-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Er0ZghICfkaCLXy4GHq7XIDSyOXkaSn9KYwisFCIXQMKDHLqLmY0YeGr3Lro0I9x 1/rOIcgNTFclDZt7AjI8ng== 0000893877-95-000169.txt : 19951208 0000893877-95-000169.hdr.sgml : 19951208 ACCESSION NUMBER: 0000893877-95-000169 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951104 FILED AS OF DATE: 19951207 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEYER FRED INC CENTRAL INDEX KEY: 0000701169 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 930798201 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11274 FILM NUMBER: 95599938 BUSINESS ADDRESS: STREET 1: 3800 SE 22ND AVE CITY: PORTLAND STATE: OR ZIP: 97202 BUSINESS PHONE: 5032328844 MAIL ADDRESS: STREET 1: PO BOX 42121 CITY: PORTLAND STATE: OR ZIP: 97242 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 4, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 0-15023 FRED MEYER, INC. (Exact name of registrant as specified in its charter) Delaware 93-0798201 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3800 S.E. 22nd Avenue Portland, Oregon 97202 (Address of principal executive offices) (Zip Code) (503) 232-8844 (Registrant's telephone number, including area code) Not applicable. (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes XX No ---- ---- Shares of Common Stock Outstanding at November 4, 1995: 26,704,480 2 Part I - Financial Information FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
November 4, January 28, 1995 1995 ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents....................... $ 41,735 $ 34,868 Receivables-net................................. 24,928 20,025 Inventories..................................... 620,441 514,473 Prepaid expenses and other...................... 36,553 42,092 Income taxes receivable......................... 2,924 15,021 Current portion of deferred taxes............... 15,586 15,116 ---------- ---------- Total current assets......................... 742,167 641,595 ---------- ---------- PROPERTY AND EQUIPMENT-NET......................... 1,007,856 896,439 ---------- ---------- OTHER ASSETS....................................... 22,262 24,638 ---------- ---------- TOTAL.................................... $1,772,285 $1,562,672 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and outstanding checks......... $ 381,914 $ 312,044 Current portion of long-term debt and lease obligations........................ 1,623 1,623 Accrued expenses and other...................... 78,378 78,414 ---------- ---------- Total current liabilities.................... 461,915 392,081 ---------- ---------- LONG-TERM DEBT AND MORTGAGES....................... 674,014 540,166 ---------- ---------- CAPITAL LEASE OBLIGATIONS.......................... 13,741 13,823 ---------- ---------- DEFERRED LEASE TRANSACTIONS........................ 42,915 45,655 ---------- ---------- DEFERRED INCOME TAXES.............................. 20,466 22,258 ---------- ---------- OTHER LONG-TERM LIABILITIES........................ 8,097 10,069 ---------- ---------- STOCKHOLDERS' EQUITY Common stock.................................... 270 268 Additional paid-in capital...................... 199,361 197,087 Retained earnings............................... 356,738 345,291 Treasury stock and other........................ (5,232) (4,026) ---------- ---------- Total stockholders' equity................... 551,137 538,620 ---------- ---------- TOTAL..................................... $1,772,285 $1,562,672 ========== ========== See notes to consolidated financial statements.
3 FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
12 Weeks Ended -------------------------- November 4, November 5, 1995 1994 ----------- ----------- NET SALES.......................................... $750,042 $626,804 -------- -------- COST OF MERCHANDISE SOLD: General........................................ 539,939 472,876 Related party lease............................ 1,285 1,285 -------- -------- Total cost of merchandise sold................. 541,224 474,161 -------- -------- GROSS MARGIN....................................... 208,818 152,643 -------- -------- OPERATING AND ADMINISTRATIVE EXPENSES: General........................................ 191,017 175,724 Related party leases........................... 12,408 13,138 -------- -------- Total operating and administrative expenses.... 203,425 188,862 -------- -------- WRITEDOWN OF CALIFORNIA ASSETS..................... --- 15,978 -------- -------- INCOME (LOSS) FROM OPERATIONS...................... 5,393 (52,197) INTEREST EXPENSE-NET............................... 9,117 6,802 -------- -------- LOSS BEFORE INCOME TAXES........................... (3,724) (58,999) BENEFIT FOR INCOME TAXES........................... (1,415) (22,420) -------- -------- NET LOSS........................................... $ (2,309) $(36,579) ======== ======== LOSS PER COMMON SHARE.............................. $(.08) $(1.28) ===== ====== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING....................... 28,254 28,556 ====== ====== See notes to consolidated financial statements.
4 FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
40 Weeks Ended --------------------------- November 4, November 5, 1995 1994 ----------- ----------- NET SALES........................................ $ 2,462,530 $ 2,296,435 ----------- ----------- COST OF MERCHANDISE SOLD: General...................................... 1,761,500 1,645,829 Related party lease.......................... 4,282 4,282 ---------- ---------- Total cost of merchandise sold............... 1,765,782 1,650,111 ---------- ---------- GROSS MARGIN..................................... 696,748 646,324 ---------- ---------- OPERATING AND ADMINISTRATIVE EXPENSES: General...................................... 607,749 569,965 Related party leases......................... 42,248 44,000 ---------- ---------- Total operating and administrative expenses.. 649,997 613,965 ---------- ---------- WRITEDOWN OF CALIFORNIA ASSETS................... --- 15,978 ---------- ---------- INCOME FROM OPERATIONS........................... 46,751 16,381 INTEREST EXPENSE-NET............................. 28,288 18,639 ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES................ 18,463 (2,258) PROVISION (BENEFIT) FOR INCOME TAXES............. 7,016 (858) ---------- ---------- NET INCOME (LOSS) ............................... $ 11,447 $ (1,400) ========== ========== EARNINGS (LOSS) PER COMMON SHARE................. $.40 $(.05) ==== ===== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING............................ 28,373 28,660 ====== ====== See notes to consolidated financial statements.
5 FRED MEYER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
40 Weeks Ended ------------------------ November 4, November 5, 1995 1994 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .............................. $ 11,447 $ (1,400) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of property and equipment.................... 80,851 67,528 Deferred lease transactions.................. (2,740) (1,999) Other liabilities............................ (1,972) 174 Income taxes................................. 9,835 (42,396) Inventories.................................. (105,968) (113,608) Other current assets......................... 636 (3,157) Accounts payable and accrued expenses........ 82,252 84,709 Writedown of California assets............... --- 15,978 Other........................................ 862 1,477 -------- -------- Net cash provided by operating activities....... 75,203 7,306 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock-net.................... 1,031 3,004 Decrease in outstanding checks.................. (12,420) (24,202) (Increase) decrease in notes receivable......... (114) 86 Long-term financing: Borrowings................................... 134,461 234,462 Repayments................................... (695) (76) -------- -------- Net cash provided by financing activities....... 122,263 213,274 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Net maturities (purchases) of investment securities..................... 1,510 (920) Purchases of property and equipment............. (198,641) (219,440) Net proceeds from sale of real property......... 6,532 3,429 -------- -------- Net cash used for investing activities.......... (190,599) (216,931) -------- -------- CASH AND CASH EQUIVALENTS: Net increase for the period..................... 6,867 3,649 Beginning of period............................. 34,868 34,054 -------- -------- End of period................................... $ 41,735 $ 37,703 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (refunded) during the period for: Interest..................................... $31,309 $21,274 Income taxes................................. (3,120) 40,759 See notes to consolidated financial statements.
6 FRED MEYER, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Interim Reporting Periods ------------------------- The Company's interim reporting periods for reports to stockholders are the 16th, 28th, and 40th weeks of its fiscal year. 2. Reclassifications ----------------- Certain prior year balances have been reclassified to conform to current year presentation. 3. Inventories ----------- Inventories consist mainly of merchandise held for sale. Substantially all the inventories are valued at the lower of last-in, first-out (LIFO) cost or market. Estimated gross margins have been used for determining the cost of merchandise sold for those operating departments not taking physical inventories at the end of the interim periods. 4. Income Taxes ------------ Income taxes have been provided for based upon the current estimate of the Company's annual effective tax rate. 5. Stockholders' Equity -------------------- Changes in stockholders' equity for the forty weeks ended November 4, 1995 were: (In thousands) -------------- Stockholders' equity, January 28, 1995 $538,620 Issuance of common stock-net 1,031 Amortization of unearned compensation 39 Net income 11,447 -------- Stockholders' equity, November 4, 1995 $551,137 ======== 6. Writedown of California Assets ------------------------------ The Company recorded a pretax write-off of approximately $16 million ($.35 per share) as a result of its decision to exit the Northern California market in the third quarter of 1994. The charge to income covers the adjustment of the Company's book value on its Northern California properties to an estimated net realizable value. The properties included one store in Chico, California and three land parcels, one in Redding and two in Sacramento, California. 7. Earnings Per Common Share ------------------------- Fully diluted earnings per common share are computed by dividing net income by the weighted average number of common and common equivalent shares outstanding. Weighted average shares reflect the dilutive effect of outstanding stock options (ranging in exercise price from $3.24 to $41.25 per share) which was determined by using the "treasury stock" method. 8. Commitments and Contingencies ----------------------------- The Company and its subsidiaries are parties to various legal claims, actions, and complaints, certain of which involve material amounts. Although the Company is unable to predict with certainty whether or not it will ultimately be successful in these legal proceedings or, if not, what the impact might be, management presently believes that disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or consolidated results of operations. --------------- 7 The financial information furnished in this Form 10-Q reflects all adjustments of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of the results for the 12 and 40 weeks ended November 4, 1995 and November 5, 1994. The consolidated results of operations presented herein are not necessarily indicative of the results to be expected for the year due to the seasonality of the Company's business. These consolidated financial statements should be read in conjunction with the financial statements and related notes incorporated by reference in the Company's latest annual report filed on Form 10-K. FRED MEYER, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION The Company funded its working capital and capital expenditure needs in 1995 and 1994 through internally generated cash flow, supplemented by borrowings under committed and uncommitted bank lines of credit and unrated commercial paper. On June 29, 1993 and August 2, 1993, the Company issued an aggregate of $70,000,000 of five-year floating rate notes to a group of five banks. At the Company's option, the notes bear interest at a spread above LIBOR or certificate of deposit rates. On June 1, 1994, the Company issued an aggregate of $57,500,000 of senior notes to a group of life insurance companies. The notes mature on July 15 of 1999, 2001, 2004, and 2007; and bear interest rates of between 7.25 percent and 7.98 percent. On April 25, 1995, the Company issued $50,000,000 of seven year senior 7.77 percent notes to a major insurance company. On May 30, 1995, the Company borrowed from a major international bank $20,000,000 with a maturity of five years and bearing interest at 6.775 percent. In May 1995 the Company also put into place a lease line of credit for land and building for up to $100,000,000. The Company anticipates closing a similar lease line of credit for $60,000,000 prior to January 1, 1996. On October 30, 1995 the Company increased its existing $400,000,000 unsecured committed line of credit, which expires June 30, 2000, to $500,000,000. The Company cancelled the existing $100,000,000 364-day line of credit. In addition to these committed credit facilities, the Company had $70,000,000 of uncommitted money market lines of credit with several foreign banks and had $107,000,000 of uncommitted money market lines of credit with banks who are in the committed credit facility. The bank lines of credit and unrated commercial paper are used primarily for seasonal inventory requirements, new store construction and financing, existing store remodeling, acquisition of land, and major projects such as MIS development. At November 4, 1995, the Company had unrated commercial paper outstanding in the amount of approximately $334,306,000, borrowings under money market lines with committed line banks of $59,000,000, borrowings under uncommitted borrowing facilities of $30,000,000, and a total of approximately $76,694,000 available for borrowings under its committed credit facilities. The Company has entered into interest rate swap and cap agreements to reduce the impact of changes in interest rates on its floating rate long-term debt. At November 4, 1995, the Company had outstanding six interest rate contracts with commercial banks, having a total notional principal amount of $100,000,000. Three of these agreements effectively fix the Company's interest rate on unrated commercial paper, floating rate facilities, and uncommitted lines of credit at rates between 4.625 percent and 7.595 percent on a notional principal amount of $50,000,000. These contracts expire in 1996, 1997, and 1998. The remaining three agreements effectively limit the maximum interest rate the Company will pay at rates between 5.00 percent and 9.00 percent on notional principal amounts totaling $50,000,000. These three agreements mature in 1996, 1998, and 1999. The Company is exposed to credit loss in the event of nonperformance by the other 8 parties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counter-parties. The Company believes that a combination of cash flow from operations and borrowings under its expanded credit facilities will permit it to finance its capital expenditure requirements for 1995, currently budgeted to be approximately $240,000,000, net of sale/leaseback activity. If the Company determines that it is preferable, it may fund its capital expenditure requirements by mortgaging facilities, entering into sale and leaseback transactions, or by issuing additional debt or equity. RESULTS OF OPERATIONS COMPARISON OF THE 12 WEEKS ENDED NOVEMBER 4, 1995 WITH THE 12 WEEKS ENDED NOVEMBER 5, 1994. Net sales for the third quarter of 1995 increased $123,238,000 or 19.7 percent over the corresponding quarter in 1994. The 1995 increase reflects the negative effect on 1994 sales of strikes in the Company's Portland area stores and other facilities. Food sales were strong in the third quarter of 1995; but nonfood sales were soft as a result of increased competition, a more promotional sales environment, sluggish consumer demand, a difficult retail climate in the Puget Sound area, and deflation in certain product categories. Comparable store sales increased 13.8 percent for the third quarter of 1995. Food comparable store sales increased 23.7 percent, and nonfood comparable store sales increased 7.4 percent. Excluding the stores affected by the strikes, total comparable store sales increased 2.2 percent, with comparable store food sales increasing 9.0 percent and comparable store nonfood sales decreasing 2.2 percent. The Company's food operations accounted for 42.4 percent of the overall sales in 1995 and 38.2 percent in 1994. Gross margin as a percent of net sales was 27.8 percent for the third quarter of 1995, compared with 24.4 percent for 1994's third quarter. Gross margins increased in the third quarter of 1995, primarily due to 1994's results being negatively affected by strikes. 1995's gross margins were reduced by slow nonfood sales, and startup costs associated with opening of the perishable portion of the Company's new food distribution center near Seattle, Washington. Operating and administrative expenses as a percent of net sales were 27.1 percent for the third quarter of 1995, compared with 30.1 percent for 1994's third quarter. Expenses as a percent of sales decreased in 1995's third quarter, due primarily to strikes in the prior year's third quarter. The third quarter expenses were up mainly as a result of higher labor costs and fixed costs due to slower than planned sales growth; and as a result of opening five new stores, closing four stores, and completing three major remodels. The Company recorded a pretax write-off of $15,978,000 in 1994's third quarter as a result of its decision to exit the Northern California market. The charge to income covers the adjustment of the Company's book value on its Northern California properties to an estimated net realizable value. Net interest expense in the third quarter of 1995 was $9,117,000, an increase of 34.0 percent from the $6,802,000 reported for 1994. The increase primarily reflects higher borrowings due to an acceleration in new store construction and remodels. The effective tax rate for the third quarters of 1995 and 1994 was 38.0 percent. The Company had a net loss of $2,309,000 in the third quarter of 1995 compared with a net loss of $36,579,000 in the third quarter of 1994. The loss per share was $.08 for the third quarter of 1995 based on 28,254,000 shares outstanding, compared with a loss per share of $1.28 for the prior year's third quarter based on 28,556,000 shares outstanding. The 1994 net loss was affected by the above-mentioned strikes plus the California after-tax write-off of $9,906,000, or $.35 per share. Excluding this write-off, the Company's 1994 third quarter net loss and loss per share were $26,673,000 and $.93, respectively. 9 COMPARISON OF THE 40 WEEKS ENDED NOVEMBER 4, 1995 WITH THE 40 WEEKS ENDED NOVEMBER 5, 1994. Net sales for the first 40 weeks of 1995 increased $166,095,000 or 7.2 percent to $2,462,530,000. The 1995 increase reflects the negative effect on 1994 sales of strikes in the Company's Portland area stores and other facilities. Food sales have been stronger than nonfood sales for the first forty weeks of 1995. Nonfood sales were soft as a result of increased competition, a more promotional sales environment, sluggish consumer demand, a difficult retail climate in the Puget Sound area, and deflation in certain product categories. Comparable store sales increased 1.4 percent for this 40 week period. Food comparable store sales increased 5.9 percent, and nonfood comparable store sales decreased 1.7 percent. Excluding the stores affected by the strikes, total comparable store sales decreased 2.0 percent for the first 40 weeks of 1995, with comparable store food sales increasing 1.6 percent and comparable store nonfood sales decreasing 4.5 percent. The Company's food operations accounted for 42.0 percent of the overall sales for the first 40 weeks of 1995 compared with 39.2 percent for the first 40 weeks of 1994. Gross margin as a percent of net sales was 28.3 percent for the first 40 weeks of 1995 compared with 28.1 percent for 1994. Gross margins increased in the first 40 weeks of 1995 primarily due to 1994's results being negatively affected by strikes. 1995's gross margins were reduced by slow nonfood sales, and startup costs associated with opening of the Company's new food distribution center near Seattle, Washington. Operating and administrative expenses as a percent of net sales were 26.4 percent for the first 40 weeks of 1995 compared with 26.7 percent for the first 40 weeks of 1994. Expenses as a percent of sales decreased in 1995's first 40 weeks, due primarily to strikes in the prior year. The Company recorded a pretax write-off of $15,978,000 in 1994's third quarter as a result of its decision to exit the Northern California market. The charge to income covers the adjustment of the Company's book value on its Northern California properties to an estimated net realizable value. Net interest expense in the first 40 weeks of 1995 was $28,288,000, an increase of 51.8 percent from the $18,639,000 for 1994. The increase primarily reflects higher borrowings due to an acceleration in new store construction and remodels, and to a lesser extent the impact on debt of 1994's strikes. The effective tax rate for the first 40 weeks of 1995 and 1994 was 38.0 percent. Net income was $11,447,000 in the first 40 weeks of 1995 compared with a loss of $1,400,000 in the first 40 weeks of 1994. Earnings per share were $.40 for the first 40 weeks of 1995 based on 28,373,000 shares outstanding, compared with a loss per share of $.05 for the prior year's period based on 28,660,000 shares outstanding. The net loss in 1994 was affected by the above-mentioned strikes plus the California after-tax write-off of $9,906,000, or $.35 per share. Excluding the California write-off, net income and earnings per share for the first 40 weeks of 1994 were $8,506,000 and $.30, respectively. EFFECT OF LIFO The Company estimates annual LIFO expense based on estimates of three factors: inflation rates (calculated by reference to the Department Stores Inventory Price Index published by the Bureau of Labor Statistics for softgoods and jewelry, and to internally generated indices based on Company purchases during the year for all other departments), expected inventory levels, and expected markup levels (after reflecting permanent markdowns and cash discounts). The Company reviewed these year-to-date indices at the end of the third quarter and adjusted its LIFO reserve on a year-to-date basis to reflect the Company's overall product mix, anticipated year-end inventory levels, and the Company's expectations of the indices for the remainder of the year. 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit ------- 4F. Amended and Restated Credit Agreement dated as of October 30, 1995 among Fred Meyer, Inc., Various Financial Institutions, Bank of America National Trust & Savings Association, as Agent, and the Bank of Nova Scotia as co-Agent; arranged by BA Securities, Inc. 10T. Fred Meyer Excess Deferral and Benefit Equalization Plan. 1994 Restatement dated as of January 1, 1994. 10U. Lease Agreement Tax Retention Operating Lease dated May 5, 1995 between First Security Bank of Utah, N.A. not individually but solely as Owner Trustee under SM Trust 1995-1, as Lessor and Fred Meyer, Inc., as Lessee, Appendix A to Participation Agreement and Lease Supplements nos. 1, 2, and 3 dated as of May 3, 1995 between First Security Bank of Utah, N.A. lessor, and Fred Meyer, Inc., lessee. 11. Computation of Earnings (Loss) per Common Share. 27. Financial Data Schedule. (b) Reports on Form 8-K No reports on Form 8-K have been filed during the period for which this report is filed. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FRED MEYER, INC. (Registrant) Dated: December 6, 1995 KENNETH THRASHER ---------------- ------------------------------- Kenneth Thrasher Senior Vice President - Finance Chief Financial Officer 12 EXHIBIT INDEX Exhibit Sequential Number Document Description Page Number - ------- -------------------- ----------- 4F Amended and Restated Credit Agreement dated as of October 30, 1995 among Fred Meyer, Inc., Various Financial Institutions, Bank of America National Trust & Savings Association, as Agent, and the Bank of Nova Scotia as co- Agent; arranged by BA Securities, Inc. 10T. Fred Meyer Excess Deferral and Benefit Equalization Plan. 1994 Restatement dated as of January 1, 1994. 10U. Lease Agreement Tax Retention Operating Lease dated May 5, 1995 between First Security Bank of Utah, N.A. not individually but solely as Owner Trustee under SM Trust 1995-1, as Lessor and Fred Meyer, Inc., as Lessee, Appendix A to Participation Agreement and Lease Supplements nos. 1, 2, and 3 dated as of May 3, 1995 between First Security Bank of Utah, N.A. lessor, and Fred Meyer, Inc., lessee. 11. Computation of Earnings (Loss) per Common Share. 27. Financial Data Schedule. EX-4.F 2 EXHIBIT 4F EXHIBIT 4F AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 30, 1995 among FRED MEYER, INC., VARIOUS FINANCIAL INSTITUTIONS, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent and THE BANK OF NOVA SCOTIA as Co-Agent; Arranged by BA SECURITIES, INC. i TABLE OF CONTENTS PAGE SECTION 1 DEFINITIONS AND INTERPRETATION.................................. 1 1.1 Definitions............................................... 1 1.2 Computations; Changes in GAAP............................. 11 1.3 Cross-References; Section Captions........................ 11 SECTION 2 COMMITMENTS OF THE LENDERS; TYPES OF LOANS; BORROWING AND CONVERSION PROCEDURES............................. 11 2.1 Commitments............................................... 