with respect to which the
Construction Agent does not have authority to act on behalf of the Lessor as
described in this Agency Agreement shall be ineffective, ab initio, to create
-- ------
in, or transfer to, the Lessor any legal or beneficial right or interest in such
property or any contractual obligation or to impose on the Lessor any liability,
obligation or responsibility with respect thereto. The Construction Agent shall
cause any agreement, contract, purchase order, or other writing entered into by
the Construction Agent purporting to be binding upon the Lessor to refer to the
Construction
1
<PAGE>
Agent as agent for the Lessor, and to provide that the Lessor shall
have no obligation for payment of any amount thereunder. The authority of the
Construction Agent hereunder shall terminate on the earliest to occur of (i)
completion of all of the Work (including all punchlist items) in accordance with
the terms and conditions of this Agency Agreement or (ii) termination of the
Construction Agent's authority pursuant to Section 5.02(a) hereof following
occurrence of an Event of Default. The termination of the Construction Agent's
authority hereunder shall not discharge the Construction Agent or limit in any
way the Construction Agent's liability hereunder with respect to obligations
arising out of this Agency Agreement and the Construction Agent's performance
hereunder, including, without limitation, with respect to the Construction
Agent's indemnification of the Indemnitee pursuant to the Participation
Agreement.
SECTION 2.02 Performance of and Payment for the Work. The
---------------------------------------
Construction Agent shall itself perform or caused to be performed by others the
work in accordance with the provisions of this Agency Agreement including,
without limitation, the provisions of Article IV, and shall cause the
Improvements to be Substantially Complete by the Completion Date. The
Construction Agent shall pay for the Improvement Cost using its own funds,
subject to reimbursement by the Lessor to the extent provided by Article III
hereof. If, for any reason, the Improvement Cost exceeds the Lessor's
obligation to reimburse the Construction Agent pursuant to Article III hereof,
the Construction Agent shall, nonetheless, be bound and required to fulfill its
obligations hereunder and to pay such excess Improvement Cost and all other
costs in connection with the Work, and, under no circumstances shall the
insufficiency of the funds available to the Construction Agent reduce or release
the Construction Agent from any of its obligations hereunder. The Lessor shall
not be liable to the Construction Agent for failure or delay in any aspect of
the performance of the Work. Upon delivery, installation, testing or completion
of construction of any aspect of the Work, as appropriate, the Construction
Agent shall inspect such aspect of the Work, and unless the Construction Agent
gives the Lessor and the Agent prompt written notice of any defect in or other
objection to such aspect of the Work, the Construction Agent shall be deemed to
have accepted such aspect of the Work and, as between the Lessor and the
Construction Agent, but without waiving any rights against contractors and
vendors, the Construction Agent shall be deemed to have agreed that such aspect
of the Work is satisfactory to the Construction Agent in all respects and
suitable for its purposes.
ARTICLE III
Lessor's Advances and Reimbursements
------------------------------------
SECTION 3.01 Lessor's Obligations. Subject to the terms and
--------------------
conditions of the Participation Agreement and of this Agency Agreement,
including satisfaction of the applicable conditions set forth in Article III of
the Participation Agreement, on each quarterly Advance Date, the Lessor paid the
Lessor's Share of the Improvement Cost as of such Advance Date. Such payments
of the Lessor's Share of the Improvement Cost were funded by the Lessor solely
from the sources specified in
2
<PAGE>
Sections 1.02 and 1.03 of the Participation Agreement. All Advances permitted
under the Transaction Documents have been made. Nothing contained in this Agency
Agreement shall in any way obligate the Lessor to pay any debt or meet any
financial obligation of the Construction Agent under this Agency Agreement or
otherwise with respect to the Work, except from monies actually received by the
Lessor from said sources.
SECTION 3.02 Advances of Lessor's Share.
---------------------------
(a) Each Advance shall be made on an Advance Date, subject to receipt
by the Lessor and the Agent at least three Business Days prior thereto, of a
completed and executed Requisition Certificate in the form of Exhibit A hereto.
(b) Each Advance shall be in an amount set forth on the Requisition
Certificate and shall not be in excess of the lesser of (i) Lessor's Share of
Improvement Cost as of such date and (ii) $30,000,000 less the Outstanding
Property Cost as of such date. The final Advance on account of the Improvements
shall be made on or before the Completion Date; provided, however, if the Lessor
--------
and the Agent have consented to an extension of the Completion Date for a Leased
Premises, then, with the consent of the Lessor and the Agent, which may withhold
such consent for any or no reason, the final Advance may include funds
requisitioned in anticipation of Improvement Cost to be incurred in connection
with final completion of the Work after December 31, 1995.
(c) The Lessor shall make or cause to be made each Advance by wire
transfer to the account of the Construction Agent and in such manner as the
Construction Agent may designate in writing no later than ten days before the
applicable Advance Date. Any additional Advance that would otherwise be
required to be made on a day that is not a Business Day shall be made on the
next following Business Day.
ARTICLE IV
Performance of the Work
-----------------------
The Construction Agent shall design, acquire, construct, and install
the Improvements on the Leased Premises in accordance with the following:
SECTION 4.01. Scope of Work. The Construction Agent shall design,
-------------
acquire, construct, and install the Improvements and otherwise perform the Work
in accordance with the Final Construction Plans in a good and workman like
manner under the supervision of a licensed architect or engineer. For each
Leased Premises, the Initial Construction Plans for the Improvements for such
Leased Premises shall be delivered to the Lessor and the Agent prior to the
Closing Date for such Leased Premises and the Final Construction Plans for such
Improvements shall be delivered to the Lessor and the Agent on or prior to the
30th day preceding commencement of construction of such Improvements.
3
<PAGE>
SECTION 4.02 Performance of Work. The Construction Agent shall be
-------------------
solely responsible for all means, methods and techniques in the performance of
the Work, and shall perform the Work or cause the Work to be performed in
accordance with the provisions of this Article IV. In furtherance, and not in
limitation of, Sections 9 and 14 of the Lease Agreement, the Construction Agent
shall promptly remedy damage or loss to any property referred to herein caused
in whole or in part by the Construction Agent, any contractor, any
subcontractor, any vendor, or anyone directly or indirectly employed by any of
them, or by anyone for whose acts any of them is liable and, therefore, for
which the Construction Agent is responsible hereunder.
SECTION 4.03 Permits. The Construction Agent shall obtain and
-------
pay for any and all permits and bonds required to be obtained before
commencement of the Work and for all other permits, governmental fees, sales
taxes and use taxes, licenses and inspections necessary or, in the opinion of
the Construction Agent, desirable for the proper execution and completion of the
Work as and when the same are required to be obtained, and, upon the request of
the Lessor or the Agent, shall provide evidence thereof.
SECTION 4.04 Competent Workforce. The Construction Agent shall
-------------------
employ, or cause its contractor to employ, a competent project manager at all
times during the progress of the Work. The Construction Agent shall be
responsible to each Indemnitee for, and shall defend and shall hold each
Indemnitee harmless from and against, the acts and omissions of its employees,
contractors and subcontractors, their respective agents and employees and any
other persons performing any of the Work, all in accordance with Section 4.02 of
the Participation Agreement.
SECTION 4.05 Compliance with Legal Requirements. The Construction
----------------------------------
Agent shall perform the Work in accordance in all material respects with all
applicable laws, rules, regulations and licenses and shall give all notices
applicable thereto, and when completed, all buildings, structures, site
improvements and the like that are part of the Improvements shall be wholly
within applicable building restriction lines and will not violate in any
material respect applicable use or other restrictions, whether established in
prior conveyances, zoning laws, governmental regulations or otherwise.
SECTION 4.06 Labor. The Construction Agent and its contractors may
------
employ open shop or union labor for performance of the Work. If the
Construction Agent or any contractor uses union labor, the Construction Agent
shall comply, or cause such contractor to comply with all union contract
requirements, including, without limitation, shop stewards, if required. In the
event of a stoppage, the Construction Agent shall make, or cause its contractor
to make, every reasonable effort to staff the performance of the Work properly.
SECTION 4.07 Books and Records. The Construction Agent shall at
-----------------
all times during the performance of the Work keep and maintain accurate books,
4
<PAGE>
records and accounts showing all materials ordered and received and all
disbursements and accounts payable in connection with performance of the Work.
SECTION 4.08 Environmental Laws. The work shall be performed in
------------------
compliance in all material respects with all applicable Environmental Laws and
all necessary environment permits will be obtained and maintained in full force
and effect.
SECTION 4.09 Inspection Rights. The Construction Agent shall
-----------------
allow the Agent and the Lessor, (or their authorized agents) to enter each
Leased Premises to inspect the Improvements upon prior written request and
during normal business hours at a time reasonably approved by the Construction
Agent, which request and approval shall not be required in the event of an
emergency or if an Event of Default hereunder or under the Loan Agreement or
Lease Agreement has occurred and is continuing, for the purpose of inspecting
the progress of the Work and examining all books, accounts, plans, drawings and
records with respect thereto. Such entry and inspection shall be carried out in
a manner that does not unreasonably disrupt the Work. So long as no Event of
Default has occurred and is continuing hereunder or thereunder, such entry and
inspection shall be made no more frequently than quarterly and at the inspecting
party's expense. While any Event of Default is continuing hereunder or
thereunder, such entry and inspection may be made from time to time at the
Construction Agent's expense.
SECTION 4.10 Completion Date.
---------------
(a) The Construction Agent shall cause the Improvements for such
Leased Premises and all portions of the Work associated therewith to be
Substantially Complete no later than Completion Date for such Improvements. So
long as no Event of Default or Unmatured Event of Default hereunder or under the
Loan Agreement or Lease Agreement shall have occurred and be continuing, in the
event that the Construction Agent determines that the Improvements for any
Leased Premises will not be Substantially Complete on or before the Completion
Date thereof, upon (i) the written request of the Construction Agent to the
Lessor and the Agent no later than the Completion Date and (ii) the written
consent of the Lessor and the Agent to such request, which consent may be
withheld for any or no reason, then the Completion Date shall be extended for a
period of time so designated by the Lessor and the Agent, but no later than May
31, 1997.
(b) If (i) the Improvements for any Leased Premises are not
Substantially Complete by the Completion Date thereof, (ii) if the Completion
Certificate and other documents specified in Section 4.18 hereof have not been
delivered for any Leased Premises by the Completion Date or (iii) if the actual
Property Cost for any Leased Premises set forth in the Completion Certificate is
greater than the lesser of (x) the Estimated Improvement Cost plus the Purchase
Price thereof or (y) the Appraised Value then, without limitation to Lessor's
rights in Article V, the Lessor may elect to require the Lessee to purchase such
Leased Premises as provided in Section 14(c) of the Lease Agreement.
5
<PAGE>
(c) Within 120 days after the date on which the Improvements are
Substantially Complete, the Construction Agent shall cause to be completed all
punchlist items and other aspects of the Work contemplated by the definition of
"Substantially Complete".
SECTION 4.11 Change Orders. Except as otherwise specifically set
-------------
forth herein, without invalidating this Agency Agreement, the Construction Agent
may order changes in the Work within the general scope of this Agency Agreement
consisting of additions, deletions or other revisions that the Construction
Agent deems necessary or desirable that do not adversely affect the soundness,
structural integrity, value, utility, operation or useful life of any
Improvements (any such change, a "Change Order"). All Change Orders shall be
performed under the applicable conditions of this Agency Agreement. On or
before the Completion Date, the Construction Agent shall deliver to the Lessor
and to the Agent copies of all supplements to, and amendments and modifications
of, the Final Construction Plans reflecting all Change Orders. No Change Order
shall be deemed to extend the Completion Date or modify the Estimated
Improvement Cost, nor shall the implementation of any Change Order constitute
evidence of any party's consent to such extension, unless the Lessor and the
Construction Agent have expressly agreed that the Completion Date is so extended
pursuant to Section 4.10 hereof.
SECTION 4.12 Independent Contractor Status. The Construction
-----------------------------
Agent recognizes that despite its designation as the Lessor's agent hereunder,
it is engaged as an independent contractor hereunder and acknowledges that
Lessor shall not have any responsibility to provide any benefits normally
associated with employee status. The Construction Agent, in accordance with its
status as an independent contractor, covenants and agrees that it will conduct
itself in a manner consistent with such status, that it will neither hold itself
out as, nor claim to be an officer, director, partner or employee of the Lessor
or the Agent by reason hereof, and that it shall not by reason hereof make any
claim, demand or application to or for any right or privilege applicable to an
officer, director, partner or employee of the Lessor or the Agent.
SECTION 4.13 Removal of Liens. If any notices of contract,
----------------
statements of claim with respect to unpaid costs for the performance of the work
or mechanics, or materialmen's liens (collectively, "Mechanics' Liens") are
filed against any Leased Premises, or any portion of any thereof, by any vendor
or agent of the Construction Agent or any employee, contractor or subcontractor
with respect to the Work, the Construction Agent agrees to promptly, and in any
event prior to the next Advance Date, to cause such Mechanic's Lien to be
removed or bonded against at its sole cost and expense as of such date.
SECTION 4.14 Standard of Work. The Construction Agent warrants to
----------------
the Lessor that all materials shall be new (except as otherwise set forth in the
Final Construction Plans) and of good quality and all Work shall be of good and
workmanlike quality, and in conformance with the requirements of the Final
Construction Plans and as set forth in this Agency Agreement.
6
<PAGE>
SECTION 4.15 Notice of Delay. The Construction Agent shall give
---------------
the Lessor and the Construction Agent prompt written notice of interruption of
the performance of the Work that may interfere with its ability to complete any
Improvements by the applicable Completion Date.
SECTION 4.16 Warranty of Title. The Construction Agent represents
-----------------
and warrants to and covenants with the Lessor that the Lessor has and shall have
good title to the Leased Premises, subject only to the Permitted Liens, and
that, except for the Lessor Liens, the Construction Agent shall warrant and
defend the same to the Lessor against the claims and demands of all Persons.
SECTION 4.17 Lease Agreement. The provisions of the Lease
---------------
Agreement shall be fully applicable to the Construction Agent, as agent
hereunder, and the Construction Agent shall comply with all the terms and
conditions thereof.
SECTION 4.18 Conditions of Completion. As a condition precedent
------------------------
to consideration of the Improvements as being Substantially Complete and as a
condition of satisfaction of the Construction Agent's obligations under Section
4.10(a) hereof, the Construction Agent shall deliver or cause to be delivered to
the Lessor all of the following items which must be satisfactory in form and
substance to the Lessor and the Agent:
(a) Final lien waivers with respect to the Improvements from any
contractor or subcontractor performing construction or installation services for
any of the Improvements establishing that all work and labor performed and
materials furnished through such date has been paid for in full, or a bond or
other assurance of payment with respect thereto or a certificate as to the non-
existence of any liens as contemplated by the form of Requisition Certificate
attached hereto as Exhibit A;
(b) All necessary consents, licenses, authorizations and approvals of
municipal or other state or federal governmental authorities having jurisdiction
over the Improvements have been obtained (including without limitation
environmental permits, but, excluding certificates of occupancy which the
Construction Agent has applied for and is diligently prosecuting);
(c) An officer's certificate (the "Completion Certificate") that the
Improvements are Substantially Complete and no Event of Default hereunder has
occurred and is continuing and setting forth the actual Improvement Cost
thereof; and
(d) A certificate of a licensed architect or engineer selected by the
Agent, subject to the Construction Agent's reasonable approval (the cost of whom
shall be paid by the Construction Agent), to the effect that the Improvements
are Substantially Complete.
7
<PAGE>
ARTICLE V
Defaults and Remedies
---------------------
SECTION 5.01 Events of Default. Any of the following shall
-----------------
constitute an Event of Default by the Construction Agent under this Agency
Agreement:
(a) If the Construction Agent defaults in making payment of any sum
payable hereunder and such default continues for five Business Days of such
default;
(b) If, as of the time when the same shall have been made, any
representation or warranty of the Construction Agent set forth herein or in any
consent, notice, certificate, demand, request or other instrument delivered by
the Construction Agent in connection with or pursuant to this Agency Agreement,
any other Transaction Document to which it is a party or the transactions
contemplated hereby or thereby shall prove to have been incorrect or untrue in
any material respect when made;
(c) If the Construction Agent fails to cause the Improvements to be
Substantially Complete in accordance with the Final Plans by the Completion Date
for a cost not greater than the Appraised Value, or if the Construction Agent
otherwise fails to satisfy conditions (i), (ii) or (iii) of Section 4.10(b)
hereof; or
(d) If the Construction Agent shall fail to cause any Mechanic's Lien to
be removed or bonded against in accordance with Section 4.13 hereof, or fail to
maintain the insurance required by Section 4.17 hereof;
(e) If the Construction Agent defaults in the performance in any other
covenant, agreement, or obligation on the part of the Construction Agent to be
performed under this Agency Agreement, and such default continues for a period
of thirty (30) days after notice thereof; provided, however, that in the case of
--------
a default that can with reasonable diligence be remedied by the Construction
Agent, but not within a period of thirty (30) days, if the Construction Agent
shall promptly commence to remedy the default and thereafter shall prosecute the
cure of such default with reasonable diligence, the period of time after
obtaining such notice of default within which to remedy the default shall be
extended for such period as may be reasonable to remedy the same with all
reasonable diligence, up to a maximum period of 90 days after notice of such
default; and
(f) An Event of Default, as defined in any of the other Transaction
Documents, by the Construction Agent shall have occurred and be continuing under
any of the Transaction Documents.
SECTION 5.02 Remedies. After the occurrence of any Event of Default
--------
hereunder, the Lessor shall have all rights and remedies available at law and in
equity
8
<PAGE>
and without limiting the generality of the foregoing, may elect to
exercise any or all of the following remedies which shall be cumulative and not
exclusive:
(a) Terminate the Construction Agent's authority and all of the
Construction Agent's rights and privileges under this Agency Agreement;
(b) Exercise all rights and remedies of the Lessor under any or all of
the Transaction Documents;
(c) Demand immediate payment of all sums due hereunder together with
interest thereon at the Late Payment Rate until paid;
(d) Specifically enforce the Construction Agent's obligations pursuant to
Article IV hereof;
(e) Recover from the Construction Agent all other damages and expenses
that the Lessor may have sustained by reason of the Event of Default, including,
without limitation, reasonable attorneys' fees and expenses, which damages and
expenses shall be paid by the Construction Agent as they are incurred by the
Lessor, together with interest thereon at the Late Payment Rate until paid.
SECTION 5.03 Costs of Enforcement. If an action shall be brought by
--------------------
the Lessor for the enforcement of any provision of this Agency Agreement, the
Construction Agent shall pay to the Lessor all costs and other expenses that may
become payable as a result thereof, including, without limitation, reasonable
attorneys' fees and expenses.
SECTION 5.04 Cumulative Remedies. No right or remedy herein
-------------------
conferred upon or reserved to the Lessor is intended to be exclusive of any
other right or remedy and every right and remedy shall be cumulative and in
addition to any other legal or equitable right or remedy given hereunder, or at
any time existing. The failure of the Lessor to insist upon the strict
performance of any provision or to exercise any option, right, power or remedy
contained in this Agency Agreement shall not be construed as a waiver or a
relinquishment thereof for the future.
ARTICLE VI
Exculpation of Lessor
---------------------
Anything in this Agency Agreement to the contrary notwithstanding, except
with respect to the Lessor Liens attributable to the Lessor and the Lessor's
gross negligence, willful misconduct or fraud, no recourse or relief shall be
had under any rule of law or equity, statute or constitution, or by enforcement
of any assessments, penalties, damages, judgments, or otherwise, for liability
arising from this or the other Transaction Documents (whether by breach of any
obligation, monetary or nonmonetary on the part
9
<PAGE>
of the Lessor) against the Lessor personally or against any officer, member,
director, or representative of the Lessor, including any predecessor or
successor of the Lessor, it being expressly understood and agreed that any
liability or obligation of the Lessor under this Agency Agreement is chargeable
to and compensable solely and exclusively from the Lessor's interest, if any, in
and to the Leased Premises, and any funds or proceeds (including rights to funds
and proceeds) in possession of the Lessor in any manner derived from the
Lessor's rights or interests under the Transaction Documents, and any claim of
liability other than the foregoing is hereby expressly waived by the
Construction Agent and by any Person claiming by, through or under the
Construction Agent.
ARTICLE VII
Miscellaneous
-------------
SECTION 7.01 Governing Law; Etc. The provisions of Section 6.06 of
-------------------
the Participation Agreement are hereby incorporated herein by reference.
SECTION 7.02 Notices; Modification.
----------------------
(a) Any notices required or permitted hereunder or under any Transaction
Document, or by Law in respect of any Transaction Document, shall be in writing
and shall be deemed given and effective when personally delivered, or if sent by
registered or certified mail, four Business Days after date of delivery to the
post office, or if sent by overnight delivery (express mail or overnight
courier), when received, or if sent by telex or telecopy, upon receipt, in each
case addressed to the Person required to receive the same at the address stated
on the signature pages of the Participation Agreement or in accordance with the
last unrevoked written direction from such Person to the other parties hereto.
(b) The terms of this Agency Agreement shall not be waived, altered,
modified, amended, supplemented, or terminated in any manner whatsoever except
by written instrument signed by the parties hereto.
SECTION 7.03 Illegal Provision. If any provision herein contained
-----------------
shall be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, and this Agency Agreement shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein.
SECTION 7.04 Binding Effect. The covenants, conditions and
--------------
agreements herein contained shall bind, and the benefits and advantages shall
inure to, the respective heirs, executors, administrators, successors and
assigns of the parties hereto. With respect to provisions of the provisions in
this Agency Agreement that by their terms are expressly for the benefit of any
of the Indemnified Parties, such Persons shall be third party beneficiaries of
this Agency Agreement and shall be entitled to
10
<PAGE>
enforce such provisions. Pursuant to the Mortgage and Assignment Agreements, the
Agent, for the benefit of the Lenders and the Equity Participant shall have the
right to and enforce any right or remedy available to the Lessor hereunder or
under any other Transaction Document (without the need for any further written
assignment). Whenever used, the singular shall include the plural, the plural
include the singular and the use of any gender shall include all genders.
SECTION 7.05 Counterparts. This Agency Agreement may be executed in
------------
any number of counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same instrument.
SECTION 7.06 Headings. The headings to the various sections of this
--------
Agency Agreement have been inserted for the convenience of reference only and
shall not limit or otherwise affect any of the terms hereof.
SECTION 7.07 Time of Essence. Time is of the essence of this Agency
---------------
Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned set their hands under seal as of the day
and year first above written.
FLEET NATIONAL BANK
Not in its individual capacity but
solely as Owner Trustee under the Trust Agreement
By: /s/ E.C. Hammer
---------------
Name: Elizabeth C. Hammer
Title: Vice President
12
<PAGE>
SMART & FINAL INC.
By: /s/ Donald G. Alvarado
----------------------
Name: Donald G. Alvarado
Title: Sr. V.P., Law/Development
13
<PAGE>
Exhibit A
REQUISITION CERTIFICATE
As of the date of this First Amendment and Restatement to the Agency Agreement,
all Advances have been fully funded. Accordingly, the form of the Requisition
Certificate attached to the Original Agency Agreement is incorporated herein by
reference.
14
<PAGE>
[Execution Copy]
FIRST AMENDMENT AND RESTATEMENT
Dated as of June 20, 1997
TO
LEASE AGREEMENT
Dated as of December 15, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Definitions......................................................... iii
SECTION 2. Lease of Leased Premises............................................ iii
SECTION 4. Rent................................................................ 3
SECTION 5. Net Lease Agreement................................................. 3
SECTION 6. Use of Leased Premises.............................................. 4
SECTION 7. Compliance with Laws................................................ 5
SECTION 8. Property Taxes and Assessments...................................... 5
SECTION 9. Maintenance and Repair of Property; Alterations..................... 6
SECTION 10. Insurance........................................................... 6
SECTION 11. Assignment and Subletting........................................... 9
SECTION 12. Liens............................................................... 11
SECTION 13. Certain Personal Property........................................... 11
SECTION 14. Loss, Damage or Destruction......................................... 12
SECTION 15. Lessee's Rights of Purchase and Renewal; Purchase Obligation........ 13
SECTION 16. Sale of Leased Premises............................................. 14
SECTION 17. Late Charges........................................................ 15
SECTION 18. No Warranties....................................................... 15
SECTION 19. Events of Default................................................... 16
SECTION 20. Remedies Upon Default............................................... 17
SECTION 21. Certain Waivers..................................................... 23
SECTION 22. Memorandum of Lease................................................. 24
SECTION 23. Lessor's Right to Perform for the Lessee............................ 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 24. Notices............................................................. 25
SECTION 25. Nature of Transaction............................................... 25
SECTION 26. Operating Lease..................................................... 26
SECTION 27. Governing Law....................................................... 26
SECTION 28. Miscellaneous....................................................... 26
</TABLE>
ii
<PAGE>
FIRST AMENDMENT AND RESTATEMENT, dated as of June 20, 1997, to LEASE
AGREEMENT (the "Original Lease Agreement"), dated as of December 15, 1994,
between FLEET NATIONAL BANK (as successor to Shawmut Bank Connecticut, National
Association), a national banking association, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement (the "Lessor") and SMART &
FINAL INC., a Delaware corporation (the "Lessee").
The parties hereto hereby agree that the Original Lease Agreement is
amended and restated to read in its entirety as follows:
SECTION 1. Definitions. All capitalized terms used and not defined
-----------
herein shall have the respective meanings ascribed thereto in Exhibit A to the
First Amendment and Restatement, dated as of June 20, 1997, to the Participation
Agreement dated as of December 15, 1994, among the parties hereto, Credit
Lyonnais New York Branch, as Agent, and the Lenders and Equity Participant named
therein, as amended from time to time.
The words "this Lease Agreement", "herein", "hereunder", "hereof" or other
like words mean and include this Lease Agreement, each Lease Supplement, and
each amendment and supplement hereto and thereto.
SECTION 2. Lease of Leased Premises.
------------------------
(a) Subject to the terms and conditions hereof, the Lessor agrees to lease
to the Lessee any and all of the Leased Premises for the Lease Term. The Lessor
shall not be obligated to acquire any Leased Premises for lease hereunder
unless:
(i) the Purchase Price plus the Estimated Improvement Cost of such
Leased Premises and all other Leased Premises leased hereunder does not
exceed $30,000,000;
(ii) the Lessee causes the conveyance of title to such Leased Premises
to the Lessor as provided in Section 3.02 of the Participation Agreement;
(iii) at the time any such Leased Premises is to be leased hereunder,
there exists no Event of Default or Unmatured Event of Default; and
(iv) the other terms and conditions hereof and of the Participation
Agreement including without limitation the terms and conditions of Article
III thereof are satisfied.
(b) The lease of each of the Leased Premises to the Lessee under this
Lease Agreement shall be evidenced by the execution and delivery by the Lessor
and the Lessee of a Lease Supplement. In addition, each Advance made by the
Lessor to the Lessee under the Agency Agreement shall be evidenced by a Lease
Supplement. All Closing Dates which may occur hereunder or under any of the
Transaction Documents have occurred.
(c) Execution by the Lessee of a Lease Supplement shall constitute (i)
in the case of a Lease Supplement evidencing the lease of Leased Premises, (x)
acknowledgment by the Lessee that possession of the Leased Premises specified
therein has been delivered to the
<PAGE>
Lessee in good condition and has been accepted for lease hereunder by the Lessee
as of the Closing Date, and (y) acknowledgment by the Lessee that the Leased
Premises specified therein are subject to all of the covenants, terms and
conditions of this Lease Agreement and such Lease Supplement, or (ii) in the
case of a Lease Supplement evidencing an Advance under the Agency Agreement, (x)
acknowledgment by the Lessee that all the Work performed and Improvements
constructed to date are a part of the Leased Premises and subject to the Lease
Agreement and (y) acknowledgment that the amount of such Advance shall be added
to, and become a part of, the Outstanding Property Cost on such Advance Date.
(d) So long as the Lessee pays the Basic Rent, any Supplemental Rent and
any other sums payable hereunder as the same become due and fully complies with
all of the terms of this Lease Agreement and the other Transaction Documents and
fully performs its obligations hereunder and thereunder, and so long as no Event
of Default has occurred and is continuing, the Lessor covenants that, subject to
the terms of this Lease Agreement and the other Transaction Documents, neither
the Lessor nor anyone claiming by, through or under the Lessor shall interfere
with the Lessee's peaceful and quiet enjoyment of the Leased Premises (except in
respect of claims which the Lessee is obligated to indemnify any Indemnified
Party pursuant to Section 4.02 of the Participation Agreement and claims arising
from encumbrances on any Leased Premises existing on the Closing Date thereof).
