[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
TABLE OF CONTENTS
Page
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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
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Page
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ARTICLE VI
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
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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
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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
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$1,000,000; further provided no Advance or payment of Purchase Price shall be
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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;
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(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
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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
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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.
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(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.
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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:
9
(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.
10
(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,
11
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
13
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;
14
(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:
15
(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
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.
17
(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
18
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
19
(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
(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:
21
(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
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
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
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
(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
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
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
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
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
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
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)
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
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
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
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.
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)]
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
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
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
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.
A-2
"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.
A-3
"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.
A-4
"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
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
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
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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.
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"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:
A-9
(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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"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
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.
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"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
EXHIBIT B
TO THE PARTICIPATION AGREEMENT
FORM OF MORTGAGE AND ASSIGNMENT AGREEMENT
B-1
SCHEDULE I
TO THE PARTICIPATION AGREEMENT
LENDERS' COMMITMENT
Maximum
Commitment %
---------- -
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%
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SI-1