11 2.2 Various Types of Loans.................................... 12 2.3 Borrowing Procedures...................................... 12 2.4 Continuation and Conversion Procedures.................... 13 2.5 Conditions................................................ 13 2.6 Pro Rata Treatment........................................ 13 2.7 Commitments Several....................................... 13 2.8 Extension of Termination Date............................. 13 SECTION 3 NOTES EVIDENCING LOANS.......................................... 14 3.1 Notes..................................................... 14 3.2 Recordkeeping............................................. 14 SECTION 4 INTEREST........................................................ 15 4.1 Interest Rates............................................ 15 4.2 Interest Payment Dates.................................... 15 4.3 Setting and Notice of Eurodollar Rates.................... 15 4.4 Computation of Interest................................... 16 SECTION 5 FEES............................................................ 16 5.1 Facility Fee.............................................. 16 5.2 Agent's Fee............................................... 16 SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS; REPAYMENT.......................................... 16 6.1 Reduction or Termination of the Commitments............................................... 16 6.2 Prepayments............................................... 16 6.3 Repayment................................................. 17 SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES................. 17 7.1 Making of Payments........................................ 17 7.2 Application of Certain Payments........................... 17 7.3 Due Date Extension........................................ 17 7.4 Setoff.................................................... 18 7.5 Proration of Payments..................................... 18 7.6 Taxes..................................................... 18 7.7 Funding Reliance.......................................... 19 ii SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS................................................ 20 8.1 Increased Costs........................................... 20 8.2 Basis for Determining Interest Rate Inadequate or Unfair...................................... 22 8.3 Changes in Law Rendering Eurodollar Loans Unlawful.................................................. 22 8.4 Funding Losses............................................ 23 8.5 Right of Lenders to Fund through Other Offices................................................... 23 8.6 Discretion of Lenders as to Manner of Funding................................................... 23 8.7 Mitigation of Circumstances; Replacement of Affected Lender or Objecting Lender.................... 23 8.8 Conclusiveness of Statements; Survival of Provisions................................................ 24 SECTION 9 WARRANTIES...................................................... 24 9.1 Organization, etc......................................... 25 9.2 Authorization; No Conflict................................ 25 9.3 Validity and Binding Nature............................... 25 9.4 Financial Information..................................... 25 9.5 No Material Adverse Change................................ 25 9.6 Litigation and Contingent Liabilities..................... 25 9.7 Ownership of Properties; Liens............................ 26 9.8 Subsidiaries.............................................. 26 9.9 Pension Plans............................................. 26 9.10 Regulated Industry........................................ 27 9.11 Regulations G, U and X.................................... 27 9.12 Taxes..................................................... 27 9.13 Environmental and Safety and Health Matters................................................... 27 9.14 Compliance with Law....................................... 27 9.15 Information............................................... 28 SECTION 10 COVENANTS....................................................... 28 10.1 Reports, Certificates and Other Information............................................... 28 10.1.1 Audit Report...................................... 28 10.1.2 Interim Reports................................... 28 10.1.3 Compliance Certificate............................ 29 10.1.4 Reports to SEC.................................... 29 10.1.5 Notice of Default, Litigation and ERISA Matters................................. 29 10.1.6 Subsidiaries...................................... 29 10.1.7 Other Information................................. 30 10.2 Books, Records and Inspections.............................. 30 10.3 Insurance................................................... 30 10.4 Compliance with Law; Payment of Taxes and Liabilities........................................... 30 10.5 Maintenance of Existence, etc............................... 30 iii 10.6 Financial Ratios and Restrictions........................... 30 10.6.1 Minimum Consolidated Tangible Net Worth......................................... 30 10.6.2 Long-Term Liabilities to Net Worth Ratio....................................... 31 10.6.3 Fixed Charge Coverage Ratio....................... 31 10.7 Limitation on Liens......................................... 31 10.8 Debt........................................................ 33 10.9 Guaranties, Loans and Advances.............................. 33 10.10 Mergers, Consolidations, Sales............................. 34 10.11 Company's and Subsidiaries' Stock.......................... 34 10.12 Unconditional Purchase Obligations......................... 35 10.13 ERISA...................................................... 35 10.14 Purchase or Redemption of Company's Securities; Dividend Restriction......................... 35 10.15 Use of Proceeds............................................ 36 SECTION 11 CONDITIONS OF LENDING........................................... 36 11.1 Initial Loan................................................ 36 11.1.1 Notes............................................. 36 11.1.2 Resolutions....................................... 36 11.1.3 Consents, etc..................................... 37 11.1.4 Incumbency and Signature Certificates...................................... 37 11.1.5 Opinion of Counsel for the Company........................................... 37 11.1.6 Existing Credit Agreement Amount............................................ 37 11.1.7 Termination of BNS Agreement...................... 37 11.1.8 Other............................................. 37 11.2 All Loans................................................... 37 11.2.1 Notice of Borrowing or Conversion/Continuation........................... 37 11.2.2 Continuation of Representations and Warranties.................................... 37 11.2.3 No Existing Default............................... 38 SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.............................. 38 12.1 Events of Default........................................... 38 12.1.1 Non-Payment of the Loans, etc..................... 38 12.1.2 Non-Payment of Other Debt......................... 38 12.1.3 Other Material Obligations........................ 38 12.1.4 Bankruptcy, Insolvency etc........................ 38 12.1.5 Non-Compliance with Provisions of This Agreement................................. 39 12.1.6 Warranties........................................ 39 12.1.7 ERISA............................................. 39 12.1.8 Judgments and Attachments......................... 39 12.1.9 Change in Control................................. 40 12.2 Effect of Event of Default.................................. 40 SECTION 13 THE AGENT....................................................... 40 13.1 Appointment and Authorization; "Agent"...................... 40 13.2 Delegation of Duties........................................ 40 iv 13.3 Liability of Agent.......................................... 41 13.4 Reliance by Agent........................................... 41 13.5 Notice of Default........................................... 42 13.6 Credit Decision............................................. 42 13.7 Indemnification of Agent.................................... 42 13.8 Agent in Individual Capacity................................ 43 13.9 Successor Agent............................................. 44 13.10 Withholding Tax............................................ 44 13.11 Co-Agent. ................................................ 45 SECTION 14 GENERAL......................................................... 46 14.1 Waiver; Amendments.......................................... 46 14.2 Confirmations............................................... 46 14.3 Notices..................................................... 46 14.4 Subsidiary References....................................... 47 14.5 Regulation U................................................ 47 14.6 Costs, Expenses and Taxes................................... 47 14.7 Indemnification by the Company.............................. 48 14.8 Successors and Assigns...................................... 48 14.9 Assignments; Participations................................. 49 14.9.1 Assignments....................................... 49 14.9.2 Participations.................................... 50 14.10 Governing Law.............................................. 51 14.11 Counterparts............................................... 51 14.12 Effect of Amendment and Restatement........................ 51 14.13 Forum Selection and Consent to Jurisdiction............................................. 52 14.14 Waiver of Jury Trial....................................... 52 14.15 OREGON LEGAL NOTICE........................................ 52 SCHEDULE I Commitments and Percentages SCHEDULE II Schedule of Subsidiaries SCHEDULE 14.3 Lending Offices; Addresses for Notices EXHIBIT A Form of Note (Section 3.1) EXHIBIT B Form of Extension Request (Section 2.8) EXHIBIT C Form of Opinion of Counsel for the Company (Section 11.1.5) EXHIBIT D Form of Assignment Agreement (Section 14.9) EXHIBIT E Form of Notice of Borrowing EXHIBIT F Form of Notice of Conversion/Continuation 1 AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 30, 1995 (as amended or otherwise modified from time to time, this "Agreement"), is entered into among FRED MEYER, INC., a Delaware corporation (the "Company"), the several financial institutions from time to time party to this Agreement (collectively, the "Lenders"; individually, a "Lender"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Lenders, and THE BANK OF NOVA SCOTIA, as co-agent. RECITALS -------- WHEREAS, the Company, certain of the Lenders and Bank of America Illinois (formerly known as Continental Bank) ("BAI"), as agent for those Lenders, entered into a Credit Agreement dated as of June 30, 1994, as amended (the "Existing Credit Agreement"), which provides for the making of loans in the maximum principal amount of $400,000,000; WHEREAS, pursuant to an Assignment and Assumption Agreement dated as of October 30, 1995 between BAI and BofA, to be effective on the date hereof, BAI has assigned and delegated, and BofA has assumed all the rights and obligations of BAI in its capacity as Agent under the Existing Credit Agreement, and the Lenders and the Company desire to confirm their agreement with such assignment and appoint BofA as Agent hereunder, subject to the terms and conditions hereof; WHEREAS, in order to provide for an increase in the maximum principal amount of loans under the Existing Credit Agreement, as well as the clarification and modification of certain other terms and provisions of the Existing Credit Agreement, the Company, the Agent and the Lenders have agreed to amend and restate the representations, warranties, covenants, agreements and obligations of the Company in this Amended and Restated Credit Agreement, which completely amends, restates and replaces the Existing Agreement, all upon the terms and provisions and subject to the conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: SECTION 1 DEFINITIONS AND INTERPRETATION. 1.1 Definitions. When used herein the following terms shall have the following meanings (such definitions to be applicable to both the singular and plural forms of such terms: Affected Lender means any Lender that has given notice to the Company (which has not been rescinded) of (i) any obligation 2 by the Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any circumstances of the nature described in Section 8.2 or 8.3. Affected Loan - see Section 8.3. Agent means BofA in its capacity as agent for the Lenders hereunder, and any successor agent arising under Section 13.9. Agent-Related Persons means the Agent and any successor agent arising under Section 13.9, together with their respective affiliates (including, in the case of BofA, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and affiliates. Agent's Payment Office means the address for payments set forth on Schedule 14.3 or such other address as the Agent may from time to time specify. Agreement - see the Preamble. Alternate Reference Rate means at any time the greater of (a) the Federal Funds Rate plus 0.25% and (b) the Reference Rate. Arranger means BA Securities, Inc., a Delaware corporation. Assets Purchase Agreement means the Asset Purchase Agreement dated as of September 25, 1981, among the Company, FMI Acquisition Corporation and Fred Meyer Real Estate Properties, Ltd., as it may be amended from time to time. Assignee - see Section 14.9.1. Assignment Agreement - see Section 14.9.1. BAI - see the Recitals. BofA means Bank of America National Trust and Savings Association, a national banking association. Business Day means any day (other than a Saturday or Sunday) on which banks are open for commercial banking business in San Francisco, California and Portland, Oregon and, in the case of a Business Day which relates to a Eurodollar Loan, on which dealings are carried on in the interbank eurodollar market. Capital Lease means any lease of property (whether real, personal or mixed) which would, in accordance with GAAP, be required to be classified and accounted for on the books of the lessee as a capital lease. Change in Control means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities 3 Exchange Act of 1934, as amended) of outstanding shares of voting stock of the Company representing in excess of 50% of voting control of Company, which Person or Persons have beneficial ownership of less than 5% of the outstanding shares of voting stock of the Company as of the date of this Agreement. Code means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. References to sections of the Code also refer to any successor sections. Commitment as to any Lender means the commitment of such Lender to make loans hereunder, as adjusted from time to time pursuant to Section 6.1 or Section 14.9. The amount of the initial Commitment of each Lender is set forth on Schedule I. Company - see the Preamble. Consolidated Long-Term Liabilities means, as of the date of any determination thereof, consolidated Debt for Borrowed Money of the Company and its Subsidiaries, secured or unsecured, (i) payable more than one year from such date, plus (ii) the Loans and Capital Leases to the extent maturing in a year or less, plus (iii) all other Debt for Borrowed Money not classified as current liabilities in the Company's financial reporting. Consolidated Net Tangible Net Worth means Consolidated Tangible Net Worth less (unless otherwise taken into account in determining consolidated net worth) the amounts of payments (whether in cash or issuance of Debt) made to employees in redemption of stock under Management Stock Agreements. Consolidated Tangible Net Worth means the consolidated net worth of the Company and its Subsidiaries less (unless otherwise deducted in determining consolidated net worth) the aggregate amount of any intangible assets of the Company and its Subsidiaries, including, without limitation, deferred financing and organizational costs (net of amortization), goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks and brand names, but not subtracting from consolidated net worth of the Company and its Subsidiaries the unamortized amount of such intangible assets arising out of the Assets Purchase Agreement and the purchase of Grand Central, Inc. in 1984, as shown on Company's audited consolidated financial statement as at January 29, 1994 previously delivered to the Lenders (such amount with respect to future calculations thereof to be determined in the same manner as the unamortized amount ($5,523,000) shown on such financial statement dated January 29, 1994). Consolidated Total Assets means the total consolidated assets of the Company and its Subsidiaries as shown on the most recent consolidated balance sheet of the Company and its Subsidiaries referred to in Section 9.4 or delivered to the Lenders pursuant to Section 10.1. 4 Debt of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under Capital Leases which have been recorded as liabilities on a balance sheet of such Person, (c) all obligations of such Person to pay the deferred purchase price of property or services (other than current accounts payable in the ordinary course of business), (d) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person (it being understood that if such Person has not assumed or otherwise become personally liable for any such indebtedness, the amount of the Debt of such Person in connection therewith shall be limited to the lesser of the face amount of such indebtedness or the fair market value of all property of such Person securing such indebtedness), (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and banker's acceptances issued for the account of such Person, (f) all obligations of such Person in respect of Hedging Arrangements, (g) all Suretyship Liabilities of such Person and (h) all Debt (as defined above) of any partnership in which such Person is a general partner. The amount of the Debt of any Person in respect of Hedging Arrangements shall be deemed to be the unrealized net loss position of such Person thereunder (determined for each counterparty individually, but netted for all Hedging Arrangements maintained with such counterparty). Debt for Borrowed Money of any Person means all Debt of such Person described in (without duplication) clauses (a), (b), (c), (d) and, to the extent constituting a Suretyship Liability in respect of Debt for Borrowed Money of another Person, (g) of the definition of Debt. A Suretyship Liability arising under a TROL shall be deemed to be Debt for Borrowed Money. Default means any event which if it continues uncured will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default. Dollar and the sign "$" mean lawful money of the United States of America. Effective Date - see Section 11.1. Environmental Laws means the Resource Conservation and Recovery Act of 1987, the Comprehensive Environmental Response, Compensation and Liability Act, any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act, and any other federal, state or local statute, law, ordinance, code, rule, regulation order or decree regulating or relating to, or imposing liability or standards of conduct concerning, any hazardous materials or other hazardous or toxic substance, as now or at any time hereafter in effect. 5 ERISA means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. ERISA Affiliate means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate. Eurocurrency Reserve Percentage means, for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward, if necessary, to the next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the Board of Governors of the Federal Reserve System, or any governmental authority succeeding to its principal functions, for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). Eurodollar Loan means any Loan which bears interest at a rate determined by reference to the Eurodollar Rate (Reserve Adjusted). Eurodollar Office means with respect to any Lender the office or offices of such Lender which shall be making or maintaining the Eurodollar Loans of such Lender hereunder or such other office or offices through which such Lender determines its 6 Eurodollar Rate. A Eurodollar Office of any Lender may be, at the option of such Lender, either a domestic or foreign office. Eurodollar Rate means, with respect to any Eurodollar Loan for any Interest Period, the average (rounded upward, if necessary, to the next higher 1/16th of 1%) of the rates per annum at which Dollar deposits in immediately available funds are offered to the Eurodollar Office of each Reference Lender two Business Days prior to the beginning of such Interest Period by major banks in the interbank eurodollar market as at or about 11:00 a.m., New York City time, for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount equal or comparable to the amount of the Eurodollar Loan of such Reference Lender for such Interest Period. Eurodollar Rate (Reserve Adjusted) means, with respect to any Eurodollar Loan for any Interest Period, a rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) determined pursuant to the following formula: Eurodollar Rate = Eurodollar Rate (Reserve Adjusted) 1-Eurocurrency Reserve Percentage The Eurodollar Rate shall be adjusted automatically as to all Eurodollar Rate Loans then outstanding as of the effective date of any change in the Eurocurrency Reserve Percentage. Event of Default means any of the events described in Section 12.1. Exemption Agreement - see Section 13.10. Existing Credit Agreement - see the Recitals. Extension Request - see Section 2.8. Federal Funds Rate means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Agent. Fee Letter - see Section 5.2. Fiscal Quarter means any fiscal quarter of a Fiscal Year. 7 Fiscal Year means the fiscal year of the Company and its Subsidiaries, which period shall be the period of approximately 12 months ending on the Saturday closest to January 31 in each year. Fixed Charge Coverage Ratio means, as of the last day of any Fiscal Quarter, the ratio (calculated without duplication) of (a) the sum of the Company's consolidated net earnings before interest expense, taxes, depreciation and amortization for the period of four Fiscal Quarters ending on such day plus the Company's consolidated rental expense on operating leases (including rent paid pursuant to a TROL) for such period to (b) the sum of (i) the Company's consolidated interest expense for such period plus (ii) the Company's consolidated rental expense on operating leases (including rent paid pursuant to a TROL) for such period plus (iii) the amount classified as the current portion of all long-term debt (excluding, if applicable, the Loans) and lease obligations of the Company and its Subsidiaries on a consolidated balance sheet prepared on such day. Floating Rate Loan means any Loan which bears interest at or by reference to the Alternate Reference Rate. GAAP means those generally accepted accounting principles as in effect from time to time. Group - see Section 2.2. Hedging Arrangement means any interest rate swap, cap or collar agreement, currency swap agreement, commodity swap agreement or other arrangement designed to hedge interest rate an/or currency risk or changes in commodity prices. Interest Period means, with respect to any Eurodollar Loan, the period commencing on and including the date such Loan is made or is converted from a Floating Rate Loan, or on the last day of the immediately preceding Interest Period for such Loan, and ending on but excluding the day which is one, two, three or six months thereafter, as the Company shall specify in the related Notice of Borrowing or Notice of Conversion/Continuation pursuant to Section 2.3 or 2.4; provided, however, that (a) if an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the immediately succeeding Business Day (unless such succeeding Business Day would be the first Business Day of a calendar month, in which case such Interest Period shall end on the immediately preceding Business Day); (b) if there exists no day in the appropriate subsequent calendar month numerically corresponding to the first 8 day of such Interest Period, such Interest Period shall end on the last Business Day of such month; and (c) the Company may not select any Interest Period which extends beyond the scheduled Termination Date. Lender - see the Preamble. Lien means, when used with respect to any Person, any interest of any other Person in any real or personal property asset or other right owned or being purchased or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise. Loan - see Section 2.1. Loan Documents means this Agreement, the Notes, the Fee Letter and all other documents delivered to the Agent or any Lender in connection herewith. Management Stock Agreement means any agreement between the Company and key employees which provides for the sale of stock to employees with repurchase rights of, and obligations in, the Company. Margin Stock means any "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System. Material Adverse Effect means a material adverse effect on the ability of the Company to timely and fully perform any of its payment or other material obligations under this Agreement or any Note. Material Subsidiary means any Subsidiary which either (a) has assets which constitute 5% or more of the consolidated assets of the Company and its Subsidiaries or (b) has revenues during its most recently-ended fiscal year which constitute more than 5% of the consolidated revenues of the Company and its Subsidiaries during the most recently-ended Fiscal Year. Multiemployer Plan means a "multiemployer plan", within the meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. Note - see Section 3.1. 