No failure by the Lessor to comply with the foregoing covenant shall give the
Lessee any right to cancel or terminate this Lease Agreement or to abate, reduce
or make a deduction from or offset against the Basic Rent, Supplemental Rent or
any other amount payable under this Lease Agreement, or to fail to perform any
other obligation of Lessee hereunder.
SECTION 3. Term.
----
(a) The "Base Term" for the Leased Premises described in a Lease Supplement
shall commence on the Closing Date set forth in such Lease Supplement, which (as
described in the Participation Agreement) is the date on which such Leased
Premises is accepted for lease hereunder by the Lessee, and shall continue until
December 31, 2001, unless terminated earlier pursuant to Section 14, 15, 16 or
20 hereof.
(b) Subject to the conditions set forth in Section 15(b) hereof, each
"Renewal Term" shall be for a period of one (1) year and shall commence on the
first day following the last day of the Base Term (in the case of the first
Renewal Term) or the last day of the preceding Renewal Term (in the case of
subsequent Renewal Terms), unless terminated earlier pursuant to Section 14, 15,
16 or 20 hereof. There may be a maximum of twenty-three (23) Renewal Terms
elected by the Lessee as provided in Section 15 hereof.
(c) The "Lease Term" shall consist of the Base Term and all Renewal Terms;
provided, however, that the Lease Term shall not, in any event, extend beyond
- --------
the first to occur of (i) December 31, 2024 and (ii) the Maturity Date of the
Notes.
(d) If the Lessee remains in possession of the Leased Premises after the
expiration of the Lease Term, such continued possession shall, if rent is paid
by the Lessee and accepted by the Lessor, create a month-to-month tenancy on the
terms and conditions herein specified but at a Basic Rent equal to the Basic
Rent that would have been payable during the period of the hold-over had the
Lessee exercised its right to extend the Lease Term for the Renewal Term
2
<PAGE>
immediately following the expiration of the Lease Term except that the Finance
Rate used in calculating the Basic Rent shall be the Late Payment Rate, and said
tenancy may be terminated at any time by either party by 30 days' prior written
notice to the other party.
SECTION 4. Rent.
----
(a) The Lessee hereby agrees to pay to the Lessor on each Payment Date
during the Lease Term the Basic Rent due on such date.
(b) The Lessee also agrees to pay to the Lessor, or to whomsoever shall be
entitled thereto as expressly provided herein or in the Participation Agreement,
all Supplemental Rent, promptly as the same shall become due and owing, or if no
due date is specified, upon demand by the Lessor, and in the event of any
failure on the part of the Lessee so to pay any such Supplemental Rent hereunder
the Lessor shall have all rights, powers and remedies provided for herein or by
law or equity or otherwise in the case of nonpayment of Basic Rent.
(c) Until the indebtedness evidenced by the Notes shall have been fully
paid and discharged, all payments (other than Excluded Amounts) required to be
made by the Lessee to the Lessor hereunder shall be made to the Agent, by wire
transfer of federal or other immediately available funds no later than 11:00
a.m. New York City time and identifying each payment in such manner and payable
to such account of the Agent as provided in Section 4.05 and the signature pages
of the Participation Agreement. Thereafter, all payments required to be made by
the Lessee to the Lessor hereunder shall be paid to the Lessor in such manner as
the Lessor has reasonably requested. All Excluded Amounts shall be paid
directly to the Person entitled thereto as specified in the preceding sentence.
Time is of the essence in connection with the payment of Basic Rent,
Supplemental Rent and all other payments hereunder.
SECTION 5. Net Lease Agreement. The lease of the Leased Premises
-------------------
hereunder is a net lease and the Lessee shall pay all costs and expenses of
every character, whether foreseen or unforeseen, ordinary or extraordinary or
structural or nonstructural, in connection with the use, operation, maintenance,
repair and reconstruction of the Leased Premises. Notwithstanding any other
provision of this Lease Agreement, it is intended that Basic Rent and
Supplemental Rent shall be paid without notice, demand, counterclaim, setoff,
deduction or defense and without abatement, suspension, deferment, diminution or
reduction. The obligations and liabilities of the Lessee hereunder shall in no
way be released, discharged or otherwise affected (except as may be expressly
provided herein) for any reason, including, without limitation: (a) any defect
in the condition, quality or fitness for use of the Leased Premises or any
portion thereof; (b) any damage to, removal, abandonment, salvage, loss or
destruction of or any requisition, condemnation, taking of, or the occurrence of
any Event of Loss with respect to the Leased Premises or any portion thereof;
(c) any restriction, prevention or curtailment of or interference with any use
of the Leased Premises or any part thereof, whether as a result of force majeure
----- -------
or otherwise; (d) any defect in or any Lien on the title to the Leased Premises
or any part thereof; (e) any change, waiver, extension, indulgence or other
action or omission in respect of any obligation or liability of the Lessee, the
Lessor or any other Person; (f) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to the Lessee,the Lessor or any other Person, or any action taken with
respect to this Lease Agreement by any trustee or receiver of the Lessee, the
Lessor or any other Person, or by any court; (g) any claim that the Lessee has
or may have against the Lessor or
3
<PAGE>
any other Person; (h) any failure on the part of the Lessor, the Equity
Participant, any Lender or the Agent to perform or comply with any of the terms
hereof or of any other Transaction Documents; (i) any invalidity or
unenforceability or disaffirmance of this Lease Agreement or any provision
hereof or any of the other Transaction Documents or any provision of any
thereof; (j) any change in the tax or other laws of the United States, any state
or any political subdivision of any thereof; (k) any assignment, novation,
merger, consolidation, sale or transfer of assets, leasing or other similar
transaction of or affecting either the Lessee, whether with or without the
approval of the Lessor or any other Person; (l) any acts or circumstances that
may constitute a foreclosure under this Lease Agreement; or (m) any other
occurrence whatsoever, whether similar or dissimilar to the foregoing, whether
or not either the Lessee shall have notice or knowledge of any of the foregoing.
This Lease Agreement shall be noncancellable by the Lessee and, except as
expressly provided herein, the Lessee, to the extent permitted by law, waives
all rights now or hereafter conferred by statute or otherwise to quit, terminate
or surrender this Lease Agreement or to any diminution or reduction of Rent or
Supplemental Rent payable by the Lessee hereunder. Except as expressly provided
herein, all payments by the Lessee shall be final and the Lessee shall not seek
to recover any such payment or any part thereof for any reason whatsoever.
Except as otherwise expressly provided herein or in other Transaction Documents,
the Lessee shall pay to the parties respectively entitled thereto, as
Supplemental Rent, all utility charges, taxes, insurance premiums, operating
charges, repair and maintenance charges and any other costs and expenses that
may accrue or become due and payable during the Lease Term relating to any
Leased Premises or any buildings, improvements, fixtures, machinery, equipment
or personal property now or hereafter constituting a part thereof, or arising
from the construction, management, maintenance, preservation or operation of,
or from any use, occupancy or activity conducted in, on or about any Leased
Premises and any buildings, improvements, fixtures, machinery, equipment or
personal property now or hereafter constituting a part thereof.
SECTION 6. Use of Leased Premises.
----------------------
The Lessee shall be permitted to use the Leased Premises for any lawful
uses, subject, however, to applicable zoning ordinances, applicable laws and any
governmental rules and regulations now in effect or hereafter adopted by any
governmental authority having or asserting jurisdiction, and such conditions,
restrictions and other encumbrances, if any, to which the Leased Premises are
subject at the time of execution and delivery of the Lease Supplement applicable
thereto. The Lessee shall not use or occupy or permit any Leased Premises to be
used or occupied, nor do or permit anything to be done in or on any Leased
Premises or any part thereof, in a manner that would in any way violate any
certificate of occupancy affecting such Leased Premises or make void or voidable
any insurance then in force with respect thereto, or that may make it impossible
to obtain fire or other insurance thereon required to be furnished hereunder by
the Lessee, or that will cause or be likely to cause structural injury to such
Leased Premises, or that will constitute a public or private nuisance or waste.
Nothing contained in this Lease Agreement and no action or inaction by the
Lessor shall be deemed or construed to mean that the Lessor has granted to the
Lessee any right, power or permission to do any act or to make any agreement
that may create, give rise to, or be the foundation for, any right, title,
interest, lien, charge or other encumbrance upon the estate of the Lessor in the
Leased Premises.
4
<PAGE>
SECTION 7. Compliance with Laws.
--------------------
(a) The Lessee shall, throughout the Lease Term, and at the Lessee's cost
and expense, promptly comply, or cause compliance (including, without
limitation, in connection with the making of any required alterations, repairs
or improvements to the Leased Premises): (i) with all applicable laws, rules,
regulations, licenses, judgments, orders or decrees of any government,
governmental body or court having jurisdiction over the Lessee or the Leased
Premises, and (ii) with any agreements, contracts, easements and restrictions
affecting any Leased Premises or any part thereof or the ownership, occupancy or
use thereof existing on the Closing Date for such Leased Premises or hereafter
created by the Lessee, or consented to or requested by the Lessee. In
furtherance, and not in limitation of, the preceding sentence, the Lessee will
comply with all Environmental Laws governing each Leased Premises.
(b) No abatement, diminution or reduction in Basic or Supplemental Rent or
any other charges required to be paid by the Lessee pursuant hereto shall be
claimed by or allowed to the Lessee for any inconvenience or interruption,
cessation, or loss of business caused directly or indirectly, by any present or
future laws or regulations, or by priorities, rationing or curtailment of labor
or materials, or by war, civil commotion, strikes or riots, or any manner or
thing resulting therefrom, or by any other cause or causes beyond the control of
the Lessor or the Lessee, nor shall this Lease Agreement be affected by any such
causes; and no diminution in the amount of the space used by the Lessee caused
by legally required changes in the construction, equipment, fixtures, motors,
machinery, operation or use of any Leased Premises shall entitle the Lessee to
any abatement, diminution or reduction of the Basic Rent or any other charges
required to be paid by the Lessee pursuant to this Lease Agreement.
SECTION 8. Property Taxes and Assessments.
------------------------------
(a) The Lessee shall pay when due and shall be obligated for all real
estate taxes and assessments assessed against any Leased Premises or any part of
any thereof. Such real estate taxes and assessments shall be hereinafter
referred to as "Real Estate Taxes." Real Estate Taxes shall also include any
tax, assessment, charge or fee in substitution for or in addition to such real
estate taxes or assessments, and a tax on rents in substitution for or in
addition to such real estate taxes or assessments, but shall not include any
Taxes specified in clauses (x) or (y) of Section 4.02(b) of the Participation
Agreement. The Lessee agrees to pay all such Real Estate Taxes on the Leased
Premises on or before the due date for payment of such Real Estate Taxes.
(b) The Lessee shall have the right to contest the amount or validity of
the Real Estate Taxes which the Lessee is required to pay hereunder, and for
that purpose, the Lessee shall have the right to file in the name of the Lessor
all such protests or petitions and to institute and prosecute such proceedings
as the Lessee may deem necessary for the purpose of such contest. The Lessee
shall pay the cost of prosecuting such contest. If payment is necessary in
order to avoid penalties or interest accruing thereon the Lessee must pay such
Real Estate Taxes prior to such protest or proceeding. Any refund of any Real
Estate Taxes paid by the Lessee shall be the property of the Lessee, and the
Lessor agrees to pay the same to the Lessee promptly in the event payment
thereof is initially made to the Lessor.
(c) The Lessee shall pay promptly when due all personal property taxes
assessed during the Lease Term upon the Lessee's fixtures, furnishing, equipment
and stock in trade or
5
<PAGE>
upon the Lessee's leasehold interest under this Lease Agreement or upon any
other personal property situated in or upon the Leased Premises.
SECTION 9. Maintenance and Repair of Property; Alterations.
-----------------------------------------------
(a) The Lessee shall, at all times during the Lease Term, at its own cost
and expense and without any cost or expense to the Lessor, preserve and maintain
the Leased Premises (including parking areas, access drives and landscaping) in
good condition and repair, consistent with industry standards, subject to
ordinary physical depreciation and wear and tear but in no event shall such
standards be lower than the standards followed by the Lessee for the maintenance
and repair of similar property owned by the Lessee, which obligation shall
include, without limitation, the maintenance and repair of both the exterior and
interior of the Leased Premises, structural components, roof membrane, interior
and exterior surfaces, window and door glass, plumbing, heating, ventilation,
and air conditioning systems and equipment, and electrical systems and
equipment. The foregoing undertaking to maintain the Leased Premises in good
condition and repair shall apply regardless of the cause necessitating repair
and regardless of whether the Lessee has possession of the Leased Premises, and
as between the Lessor and the Lessee, all risks of damage to the Leased Premises
are assumed by the Lessee.
(b) The Lessee may, at its own cost and expense, make additions to, and
alterations of, the Leased Premises, provided that (i) the then Appraised Value
of any Leased Premises shall not be decreased thereby, (ii) such work shall be
expeditiously completed in a good and workman like manner under the supervision
of a licensed architect or engineer in accordance with plans and specifications
and cost estimates prepared by such architect or engineer and in compliance with
all applicable laws, rules, regulations, licenses (including all notice
requirements thereof), (iii) no structural alteration shall be made unless the
Lessor's prior written consent shall have been obtained, which consent will not
be unreasonably withheld or delayed, and (iv) no material improvements shall be
demolished or maded unless the Lessor's prior written consent shall have been
obtained, which consent will not be unreasonably withheld or delayed. If the
estimated cost of any single or connected series of such additions, alterations
or improvements exceeds $1,000,000 (other than the Improvements made pursuant to
the Agency Agreement), the Lessee will (x) give the Lessor and the Agent advance
notice thereof, (y) provide the Lessor and the Agent for its review preliminary
and final plans and specifications and any material amendments thereto, and (z)
use only reputable general contractors and subcontractors, licensed to the
extent required by the provisions of applicable law. All such additions,
alterations and improvements shall be and remain the property of the Lessor,
shall be deemed part of the Leased Premises and shall be subject to this Lease
Agreement.
SECTION 10. Insurance.
---------
(a) The Lessee will maintain the following insurance in respect of each of
the Leased Premises in each case in amounts and with carriers acceptable to the
Lessor and the Agent:
(i) property insurance (including coverage for business interruption)
against all risks of direct physical loss, including loss by fire,
lightning, windstorm (if commercially reasonable to obtain), hail,
explosion, riot and civil commotion, aircraft and vehicles, smoke, flood
(if commercially reasonable to obtain), earthquake (if
6
<PAGE>
commercially reasonable to obtain) and other risks which at the time are
included under usual and customary extended coverage endorsements in
amounts sufficient to prevent the Lessor and the Lessee from becoming a co-
insurer of any loss, but in any event not less than the actual replacement
value of the buildings and improvements on the Leased Premises or the
Termination Value, whichever is greater (and in any event not less than the
coverage obtained by the Lessee on similar properties); provided, however
-------- -------
that any deductible under such insurance policies shall not be in excess
of an amount acceptable to Lessor and the Agent and, provided further,
-------- -------
that the Lessee may provide for property insurance (including coverage for
business interruption) against such claims under a blanket property
insurance policy of at least $100,000,000 coverage per occurrence and
$100,000,000 aggregate per annum covering all Premises owned, leased or
occupied by the Lessee including the Leased Premises;
(ii) commercial general liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the Leased
Premises, and any claims arising out of the ownership, operation,
maintenance, condition and use of the Leased Premises, in the minimum
amount of $50,000,000 in respect of personal injury or death to any one
person, in the minimum amount of $50,000,000 in respect of any one accident
and in the minimum amount of $10,000,000 in respect of property damage;
provided, however, that the Lessee may provide for commercial general
-------- -------
liability insurance against such claims under an umbrella liability policy;
(iii) to the extent required by the law of the state in which the
Leased Premises are located, worker's compensation insurance, including
employer's liability, disability and similar insurance; and
(iv) prior to the date that the Work is Substantially Complete
builder's risk insurance on a completed value, nonreporting basis for the
Estimated Improvement Cost and worker's compensation insurance as required
by applicable law and regulations; provided, however, that any deductible
-------- -------
amounts exceeding $25,000 under the builder's risk policy shall be subject
to the approval of the Lessor and the Agent.
Notwithstanding the foregoing, the Lessee shall at all times comply
with any provisions of applicable law affecting any Leased Premises regarding
insurance that are more stringent than the foregoing provisions. All insurance
shall be written or substantially underwritten by companies of nationally
recognized financial standing, which are legally qualified to issue such
insurance.
(b) Every such policy shall:
(i) designate (except in the case of workers' compensation insurance
and employer liability insurance) the Lessor, the Trust Company, the Owner
Trustee (in its individual capacity), each Lender, the Equity Participant
and the Agent as additional insureds as their interests may appear and the
Lessor as the sole loss payee;
(ii) provide (except for workers' compensation, public and employer
liability insurance) that all insurance proceeds shall be payable to the
Lessor;
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(iii) provide that there shall be no recourse to the Lessor, the
Trust Company, the Equity Participant, any Lender or the Agent for the
payment of premiums or commissions or (if such policies provide for the
payment thereof) additional premiums or assessments;
(iv) provide that such insurance shall be primary insurance without
any right of contribution from any other insurance carried by the Lessor,
the Trust Company, the Equity Participant, each Lender or the Agent, and
that all provisions thereof, except the limits of liability (which shall be
applicable to all insurers as a group) and liability for premiums (which
shall be solely a liability of the Lessee), shall operate in the same
manner as if there were a separate policy covering each insured;
(v) provide that the Lessor and the Agent will be furnished with at
least 30 days' advance written notice of any material change or
cancellation or expiration or non-renewal of coverage, and that such
material change, cancellation or expiration shall not be effective as to
the Lessor, the Equity Participant, any Lender or the Agent prior to the
expiration of such period after notice to the Agent and the Lessor;
(vi) waive any right of subrogation of the insurers thereunder against
the Lessor, the Equity Participant, each Lender or the Agent, and any right
of the insurers to any setoff or counterclaim or any other deduction,
whether by attachment or otherwise, with respect to any liability of any
such person insured under such policy;
(vii) provide that any losses recovered under the insurance described
in this Section 10 shall not be invalidated notwithstanding (A) any act,
failure to act or negligence or violation of warranties, declarations, or
conditions contained in such policy by any named insured or owner of the
property, (B) the occupation or use of any Leased Premises for purposes
more hazardous than permitted by the terms thereof, (C) any foreclosure or
other action or proceeding or notice of sale relating to the property or
(D) any change in title or ownership of the property; and
(viii) Within 120 days after the end of each calendar year, the
Lessee shall deliver to the Lessor, the Equity Participant and the Agent
(i) a list prepared as of the last day of such year describing all
insurance maintained in accordance with this Section 10 (and in particular
describing risks insured against, coverage, amounts, deductibles, the
identity of insurers and expiration dates) and (ii) an officer's
certificate of the Lessee, confirmed by an insurance certificate of the
respective insurers, to the effect that all premiums due under such
policies have been paid in full and that such insurance meets all
requirements of this Section 10.
(c) The Lessee will deliver to the Lessor, the Equity Participant, or the
Agent, promptly upon any request therefor, (i) the originals or copies certified
by the insurer of all policies evidencing all insurance required to be
maintained under this Section 10 and (ii) evidence as to the payment of all
premiums due thereon; provided, however, that the Lessor, the Equity
-------- -------
Participant, any Lender or the Agent shall not be deemed by reason of their
respective custody of such policies to have knowledge of the contents thereof.
The Lessee will use its best efforts to deliver to the Lessor, the Equity
Participant and the Agent, a new policy or certificate evidencing such new
policy as replacement for any expiring policy at least 30 days
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prior to the date of such expiration, but in any event the Lessee shall so
deliver such policy or certificate prior to the date of such expiration.
(d) In addition to the foregoing, if the Lessee shall be in default in
respect of its obligations to obtain insurance pursuant to this Section 10, the
Lessor or the Agent shall have the right (but not the obligation), and without,
in any way, limiting or otherwise modifying any other rights or remedies of the
Lessor or the Agent under this Lease Agreement by reason of such default or
otherwise, to obtain such insurance at the Lessor or the Agent, as the case may
be, upon demand for the cost thereof, together with interest thereon at the Late
Payment Rate.
(e) The Lessee hereby irrevocably assigns to the Lessor any compensation or
insurance proceeds to which the Lessee may become entitled by reason of the
Lessee's interest in the Leased Premises if any Leased Premises or any part
thereof is damaged or destroyed by fire or other casualty. If any Leased
Premises or any part of any thereof is damaged or destroyed by fire or other
casualty, and if the estimated cost of rebuilding, replacing or repairing the
same exceeds $500,000, the Lessee promptly shall notify the Lessor and the Agent
thereof. Subject to the next sentence, Lessee shall negotiate, prosecute and
adjust any claim for any compensation or insurance payment on account of any
such damage or destruction and may unilaterally settle any such negotiation,
prosecution or adjustment, but the Lessor shall be entitled to participate in
any such negotiation, prosecution and adjustment. If Net Casualty Proceeds (as
hereinafter defined) are reasonably expected to exceed $500,000, the Lessee
shall not settle such negotiation, prosecution or adjustment without the consent
of the Lessor. Any compensation or insurance payment shall be paid to and held
in trust in a separate account and applied in accordance with this Lease
Agreement by the Agent. All amounts paid in connection with any such damage or
destruction shall be applied pursuant to Section 14 hereof and all such amounts
paid or payable in connection therewith (minus the expenses of collecting such
amounts) are herein called the "Net Casualty Proceeds". The Lessee shall pay
all reasonable costs and expenses in connection with each such negotiation,
prosecution and adjustment for which costs and expenses the Lessee shall be
reimbursed out of any compensation or insurance payment received.
SECTION 11. Assignment and Subletting.
-------------------------
(a) The Lessee shall sublease each of the Leased Premises to either of its
wholly owned subsidiaries, Smart & Final Stores Corporation, or Port Stockton
Food Distributors, Inc. (the "Permitted Sublessees") which will use such Leased
Premises in its business. The Lessee shall effectively assign to the Lessor
(and the Lessor, in turn, will assign to the Agent for the benefit of the
Lenders and the Equity Participant), each such sublease and all Basic Rent and
Supplemental Rent and any other amounts payable thereunder. Each Permitted
Sublessee shall enter into a Sublease in the form attached hereto as Exhibit A
(a "Subsidiary Sublease") with the Lessee contemporaneously with the execution
and delivery hereof. The sublease of each Leased Premises thereunder by the
Lessee to a Subsidiary Sublessee shall be evidenced by the execution and
delivery of a Sublease Supplement for such Leased Premises.
(b) If a Permitted Assignee or other transferee defaults under this Lease
Agreement, the Lessor may proceed directly against the Lessee without pursuing
remedies against the
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transferee. The Lessor's acceptance of rent from any other Person is not waiver
of any provision of this Section 11.
(c) No portion of the Leased Premises or of the Lessee's interest in this
Lease Agreement may be acquired by any other Person other than the Permitted
Sublessees as provided in Section 11(a) hereof, whether by sale, assignment,
mortgage, sublease, transfer, operation of law, or act of the Lessee, without
the Lessor's prior written consent, which may be withheld in the Lessor's sole
discretion; provided, however, that to the extent, but only to the extent, that
applicable law prohibits the Lessor from withholding such consent in its sole
discretion, the following shall apply:
(i) No portion of the Leased Premises or of the Lessee's interest in this
Lease Agreement may be acquired by any other Person other than the Permitted
Sublessees, whether by sale, assignment, mortgage, sublease, transfer, operation
of law, or act of the Lessee, without the Lessor's prior written consent, except
as provided in clause (ii) below. The Lessor has the right to grant or withhold
its consent as provided in clause (ii) below. Notwithstanding anything to the
contrary set forth in Section 12 hereof, any attempted transfer without consent
shall be void and shall constitute a non-curable breach of this Lease. Should
the Lessee desire to sublease or assign this Lease Agreement for all or a
portion of the Leased Premises, the Lessee shall first give the Lessor 60 days
prior written notice of its intent to offer all or a portion of any Leased
Premises for sublease or assignment, which notice shall be given before offering
such Leased Premises for sublease or assignment.
(ii) The Lessee's request for consent to any transfer described in Section
11(c)(i) hereof shall set forth in writing the details of the proposed transfer,
including the name, business and financial condition of the prospective
transferee, financial details of the proposed transfer (e.g., the term of and
the rent and security deposit payable under any proposed assignment or
sublease), and any other information the Lessor deems relevant. The Lessor
shall have the right to withhold consent, if reasonable, or to grant consent,
based on the following factors: (i) the business of the proposed assignee or
subtenant and the proposed use of the Leased Premises; (ii) the net worth and
financial reputation of the proposed assignee or subtenant; (iii) the Lessee's
compliance with all of its obligations under the Lease Agreement; and (iv) such
other factors as the Lessor may reasonably deem relevant. If the Lessor objects
to a proposed assignment solely because of the net worth and/or financial
reputation of the proposed assignee, the Lessee may nonetheless sublease (but
not assign), all or a portion of the Leased Premises to the proposed transferee,
but only on the other terms of the proposed transfer. In the event of any
proposed sublease or assignment, the Lessee shall submit such financial and
related information concerning the proposed sublessee or assignee as the Lessor
shall require in its sole discretion, and the Lessor shall have a reasonable
period of time to complete its review of such information from the date the
Lessee delivers to the Lessor a complete submittal of all such information
responsive to the Lessor's request.
(d) Any assignment or sublease of any Leased Premises made pursuant to
clause (c) above shall be expressly subject and subordinate to all the terms and
conditions of this Lease Agreement (including without limitation, the rights of
the Lessor and the Agent to enforce remedies under Section 19 hereof), and any
such assignment or sublease shall not in any manner whatsoever relieve the
Lessee from any obligations under this Lease Agreement (it being understood and
agreed that the Lessee shall remain primarily liable for such obligations
10
<PAGE>
notwithstanding any such assignment or sublease) and all other Transaction
Documents to which each is a party, such liability to be unconditional
irrespective of any circumstances whatsoever which might constitute a legal or
equitable discharge or defense of a surety or guarantor, and the Lessee hereby
waives any rights they may now have or hereafter acquire to avoid any such
obligations by reason of such assignment or sublease or any circumstances
arising from such assignment or sublease. Any such assignment or sublease shall
be evidenced by a written instrument executed by the Lessee and the assignee or
sublessee, as the case may be, which written instrument shall be in form and
substance acceptable to the Lessor and the Agent (a "Sublease"). The Lessee
agrees to deliver notice of any such Sublease to the Lessor, together with an
execution copy of such assignment or sublease. The Lessee agrees to indemnify
and hold the Lessor, the Agent and the Lenders harmless against any and all
reasonable out-of-pocket expenses, claims, demands and liabilities, of whatever
nature, relating to or in any way arising out of any such sublease, including,
without limitation, all reasonable out-of-pocket costs, damages, charges,
attorneys' fees and expenses arising out of or necessitated by assertion of any
such claim or demand with regard to such assignment or sublease. Any sublease or
assignment entered into in violation of this Section shall be void.
(e) In addition to the assignment of this Lease Agreement under the
Mortgage and Assignment Agreements, to which the Lessee hereby consents, the
Lessor may, subject to the Mortgage and Assignment Agreements, assign its
interest under this Lease Agreement as provided in the other Transaction
Documents. If the Lessor assigns its interest under this Lease Agreement
together with fee title to the Leased Premises, the Lessor shall be relieved of
any and all future obligations and liabilities under this Lease Agreement
accruing from and after the date of such conveyance, and the Lessee shall
deliver to the Lessor a written release so stating, provided that any assignee
or successor of the Lessor shall provide the Lessee with a written assumption
agreement for the benefit of the Lessee and the Lessor whereby such assignee or
successor assumes and agrees to punctually perform all of the obligations and
liabilities of the Lessor hereunder.
SECTION 12. Liens. The Lessee will not directly or indirectly create,
-----
incur, assume or suffer to exist any Lien on or with respect to any Leased
Premises or any part of any thereof, or interest therein, or this Lease
Agreement or any of the Lessor's or the Lessee's interests hereunder, except any
Permitted Lien. The Lessee, at its own expense, will promptly pay, satisfy and
otherwise take such actions as may be necessary to keep this Lease Agreement and
the Leased Premises free and clear of, and to duly discharge or eliminate or
bond in a manner reasonably satisfactory to the Lessor and the Agent, any such
Lien not excepted above if the same shall arise at any time. The Lessee will
notify the Lessor and Agent in writing promptly upon a Senior Financial Officer
becoming aware of any Lien (other than any Permitted Lien) that shall attach to
any Leased Premises or any part thereof or interest therein, and of the full
particulars thereof.
SECTION 13. Certain Personal Property. Any equipment, signs and other
-------------------------
movable property installed in or attached to the Leased Premises by and at the
expense of the Lessee shall remain the property of the Lessee, and upon request
the Lessor agrees to disclaim any interest in said property. The Lessee may
finance or refinance the purchase price of all or any part of its furnishings,
equipment and signs and in connection therewith may grant security interests in
and liens upon such items, provided that no Liens may be granted or placed upon
--------
the Lessor's fee interest in the Leased Premises. The Lessor agrees to execute
and deliver such
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subordination or waivers of lien as the Lessee or its respective equipment
lenders may reasonably request with respect to such furnishings, equipment and
signs in connection with any such financing or refinancing. The Lessee shall
have the right, prior to the expiration of the Lease Term, to remove any and all
of its trade fixtures, equipment and other movable property which it may have
stored, attached to, or installed in the Leased Premises; provided, however,
-------- -------
that the Lessee may not remove any fixtures (except trade fixtures) or other
items which cannot be removed without causing structural damage to the Leased
Premises, and the Lessee will repair any and all damage to the Leased Premises
occasioned by such removal.
SECTION 14. Loss, Damage or Destruction.
---------------------------
(a) The Lessee hereby assumes all risk of loss, damage, taking,
destruction, confiscation, requisition or commandeering, partial or complete, of
the Leased Premises or any part thereof or of any interest therein, however
caused or occasioned, such risk to be borne by the Lessee with respect to the
Leased Premises. No occurrence specified in the preceding sentence nor the
resulting loss of use of any Leased Premises (including without limitation any
period while such Leased Premises is being repaired, replaced or rebuilt) shall
impair, in whole or in part, any obligation of the Lessee under this Lease
Agreement, including, without limitation, the obligation to pay Basic Rent and
Supplemental Rent, and this Lease Agreement shall continue in full force and
effect with respect to any Leased Premises suffering any such occurrence unless
and until the lease of such Leased Premises hereunder is terminated pursuant to
subsection (b) below). If such occurrence does not constitute an Event of Loss,
then the Lessee promptly will commence and diligently will proceed to rebuild,
repair or replace any damage caused by such occurrence in conformity to Section
9(b) hereof to its condition immediately prior to such occurrence and any
insurance proceeds received by the Lessor shall in connection therewith
promptly be paid to the Lessee, provided no Event of Default has occurred and is
--------
continuing.
(b) Upon an Event of Loss with respect to any Leased Premises, the Lessee
shall give the Lessor and the Agent prompt notice thereof. Except as provided
in subsection (c) below, on the Payment Date next following more than 45 days
after an Event of Loss with respect to any Leased Premises, the Lessee shall
purchase such Leased Premises for a purchase price equal to the Termination
Value of such Leased Premises. Upon receipt by the Lessor of the purchase
price, the Basic Rent due on such date, any Supplemental Rent and all other
amounts then due and owing hereunder, the Lessor shall transfer title to such
Leased Premises (together with any claim for unpaid insurance proceeds or
condemnation award) by a quit-claim deed to the Lessee, on an as-is basis,
without any warranty of any kind (other than the absence of Lessor Liens) by, or
recourse of any kind to, the Lessor. Any insurance proceeds or condemnation
award received by the Lessor shall be retained by the Lessor and applied to said
payment of the purchase price of such Leased Premises.
(c) If any Leased Premises subject to an Event of Loss can be fully
repaired and restored to the condition thereof immediately prior to such Event
of Loss within one year of the Payment Date next following the occurrence of
such Event of Loss (the "Restoration Date"), in lieu of the application
described in subsection (b) above, the Lessee on 30 days' written notice to the
Lessor may elect to repair and reconstruct such Leased Premises to its condition
immediately prior to such Event of Loss (assuming compliance by the Lessee with
the terms and conditions of this Lease Agreement and the other Transaction
Documents). If the Lessee so
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elects, it shall, at its own cost and expense, promptly commence and diligently
proceed to rebuild, replace or repair the damage to such Leased Premises caused
by such Event of Loss in conformity with requirements of Section 9(b) hereof so
as to restore the Leased Premises to the fair market value and to the condition
thereof immediately prior to such Event of Loss. Prior to any such rebuilding,
the Lessor and the Lessee shall agree on the maximum cost of such rebuilding
(the "Casualty Restoration Cost"); the Casualty Restoration Cost shall be paid
first out of Lessee's own funds to the extent that the Casualty Restoration Cost
exceeds the amount of the Net Casualty Proceeds. After such expenditure, and so
long as no Event of Default has occurred and is continuing hereunder, the Lessee
shall be entitled to receive the Net Casualty Proceeds, but only against a
certification (made no more frequently than once each month) describing the work
for which the Lessee is requesting payment and the cost incurred by the Lessee
in connection therewith and stating that the Lessee has not theretofore received
payment for such work. Any Net Casualty Proceeds remaining after final payment
has been made for such work shall be paid to the Lessee and if the cost of the
work required to be made by the Lessee pursuant to this subsection exceeds the
amount of such Net Casualty Proceeds, the deficiency shall be paid by the
Lessee. If such Leased Premises are not restored or reconstructed to their
condition prior to such Event of Loss prior to the Restoration Date, then the
Lessee shall purchase such Leased Premises on the next following Payment Date in
accordance with subsection (b) above.
SECTION 15. Lessee's Rights of Purchase and Renewal; Purchase
-------------------------------------------------
Obligation.
- ----------
(a) So long as no Event of Default has occurred and is continuing,
commencing December 31, 1997, the Lessee shall have the right, upon 90 days'
prior written notice to the Lessor, to purchase all, but not less than all, of
the Leased Premises at the end of any Payment Period for an amount equal to the
Termination Value on such date. Upon receipt by the Lessor of said purchase
price, the Basic Rent due on such date, any Supplemental Rent and all other
amounts then due and owing hereunder, the Lessor shall transfer title to the
Leased Premises, by quit-claim deeds, to the Lessee, on an as-is basis without
any warranty of any kind (other than the absence of Lessor Liens) by, or any
recourse of any kind to, the Lessor. In the event that the Lessee fails, for any
reason, to exercise the sale option provided by Section 16 at least 360 days
prior to the end of the Lease Term, the Lessee shall be deemed to exercise the
purchase option provided by this Section 15(a) to purchase all the Leased
Premises at the end of the Lease Term for an amount equal to the Termination
Value on such date.
(b) If (i) no Event of Default shall have occurred and be continuing and
(ii) this Lease Agreement shall not have been earlier terminated, the Lessee
may, by irrevocable written notice to the Lessor and the Agent 360 days prior to
the end of the Lease Term, request that the Lease Term of all, but not less then
all, of the Leased Premises for a one-year period (a "Renewal Term") provided
that no Renewal Term shall extend beyond the first to occur of (x) December 31,
2024 and (y) the Maturity Date of the Notes. Such request shall be granted only
if each of the Lenders, in their sole discretion, shall by notice to the Lessee
and the Agent not later than 30 days prior to the then end of the Lease Term,
consent to such extension; provided that in no event shall the Lease Term be
extended without the written consent of all Lenders except to the extent
alternative financing acceptable to all parties is obtained. Except as otherwise
provided herein each extension of this Lease Agreement shall be on the same
terms and conditions for the Base Term.
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(c) If an Environmental Put Event occurs with respect to any Leased
Premises, then, upon written notice to the Lessee, the Lessor may require the
Lessee to purchase such Leased Premises on the next Payment Date which occurs at
least 15 days after the date of such notice for a purchase price equal to the
Termination Value of such Leased Premises on such date. Upon receipt by the
Lessor of said purchase price, the Basic Rent due on such date, any Supplemental
Rent and all other amounts then due and owing hereunder, the Lessor shall
transfer title to such Leased Premises, by quit-claim deed, to the Lessee, on an
as-is basis without any warranty of any kind (other than the absence of Lessor
Liens) by, or any recourse of any kind to, the Lessor.
SECTION 16. Sale of Leased Premises.
-----------------------
(a) If (i) no Event of Default shall have occurred and be continuing and
(ii) this Lease Agreement shall not have been earlier terminated, the Lessee
may, by irrevocable written notice to the Lessor and the Agent not more than 390
days and not less than 360 prior to the end of the Lease Term, elect to cause
all, but not less than all, of the Lease Premises then owned by the Lessor
hereunder to be sold as follows:
(i) on the last day of the Lease Term the Lessee shall pay the Lessor the
Basic Rent then due and any Supplemental Rent and all other amounts then due and
owning hereunder plus the Residual Guaranty Payment as of such date; and
(ii) at, or prior to, the end of the Lease Term, the Lessee shall vacate
the Leased Premises and arrange for the sale of the Leased Premises to one or
more buyers unrelated to the Lessee or its Affiliates prior to the end of the
Lease Term, as the agent of the Lessor, and receipt by the Lessor of the sale
proceeds thereof (the Lessee shall pay all expenses of sale) on or before the
last day of the Lease Term; provided that the Lessor may designate itself or a
third party as sales agent to sell the Leased Premises instead of or in addition
to the Lessee. Lessee will use its best efforts to sell the Leased Property for
its Fair Market Sales Value.
All above payments shall be made on the date the sale proceeds are due and
payable to the Lessor. Each of the Leased Premises shall be in substantially
the same physical and operating condition as when such Leased Premises were
Substantially Complete, capable of being occupied by a third party and otherwise
in full compliance with the terms and conditions hereof. Prior to the sale of
the Leased Premises pursuant to this Section, at the request of the Lessor, the
Lessee will provide (at its own cost and expense) a current "Phase I"
environmental assessment of each Leased Premise performed by the Environmental
Consultant, the results of which must be satisfactory to the Lessor and each of
the Lenders.
(b) Upon receipt by the Lessor of such sale proceeds, the Basic Rent due on
the last day of the Lease Term, any Supplemental Rent and all other amounts then
due and owing hereunder, the Lessor shall transfer title to the Leased Premises
to the purchasers designated by the Lessee on an as-is basis, without any
warranty of any kind (other than the absence of Lessor Liens) by, or any
recourse of any kind to, the Lessor; and, provided no Event of Default or
Default shall exist and be continuing, if the sum of (i) such aggregate net
proceeds of sale for all the Leased Premises plus (ii) the Residual Guaranty
Payment is greater than the Termination Value on such date, the Lessor shall pay
to the Lessee the amount by which such sum exceeds such Termination Value. If
such aggregate net proceeds of sale are less than the excess of the
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Termination Value over the Residual Guaranty Payment on such date, in addition
to the other amounts specified above, the Lessee shall pay to the Lessor an
amount equal to the additional amount, if any, not greater than such deficiency,
by which such sale price is less than the Fair Market Sales Value as a
consequence of any failure by the Lessee to maintain or repair the Leased
Premises as provided by Sections 9 or 14 hereof.
The Lessor shall have no obligation to make any payment required of it
under this paragraph (b) above until the Lessor shall have received the sale
proceeds, Residual Guaranty Payment, Basic Rent, any Supplemental Rent and all
other amounts then due and owing hereunder.
(c) The provisions of Sections 15 and 16 hereof are of the essence of this
Lease Agreement, and time is of the essence for any payment and performance of
the obligations of the Lessee set forth therein.
SECTION 17. Late Charges. The Lessee shall pay to the Lessor, upon
------------
demand, to the extent permitted by applicable law, interest on any installment
of Basic Rents not paid when due, and on any Supplemental Rent or other amount
payable under this Lease Agreement which is not paid when due, for any period
for which any of the same is overdue (without regard to any grace period) at a
rate equal to the Late Payment Rate so long as an Event of Default has not
occurred. Upon the occurrence and during the continuance of an Event of Default
or in respect of any payments made under Section 3(d) hereof, the Basic Rent
shall be calculated using a Late Payment Rate instead of the Finance Rate and
overdue Basic Rent shall bear interest at the Late Payment Rate. Payments under
this Section 17 are due and payable on demand.
SECTION 18. No Warranties. THE LEASED PREMISES ARE LEASED ON AN AS-IS
-------------
BASIS AND EXCEPT AS PROVIDED IN SECTION 2(d) HEREOF THE LESSOR EXPRESSLY
DISCLAIMS AND MAKES NO REPRESENTATION OR WARRANTY, EITHER EXPRESSED OR IMPLIED,
AS TO THE DESIGN, CONDITION, QUALITY, CAPACITY, MERCHANTABILITY, DURABILITY,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF, OR ANY OTHER MATTER
CONCERNING, THE LEASED PREMISES AND THE DESIGN OR CONDITION OF THE LEASED
PREMISES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE LESSOR SHALL NOT
BE LIABLE OR RESPONSIBLE FOR ANY DEFECTS, EITHER PATENT OR LATENT (WHETHER OR
NOT DISCOVERABLE BY THE LESSEE), IN THE LEASED PREMISES, OR FOR ANY DIRECT OR
INDIRECT DAMAGE TO PERSONS OR LEASED PREMISES RESULTING THEREFROM, OR FOR THE
LESSEE'S LOSS OF USE OF THE LEASED PREMISES OR FOR ANY INTERRUPTION IN THE
LESSEE'S BUSINESS CAUSED BY THE LESSEE'S INABILITY TO USE THE LEASED PREMISES
FOR ANY REASON WHATSOEVER. THE LESSEE HEREBY WAIVES ANY CLAIM (INCLUDING ANY
CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR INFRINGEMENT) IT MIGHT
HAVE AGAINST THE LESSOR FOR ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR
CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY THE LEASED PREMISES OR BY THE
LESSEE'S LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER. During the Lease Term
and so long and only so long as an Event of Default shall not have occurred and
be continuing, the Lessor authorizes the Lessee, at the Lessee's expense, to
assert for the Lessor's account, all rights and powers of the Lessor under any
contractor's, manufacturer's, vendor's or warranty on the Leased Premises or any
part thereof;
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provided, however, that the Lessee shall indemnify, protect, save, defend and
hold harmless the Lessor from and against any and all claims, and all costs,
expenses, damages, losses and liabilities incurred or suffered by the Lessor in
connection therewith, as a result of, or incident to, any action by the Lessee
pursuant to the foregoing authorization.
SECTION 19. Events of Default. Each of the following shall be deemed an
-----------------
Event of Default:
(a) Failure of the Lessee to pay Basic Rent for more than 3 days after such
payment is due pursuant to Section 4 hereof, or failure of the Lessee to pay
Supplemental Rent or any other amount payable by the Lessee hereunder for more
than 10 days after such payment is due; or
(b) Failure to maintain the insurance required by Section 10 hereof or
default in the performance of the covenant contained in Section 10(c) hereof; or
(c) Default in the performance of any other obligation or covenant of the
Lessee pursuant to this Lease Agreement and the continuance of such default for
10 days after written notice to the Lessee by the Lessor; or
(d) The occurrence of an Event of Default under the Participation Agreement
or the Agency Agreement; or
(e) The entry of a decree or order for relief in respect of the Lessee by a
court having jurisdiction in the premises in an involuntary case under the
federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Lessee or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 30 consecutive
days; or
(f) The suspension or discontinuance of the Lessee's business operations,
its insolvency (however evidenced) or its admission of insolvency or bankruptcy,
or the seeking by it of reorganization or relief or the commencement by the
Lessee of a voluntary case under the federal bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or the consent by it to the appointment of or
taking possession by a receiver, litial part of its property, or the making by
it of an assignment for the benefit of creditors, or the failure of the Lessee
generally to pay its debts as such debts become due, or the taking of corporate
action by the Lessee in furtherance of any such action; or
(g) A default or event of default, the effect of which is to permit the
lender or lenders of any instrument, or a trustee or agent on behalf of such
lender or lenders, to cause the indebtedness evidenced by such instrument to
become due prior to its stated maturity shall occur under the provisions of any
instrument evidencing indebtedness for borrowed money of the Lessee or any
Affiliate thereof (or under the provisions of any agreement pursuant to which
such instrument was issued) or any obligation of the Lessee or any Affiliate
thereof for the payment
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of such indebtedness shall become or be declared to be due and payable prior to
its stated maturity, or shall not be paid when due; or
(h) Any representation or warranty made by the Lessee in this Lease
Agreement any other Transaction Document or any document contemplated hereby or
thereby proves to be false or inaccurate in any material respect; or
(i) A final judgment or judgments entered by a court of competent
jurisdiction for the payment of money in excess of $5,000,000 in the aggregate
(excluding any insured portions) shall be rendered against the Lessee and shall
remain in force undischarged, unstayed or unbonded for a period of more than 60
days; or
(j) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Lessee or any Affiliate
thereof, (iii) a Reportable Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any single employer plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the reasonable
opinion of the Lessor, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any single employer plan shall terminate for
purposes of Title IV of ERISA, or (v) the Lessee or any Affiliate thereof shall,
or in the reasonable opinion of the Lessor is likely to, incur any liability in
connection with a withdrawal from, or the insolvency or reorganization of, a
multiemployer Plan; and in each case in clauses (i) through (vi) above, such
event or condition, together with all other such events or conditions, if any,
could reasonably be expected to have a Material Adverse Effect.
SECTION 20. Remedies Upon Default.
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(a) Upon the occurrence of any Event of Default and at any time thereafter
so long as the same shall be continuing, the Lessor may exercise one or more of
the following remedies as the Lessor in its sole discretion shall elect:
(i) The Lessor shall have the right to terminate this Lease Agreement upon
written notice to the Lessee. Whether or not the Lease Agreement shall have
been terminated, the Lessor shall have the right to reenter and repossess the
Leased Premises or any thereof and the right to remove all persons and property
therefrom by summary proceedings, ejectment, any other legal action or in any
lawful manner the Lessor determines to be necessary or desirable. The Lessor
shall be under no liability by reason of any such reentry, repossession or
removal. No such reentry, repossession or removal shall be construed as an
election by the Lessor to terminate this Lease Agreement unless a notice of such
termination is given to the Lessee pursuant to this Section or unless such
termination is decreed by a court.
(ii) The Lessor may demand, by written notice to the Lessee specifying a
purchase date, that the Lessee purchase the Leased Premises from the Lessor, and
the Lessee shall purchase the Leased Premises from the Lessor, on the purchase
date specified in such notice (on an as is basis, without any warranty of any
kind (other than the absence of Lessor Liens) by,
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or any recourse of any kind to the Lessor, as liquidated damages for loss of
bargain and not as a penalty (in lieu of the Basic Rent and Supplemental Rent
due after the payment date specified in such notice)), for a price equal to (x)
the Termination Value on such date plus (y) any unpaid Basic Rent accrued and
unpaid through the payment date specified in such notice (together with interest
thereon at the Late Payment Rate from the payment date specified in such notice
to the date of actual payment) and any Supplemental Rent or other amounts due
and unpaid.
(iii) If the Lessee defaults under Section 20(a)(ii) hereof, upon 15
days' written notice to the Lessee of the date, time and place of any proposed
sale (which notice the Lessee agrees is reasonable) and subject to any
requirements of applicable law, sell in good faith and in a commercially
reasonable manner, all or any part of the Leased Premises or its interest
therein, at public or private sale, as the Lessor may determine, or otherwise
dispose of, in good faith and in a commercially reasonable manner, all or any
part of the Leased Premises or its interest therein, as the Lessor may
determine, in each case free and clear of any rights of the Lessee and without
any duty to account to the Lessee with respect to such action or inaction or for
any proceeds with respect thereto (except to the extent required under Section
20(b)(iii) hereof, in the event that the Lessor elects to exercise its right
under Section 20(a)(iii) hereof, in which event the Lessee's obligation to pay
Basic Rent hereunder for periods commencing after the date of such sale shall be
terminated or proportionately reduced, as the case may be (except to the extent
that Basic Rent is to be included in the computation under Section 20(a)(i) or
(ii) hereof, if the Lessor shall elect to exercise its right thereunder)).
(iv) If the Lessor shall have sold the entire Leased Premises or its
entire interest therein pursuant to Section 20(a)(iii) hereof, the Lessor may
demand that the Lessee pay to the Lessor and the Lessee shall pay to the Lessor
on the date of such sale, as liquidated damages for loss of a bargain and not a
penalty (in lieu of Basic Rent due for any period commencing after the date of
such sale), any accrued and unpaid Basic Rent through the date of such sale,
plus the amount by which the amount required to be paid by the Lessee under
Section 20(a)(ii) hereof determined as of such purchase date exceeds the amount
obtained pursuant to Section 20(a)(iii) hereof and any Supplemental Rent due and
unpaid as of the date of actual payment (together with interest thereon at the
Late Payment Rate from the payment date specified in such notice to the date of
actual payment and any Supplemental Rent due and unpaid).
(v) THE LESSOR AND THE LESSEE AGREE AND ACKNOWLEDGE THAT IT WOULD BE
IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE ACTUAL DAMAGES WHICH THE
LESSOR WOULD SUFFER IN THE EVENT THAT THE LESSEE DEFAULTS AND FAILS TO COMPLETE
THE PURCHASE OF THE LEASED PREMISES IN ACCORDANCE WITH THE TERMS OF THIS LEASE
AGREEMENT INCLUDING SECTION 20(b)(i) AND (ii) HEREOF. THE PARTIES HEREBY AGREE
THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT THE LESSOR WOULD
SUFFER IN THE EVENT OF THE LESSEE'S DEFAULT AND FAILURE TO COMPLETE THE PURCHASE
OF THE LEASED PREMISES IS AND SHALL BE AN AMOUNT EQUAL TO THE DAMAGES SET
FORTH IN CONFORMANCE WITH SECTION 20(a)(ii) AND SECTION 20(a)(iv) HEREOF.
(vi) No termination of the Lease Term pursuant to this Section, by
operation of law, or otherwise, and
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no reletting of the Leased Premises pursuant to this Section or otherwise, shall
relieve the Lessee of its liabilities and obligations under this Lease Agreement
all of which shall survive such termination, reentry, repossession, removal or
reletting.
(vii) Additionally, the Lessor may exercise any other right or remedy which
may be available to it under applicable law or common practice, including,
without limitation, proceeding by appropriate court action to enforce the terms
hereof or to recover damages for the breach hereof or to rescind this Lease
Agreement.
(b) This Section 20(b) shall be in addition to each and every right and
remedy granted to the Lessor hereunder, and shall apply to the extent, but only
to the extent, that either (i) a court of competent jurisdiction determines that
the laws of the State of California or of the State of Florida must be applied,
or (ii) the Lessor determines in its sole discretion that it is necessary to
apply the procedural laws of the State of California or of the State of Florida,
as the case may be, in order for the Lessor to fully and effectively exercise
its rights and remedies hereunder, in which event, upon the occurrence of any
Lease Event of Default and at any time thereafter, the Lessor may exercise one
or more of the following remedies as the Lessor in its sole discretion shall
elect:
(i) Whether or not the Lease Agreement shall have been terminated, to
reenter and repossess the Leased Premises or any thereof and the right to remove
all persons and property therefrom by summary proceedings, ejectment, any other
legal action or in any lawful manner the Lessor determines to be necessary or
desirable. The Lessor shall be under no liability by reason of any such
reentry, repossession or removal. No such reentry, repossession or removal
shall be construed as an election by the Lessor to terminate this Lease
Agreement unless a notice of such termination is given to the Lessee pursuant to
this Section 20 or unless such termination is decreed by a court.
(ii) In this Section or as permitted by law, the Lessee shall quit and
surrender the Leased Premises to the Lessor, and the Lessor may without further
notice enter upon, reenter, possess and repossess the same by summary
proceedings, ejectment or otherwise, and again have, repossess and enjoy the
same as if this Lease Agreement had not been made, and in any such event neither
the Lessee nor any Person claiming through or under the Lessee by virtue of any
law or an order of any court shall be entitled to possession or to remain in
possession of the Leased Premises but shall forthwith quit and surrender the
Leased Premises, and the Lessor shall, notwithstanding any other provision of
this Lease Agreement and in lieu of all other claims for damages on account of
such termination, be entitled to recover from the Lessee the aggregate of all
amounts the Lessor is permitted to recover from the Lessee, including:
(1) the worth at the time of award, as computed below, of the unpaid rent
(including, without limitation, Basic Rent and Supplemental Rent (other than
Termination Value)) which had been earned at the time of termination of this
Lease Agreement;
(2) the worth at the time of award of the amount by which the unpaid rent
(including, without limitation, Basic Rent and Supplemental Rent (other than
Termination Value)) which would have been earned after the time of termination
of this Lease Agreement until the time of
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award exceeds the amount of such rental loss that the Lessee proves could
have been reasonably avoided;
(3) the worth at the time of award of the amount by which the unpaid rent
(including, without limitation, Basic Rent and Supplemental Rent (other than
Termination Value)) for the balance of the term after the time of award exceeds
the amount of such rental loss for said balance of the term that the Lessee
proves could be reasonably avoided; and
(4) any other amount necessary to compensate the Lessor for all the
detriment proximately caused by the Lessee's failure to perform its obligations
under this Lease Agreement or which in the ordinary course of things would be
likely to result therefrom; including without limitation any loss or damage
arising out of the failure of the Lessor to receive the benefit of the
performance by the Lessee of any obligation to purchase the Leased Premises
under the provisions of this Lease Agreement. The Lessee acknowledges and
agrees that, in reliance upon this Lease Agreement and the Lessee's covenants
and agreements hereunder and the creditworthiness and financial condition of the
Lessee, the Lessor has entered into certain special transactions to finance the
costs of developing the Leased Premises and constructing the Improvements on the
Leased Premises and, in connection with such financing transactions, Lessor has
incurred and will continue to incur indebtedness and liabilities under and
pursuant to the Loan Agreement, and the other Transaction Documents. The Lessee
acknowledges and agrees that an Event of Default will cause the Lessor
substantial damage and detriment due to its obligations and liabilities under
the Loan Agreement, and thelities of the Lessor will be accelerated and
materially altered and increased by an Event of Default. Accordingly, in order
to compensate the Lessor for all detriment proximately caused by the Lessee's
failure to perform its obligations under this Lease, the Lessor shall be
permitted to recover from the Lessee all amounts payable under the Lease
Agreement inasmuch as such amounts equal the amounts payable by the Lessor under
or pursuant to the Loan Agreement as a result of an Event of Default hereunder
and a substantially proportionate amount in respect of the investment of the
Equity Participant.
The "worth at the time of award" of the amounts referred to in the
foregoing Sections 20(b)(ii)(1) and (2) shall be computed by allowing interest
at the Late Payment Rate on each rental installment from the date the same was
due hereunder to the time of award. The "worth at the time of award" of the
amount referred to in the foregoing Section 20(b)(ii)(3) shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award plus one percent (1%). As used herein, the
term "time of award" shall mean either (A) the date upon which the Lessee pays
to the Lessor the amount recoverable by the Lessor as hereinabove set forth or
(B) the date of entry of any determination, order or judgment of any court,
other legally constituted body, or any arbitrator(s), determining the amount
recoverable, whichever first occurs. If the time of award is determined under
clause (B) of the preceding sentence, then the amount recoverable by the Lessor
hereunder shall bear interest from the time of award until paid at the Default
Rate (or at the highest rate permitted by applicable law, whichever is less).
Nothing herein contained shall limit or prejudice the right of the Lessor, and
the Lessor is hereby expressly granted the right, in any bankruptcy or
reorganization or insolvency proceedings, to prove for and obtain as damages
by reason of such term to the maximum allowed by any statute or rule of law
whether such amount shall be greater or less than the amounts referred to above.
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THE LESSOR AND THE LESSEE AGREE AND ACKNOWLEDGE THAT IT WOULD BE
IMPRACTICAL AND EXTREMELY DIFFICULT TO FIX THE ACTUAL AMOUNT OF ALL DAMAGES
WHICH THE LESSOR WOULD SUFFER IN THE EVENT OF THE LESSEE'S DEFAULT AND FAILURE
TO PERFORM ITS OBLIGATIONS IN ACCORDANCE WITH THE TERMS OF THIS LEASE AGREEMENT.