9 Notice of Borrowing means a notice in substantially the form of Exhibit E. Notice of Conversion/Continuation means a notice in substantially the form of Exhibit F. Objecting Lender - see Section 2.8. Occupational Safety and Health Law means the Occupational Safety and Health Act of 1970 and any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating or relating to, or imposing liability or standards of conduct concerning, employee health and/or safety, as now or at any time hereafter in effect. Participant - see Section 14.9.2. PBGC means the Pension Benefit Guaranty Corporation, or any governmental authority succeeding to any of its principal functions under ERISA. Pension Plan means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years. Percentage means as to any Lender the percentage which the amount of such Lender's Commitment is of the aggregate amount of Commitments (or, if the Commitments have terminated, which the principal amount of such Lender's outstanding Loans is of the principle amount of all outstanding Loans). The Percentages of Lenders as of the Effective Date are set forth in Schedule I. Person means any natural person, corporation, partnership, trust, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity. Plan means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Company sponsors or maintains or to which the Company makes, is making, or is obligated to make contributions and includes any Pension Plan. Reference Lender means each of NationsBank, The Bank of New York, The Bank of Nova Scotia and BofA. Reference Rate means at any time the rate of interest in effect for such day as publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." (The "reference rate" is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic 10 conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change. Release means a "release", as such term is defined in CERCLA. Reportable Event means, any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. Required Lenders means Lenders having an aggregate Percentage of 66-2/3% or more. SEC means the Securities and Exchange Commission. Subsidiary means, with respect to any Person, any corporation of which such Person and/or its other Subsidiaries own, directly or indirectly, such number of outstanding shares as have more than 50% of the ordinary voting power for the election of directors. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to Subsidiaries of the Company. Suretyship Liability means any agreement, undertaking or other contractual arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or otherwise to invest in a debtor, or otherwise to assure a creditor against loss) any indebtedness, obligation or other liability (including accounts payable) of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. Suretyship Liability shall include any liability or contingent liability of a Person under or in connection with a TROL. The amount of any Person's obligation under any Suretyship Liability shall (subject to any limitation set forth therein) be deemed to be the principal amount of the indebtedness, obligation or other liability guaranteed thereby. As of any date, the amount of any Person's obligation under any TROL shall be equal to the amount which such Person would be obligated to pay if the TROL was accelerated on such date (disregarding accrued scheduled lease payments which would be characterized as interest if such TROL were treated as a Capital Lease under GAAP). Termination Date means June 30, 2000, as such date is extended from time to time pursuant to Section 2.8 or such other date on which the Commitments shall terminate pursuant to Section 6.1 or 12.2. 11 TROL means any tax retention operating lease, off balance sheet lease, synthetic lease or similar lease transaction where the lessee is treated as owner of the leased property for U.S. federal income tax purposes while the lease is accounted for on the financial statements of the lessee, prepared in accordance with GAAP, as an operating lease, including without limitation that certain Lease Agreement (Tax Retention Operating Lease) dated as of May 5, 1995 between First Security Bank of Utah, N.A., as lessor, and the Company, as lessee. Type of Loan or Borrowing - see Section 2.2. The types of Loans or borrowings under this Agreement are as follows: Floating Rate Loans or borrowings and Eurodollar Loans or borrowings. Unfunded Pension Liability means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. 1.2 Computations; Changes in GAAP. Where the character or amount of any asset or liability or any item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made, for purposes of this Agreement, such determination or calculation shall, to the extent applicable and except as otherwise specified in this Agreement, be made in accordance with GAAP. If any change in accounting principles from those used in the preparation of the audited financial statements referred to in Section 9.4 hereafter occasioned by the promulgation of any rule, regulation, pronouncement or opinion by or required by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successors thereto or agencies with similar functions) results in a change in the method of calculation of financial covenants, standards or terms found in Section 1 or 10, the parties hereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating the Company's financial condition shall be the same after such change as if such change had not been made. 1.3 Cross-References; Section Captions. A Section, an Exhibit or a Schedule is, unless otherwise stated, a reference to a section hereof or an exhibit or schedule hereto, as the case may be. Section captions are for convenience only and shall not affect the interpretation of this Agreement. SECTION 2 COMMITMENTS OF THE LENDERS; TYPES OF LOANS; BORROWING AND CONVERSION PROCEDURES. 2.1 Commitments. Subject to the terms and conditions of this Agreement, each of the Lenders, severally and for itself alone, agrees to make loans to the Company on a revolving basis 12 (collectively the "Loans" and individually each a "Loan") from time to time before the Termination Date in such Lender's Percentage of such aggregate amounts as the Company may from time to time request from all Lenders; provided, however, that (i) the aggregate principal amount of all Loans which any Lender shall be committed to have outstanding hereunder shall not at any time exceed the amount of such Lender's Commitment; and (ii) the aggregate principal amount of all Loans which all Lenders shall be committed to have outstanding hereunder shall not at any time exceed $500,000,000 (as such amount is reduced from time to time pursuant to Section 6.1). 2.2 Various Types of Loans. Each Loan shall be either a Floating Rate Loan or a Eurodollar Loan (each a "type" of Loan), as the Company shall specify in the related Notice of Borrowing or Notice of Conversion/Continuation pursuant to Section 2.3 or 2.4. Eurodollar Loans having the same Interest Period are sometimes alled a "Group" or collectively "Groups". Floating Rate Loans and Eurodollar Loans may be outstanding at the same time provided that (i) not more than eight different Groups of Loans shall be outstanding at any one time and (ii) the aggregate principal amount of each Group of Loans shall at all times (including after giving effect to any conversion or continuation of any Loans) be at least $10,000,000 (in the case of a Eurodollar Loan) and an integral multiple of $1,000,000. 2.3 Borrowing Procedures. The Company shall give written or telephonic notice (in the case of telephonic notice, followed promptly by written notice by facsimile) to the Agent of each proposed borrowing in the form of a Notice of Borrowing not later than (a) in the case of a Floating Rate borrowing, 9:00 a.m., San Francisco time, on the proposed date of such borrowing, and (b) in the case of a Eurodollar borrowing, 9:00 a.m., San Francisco time, at least three Business Days prior to the proposed date of such borrowing. Each such Notice of Borrowing shall be effective upon receipt by the Agent and shall specify the date, amount and type of borrowing and, in the case of a Eurodollar borrowing, the initial Interest Period therefor. Promptly upon receipt of such Notice of Borrowing, the Agent shall advise each Lender thereof. Not later than 11:00 a.m., San Francisco time, on the date of a proposed borrowing, each Lender shall provide the Agent at the Agent's Payment Office with immediately available funds covering such Lender's Percentage of such borrowing and, subject to the satisfaction of the conditions precedent set forth in Section 11 with respect to such borrowing, the Agent will then make such funds available to the Company at such office by crediting the account of the Company on the books of BofA with the aggregate of the amounts made available to the Agent by the Lenders or by wire transfer in accordance with written instructions provided to the Agent by the Company with the applicable Notice of Borrowing, in each case in like funds as received by the Agent. Each borrowing shall be on a Business Day. Each borrowing shall be in aggregate amount of at least $1,000,000, in the case of Floating Rate Loans, or $10,000,000, 13 in the case of Eurodollar Loans, and shall be in an integral multiple of $1,000,000. 2.4 Continuation and Conversion Procedures. Subject to the provisions of the last sentence of Section 2.2, the Company may convert all or any part of any outstanding Loan into a Loan of a different type, or continue all or any part of any outstanding Eurodollar Loan for a succeeding Interest Period beginning on the last day of the current Interest Period for such Loan, by giving written or telephonic notice (in the case of telephonic notice, followed promptly by written notice by facsimile) to the Agent in the form of a Notice of Conversion/Continuation not later than (a) in the case of conversion into a Floating Rate Loan, 9:00 a.m., San Francisco time, on the proposed date of such conversion, and (b) in the case of a conversion into or continuation of a Eurodollar Loan, 9:00 a.m., San Francisco time, at least three Business Days prior to the proposed date of such conversion or continuation. Each Notice of Conversion/Continuation shall be effective upon receipt by the Agent and shall specify the date and amount of such conversion or continuation, the amount of the Loan to be so converted or continued and, in the case of a conversion into or continuation of a Eurodollar Loan, the initial or subsequent Interest Period therefor, as applicable. Promptly upon receipt of such Notice of Conversion/Continuation, the Agent shall advise each Lender thereof. Subject to Section 2.5, such Loan shall be so converted or continued on the requested date of conversion or continuation. Each conversion and continuation shall be on a Business Day. If the Company fails to give a timely Notice of Conversion/Continuation with respect to a Eurodollar Loan, such Loan shall automatically convert to a Floating Rate Loan on the last day of the Interest Period therefor. 2.5 Conditions. Notwithstanding any other provision of this Agreement, no Lender shall be obligated to make any Loan, or to convert into or permit the continuation at the end of the applicable Interest Period of any Eurodollar Loan, if an Event of Default or Default exists. 2.6 Pro Rata Treatment. All borrowings, conversions and repayments shall be effected so that after giving effect thereto, each Lender will have a pro rata share (according to its Percentage) of all types and Groups of Loans. 2.7 Commitments Several. The failure of any Lender to make a requested Loan on any date shall not relieve any other Lender of its obligation (if any) to make a Loan on such date, but a Lender shall be responsible for the failure of any other Lender to make any Loan to be made by such other Lender. 2.8 Extension of Termination Date. On or before May 1 of each year, commencing on May 1, 1996, the Company may, at its option, deliver to the Agent (which shall promptly notify each Lender) a signed copy of an extension request (an "Extension 14 Request") in the form of Exhibit B, requesting an extension of the Termination Date for a period of one year. On or before June 1 of each year that the Company has delivered an Extension Request, each Lender shall have the right, in its sole and absolute discretion, to deliver a written notice to the Agent consenting to or rejecting the requested extension. If a Lender has not given such notice to the Agent by June 1 of such year, such Lender shall be deemed not to have consented to such extension. If all Lenders consent to an Extension Request, the Termination Date shall be extended for an additional year effective on June 1 of the applicable year. If any Lender (an "Objecting Lender") rejects, or is deemed not to have consented to, an Extension Request by June 1 of the applicable year, the Termination Date shall not be so extended; provided that if Lenders with an aggregate Percentage of 20% or less are Objecting Lenders, then the Termination Date shall be so extended if, on or before June 30 of the applicable year, the Company (a) replaces each Objecting Lender pursuant to Section 8.7 with Lenders (which may be existing or new Lenders) which consent to the applicable Extension Request or (b) to the extent all Objecting Lenders have not been so replaced, by notice to the Agent and each Objecting Lender, terminates the Commitments of all Objecting Lenders (and concurrently pays to the Agent for the account of each Objecting Lender all amounts owed to such Objecting Lender hereunder) and reduces the aggregate amount of all of the Commitments by a corresponding amount. SECTION 3 NOTES EVIDENCING LOANS 3.1 Notes. The Loans of each Lender shall be evidenced by a promissory note (as amended, supplemented, replaced or otherwise modified from time to time, individually each a "Note" and collectively for all Lenders the "Notes") substantially in the form set forth in Exhibit A, with appropriate insertions, dated the Effective Date (or such other date as shall be satisfactory to the Agent), payable to the order of such Lender in the principal amount of the Commitment of such Lender (or, if less, in the aggregate unpaid principal amount of such Lender's Loans) on the Termination Date. 3.2 Recordkeeping. Each Lender shall record in its records, or at its option on the schedule attached to its Note, the date and amount of each Loan made by such Lender, each repayment or conversion thereof and, in the case of each Eurodollar Loan, the dates on which each Interest Period for such Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Note. The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the obligations of the Company hereunder or under any Note to repay the principal amount of the Loans evidenced by such Note together with all interest accruing thereon. 15 SECTION 4 INTEREST. 4.1 Interest Rates. The Company promises to pay interest on the unpaid principal amount of each Loan for the period commencing on and including the date of such Loan to but excluding the date such Loan is paid in full, as follows: (a) at all times while such Loan is a Floating Rate Loan, at a rate per annum equal to the Alternate Reference Rate from time to time in effect; and (b) at all times while such Loan is a Eurodollar Loan, at a rate per annum equal to the Eurodollar Rate (Reserve Adjusted) applicable to each Interest Period for such Loan plus 0.275%; provided, however, that if any principal of any Loan is not paid when due (by acceleration or otherwise), such principal shall thereafter bear interest at a rate per annum equal to the sum of the Alternate Reference Rate from time to time in effect plus 1%. 4.2 Interest Payment Dates. Accrued interest on each Floating Rate Loan shall be payable on the last day of each January, April, July and October and on the Termination Date. Accrued interest on each Eurodollar Loan shall be payable on the last day of each Interest Period relating to such Loan (and, in the case of any Eurodollar Loan with an Interest Period exceeding three months, on each three-month anniversary of the first day of such Interest Period) and on the Termination Date. During the existence of any Event of Default, interest shall be paid on demand of the Agent at the request or with the consent of the Required Lenders. 4.3 Setting and Notice of Eurodollar Rates. The applicable Eurodollar Rate for each Interest Period shall be determined by the Agent, and notice thereof shall be given by the Agent promptly to the Company and each Lender. Each determination of the applicable Eurodollar Rate by the Agent shall be conclusive and binding upon the parties hereto, in the absence of demonstrable error. The Agent shall, upon written request of the Company or any Lender, deliver to the Company or such Lender a statement showing the computations used by the Agent in determining any applicable Eurodollar Rate hereunder. Each Reference Lender agrees to use reasonable efforts to timely notify the Agent of its applicable rate for each Interest Period (as contemplated in the definition of Eurodollar Rate). If, as to any Interest Period, any Reference Lender is unable or fails to notify the Agent of its applicable rate by 9:00 a.m., San Francisco time, two Business Days before such Interest Period, then the Eurodollar Rate shall be determined on the basis of the rates of the other Reference Lenders. 16 4.4 Computation of Interest. Interest shall be computed for the actual number of days elapsed on the basis of a year of 360 days (or, in the case of Floating Rate Loans bearing interest at the Reference Rate, 365 or 366 days, as appropriate). The applicable interest rate for each Floating Rate Loan shall change simultaneously with each change in the Reference Rate. SECTION 5 FEES. 5.1 Facility Fee. The Company agrees to pay to the Agent for the account of each Lender a facility fee for the period from and including the Effective Date to but excluding the Termination Date in an amount equal to 0.15% per annum of the daily average of the amount of such Lender's Commitment (whether used or unused). Such facility fee shall be payable in arrears on the last day of each calendar quarter and on the Termination Date for any period then ending for which such facility fee shall not have been theretofore paid. The facility fee shall be computed for the actual number of days elapsed on the basis of a year of 360 days. 5.2 Agent's Fee. The Company shall pay an agency fee to the Agent for the Agent's own account, as required by the letter agreement ("Fee Letter") between the Company and Agent (as successor-by-assignment to BAI, as Agent) dated July 7, 1994, or as otherwise agreed to from time to time by the Company and the Agent. SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS; REPAYMENT 6.1 Reduction or Termination of the Commitments. The Company may from time to time on at least five Business Days' prior written notice received by the Agent (which shall promptly advise each Lender thereof) permanently reduce the amount of the Commitments to an amount not less than the aggregate unpaid principal amount of the Loans. Any such reduction shall be in an amount that is an integral multiple of $10,000,000 and shall be pro rata among the Lenders according to their respective Percentages. The Company may at any time on like notice terminate the Commitments upon payment in full of all Loans and all other obligations of the Company hereunder. Once reduced in accordance with this Section, the Commitments may not be increased. 6.2 Prepayments. The Company may from time to time prepay the Loans in whole or in part, provided that (a) the Company shall give the Agent (which shall promptly advise each Lender) written notice thereof not later than 9:00 a.m., San Francisco time, on the date of such prepayment, in the case of Floating Rate Loans, and not less than three Business Days prior to the date of such prepayment, in the case of Eurodollar Loans, in each case specifying the Loans to be prepaid and the date (which shall be a Business Day) and amount of prepayment, (b) each partial 17 prepayment of Loans shall be in an aggregate principal amount of at least $10,000,000 and an integral multiple of $1,000,000 and (c) any prepayment of Eurodollar Loans on a day other than the last day of an Interest Period therefor shall be subject to Section 8.4. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 8.4. After giving effect to any prepayment of Eurodollar Loans, each Group of Eurodollar Loans shall be at least $10,000,000 and an integral multiple of $1,000,000. 6.3 Repayment. The Company shall repay to the Lenders on the Termination Date the aggregate principal amount of Loans outstanding on such date. SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES. 7.1 Making of Payments. All payments to be made by the Company shall be made without set-off, recoupment or counterclaim. All payments of principal of or interest on the Notes, and of all fees, shall be made by the Company to the Agent in immediately available funds at the Agent's Payment Office not later than 10:00 a.m., San Francisco time, on the date due; and funds received after that hour shall be deemed to have been received by the Agent on the immediately following Business Day. The Agent shall promptly remit to each Lender its share of all such payments received in collected funds by the Agent for the account of such Lender. All payments under Sections 8.1 and 8.4 shall be made by the Company directly to the Lender entitled thereto. 7.2 Application of Certain Payments. Each payment of principal shall be applied to such Loans as the Company shall direct by notice to be received by the Agent on or before the date of such payment or, in the absence of such notice, as the Agent shall determine in its discretion. Concurrently with each remittance to any Lender of its share of any such payment, the Agent shall advise such Lender as to the application of such payment. 7.3 Due Date Extension. If any payment of principal or interest with respect to any of the Notes, or of any fee, falls due on a day which is not a Business Day, then such due date shall be extended to the immediately following Business Day (unless, in the case of a Eurodollar Loan, such immediately following Business Day is the first Business Day of a calendar month, in which case such due date shall be the immediately preceding Business Day), and, in the case of principal, additional interest shall accrue and be payable for the period of any such extension. 18 7.4 Setoff. The Company agrees that the Agent and each Lender have all rights of set-off and bankers' lien provided by applicable law, and in addition thereto, the Company agrees that at any time any Default under Section 12.1.4 or any Event of Default exists, the Agent and each Lender may apply to the payment of any obligations of the Company hereunder, whether or not then due), any and all balances, credits, deposits, accounts or moneys of the Company (excluding amounts held in trust accounts for the benefit of Persons other than the Company) then or thereafter with the Agent or such Lender. 7.5 Proration of Payments. If any Lender shall obtain by payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise) on account of principal of or interest on any Note in excess of its pro rata share of payments and other recoveries obtained by all Lenders on account of principal of and interest on all Notes (other than any non-pro rata interest payment resulting from a Loan being an Affected Loan or as a result of replacement of a Lender pursuant to Section 8.7), such Lender shall purchase from the other Lenders such participation in the Notes held by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery. 7.6 Taxes. (a) All payments by the Company of principal, interest, fees, indemnities and other amounts payable hereunder and under the Notes shall be made to the recipient thereof without setoff counterclaim and free and clear of, and without withholding or deduction for or on account of, any present or future Taxes (other than Excluded Taxes) now or hereafter imposed on such recipient or its income, property, assets or franchises (such recipient's "Recipient Taxes"), except to the extent that such withholding or deduction (i) is required by applicable law, (ii) results from the breach by such recipient of its Exemption Agreement, or (iii) would not be required if such recipient's Exemption Representation (as defined below) were true. If any such withholding or deduction is required by applicable law, the Company will: (A) pay to the relevant authorities the full amount if required to be withheld or deducted; (B) promptly forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authorities; and (C) except to the extent that such withholding or deduction results from the breach, by the recipient of a 19 payment, of its Exemption Agreement or would not be required if such recipient's Exemption Representation were true, pay to the Agent for the account of the relevant recipient such additional amount as is necessary to ensure that the net amount actually received by such recipient will equal the full amount such recipient would have received had no such withholding or deduction been required. For the purposes of this Section 7.6, (a) "Taxes" means, with respect to any Person, taxes, assessments or other governmental charges or levies imposed upon such Person, such Person's income or any of such Person's properties, franchises or assets; and (b) "Excluded Taxes" means, in the case of payments made to any Lender or the Agent, all of the following: taxes imposed upon the overall gross or net income or receipts of such Lender or the Agent, franchise taxes imposed upon such Lender or the Agent with respect to its gross or net income or receipts by the jurisdiction under the laws of which such Lender or the Agent, as the case may be, is organized or any political subdivision thereof, and franchise taxes imposed upon such Lender or the Agent with respect to its gross or net income or receipts by the jurisdiction in which such Lender's or the Agent's applicable lending office is located or any political subdivision thereof. (b) Each Lender hereby represents and warrants (such Lender's "Exemption Representation") to the Company that on the Effective Date (or, if later, the date such Lender becomes a party to this Agreement) it is entitled to receive payments of principal of, and interest on, Loans made by such Lender without withholding or deduction for or on account of such Lender's Recipient Taxes imposed by the United States of America or any political subdivision thereof. The provisions of this Section shall survive repayment of the Loans, cancellation of the Notes and any termination of the Commitments or this Agreement. 7.7 Funding Reliance. (a) Unless the Agent receives notice from the Company prior to the date on which any payment is due to the Lenders that the Company will not make such payment in full as and when required, the Agent may assume that the Company has made such payment in full to the Agent on such date in immediately available funds and the Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Company has not made such payment in full to the Agent, each Lender shall repay to the Agent on demand such amount distributed to such Lender, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Lender until the date repaid. 20 (b) Unless the Agent receives notice from a Lender at least one Business Day prior to the date of a requested borrowing that such Lender will not make available as and when required hereunder to the Agent for the account of the Company the amount of that Lender's Percentage of the borrowing, the Agent may assume that each Lender has made such amount available to the Agent in immediately available funds on the borrowing date and the Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Lender shall not have made its full amount available to the Agent in immediately available funds and the Agent in such circumstances has made available to the Company such amount, that Lender shall on the Business Day following such borrowing date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Agent submitted to any Lender with respect to amounts owing under this subsection (b) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Lender's Loan on the date of borrowing for all purposes of this Agreement. If such amount is not made available to the Agent on the Business Day following the borrowing date, the Agent will notify the Company of such failure to fund and, upon demand by the Agent, the Company shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such borrowing. SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS. 8.1 Increased Costs. (a) If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System), or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any Eurodollar Office of such Lender) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency (A) shall subject any Lender (or any Eurodollar Office of such Lender) to any tax, duty or other charge with respect to its Eurodollar Loans, its Note or its obligation to make Eurodollar Loans, or shall change the basis of taxation of payments to any Lender of the principal of or interest on its Eurodollar Loans or any other amounts due under this Agreement in respect of its Eurodollar Loans or its obligation to make Eurodollar Loans (except for taxes imposed on or measured by the overall gross or net income or receipts of such Lender or its Eurodollar Office imposed by 21 the jurisdiction, or any political subdivision thereof or taxing authority therein, in which such Lender's principal executive office or Eurodollar Office is located or in which such Lender is incorporated); or (B) shall impose, modify or deem applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System, but excluding any reserve included in the determination of interest rates pursuant to Section 4), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by any Lender (or any Eurodollar Office of such Lender); or (C) shall impose on any Lender (or its Eurodollar Office) any other condition affecting its Eurodollar Loans, its Note or its obligation to make Eurodollar Loans; and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D referred to above, to impose a cost on) such Lender (or any Eurodollar Office of such Lender) of making or maintaining any Eurodollar Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Eurodollar Office) under this Agreement or under its Note with respect thereto, then within 15 days after demand by such Lender (which demand shall be accompanied by a statement setting forth the basis of such demand, a copy of which shall be furnished to the Agent), the Company shall pay directly to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or such reduction. (b) If, after the Effective Date, any Lender shall reasonably determine that the adoption or phase-in of any applicable law, rule or regulation regarding capital adequacy, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Eurodollar Office) or any Person controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's or such controlling Person's capital as a consequence of such Lender's obligations hereunder (including, without limitation, such Lender's Commitment) to a level below that which such Lender or such controlling Person could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such controlling Person's policies with respect to capital adequacy) by an amount deemed by such Lender or such controlling Person to be material, then from time to time, within 15 days after demand by such Lender (which demand shall be accompanied by a statement setting forth the basis of such demand, a copy of which shall be furnished to the Agent), the 22 Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling Person for such reduction. 8.2 Basis for Determining Interest Rate Inadequate or Unfair. If with respect to any Interest Period: (a) the Agent is advised by two or more Reference Lenders that deposits in Dollars (in the applicable amounts) are not being offered to such Reference Lenders in the relevant market for such Interest Period, or the Agent otherwise reasonably determines (which determination shall be binding and conclusive on the Company) that by reason of circumstances affecting the interbank eurodollar market adequate and reasonable means do not exist for ascertaining the applicable Eurodollar Rate; or (b) Lenders having an aggregate Percentage of 33% or more advise the Agent that the Eurodollar Rate (Reserve Adjusted) as determined by the Agent will not adequately and fairly reflect the cost to such Lenders of maintaining or funding such Loans for such Interest Period, or that the making or funding of Eurodollar Loans has become impracticable as a result of an event occurring after the date of this Agreement which in the reasonable opinion of such Lenders materially affects such Loans, then, the Agent shall promptly notify the other parties thereof and, so long as such circumstances shall continue, (i) no Lender shall be under any obligation to make or convert into Eurodollar Loans and (ii) on the last day of the current Interest Period for each Eurodollar Loan, such Loan shall, unless then repaid in full, automatically convert to a Floating Rate Loan. 8.3 Changes in Law Rendering Eurodollar Loans Unlawful. In the event that any change in (including the adoption of any new) applicable laws or regulations, or any change in the interpretation of applicable laws or regulations by any governmental or other regulatory body charged with the administration thereof, should make it (or in the good faith judgment of any Lender cause a substantial question as to whether it is) unlawful for any Lender to make, maintain or fund Eurodollar Loans, then such Lender shall promptly notify each of the other parties hereto and, so long as such circumstances shall continue, (a) such Lender shall have no obligation to make or convert into Eurodollar Loans (but shall make Floating Rate Loans concurrently with the making of or conversion into Eurodollar Loans by the Lenders which are not so affected, in each case in an amount equal to such Lender's Percentage of all Eurodollar Loans which would be made or converted into at such time in the absence of such circumstances) and (b) on the last day of the current Interest Period for each Eurodollar Loan of such Lender (or, in any event, if such Lender so requests, on such earlier date as may be required by the relevant law, regulation or interpretation), such Eurodollar Loan shall, unless then repaid in full, automatically convert to a Floating Rate Loan. Each 23 Floating Rate Loan made by a Lender which, but for the circumstances described in the foregoing sentence, would be a Eurodollar Loan (an "Affected Loan") shall, notwithstanding any other provision of this Agreement, remain outstanding for the same period as the Group of Eurodollar Loans of which such Affected Loan would be a part absent such circumstances. 8.4 Funding Losses. The Company hereby agrees that upon demand by any Lender (which demand shall be accompanied by a statement setting forth the basis for the calculations of the amount being claimed, a copy of which shall be furnished to the Agent) the Company will indemnify such Lender against any net loss or expense which such Lender may sustain or incur (including, without limitation, any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain any Eurodollar Loan, but excluding any loss of margin), as reasonably determined by such Lender, as a result of (a) any payment (including, without limitation, after acceleration thereof) or prepayment or conversion of any Eurodollar Loan of such Lender on a date other than the last day of an Interest Period for such Loan (including, without limitation, any conversion pursuant to Section 8.3) or (b) any failure of the Company to borrow or convert any Loans on a date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation pursuant to this Agreement (other than as a result of a default by such Lender or the Agent). For this purpose, all notices to the Agent pursuant to this Agreement shall be deemed to be irrevocable. 8.5 Right of Lenders to Fund through Other Offices. Each Lender may, if it so elects, fulfill its commitment as to any Eurodollar Loan by causing a foreign branch or affiliate of such Lender to make such Loan, provided that in such event for the purposes of this Agreement such Loan shall be deemed to have been made by such Lender and the obligation of the Company to repay such Loan shall nevertheless be to such Lender and shall be deemed held by it, to the extent of such Loan, for the account of such branch or affiliate. 8.6 Discretion of Lenders as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Lender had actually funded and maintained each Eurodollar Loan during each Interest Period for such Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Eurodollar Rate for such Interest Period. 8.7 Mitigation of Circumstances; Replacement of Affected Lender or Objecting Lender. (a) Each Lender shall promptly notify the Company and the Agent of any event of which it has 24 knowledge which will result in, and will use reasonable commercial efforts available to it (and not, in such Lender's sole judgment, otherwise disadvantageous to such Lender) to mitigate or avoid, (i) any obligation by the Company to pay any amount pursuant to Section 7.6 or 8.1 (ii) the occurrence of any circumstance of the nature described in Section 8.2 or 8.3 (and if any Lender has given notice of any such event described in clause (i) or (ii) above and thereafter such event ceases to exist, such Lender shall promptly so notify the Company and the Agent). Without limiting the foregoing, each Lender will designate a different funding office if such designation will avoid (or reduce the cost to the Company of) any event described in clause (i) or (ii) of the preceding sentence and such designation will not, in such Lender's reasonable judgment, be otherwise disadvantageous to such Lender. (b) At any time any Lender is an Affected Lender or an Objecting Lender, the Company may replace such Lender as a party to this Agreement with one or more other bank(s) or financial institution(s) reasonably satisfactory to the Agent, such bank(s) or financial institution(s) to have a Commitment or Commitments, as the case may be, in such amounts as shall be reasonably satisfactory to the Agent (and upon notice from the Company such Affected Lender or Objecting Lender shall assign, without recourse or warranty, its Commitment, its Loans, its Note and all of its other rights and obligations hereunder to such replacement bank(s) or other financial institution(s) for a purchase price equal to the sum of the principal amount of the Loans so assigned, all accrued and unpaid interest thereon, its ratable share of all accrued and unpaid non-use fees, any amounts payable under Section 8.4 as a result of such Lender receiving payment of any Eurodollar Loan prior to the end of an Interest Period therefor and all other obligations owed to such Affected Lender or Objecting Lender hereunder). 8.8 Conclusiveness of Statements; Survival of Provisions. Determinations and statements of any Lender pursuant to Section 8.1, 8.2, 8.3 or 8.4 shall be conclusive absent demonstrable error. Lenders may use reasonable averaging and attribution methods in determining compensation under Sections 8.1 and 8.4, and the provisions of such Sections shall survive repayment of the Loans, cancellation of the Notes and any termination of the Commitments or this Agreement (provided that any claim for compensation by a Lender under such Sections shall be made to the Company not later than 45 days after the later to occur of repayment in full of the Loans and termination of the Commitments). SECTION 9 WARRANTIES. To induce the Agent and the Lenders to enter into this Agreement and to induce the Lenders to make Loans hereunder, the Company warrants to the Agent and the Lenders that: 25 9.1 Organization, etc. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; each Subsidiary is duly organized and validly existing under the laws of the jurisdiction of its organization; and the Company and each Subsidiary is duly qualified to do business in each other jurisdiction where the nature of its business makes such qualification necessary, except where such failure to so qualify would not have a Material Adverse Effect. 9.2 Authorization; No Conflict. The execution and delivery by the Company of this Agreement and each Note, the borrowings hereunder, and the performance by the Company of its obligations under this Agreement and each Note are within the corporate powers of the Company, have been duly authorized by all necessary corporate action on the part of the Company (including any necessary shareholder action), have received all necessary governmental approval, and do not and will not (a) violate any provision of law, rule or regulation or any order, decree, judgment or award which is binding on the Company or any Subsidiary, (b) contravene or conflict with, or result in a breach of, any provision of the Certificate of Incorporation, By-Laws or other organizational documents of the Company or any Subsidiary or of any agreement, indenture, instrument or other document which is binding on the Company or any Subsidiary or (c) result in, or require, the creation or imposition of any Lien on any asset of the Company or any Subsidiary. 9.3 Validity and Binding Nature. This Agreement is, and upon the execution and delivery thereof each Note will be, the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. 9.4 Financial Information. The Company's audited consolidated financial statements as at January 28, 1995 and unaudited consolidated financial statements as at August 12, 1995, copies of which have been furnished to the Lenders, have been prepared in accordance with generally accepted accounting principles (subject, in the case of such unaudited statements, to the absence of footnotes and to normal year-end adjustments) and fairly present the financial condition of the Company and its Subsidiaries on a consolidated basis as of such dates and their consolidated results of operations for the Fiscal Year and fiscal period then ended. 9.5 No Material Adverse Change. Since the date of the audited financial statements described in Section 9.4, there has been no event or occurrence which has had or is reasonably likely to have a Material Adverse Effect. 9.6 Litigation and Contingent Liabilities. Except as set forth in the Company's Annual Report on Form 10-K for the Fiscal Year ended January 28, 1995 and the Company's Quarterly Report on Form 10-Q for the Fiscal Quarter ended August 12, 1995, no 26 litigation (including, without limitation, derivative actions), arbitration proceeding or governmental proceeding is pending or, to the Company's knowledge, threatened against the Company or any Subsidiary which, if adversely decided, is reasonably likely to result, either individually or collectively, in a Material Adverse Effect. Other than any liability incident to such litigation or proceedings, neither the Company nor any Subsidiary has any material contingent liabilities not provided for or disclosed in the financial statements referred to in Section 9.4. 9.7 Ownership of Properties; Liens. Each of the Company and each Subsidiary owns good and sufficient title to, or a subsisting leasehold interest in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever, free and clear of all Liens, except as permitted pursuant to Section 10.7. 9.8 Subsidiaries. Set forth on Schedule II is a complete and accurate list of name and jurisdiction of organization of each Subsidiary of the Company and the percentage ownership interest of the Company and its other Subsidiaries in each such Subsidiary. 9.9 Pension Plans. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the best knowledge of the Company, nothing has occurred which would cause the loss of such qualification, in each case except as the same could not result in the incurrence by the Company or any ERISA Affiliate of any material liability, fine or penalty. The Company and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan, in each case except as the same could not result in the incurrence by the Company or any ERISA Affiliate of any material liability, fine or penalty. (b) There are no pending or, to the best knowledge of Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur which could result in the incurrence by the Company or any ERISA Affiliate of any material liability, fine or 27 penalty; (ii) no Pension Plan has any material Unfunded Pension Liability; (iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any material liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any material liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. 9.10 Regulated Industry. Neither the Company nor any Subsidiary is (a) an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended, or (b) a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 9.11 Regulations G, U and X. Neither the Company nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Loan will be used for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock or maintaining or extending credit to others for such purpose. 9.12 Taxes. Each of the Company and each Subsidiary has filed all material tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on its books. 9.13 Environmental and Safety and Health Matters. To the best of the knowledge of the Company, after inquiry it has deemed appropriate, the Company and each Subsidiary is in compliance with all Environmental Laws and Occupational Safety and Health Laws where failure to comply could have a Material Adverse Effect. Neither the Company nor any Subsidiary has received notice of any claims that any of them is not in compliance in all material respects with any Environmental Law where failure to comply could have a Material Adverse Effect. 9.14 Compliance with Law. Each of the Company and each Subsidiary is in compliance with all statutes, judicial and administrative orders, permits and governmental rules and regulations which are material to its business or the non- 28 compliance with which could result in any material fine, penalty or liability. 9.15 Information. All information heretofore or contemporaneously herewith furnished by the Company or any Subsidiary to any Lender for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all information hereafter furnished by or on behalf of the Company or any Subsidiary to any Lender pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and such information, taken as a whole, does not and will not omit to state any material fact necessary to make such information, taken as a whole, not misleading. SECTION 10 COVENANTS. Until the expiration or termination of the Commitments and thereafter until all obligations hereunder and under the Notes are paid in full, the Company agrees that, unless at any time the Required Lenders shall otherwise expressly consent in writing, it will: 10.1 Reports, Certificates and Other Information. Furnish to each Lender through the Agent: 10.1.1 Audit Report. Promptly when available and in any event within 100 days after the close of each Fiscal Year, a copy of the annual audit report of the Company and its Subsidiaries for such Fiscal Year, including therein a consolidated balance sheet of the Company and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Company and its Subsidiaries for such Fiscal Year certified, without disclaimer of opinion and without qualification as to going concern, by Deloitte & Touche or other independent auditors of recognized national standing selected by the Company, together with a certificate from such accountants to the effect that, in making the examination necessary for the signing of such annual report by such auditors, they have not become aware of any Event of Default or Default that has occurred and is continuing or, if they have become aware of any such event, describing it in reasonable detail. 10.1.2 Interim Reports. Promptly when available and in any event within 60 days after the end of each Fiscal Quarter (except the last Fiscal Quarter of each Fiscal Year), a consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter, and consolidated statements of earnings and cash flow for such quarter and for the period beginning with the first day of such Fiscal Year and ending on the last day of such quarter, together with a certificate of the President, the Chief Financial Officer, the Controller or the Treasurer of the Company to the effect that such financial statements fairly present the financial condition and results of operations of the Company and 29 its Subsidiaries as of the date and periods indicated (subject to normal year-end adjustments). 10.1.3 Compliance Certificate. Concurrently with each set of financial statements delivered pursuant to Section 10.1.1 and 10.1.2, a certificate of the President, the Chief Financial Officer, the Controller or the Treasurer of the Company, in form and substance reasonably satisfactory to the Agent and the Required Lenders, (a) to the effect that such officer is not aware of any Event of Default or Default that has occurred and is continuing or, if there is any such event, describing it in reasonable detail, and (b) containing a computation of each of the financial ratios and restrictions set forth in Section 10.6. 10.1.4 Reports to SEC. Promptly upon the filing or sending thereof, a copy of any annual, period or special report or registration statement (inclusive of exhibits thereto) filed by the Company or any Subsidiary with the SEC or any securities exchange and of each communication from the Company or any Subsidiary to shareholders generally. 10.1.5 Notice of Default, Litigation and ERISA Matters. Immediately upon becoming aware of any of the following, written notice describing the same and the steps being taken by the Company or the Subsidiary affected thereby with respect thereto: (a) the occurrence of an Event of Default or a Default; (b) any litigation, arbitration or governmental investigation or proceeding not previously disclosed by the Company to the Lenders which has been instituted or, to the knowledge of the Company, is threatened against the Company or any Subsidiary or to which any of the assets of any thereof is subject which, if adversely determined, is reasonably likely to have a Material Adverse Effect; (c) the occurrence of any of the following events affecting the Company or any ERISA Affiliate, along with a copy of any notice with respect to such event that is filed with a governmental authority and any notice delivered by a governmental authority to the Company or any ERISA Affiliate with respect to such event: (i) an ERISA Event which could result in the incurrence by the Company or any ERISA Affiliate of any material liability, fine or penalty, (ii) a material increase in the Unfunded Pension Liability of any Pension Plan, (iii) the adoption of, or the commencement of any material contributions to, any Plan subject to Section 412 of the Code by the Company or any ERISA Affiliate, or (iv) the adoption of any amendment to a Plan subject to Section 412 of the Code, if such amendment results in a material increase in contributions or Unfunded Pension Liability; and (d) any other event or occurrence which has had or is reasonably likely to have a Material Adverse Effect. 10.1.6 Subsidiaries. Promptly from time to time a written report of any change in the list of its Subsidiaries. 30 10.1.7 Other Information. From time to time such other information concerning the Company and its Subsidiaries as any Lender or the Agent may reasonably request. 10.2 Books, Records and Inspections. Keep, and cause each Subsidiary to keep, its books and records reflecting all of its business affairs and transactions in accordance with sound business practices sufficient to allow the preparation of the Company's consolidated financial statements in accordance with GAAP; and permit, and cause each Subsidiary to permit, any Lender or the Agent or any representative thereof, at such Lender's or the Agent's expense unless an Event of Default exists, during reasonable business hours and on reasonable notice, to visit any or all of its offices, to discuss its financial matters with its officers and its independent auditors (and the Company hereby authorizes such independent auditors to discuss such financial matters with any Lender or the Agent or any representative thereof), and to examine (and make copies of) any of its books or other corporate records. 10.3 Insurance. Maintain, and cause each Subsidiary to maintain, with responsible and financially-sound insurance companies or associations, insurance in such amounts and covering such risks (and having such deductibles and self-insurance) as is usually maintained by companies engaged in similar businesses and owning similar properties similarly situated. 