THE PARTIES HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE OTHER AMOUNTS
NECESSARY TO COMPENSATE THE LESSOR FOR ALL THE DETRIMENT THAT THE LESSOR WOULD
SUFFER IN THE EVENT OF THE LESSEE'S DEFAULT IS AN AMOUNT DETERMINED AT THE TIME
OF THE AWARD EQUAL TO THE SUM OF (A) THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES
THEN OUTSTANDING PLUS (B) INTEREST ACCRUED ON THE AMOUNT THEN OUTSTANDING TO THE
DATE OF ACTUAL PAYMENT PLUS (C) THE CERTIFICATE BALANCE THEN OUTSTANDING PLUS
THE CERTIFICATE RATE ACCRUED THEREON TO THE DATE OF ACTUAL PAYMENT PLUS (D) A
PREMIUM EQUAL TO THE MAKE-WHOLE AMOUNT LESS THE SUM OF THE AMOUNTS AWARDED TO
THE LESSOR UNDER CLAUSES (1), (2) AND (3) OF THIS SECTION 20(b)(ii) AND THE
LESSEE SHALL PAY TO THE LESSOR AND THE LESSOR SHALL BE ENTITLED TO RECOVER FROM
THE LESSEE SUCH AMOUNT AS LIQUIDATED DAMAGES AND NOT AS A PENALTY.
(iii) In addition to the other rights and remedies set forth herein, the
Lessor shall have the right to continue this Lease Agreement in effect and, as
permitted by Section 1951.4 of the California Civil Code (with respect to any
Leased Premises located in California), to enforce, by suit or otherwise, all
covenants and conditions hereof to be performed or complied with by the Lessee
and exercise all of the Lessor's rights and remedies under this Lease Agreement,
including, without limitation, the right to recover Basic Rent from the Lessee
as it becomes due under this Lease Agreement, even though the Lessee has
breached this Lease Agreement and abandoned the Leased Premises. Acts of
maintenance or preservation, or efforts by the Lessor or on the Lessor's behalf
to relet the Leased Premises, or the appointment of a receiver upon the
initiative of the Lessor to protect the Lessor's interest under this Lease
Agreement shall not constitute a termination of the Lessee's right to possession
of the Leased Premises; provided, however, that the foregoing enumeration shall
not be construed as in any way limiting the actions the Lessor may take without
terminating the Lessee's right to possession. In furtherance of the rights
hereby granted to the Lessor, and to the extent permitted by law, the Lessee
hereby appoints the Lessor as its agent and attorney-in-fact, which appointment
shall be deemed to be coupled with an interest and is irrevocable, with power of
substitution, to enter the Leased Premises upon an Event of Default hereunder
and remove therefrom all persons and property (with the right to store such
property on the Leased Premises in a public warehouse or elsewhere at the cost
and risk and for the account of the Lessee) and to alter the Leased Premises in
such manner as the Lessor may deem necessary or advisable so as to put the
Leased Premises in good order and to make the same rentable and from time to
time sublet the Leased Premises or any part thereof for such term or terms
whether or not extending beyond the then current term of this Lease Agreement
(but such sublease may provide for a new and successive lease to commence
immediately upon the termination of this Lease), at such rentals and upon such
other terms as the Lessor in its sole discretion may deem advisable, and with
the right to make alterations and repairs to the Leased Premises; and the Lessee
agrees to pay to the Lessor on demand all reasonable expenses incurred by the
Lessor in such subletting, and in altering, repairing and putting the Leased
Premises in good order and condition, and in reletting the same,
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including fees of attorneys and architects, and all other reasonable expenses or
commissions; provided that the Lessor will not sublet the Leased Premises
without first giving the Lessee thirty (30) days after the Event of Default to
sublet the Leased Premises or assign this Lease Agreement on the Lessee's own
initiative in accordance with the provisions of this Lease Agreement governing
assignment and subletting. The Lessor shall be the Lessee's agent and
representative on the Leased Premises in respect of all matters arising under or
in connection with any such sublease made for the Lessee by the Lessor. Under
each such sublease, the Lessee shall retain the right to enter upon and use the
Leased Premises, subject to the terms and conditions of such sublease and the
rights of the sublessee thereunder. The Lessee further agree to pay to the
Lessor, following the date of such subletting, to and including the date
provided in this Lease Agreement for the expiration of the Lease Term, the sums
of money which would have been payable by the Lessee as Basic Rent and
Supplemental Rent, deducting only the net amount of rent, if any, which the
Lessor shall actually receive (after deducting from the gross receipts the
expenses, costs and payments of the Lessor which in accordance with the terms of
this Lease Agreement would have been borne by the Lessee) in the meantime from
and by any such subletting of the Leased Premises, and the Lessee hereby agrees
to remain liable for all sums otherwise payable by the Lessee under this Lease,
including, but not limited to, the expenses of the Lessor aforesaid, as well as
for any deficiency aforesaid. The Lessor shall have the right from time to time
to begin and maintain successive actions or other legal proceedings against the
Lessee for the recovery of such deficiency, expenses or damages or for a sum
equal to any installments of Basic Rent or Supplemental Rent and other sums
payable hereunder, and to recover the same upon the liability of the Lessee
herein provided, which liability it is expressly covenanted shall survive the
commencement or determination of any action to secure possession of the Leased
Premises. Nothing herein contained shall be deemed to require the Lessor to wait
to begin such action or other legal proceedings until the date when this Lease
Agreement would have expired had there been no such Event of Default.
Notwithstanding any such subletting, pursuant to the terms hereof, the Lessor
shall retain the right to and may at any time thereafter elect to terminate this
Lease Agreement or the Lessee's right to possession of the Leased Premises for
any previous breach which remains uncured or for any subsequent breach by giving
the Lessee written notice thereof as herein provided, and in such event the
Lessee shall forfeit any rights or interest under any such sublease and
thereafter the obligations of any such sublessee shall run directly to the
Lessor for its own account. Upon application by the Lessor, a receiver may be
appointed to take possession of the Leased Premises, exercise all rights granted
to the Lessor as agent and attorney-in-fact for the Lessees set forth in this
Section 20(b)(iii) and apply any rentals collected from the Leased Premises as
hereinabove provided. No taking of possession of the Leased Premises or other
act by the Lessor as the agent and attorney-in-fact for the Lessee pursuant to
the foregoing provisions, nor any subletting by the Lessor for the Lessee
pursuant to the foregoing provisions, nor any such appointment of a receiver
shall constitute or be construed as an election by the Lessor to terminate this
Lease Agreement or the Lessee's right to possession of the Leased Premises
unless a written notice of such intention be given to the Lessee.
(c) In addition to each and every other provision of this Section 20, the
Lessee shall be liable for all costs and expenses, including reasonable
attorney's fees, incurred by the Lessor or Agent by reason of the occurrence of
any Event of Default or the exercise of the Lessor's remedies with respect
thereto. No remedy referred to in this Section is intended to be exclusive, but
each shall be cumulative and in addition to any other remedy referred to above
or otherwise available to the Lessor at law or in equity; and the exercise or
beginning of exercise by the
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Lessor of any one or more of such remedies shall not constitute the exclusive
election of such remedies and shall not preclude the simultaneous or later
exercise by the Lessor of any or all of such other remedies under this Lease
Agreement. No express or implied waiver by the Lessor of any Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Event of Default. To the extent permitted by applicable law, the Lessee hereby
waives any rights now or hereafter conferred by statute or otherwise which may
require the Lessor to sell, lease or otherwise use the Leased Premises in
mitigation of the Lessor's damages as set forth in this Section or which may
otherwise limit or modify any of the Lessor's rights and remedies in this
Section.
SECTION 21. Certain Waivers. (a) To the extent this Lease Agreement is
---------------
interpreted to be a guarantee of the Notes, the Lessee hereby expressly waives:
(i) notice of the acceptance by the Lessee of this Lease Agreement and
the other Transaction Documents;
(ii) notice of the existence or creation or non-payment of all or any of
the obligations under this Lease Agreement or the other Transaction Documents;
(iii) presentment, demand, notice of dishonor, protest, notice of protest
and all other notices whatsoever;
(iv) all diligence in collection or protection of or realization upon the
obligations under this Lease Agreement or the other Transaction Documents or any
thereof, any obligation hereunder or any security for or guaranty of any of the
foregoing;
(v) any right to direct or affect the manner or timing of either the
Agent's or a Lender's enforcement of its rights or remedies;
(vi) any defense, right of set-off or other claim whatsoever (other than
payment in full and performance in full of all of the obligations under this
Lease Agreement or under any other Transaction Documents in accordance with the
terms hereof or thereof) that the Lessee or any third party may or might have to
the payment or performance of the obligations under the Transaction Documents;
(vii) any and all benefits and defenses to or discharges of liability
that may arise from any insolvency, bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, or similar proceeding with
respect to the Lessor or the Lessee;
(viii) any and all defenses which would otherwise arise upon the occurrence
of any Event of Default hereunder or under any other Transaction Document, or
upon the taking of any action by the Agent or the Lenders permitted hereunder or
thereunder;
(ix) any defense, right of set-off, claim or counterclaim whatsoever
(other than payment and performance in full of all of the obligations under this
Lease Agreement or the other Transaction Documents in accordance with the terms
hereof or thereof and the documents securing those obligations), and any and all
other rights, benefits, protections and other defenses which the Lessee may
have, now or at any time hereafter, to full payment or performance of the
obligations pursuant to the terms of this Lease Agreement and the other
Transaction
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Documents, including, without limitation, under California Civil Code Sections
2809, 2810, 2819, 2821, 2845, 2849, 2850 and 2855, and California Code of Civil
Procedure Sections 580a, 580b and 580d, and all successor sections;
(x) any and all defenses against any claim by the Agent or any Lender
following the Agent's or any Lender's nonjudicial foreclosure of any Mortgage
securing the obligations under this Lease Agreement or the other Transaction
Documents, including, but not limited to, the defense that would otherwise have
been available to the Lessee by virtue of the Agent's or any Lender's
nonjudicial foreclosure of such Mortgage having destroyed the right to pursue a
deficiency against the Lessor, to which the Lessee would have otherwise been
subrogated, in accordance with California Civil Code Section 580(d), or any
subsequent enactments, modifications, and recodifications thereof; and
(xi) all other principles or provisions of Law, if any, that conflict with
the terms of this Lease Agreement or the other Transaction Documents, including,
without limitation, the effect of any circumstances that may or might constitute
a legal or equitable discharge of a guarantor or surety.
(b) In addition to the specific waivers set forth in this Section 21, the
Lessee does hereby waive and shall have no right of subrogation, reimbursement,
exoneration, contribution or indemnity against the Lessor or any other Person
for any reason, including but not limited to, by reason of any payments made or
acts performed by the Lessee in compliance with the obligations of the Lessee
hereunder or any actions taken by the Agent or any Lender pursuant to this Lease
Agreement or pursuant to the other Transaction Documents.
(c) Nothing contained in this Lease Agreement or the other Transaction
Documents shall prevent the Agent or any Lender from suing to collect on the
obligations under this Lease Agreement or the other Transaction Documents or
from exercising concurrently or successively any rights available to it at law
or in equity or under any of the Transaction Documents, and that the exercise of
any of the aforesaid rights shall not constitute a legal or equitable discharge
of the Lessee. The Lessee hereby authorizes and empowers the Agent or any
Lender to exercise, in its sole discretion, any rights and remedies, or any
combination thereof, which may then be available, since it is the intent and
purpose of the Lessee that the obligations hereunder shall be absolute,
independent, and unconditional under any and all circumstances. Notwithstanding
any foreclosure of the lien of any deed of trust or security agreement with
respect to any or all of any real or personal property secured thereby, whether
by the exercise of the power of sale contained therein, by an action for
judicial foreclosure, or by the acceptance of a deed or possession of any other
collateral in lieu of foreclosure, the Lessee shall remain bound under this
Lease Agreement and the other Transaction Documents.
SECTION 22. Memorandum of Lease.
-------------------
This Lease Agreement shall not be recorded, but a Memorandum of Lease, in
the form attached hereto as Exhibit B, shall be executed and acknowledged by the
parties and recorded by the Lessee, at its own expense, in the county where the
Leased Premises are located as soon as reasonably possible after full execution
and delivery of this Lease.
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SECTION 23. Lessor's Right to Perform for the Lessee. If the Lessee
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fails to pay any Supplemental Rent or fails to perform or comply with any of its
agreements contained herein, the Lessor may itself, after notice to the Lessee,
make such payment or perform or comply with such agreement, and the amount of
such payment and the amount of the reasonable expenses of the Lessor incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with interest thereon at the rate
specified in Section 17 hereof, shall, if not paid by the Lessee to the Lessor
on demand, be deemed a Supplemental Payment hereunder; provided, however, that
-----------------
no such payment, performance or compliance by the Lessor shall be deemed to cure
any Event of Default hereunder.
SECTION 24. Notices. All notices provided for or required under the
-------
terms and provisions hereof shall be given in the manner provided for and the
addresses specified in Section 6.02 of the Participation Agreement.
SECTION 25. Nature of Transaction.
---------------------
(a) It is the intention of the parties that for federal, state and local
income or franchise tax, bankruptcy (including the substantive law upon
which bankruptcy proceedings are based), real estate and Uniform Commercial
Code purposes:
(i) this overall transaction constitutes a loan by the Lenders and Equity
Participant to Lessee and preserves beneficial ownership in the Leased Premises
in Lessee, and obligations of Lessee to pay Basic Rent shall be treated as
payments of interest; and
(ii) the Mortgage and the Assignment Agreements create liens and security
interests in the Leased Premises in favor of Agent for the benefit of the
Lenders and Equity Participant.
Accordingly, and notwithstanding any provision of this Lease to the
contrary, the parties hereto agree and declare that: (i) the transactions
contemplated by this Lease are intended to have a dual, rather than single form,
as evidenced by the statements set forth in Section 26 hereof, and (ii) all
references in the Transaction Documents to the "lease" of the Leased Premises
which fail to reference such dual form do so as a matter of convenience only and
do not reflect the intent of the parties hereto as to the true characterization
of such arrangements. Notwithstanding the intentions of the parties set forth
above, Lessee acknowledges and agrees that none of Agent, any Lender, the Equity
Participant or their representatives have made any representations or warranties
concerning the tax, accounting or legal characteristics of the Transaction
Documents and that Lessee has obtained and relied upon such tax, accounting and
legal advice from its own experts concerning the Transaction Documents as it
deems appropriate.
(b) Specifically, without limiting the generality of paragraph (a) of this
Section 25, the Lessor and the Lessee intend and agree that with respect to the
nature of the transactions evidenced by this Lease in the context of the
exercise of remedies under the Transaction Documents, including, without
limitation, in the case of any
25
<PAGE>
insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any state thereof affecting the Lessee, the Lessor, any
Lender or the Equity Participant or any enforcement or collection actions, the
transactions evidenced by this Lease are loans made by the Equity Participant
and the Lenders as unrelated third party lenders to the Lessee secured by the
Leased Premises pursuant to the Mortgage and Assignment Agreements.
(c) The Lessor agrees that it will not file any federal, state or local
income tax returns during the Lease Term that are inconsistent with the
treatment of the Lessee as owner of the Leased Premises for federal, state and
local income tax purposes. The Lessee agrees to file all applicable state and
local property returns, reports, forms and notices with respect to the Leased
Premises during the Lease Term consistent with the treatment of the Lessee as
the owner of the Leased Premises for state and local property tax purposes.
SECTION 26. Operating Lease. Notwithstanding the provisions of Section
---------------
25 hereof, the Lessor and the Lessee hereby declare that it is their mutual
intent that for accounting purposes this Lease Agreement be an operating lease
(for purposes of FASB Statement 13) and not an instrument or evidence of
indebtedness, and that the relationship between the Lessor and the Lessee under
this Lease Agreement shall always be that of lessor and lessee only.
SECTION 27. Governing Law. The provisions of Section 6.06 of the
--------------
Participation Agreement are hereby incorporated herein by reference.
SECTION 28. Miscellaneous.
-------------
(a) The Lessee will promptly execute and deliver all further instruments
and documents and take all further action that may be necessary in order to give
effect to the provisions of this Lease Agreement and the other Transaction
Documents. The Lessee, at its own cost and expense, will take all such actions
as may be reasonably requested by the Lessor, the Agent, or any Lender, in order
to establish, preserve and perfect (a) the Lessor's good and marketable title to
the Leased Premises and the Lessor's rights under this Lease Agreement and the
other Transaction Documents, and (b) the first and prior perfected Lien of the
Agent in the Leased Premises and this Loan Agreement, including, without
limitation, procuring, executing and delivering from time to time any
endorsements, assignments, financing statements, deeds of trust and other
writings reasonably deemed necessary or appropriate by the Lessor or the Agent.
(b) All rights and obligations under this Lease Agreement shall bind, and
inure to the benefit of, the parties hereto and their successors and permitted
assigns.
(c) If any term or provision of this Lease Agreement or the application
thereof to any person or circumstances shall to any extent be invalid and
unenforceable, the remainder of this Lease Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
invalid or
26
<PAGE>
unenforceable, shall not be affected thereby, and each term and provision of
this Lease Agreement shall be valid and shall be enforced to the extent
permitted by law.
(d) The failure of a party to insist upon a strict performance of any of
the terms, conditions and covenants herein shall not be deemed a waiver of any
rights or remedies that said party may have, and shall not be deemed a waiver of
any subsequent breach or default in the terms, conditions and covenants herein
contained.
(e) No change in the provisions of this Lease Agreement shall be effective
unless made in writing and signed by the Lessor and the Lessee.
(f) The headings preceding the text of sections of this Lease Agreement are
for convenience only and shall not modify or affect the substantive provisions
of this Lease.
(g) There are no oral, verbal, or other agreements (unless attached hereto
or specifically referred to herein) which modify or affect this Lease. This
Lease Agreement supersedes any and all prior agreements executed by or on behalf
of the parties hereto regarding the Leased Premises.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement to be
duly executed by their duly authorized officers as of the date first written
above.
FLEET NATIONAL BANK,
not in its individual capacity
but solely as Owner Trustee
under the Trust Agreement
By: /s/ Elizabeth C. Hammer
----------------------
Elizabeth C. Hammer
Vice President
SMART & FINAL INC.
By: /s/ Donald G. Alvarado
----------------------
Senior Vice President
Law/Development
28
<PAGE>
EXHIBIT A
TO LEASE AGREEMENT
FORM OF LEASE SUPPLEMENT
ALL ADVANCES HAVE ALREADY BEEN FUNDED. ACCORDINGLY THE FORM OF LEASE
SUPPLEMENT ATTACHED TO THE ORIGINAL LEASE AGREEMENT IS HEREBY INCORPORATED
HEREIN BY REFERENCE.
29
<PAGE>
EXHIBIT B
TO LEASE AGREEMENT
FORM OF SUBSIDIARY SUBLEASE
Since all Advances have been fully funded, the form of Sublease from the
Original Lease Agreement is hereby incorporated herein by reference.
30
<PAGE>
EXHIBIT C
TO LEASE AGREEMENT
FORM OF MEMORANDUM OF LEASE
Since all Advances have been fully funded, the form of Memorandum of Lease from
the Original Lease Agreement is hereby incorporated herein by reference.
31
<PAGE>
[Execution Copy]
FIRST AMENDMENT AND RESTATEMENT
Dated as of June 20, 1997
TO
LOAN AGREEMENT
Dated as of December 15, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I
Definitions............................ 1
ARTICLE II
Notes............................... 1
2.01 Loans....................................................... 1
2.02 Characteristics of all Notes................................ 2
2.03 Characteristics of Series A Notes and the Series B Notes.... 5
2.04 Prepayment of Notes......................................... 5
2.05 Register, Transfer, and Exchange of Notes................... 6
2.06 Application of Payments Prior to an Event of Default........ 7
2.07 Amendments of Lease Agreement; the Lessor Actions........... 8
2.08 Investment of Funds......................................... 9
ARTICLE III
Covenants of the Lessor...................... 10
ARTICLE IV
Limitation of Liability...................... 11
ARTICLE V
Events of Default; Remedies.................... 12
5.01 Events of Default........................................... 12
5.02 Specific Remedies........................................... 13
5.03 Application of Proceeds..................................... 13
5.04 Rescission.................................................. 14
5.05 Rights and Remedies Cumulative; No Waiver................... 14
5.06 Restoration of Rights and Remedies.......................... 14
5.07 Compliance with Law......................................... 15
ARTICLE VI
Agent............................... 15
6.01 Appointment................................................. 15
6.02 Delegation of Duties........................................ 15
6.03 Nature of Duties; Independent Credit Investigation.......... 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.04 Actions in Discretion of the Agent; Required Lenders' Consent. 16
6.05 Exculpatory Provisions........................................ 16
6.06 Reimbursement and Indemnification............................. 16
6.07 Reliance by the Agent......................................... 17
6.08 Individual Capacity........................................... 17
6.09 Holders of Notes.............................................. 17
6.10. Successors.................................................... 17
6.11. Distributions to the Lenders.................................. 17
ARTICLE VII
Miscellaneous............................. 18
7.01 Notices....................................................... 18
7.02 Survival...................................................... 18
7.03 Amendments and Waivers........................................ 18
7.04 Entire Agreement.............................................. 18
7.05 Governing Law................................................. 18
7.06 Non-Recourse To Certain Parties............................... 18
7.07 Invalidity of Provisions...................................... 19
7.08 Counterparts.................................................. 19
7.09 Effectiveness................................................. 19
7.10. Headings...................................................... 19
7.11. Holders of Notes.............................................. 19
7.12. Successors and Assigns........................................ 19
</TABLE>
ii
<PAGE>
FIRST AMENDMENT AND RESTATEMENT, dated as of June 20, 1997, to the
LOAN AGREEMENT (the "Original Loan Agreement"), dated as of December 15, 1994,
among FLEET NATIONAL BANK (as successor to SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION), a national banking association, not in its individual capacity but
solely as the Owner Trustee under the Trust Agreement (the "Lessor"); CREDIT
LYONNAIS LOS ANGELES BRANCH, a branch duly licensed under the laws of the State
of California of a banking corporation organized and existing under the laws of
the Republic of France; BANK LEUMI-LE-ISRAEL, B.M., a banking corporation
organized and existing under the laws of Israel; THE FUJI BANK, LIMITED, LOS
ANGELES AGENCY, an agency duly licensed under the laws of the State of
California, of a banking corporation organized and existing under the laws of
Japan; THE INDUSTRIAL BANK OF JAPAN LIMITED, LOS ANGELES AGENCY, an agency duly
licensed under the laws of the State of California of a banking corporation
organized and existing under the laws of Japan and VIA BANQUE, S.A., a banking
corporation organized and existing under the laws of the Republic of France
(each of the foregoing which holds a Series A Note being, in such capacity as
"Series A Lender"; and each of the foregoing which holds a Series B Note being,
in such capacity, a "Series B Lender") and CREDIT LYONNAIS NEW YORK BRANCH, a
branch duly licensed under the laws of New York of a banking corporation
organized and existing under the laws of the Republic of France, as agent for
the Series A Lenders and the Series B Lenders (the "Agent").
The parties hereto hereby agree that the Original Loan Agreement is
amended and restated to read in its entirety as follows:
ARTICLE I
---------
Definitions
-----------
Capitalized terms used but not defined herein shall have the
respective meanings assigned thereto in the Definition Schedule attached as
Exhibit A to the Participation Agreement.
ARTICLE II
----------
Notes
-----
2.01 Loans.
-----
(a) General. The Series A Lenders and the Series B Lenders have
-------
severally, and on the other terms and subject to the conditions set forth in
this Loan Agreement and the other Transaction Documents, made loans to the
Lessor on each Closing Date and Advance Date. The Lessor's obligation to repay
the loans hereunder is evidenced by its non-recourse promissory notes, referred
to as the Series A Notes and the Series B Notes, executed in favor of the Series
A Lenders and the Series B Lenders, respectively, as more fully described below.
1
<PAGE>
(b) Procedure for Borrowings. All loans having been disbursed, this
------------------------
Subsection is intentionally left blank.
2.02 Characteristics of all Notes.
----------------------------
(a) General. The Notes (i) shall be dated as of the initial Closing
-------
Date under the Participation Agreement, (ii) shall entitle the holders thereof
to payments of interest on the outstanding principal amount thereof for each day
during each Payment Period applicable thereto from the date thereof, (iii) shall
entitle the holders thereof to repayment of principal on the last day of each
Payment Period beginning March 31, 2001, in the amounts and to the extent set
forth in the payment schedules attached to such Notes, and (iv) as provided in
Section 2.06 hereof, shall be exchangeable for an equal aggregate principal
amount of Notes of like tenor. Unless sooner paid, by reason of acceleration or
otherwise, the entire unpaid principal balance of the Notes, together with
interest accrued thereon, shall be due and payable on the Maturity Date. Except
as otherwise provided in paragraphs (d) and (e) below, borrowings evidenced by
the Notes shall consist of (i) for the period beginning on the initial Closing
Date and ending on the last day of the Payment Period next following the
Completion Date, one or more (but not greater than four) of the following: Base
Rate Notes, Eurodollar Notes and LIBOR Notes (the LIBOR Notes being available
only for a full Payment Period of three months), and (ii) thereafter,
consecutive LIBOR Notes having Payment Periods of three months.
(b) Interest. So long as no Event of Default has occurred and is
--------
continuing, the Lessor shall pay interest to the Lenders on the outstanding and
unpaid principal amount of the Notes at a rate per annum as follows:
(i) For each LIBOR Series A Note at a rate equal to the LIBOR Rate
plus 0.50% per annum for the period through December 31, 1999 and the LIBOR Rate
plus 0.80% thereafter; and for each LIBOR Series B Note at a rate equal to the
LIBOR Rate plus 0.75% per annum for the period through December 31, 1999 and the
LIBOR Rate plus 1.00% per annum thereafter;
(ii) For each Eurodollar Series A Note, at a rate equal to the
Eurodollar Rate plus 0.50% per annum and for each Eurodollar Series B Note, at a
rate equal to the Eurodollar Rate plus 0.75% per annum; and
(iii) For a Base Rate Note, whether a Series A Note or a Series B
Note, at a rate equal to the Base Rate.
Interest on all Notes shall be paid on the last day of each Payment
Period by wire transfer of federal funds or other immediately available funds to
the Agent at the times and in the same manner as set forth under Section 2.02(c)
hereof in respect of payments of principal. In computing interest on any Note,
the first date of the Payment Period shall be included and the date of payment
shall be excluded. Except in the case of an Event of Default, any amounts under
the Notes not paid when due shall bear additional interest at the Late Payment
Rate for the period for which the same shall be overdue. Upon the occurrence and
during the continuance of an Event of Default, the Lessor shall pay interest on
the
2
<PAGE>
outstanding and unpaid principal of the Notes and on all overdue payments of
interest on such Notes at the Late Payment Rate. Payments of interest at the
Late Payment Rate are due and payable on demand.
(c) Method of Payment. The Lessor shall make each payment of
-----------------
principal under this Loan Agreement not later than 11 A.M., New York City time,
on the day when due to the Agent by wire transfer of federal funds or other
immediately available funds, identifying each payment in such manner and payable
to such account of Agent as provided on the signature pages of the Participation
Agreement. The Agent will promptly thereafter distribute to each registered
holder of Notes its ratable share of each such payment received by the Agent for
the account of such holders at such place as has been provided to Agent in
writing, to be applied with and subject to the terms of this Loan Agreement,
including, without limitation, Section 2.07 hereof. Unless the Agent shall have
received notice from the Lessor prior to the date on which any payment is due
from the Lessor to one or more of the holders of Notes hereunder that the Lessor
will not make such payment in full, the Agent may assume that the Lessor has
made such payment in full to the Agent on such date and distributed to each
holder of Notes on such due date an amount equal to the amount then due such
holder of Notes from the Lessor. If and to the extent that the Lessor shall not
have so made such payment, each holder of Notes shall repay to the Agent
forthwith on demand such amount distributed to such holder of Notes together
with interest thereon, for each day from the date such amount is distributed to
such holder of Notes until the date such holder of Notes pays such amount to the
Agent, at the Federal Funds Rate.
(d) Illegality. Notwithstanding any other provision in this Loan
----------
Agreement, if on any date on which the LIBOR Rate or Eurodollar Rate would
otherwise be set, any Lender determines that any applicable law, rule, or
regulation, or any change therein, or any change in the interpretation or
administration thereof by, or any guideline of, any governmental authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender with any request or
directive (whether or not having the force of law) of any such authority,
central bank, or comparable agency shall make it unlawful or impracticable for
any Lender to maintain or fund its respective LIBOR Notes or Eurodollar Notes in
good faith, then upon notice of such event to the Lessor by such Lender, as the
case may be, the affected Notes held by Lender shall thereafter consist of, and
shall be converted into Base Rate Notes either (i) on the last day of the then-
current Payment Period applicable to such LIBOR Notes or Eurodollar Notes if
such Lender may lawfully continue to maintain and fund such LIBOR Notes or
Eurodollar Notes to such day or (ii) immediately if such Lender shall determine
it may not lawfully continue to maintain and fund such LIBOR Notes or Eurodollar
Notes to such day, and shall remain Base Rate Notes until such time that such
Lender notifies the Lessor that the circumstances giving rise to such conversion
no longer exist.