10.4 Compliance with Law; Payment of Taxes and Liabilities. (a) Comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, rules, regulations and orders the non- compliance with which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and (b) pay, and cause each Subsidiary to pay, prior to delinquency, all taxes and other governmental charges against it or any of its assets, provided, however, that the foregoing shall not require the Company or any Subsidiary to pay any such tax or charge so long as it shall contest the validity thereof in good faith by appropriate proceedings and shall set aside on its books adequate reserves with respect thereto. 10.5 Maintenance of Existence, etc. Maintain and preserve, and (subject to Section 10.10) cause each Subsidiary to maintain and preserve, (a) its existence and good standing in the jurisdiction of its organization and (b) its foreign qualification in each other jurisdiction where the nature of its business makes such qualification necessary (except in those instances in which the failure to be qualified or in good standing will not have a Material Adverse Effect). 10.6 Financial Ratios and Restrictions. 10.6.1 Minimum Consolidated Tangible Net Worth. Not at any time permit Consolidated Tangible Net Worth to be less than the sum of (a) $425,000,000 plus (b) 50% of the Company's cumulative 31 consolidated net earnings for all Fiscal Quarters ending after January 30, 1994 (but disregarding any Fiscal Quarter in which there is a loss) plus (c) 50% of the amount by which the shareholders' equity of the Company is increased by the issuance of capital stock (or the exercise of warrants or options in respect thereof) after January 30, 1994. 10.6.2 Long-Term Liabilities to Net Worth Ratio. Not at any time permit the ratio of Consolidated Long-Term Liabilities to Consolidated Tangible Net Worth to exceed 1.5 to 1. 10.6.3 Fixed Charge Coverage Ratio. Not permit the Fixed Charge Coverage Ratio as of the last day of any Fiscal Quarter to be less than 1.4 to 1. 10.7 Limitation on Liens. Not, and not permit any Material Subsidiary to, create or permit to exist any Lien with respect to any assets now owned or hereafter acquired, except: (a) Liens existing on the date of this Agreement; (b) Liens created by or resulting from any litigation or legal proceeding which is currently being contested in good faith by appropriate proceedings unless the judgment secured thereby shall not have been stayed, bonded or discharged within 60 days; (c) Liens incidental to the normal conduct of business of the Company or any Material Subsidiary or the ownership of their respective assets and Liens to secure the performance of bids, tenders or trade contracts, materialmens' and mechanics' liens, and Liens to secure statutory obligations, surety or appeal bonds or other Liens of like general nature, in each case which are not incurred in connection with the incurrence of Debt and which do not in the aggregate impair the use of any such asset in the operation of the business of the Company or any Material Subsidiary or the value of any such asset for the purposes of any such business; (d) pledges or deposits (other than any Lien imposed by ERISA and not permitted under clause (g) of this Section) to secure obligations under workers' compensation and unemployment compensation laws or similar legislation to secure public or statutory obligations of the Company or any Material Subsidiary; (e) any Lien (i) on assets (including Liens arising under Capital Leases) imposed in connection with the financing of all or part of the purchase price therefor on the cost of the construction, extension or improvement of any new or existing asset created contemporaneously with, or within 270 days after, such acquisition, completion of such construction, such 32 extension or such improvement, (ii) existing on assets at the time of the acquisition thereof by the Company or any Material Subsidiary, (iii) existing on assets or the outstanding shares or Debt of a corporation at the time such corporation is merged into or consolidated with the Company or any Material Subsidiary or at the time of a sale, lease or other disposition of the assets or outstanding shares of Debt of a corporation or firm as an entirety to the Company or any Material Subsidiary, or (iv) arising in connection with the purchase of inventory, supplies or services from trade creditors on customary business terms; provided that the amount secured by any Lien described in this clause (e) shall not exceed the lesser of the fair market value or cost of the related asset at the time of the imposition of such Lien; (f) Liens associated with any tenant's leasehold interest in any asset of the Company or a Material Subsidiary incurred solely in conjunction with leasing such asset; (g) Liens for taxes or assessments or other governmental charges or levies which either are not yet due and payable or are currently being contested in good faith by appropriate proceedings; (h) Liens securing Debt of a Material Subsidiary owing to the Company or another Material Subsidiary; (i) the extension, renewal or replacement of any Lien permitted by the foregoing clauses of this Section 10.7 in respect of the same asset subject to such Lien (but without increase in the principal amount of the Debt secured thereby); (j) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Company and its Material Subsidiaries or which customarily exist on properties of Persons engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Company and its Material Subsidiaries; and (k) Liens not otherwise permitted by the foregoing clauses of this Section 10.7 so long as the sum, without duplication, of (x) all obligations secured by such Liens and (y) Debt of Material Subsidiaries permitted solely by clause (f) of Section 10.8 does not exceed 15% of Consolidated Total Assets. 33 10.8 Debt. Not permit any Material Subsidiary to incur or permit to exist any Debt, except: (a) Debt owed to the Company or to another Material Subsidiary; (b) Debt outstanding on the date hereof; (c) Debt secured by Liens permitted by clause (e) of Section 10.7; (d) Debt outstanding when such entity becomes a Material Subsidiary or is merged or consolidated with another Material Subsidiary; (e) Debt in respect of commercial letters of credit issued to support the purchase of goods by the applicable Material Subsidiary in the ordinary course of business; and (f) Debt not otherwise permitted by the foregoing clauses of this Section 10.8 so long as the sum, without duplication, of (x) all such Debt and (y) all obligations secured by Liens permitted solely by clause (k) of Section 10.7 does not exceed 15% of consolidated Total Assets. 10.9 Guaranties, Loans and Advances. Not, and not permit any Material Subsidiary to, become or be a guarantor or surety of, or otherwise become or be responsible in any manner (whether by agreement to purchase any obligations, stock, assets, goods or services, or to supply or advance any funds, assets, goods or services, or otherwise) with respect to, any undertaking of any other Person or make or permit to exist any loans or advances to any other Person, except for (i) the endorsement, in the ordinary course of collection, of instruments payable to it or to its order, (ii) loans or advances constituting indebtedness of Subsidiaries to the Company or to other Subsidiaries or of the Company to Subsidiaries, guaranties by the Company of the obligations of Subsidiaries and guaranties by Subsidiaries of obligations of the Company and of other Subsidiaries, (iii) advances not to exceed, in the aggregate for Company and all Material Subsidiaries at any one time outstanding, $100,000 to officers, employees, subcontractors or suppliers, (iv) loans or advances to employees in connection with the purchase of the Company's stock under Management Stock Agreements, (v) advances to employees for moving and travel expenses, drawing accounts and similar expenditures in the ordinary course of business, (vi) notes to the Company from Frontier Associates in the amount of $5,000,000, (vii) guaranties provided for in Section 1.9 of the Assets Purchase Agreement, (viii) continuing obligations of the Company or any Subsidiary, not exceeding $9,000,000 in the aggregate for the Company and all Subsidiaries payable during any Fiscal Year, as assignor of any lease or other agreement which 34 has been assigned to any other Person, (ix) guaranties by Company or any Subsidiary of the performance of obligations of Subsidiaries (other than obligations constituting Debt for Borrowed Money except for obligations under Capital Leases) entered into in the ordinary course of business, and (x) letters of credit issued to Multiemployer Plans. Any obligations of the Company or any Material Subsidiary under any TROL to which it is a party (whether matured or unmatured or contingent) shall not be deemed to be prohibited by this Section 10.9. 10.10 Mergers, Consolidations, Sales. Not, and not permit any Material Subsidiary (or Subsidiary that would become a Material Subsidiary as a result of such transaction) to, be a party to any merger or consolidation, or, except in the ordinary course of its business, sell, transfer, convey or lease all or any substantial part of its assets or sell or assign with or without recourse any receivables, except that (a) the Company may be a party to a merger or consolidation if the Company is the surviving corporation and no Event of Default or Default exists or would result from such merger or consolidation, and (b) any Subsidiary may be a party to a merger or consolidation, or sell all or substantially all of its assets if the Company (directly or indirectly through its Subsidiaries) maintains a percentage of ownership of the surviving or acquiring corporation similar to its percentage of ownership of the prior or selling Subsidiary and no Event of Default or Default, exists or would result from such merger, consolidation or sale. Notwithstanding the foregoing, the Company or any Material Subsidiary may contribute all of the stock of, or all or substantially all of the assets of, a Material Subsidiary to a joint venture which is at least 50% owned by the Company or a Material Subsidiary so long as (i) no Event of Default or Default exists or would result therefrom and (ii) the aggregate amount so contributed by the Company or any Material Subsidiary in any Fiscal Year will not exceed 5% of the assets of the Company and its Subsidiaries as of the end of the preceding Fiscal Year. 10.11 Company's and Subsidiaries' Stock. Not permit any Subsidiary to purchase or otherwise acquire any shares of capital stock of the Company; and not take any action, or permit any Subsidiary to take any action, which will, so long as any shares of capital stock or Debt of any corporation which is a Subsidiary at the date of this Agreement are owned by the Company or any Subsidiary, result in a decrease in the percentage of the outstanding shares of capital stock of such corporation owned at the date of this Agreement by the Company and its other Subsidiaries, except that the Company or any Subsidiary may sell or otherwise dispose of stock or ownership interests in any Subsidiary that is not a Material Subsidiary for arms-length consideration. Notwithstanding the foregoing, the Company or any Material Subsidiary may contribute all of the stock of, or all or substantially all of the assets of, a Material Subsidiary to a joint venture which is at least 50% owned by the Company or a Material Subsidiary so long as (i) no Event of Default or Default 35 exists or would result therefrom and (ii) the aggregate amount so contributed by the Company or any Material Subsidiary in any Fiscal Year will not exceed 5% of the assets of the Company and its Subsidiaries as of the end of the preceding Fiscal Year. 10.12 Unconditional Purchase Obligations. Not, and not permit any Material Subsidiary to, enter into or be a party to any contract for the purchase of materials, supplies or other property or services, if such contract requires that payment be made by it regardless of whether or not delivery is ever made of such materials, supplies or other property or services. 10.13 ERISA. (a) Maintain, and cause each of its ERISA Affiliates to maintain, each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; and (b) make, and cause each of its ERISA Affiliates to make, all required contributions to any Plan subject to Section 412 of the Code, and not, and not suffer or permit any of its ERISA Affiliates to: (x) engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan which has resulted or could reasonably expected to result in liability of the Company in an aggregate amount in excess of $5,000,000; or (y) engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA. 10.14 Purchase or Redemption of Company's Securities; Dividend Restriction. Not purchase or redeem any shares of capital stock of the Company, declare or pay any dividends thereon (other than stock dividends or cash dividends as provided for below), make any distribution to stockholders or set aside any funds for any such purpose, and not prepay, purchase, defease or redeem, and not permit any Subsidiary to purchase, any subordinated Debt of the Company; provided that, so long as no Event of Default or Default exists or could result therefrom, the Company may (a) redeem shares from employees upon termination of employment or thereafter as provided in the Management Stock Agreements in amounts paid in cash (including amounts paid on account of principal of Debt issued in redemption of such stock) not exceeding in any Fiscal Year the greater of $10,000,000 or 5% of Consolidated Net Tangible Net Worth as of the end of the preceding Fiscal Year; (b) repurchase or redeem shares from persons upon the exercise of stock options in amounts (including amounts paid on account of principal of Debt issued in redemption of such stock) not exceeding, in any Fiscal Quarter, the sum of $500,000 plus the additional amount, if any, that, when added to the $500,000 amount, would cause the shareholders' equity of the Company (measured at the end of the Fiscal Quarter in which such redemption or repurchase takes place) to be not lower than at the end of the immediately preceding quarter; and (c) (i) for the Fiscal Years ending on or about January 31, 1996, January 31, 1997 and January 31, 1998, (A) pay cash dividends to its shareholders in an aggregate amount, in any Fiscal Year, not exceeding 40% of its consolidated net earnings for the prior 36 Fiscal Year, and (B) repurchase its stock, in an aggregate amount not exceeding the greater of (x) 40% of its consolidated net earnings for the prior Fiscal Year or (y) the cumulative amount of $70,000,000 for stock repurchases made during the two year period from June 15, 1995 through and including June 14, 1997, less, in each case of clause (x) and (y), the amount of cash dividends paid to its shareholders in such Fiscal Years, and (ii) thereafter, pay cash dividends to its shareholders or repurchase its stock in an aggregate amount, in any Fiscal Year, not exceeding 40% of its consolidated net earnings for the prior Fiscal Year. 10.15 Use of Proceeds. Use the proceeds of the Loans for working capital and for other general corporate purposes; and not use or permit any proceeds of any Loan to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of (a) "purchasing or carrying" any Margin Stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended from time to time, or (b) purchasing or otherwise acquiring any stock of any Person if such Person (or its board of directors) has (i) announced that it will oppose such purchase or other acquisition or (ii) commenced any litigation which alleges that such purchase or other acquisition violates, or will violate, any applicable law. SECTION 11 CONDITIONS OF LENDING. The obligation of each Lender to make its Loans is subject to the following conditions precedent: 11.1 Initial Loan. The obligation of each Lender to make its initial Loan is, in addition to the conditions precedent specified in Section 11.2, subject to the conditions precedent (and the date on which all such conditions precedent have been satisfied or waived in writing by the Lenders is herein called the "Effective Date") that the Agent shall have received (a) evidence, reasonably satisfactory to the Agent, that all obligations of the Company under the Existing Credit Agreement have been paid in full and (b) all of the following documents, each duly executed and dated the Effective Date (or such other date as shall be satisfactory to the Agent), in form and substance satisfactory to the Agent and each Lender, and each (except for the Notes, of which only the originals shall be signed) in sufficient number of signed counterparts to provide one for each Lender: 11.1.1 Notes. The Notes of the Company payable to the order of the Lenders. 11.1.2 Resolutions. Certified copies of resolutions of the Board of Directors of the Company authorizing or ratifying the execution, delivery and performance by the Company of this 37 Agreement, the Notes and the other documents to be executed by the Company pursuant hereto. 11.1.3 Consents, etc. Certified copies of all documents evidencing any consents and governmental approvals (if any) required for the execution, delivery and performance by the Company of this Agreement and the Notes. 11.1.4 Incumbency and Signature Certificates. An incumbency and signature certificate of the Company certifying the names of the officer or officers of the Company authorized to sign this Agreement, the Notes and the other documents required to be delivered by the Company in connection with this Agreement, together with a sample of the true signature of each such officer (it being understood that the Agent and each Lender may conclusively rely on such certificate until formally advised by a like certificate of any changes therein). 11.1.5 Opinion of Counsel for the Company. The opinion of Stoel Rives, counsel to the Company, substantially in the form of Exhibit C. 11.1.6 Existing Credit Agreement Amount. Evidence of payment or repayment by the Company of (i) all facility fees accrued to the Effective Date under Section 5.1 of the Existing Credit Agreement and (ii) all principal, accrued interest and any amounts payable under Section 8.4 of the Existing Credit Agreement. 11.1.7 Termination of BNS Agreement. A certificate of the President, Chief Financial Officer or Treasurer of the Company dated as of the Effective Date, certifying that all commitments to extend credit under the Credit Agreement, dated as of March 6, 1995, among the Company, various financial institutions and The Bank of Nova Scotia, as agent, as amended, have been irrevocably terminated and that all principal, interest and fees due thereunder have been paid in full. 11.1.8 Other. Such other documents as the Agent or any Lender may reasonably request. 11.2 All Loans. The obligation of each Lender to make any Loan to be made by it or to continue or convert any Loan as or into a Eurodollar Loan under Section 2.4 is subject to the satisfaction of the following conditions precedent on the relevant borrowing date or date of conversion or continuation: 11.2.1 Notice of Borrowing or Conversion/Continuation. The Agent shall have received a Notice of Borrowing or a Notice of Conversion/Continuation, as applicable; 11.2.2 Continuation of Representations and Warranties. The representations and warranties in Section 9 (excluding Sections 9.6 and 9.8) shall be true and correct in all material 38 respects on and as of such borrowing date or date of such conversion or continuation with the same effect as if made on and as of such date; and 11.2.3 No Existing Default. No Default or Event of Default shall exist or shall result from such borrowing or a continuation or conversion. Each Notice of Borrowing and Notice of Conversion/Continuation and each telephonic notice of a requested borrowing, conversion or continuation submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice and as of each requested borrowing date or date of such conversion or continuation, as applicable, that the conditions in this Section 11.2 are satisfied. SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT. 12.1 Events of Default. Each of the following shall constitute an Event of Default under this Agreement: 12.1.1 Non-Payment of the Loans, etc. Default in the payment when due of any principal of any Loan; or default, and continuance thereof for five days, in the payment when due of any interest on any Loan or any fee or other amount payable by the Company hereunder. 12.1.2 Non-Payment of Other Debt. Any default shall occur under the terms applicable to any Debt of the Company or any Subsidiary in an aggregate amount (for all Debt so affected) exceeding $5,000,000 and such default shall (a) consist of the failure to pay such Debt when due (subject to any applicable grace period, whether by acceleration or otherwise, or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable prior to its expressed maturity. 12.1.3 Other Material Obligations. Default in the payment when due of any obligation of $5,000,000 or more of the Company or any Subsidiary with respect to any material purchase or lease of goods or services (except only to the extent that the existence of any such default is being contested by the Company or such Subsidiary in good faith and by appropriate proceedings and appropriate reserves have been made in respect of such default), and continuance of such default for 30 days after notice thereof from the Agent or any Lender. 12.1.4 Bankruptcy, Insolvency etc. The Company or any Material Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or the Company or any Material Subsidiary applies for, consents to, or acquiesces in the appointment of a 39 trustee, receiver or other custodian for the Company or such Material Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for the Company or any Material Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is commenced in respect of the Company or any Material Subsidiary, and if such case or proceeding is not commenced by the Company or such Material Subsidiary, it is consented to or acquiesced in by the Company or such Material Subsidiary, or remains for 60 days undismissed; or the Company or any Material Subsidiary takes any corporate action to authorize, or in furtherance of, any of the foregoing. 12.1.5 Non-Compliance with Provisions of This Agreement. Failure by the Company to comply with or to perform any provision of this Agreement (and not constituting an Event of Default under any of the other provisions of this Section 12) and continuance of such failure for 30 days after notice thereof to the Company from the Agent or any Lender. 12.1.6 Warranties. Any warranty made by the Company herein is breached or is false or misleading in any material respect, or any schedule, certificate, financial statement, report, notice or other writing furnished by the Company to the Agent or any Lender is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified. 12.1.7 ERISA. (i) An ERISA Event shall occur with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Company under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $5,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time exceeds $5,000,000; or (iii) the Company or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $5,000,000. 12.1.8 Judgments and Attachments. Any money judgment, writ or warrant of attachment or similar process involving in any case a final judgment in an amount in excess of $5,000,000 shall be entered or filed against the Company or any Material Subsidiary or any of their respective assets and shall remain unsatisfied, undischarged, unvacated, unbonded or unstayed for a period of 60 days or in any event later than five days prior to the date of any proposed sale thereunder. 40 12.1.9 Change in Control. Any Change in Control shall occur. 12.2 Effect of Event of Default. If any Event of Default described in Section 12.1.4 shall occur, the Commitments (if they have not theretofore terminated) shall immediately terminate and the Notes and all other obligations hereunder shall become immediately due and payable, all without presentment, demand, protest or notice of any kind; and if any other Event of Default occurs and is continuing, the Agent may, and upon written request of the Required Lenders shall, by written notice to the Company declare the Commitments (if they have not theretofore terminated) to be terminated and/or declare all Notes and all other obligations hereunder to be due and payable, whereupon the Commitments (if they have not theretofore terminated) shall immediately terminate and/or all Notes and all other obligations hereunder shall become immediately due and payable, all without presentment, demand, protest or other notice of any kind. Notwithstanding the foregoing, the effect as an Event of Default of any event described in Section 12.1.1 or Section 12.1.4 may be waived by the written concurrence of all of the Lenders, and the effect as an Event of Default of any other event described in this Section 12 may be waived by the written concurrence of the Required Lenders. SECTION 13 THE AGENT. 13.1 Appointment and Authorization; "Agent". Each Lender hereby irrevocably (subject to Section 13.9) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and the Loan Documents and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. 13.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining 41 to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 13.3 Liability of Agent. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Company or any Subsidiary or affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any of the Company's Subsidiaries or affiliates. 13.4 Reliance by Agent. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 11.1, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to 42 be consented to or approved by or acceptable or satisfactory to the Lender. 13.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 12; provided, however, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. 13.6 Credit Decision. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Company and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and credit worthiness of the Company and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and credit worthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or credit worthiness of the Company which may come into the possession of any of the Agent-Related Persons. 13.7 Indemnification of Agent. Whether or not the transactions contemplated hereby are consummated, the Lenders 43 shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and disbursements of internal counsel) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans or the termination of the Commitments and the termination, resignation or replacement of the Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Agent-Related Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Agent-Related Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any insolvency proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any such indemnified Agent-Related Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, however, that no Lender shall be liable for the payment to the Agent- Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including attorneys' fees and disbursements and the allocated costs of staff counsel) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the payment of the Loans, cancellation of the Notes and any termination of the Commitments or this Agreement and the resignation or replacement of the Agent. 13.8 Agent in Individual Capacity. BofA and its affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Company and its Subsidiaries and affiliates as though BofA were not the Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, BofA or its affiliates may receive information regarding the Company or its affiliates (including information that may be subject to confidentiality obligations in favor of the Company or such Subsidiary) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to 44 its Loans, BofA shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" include BofA in its individual capacity. 13.9 Successor Agent. The Agent may, and at the request of the Required Lenders shall, resign as Agent upon 30 days' notice to the Lenders. If the Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Company, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 13 and Sections 14.6 and 14.7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. 13.10 Withholding Tax. (a) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the Code, such Lender agrees with and in favor of the Agent and the Company (such Lender's "Exemption Agreement"), to deliver to the Agent and the Company: (i) if such Lender claims an exemption from withholding tax under a United States tax treaty, two properly completed and executed copies of IRS Form 1001 before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement; (ii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form 4224 before the payment of any interest is due in the first taxable year of such Lender and in each succeeding taxable year of such Lender during which interest may be paid under this Agreement; and (iii) such other form or forms as may be required under the Code or other laws of the United States 45 as a condition to exemption from, or reduction of, United States withholding tax. Such Lender agrees to promptly notify the Agent and the Company of any change in circumstances which would modify or render invalid any claimed exemption or reduction. (b) If any Lender claims exemption from withholding tax under a United States tax treaty by providing IRS Form 1001 and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the obligations of the Company hereunder to such Lender, such Lender agrees to notify the Agent and the Company of the percentage amount in which it is no longer the beneficial owner of obligations of the Company hereunder to such Lender. To the extent of such percentage amount, the Agent and the Company will treat such Lender's IRS Form 1001 as no longer valid. (c) If any Lender claiming exemption from United States withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the obligations of the Company hereunder to such Lender, such Lender agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code. (d) If the forms or other documentation required by subsection (a) of this Section are not delivered to the Agent, then the Agent may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. (e) If the Internal Revenue Service or any other governmental authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or was not properly executed, or because such Lender failed to notify the Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Agent under this Section, together with all costs and expenses (including attorneys' fees and disbursements and the allocated costs of staff counsel). The obligation of the Lenders under this subsection shall survive the payment of the Loans, cancellation of the Notes and any termination of the Commitments or this Agreement and the resignation or replacement of the Agent. 13.11 Co-Agent. The Lender identified on the facing page and signature pages of, and in the preamble to, this Agreement as a "co- agent" shall not have any right, power, obligation, 46 liability, responsibility or duty under this Agreement or any other Loan Document other than those applicable to all Lenders as such. Without limiting the foregoing, the Lender so identified as a "co-agent" shall not have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on the Lender so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. SECTION 14 GENERAL. 14.1 Waiver; Amendments. No delay on the part of the Agent or any Lender in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective unless the same shall be in writing and signed and delivered by the Agent and signed and delivered by Lenders having an aggregate Percentage of not less than the aggregate Percentage expressly designated herein with respect thereto or, in the absence of such designation as to any provision of this Agreement or the Notes, by the Required Lenders, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent shall (i) extend or increase the amount of the Commitments, (ii) extend the date for payment of any principal of or interest on the Loans or any fees payable hereunder, (iii) reduce the principal amount of any Loan, the rate of interest thereon or any fees payable hereunder, (iv) change the definition of Required Lenders or otherwise reduce the aggregate Percentage required to effect an amendment, modification, waiver or consent or (v) amend this sentence without, in each case, the consent of all Lenders. No provisions of Section 13 shall be amended, modified or waived without the written consent of the Agent. 14.2 Confirmations. The Company and each holder of a Note agree from time to time, upon written request received by it from the other, to confirm to the other in writing (with a copy of each such confirmation to the Agent) the aggregate unpaid principal amount of the Loans then outstanding under such Note. 14.3 Notices. (a) All notices, requests, consents, approvals, waivers and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Company by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on Schedule 14.3, and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, faxed or delivered, to the address or facsimile number specified for notices on Schedule 14.3; or, as directed to the Company or the Agent, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other 47 address as shall be designated by such party in a written notice to the Company and the Agent. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine (and, in the case of notices to or from the Company by facsimile transmission, when receipt is confirmed by confirming transmission equipment or acknowledged by the addressee), respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Section 2 or Section 13 to the Agent shall not be effective until actually received by the Agent. (c) Any agreement of the Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agent and the Lenders shall not have any liability to the Company or other Person on account of any action taken or not taken by the Agent or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agent and the Lenders of a confirmation which is at variance with the terms understood by the Agent and the Lenders to be contained in the telephonic or facsimile notice. 14.4 Subsidiary References. The provisions of this Agreement relating to Subsidiaries shall apply only during such times as the Company has one or more Subsidiaries. 14.5 Regulation U. Each Lender represents that it in good faith is not relying, either directly or indirectly, upon any Margin Stock as collateral security for the extension or maintenance by it of any credit provided for in this Agreement. 14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Agent (including the fees and charges of counsel for the Agent and of local counsel, if any, who may be retained by said counsel, and the allocated costs of staff counsel for the Agent) in connection with the preparation, execution and delivery of this Agreement and all other documents provided for herein or delivered or to be delivered hereunder or in connection herewith (including, without limitation, any amendment, supplement or waiver to this Agreement or any such other document). The Company further agrees to pay all reasonable out-of-pocket costs and expenses (including reasonable attorneys' fees, court costs and other legal expenses and allocated costs of staff counsel) 48 incurred by the Agent and each Lender after the occurrence of an Event of Default in enforcing any right hereunder or in connection with the negotiation of any restructuring or "work-out" (whether or not consummated) of the obligations of the Company hereunder. In addition, the Company agrees to pay, and to save the Agent and the Lenders harmless from all liability for, any stamp, transfer or other similar taxes which may be payable in connection with the execution and delivery of this Agreement, the borrowings hereunder, the issuance of the Notes or the execution and delivery of any other document provided for herein or delivered or to be delivered hereunder or in connection herewith. All obligations provided for in this Section 14.6 shall survive repayment of the Loans, cancellation of the Notes and any termination of the Commitments or this Agreement. 14.7 Indemnification by the Company. In consideration of the execution and delivery of this Agreement by the Agent and the Lenders and the agreement to extend the Commitments provided hereunder, the Company hereby agrees to indemnify, exonerate and hold the Agent, each Lender and each of the officers, directors, employees and agents of the Agent and each Lender (collectively the "Lender Parties" and individually each a "Lender Party") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees and charges and allocated costs of staff counsel (collectively called the "Indemnified Liabilities"), incurred by the Lender Parties or any of them as a result of, or arising out of, or relating to, (i) any tender offer, merger, purchase of stock, purchase of assets or other similar transaction financed or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of any of the Loans, (ii) the use, handling, release, discharge, transportation, storage, treatment or disposal of any "hazardous waste" or "hazardous material" (each as defined in any applicable Environmental Law) at any real property owned or leased by the Company or any Subsidiary or used by the Company or any Subsidiary in its business or operations or (iii) the enforcement of this Agreement or any Note by any of the Lender Parties, except for any such Indemnified Liabilities arising on account of any such Lender Party's bad faith, gross negligence or willful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. All obligations provided for in this Section 14.7 shall survive repayment of the Loans, cancellation of the Notes and any termination of the Commitments or this Agreement. 14.8 Successors and Assigns. This Agreement shall be binding upon the Company, the Lenders and the Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Lenders and the Agent and the successors and assigns of the Lenders and the Agent. The Company may not assign 49 its rights or obligations hereunder without the prior written consent of all Lenders. 14.9 Assignments; Participations. 14.9.1 Assignments. Any Lender may, with the prior written consents of the Company and the Agent (which consents shall not be unreasonably delayed or withheld), at any time assign and delegate to one or more commercial banks or other financial institutions (any Person to whom such an assignment and delegation is to be made being herein called an "Assignee"), all or any fraction of such Lender's Loans and Commitment (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lender's Loans) in a minimum aggregate amount equal to the lesser of (i) the assigning Lender's remaining Commitment and (ii) $10,000,000; provided, however, that (a) no assignment and delegation may be made to any Person if, at the time of such assignment and delegation, the Company would be obligated to pay any greater amount under Section 7.6 or Section 8 to the Assignee than the Company is then obligated to pay to the assigning Lender under such Section and (b) the Company and the Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee until the date when all of the following conditions shall have been met: (x) five Business Days (or such lesser period of time as the Agent and the assigning Lender shall agree) shall have passed after written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee, shall have been given to the Company and the Agent by such assigning Lender and the Assignee, (y) the assigning Lender and the Assignee shall have executed and delivered to the Company and the Agent an assignment agreement substantially in the form of Exhibit D (an "Assignment Agreement"), together with any documents required to be delivered thereunder, which Assignment Agreement shall have been accepted by the Agent and the Company, and (z) the assigning Lender or the Assignee shall have paid the Agent a processing fee of $2,500. From and after the date on which the conditions described above have been met, (x) such Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder, and (y) the assigning Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it pursuant to such Assignment Agreement, shall be released from its obligations hereunder. Within five Business Days after effectiveness of any 50 assignment and delegation, the Company shall execute and deliver to the Agent (for delivery to the Assignee and the Assignor, as applicable) a new Note in the principal amount of the Assignee's Commitment and, if the assigning Lender has retained a Commitment hereunder, a replacement Note in the principal amount of the Commitment retained by the assigning Lender (such Note to be in exchange for, but not in payment of, the predecessor Note held by such assigning Lender). Each such Note shall be dated the effective date of such assignment. The assigning Lender shall mark the predecessor Note "exchanged" and deliver it to the Company. Accrued interest on that part of the predecessor Note being assigned shall be paid as provided in the Assignment Agreement. Accrued interest and fees on that part of the predecessor Note not being assigned shall be paid to the assigning Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Note and in this Agreement. Any attempted assignment and delegation not made in accordance with this Section 14.9.1 shall be null and void. Notwithstanding the foregoing provisions of this Section 14.9.1 or any other provision of this Agreement, any Lender may at any time assign all or any portion of its Loans and its Note to a Federal Reserve Bank (but no such assignment shall release any Lender from any of its obligations hereunder). 14.9.2 Participations. Any Lender may at any time sell to one or more commercial banks or other Persons participating interests in any Loan owing to such Lender, the Note held by such Lender, the Commitment of such Lender or any other interest of such Lender hereunder (any Person purchasing any such participating interest being herein called a "Participant"). In the event of a sale by a Lender of a participating interest to a Participant, (x) such Lender shall remain the holder of its Note for all purposes of this Agreement and (y) the Company and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations hereunder. No Participant shall have any direct or indirect voting rights hereunder (except that a Lender may grant a Participant rights with respect to any of the events described in the penultimate sentence of Section 14.1). The Company agrees that if amounts outstanding under this Agreement and the Notes are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement or such Note; provided that such right of setoff shall be subject to the obligation of each Participant to share with the Lenders, and the Lenders agree to share with each Participant, as provided in Section 7.5. The Company also agrees that each Participant shall be entitled to the benefits of Section 7.6 and Section 8 as if it were a Lender (provided that no Participant shall receive any greater compensation pursuant to 51 such Sections than would have been paid to the participating Lender if no participation had been sold). 14.10 Governing Law. This Agreement and each Note shall be a contract made under and governed by the laws of the State of California applicable to contracts made and to be performed entirely within the State of California; provided that the Agent and the Lenders shall retain all rights arising under federal law. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. All obligations of the Company and rights of the Agent and the Lenders expressed herein or in the Notes shall be in addition to and not in limitation of those provided by applicable law. 14.11 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. When counterparts executed by all of the parties hereto shall have been lodged with the Agent (or, in the case of any Lender as to which an executed counterpart shall not have been so lodged, the Agent shall have received confirmation from such Lender of execution of a counterpart hereof by such Lender), this Agreement shall become effective as of the date hereof, and at such time the Agent shall notify the Company and each Lender. 14.12 Effect of Amendment and Restatement. (a) This Agreement is intended to completely amend, restate and replace the Existing Credit Agreement, without novation. The Company and the Lenders party to the Existing Credit Agreement agree that from and after the Effective Date, BAI in its capacity as agent under the Existing Credit Agreement shall relinquish its rights and be released from its duties and obligations as agent thereunder and under any documents or instruments given in connection therewith; provided, however, that the provisions of Section 13 of the Existing Credit Agreement and Sections 14.6 and 14.7 of the Existing Credit Agreement shall inure to the benefit of BAI as to any actions taken or omitted to be taken by it while it was agent thereunder. (b) Concurrently with the Effective Date, BAI shall cease to be a "Lender" under and for all purposes of this Agreement and shall no longer have any rights or obligations hereunder, except for (i) rights to receive payment of indemnities, reimbursements and other similar obligations and (ii) obligations to indemnify, reimburse or make payment to the Agent, any Lender or the Company with respect to actions, failures to act, conditions, circumstances or events, in either 52 case arising under the Existing Credit Agreement on or prior to the Restatement Effective Date. 14.13 Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR NOTE, MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF CALIFORNIA OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF CALIFORNIA. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 14.14 Waiver of Jury Trial. THE COMPANY, THE LENDERS AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT- RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 14.15 OREGON LEGAL NOTICE. WITHOUT LIMITING THE VALIDITY OF THE CHOICE OF CALIFORNIA LAW PROVIDED HEREIN, UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE LENDERS AFTER THE EFFECTIVE DATE OF THE ACT SPECIFIED HEREIN CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY THE LENDERS TO BE ENFORCEABLE. THE ACT SPECIFIED HEREIN MEANS CHAPTER 967 OREGON LAWS 1989, THE EFFECTIVE DATE OF WHICH WAS OCTOBER 3, 1989. 53 Delivered at San Francisco, California, as of the day and year first above written. FRED MEYER, INC. By /s/ ------------------------------- Vice President and Corporate Treasurer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ ------------------------------- Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender By /s/ STEVEN F. STERLING ------------------------------- Title Vice President THE BANK OF NOVA SCOTIA, as co-agent and as a Lender By /s/ ------------------------------- Title Relationship Manager BANQUE NATIONALE DE PARIS By /s/ JUDITH A. DOWLING ------------------------------- Title Vice President By /s/ KATHERINE WOLFE ------------------------------- Title Vice President 54 CIBC Inc. By /s/ ------------------------------- Title Assistant Vice President COOPERATIVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND" NEW YORK BRANCH By /s/ JESSALYN PETERS ------------------------------- Title Vice President By /s/ JAN REECE ------------------------------- Title Vice President and Manager CREDIT LYONNAIS CAYMAN ISLAND BRANCH By /s/ ------------------------------- Title Authorized Signatory CREDIT LYONNAIS LOS ANGELES BRANCH By /s/ ------------------------------- Title Vice President CREDIT SUISSE By /s/ STEPHEN M. FLYNN ------------------------------- Title Member of Senior Management By /s/ MARILOU PALENZUELA ------------------------------- Title Member of Senior Management 55 FIRST INTERSTATE BANK OF OREGON, N.A. By /s/ MARCIA BENNER ------------------------------- Title Vice President By ------------------------------- Title ---------------------------- FIRST SECURITY BANK OF UTAH, N.A. By /s/ JUDY CALLISTER ------------------------------- Title VICE PRESIDENT By ------------------------------- Title ---------------------------- KEY BANK OF WASHINGTON By /s/ ------------------------------- Title VICE PRESIDENT NATIONSBANK OF TEXAS, N.A. By /s/ WILLIAM B. GUFFEY ------------------------------- Title Vice President By ------------------------------- Title ---------------------------- SEATTLE FIRST NATIONAL BANK By /s/ ------------------------------- Title Vice President By ------------------------------- Title ---------------------------- 56 THE BANK OF CALIFORNIA, N.A. By /s/ ------------------------------- Title Assistant Vice President By ------------------------------- Title ---------------------------- THE BANK OF NEW YORK By /s/ CHARLOTTE SOH ------------------------------- Title Assistant Vice President By ------------------------------- Title ---------------------------- THE BANK OF TOKYO, LTD. PORTLAND BRANCH By /s/ ------------------------------- Title Vice President THE FUJI BANK, LTD. By /s/ ------------------------------- Title Joint General Manager By ------------------------------- Title ---------------------------- THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED By /s/ ------------------------------- Title Vice President By ------------------------------- Title ---------------------------- 57 THE INDUSTRIAL BANK OF JAPAN, LTD., SAN FRANCISCO AGENCY By /s/ ------------------------------- Title General Manager UNION BANK By /s/ ------------------------------- Title Vice President UNITED STATES NATIONAL BANK OF OREGON By /s/ ------------------------------- Title Vice President By ------------------------------- Title ---------------------------- WEST ONE BANK, IDAHO By /s/ ------------------------------- Title Vice President By ------------------------------- Title ---------------------------- Acknowledged: BANK OF AMERICA ILLINOIS By /s/ - ------------------------------- Title Vice President S-I SCHEDULE I COMMITMENTS AND PERCENTAGES Lender Commitment Percentage - ------ ---------- ---------- [BankAmerica Corporation- affiliated Lenders] Bank of America National Trust and Savings Association $45,000,000 9.00% Seattle First National Bank 20,000,000 4.00 ---------- ----- [65,000,000] [13.00] The Bank of Nova Scotia 60,000,000 12.00 Banque Nationale de Paris 15,000,000 3.00 CIBC Inc. 10,000,000 2.00 Cooperative Centrale Raiffeisen- Boerenleenbank B.A., "Rabobank Nederland" New York Branch 25,000,000 5.00 Credit Lyonnais Cayman Island Branch and Credit Lyonnais Los Angeles Branch 15,000,000 3.00 Credit Suisse 15,000,000 3.00 First Interstate Bank of Oregon, N.A. 50,000,000 10.00 First Security Bank of Utah, N.A. 15,000,000 3.00 Key Bank of Washington 15,000,000 3.00 NationsBank of Texas, N.A. 50,000,000 10.00 The Bank of California, N.A. 15,000,000 3.00 The Bank of New York 20,000,000 4.00 The Bank of Tokyo, Ltd. Portland Branch 30,000,000 6.00 The Fuji Bank, Ltd. 15,000,000 3.00 The HongKong and Shanghai Banking Corporation Limited 15,000,000 3.00 The Industrial Bank of Japan, Ltd., San Francisco Agency 15,000,000 3.00 Union Bank 5,000,000 1.00 United States National Bank of Oregon 30,000,000 6.00 West One Bank, Idaho 20,000,000 4.00 ----------- ------ TOTAL $500,000,000 100.00% =========== ====== EX-10.T 3 EXHIBIT 10T EXHIBIT 10T CONFORMED COPY FRED MEYER EXCESS DEFERRAL AND BENEFIT EQUALIZATION PLAN 1994 RESTATEMENT January 1, 1994 Fred Meyer, Inc. an Oregon corporation PO Box 42121 Portland, Oregon 97242 Fred Meyer i TABLE OF CONTENTS Section Page - ------- ---- 1. Purposes; Administration; Plan Year.................................. 1 2. Eligibility.......................................................... 1 3. Compensation Deferral................................................ 2 4. Basic and Matching Contribution Credits.............................. 3 5. Deferred Compensation Account; Vesting............................... 