(e) Disaster. Notwithstanding any other provision of this Agreement,
--------
if on any date on which the LIBOR Rate or Eurodollar Rate would otherwise be
set, the Agent (in the case of clauses (i), or (ii) below) or any Lender,
including any subsequent holder of a Series A Note, (in the case of clause (iii)
below) shall have determined in good faith (which determination shall be
conclusive) that (i) adequate and reasonable means do not exist for
3
<PAGE>
ascertaining the LIBOR Rate or Eurodollar Rate, (ii) a contingency has occurred
which materially and adversely affects the interbank Eurodollar market, or (iii)
the effective cost to lenders of funding loans from funds obtained in the London
interbank market shall exceed the LIBOR Rate or Eurodollar Rate; then, and in
any such event, the Agent or such Lender, as the case may be, may notify the
Lessor of such determination. Upon such date as shall be specified in such
notice (which shall not be earlier than the date such notice is given) the
affected Notes shall be converted to Base Rate Notes on the last day of the
then-current Payment Period applicable thereto until such time that the Agent or
Lender, as the case may be, notifies the Lessor that the circumstances giving
rise to such conversion no longer exist.
(f) Increased Cost. The Lessor shall pay to the Lenders from time to
--------------
time such amounts as any Lender may determine to be necessary to compensate such
Lender for any costs incurred by such Lender which such Lender determines are
attributable to its funding or maintaining the Notes held by it hereunder, or
any reduction in any amount receivable by such Lender under this Loan Agreement
in respect of any Note (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any change
after the date of this Loan Agreement in U.S. federal, state, municipal, or
foreign laws or regulations (including Regulation D), or the adoption or making
after such date of any interpretations, directives, or requirements applying to
a any U.S. federal, state, municipal, or any foreign laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof
("Regulatory Change"), which: (i) imposes or modifies any reserve, special
deposit, compulsory loan, or similar requirements relating to any extensions of
credit or commitments to extend credit or other assets of (funded or
contingent), or any deposits with or the liabilities of, such Lender (including
any of such liabilities or any deposits referred to in the definition of LIBOR
Rate or Eurodollar Rate, as applicable); or (ii) imposes any other condition
affecting this Loan Agreement or the extension of credit hereunder. Each Lender
will notify the Lessor of any event occurring after the date of this Loan
Agreement which will entitle such Lender to compensation pursuant to this
paragraph as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation. Determinations by such Lender for
purposes of this paragraph of the effect of any Regulatory Change on its costs
of funding or maintaining the Notes or on amounts receivable by it in respect of
Notes, and of the additional amounts required to compensate such Lender in
respect of any Additional Costs, shall be conclusive, provided that such
determinations are made on a reasonable basis.
(g) Capital. In the event any Lender determines that (i) the adoption
-------
of any applicable law, rule or regulation regarding capital adequacy, or any
change therein, (ii) compliance with any interpretation by any judicial,
administrative, or other governmental or central bank or comparable agency
charged with the interpretation or administration of any such law, rule or
regulation or (iii) compliance by such Lender with any guideline or request from
any such central bank, government authority or comparable agency (whether or not
having the force of law) has or would have the effect of requiring an increase
in the amount of capital required or expected to be maintained by such Lender,
or any person controlling such Lender, and such Lender determines (taking into
consideration such Lender's policies with respect to capital adequacy) that such
increase is based upon its obligations hereunder, and other similar obligations,
the Lessor shall pay to such Lender such additional amount as
4
<PAGE>
shall be certified by such Lender to be the amount allocable to such Lender's
obligations to the Lessor hereunder. The Lender will notify the Lessor of any
event occurring after the date of this Loan Agreement that will entitle such
Lender to compensation pursuant to this paragraph as promptly as practicable
after it obtains knowledge thereof and determines to request such compensation.
Determinations by such Lender for purposes of this paragraph of the effect of
any increase in the amount of capital required to be maintained by such Lender
or any person controlling the Lender, and of the amount allocable to such
Lender's obligations to the Lessor hereunder shall be conclusive, provided that
such determinations are made on a reasonable basis.
(h) Funding Loss Indemnification. The Lessor shall pay to the Agent,
----------------------------
upon the request of the Agent, such amount or amounts as shall be sufficient (in
the reasonable opinion of the Agent) to compensate it for any loss, cost, or
expense incurred as a result of any payment of a LIBOR Note or Eurodollar Note
on a date other than the last day of the Payment Period for such Note including,
but not limited to, acceleration of the Notes by the Agent hereunder.
2.03 Characteristics of Series A Notes and the Series B Notes.
--------------------------------------------------------
(a) The Series A Notes shall be in the stated aggregate principal
amount of $25,284,000.00 (which shall represent the amount of the maximum
commitment of the Series A Lenders), shall be in registered form, in
substantially the form set forth in Annex A hereto, with blanks appropriately
filled in, shall bear interest at such rate, be payable as to principal and
interest on such date or dates, and shall contain such other terms and
provisions as shall be set forth herein and in the form set forth in Annex A.
The unpaid principal balance of the Series A Notes shall be repaid on the
Maturity Date.
(b) The Series B Notes shall be in the initial aggregate principal
amount of $3,816,000.00 (which shall represent the amount of the maximum
commitment of the Series B Lenders), shall be in registered form in
substantially the form set forth in Annex B hereto, with blanks appropriately
filled in, and shall bear interest at such rate, be payable as to principal and
interest on such date or dates, and shall contain such other terms and
provisions as shall be set forth herein. The unpaid principal balance of the
Series B Notes shall be repaid on the Maturity Date.
2.04 Prepayment of Notes. The Lessor shall not be permitted to prepay
-------------------
the Notes except as set forth below.
(a) Mandatory Prepayment on Termination of Lease Agreement. Upon the
------------------------------------------------------
sale of the Leased Premises pursuant to Section 15(a) or 16 of the Lease
Agreement, the Lessor shall on the last day of the Lease Term under the Lease
Agreement prepay the Notes in whole in an amount equal to the unpaid principal
amount thereof, together with all interest accrued thereon and any other amounts
due and payable to the Lenders under the Loan Agreement, and no amounts
(including sales proceeds) shall be distributed to the Equity Participant until
all amounts due and owing under the Notes have been paid in full.
5
<PAGE>
(b) Mandatory Prepayment Upon Event of Loss or Certain Purchases of
---------------------------------------------------------------
Leased Premises. Upon the occurrence of an Event of Loss with respect to some
- ---------------
or all of the Leased Premises for which payment of Termination Value is due
under Section 14(b) of the Lease Agreement or upon the purchase of any Leased
Premises pursuant to Sections 15(a) and 15(c) of the Lease Agreement or pursuant
to Section 4.10(b) of the Agency Agreement, the Lessor shall, on the next date
for which an installment of principal is due on the Notes, prepay a principal
amount of Notes, together with interest accrued thereon, equal to 97% of the
amount of the payment of Termination Value in respect of such Event of Loss or
purchase, as the case may be, and any other amounts due and payable to the
Lenders under the Loan Agreement, and no amounts (including payments of
Termination Value) shall be distributed to the Equity Participant until all
amounts due and owing under the Notes have been paid in full.
(c) Notice. Upon receipt by the Agent of notice from the Lessor or
------
the Lessee of an event which shall result in a prepayment of the Notes,
specifying the principal amount of Notes to be prepaid, such principal amount of
Notes, together with accrued interest thereo notice which in any event shall be
the last day of a Payment Period. Such notice shall be given to Agent no later
than five (5) London Business Days prior to the date of the payment specified.
In the event of any partial prepayment of the principal amount of any Note
pursuant to this Loan Agreement, the amount of each payment of such Note
becoming due, with any other amounts set forth in Section 2.04(d), after
application of such prepayment shall be adjusted by an appropriate amendment to
the payment schedules attached to each Note so that the principal paid on each
date for an installment of principal shall bear the same proportion to the
original amount payable on such date as the total unpaid balance bears to the
original balance unpaid on such date but for such prepayment and that, upon the
due payment of all payments thereafter, the entire unpaid principal amount of
and interest on such Note shall have been paid in full.
(d) Payment of Certain Sums. In each case under this Section 2.04, if
-----------------------
the Lessor makes a prepayment, the Lenders shall be reimbursed on the date
specified in Section 2.04(c) or upon demand for any resulting loss or expense
incurred by such Lenders including, without limitation, any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such prepayment as such Lender shall
have determined and notified the Lessor, which determination shall be conclusive
provided it is made on a reasonable basis.
2.05 Register, Transfer, and Exchange of Notes.
-----------------------------------------
(a) Register. The Lessor shall maintain a register for the purpose of
--------
registration, and registration of transfer and exchange, of Notes, in which
shall be entered the names and addresses of the holders of such Notes and
particulars of the Notes held by them, respectively. The Lessor and Agent may
deem and treat the registered holder of any Note as the absolute owner of such
Note for the purpose of receiving payment of all amounts payable with respect to
such Note and for all other purposes.
6
<PAGE>
(b) Transfer; Exchange. Subject to the restrictions on assignability
------------------
of Notes contained in the Participation Agreement, a holder of any Note
intending to transfer or exchange any Note may deliver such Note to Agent for
prompt presentment to the Lessor duly endorsed for transfer by, or accompanied
by a written instrument of transfer duly executed by, the registered holder of
such Note, together with the written request of such registered holder and
evidence satisfactory to the Agent that such transfer complies with the
applicable provisions of the Participation Agreement, for the issuance of a new
Note or Notes, specifying the denomination or denominations of the same, the
name and address of the new registered holder or holders, and the information
required in order that the Agent may make wire transfer of payments on such
Notes to or for the account of such new holder or holders. Promptly upon such
presentation, the Lessor shall execute, authenticate and deliver such new Note
or Notes, in the principal amount equal to the unpaid principal amount or
amounts of such Note or Notes so surrendered, having the same terms and dated
the same date as the Notes so surrendered, in such denomination or denominations
and registered in the name or names of the transferee specified in the written
request. The Lessor shall make a notation on each transferred or exchanged Note
of the amount of all payments of principal and interest theretofore made, or the
r exchanged. Prompt notice of the foregoing shall be delivered by the Lessor to
Agent. The holder of the transferred or exchanged Note shall, at the time such
transfer or exchange, pay the Agent an administrative fee of $3,000 for each
such transfer or exchange.
(c) Replacement. If any Note shall be destroyed, mutilated, lost, or
-----------
stolen, the Lessor shall, upon the written request of the registered holder of
such Note, execute and deliver in replacement thereof a new Note, payable in the
same original principal amount and dated the same date as the Note so destroyed,
mutilated, lost, or stolen. The Lessor may make a notation on each new Note of
the amount of all payments of principal and interest theretofore made, or the
date to which such payments have been made, on the Note so destroyed, mutilated,
lost or stolen. Prompt notice of the foregoing shall be delivered by the Lessor
to the Agent. If the Note being replaced has been mutilated, such Note shall be
delivered to the Lessor and shall be cancelled by it. If the Note being
replaced has been destroyed, lost, or stolen, the registered holder of such Note
shall furnish to the Lessor such indemnity agreement or bond as shall be
reasonably satisfactory to it together with evidence satisfactory to the Lessor
of the destruction, loss or theft of such Note and of the ownership thereof. If
the registered holder of such destroyed, lost, or stolen Note is a party to the
Participation Agreement or an Affiliate of any such Person, the written
statement of such party shall be sufficient proof of such destruction, loss or
theft and an indemnity agreement of such party signed by a duly authorized
officer thereof delivered to the Lessor shall be sufficient security and
indemnity.
2.06 Application of Payments Prior to an Event of Default. Prior to
----------------------------------------------------
the occurrence of an Event of Default described in Section 5.01, the Agent shall
apply all Basic Rent, Supplemental Rent (other than Supplemental Rent payable to
the Agent or any Lender for reimbursement for its own account for expenses or
indemnities under Section 2.02(f), (g) or (h) hereof or payable under the Lease
Agreement or the Participation Agreement or pursuant to any insurance policies
maintained under Section 10 of the Lease Agreement) and payments of Termination
Value under the Lease Agreement to the payment of principal and interest on the
Notes ratably in accordance with the amount due thereon without priority of
7
<PAGE>
any Notes or Series of Notes over any other Notes or Series of Notes, except
that upon a sale of the Leased Premises to a third party pursuant to Section 16
of the Lease Agreement, or the purchase by the Lessee of the Leased Premises
pursuant to Section 15 of the Lease Agreement and so long as no Event of Default
or Unmatured Default shall have occurred and be continuing, (x) the net amount
pursuant to Section 16(b) or (y) the purchase price under Section 15(a) and
Section 15(c) of the Lease Agreement, as the case may be, shall be first applied
to pay the principal of, and accrued interest on, the Series A Notes and, only
upon payment in full of all outstanding Series A Notes, to pay the principal of,
and interest on, the Series B Notes; provided, however, the Principal Component
--------
of any payment of Basic Rent shall be applied to the payment of principal on the
Series A Notes only.
2.07 Amendments of Lease Agreement; the Lessor Actions. The Lessor
-------------------------------------------------
shall be entitled to receive, and the Agent agrees to send to the Lessor, copies
of all notices, demands, consents, approvals and waivers which may, from time to
time, be given or granted by the Agent to the Lessee pursuant to the provisions
of the Lease Agreement. Prior to the time that the Notes and other amount due
hereunder have been discharged, Agent and the Lenders shall be entitled to
receive, and the Lessor agrees to send to the Agent and the Lenders, copies of
all notices, demands, consents, approvals and waivers which may, from time to
time, be given or granted by the Lessor to the Lessee or received by the Lessor
from the Lessee pursuant to the provisions of the Lease Agreement provided, that
--------
without the prior consent of each Lender and the Agent, the Lessor shall not:
(a) modify or waive any provision of any Transaction Document
requiring the Required Lender's Consent or release any collateral (except
as otherwise specifically provided in any Transaction Document);
(b) reduce the amount or change the time of payment of any amount of
principal owing or interest owing or payable on any Note;
(c) modify, amend, waive or supplement any of the provisions of
Sections 15, 16, 19 and 20 of the Lease;
(d) reduce, modify, amend or waive any indemnities in favor of any
Lender or Agent;
(e) reduce the amount or change the time of payment of Rent,
Termination Value or Supplemental Rent;
(f) consent to any assignment of the Lease releasing the Lessee from
its obligations to pay Rent, Termination Value or Supplemental Rent or
changing the absolute and unconditional character of such obligations; or
(g) permit the creation of any Lien on the Trust Estate or any part
thereof except as contemplated by the Transaction Documents, or deprive any
Lender of the benefit of the security interest and lien secured by the
Trust Estate.
8
<PAGE>
2.08 Investment of Funds. The Agent shall hold all moneys received by
-------------------
it hereunder as to which no immediate application thereof is provided, and shall
invest such moneys in U.S. Treasury securities having maturities of no greater
than one year or in the commercial paper of any issuer rated in the highest
rating category by both Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group. The earnings from any such investments, less the Agent's
expenses incurred in making such investments and any losses therefrom, shall be
for the account of the Person or Persons ultimately entitled to receive such
moneys.
9
<PAGE>
ARTICLE III
-----------
Covenants of the Lessor
-----------------------
The Lessor hereby covenants and agrees as follows:
(a) Payment of Principal and Interest. The Lessor shall duly and
---------------------------------
punctually pay (or cause to be paid) to Agent the principal of and interest on
the Notes in accordance with the terms thereof and this Loan Agreement when such
payments shall become due, including, but not limited to, mandatory prepayments
hereunder;
(b) Liens. The Trust Estate shall be and shall remain free and clear
-----
of the Lessor Liens and the Lessor shall take such action as may be necessary to
discharge any Lessor Liens;
(c) Lease and Other Obligations. The Lessor shall faithfully abide
----------------------------
by, perform and discharge each and every obligation, covenant and agreement that
the Lease Agreement and the Participation Agreement provide are to be performed
by the Lessor; the Lessor shall upon the prior written request of the Agent, at
the expense of the Lenders to the extent not paid or reimbursed by the Lessee,
enforce any or all of its rights as the Lessor under the Lease Agreement and the
Participation Agreement; without the Required Lenders' Consent, the Lessor shall
not anticipate the rents under the Lease Agreement or waive, excuse, condone,
forgive or in any manner release or discharge the Lessee thereunder of or from
the obligations, covenants, conditions and agreements to be performed by the
Lessee that are intended to satisfy the Lessor obligations or to preserve and
protect the interest of Lenders in the Lease Agreement and the Leased Premises,
including, without limitation, the obligation to make payments in the manner and
at the time and place specified in the Lease Agreement, or enter into any
agreement or take any action the result of which would be to amend, modify or
terminate the Lease Agreement or the obligations of the Lessee thereunder;
(d) Transfers. The Lessor shall not sell, assign or transfer its
---------
rights under this Loan Agreement or in or to the Trust Estate, except as may be
permitted by the express provisions of Article V of the Participation Agreement;
(e) Lease Termination Remedies. Unless and until the Notes and all
--------------------------
other obligations of the Lease hereunder have been discharged, the Lessor,
without the consent of each of the Lenders, shall not terminate the Lease
Agreement, or otherwise exercise the remedies available under the Lease
Agreement against the Lessee or the Leased Premises; and
(f) Defaults. The Lessor shall promptly notify the Lenders of any
--------
Event of Default hereunder or under the Lease Agreement of which the Lessor
shall have knowledge.
10
<PAGE>
ARTICLE IV
----------
Limitation of Liability
-----------------------
Notwithstanding anything in this Loan Agreement or any Mortgage and
Assignment Agreement to the contrary, the liability of the Lessor for all
payments to be made under and pursuant to the Notes, hereunder and thereunder
and the performance of all other obligations hereunder and under any other
Transaction Document shall not exceed an amount equal to, and shall be payable
only out of, the Income and Proceeds from the Trust Estate. As used herein the
term "Income and Proceeds from the Trust Estate shall mean:
(i) if an Event of Default shall have occurred and while it shall be
continuing so much of the following amounts as are indefeasibly received by
the Lessor or Agent or Lenders as assignee of the Lessor at any time after
the occurrence of such Event of Default and during the continuance thereof:
(A) all payments and any other sums due and to become due under the Lease
Agreement except Excluded Amounts, and (B) any and all other payments or
proceeds received pursuant to the Lease Agreement or for or with respect to
the Trust Estate as the result of the sale, lease or other disposition
thereof, after deducting all costs and expenses of such sale, lease or
other disposition; and
(ii) at any other time only that portion of the amounts referred to in
the foregoing clause (i) or otherwise payable to the Lessor pursuant to the
Lease Agreement as are indefeasibly received by the Lessor, the Agent or
the Lenders as assignee of the Lessor and as shall equal the payments
specified in clause (a) of Article III hereof due and payable by the Lessor
on the date such amounts so received were required to be paid pursuant to
the Lease Agreement or as shall equal any other payments (including
payments in respect of loss or destruction of the Leased Premises and early
termination of the Lease Agreement) then due and payable under this Loan
Agreement.
The Lessor shall not be liable for any deficiency arising out of the
sale by the Lessor of all or any portion the Leased Premises pursuant to the
Lease Agreement and the Lenders agree to look only to the Trust Estate and the
rights of the Lessor against the Lessee under the Lease Agreement and the
Participation Agreement for the amount of such deficiency. Each Lender agrees
that if it obtains a judgment against the Lessor for an amount in excess of the
amounts payable by the Lessor pursuant to the limitations set forth in this
Article IV, it will, accordingly, limit its execution of such judgment to such
amount and it will not bring suit against the Lessor for any sums in addition to
the amounts payable by the Lessor pursuant to said limitations (or obtain a
judgment, order or decree against the Lessor for any relief other than the
payment of money) except as may be required by applicable rules of procedure to
enforce against the Trust Estate and the Lessee (rather than against the Lessor
personally), by appropriate proceedings against obligee at law or in equity or
otherwise, the obligation to make the payments due to such Lender under the
Notes and this Loan Agreement. Nothing contained herein limiting the liability
of the Lessor shall derogate from the right of the Agent on behalf of the
Lenders to proceed against the Trust Estate or the Lessee (to the extent of the
Lessor's rights against the Lessee under the Lease
11
<PAGE>
Agreement and the Participation Agreement) as provided for herein or in the
Mortgage and Assignment Agreements for the full unpaid principal amount of the
Notes and interest thereon, or to proceed against the Lessor for damages and
exercise other remedies for breach of the covenants of this Loan Agreement
(subject to the aforesaid limitations) or the inaccuracy of the representations
and warranties of the Lessor contained herein or in the Participation Agreement.
ARTICLE V
---------
Events of Default; Remedies
---------------------------
5.01 Events of Default. If any of the following events (each such
-----------------
event being hereinafter referred to as an "Event of Default") shall have
occurred (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary) and be continuing:
(a) failure to pay principal or interest or make any mandatory
prepayment of principal on the Notes when due (except to the extent
attributable to any failure of Agent to pay any amount due to holders of
Series A Notes on account of interest pursuant to Section 2.02(c) hereof)
and such failure shall continue unremedied for three (3) Business Days; or
(b) an "Event of Default" under the Lease Agreement shall have
occurred and be continuing; or
(c) the Lessor shall become insolvent or bankrupt or make an
assignment for the benefit of creditors or consent to the appointment of a
trustee or receiver; or a trustee or a receiver shall be appointed for the
Lessor or for a substantial part of the Lessor's property without the
Lessor's consent and shall not be dismissed within a period of ninety (90)
days; or bankruptcy, reorganization or insolvency proceedings shall be
instituted by or against the Lessor and, if instituted against the Lessor,
shall not be dismissed for a period of thirty (30) days; or
(d) the Lessor shall fail to observe any covenant contained in clause
(c) or (d) of Article III hereof and such failure shall continue for a
period of ten days after written notice thereof;
then, the Agent, upon receipt of the Required Lenders' Consent shall, by notice
to the Lessor and the Lessee, declare the unpaid principal amount of the Notes,
interest accrued thereon and all other amounts owing by the Lessor hereunder,
under the Notes or under any other Transaction Document to be immediately due
and payable without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived, and an action therefor shall
immediately accrue; provided, however, that in the event of an actual or deemed
--------
entry of an order for relief with respect to the Lessor under the Federal
Bankruptcy Code, (x) the obligation of any Lender to make loans hereunder shall
automatically terminate
12
<PAGE>
and (y) the Notes, all interest thereon and all other amounts payable hereunder
shall automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Lessor; the Agent shall, upon receipt of the Required Lenders' Consent, be
entitled and empowered to institute such action or proceedings at law or in
equity for the collection of any amounts due and unpaid as shall be consistent
with such Required Lenders' Consent, and may prosecute any such action or
proceedings to judgment or final decree, and may enforce any such judgment or
final decree against the Lessor and collect in the manner provided by law out of
the Trust Estate, wherever situated, the moneys adjudged or decreed to be
payable (subject to the provisions of Article IV hereof).
5.02 Specific Remedies. Upon the occurrence and during the
-----------------
continuance of an Event of Default, the Agent may, and upon receipt of the
Required Lenders' Consent and indemnification reasonably satisfactory to the
Agent, shall:
(i) take any and all action available to a creditor to recover from
the Lessor (subject to the limited recourse provisions contained herein and
in the Notes) all amounts then due and payable by the Lessor under the
Notes or otherwise to each Lender; or
(ii) exercise any and all of the rights remedies available to it
against the Trust Estate under the Mortgage and Assignment Agreements; or
(iii) subject to the rights of the Lessee under the Lease Agreement,
exercise, as assignee of the Lessor any and all of the rights and remedies
of the Lessor under the Lease Agreement;
provided, however, that if the only Event of Default which has occurred and is
- -------- -------
continuing hereunder is an Event of Default described in Section 5.01(b) hereof
or any other Event of Default which has resulted from an Event of Default
described in Section 5.01(b) hereof (such Events of Default called "the Lessee
Defaults"), the Agent shall be entitled to exercise a right or remedy hereunder
only if it concurrently pursues, to the extent it has not already done so and is
then entitled to do so hereunder and under the Lease Agreement and is not then
stayed against the Lessee or otherwise prevented from doing so by operation of
law, one or more remedies available to the Agent as assignee of the Lessor's
interest in the Lease Agreement.
Written notice shall be given by the Agent to the Lessor of any
election by the Agent to retain the Trust Estate.
5.03 Application of Proceeds. If an Event of Default shall have
-----------------------
occurred and be continuing and the Agent shall exercise any of the powers
conferred upon it by Sections 5.01 and 5.02 hereof, all payments made by the
Lessor to the Agent hereunder after such Event of Default, and the proceeds of
any judgment collected hereunder from the Lessor by the Agent, and the proceeds
of every sale by the Agent of any of the Trust Estate, together with any other
sums which may then be held or obtained by the Agent or the Lenders under any of
the provisions hereof or any other Transaction Document, shall be
13
<PAGE>
applied by the Agent to the payment in the following order of priority: (i) of
all proper charges, expenses (including without limitation all reasonable
attorney's fees) or advances made or incurred by the Lenders or the Agent or, in
the case of an Lessee Default, the Lessor in the exercise of the Lenders', the
Agent's or the Lessor's remedies hereunder or under any other Transaction
Document, (ii) of the interest then due on the Notes, ratably and without
priority of any Notes or any Series of Notes over any other Notes or Series of
Notes, with interest on overdue interest at the Late Payment Rate to the extent
legally enforceable, and (iii) of the principal of all outstanding Notes,
without priority as aforesaid, with interest thereon at the Late Payment Rate to
the extent legally enforceable from the first date on which such principal was
due and not paid, whether such Notes shall have then matured by their terms or
not.
If after applying as aforesaid the sums of money realized by the Agent
on behalf of Lenders there shall remain a surplus in the possession of the
Agent, such surplus shall be paid to the Lessor.
5.04 Rescission. If, at any time after the outstanding principal
----------
amount of the Notes shall have become due and payable by acceleration pursuant
to Section 5.01 hereof, no judgment for any amount so becoming due shall have
been entered and the Collateral has not been sold or otherwise disposed of in
the exercise of remedies hereunder, (i) all amounts of principal and interest on
the Notes which have become due otherwise than pursuant to Section 5.01 hereof,
together with interest on all such overdue principal and, to the extent
permitted by law, interest at the Late Payment Rate and an amount sufficient to
cover all costs and expenses of collection of Agent and the Lenders shall have
been paid in full and (ii) every other Event of Default shall have been cured or
waived, then the Agent may, with the Required Lenders' Consent, and by notice to
the Lessor and the Lessee, rescind and annul such acceleration and any related
declaration of acceleration under the Lease Agreement and their related
consequences, but no such rescission and annulment shall extend to or affect any
subsequent Event of Default hereunder or under the Lease Agreement or impair any
right consequent thereon.
5.05 Rights and Remedies Cumulative; No Waiver. Each and every right,
-----------------------------------------
power and remedy herein specifically given to the Agent or any or all of the
Lenders under this Loan Agreement shall be cumulative and shall be in addition
to every other right, power and remedy herein specifically given or now or
hereafter existing at Law, in equity or by statute, and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as may be deemed
expedient by the Agent, and the exercise or the beginning of the exercise of any
power or remedy shall not be construed to be a waiver of the right to exercise
at the same time or thereafter any other right, power or remedy. No delay or
omission by the Agent or the Lenders in the exercise of any right, remedy or
power or in the pursuance of any remedy shall impair any such right, power or
remedy or be construed to be a waiver of any default on the part of the Lessor
or the Lessee or to be an acquiescence therein. No waiver in respect of any
Event of Default shall extend to any subsequent or other Event of Default.
5.06 Restoration of Rights and Remedies. In case the Lenders shall
----------------------------------
have directed the Agent to proceed to enforce any right, power or remedy under
this Loan
14
<PAGE>
Agreement by foreclosure, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Agent or the Lenders, then and in every such case the Lessor,
the Agent and the Lenders shall be restored to their former positions and rights
hereunder with respect to the Trust Estate, and all rights, remedies, and powers
of the Agent and the Lenders shall continue as if no such proceedings had been
taken.
5.07 Compliance with Law. The foregoing provisions of this Article V
-------------------
are subject in all respects to all mandatory legal requirements at the time in
force and applicable.