5 6. Irrevocable Trust.................................................... 6 7. Time and Manner of Payment........................................... 7 8. Withdrawals.......................................................... 8 9. Death or Disability.................................................. 9 10. Termination; Amendment...............................................11 11. Claims Procedure.....................................................11 12. General Provisions...................................................12 13. Effective Date.......................................................13 FRED MEYER EXCESS DEFERRAL AND BENEFIT EQUALIZATION PLAN 1994 Restatement January 1, 1994 Fred Meyer, Inc. an Oregon corporation PO Box 42121 Portland, Oregon 97242 Fred Meyer 1. Purposes; Administration; Plan Year 1.1 This plan is adopted to permit eligible employees of Employers to defer a portion of what would otherwise be current compensation in amounts exceeding the elective deferrals allowed under the Fred Meyer Profit Sharing Plan (the Profit Sharing Plan). The plan will also allow Employers to provide deferred compensation credits for cut-backs in eligible employees' basic and matching contributions under the Profit Sharing Plan because of legal limits. The plan shall apply to Fred Meyer and affiliates of Fred Meyer designated by the Committee (see below). The term "Employer" refers to Fred Meyer and all designated affiliates. 1.2 This plan shall be administered by a Compensation Committee appointed by the Chair of the Board of Directors of Fred Meyer. The Committee shall interpret the plan and make determinations about participation and benefits. Any decision by the Committee within its authority shall be final and binding on all parties. The Committee may delegate all or part of its authority. 1.3 The plan year shall be a calendar year. 2. Eligibility 2.1 An employee of an Employer shall be eligible to participate for a plan year if the employee is designated by the Committee to participate in the plan. 2.2 An employee eligible under 2.1 shall automatically participate in Basic Contribution Credits starting with the first plan year of eligibility for Basic Contributions under the Profit Sharing Plan. 2 2.3 An employee eligible under 2.1 may participate in elective deferrals and related matching credits by filing a deferral election as follows: (a) An employee who is eligible on the effective date of the plan or who later becomes eligible during a year may participate with respect to future compensation by filing an election within 30 days after being notified of eligibility by the Committee. (b) Except as provided in (a), an election for a year must be filed before the start of the year. 2.4 A person having an Account under the plan shall be known as a participant. 3. Compensation Deferral 3.1 An eligible employee may elect for each plan year (or part plan year under 2.3(a)) to defer a portion of regular compensation paid for the year or part year as follows: (a) The amount deferred may be expressed as a dollar amount, a percentage of regular salary or bonus or a percentage of bonus over a certain dollar amount. The minimum deferral shall be $100 per month. (b) An expressed percentage shall apply to any pay changes in the year. A stated dollar amount shall not be affected by pay changes. Separate percentages or dollar amounts may be stated for salary and bonuses. (c) A bonus deferral shall be governed by the election for the year for which the bonus is payable, not the year in which the bonus is paid. (d) The maximum deferral for any year will be 50 percent of regular salary and 100 percent of bonus pay before reductions for contributions under this plan or the Profit Sharing Plan. The amount deferred shall be offset by the maximum elective deferral the employee could make under the Profit Sharing Plan, after reduction to comply with the annual dollar limit on elective deferrals, the actual deferral percentage test, the limit on annual additions and adjustments to avoid top-heavy status. 3 3.2 Deferral elections under the plan shall be made in writing to the Committee on a form provided for that purpose. Elections shall be effective as follows: (a) An election by a person first becoming eligible for participation shall be effective for the year the participant becomes eligible if made within 30 days after notice of eligibility. (b) Except as provided in (a), an election shall be effective for the plan year starting after the plan year in which the election is received by the Committee. An election shall be irrevocable for the first plan year for which it is effective. (c) An election may be effective indefinitely or for one or more years as specified in the election. A new election is required to continue deferrals after an election expires. A continuing election may be revoked or changed by a new election under (b). 4. Basic and Matching Contribution Credits 4.1 Under the Profit Sharing Plan, Employer makes a Basic Contribution and a Matching Contribution for participants each year as follows: (a) The amounts are fixed by the Board of Directors of Fred Meyer each year. (b) The Basic Contribution is allocated among participants in proportion to covered compensation under the Profit Sharing Plan. (c) The Matching Contribution is allocated among participants in proportion to their elective deferrals up to 5 percent of compensation. 4.2 Basic or Matching Contributions for a participant under the Profit Sharing Plan may be reduced in any year as follows: (a) Basic Contributions may be reduced because of one or more of the following reasons: (1) The limit under Code section 401(a)(17) on compensation considered for allocations. 4 (2) The limit under Code section 415 on annual additions. (3) An adjustment to avoid top-heavy status. (4) Deferral of compensation under this plan. (b) Matching Contributions may be reduced because the participant may be prevented from making elective deferrals under the Profit Sharing Plan of 5 percent of compensation due to ineligibility or due to the annual dollar limit on elective deferrals, the actual deferral percentage test, the limit on annual additions or an adjustment to avoid top-heavy status. 4.3 If Basic or Matching Contributions, or both, are reduced under 4.2 in any year for an employee eligible to participate under 2.1, the participant shall receive a corresponding credit or credits to the participant's Account in this plan as follows: (a) The Matching Contribution credit shall equal the additional Matching Contribution, if any, the participant would have been allocated under the Profit Sharing Plan if the amounts deferred under this plan had been allowed as elective deferrals under the Profit Sharing Plan. The amount credited shall be controlled by the deferral election under 3.2 in effect for the year to which the Matching Contribution relates. (b) The Basic Contribution Credit shall equal the amount of Basic Contribution reduction for the participant for the year under 4.2(a). (c) The Basic or Matching Contribution credit shall be reserved by Employer or paid to the trust under 6 below at a time fixed by the Committee. Amounts shall be credited for accounting and guideline investment purposes when paid or reserved. (d) For a year of participation because of ineligibility for the Profit Sharing Plan, Basic and Matching Contribution credits shall not be made for anyone below the level of senior vice president. 4.4 Basic and Matching Contribution credits under 4.2 shall be recorded, adjusted for investment guideline credits and paid out in accordance with this plan. 5 5. Deferred Compensation Account; Vesting 5.1 As of the first of each four-week accounting period, Employer shall credit the amount deferred for that four-week accounting period pursuant to the participants' election. 5.2 Employer shall credit to a participant's Account any Basic or Matching Contribution credit at the time specified in 4.3(c). 5.3 Employer shall make guideline investment credits to each participant's Account, until the entire Account has been paid out, as follows: (a) The Committee shall establish guideline investment funds with investment objectives fixed by the Committee. The guideline funds may parallel the investment funds created under the Profit Sharing Plan, available under any insurance policy or policies purchased by the Company in connection with this plan or available under any irrevocable trust established under Section 6, below. (b) Each participant shall, under procedures established by the Committee, elect the guideline fund or funds for the participant's Accounts under this plan, including amounts attributable to Basic and Matching Contribution Credits. In the absence of a proper election, a balanced guideline fund will be used. Participant elections may be changed at such times and subject to such limits as may be fixed by the Committee. (c) The Committee shall adjust all Accounts in accordance with the elected guidelines at a time as close as reasonably practicable to the time that participant accounts are adjusted under the Profit Sharing Plan. For this purpose, Accounts shall be treated as though Basic and Matching Contribution Credits had been made at the times as of which such contributions would have been credited to participant's accounts if made under the Profit Sharing Plan. (d) When an Account is in pay status, the Committee may require use of a cash equivalent guideline fund to the extent necessary to allow more frequent adjustments to coincide with the timing of pay distributions. 6 5.4 Each participant's Account shall be maintained on the books of the Employer until full payment has been made to the participant or beneficiaries under Sections 7 and 8 and the following shall apply subject to 6.3: (a) Employer shall not be obligated to set aside or earmark any funds for the Account, which shall be purely a bookkeeping device. (b) All amounts of deferred compensation under this plan shall remain at all times the unrestricted assets of the Employer, and the promise to pay the deferred amounts shall at all times remain unfunded as to the participants. 5.5 A participant's Account, including Basic and Matching Contribution credits, shall be 100 percent vested at all times whether or not the participant is fully vested in all accounts under the Profit Sharing Plan. 5.6 Amounts deferred or credited as Basic or Matching Contribution credits are treated as wages for FICA and FUTA taxes and withholding as follows: (a) Subject to (b) and (c), required withholding shall be imposed on other current pay of the participant, not on the amount deferred or otherwise credited. (b) A participant may, under rules of the Committee, elect to have any required withholding satisfied by reducing the credits under this plan or by direct payment by the participant. (c) If the participant's other current pay is insufficient to cover the required withholding, the difference shall be satisfied from the amount otherwise credited unless timely paid by the participant under Committee rules. (d) Guideline investment credits are not subject to FICA or FUTA tax or withholding. 6. Irrevocable Trust 6.1 Employer may but shall not be required to establish an irrevocable trust to assume the liabilities to participants in certain circumstances, and may transfer cash to such a trust. 6.2 If Employer creates a trust under 6.1 above, assets transferred to the trust shall be invested as follows: 7 (a) Investment of such assets shall be at the absolute discretion of the Committee, the trustee, or both on a shared basis, as provided in the trust. (b) The guideline investment funds under 5.3 shall be purely for measuring the amount of time-value credits. (c) Neither employer nor the trustee shall be required to invest in such funds in accordance with participants' elections. Employer and the trustee may, however, choose, in their discretion, to invest in the elected guideline funds in accordance with the elections, and shall incur no liability for doing so. 6.3 The trust under 6.1 shall be a grantor's trust and all assets held in trust shall be assets of Employer subject to the trust terms. All assets of the trust shall at all times be subject to the claims of creditors of Employer in circumstances described in the trust. Participants will not receive a vested priority interest in the trust assets ahead of such creditors. Participants' interests in the trust will be governed by the trust terms at all times. 7. Time and Manner of Payment 7.1 Subject to 7.3 and 8.1 a participant's Payment Date shall be one of the following as selected under 7.3: (a) The date the participant terminates employment under 7.5 for any reason. (b) The date the participant has terminated employment under 7.5 and has reached an age up to 70 specified in the deferral election. 7.2 A participant's Account shall be paid in one of the following ways as selected under 7.3 and 7.4: (a) In a lump sum within 30 days after the Payment Date. (b) In a lump sum within 30 days after the January 1 following the Payment Date. (c) In installments under 7.4 over a period up to 10 years starting the first of the month after the Payment Date. 8 (d) In installments under 7.4 over a period up to 10 years, starting the January 1 following the Payment Date. 7.3 In the deferral election a participant shall select the Payment Date under 7.1 and the form of payment under 7.2. The selection shall be irrevocable for the portion of the Account attributable to amounts deferred under the election. If different selections are made in deferral elections applicable to different years, the Account shall be appropriately divided for distribution. 7.4 If installments are selected, the payout period shall be specified in the deferral election. The installment size shall be fixed on the benefit starting date and each later January 1 as though equal installments were to be paid for the balance of the payment period including investment guideline credits at a rate estimated as of the date of calculation. Installments may be monthly, quarterly or annually, as elected by the participant at termination. If participant fails to make an election within 30 days after notification that an election must be made, installment payments shall automatically be made on an annual basis. 7.5 A participant terminates employment when no longer employed by an Employer or an affiliate of an Employer. An affiliate is a corporation or other entity that has been designated an affiliate for this purpose by the Committee. 7.6 The Employer may withhold from any payments any income tax or other amounts as required by law. Payments are generally not subject to FICA or FUTA tax or related withholding. 8. Withdrawals 8.1 A participant may withdraw amounts from the Account before the Payment Date as follows: (a) Upon approval of the Committee, up to 100 percent of the amount reasonably necessary to meet an unforeseeable emergency under 8.2, as determined by the Committee. (b) At the participant's option, 100 percent of the Account balance less a forfeiture of 10 percent of the amount withdrawn. The participant shall be permanently ineligible to participate after a forfeiture withdrawal. 8.2 "Unforseen emergency" means a participant's severe financial hardship that cannot be met from other reasonably available resources and is caused by one or more of the following: 9 (a) Illness or accident of the participant or a dependent under Internal Revenue Code section 152(a). (b) Loss of the participant's property due to casualty. (c) Other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant. 8.3 Other resources are reasonably available if assets can be liquidated without that itself creating severe financial hardship, if insurance or other reimbursement is available, or if deferrals under this plan can be stopped. 8.4 The Committee shall establish guidelines and procedure for implementing withdrawals. An application for withdrawal shall be written, shall be signed by the participant and shall include the following: (a) For hardship withdrawal, a statement of the facts causing the financial hardship and any other facts as may be required by the Committee. (b) For forfeiture withdrawal, an acknowledgement of the forfeiture and future ineligibility. 8.5 The withdrawal date shall be fixed by the Committee. The Committee may require a minimum advance notice and may limit the amount, time and frequency of withdrawals. 8.6 Amounts forfeited under 8.1(b) shall be applied at the first opportunity to offset contributions by Employer that may otherwise be payable to a trust created under 6.1. 9. Death or Disability 9.1 A Participant's Account shall be payable under this Section on the participant's death or disability regardless of the provisions of Section 7. 9.2 On death the Account shall be paid under 9.3 within 30 days as follows: (a) If the recipient is the surviving spouse and the participant had selected installment pay out, by installments in accordance with the selection. (b) In all other cases, by a lump sum. 10 9.3 An amount payable on death of a participant shall be paid to the participant's beneficiary in the following order of priority: (a) To the surviving beneficiaries designated by the participant in writing to the Committee. (b) To the surviving beneficiaries designated by the participant to receive death benefits under the Profit Sharing Plan. (c) To the participant's surviving spouse. (d) To the participant's surviving children in equal shares. (e) To the participant's estate. 9.4 If a surviving spouse is receiving installments and dies when a balance remains, the balance shall be paid in a lump sum to the spouse's estate. 9.5 If a participant is temporarily disabled while employed or is receiving long-term disability benefits under a plan described in 9.6 the following shall apply: (a) The participant shall be treated as employed until age 65, and no payments will be made from the Account before age 65 except as provided below. (b) If disability benefits stop and disability continues, the Account shall be paid in accordance with the election under Section 7. (c) If the participant dies, the provisions applicable to death shall be followed. (d) If the participant ceases to be disabled and does not resume employment, the provisions applicable to termination shall be followed. 9.6 A participant is disabled if the Committee determines that either of the following applies: 11 (a) The participant is eligible to receive long-term disability benefits under a plan maintained by the Employer or an affiliate or would have been eligible if covered by the plan. (b) In the absence of a plan under (a), the participant is permanently and totally disabled on the basis of criteria established by the Committee. 10. Termination; Amendment 10.1 The Committee may terminate this plan effective the first day of any month after notice to the participants or earlier as provided in 12.4. On termination the following shall apply except as provided in 10.3: (a) Amounts deferred through the last month before the effective date of termination shall remain deferred and be credited to the Accounts in accordance with the plan. (b) Deferral elections shall terminate as of the effective date of termination, and no further deferrals shall be allowed. (c) Amounts in an Account shall remain to the credit of the Account, shall continue to receive investment guideline credits and shall be paid out in accordance with Sections 7, 8 and 9. 10.2 The Committee may amend this plan effective the first day of any month by notice to the participants. An amendment may be retroactive within the plan year in which notice is given except that the right of participants to defer compensation may not be reduced for the portion of the plan year through the month in which the notice is given. 10.3 If the Internal Revenue Service issues a final ruling that any amounts deferred under this plan will be subject to current income tax, all amounts to which the ruling is applicable shall be paid to the participants within 30 days. 11. Claims Procedure 11.1 Any person claiming a benefit, requesting an interpretation or ruling under the plan, or requesting information under the plan shall present the request in writing to the Committee, which shall respond in writing as soon as practicable. 11.2 If the claim or request is denied, the written notice of denial shall state: 12 (a) The reasons for denial, with specific reference to the plan provisions on which the denial is based. (b) A description of any additional materials or information required and an explanation of why it is necessary. 11.3 The initial notice of denial shall normally be given within 90 days after receipt of the claim. If special circumstances require an extension of time, the claimant shall be so notified and the time limit shall be 180 days. 11.4 Any person whose claim or request is denied or who has not received a response within 30 days may request review by notice in writing to the Committee. The original decision shall be reviewed by the Committee which may, but shall not be required to, grant the claimant a hearing. On review, whether or not there is a hearing, the claimant may have representation, examine pertinent documents and submit issues and comments in writing. 11.5 The decision on review shall ordinarily be made within 60 days. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be 120 days. The decision shall be in writing and shall state the reasons and the relevant plan provisions. Subject to 11.6, all decisions on review shall be final and bind all parties concerned. 11.6 If Employer creates a trust under 6.1, a decision of the Committee shall be subject to review by the Trustee to the extent provided for under the trust. 12. General Provisions 12.1 If suit or action is instituted to enforce any rights under this plan, the prevailing party may recover from the other party reasonable attorneys' fees at trial and on any appeal. 12.2 Any notice or directions under this plan shall be in writing and shall be effective when actually delivered or, if mailed, when deposited postage prepaid as first class. Mail shall be directed to Fred Meyer at the address stated in this plan, to the participant at the address stated in the deferral election or to such other address as a party may specify by notice to the other parties. Notices to an Employer or the Committee shall be sent to Fred Meyer's address. 12.3 The rights of a participant under this plan are personal. Except for the limited provisions of 9.3 and 12.5, no interest of a participant or any beneficiary or representative of a participant may be directly or indirectly transferred, encumbered, seized by legal process or in any other way subjected to the claims of any creditor. 13 12.4 If an Employer merges, consolidates, or otherwise reorganizes or if its assets or business are acquired by another company, this plan shall continue with respect to those eligible employees who continue in the employ of the successor company. The transition of Employers shall not be considered a termination of employment for purposes of this plan. In such an event, however, a successor corporation may terminate this plan as to its employees on the effective date of the succession by notice to eligible employees within 30 days after the succession. 12.5 The Committee may decide that because of the mental or physical condition of a person entitled to payments, or because of other relevant factors, it is in the person's best interest to make payments to others for the benefit of the person entitled to payment. In that event the Committee may in its discretion direct that payments be made to one or more of the following: (a) To a parent or spouse or a child of legal age. (b) To a legal guardian. (c) To one furnishing maintenance, support, or hospitalization. 13. Effective Date This Restatement shall be effective as follows: (a) The general effective date shall be January 1, 1994. (b) The change in maximum deferral under 3.1(d) shall apply to deferrals after December 31, 1995. Adopted July 20, 1995. Fred Meyer, Inc. By KENNETH THRASHER, SR VP ------------------------------ Executed November 22, 1995 EX-10.U 4 EXHIBIT 10U EXHIBIT 10U - ------------------------------------------------------------------------------- LEASE AGREEMENT (Tax Retention Operating Lease) Dated as of May 5, 1995 between FIRST SECURITY BANK OF UTAH, N.A., not individually, but solely as Owner Trustee under the FM Trust 1995-1, as Lessor and FRED MEYER, INC., as Lessee - ------------------------------------------------------------------------------- This Lease Agreement is subject to a security interest in favor of NationsBank of Texas, N.A., as Administrative Agent (the "Agent") under a Credit Agreement dated as of May 5, 1995, among First Security Bank of Utah, N.A., not individually except as expressly stated therein, but solely as Owner Trustee under the FM Trust 1995-1, the Lenders and the Agent, as amended, modified, supplemented, restated and/or replaced from time to time. This Lease Agreement has been executed in several counterparts. To the extent, if any, that this Lease Agreement constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), the counterpart of this Lease Agreement containing the receipt therefore executed by the Agent on the signature page hereof shall be deemed the only original counterpart hereof. i TABLE OF CONTEXTS ARTICLE I ......................................................... 1 1.1 Definitions.............................................. 1 1.2 Interpretation........................................... 1 ARTICLE II ......................................................... 2 2.1 Property................................................. 2 2.2 Lease Term............................................... 2 2.3 Title.................................................... 2 2.4 Lease Supplements........................................ 2 ARTICLE III ......................................................... 2 3.1 Rent..................................................... 2 3.2 Payment of Basic Rent.................................... 3 3.3 Supplemental Rent........................................ 3 3.4 Performance on a Non-Business Day........................ 3 3.5 Rent Payment Provisions.................................. 