ARTICLE VI
----------
Agent
-----
6.01 Appointment. The Lenders hereby appoint Credit Lyonnais New York
-----------
Branch to act as the Agent as herein specified for the Lenders hereunder. Each
of the Lenders by its execution and delivery of the Participation Agreement
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note shall be deemed irrevocably to authorize, the Agent to take such action on
its behalf under the provisions of this Loan Agreement and any other Transaction
Document, or other instruments and agreements referred to herein or therein, and
to exercise such powers and to perform such duties hereunder and thereunder, as
are specifically delegated to or required of the Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental thereto. Credit
Lyonnais New York Branch agrees to act as the Agent on behalf of the Lenders to
the extent provided in this Loan Agreement.
6.02 Delegation of Duties. The Agent may perform any of its duties
--------------------
hereunder by or through agents or employees and shall be entitled to rely on the
advice of independent counsel concerning all matters pertaining to its duties
hereunder and thereunder.
6.03 Nature of Duties; Independent Credit Investigation. The Agent
--------------------------------------------------
shall have no duties or responsibilities except those expressly set forth in
this Loan Agreement and the Participation Agreement. The duties of the Agent
shall be mechanical and administrative in nature. The Agent shall not have by
reason of this Loan Agreement or any Transaction Document a fiduciary
relationship in respect of any Lender and nothing in this Loan Agreement or any
Transaction Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of this Loan
Agreement or any Transaction Document except as expressly set forth herein or
therein. Each Lender expressly acknowledges (i) that the Agent has not made any
representations or warranties to it and that no act by the Agent hereafter taken
shall be deemed to constitute any representation or warranty by the Agent to any
Lender; (ii) that it has made and will make its own independent investigation of
the financial condition and affairs, and its own appraisal of the
creditworthiness of the Lessor and the Lessee, in connection with this Loan
Agreement; (iii) that it has made its own independent investigation of the legal
matters relating to this Loan Agreement, the Transaction Documents and the Notes
to be issued to it hereunder; and (iv) that the Agent shall have no duty or
responsibility, either initially or on a continuing
15
<PAGE>
basis, to provide any the Lender with any information, except for notices,
reports or other information, if any, expressly required to be furnished to the
Lenders by the Agent hereunder.
6.04 Actions in Discretion of the Agent; Required Lenders' Consent.
-------------------------------------------------------------
The Agent agrees, upon receipt of the Required Lenders' Consent and indemnity
reasonably satisfactory to it, to take any action of the type specified therein
so long as the same is not inconsistent with the other Transaction Documents.
The Agent shall take, or refrain from taking, such action hereunder in
accordance with the Required Lenders' Consents. In the absence of receipt of
the Required Lenders' Consent, the Agent shall take no action and shall not be
subject to any liability, penalty, cost or expense for such inaction. Any
action taken or failure to act pursuant to such Required Lenders' Consent shall
be binding on the Lenders and on all holders of Notes. No Lender shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the Required Lenders'
Consent, or in the absence of the Required Lenders' Consent, in the absolute
discretion of Agent, subject to the provisions of Section 6.05 hereof.
6.05 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it hereunder or under the Notes or
Transaction Documents, or in connection herewith or therewith, unless caused by
its own gross negligence or willful misconduct. In performing its functions and
duties hereunder on behalf of Lenders, the Agent shall exercise the same care
which it would exercise in dealing with loans for its own account, but it shall
not (i) be responsible in any manner to any of the Lenders for the
effectiveness, enforceability, genuineness, validity or the due execution of
this Loan Agreement, the Transaction Documents or any of the Notes, or for any
recital, representation, warranty, document, certificate, report or statement
herein or therein made or furnished under or in connection with this Loan
Agreement or (ii) be under any obligation to any of the Lenders to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions hereof or thereof on the part of the Lessor, the Lessee or any other
Person, or the financial condition of the same or the existence or possible
existence of any Event of Default or Unmatured Event of Default.
6.06 Reimbursement and Indemnification. Each holder of Notes shall
---------------------------------
reimburse and indemnify the Agent to the extent not reimbursed by the Lessee
(and without limiting the obligation of the Lessee), ratably in the proportion
which the sum of the principal balance of Notes then held by such holder bears
to the sum of the then outstanding principal balance of the Series A Notes and
Series B Notes, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent, in its capacity as such, in any way relating to or
arising out of this Loan Agreement, the Transaction Documents, the Notes or any
action taken or omitted by the Agent hereunder or thereunder, provided, that no
holder shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
to the extent that the same result from the Agent's gross negligence or willful
misconduct.
16
<PAGE>
6.07 Reliance by the Agent. The Agent shall be entitled to rely upon
---------------------
any writing, telegram, telex or teletype message, resolution, notice, consent,
certificate, letter, cablegram, statement, order or other document or
conversation by telephone or otherwise believed by it to be genuine and correct
and to have been signed, sent or made by the proper party or parties, and upon
opinions of counsel and other professional advisers selected by the Agent.
Subject to Section 6.05 hereof, the Agent shall be fully justified in failing or
refusing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
6.08 Individual Capacity. With respect to this Loan Agreement and the
-------------------
Series A Notes held by it, Credit Lyonnais, as Series A Lender or as Series B
Lender, shall have the same rights and powers hereunder as any other holder of a
Series A Note or Series B Note and may exercise the same as though it were not
the Agent, and the terms, "Lenders", "Series A Lender", "Series B Lender" shall,
unless the context hereof otherwise indicates, include Credit Lyonnais in its
individual capacity.
6.09 Holders of Notes. The Agent may deem and treat the payee of any
----------------
Note as the owner of such Note for all purposes hereof unless and until written
notice of the assignment or transfer thereof shall have been filed with the
Agent in accordance with Section 2.06 hereof. Any request, authority or consent
of any party who at the time of making such request or giving such authority or
consent is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
6.10. Successors. The Agent may resign at any time by giving
----------
written notice thereof to the Lenders. Upon any such resignation, the holders
of the Series A Notes and the Series B Notes, by execution and delivery of a
Required Lenders' Consent, shall agree upon a successor Agent. If no successor
Agent shall have been so agreed upon and appointed, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation, then the retiring Agent, any holder of a Note or the Lessor may
petition (or in the absence of such petition, the Lessee may petition) a court
of competent jurisdiction to appoint a successor Agent which shall be a
commercial bank organized under the Laws of the United States of America or any
state thereof, having a combined capital and surplus of at least $250,000,000.
Upon the acceptance by a successor Agent of its appointment as Agent hereunder,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties under this Loan Agreement. After any
retiring Agent's resignation hereunder as the Agent, the provisions of this
Article VI shall inure to its benefit as to any actions taken or omitted by it
while it was the Agent under this Loan Agreement.
6.11. Distributions to the Lenders. The Agent agrees that all
----------------------------
sums paid by the Lessee to the Agent under any Transaction Document for
distribution to the holders of Notes pursuant hereto, and any other proceeds of
the Collateral or any portion thereof (i) shall, until paid to the holders of
Notes in accordance with the provisions hereof, be held by the Agent for the
benefit of the holders of Notes, and (ii) if received by the Agent prior to
17
<PAGE>
12:00 Noon, New York City Time, shall be disbursed to holders of Notes no later
than 4:00 P.M. on the same Business Day, and if received by the Agent after
12:00 Noon, New York City Time, shall be disbursed to holders of Notes no later
than 4:00 P.M. on the next succeeding Business Day.
ARTICLE VII
-----------
Miscellaneous
-------------
7.01 Notices. Any notice required or permitted under this Loan
-------
Agreement, or by law in respect of this Loan Agreement, shall be in writing and
shall be deemed effective, when personally delivered or if sent by registered or
certified mail, three Business Days after the date of delivery to the post
office, or if sent by overnight delivery (express mail or overnight courier),
when received, or if sent by telex or telecopy, upon receipt, in each case
addressed to the Person required to receive the same at the address stated on
the signature pages of the Participation Agreement or in accordance with the
last unrevoked written direction from such Person to the other parties hereto.
7.02 Survival. All covenants, agreements, indemnities,
--------
representations, and warranties contained in this Loan Agreement, or any
document, agreement, or certificate delivered pursuant hereto shall survive the
expiration or other termination of this Loan Agreement.
7.03 Amendments and Waivers. The terms of this Loan Agreement shall
----------------------
not be waived, altered, modified, amended, supplemented, or terminated in any
manner whatsoever except by written instrument signed by the Lessor and the
Agent following receipt of the Required Lenders' Consent; provided, however,
that no such amendment shall revise or delete Sections 2.07, 2.08, 5.03 hereof
or this Section 7.03 without the prior written consent of the holders of each of
the Series A Notes and the Series B Notes respectively.
7.04 Entire Agreement. This Loan Agreement and the other agreements
----------------
and documents referred to herein constitute the final and entire expression of
the agreement of the parties with respect to the matters contemplated hereby.
7.05 Governing Law. The provisions of Section 6.06 of the
-------------
Participation Agreement are hereby incorporated herein by reference.
7.06 Non-Recourse To Certain Parties. This Loan Agreement is solely a
-------------------------------
corporate obligation and no recourse shall be had in respect of any obligation,
covenant, or agreement of this Loan Agreement, or referred to herein, against
any stockholder, incorporator, director, or officer, as such, past, present, and
future, of the parties hereto by the enforcement of any assessment or by any
legal or equitable proceeding, by virtue of statute or otherwise.
18
<PAGE>
7.07 Invalidity of Provisions. Any provision of this Loan Agreement
------------------------
which may be prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
7.08 Counterparts. This Loan Agreement may be executed in any number
------------
of counterparts and by the different parties hereto on separate counterparts,
all of which together shall constitute a single agreement.
7.09 Effectiveness. Although this Loan Agreement is dated as of the
-------------
date first above written for convenience, the actual dates of execution hereof
by the parties hereto are respectively the dates set forth under the signatures
hereto, and this agreement shall be effective on the latest of such dates.
7.10. Headings. Any headings or captions preceding the individual
--------
sections hereof are intended solely for the convenience of the parties and shall
not alter or vary the meaning, construction or effect of this Loan Agreement.
7.11. Holders of Notes. All representations, warranties,
----------------
covenants, and agreements contained herein shall be binding on, and shall inure
to the benefit of, the Series A Lender and the Series B Lender and any
registered transferee of the Series A Lender or the Series B Lender as holder of
a Note or Notes. Any request, notice, direction, consent, waiver or other
instrument or action by any holder of a Note or Notes shall bind the successor
and assigns of such holder.
7.12. Successors and Assigns. The provisions of this Loan
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, subject to Section 2.06 hereof and
the provisions of the Participation Agreement.
19
<PAGE>
IN WITNESS WHEREOF the parties hereto have each caused this Agreement
to be duly executed by their respective officers thereunto duly authorized.
FLEET NATIONAL BANK,
not in its individual capacity (except as
expressly stated above) but solely as Owner
Trustee under the Trust Agreement
By /s/ E.C. Hammer
_______________
Date:
<PAGE>
CREDIT LYONNAIS LOS ANGELES
BRANCH, as Series A Lender and
Series B Lender
By: /s/ Dianne M. Scott
--------------------
Date: June 20, 1997
<PAGE>
BANK LEUMI LE-ISRAEL B.M.,
as Series A Lender and Series B Lender
By: /s/ Jacques Delvoy, Vice President
----------------------------------
Date:
<PAGE>
THE FUJI BANK, LIMITED
LOS ANGELES AGENCY
as Series A Lender and Series B Lender
By: /s/ Hirotoshi Naito
-------------------
Date:
<PAGE>
THE INDUSTRIAL BANK OF JAPAN LIMITED,
LOS ANGELES AGENCY
as Series A Lender and Series B Lender
By: /s/ Shusai Nagai, General Manager
---------------------------------
Date:
<PAGE>
VIA BANQUE, S.A.
as Series A Lender and Series B Lender
By: /s/ Christel Prot, Sous-Directeur
---------------------------------
Date:
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
as Agent
By: /s/ David C. Fink, Vice President
---------------------------------
Date:
<PAGE>
R-__
[FORM OF SERIES A NOTE]
THE STATED PRINCIPAL AMOUNT OF THIS NOTE REPRESENTS
THE MAXIMUM AMOUNT THEREOF PAYABLE TO THE HOLDER
HEREOF AND MAY NOT CORRESPOND TO THE ACTUAL UNPAID
PRINCIPAL BALANCE HEREOF.
THE AMOUNT OF THE UNPAID PRINCIPAL BALANCE AT ANY
TIME MAY BE OBTAINED FROM THE OWNER TRUSTEE.
FLEET NATIONAL BANK,
(as successor to Shawmut Bank Connecticut, National Association)
not in its individual capacity but solely as Owner Trustee
under Trust Agreement dated as of December 15, 1994
NON-RECOURSE SERIES A PROMISSORY NOTE DUE DECEMBER 31, 2001
New York, N.Y.
December 29, 1994
FOR VALUE RECEIVED, the undersigned, not in its individual capacity
but solely as Owner Trustee (herein in such capacity called the "Owner Trustee")
under that certain Trust Agreement dated as of December 15, 1994, between the
Equity Participant named therein and FLEET NATIONAL BANK (as successor to
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION) ("the Lessor"), hereby promises
to pay, to ________________________ or registered assigns (hereinafter together
with any other holder hereof referred to as the "Holder"), the maximum principal
amount of $____________ in lawful money of the United States and in immediately
available funds payable in installments beginning on March 31, 2001 and payable
on the last day of each Payment Period thereafter, subject to the second
paragraph hereof, as provided in the Loan Agreement and the schedule hereto,
provided however, that the last payment hereunder shall be in the amount
necessary to repay in full on December 31, 2001 the unpaid principal amount of
this Series A Note. Interest shall accrue from the date of this Series A Note
on the outstanding principal amount hereof in accordance with the Loan Agreement
and shall be payable on such dates and in such amounts as determined in
accordance with the Loan Agreement. All such payments of principal and interest
shall be made to such place or places and to such account or accounts as Holder
shall direct by written notice to the Lessor.
This Series A Note is one of the Series A Notes issued in an original
principal amount of $25,284,000 referred to in, and is entitled to the benefits
of, the Loan Agreement
27
<PAGE>
dated as of December 15, 1994 between the Lessor, as Series A Lender and Series
B Lender, and Credit Lyonnais New York Branch as the Agent as amended from time
to time, including without limitation pursuant to the First Amendment and
Restatement thereto dated as of ______, 1997, (the "Loan Agreement") as to which
reference is hereby made for a statement of the terms, conditions and covenants
under which the indebtedness evidenced hereby was and will be made and is to be
repaid, including, among others, those related to the acceleration of the
indebtedness represented hereby upon the occurrence of an Event of Default or
the mandatory prepayment of any of the indebtedness represented hereby as
provided in the Loan Agreement. This Series A Note is not subject to prepayment
except as provided in the Loan Agreement. All capitalized terms used herein and
not defined herein shall have the respective meanings ascribed thereto in the
Loan Agreement.
This Series A Note is secured by Trust Estate as provided in the Loan
Agreement and Mortgage and Assignment Agreements.
This Series A Note is a non-recourse obligation of the Owner Trustee,
and all payments of principal and interest to be made by the Owner Trustee on
this Series A Note shall be made only from the Income and Proceeds from the
Trust Estate. The Holder hereof, by its acceptance of this Series A Note,
agrees that it will look solely to the Income and Proceeds from the Trust Estate
to the extent available for distribution to the Holder hereof and that the
Lessor shall not be personally liable to the Holder hereof for any amounts
payable under this Series A Note or, except as expressly provided in the Loan
Agreement, for any liability under the Loan Agreement or the other Transaction
Documents.
This Note is a registered Note and may be transferred only by
registration of transfer as provided in Section 2.06 of the Loan Agreement. THIS
NOTE IS ALSO SUBJECT TO ADDITIONAL TRANSFER RESTRICTIONS SET FORTH IN THE
PARTICIPATION AGREEMENT DEFINED IN THE SECOND "WHEREAS" CLAUSE OF THE LOAN
AGREEMENT.
To the extent permitted by applicable law, the Lessor waives notice,
presentment, and demand.
This Series A Note shall be governed by the laws of the State of New
York without giving effect to the principles of conflicts of law.
FLEET NATIONAL BANK,
not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement
By: ________________________________________
28
<PAGE>
SERIES A NOTE AMORTIZATION SCHEDULE/1/
<TABLE>
<CAPTION>
Payment Date Principal Payment Percentage
------------ ----------------------------
<S> <C>
On or before
December 31, 2000 0%
March 31, 2001 1.042%
June 30, 2001 1.042%
September 30, 2001 1.042%
December 31, 2001 remaining principal balance
</TABLE>
- ----------------------
/1/ The principal payment for any date is the percentage set forth opposite
such date multiplied by the excess of the Outstanding Property Cost on
December 31, 2000 over the aggregate amount of any Termination Value payments
made by the Lessee after December 31, 2000.
29
<PAGE>
R-__
[FORM OF SERIES B NOTE]
THE STATED PRINCIPAL AMOUNT OF THIS NOTE REPRESENTS
THE MAXIMUM AMOUNT THEREOF PAYABLE TO THE HOLDER
HEREOF AND MAY NOT CORRESPOND TO THE ACTUAL UNPAID
PRINCIPAL BALANCE HEREOF.
THE AMOUNT OF THE UNPAID PRINCIPAL BALANCE AT ANY
TIME MAY BE OBTAINED FROM THE OWNER TRUSTEE.
FLEET NATIONAL BANK
(as successor to SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION)
not in its individual capacity but solely as Owner Trustee
under Trust Agreement dated as of December 15, 1994
NON-RECOURSE SERIES B PROMISSORY NOTE DUE DECEMBER 31, 2001
New York, N.Y.
December 29, 1994
FOR VALUE RECEIVED, the undersigned, not in its individual capacity but
solely as Owner Trustee (herein in such capacity called the "Owner Trustee")
under that certain Trust Agreement dated as of December 15, 1994, between the
Equity Participant named therein and FLEET NATIONAL BANK (as successor to
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION ("the Lessor"), hereby promises
to pay, to ______________________ or registered assigns, (hereinafter together
with any other holder hereof referred to as the "Holder"), the maximum principal
amount of $ _________ in lawful money of the United States and in immediately
available funds payable, to the extent not previously repaid, on December 31,
2001. Interest shall accrue from the date of this Series B Note on the
outstanding principal amount hereof in accordance with the Loan Agreement and
shall be payable on such dates and in such amounts as determined in accordance
with the Loan Agreement. All such payments of principal and interest shall be
made to such place or places and to such account or accounts as Holder shall
direct by written notice to the Lessor.
This Series B Notes is one of the Series B Note originally issued in a
principal amount of $3,816,000 referred to in, and is entitled to the benefits
of, the Loan Agreement dated as of December 15, 1994 between the Lessor, the
Series A Lender and the Series B Lender referred to therein and Credit Lyonnais
New York Branch as Agent as amended from time to time, including without
limitation, pursuant to the First Amendment and Restatement thereto dated as of
_____ ___, 1997 (the "Loan Agreement") as to which reference is hereby made for
a statement of the terms, conditions and covenants under which the indebtedness
evidenced hereby was and will be made and is to be repaid, including, among
others, those related to the acceleration of the indebtedness represented hereby
upon the occurrence of an Event of Default
30
<PAGE>
or the mandatory prepayment of any of the indebtedness represented hereby as
provided in the Loan Agreement. This Series B Note is not subject to prepayment
except as provided in the Loan Agreement. All capitalized terms used herein and
not defined herein shall have the respective meanings ascribed thereto in the
Loan Agreement.
This Series B Note is secured by the Trust Estate as provided in the Loan
Agreement and Mortgage and Assignment Agreements.
This Series B Note is a non-recourse obligation of the Owner Trustee, and
all payments of principal and interest to be made by the Owner Trustee on this
Series B Note shall be made only from the Income and Proceeds from the Trust
Estate. The Holder hereof, by its acceptance of this Series B Note, agrees that
it will look solely to the Income and Proceeds from the Trust Estate to the
extent available for distribution to the Holder hereof and that the Lessor shall
not be personally liable to the Holder hereof for any amounts payable under this
Series B Note or, except as expressly provided in the Loan Agreement, for any
liability under the Loan Agreement or the other Transaction Documents.
Under certain conditions provided for in the Loan Agreement, payments on
the Series A Notes issued pursuant to the Loan Agreement may have a priority in
right of payment over the Series B Notes.
This Note is a registered Note and may be transferred only by
registration of transfer as provided in Section 2.06 of the Loan Agreement.
THIS NOTE IS ALSO SUBJECT TO ADDITIONAL TRANSFER RESTRICTIONS SET FORTH IN THE
PARTICIPATION AGREEMENT DEFINED IN THE SECOND "WHEREAS" CLAUSE OF THE LOAN
AGREEMENT.
To the extent permitted by applicable law, the Lessor waives notice,
presentment, and demand.
This Series B Note shall be governed by the laws of the State of New York
without giving effect to the principles of conflicts of law.
FLEET NATIONAL BANK
not in its individual capacity, but solely as
Owner Trustee
By:
-------------------------------------------
31
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into as
of the 30th day of May, 1997, by and among PORT STOCKTON FOOD DISTRIBUTORS,
INC., a California corporation (the "Buyer"), and MALLARD'S FOOD PRODUCTS, INC.,
a California corporation (the "Company").
RECITALS
--------
A. The Company through its DAVIS LAY FOOD SERVICE division ("Davis Lay")
is engaged in the wholesale distribution of produce in northern California (the
"Business") and is interested in selling substantially all of the assets of
Davis Lay. The Company also operates a separate division that manufactures,
distributes and sells various food products. The parties understand,
acknowledge, and agree that the transaction contemplated by this Agreement
relates only to the Company's produce distribution business, and does not
include any of the assets or liabilities of the Company's food products
division.
B. Buyer desires to purchase and the Company desires to sell
substantially all of the Davis Lay assets, on the terms and conditions set forth
below. Buyer is also engaged and has substantial experience in the wholesale
distribution of produce in Northern California.
ACCORDINGLY, in consideration of the foregoing and the mutual covenants set
forth below, the parties agree as follows:
AGREEMENT
---------
1. PURCHASE AND SALE OF ASSETS.
----------------------------
1.1 Transfer of Purchased Assets. In consideration of the payment of
----------------------------
the purchase price set forth in Section 1.6 below, the Company shall sell,
assign and deliver to Buyer, on the Closing Date (as defined in Section 2.1
below), free and clear of any and all material liens, charges, claims,
encumbrances, pledges, security interests, community property rights,
liabilities, debts, obligations, restrictions on transfer or other defects in
title of any kind or nature, fixed or contingent, except as otherwise set forth
or identified, and except for the Assumed Liabilities (as defined in Section 1.3
below), and Buyer shall purchase and accept, all assets, properties, rights,
titles and interests of every kind and nature owned or leased by the Company and
used in connection with the Business, as specified in this Agreement, as of the
Financials Date (as defined below), whether tangible or intangible, real or
personal, and wherever located and by whomever possessed (the "Purchased
Assets"), including, without limitation, the following assets used exclusively
in connection with the Business, but excluding the Excluded Assets (as defined
in Section 1.2 below):
1
<PAGE>
(a) all deposits, cash and cash equivalents, securities and
investments, if any;
(b) all accounts receivable, whether or not evidenced by a note;
(c) all prepayments, prepaid taxes and expenses, credits and deferred
charges;
(d) all of Davis Lay's interest in its month-to-month lease in
the real property located at 1601 Cummins Drive in Modesto, Stanislaus County,
California;
(e) all raw materials, packaging, spare parts, work-in-process,
finished goods, inventories and supplies located at 1601 Cummins Drive;
(f) all machinery, equipment, computers, telephone systems, furniture,
automobiles, trucks, tractors, trailers, vehicles and other tangible personal
property located at 1601 Cummins Drive;
(g) all rights, title and interests in and to all patents, copyrights,
trademarks, trade names, service marks, service names, logos, and identifying
marks and styles, if any, including, without limitation, the name "Davis Lay
Food Service Distributors" and any variant thereof. Notwithstanding the
foregoing, Buyer understands, acknowledges and agrees that the Company may
continue to utilize existing packaging for sale of its manufactured food
products which include the language "MALLARD'S FOOD PRODUCTS, a Division of
DAVIS LAY, INC." until such currently existing packaging materials are
completely used up;
(h) all rights under the contracts, agreements, orders, leases,
licenses and arrangements, to the extent assignable;
(i) all rights under all permits, licenses, variances, approvals and
other authorizations obtained from foreign, federal, state or local governments
or governmental agencies or other similar rights, to the extent such exist and
are assignable;
(j) all claims, insurance, warranties, guarantees, refunds, causes of
action, rights of recovery, rights of set-off and rights of recoupment of every
kind and nature relating to the operation of the Business, and, other than those
relating exclusively to the Excluded Assets or the Excluded Liabilities;
(k) all insurance, warranty and condemnation proceeds received after
the Closing Date hereof with respect to damage, non-conformance or loss to the
Purchased Assets;
(l) all books, ledgers, files, documents, correspondence, brochures,
lists, studies, reports, data, business records and other printed or written
materials (including, without limitation, records pertaining to past and current
customer accounts, suppliers, distributors, personnel and agents) as such items
existed on the Financials Date, up to and through the Closing Date;
2
<PAGE>
(m) all rights to receive mail and other communications addressed to
Davis Lay (including, without limitation, the payments for accounts or notes
receivable)that relates exclusively to the Business, and not to the Company's
food products division, subject to Section 5.3 below;
(n) all rights, title and interests in and to all confidential
business and technical information, trade secrets and proprietary rights of the
Business; and
(o) the Business and all goodwill associated therewith.
1.2 Excluded Assets. Notwithstanding the foregoing, the following
---------------
assets are expressly excluded from the purchase and sale contemplated hereby
(the "Excluded Assets") and, as such, are not included in the Purchased Assets:
(a) Any and all assets or property, whether tangible or intangible,
real or personal, of the Company's food products division, including, without
limitation, any property related to MALLARD'S FOOD PRODUCTS, MALLARD'S
RESTAURANTS, INC., and/or MALLARD'S COOKING MADE EASY, and any trademarks, trade
names, trade secrets, confidential information or contract rights relating
thereto;
(b) the Company's rights under or pursuant to this Agreement;
(c) all minute books, stock books, corporate seal and other corporate
records and property of any kind or character that relate exclusively to the
Company's organization, existence and capitalization;
(d) all contracts, agreements, orders, leases, licenses and
arrangements which are not expressly specified to be assumed by the Buyer or
which are not transferable to Buyer;
(e) all claims, insurance, warranties, guarantees, refunds, causes of
action, rights of recovery, rights of set-off and rights of recoupment that
relate exclusively to the Excluded Assets or the Excluded Liabilities; and
(f) the right to receive mail and other communications addressed to
the Company that relates exclusively to the Excluded Assets or the Excluded
Liabilities.
1.3 Limited Assumption of Liabilities. Subject to the terms and
---------------------------------
conditions of this Agreement, from and after the Closing Date, Buyer shall
assume and agree to pay, defend, discharge and perform as and when due only the
following specific liabilities and obligations of the Company which relate
exclusively to the Business (the "Assumed Liabilities") pertaining to Davis Lay
from the first day after the Closing Date and thereafter, subject to certain
limitations and rights as are set forth in Section 1.5 below:
(a) all liabilities and obligations under the contracts, agreements,
orders, leases, licenses and arrangements expressly assumed by and transferred
to Buyer on the Closing Date,
3
<PAGE>
but excluding any liabilities or obligations relating to or arising out of (i)
any breach or default occurring thereunder on or prior to the Closing Date, or
(ii) any violation of law, tort or infringement occurring with respect thereto
on or prior to the Closing Date; and
(b) all current liabilities of the Company, reflected on the Company's
balance sheet as of the Closing Date (as defined below) which have not been
discharged or paid and such additional liabilities of the same kind and type
which have subsequently arisen in the ordinary course of business consistent
with past business practices, including all accrued income tax relating to
profits earned by the Business after the Closing Date, vacation, sick pay and
other liabilities relating to employee benefit plans covering Davis Lay
employees.
(c) Notwithstanding any other provision in this agreement to the
contrary, any and all liabilities of the Business which arise after the Closing
Date.
(d) Subject to the terms and conditions of this Agreement, from and
after the Closing Date, Buyer shall assume and agree to pay, defend, discharge
and perform as and when due only the following specific liabilities and
obligations of the Company which relate exclusively to the Business (the
"Assumed Liabilities") pertaining to Davis Lay from the first day after the
Financials Date (as defined in Section 3.5 below) and thereafter, subject to
certain limitations and rights as are set forth in Section 1.5 below:
(i) Davis Lay's accounts payable as set forth in the Company's
aged trial balance dated as of the Closing Date, a copy of which has been
reviewed by Buyer;
(ii) accrued vacation pay allocable to the employees of Davis Lay
as of May 31, 1997; and
(iii) Davis Lay's payroll for the week ending May 31, 1997.
1.4 Excluded Liabilities. Notwithstanding anything to the contrary
--------------------
contained in this Agreement and regardless of whether such liability or
obligation is disclosed herein or on any Exhibit or Schedule hereto, Buyer shall
not assume or in any way be responsible or liable for any other liabilities or
obligations of the Company or any other liabilities or obligations whatsoever
related to the operation of the Business or condition of the Purchased Assets at
any time on or prior to the Closing Date (the "Excluded Liabilities"), the
general nature of which is described in subsections (a) and (b) of Section 1.3
above. Without limiting the generality of the foregoing, the Excluded
Liabilities shall include, without limitation:
(a) all obligations, commitments or liabilities of or claims against
the Company , arising out of or in connection with the transfer and sale of the
Purchased Assets hereunder;
(b) all liabilities and obligations for transfer or sales taxes and
documentary fees imposed by virtue of the transfer and sale of the Purchased
Assets hereunder;
4
<PAGE>
(c) all liabilities and obligations for any damage or injury to person
or property arising from the ownership, possession or use of any products
manufactured or sold by the Company on or prior to the Closing Date to the
extent such liabilities and obligations are not covered by Buyer's (or, if
applicable, Seller's) insurance;
(d) all liabilities and obligations arising from the operation of the
Business on or prior to the Closing Date in connection with any law, statute,
rule, regulation, order or decree of any foreign, federal, state or local
governmental or regulatory authority (including, without limitation, those
relating to business conduct, public health and safety, occupational health and
safety and the environment);
(e) all liabilities and obligations of the Company whatsoever not
expressly assumed by Buyer in accordance with subsections (a) and (b) of Section
1.3 above, at the Closing Date.
1.5 Offset for Uncollected Receivables; Value of Net Assets. Buyer
--------------------------------------------------------
shall use good faith and reasonable diligence in seeking to collect all accounts
receivable. Any payments received from any debtor shall be applied first to the
oldest outstanding principal balance for such debtor. Buyer shall make its
relevant financial records available to the Company at reasonable times and upon
reasonable notice for purposes of auditing the accounts receivable collected by
Buyer. All accounts receivable listed in Section 1.3 which remain uncollected at
December 31, 1997, and all merchandise inventories which remain unsold as of
that date shall be deemed uncollectible and unsalable, and Buyer shall have the
right to offset the amount of such uncollectible accounts receivable and/or such
unsalable inventory up to a maximum amount of $500,000 against the promissory
note portion of the Purchase Price described in Section 1.6(b) below. The Buyer
shall, at the Company's request, assign any and all such uncollectible accounts
receivable and/or unsalable inventory back to the Company. Buyer's obligation to
assume liabilities dating from the day after the Financials Date up to and
including the Closing Date shall be limited to such liabilities which do not
allow the value of the Purchased Assets on a net basis to fall below the sum of
---
One Million Two Hundred Twenty-Two Thousand and No/100 Dollars ($1,222,000.00).
1.6 Purchase Price. The total purchase price (the "Purchase Price")
--------------
for the Purchased Assets to be acquired by Buyer on the Closing Date is (i) the
assumption of certain liabilities as described in Section 1.3 above, and (ii)
payment of the sum of Five Million Five Hundred Thousand and no/100 Dollars
($5,500,000.00), payable as follows:
(a) Five Million Dollars ($5,000,000.00) payable by Buyer's check
at the Closing; and
(b) The balance of Five Hundred Thousand Dollars ($500,000.00) shall
be paid on January 2, 1998. Buyer's obligation to pay the balance of the
Purchase Price shall be evidenced by a Promissory Note in the form of Exhibit A
---------
attached hereto bearing interest at the rate of seven percent (7%) per annum,
payable in arrears.
5
<PAGE>
1.7 Allocation of Purchase Price. The parties agree negotiate in
----------------------------
good faith to arrive at an agreement to allocate the Purchase Price among the
Purchased Assets for purposes of federal and state income and franchise taxes.
Buyer shall prepare a draft schedule for the allocation for the Company's review
within ten (10) days of the Closing Date.
1.8 Lease. Concurrently with the Closing, Buyer may, in its sole
------
discretion, enter into a lease ("the Lease") for Davis Lay's facilities located
at 1601 Cummins Drive, Modesto, California (the "Real Property") which is owned
by a third party. Davis Lay's obligations to the lessor under its current
month-to-month rental arrangement shall be assumed by Buyer as of the Closing
Date.
1.9 Guarantee of Restaurant Business. Both Mr. Costa and Mallard's
---------------------------------
Restaurants, Inc., a California corporation and an affiliate of the Company,
will guarantee jointly and severally to Buyer a minimum of One Million Two
Hundred Fifty Thousand and No/100 Dollars ($1,250,000.00) in foodservice
purchases from businesses owned or controlled by Mr. Costa, each year of the
four (4) year period following the Closing Date (the "Continuing Guaranty"),
pursuant to a form of Continuing Guaranty substantially in the form attached as
Exhibit B hereto.
- ---------
1.10 Risk of Loss. Any and all risk of loss or damage to the
-------------
Purchased Assets shall pass from the Company to the Buyer on the Closing Date.
2. The Closing.
------------
2.1 The Closing. The purchase and sale of the Purchased Assets shall
-----------
take place at 10:00 a.m. (local time) on May 30, 1997, at the offices of counsel
for the Company or at such other time and place as may be mutually agreed upon
in writing by Buyer and the Company. The time and date of purchase and sale, as
the same may be postponed or accelerated from time to time, are referred to in
this Agreement as the "Closing" and the "Closing Date," respectively.
2.2 Deliveries to be Made at Closing. On the Closing Date, the
--------------------------------
Company shall deliver to Buyer such leases, warranty bills of sale,
assignments and other instruments reasonably satisfactory to Buyer and its
counsel as are necessary or desirable to transfer the Purchased Assets, such
assumption agreements satisfactory to the Company and its counsel as are
necessary or desirable to assume the Assumed Liabilities, and the parties shall
deliver the other items contemplated by Sections 6 and 7. All deliveries shall
be considered to have taken place simultaneously as a single transaction, and no
delivery shall be considered to have been made until all deliveries are
completed. With respect to any Purchased Assets sold hereunder which cannot be
physically delivered at the Closing because they are in the possession of third
parties, the Company shall give irrevocable instructions to such third parties
that all rights, title and interests in such Purchased Assets have been vested
in Buyer.
6
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company, to the
---------------------------------------------
best of its knowledge, represents and warrants to Buyer as follows:
3.1 Ownership of the Purchased Assets. The Company has good title
---------------------------------
to all the Purchased Assets. The Purchased Assets are owned by the Company, and
at the Closing will be delivered to Buyer, free (except imperfections of title
that do not materially detract from the value of the properties, do not
interfere with the use of the property, and have arisen in the ordinary course
of business) and clear of any and all liens, charges, claims, encumbrances,
pledges, security interests, community property rights, equities, liabilities,
debts, obligations, restrictions on transfer or other defects in title of any
kind or nature, fixed or contingent, except for the Assumed Liabilities.
3.2 Authority to Enter Agreement; Enforceability. The Company has
--------------------------------------------
the right, power, legal capacity and authority to enter into and to carry out
the terms and provisions of this Agreement (including, without limitation, the
sale and delivery of the Purchased Assets being sold pursuant to this Agreement)
and the other agreements to be entered into by the Company in connection with
the consummation of this Agreement without obtaining the approval or consent of
any other party or authority, and this Agreement and such other agreements
constitute the legal, valid and binding agreements of the Company , enforceable
against it in accordance with their respective terms.
3.3 Organization and Standing. The Company is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
California with full power and authority (corporate and other) to own, lease and
operate its property and carry on the Business as now conducted. The Company is
currently doing business in such jurisdiction, and is qualified to do business
in each such jurisdiction. The Company's books and records are complete and
correct in all material respects which relate to the Business and fairly reflect
the conduct of the Business.
3.4 Intentionally Omitted.
----------------------
3.5 Financial Statements. Schedule 3.5 to this Agreement contains
-------------------- ------------
the Company's consolidated balance sheets as of December 29, 1996. The foregoing
financial statements (i) are in accordance with the books and records of the
Company and were prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods and (ii) fairly
present the Company's financial condition and results of operations and cash
flows as of the dates and for the periods specified. The Company has no
liabilities or obligations, whether contingent or absolute, direct or indirect,
matured or unmatured, which are not shown or provided for on Schedule 3.5,
except those incurred in the ordinary course of business since December 29,
1996, and the Company knows of no basis for the assertion of any such
liabilities or obligations. December 29, 1996, which is the date of the most
recent audited balance sheet, is sometimes referred to below as the "Financials
Date". Buyer has inspected fully all financial statements and supporting records
provided or made available to Buyer for inspection, and hereby confirms its
understanding and agreement to the foregoing.
3.6 Absence of Certain Changes. To the best of the Company's actual
--------------------------
knowledge, since the Financials Date, except as disclosed on Schedule 3.6 to
------------
this Agreement, there has not been with respect to Davis Lay:
7
<PAGE>
(a) any material or significant change in the condition (financial or
other), net worth, assets, liabilities, capitalization, prospects, business,
properties or results of operations of Davis Lay other than changes (i)
described in the Schedules to this Agreement or (ii) made or incurred in the
ordinary course of business;
(b) any material employment or other contracts or commitments entered
into by the Company, except as described in the Schedules to this Agreement;
(c) any sale, assignment, transfer or other disposition of any assets
or properties, the latest cost of which on the accounting records of the Company
exceeds $10,000, excluding any inventory or supplies disposed of in the ordinary
course of business consistent with past practices;
(d) any capital expenditure, capital addition or capital improvement
involving an amount in excess of $10,000;
(e) any mortgage, lien, pledge, encumbrance, or security interest
created on any Purchased Asset, tangible or intangible, except purchase money
security interests created in the ordinary course of business consistent with
past practices;
(f) any material damage, destruction or loss (whether or not covered
by insurance) adversely affecting Davis Lay, the Business or prospects of the
Company;
(g) any material increase in the compensation payable or to become
payable by the Company to any officer, director or other employee, agent,
independent contractor or consultant or any shareholder, or any declaration,
payment, commitment or obligation of any kind for the payment by the Company of
any bonus, additional salary or compensation, any worker compensation claims or
any retirement, termination or severance benefits, to officers, directors,
employees, agents, independent contractors, consultants or shareholder, other
than pursuant to existing written commitments of the Company otherwise disclosed
in the Schedules to this Agreement, except in the ordinary course of business;
(h) any material change in the amount of any notes or other
obligations payable by the Company to officers, directors, employees, agents,
independent contractors, consultants or shareholder;
(i) any labor disturbances adversely affecting or threatening the
Business;
(j) any revocation or termination, or any notice of any threatened
revocation or termination, of any permit or license issued to the Company or, to
the extent the Company's Business or prospects may be materially and adversely
affected by such termination, to any of its employees, independent contractors,
consultants or agents;
8
<PAGE>
(k) any guaranty by the Company with respect to the Business, or any
revocation or cancellation of any loan or guaranty made to the Company for the
benefit of the Business;
(l) any change or anticipated change in the relationship between the
Company and any of its customers, vendors, suppliers, employees, agents,
independent contractors or consultants which materially and adversely affects
the properties, prospects or business of the Business;
(m) any other event or condition which has adversely affected the
properties, business or prospects of the Business; or
(n) any agreement or commitment obligating the Company to do any
of the things set forth in this Section 3.7.
(o) Buyer understands, acknowledges, and agrees that since the
Financials Date, the Company has operated the Business in accordance with its
established past practices, and will continue to do so until the Closing Date.
Buyer also understands, acknowledges and agrees that since the Financials Date,
operation of the Business may have included the gain and loss of customers,
which gain and/or loss will continue up to and including the Closing Date.
Buyer acknowledges and agrees that it has knowledge and experience in the
produce business in Northern California, and, as a result of such knowledge and
experience, it understands these facts. Buyer further understands, acknowledges
and agrees that Buyer is knowingly purchasing the Business without any guarantee
whatsoever of future profitability of the Business. Having been made aware of
these circumstances, and subject to Buyer's completion of its due diligence,
Buyer shall purchase the Business from the Company on an "as-is" basis without
any warranty, express or implied, except as specifically set forth in this
Agreement.
3.7 Accounts Receivable. The Company has delivered to Buyer and
-------------------
Buyer hereby acknowledges receipt of a complete and accurate list of Davis Lay's
accounts receivable as of the Financials Date, together with an accurate aging
thereof. To the best of the Company's knowledge, said accounts receivable and
all accounts receivable which have arisen since the Financials Date (i) are
valid and enforceable claims for the sales and services which give rise to such
accounts, and (ii) are subject to no defenses or offsets and are fully
collectible in the ordinary course of business without resort to legal
proceedings, subject to any reserves contained in the financial statements
contained in Schedule 3.5 to this Agreement.
------------
3.8 Inventories. All inventories reflected on the Company's
-----------
unaudited balance sheet belonging to Davis Lay as of the Financials Date and all
inventories which have been acquired since that date are stated on the Company's
books and records at the lower of average cost or market and are in good and
salable condition and are not obsolete.
3.9 Prepaid Items, Accounts Payable and Accrued Expenses. The
----------------------------------------------------
Company's unaudited balance sheet as of the Financials Date presents fairly the
prepaid items, accounts payable and accrued expenses of the Company with respect
to Davis Lay as at and for the Financials Date. All prepaid items, accounts
payable and accrued expenses incurred after the Financials Date were incurred
9
<PAGE>
in the ordinary course of business and are usual and normal in amount, both
individually and in the aggregate.
3.10 Tax Matters. With respect to Davis Lay, the Company has
-----------
properly prepared and filed returns for and paid in full all federal, state,
local and foreign taxes, assessments, additions to taxes, penalties and interest
with respect thereto, to the extent such filings and payments are required prior
to the Financials Date and there is no known outstanding or proposed deficiency
or assessment known to the Company by any federal, state, local or foreign
government with respect to any tax period. Any amounts set up as reserves for
taxes on the financial statements contained in Schedule 3.5 with respect to
------------
Davis Lay are sufficient for the payment of all accrued and unpaid federal
income, accumulated earnings or other federal taxes, and state, local or foreign
income, franchise, real property, personal property, sales, use, withholding and
all other taxes imposed on the Company or its property or payable by it,
including interest, additions to taxes and penalties, if any, with respect
thereto, whether known or unknown and whether disputed or not, as of the Closing
Date, the dates of the respective financial statements and for all periods prior
thereto. The Company's federal, state and local tax returns have not been
audited with respect to Davis Lay and the Company is not aware of any proposed
audit by the Internal Revenue Service or any foreign, state or local taxing
authority with respect to Davis Lay.
3.11 Employees; Collective Bargaining Agreements. Schedule 3.11 to
-------------------------------------------- -------------
this Agreement contains a true and complete list of the employees of Davis Lay
as of the Closing Date. To the best of the Company's knowledge, the Company has
paid in full to all employees of Davis Lay all wages, salaries, commissions,
bonuses and other direct compensation for all services performed by them, except
for such accrued and unpaid amounts, including accrued sick pay and vacation pay
as listed on Schedule 3.5 hereto. To the best of the Company's knowledge, the
------------
Company is in compliance with all laws and regulations respecting employment and
employment practices, terms and conditions of employment, wages and hours,
employee benefit plans and taxes (including withholding taxes) relating to
employment or to personal services provided to Davis Lay. To the best of the
Company's knowledge, no employee of Davis Lay is in material violation of any
employment agreement, consulting agreement, proprietary information
nondisclosure agreement or any other contract or agreement with Davis Lay. To
the best of the Company's knowledge, there are no agreements, commitments or
other obligations of the Company, whether oral or written, which would prevent
or obstruct the dismissal of any of the Business's employees. With respect to
Davis Lay, the Company has no collective bargaining agreements nor any
obligations with respect to former collective bargaining agreements. To the best
of the Company's knowledge, the Business has no agents, independent contractors
or consultants to which the above-described obligations would apply.
3.12 Intentionally Omitted.
----------------------
3.13 Tangible Personal Property. Section 3.13A to this Agreement
-------------------------- -------------
contains a true and complete list describing and specifying the location of all
vehicles, equipment, furniture, fixtures, leasehold improvements and all other
tangible personal property or assets, used, owned, possessed or leased by, or in
the possession of, Davis Lay in connection with the Business that have book
values of $10,000 or more. Except as set forth in Schedule 3.13B to this
--------------
Agreement, all personal property (except items of nominal value) owned, used,
possessed or leased by Davis Lay is owned, used,
10
<PAGE>
possessed or leased by Davis Lay or the Company free and clear of all material
liens, claims, charges, pledges, security interests, encumbrances, liabilities,
debts, equities, restrictions on transfer or other defects in title of any kind
or nature. All items of personal property owned, used, possessed or leased by
Davis Lay are in good operating condition and repair, normal wear and tear
excepted. All leases pursuant to which Davis Lay holds any items of personal
property are listed on Schedule 3.13B to this Agreement and are in full force
--------------
and effect and are enforceable in accordance with their terms. Except as set
forth on Schedule 3.13B, none of such leases have been amended or modified.
--------------
Neither the Company nor, to the best of the Company's knowledge, the other
parties thereto are in material breach or default under any of such leases; and
no event has occurred which with notice or lapse of time, or both, could
constitute a material breach or default by Company or, to the best of the
Company's knowledge, the other parties thereto under such leases or could
accelerate any obligation or create any lien or encumbrance under such leases.
The Company has not assigned any of its interest in such leases. No claim has
been asserted or, to the best of the Company's knowledge, exists that is adverse
to the rights of the Company to the continued possession of the leased property
under such leases.
3.14 Intangible Property. Schedule 3.14 to this Agreement contains a
------------------- -------------
true and complete list of all patents, copyrights, trademarks, service marks,
trade names, logos and identifying marks and styles used by the Company in
connection with the Business (the "Intangible Property"). Except as disclosed on
Schedule 3.14 to this Agreement, and to the best of its knowledge, the Company
owns and has the full right to use the name "Davis Lay Food Service" and all the
Intangible Property in each jurisdiction in which it conducts business. Within
five (5) days of the Closing Date, the Company will record an Abandonment of
Fictitious Business Name Statement with regard to the name "Davis Lay Food
Service Distribution".
3.15 Contracts and Agreements. To the best of the Company's
------------------------
knowledge, Schedule 3.15 contains a true and complete list of the following
-------------
material agreements, contracts, leases (other than the leases already listed on
Schedule 3.13 to this Agreement) or other obligations or commitments, whether
- -------------
written or oral (collectively "Contracts") pertaining to Davis Lay, to which the
Company is a party or by which it or Davis Lay's property is bound, including
(i) contracts with employees not cancelable at will without cost or other
liability by reason of such termination; (ii) contracts with customers; (iii)
contracts with suppliers or manufacturers of products sold by the Company in the
ordinary course of business; (iv) bonus, deferred or incentive compensation,
group insurance or other employee benefit plans; (v) collective bargaining
contracts; (vi) leases as lessor or lessee; (vii) advertising or public
relations contracts; (viii) conditional sales contracts, security agreements,
pledge agreements, trust receipts or any other agreements or arrangements
whereby any of the assets of the Company are subject to a lien, encumbrance,
charge or other restriction; (ix) mortgages, indentures, notes or other
instruments for or relating to any borrowing of money or the extension of credit
or the deferred purchase of property; (x) guarantees of any obligations for the
borrowing of money or otherwise, or any other agreements of guarantee or
indemnification (other than endorsements made for collection in the ordinary
course of business); (xi) agreements or arrangements for the purchase or sale of
any assets other than in the ordinary course of business; (xii) continuing
contracts for future purchase of materials, supplies or equipment; (xiii)
agreements, contracts or commitments relating to the issuance of any securities;
(xiv) agreements, contracts or commitments relating to the acquisition of
assets, capital stock or ownership interests of any business enterprise; (xv)
agreements, contracts, or commitments with any officer, director or shareholder
of the Company; (xvi)
11
<PAGE>
contracts restricting doing business in any areas or in any way limiting
competition; and (xvii) any other contracts (other than contracts entered into
in the ordinary course of business) to be performed in whole or in part more
than 30 days from the date hereof calling for aggregate payments by Davis Lay or
the Company in excess of $3,000 per month and which are not terminable without
cost or liability on 30-days' notice. Except as set forth on Schedule 3.15, none
-------------
of the Contracts have been amended or modified. Each of the Contracts is in full
force and effect and is enforceable in accordance with its terms. Neither the
Company nor, to the best of the Company's knowledge, the other parties thereto
are in material breach or default under any such Contracts and no event has
occurred which with notice or lapse of time, or both, could constitute a
material breach or default under any such Contract or could accelerate any
obligation or create any lien or encumbrance under any such Contract. The
Company has not assigned any of its interest in the Contracts. No claim has been
asserted or, to the best of the Company's knowledge, exists that is adverse to
the rights of the Company under any of the Contracts.
3.16 Insurance. Within thirty (30) days of the Closing Date, the
---------
Company will deliver to Buyer a true and complete copy of all life, fire,
casualty, liability and all other insurance policies maintained by the Company
pertaining to the Business and the property located at 1601 Cummins Drive,
Modesto, California, for the purpose of identification of later claims which
may be forwarded to Buyer but responsibility for which has been retained by the
Company.
3.17 Litigation. Except as set forth on Schedule 3.17 to this
---------- -------------
Agreement, there is no suit, action or legal, administrative, arbitration
pending, filed or initiated by, against or affecting Davis Lay, and the Company
has no knowledge of any suit, action or legal, administrative, arbitration or
other proceeding threatened by, against or affecting Davis Lay, or, with respect
to matters arising out of the Business, pending or threatened by, against or
affecting any of the Company's officers or directors. To the best of the
Company's knowledge there is no event or circumstance which could form the basis
of any such suit, action, proceeding or investigation.
3.18 Compliance with Law and Other Instruments. To the best of
-----------------------------------------
Company's knowledge, the business and operations of the Company with respect to
Davis Lay have been and are being conducted in accordance with all applicable
laws, statutes, ordinances, rules and regulations of all authorities (including,
without limitation, those relating to business conduct, public health and
safety, occupational health and safety and the environment). To the best of the
Company's knowledge, the Company is not in violation, nor will entry into the
transaction contemplated by this Agreement result in a violation or breach of,
or default under, any term or provision of its Articles of Incorporation or its
Bylaws or of any order, judgment, writ, injunction, decree, license or permit of
any court or any governmental or regulatory authority or of any indenture,
mortgage, deed of trust, lease, contract, instrument, commitment or other
agreement or arrangement, or subject to any restriction of any kind or
character, which would materially and adversely affect Davis Lay, the Business
or its prospects.
3.19 Intentionally Omitted.
----------------------
3.20 Licenses and Permits. Schedule 3.20 to this Agreement contains
-------------------- -------------
a true and complete list of all material licenses, permits, orders, approvals
and other authorizations issued to Davis Lay or to the Company on behalf of
Davis Lay and its employees, which are in full force and effect and
12
<PAGE>
which in any way relate to the Business. Davis Lay and its employees or agents
have all licenses, permits, orders, approvals and other authorizations required
for the conduct of the Business as presently conducted and, to the best of the
Company's knowledge, no suspension or cancellation of any of them is threatened.
3.21 Benefit Plans. Except as previously disclosed to Buyer, Davis
--------------
Lay does not have any employee benefit plans ("Plans") which are subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") including,
but not limited to, pension, retirement, profit sharing and stock bonus plans or
any Employee Plan that is a multi-employer plan as defined in Section 3(37) of
ERISA. To the best of the Company's knowledge, to the extent that it may affect
employees or the Purchased Assets of, each Plan is now, and has always been,
established, maintained and operated in all material respects in accordance with
all applicable laws (including but not limited to ERISA and the Internal Revenue
Code of 1986, as amended, and regulations thereunder) and in accordance with the
Plan documents. There is no unfunded liability for vested or nonvested benefits,
or any pending or, to the best knowledge of the Company, threatened litigation
or arbitration concerning or involving any Davis Lay Plan which could subject
the Purchased Assets of Davis Lay to any claims.
3.22 Brokerage and Finders' Fees. Except as previously disclosed to
---------------------------
Buyer, the Company has not incurred any liability to any broker, finder or agent
for any brokerage fees, finders' fees or commissions with respect to the
transactions contemplated by this Agreement.
3.23 Suppliers and Customers. No single supplier who accounted for
-----------------------
more than 10% of Davis Lay's purchases, or customer who accounted for more than
10% of Davis Lay's sales, during its most recent complete fiscal year, or the
fiscal year to date, nor any supplier who is a material source of supply of any
goods essential to the Business, has (i) canceled or otherwise terminated, or
made any threat to cancel or otherwise terminate, its relationship with the
Company or (ii) materially decreased its sale of services or supplies to the
Company or its purchase of products therefrom or made any threat with respect
thereto.
3.24 Intentionally Omitted.
----------------------
3.25 Hazardous Materials. To the best of the Company's knowledge,
-------------------
for the approximately ten year period during which it has leased the facility
located at 1601 Cummins Drive, Modesto, California, it has not been made aware
of any storage, use, manufacture, generation, disposal, treatment or release of
any "Hazardous Materials" (as defined below) on, under, or about such premises.
Buyer has had the opportunity to perform its own investigation of the
environmental condition of the above-referenced premises, and has either done
so, or knowingly and voluntarily waived its right to do so. The Company makes no
other representations or warranties whatsoever regarding the physical condition
of the above-referenced premises, and, except for such warranties and
representations which Buyer may be able to obtain from the owner of such
premises, the Buyer shall take possession of and accept said premises in their
current "as-is" condition. For the purposes of this Section, the term "Hazardous
Materials" shall mean flammable explosives, radioactive materials, hazardous
wastes, toxic substances or any other materials which are included within the
definition of "hazardous materials", "hazardous substances", "hazardous wastes",
or "toxic substances", under the
13
<PAGE>
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (42 U.S.C. (S)(S) 9601 et seq.) or any other federal, state and local
laws or ordinances pertaining to industrial hygiene, soil and ground water or
environmental conditions, including, without limitation, asbestos in any form
and urea formaldehyde insulation. The use of the premises is in compliance with
all local, state and federal statutes, laws, ordinances, rules and regulations
regarding Hazardous Materials.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
----------------------------------------
to the Company as follows:
4.1 Organization and Standing. Buyer is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
California, with full power and authority (corporate and other) to carry on its
business and to enter into and carry out the terms of this Agreement.
4.2 Authority to Enter Agreement; Enforceability. Except for the
--------------------------------------------
requirement that the terms and conditions of this Agreement and the other
agreements to be entered into by Buyer in connection with the consummation of
this Agreement be approved by Buyer's Board of Directors, which approval has not
yet been obtained, (i) Buyer has the right, power and authority to enter into
and to carry out the terms of this Agreement and such other agreements, without
obtaining the approval or consent of any other party or authority, and (ii) this
Agreement and such other agreements, including, without limitation, the
Promissory Note constitute the legal, valid and binding agreements of Buyer,
enforceable against it in accordance with their respective terms.
4.3 Compliance with Law and Other Instruments. Except for the
-----------------------------------------
requirement that the terms and conditions of this Agreement and the other
agreements to be entered into by Buyer in connection with the consummation of
this Agreement be approved by Buyer's Board of Directors, which approval has not
yet been obtained, neither the execution and delivery of this Agreement or such
other agreements, nor the consummation of the transactions contemplated by this
Agreement and such other agreements, will conflict with, or result in a
violation or breach of, or constitute a default under, any term or provision of
Buyer's Certificate of Incorporation or Bylaws or any order, judgment, writ,
injunction, decree, license, permit, law, statute ordinance, rule or regulation
of any court or any governmental or regulatory authority (including, without
limitation the bulk sales provisions of the California Commercial Code) or any
indenture, mortgage, deed of trust, lease, contract, instrument, commitment or
other agreement or arrangement to which Buyer is a party or by which it or its
properties are bound. Buyer is duly licensed as a produce dealer with the
California Department of Food and Agriculture, Market Enforcement Division.
4.4 Brokerage and Finders' Fees. Buyer has not incurred any
---------------------------
liability to any broker, finder or agent for any brokerage fees, finders' fees
or commissions with respect to the transactions contemplated by this Agreement.
4.5 Litigation. There is no suit, action or legal, administrative,
-----------
arbitration or other proceeding pending, filed or initiated by, against or
affecting the Buyer which would affect the Buyer's ability to consummate the
transactions contemplated by this Agreement.
14
<PAGE>
4.6 No Misrepresentation. The representations, warranties and
---------------------
statements made by Buyer in or pursuant to this Agreement are true, complete and
correct in all material respects. None of such representations, warranties or
statements contains any untrue statement of material facts or omits to state any
material fact necessary to make any such representation, warranty or statement,
under the circumstances in which it is made, not misleading.
5. COVENANTS OF THE PARTIES.
-------------------------
5.1 Operation of the Business of the Company. During the period from
----------------------------------------
and after the date of this Agreement and until the Closing Date, the Company
covenants and agrees that, unless it obtains Buyer's prior written consent to
the contrary, or except as specifically authorized in this Agreement, the
Company shall, with respect to Davis Lay, to,:
(a) make, amend and terminate contracts only in the ordinary course of
business;
(b) refrain from suffering or refrain from creating any security
interest, encumbrance or restriction on its properties or assets, except in the
ordinary course of business consistent with past practices;
(c) refrain from disposing of any of Davis Lay's properties or assets,
except in the ordinary course of business consistent with past practices;
(d) refrain from entering into or becoming a party to any employment,
consulting or sales representation agreement, except in the ordinary course of
business consistent with past practices;
(e) refrain from increasing the rate of compensation paid or payable
by it to any of Davis Lay's officers, directors, employees, agents, independent
contractors or consultants, except pursuant to existing contractual obligations,
and from making loans or advances to officers, directors, agents, employees,
independent contractors, consultants or any shareholder, or any member of the
families of any of them, except for advances for reasonable business expenses in
accordance with past practices;
(f) refrain from paying or agreeing to pay any bonus, extra
compensation, pension or severance pay under any pension plan or otherwise,
except pursuant to existing contractual obligations;
(g) maintain its books accounts and records in the usual, regular and
ordinary manner and in compliance with all applicable laws;
(h) meet its obligations under all contracts and not become in default
thereunder;
15
<PAGE>
(i) maintain all of its assets in good repair, order and condition,
ordinary wear and tear excepted;
(j) refrain from borrowing or agreeing to borrow any funds other than
under existing banking relationships, in the ordinary course of business
consistent with past practices;
(k) refrain from guaranteeing or agreeing to guarantee the obligations
of others;
(l) refrain from waiving or committing to waive any rights of
substantial value except for good and valuable consideration;
(m) refrain from canceling or materially amending any insurance policy
except in exchange for a new policy with at least the same coverage;
(n) refrain from entering into any transaction which would in any
significant respect change the character of the Business; and
(o) operate in such manner as to assure that the representations and
warranties of the Company set forth in this Agreement will be true, correct and
complete on and as of the Closing Date.
5.2 Access to Information and Records. The Company covenants and
---------------------------------
agrees to cause the Company, to give Buyer and its counsel, accountants and
other representatives (collectively, "Buyer's Representatives") full access,
during normal business hours, throughout the period prior to the Closing Date,
to all information concerning Davis Lay's assets, properties, contracts,
commitments, books and records, and to cause the Company to furnish Buyer and
Buyer's Representatives during such period with all information concerning Davis
Lay's affairs as they reasonably may request. No investigation or inquiry made
by Buyer or Buyer's Representatives hereunder shall in any way affect or lessen
the representations and warranties made by the Company r under this Agreement.
Buyer will make no contact with Davis Lay's hourly personnel except as may be
expressly authorized by the Company.
5.3 Best Efforts; Further Assurances. Each party to this Agreement
--------------------------------
shall use his or its best efforts to cause the satisfaction of all conditions to
the consummation of this Agreement which are in the control of such party and to
cooperate as necessary in the satisfaction of all other conditions to the
consummation of this Agreement. Each party hereto will, from time to time after
the execution and consummation of this Agreement, execute and deliver such
instruments, documents and assurances and take such further actions as the other
parties may reasonably request to carry out the purpose and intent of this
Agreement. The parties agree to cooperate in determining whether mail received
by the Company or the Buyer after the Closing Date belongs to the other party,
and both parties agree to forward mail belonging to the other party as soon as
is reasonably practicable upon receipt.
5.4 Publicity. All notices to third parties and all other publicity
---------
concerning this Agreement and the transactions contemplated by this Agreement
shall be jointly planned and
16
<PAGE>
coordinated between Buyer, on the one hand, and the Company on the other hand.
No party shall make a unilateral press release or public announcement, or
announcement to employees, creditors, customers or others without the prior
written approval of the other parties except as may be required by law.
5.5 Trade Secrets, Non-Competition, Etc. As a material inducement to
-----------------------------------
Buyer to enter into and consummate this Agreement, the Company agrees that,
after the Closing Date:
(a) Trade Secrets. The Company shall not, without the prior written
-------------
consent of Buyer, except as may be required by law, governmental rules and
regulations or litigation between the parties, disclose or use, in any way, any
confidential business or technical information or trade secret of Davis Lay,
whether or not conceived of or prepared by the Company (the "Trade Secrets"),
including without limitation any information concerning any procedures,
operations, investments, techniques, data, compilations of information, records,
financing, costs, employees, purchasing, accounting, marketing, merchandising,
sales, customers, salaries, pricing, profits, plans for future development, and
the identity, requirements, preferences, practices and methods of doing business
of specific parties with whom Davis Lay transacts business, and all other
information which is related to the Business; all of which Trade Secrets will be
the exclusive and valuable property of Buyer.
(b) Tangible Items. All customer lists, , trade names, files,
--------------
records, documents, drawings, plans, specifications, manuals, books, forms,
receipts, notes, reports, memoranda, studies, data, calculations, recordings,
catalogues, compilations of information, correspondence and all copies,
abstracts and summaries of the foregoing and all physical items related to the
Business, other than a merely personal item, whether of a public nature or not,
and whether prepared by the Company or not, are and shall be the exclusive
property of Buyer and shall not be removed from the premises of Buyer, without
the prior written consent of Buyer. Upon delivery of reasonable prior notice to
Buyer, the Company shall have reasonable access to all of the above tangible
items for a period of seven (7) years following the Closing Date. Buyer agrees
to give the Company prior written notice of any proposed destruction of any of
the above tangible items sufficient to allow the Company to make necessary
copies of such items.
(c) Solicitation of Customers. During the period commencing on the
--------------------------
Closing Date and ending four years from that date (such period not to include
any period of violation hereof by the Company or period which is required for
litigation to enforce this Section 5.5(c)), the Company shall not directly or
indirectly, either for its or his own benefit or purposes or for the benefit or
purposes of any other person, solicit, call on, interfere with, accept any
business from, attempt to divert or entice away any person or firm who was or is
a customer of the Business prior to or on the Closing Date or is a customer of
Buyer after the Closing Date, if such business involves the wholesale
distribution of food or related equipment or supplies. The parties understand,
acknowledge and agree, however, that the Company may actively solicit and accept
business from any person who is or was a customer of Davis Lay for purposes of
selling the Company's manufactured food products.
(d) Solicitation of Employees. During the period commencing on the
-------------------------
Closing Date and ending four years from that date, the Company shall not,
directly or indirectly, call on, solicit, interfere with or attempt to entice
away any existing employee of Buyer. Buyer
17
<PAGE>
understands, acknowledges and agrees that, provided the Company has complied
with the foregoing with respect to any employee of Buyer, the Company shall be
free to employ any person who first terminates his or her employment with Buyer,
subject to the terms of any non-competition agreement which may still be in
force between Buyer and such person.
(e) Noncompetition.
---------------
(i) As used herein, the term "Competitive Activity" shall mean
any participation in, assistance of business from, engagement in business with,
or assistance, promotion or organization of, any person, partnership,
corporation, firm, association or other business organization, entity or
enterprise by the Company which, directly or indirectly, is engaged in, or
hereinafter engages in the wholesale distribution of produce.
(ii) During the period commencing on the Closing Date and ending
on four years from that date (any such period not to include any period of
violation hereof by the Company or period which is required for litigation to
enforce this Section 5.5(e)), the Company shall not engage in any Competitive
Activity in the State of California;
(f) Injunctive Relief. The Company hereby acknowledges and agrees
-----------------
that it would be difficult to fully compensate Buyer for damages resulting from
the breach or threatened breach of the foregoing provisions and, accordingly,
that Buyer, shall be entitled to temporary and injunctive relief, including
temporary restraining orders, preliminary injunctions and permanent injunctions,
to enforce such provisions. This provision with respect to injunctive relief
shall not, however, diminish the right of Buyer to claim and recover damages.
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
----------------------------------------------------
obligation to consummate this Agreement is expressly subject to the
satisfaction, on or prior to the Closing Date, of all of the following
conditions (compliance with which or the occurrence of which may be waived in
whole or in part by Buyer in writing):
6.1 Representation and Warranties. Unless the Company agrees to cure
-----------------------------
any default, all representations and warranties of the Company contained in this
Agreement, or any certificate, schedule, exhibit, statement, report or other
document delivered or furnished by the Company pursuant this Agreement, shall be
true, correct and complete (except for changes in the ordinary course of
business or events beyond the Company's control) as of the Closing Date as if
made at and as of such date.
6.2 Covenants. The Company shall have performed and satisfied all
---------
covenants and conditions required by this Agreement to be performed or satisfied
by them on or prior to the Closing Date.
6.3 Intentionally Omitted.
---------------------
18
<PAGE>
6.4 Material Errors. Buyer shall not have discovered any material
---------------
error, misstatement or omission in any of the representations or warranties made
by the Company in this Agreement, or any certificate, schedule, exhibit,
statement, report or other documents delivered or furnished by the Company
pursuant to this Agreement; or (ii) failure on the part of the Company to
perform or satisfy any covenants or conditions required to be performed or
satisfied by it or him under this Agreement.
6.5 Absence of Litigation. No action or proceeding shall have been
---------------------
instituted or threatened prior to or at the Closing Date before any court or
other governmental body, or instituted or threatened by any public authority,
the result of which could prevent or make illegal the consummation of the
transactions contemplated hereunder or under the other agreements to be entered
into in connection with this Agreement or which could have a material adverse
effect the Company or its properties, Business or prospects.
6.6 Absence of Damage to Property. Davis Lay's tangible property
-----------------------------
shall not have suffered any substantial (meaning greater than $10,000 in value)
damage or destruction not covered by insurance, whether by fire or otherwise,
and whether or not covered by insurance, which could have a material adverse
effect on the Business or its prospects.
6.7 Consents. The Company shall have obtained the consent or
--------
approval of each person whose consent to or approval of the transactions
contemplated by this Agreement or the other agreements to be entered into in
connection with this Agreement is required in order to consummate this such
other agreements or to continue the operation of the Business as it is currently
conducted. Such consents and approvals shall include, without limitation, the
consent of Davis Lay's current landlord in regard to Buyer's assumption of the
Company's real property leasehold interest, in forms satisfactory to Buyer and
its counsel.
6.8 Intentionally Omitted.
----------------------
6.9 Execution of Non-Compete Agreements. Messrs. Dan Costa, Glenn
-----------------------------------
Davis and Jeffrey Sacchini shall have executed and delivered to Buyer, a Non-
Compete Agreement in the forms attached as Exhibit C-1, C-2 and C-3 to this
Agreement (a "Non-Compete Agreement").
6.10 Intentionally Omitted.
----------------------
6.11 Opinion of Counsel. The Company shall have furnished Buyer with
------------------
the opinion of Curtis & Arata, dated as of the Closing Date, in form and
substance reasonably satisfactory to Buyer and its counsel, covering the matters
specified in Exhibit D to this Agreement.
6.12 Due Diligence Review. On or prior to June 5, 1997, Buyer and
--------------------
Buyer's representatives shall have completed their due diligence review of the
Company, to their complete satisfaction.
19
<PAGE>
6.13 Board Approval. Buyer's Board of Directors shall have approved
--------------
of the terms and conditions of this Agreement and the other agreements to be
entered into in connection with this Agreement.
6.14 Approval of Documentation. The form and substance of all
--------------------------
opinions, certificates, instruments of transfer and other documents to be
furnished by the Company and its counsel under this Agreement shall be
satisfactory in all reasonable respects to Buyer and its counsel.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND TO CLOSE.
--------------------------------------------------------------------
The obligation of the Company to consummate this Agreement is expressly subject
to the satisfaction, on or prior to the Closing Date, of all of the following
conditions (compliance with which or the occurrence of which may be waived in
whole or in part in writing by all of the Company ):
7.1 Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained in this Agreement shall be true, correct and
complete as of the Closing Date as if made at and as of such date.
7.2 Covenants. Buyer shall have performed and satisfied all
---------
covenants and conditions required by this Agreement to be performed or satisfied
by it on or prior to the Closing Date, including, without limitation, approval
by Buyer's Board of Directors of the terms and conditions of this Agreement and
the other agreements to be entered into in connection with this Agreement.
7.3 Intentionally Omitted.
7.4 Material Errors, Etc. The Company shall not have discovered any
--------------------
material (i) error, misstatement or omission in any of the representations or
warranties made by Buyer in this Agreement, or any certificate, schedule,
exhibit, statement, report or other document delivered or furnished by Buyer
pursuant to this Agreement; or (ii) failure on the part of Buyer to perform or
satisfy any covenants or conditions required to be performed or satisfied by it
hereunder.
7.5 Absence of Litigation. No action or proceeding shall have been
---------------------
instituted prior to or at the Closing Date before any court or other
governmental body, or instituted or threatened by any public authority, the
result of which could prevent or make illegal the consummation of the
transactions contemplated hereunder or under the other agreements to be entered
into in connection with this Agreement.
7.6 Opinion of Counsel. Buyer shall have furnished the Company with
------------------
the opinion of Donald G. Alvarado, Esq., dated the Closing Date, in form and
substance reasonably satisfactory to the Company and its counsel, covering the
matters specified in Exhibit E to this Agreement.
7.7 Approval of Documentation. The form and substance of all
-------------------------
opinions, certificates and other documents to be delivered by Buyer and its
counsel under this Agreement shall be satisfactory in all reasonable respects to
the Company and its counsel.
20
<PAGE>
8. TERMINATION AND ABANDONMENT.
----------------------------
8.1 Termination. This Agreement may be terminated on or before the
-----------
Closing Date without liability on the part of any party exercising such right of
termination:
(a) by the mutual consent of Buyer and the Company ;
(b) by any party hereto if there has been a material misrepresentation
or breach on the part of the other party of the warranties of such other party
as set forth in this Agreement or made pursuant hereto, or if there has been any
material failure on the part of the other party to perform its obligations or
comply with the covenants under this Agreement.
8.2 Procedure and Effect of Termination. In the event of termination
-----------------------------------
and abandonment by Buyer, as one party, or by the Company , as the other party,
or by both parties pursuant to Section 8.1 above, written notice thereof shall
be given to the other party and this Agreement shall terminate and be abandoned,
without further action by any of the parties hereto. If this Agreement is
terminated as provided in Sections 8.1(a) or 8.1(b) above or because a condition
to a party's obligation to consummate the transactions contemplated by this
Agreement has not been satisfied by July 1, 1997, and the other party is not in
default, no party hereto shall have any liability or further obligations to any
other party to this Agreement.
9. SURVIVAL AND INDEMNIFICATION.
-----------------------------
9.1 Survival of Representations, Warranties and Covenants. For a
-----------------------------------------------------
period commencing on the Closing Date and ending on the second anniversary
thereof, all representations, warranties and agreements made by Buyer and the
Company in this Agreement (including statements contained in any schedule,
certificate, exhibit, statement, report or other document delivered by or on
behalf of any party hereto or in connection with the transactions contemplated
hereby) shall survive the execution, delivery and performance of this Agreement
and any investigations, inspections, examinations, or audits made by or on
behalf of the parties. Nothing in this Section 9.1 shall affect the obligations
and indemnities of the parties with respect to the covenants and agreements
contained in this Agreement that are permitted or required to be performed, in
whole or in part, after the Closing Date.
9.2 Indemnification.
----------------
(a) Except for the limitations on indemnification regarding
uncollectible accounts receivable and unsold inventory as set forth in Section
1.5 herein, for a period commencing on the Closing Date and ending on the second
anniversary thereof, the Company agrees to indemnify Buyer and hold it harmless
against and in respect of any and all claims, losses, expenses, obligations and
liabilities, including court costs and reasonable attorneys' fees associated
therewith, which arise or result from or are incident or related to (i) the
inaccuracy of any representation or breach of any warranty of the Company , or
(ii) any default or failure of the Company's commitments or obligations under
this Agreement, or (iii) by reason of any act or omission of the Company which
constitutes a
21
<PAGE>
breach or default under this Agreement, or (iv) the Excluded Liabilities. The
Company shall reimburse Buyer on demand for any payment made or loss suffered by
Buyer at any time after the execution of this Agreement, based upon the judgment
of any court of competent jurisdiction or pursuant to a bona fide compromise or
settlement of claims, demands or actions, in respect of any damages to which the
foregoing indemnity relates. Notwithstanding the foregoing, Buyer shall have the
right, but shall not be required, to offset or reduce the amount of any and all
payments made as part of the Purchase Price by the amount of any such payment or
loss up to a maximum of Five Hundred Thousand Dollars ($500,000.00). Any such
offset or reduction shall not be deemed a waiver of any right or remedy which
Buyer may have either under this Agreement or otherwise. Consummation of the
transaction contemplated under this Agreement shall not be deemed or construed
to be a waiver of any right or remedy of Buyer, nor shall this Section or any
other provision of this Agreement be deemed or construed to be a waiver of any
ground of defense by Buyer. The maximum amount of the Company's liability under
this Section shall be Five Hundred Thousand Dollars ($500,000.00).
(b) For a period commencing on the Closing Date and ending on the
second anniversary thereof, Buyer agrees to indemnify the Company and hold them
harmless against and in respect of any and all damages, claims, losses,
expenses, costs, obligations and liabilities, including court costs and
reasonable attorneys' fees, which arise or result from or are incident or
related to (i) the inaccuracy of any representation or breach of any warranty of
Buyer, or (ii) any default of the commitments or obligations of Buyer under this
Agreement, or (iii) by reason of any act or omission of Buyer which constitutes
a breach or default under this Agreement, or (iv) the Assumed Liabilities. Buyer
shall reimburse the Company on demand for any payment made or loss suffered by
it at any time after the execution of the Agreement, based on the judgment of
any court of competent jurisdiction or pursuant to a bona fide compromise or
settlement of claims, demands or actions, in respect of any damages to which the
foregoing indemnity relates. Consummations of the transaction contemplated under
this Agreement shall not be deemed or construed to be a waiver of any right or
remedy of the Company, nor shall this Section or any other provision of this
Agreement be deemed or construed to be a waiver of any ground of defense by
them. The maximum amount of Buyer's liability under this Section shall be Five
Hundred Thousand Dollars ($500,000.00).
(c) The party indemnified hereunder (the "Indemnitee") shall promptly
notify the indemnifying party (the "Indemnitor") of the existence of any claim,
demand, or other matter involving liabilities to third parties to which the
Indemnitor's indemnification obligations would apply and shall give the
Indemnitor 30 days (or such shorter period as required by the contingencies of
such claim, demand or other matter involving liabilities to third parties) in
which to elect to defend the same at its own expense and with counsel of its own
selection (who shall be approved by the Indemnitee, which approval shall not be
unreasonably withheld); provided that the Indemnitee shall at all times also
have the right to fully participate in the defense at its own expense. If the
Indemnitor shall, within such 30-day period, fail to defend, the Indemnitee
shall have the right, but not the obligation, to undertake the defense of, and
to compromise or settle (exercising reasonable business judgment) the claim or
other matter on behalf, for the account, and at the risk and expense of the
Indemnitor. Notwithstanding the foregoing, if the matter might have an effect
on the ongoing Business or the Purchased Assets or Buyer's relationship with
customers or suppliers, Buyer shall have first right to defend the same on the
basis set forth in the preceding sentence. Except as provided above, the
Indemnitee shall not compromise or settle the claim or other matter without the
written consent of the
22
<PAGE>
Indemnitor, such consent not to be unreasonably withheld. If the claim is one
that cannot by its nature be defended solely by the Indemnitor, the Indemnitee
shall make available all information and assistance that the Indemnitor may
reasonably request; provided that any associated expenses shall be paid by the
Indemnitor.
10. MISCELLANEOUS.
--------------
10.1 Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing, and shall be deemed to have been given
if personally delivered or 72 hours after being placed in the United States
mail, registered or certified-return receipt requested, postage prepaid,
addressed as follows:
If to the Company: Mallard's Food Products, Inc.
708 L Street
Modesto, CA 95354-2240
Phone: (209) 522-1018
Fax: (209) 577-8364
With a copy to: Ralph S. Curtis, Esq.
Curtis & Arata
P.O. Box 3030
Modesto, CA 95353
1300 K Street
Modesto, CA 95354
Phone: (209) 521-1800
Fax: (209) 572-3501
If to Buyer: Port Stockton Food Distributors, Inc.
4343 E. Fremont Street
P.O. Box 30
Stockton, CA 95201
Attn: John Goneau
Phone: (209) 944-4658
Fax: (209) 467-3640
With a copy to: Smart & Final Inc.
4700 South Boyle Avenue
Los Angeles, CA 90058
Attn: Donald G. Alvarado, Esq.
Phone: (213) 589-9726
Fax: (213) 589-0415
Each of the parties shall be entitled to specify a different address
by giving notice as aforesaid.
23
<PAGE>
10.2 Entire Agreement. This Agreement, and the Exhibits and
----------------
Schedules hereto, which are incorporated into this Agreement by reference and
are made a part hereof, constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations, and discussions, whether oral or
written.
10.3 Amendment and Modification. No supplement, modification, waiver
--------------------------
or termination of this Agreement shall be binding unless executed in writing by
the party to be bound. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
10.4 Headings. Section and subsection headings are not to be
--------
considered part of this Agreement and are included solely for convenience and
reference and shall not be held to define, construe or limit the meaning of any
provision of this Agreement.
10.5 Successors and Assigns. All of the terms, provisions and
----------------------
obligations of this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns. Notwithstanding the foregoing, neither this Agreement
nor any rights or obligations hereunder shall be assigned, pledged, hypothecated
or otherwise transferred by a party without the prior written consent of all
other parties, except (i) by operation of law, or (ii) by Buyer to any entity
that Buyer controls (provided that such assignment shall not relieve Buyer of
its obligations hereunder, if such assignee does not perform such obligations).
10.6 Governing Law; Venue. The validity, construction and
--------------------
interpretation of this Agreement shall be governed by the internal laws of the
State of California applicable to contracts made and to be performed wholly
within that state. In the event the arbitration clause set forth herein does not
apply, any action commenced by the parties may be brought only in the Federal or
California state courts serving Stanislaus County. The parties expressly consent
to the jurisdiction of the foregoing courts, and waive any objection that such
courts constitute an inconvenient forum.
10.7 Third Parties. Nothing in this Agreement, expressed or implied,
-------------
is intended to confer upon any person other than the parties hereto any rights
or remedies under or by reason of this Agreement.
10.8 Expenses; Attorneys' Fees. Each party shall bear the expenses
-------------------------
(including, without limitation, attorneys' fees) incurred by him or it in
connection with the negotiation, execution and delivery of this Agreement and
the agreements contemplated by this Agreement. In the event any party takes
legal action to enforce any of the terms of this Agreement, the unsuccessful
party to such action shall pay the successful party's reasonable expenses,
including attorneys' fees for pretrial investigation, at trial, and on appeal,
incurred in such action.
10.9 Arbitration; Mediation. Any dispute concerning this Agreement
-----------------------
shall first be mediated by the parties. If the dispute is not settled by way of
mediation, the parties shall submit any and all disputes concerning the
interpretation of the enforcement of rights and duties under this
24
<PAGE>
Agreement to final and binding arbitration pursuant to the California
Arbitration Act (CCP (S)(S) 1280-1294.2). At the request of any party, the
arbitrators, attorneys, parties to the arbitration, witnesses, experts, court
reporters, or other persons present at the arbitration shall agree in writing to
maintain the strict confidentiality of the arbitration proceedings. Arbitration
shall be conducted by a neutral arbitrator selected in accordance with the
statute and/or rules governing the arbitration. The award of the arbitrator
shall be enforceable according to the applicable provisions of the California
Code of Civil Procedure. The arbitrator may award damages, interest, attorneys'
fees and litigation costs, and/or permanent injunctive relief, but in no event
shall the arbitrator have the authority to award punitive or exemplary damages.
The prevailing party, as determined by the arbitrator, shall be entitled to
recover all of its reasonable litigation fees and costs. Notwithstanding the
foregoing, a party may apply to a court of competent jurisdiction for relief in
the form of a temporary restraining order or preliminary injunction, or other
provisional remedy pending final determination of a claim through arbitration in
accordance with this paragraph. If proper notice of any hearing has been given,
the arbitrator will have full power to proceed to take evidence or to perform
any other acts necessary to arbitrate the matter in the absence of any party who
fails to appear. THE PARTIES UNDERSTAND, ACKNOWLEDGE AND AGREE THAT THEY ARE
HEREBY WAIVING THEIR RESPECTIVE RIGHT TO A JURY TRIAL BY AGREEING TO SUBMIT ANY
AND ALL DISPUTES TO FINAL AND BINDING ARBITRATION.
10.10 Counterparts. This Agreement may be executed simultaneously
------------
and in two or more counterparts, each one of which shall be deemed an original,
but all of which shall constitute one and the same instrument.
10.11 Intentionally Omitted.
----------------------
10.12 Severable Provisions. If any of the provisions of this
--------------------
Agreement may be determined to be illegal or otherwise unenforceable, in whole
or in part, the remaining provisions, and any partially unenforceable provisions
to be the extent enforceable, shall nevertheless be binding and enforceable. For
the purpose of determining the scope of the covenants set forth in Section
5.5(e)(ii) above, each of the subsections thereof shall be considered a separate
covenant such that if the geographic scope of any such subsections shall be
determined by a court of competent jurisdiction to be excessive and invalid,
such subsections shall be severed and the remaining subsections shall be deemed
enforceable and remain in full force and effect.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in Modesto, California as of the date and year first set
forth above.
BUYER:
------
PORT STOCKTON FOOD DISTRIBUTORS, INC.,
a California corporation
By /s/ John R. Goneau, Jr.
-----------------------
Its President
By /s/ Michael R. LeMaster
-----------------------
Its Vice President
THE COMPANY:
------------
MALLARD'S FOOD PRODUCTS, INC., a
California corporation
By /s/ Dan J. Costa
----------------
Its CEO
26
<PAGE>
EXHIBITS
--------
A - Promissory Note
B - Continuing Guaranty
C-1 Agreement Not to Compete for Dan Costa
C-2 Agreement Not to Compete for Glenn Davis
C-3 Agreement Not to Compete for Jeffrey Sacchini
D- Opinion of Company's Counsel
E- Opinion of Buyer's Counsel
27
<PAGE>
SCHEDULES
---------
Schedule No. Description
- ------------ -----------
3.5 Balance Sheet as of December 29, 1996
3.6 Material or Significant Changes in Financial Position
3.11 Employees
3.13A List of Personal Property
3.13B Personal Property Leases
3.14 Intangible Property
3.15 Other Agreements
3.17 Litigation
3.20 Licenses and Permits
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-04-1998
<PERIOD-START> DEC-30-1996
<PERIOD-END> JUN-15-1997
<CASH> 18,733
<SECURITIES> 0
<RECEIVABLES> 70,800
<ALLOWANCES> 2,893
<INVENTORY> 124,010
<CURRENT-ASSETS> 221,857
<PP&E> 277,915
<DEPRECIATION> 87,163
<TOTAL-ASSETS> 457,570
<CURRENT-LIABILITIES> 140,841
<BONDS> 90,005
0
0
<COMMON> 221
<OTHER-SE> 201,873
<TOTAL-LIABILITY-AND-EQUITY> 457,570
<SALES> 641,932
<TOTAL-REVENUES> 641,932
<CGS> 547,647
<TOTAL-COSTS> 547,647
<OTHER-EXPENSES> 72,004
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,264
<INCOME-PRETAX> 19,101
<INCOME-TAX> 7,278
<INCOME-CONTINUING> 11,823
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,823
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