4 ARTICLE IV ......................................................... 4 4.1 Utility Charges.......................................... 4 ARTICLE V ......................................................... 4 5.1 Quiet Enjoyment.......................................... 4 5.2 Transfers by Lessor; Lessor Liens........................ 4 ARTICLE VI ......................................................... 5 6.1 Net Lease................................................ 5 6.2 No Termination or Abatement.............................. 5 ARTICLE VII ......................................................... 6 7.1 Ownership of the Property................................ 6 ARTICLE VII ......................................................... 7 8.1 Condition of the Property................................ 7 8.2 Possession and Use of the Property....................... 7 ARTICLE IX ......................................................... 8 9.1 Compliance With Legal Requirements and Insurance Requirements................................... 8 ARTICLE X ......................................................... 9 10.1 Maintenance and Repair; Return........................... 9 10.2 Environmental Inspection................................. 10 ARTICLE XI ......................................................... 10 11.1 Modifications, Substitutions and Replacements............ 10 ARTICLE XII ......................................................... 11 12.1 Warranty of Title........................................ 11 ARTICLE XIII ......................................................... 12 13.1 Permitted Contests Other Than in Respect of Indemnities........................................... 12 ii ARTICLE XIV ......................................................... 13 14.1 Public Liability and Workers' Compensation Insurance................................................ 13 14.2 Hazard and Other Insurance............................... 13 14 3 Coverage................................................. 14 ARTICLE XV ......................................................... 15 15.1 Casualty and Condemnation................................ 15 15.2 Environmental Matter..................................... 17 15.3 Notice of Environmental Matters.......................... 17 ARTICLE XVI ......................................................... 18 16.1 Termination Upon Certain Events.......................... 18 16.2 Procedures............................................... 18 ARTICLE XVI ......................................................... 18 17.1 Lease Events of Default.................................. 18 17.2 Surrender of Possession.................................. 22 17.3 Reletting................................................ 22 17.4 Damages.................................................. 22 17.5 Power of Sale............................................ 23 17.6 Final Liquidated Damages................................. 23 17.7 Lessee's Purchase Option During Default.................. 24 17.8 Waiver of Certain Rights................................. 24 17.9 Assignment of Rights Under Contracts..................... 24 17.10 Remedies Cumulative...................................... 24 ARTICLE XVIII ......................................................... 25 18.1 Lessor's Right to Cure Lessee's Lease Defaults........... 25 ARTICLE XIX ......................................................... 25 19.1 Provisions Relating to Lessee's Exercise of its Purchase Option...................................... 25 19.2 No Termination With Respect to Less than All of a Property............................................ 25 ARTICLE XX ......................................................... 26 20.1 Purchase Options......................................... 26 20.2 Expiration Date Purchase or Sale Option.................. 27 20.3 Lessor's Transfer Option................................. 27 ARTICLE XXI ......................................................... 28 21.1 Renewal.................................................. 28 ARTICLE XXII ......................................................... 28 22.1 Sale Procedure........................................... 28 22.2 Application of Proceeds of Sale.......................... 30 22.3 (intentionally omitted).................................. 30 22.4 (intentionally omitted).................................. 30 22.5 Certain Obligations Continue............................. 31 22.6 Sale of Undeveloped Pads................................. 31 ARTICLE XXIII ......................................................... 31 23.1 Holding Over............................................. 31 iii ARTICLE XXIV ......................................................... 32 24.1 Risk of Loss............................................. 32 ARTICLE XXV ......................................................... 32 25.1 Assignment............................................... 32 25.2 Subleases................................................ 32 ARTICLE XXVI ......................................................... 33 26.1 No Waiver................................................ 33 ARTICLE XXVII ......................................................... 33 27.1 Acceptance of Surrender.................................. 33 27.2 No Merger of Title....................................... 33 ARTICLE XXVIII......................................................... 34 28.1 Incorporation of Covenants............................... 34 ARTICLE XXIX ......................................................... 34 29.1 Notices.................................................. 34 ARTICLE XXX ......................................................... 35 30.1 Miscellaneous............................................ 35 30.2 Amendments and Modifications............................. 36 30.3 Successors and Assigns................................... 36 30.4 Headings and Table of Contents........................... 36 30.5 Counterparts............................................. 36 30.6 GOVERNING LAW............................................ 36 30.7 Calculation of Rent...................................... 36 30.8 Memoranda of Lease and Lease Supplements................. 36 30.9 Allocations between the Lenders and the Holder........... 36 30.10 Limitations on Recourse.................................. 37 30.11 Estoppel Certificates.................................... 37 30.12 Decision Making by Parties............................... 37 30.13 Limited Power of Attorney................................ 37 30.14 Submission To Jurisdiction; Waivers...................... 38 30.15 WAIVERS OF JURY TRIAL.................................... 39 EXHIBITS - -------- EXHIBIT A - Lease Supplement No. ___ EXHIBIT B-1 - Memorandum of Lease and Lease Supplement EXHIBIT B-2 - Memorandum of Lease LEASE AGREEMENT --------------- (Tax Retention Operating Lease Agreement) THIS LEASE AGREEMENT (Tax Retention Operating Lease) (this "Lease"), dated as of May 5, 1995, is between FIRST SECURITY BANK OF UTAH, N.A., a national banking association, having its principal office at 79 South Main Street, Salt Lake City, Utah 84111, not individually, but solely as Owner Trustee under the FM Trust 1995-1, as lessor (the "Lessor"), and FRED MEYER, INC., a Delaware corporation, having its principal place of business at 3800 S.E. 22nd Avenue, Portland, Oregon 97202, as lessee (the "Lessee") W I T N E S S E T H: - - - - - - - - - - A. WHEREAS, subject to the terms and conditions of the Agency Agreement, Lessor will (i) purchase or ground lease various parcels of real property, some of which will have existing Improvements thereon, from one or more third parties designated by Lessee and (ii) fund the development, refurbishment and construction by the Construction Agent of Improvements on such real property; and B. WHEREAS, the Basic Term shall commence with respect to each Property on the Basic Term Commencement Date described in Section 2.2 hereof; and C. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to lease from Lessor, each Property; NOW, THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I 1.1 Definitions. Capitalized terms used but not otherwise defined in this Lease have the respective meanings specified in Appendix A to the Participation Agreement of even date herewith (as such may be amended, modified, supplemented, restated and/or replaced from time to time, the "Participation Agreement") among the Lessee, the Construction Agent, First Security Bank of Utah, N.A., not individually, except as expressly stated therein, as Owner Trustee under the FM Trust 1995-1, the Holder, the Lenders and the Agent. 1.2 Interpretation. The rules of usage set forth in Appendix A to the Participation Agreement shall apply to this Lease. 2 ARTICLE II 2.1 Property. Subject to the terms and conditions hereinafter set forth and contained in the respective Lease Supplement relating to each Property, Lessor hereby leases to Lessee and Lessee hereby leases from Lessor, each Property. 2.2 Lease Term. The term of this Lease with respect to each Property (the "Basic Term") shall begin upon the earliest to occur of (i) the Completion Date for such Property, (ii) with respect to Improved Property, the Property Closing Date with respect to such Improved Property or (iii) if such Property is a Construction Period Property as of the date of any Agency Agreement Event of Default, the date of such Agency Agreement Event of Default (in each case the "Basic Term Commencement Date") and shall end on May 5, 2000 (the "Basic Term Expiration Date"), unless the Term is extended or earlier terminated in accordance with the provisions of this Lease. 2.3 Title. Each Property is leased to Lessee without any representation or warranty, express or implied, by Lessor and subject to the rights of parties in possession, the existing state of title (including, without limitation, the Permitted Exceptions) and all applicable Legal Requirements. Lessee shall in no event have any recourse against Lessor for any defect in title to any Property. 2.4 Lease Supplements. On or prior to the Completion Date with respect to the Improvements to be constructed on Unimproved Property and on or prior to the Property Closing Date with respect to each acquisition of Improved Property, Lessee covenants and agrees with Lessor that it will execute and deliver to Lessor a Lease Supplement for the Property to be leased effective as of the Basic Term Commencement Date for such Property (such Lease Supplement to be in substantially the form of Exhibit A hereto), and thereafter such Property shall be subject to the terms of this Lease. ARTICLE III 3.1 Rent. (a) Lessee shall pay Basic Rent in arrears, on each Payment Date, and on any date on which this Lease shall terminate with respect to any or all Properties during the Term; provided, however, with respect to each individual Property Lessee shall have no obligation to pay Basic Rent with respect to such Property until the Basic Term has commenced with respect to such Property. (b) Basic Rent shall be due and payable in lawful money of the United States and shall be paid by wire transfer (including Automated Clearing House transfer) of immediately available funds on the due-date therefor to such 3 account or accounts at such bank or banks as Lessor shall from time to time direct. (c) Lessee's inability or failure to take possession of all or any portion of any Property when delivered by Lessor, whether or not attributable to any act or omission of Lessee or any act or omission of Lessor (other than an act or omission that constitutes gross negligence or wilful misconduct of Lessor), or for any other reason whatsoever, shall not delay or otherwise affect Lessee's obligation to pay Rent for such Property in accordance with the terms of this Lease. 3.2 Payment of Basic Rent. Basic Rent shall be paid absolutely net to Lessor or its designee, so that this Lease shall yield to Lessor the full amount thereof, without setoff, deduction or reduction. 3.3 Supplemental Rent. Lessee shall pay to Lessor or its designee or to the Person entitled thereto any and all Supplemental Rent promptly as the same shall become due and payable, and if Lessee fails to pay any Supplemental Rent, Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent. Lessee shall pay to Lessor, as Supplemental Rent, among other things, on demand, to the extent permitted by applicable Legal Requirements, (a) any and all unpaid fees, charges, payments and other obligations (other than the obligations of Lessor to pay the principal amount of the Loans and the Holder Amount) due and owing by Lessor under the Credit Agreement, under the Trust Agreement and/or under any other Operative Agreement (including specifically without limitation any amounts owing to the Lenders under Section 2.10 or Section 2.11 of the Credit Agreement and any amounts owing to the Holder under Section 3.8 or Section 3.9 of the Trust Agreement) and (b) interest at the applicable Overdue Rate on any installment of Basic Rent not paid when due for the period for which the same shall be overdue and on any payment of Supplemental Rent not paid when due or demanded by Lessor for the period from the due date or the date of any such demand, as the case may be, until the same shall be paid. The expiration or other termination of Lessee's obligations to pay Basic Rent hereunder shall not limit or modify the obligations of Lessee with respect to Supplemental Rent. Unless expressly provided otherwise in this Lease, in the event of any failure on the part of Lessee to pay and discharge any Supplemental Rent as and when due, Lessee shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent. 3.4 Performance on a Non-Business Day. If any payment is required hereunder on a day that is not a Business Day, then such payment shall be due on the next succeeding Business Day. 4 3.5 Rent Payment Provisions. Lessee shall make payment of all Basic Rent and Supplemental Rent when due regardless of whether any of the Operative Agreements pursuant to which same is calculated and is owing shall have been rejected, avoided or disavowed in any bankruptcy or insolvency proceeding involving any of the parties to any of the Operative Agreements. Such provisions of such Operative Agreements and their related definitions are incorporated herein by reference and shall survive any termination, amendment or rejection of any such Operative Agreements. ARTICLE IV 4.1 Utility Charges. Lessee shall pay or cause to be paid all charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and all other rents and utilities used in or on a Property and related real property during the Term. Lessee shall be entitled to receive any credit or refund with respect to any utility charge paid by Lessee. The amount of any credit or refund received by Lessor on account of any utility charges paid by Lessee, net of the reasonable costs and expenses incurred by Lessor in obtaining such credit or refund, if any, shall be promptly paid over to Lessee. All charges for utilities imposed with respect to a Property for a billing period during which this Lease expires or terminates shall be adjusted and prorated on a daily basis between Lessor and Lessee, and each party shall pay or reimburse the other for such party's pro rata share thereof. ARTICLE V 5.1 Quiet Enjoyment. Subject to the rights of Lessor contained in Sections 17.2, 17.3 and 20.3 and the other terms of this Lease and so long as no Lease Event of Default shall have occurred and be continuing, Lessee shall peaceably and quietly have, hold and enjoy each Property for the applicable Term, free of any claim or other action by Lessor or anyone rightfully claiming by, through or under Lessor (other than Lessee) with respect to any matters arising from and after the applicable Basic Term Commencement Date. 5.2 Transfers by Lessor; Lessor Liens. So long as no Lease Event of Default shall have occurred and be continuing, Lessor shall not assign or convey any of its right, title or interest in and to this Lease or the Properties, except for the Liens specifically contemplated under the Operative Agreements or as otherwise required by Law. In addition to the foregoing, Lessor agrees that it will, in its individual capacity and at its own cost and expense (and without any right of indemnity under the Operative Agreements) promptly take such action as may be necessary to duly discharge and satisfy in full any Lessor Liens in a manner consistent with the requirements of Section 10.2(a) of the Participation Agreement. 5 ARTICLE VI 6.1 Net Lease. This Lease shall constitute a net lease. Any present or future law to the contrary notwithstanding, this Lease shall not terminate, nor shall Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, counter- claim, or defense with respect to the Rent, nor shall the obligations of Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith) by reason of: (i) any damage to or destruction of any Property or any part thereof; (ii) any taking of any Property or any part thereof or interest therein by Condemnation or otherwise; (iii) any prohibition, limitation, restriction or prevention of Lessee's use, occupancy or enjoyment of any Property or any part thereof, or any interference with such use, occupancy or enjoyment by any Person or for any other reason; (iv) any title defect, Lien or any matter affecting title to any Property; (v) any eviction by paramount title or otherwise; (vi) any default by Lessor hereunder; (vii) any action for bankruptcy, insolvency, reorganization, liquidation, dissolution or other proceeding relating to or affecting Lessor or any Governmental Authority; (viii) the impossibility or illegality of performance by Lessor, Lessee or both; (ix) any action of any Governmental Authority; (x) Lessee's acquisition of ownership of all or part of any Property; (xi) breach of any warranty or representation with respect to any Property or any Operative Agreement; (xii) any defect in the condition, quality or fitness for use of any Property or any part thereof; or (xiii) any other cause or circumstance whether similar or dissimilar to the foregoing and whether or not Lessee shall have notice or knowledge of any of the foregoing. The parties intend that the obligations of Lessee hereunder shall be covenants, agreements and obligations that are separate and independent from any obligations of Lessor hereunder and shall continue unaffected unless such covenants, agreements and obligations shall have been modified or terminated in accordance with an express provision of this Lease. Lessor and Lessee acknowledge and agree that the provisions of this Section 6.1 have been specifically reviewed and subject to negotiation. 6.2 No Termination or Abatement. Lessee shall remain obligated under this Lease in accordance with its terms and shall not take any action to terminate, rescind or avoid this Lease, notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding affecting Lessor or any Governmental Authority, or any action with respect to this Lease or any Operative Agreement which may be taken by any trustee, receiver or liquidator of Lessor or any Governmental Authority or by any court with respect to Lessor or any Governmental Authority. Lessee hereby waives all right (i) to terminate or surrender this Lease or (ii) to avail itself of any abatement, suspension, deferment, reduction, setoff, counterclaim or defense with respect to any Rent. Lessee shall remain obligated under this Lease in accordance with its terms and Lessee hereby waives any and all rights now or hereafter 6 conferred by statute or otherwise to modify or to avoid strict compliance with its obligations under this Lease. Notwithstanding any such statute or otherwise, Lessee shall be bound by all of the terms and conditions contained in this Lease. ARTICLE VII 7.1 Ownership of the Property. (a) Lessor and Lessee intend that (i) for financial accounting purposes with respect to Lessee (A) this Lease will be treated as an "operating lease" pursuant to Statement of Financial Accounting Standards No. 13, as amended, (B) Lessor will be treated as the owner and lessor of each Property and (C) Lessee will be treated as the lessee of each Property, but (ii) for federal and all state and local income tax purposes, bankruptcy and commercial law and real estate purposes and all other purposes (A) this Lease will be treated as a financing arrangement, and (B) Lessee will be treated as the owner of the Properties and will be entitled to all tax benefits ordinarily available to owners of property similar to the Properties for such tax purposes. (b) To the extent this Lease is hereafter deemed to constitute a finance lease and not a true lease, then and only in such event, Lessor and Lessee intend and agree that, for the purpose of securing Lessee's obligations hereunder, (i) this Lease shall be deemed to be a security agreement and financing statement within the meaning of Article 9 of the Uniform Commercial Code respecting each of the Properties to the extent such is personal property and an irrevocable grant and conveyance of a lien and mortgage on each of the Properties to the extent such is real property; (ii) the conveyance provided for in Article II shall be deemed to be a grant by Lessee to Lessor of, and Lessee hereby grants to Lessor, a lien on and security interest, mortgage and deed of trust in all of Lessee's right, title and interest in and to the Property and all proceeds (including without limitation insurance proceeds) of the conversion, voluntary or involuntary, of the foregoing into cash, investments, securities or other property, whether in the form of cash, investments, securities or other property, and an assignment of all rents, profits and income produced by the Property; and (iii) notifications to Persons holding such property, and acknowledgements, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of Lessee shall be deemed to have been given for the purpose of perfecting such security interest, mortgage, deed of trust or lien under applicable law. Lessor and Lessee shall, to the extent consistent with this Lease, take such actions as may be necessary (including without limitation the filing of Uniform Commercial Code Financing Statements, Uniform Commercial Code Fixture 7 Filings and memoranda of this Lease and the various Lease Supplements) to ensure that, if this Lease were deemed to create a lien, mortgage, deed of trust or security interest in the Property in accordance with this Section, such lien, mortgage, deed of trust or security interest would be deemed to be perfected and to have a first priority position under applicable law and will be maintained as such throughout the Term. ARTICLE VIII 8.1 Condition of the Property. EXCEPT FOR THE COVENANTS OF LESSOR SET FORTH IN ARTICLE V HEREOF, LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY LESSOR AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, (D) ALL APPLICABLE LEGAL REQUIREMENTS AND (D) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF. NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR THE HOLDER HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR THE HOLDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT. THE LESSEE HAS OR WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO INSPECT THE PROPERTY AND THE IMPROVEMENTS THEREIN, IS OR WILL BE (INSOFAR AS THE LESSOR, THE AGENT, EACH LENDER AND EACH HOLDER ARE CONCERNED) SATISFIED WITH THE RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS BETWEEN THE LESSOR, THE AGENT, THE LENDERS AND THE HOLDER, ON THE ONE HAND, AND THE LESSEE, ON THE OTHER HAND, ARE TO BE BORNE BY LESSEE. 8.2 Possession and Use of the Property. (a) At all times during the Term with respect to each Property, such Property shall not be used by Lessee for any unlawful purpose. Lessee shall pay, or cause to be paid, all charges and costs required in connection with the use of the Properties as contemplated by this Lease. During the Term, Lessee may cease operations at Properties having a Maximum Property Cost not to exceed fifty percent (50%) of the Maximum Property Cost of all Properties as of the Construction Period Termination Date; provided, during such 8 period of ceased operations Lessee shall comply with its obligations under the Operative Agreements. (b) The address of Lessee set forth in Section 29.1 herein or otherwise disclosed to Lessor by Lessee pursuant to written notice hereunder no less than 30 days prior to the effective date of such changed location is the chief place of business and chief executive office of Lessee (as such terms are used in Section 9-103(3) of the Uniform Commercial Code of any applicable jurisdiction). Regarding a particular Property, each Lease Supplement correctly identifies the initial location of the related Equipment and Improvements and contains an accurate legal description for the related parcel of Land. Lessee has no other places of business where the Equipment or Improvements will be located other than those identified on the applicable Lease Supplement. (c) Lessee will not attach or incorporate any item of Equipment to or in any other item of equipment or personal property or to or in any real property (except the Land identified in the Lease Supplement in which such Equipment is also described) in a manner that could give rise to the assertion of any Lien on such item of Equipment by reason of such attachment or the assertion of a claim that such item of Equipment has become a fixture and is subject to a Lien in favor of a third party that is prior to the Liens thereon created by the Operative Agreements. (d) With respect to each Property, subject to the terms and conditions of this Lease and the Participation Agreement, on each Basic Term Commencement Date Lessor and Lessee shall execute and deliver a Lease Supplement containing, in regard to such Property, an Equipment Schedule that has a complete description of each item of Equipment, an Improvement Schedule that has a complete description of each Improvement and a legal description of the Land, to be leased hereunder as of such date. Simultaneously therewith, such Equipment, Improvements and Land shall be deemed to have been accepted by Lessee for all purposes of this Lease and to be subject to this Lease. ARTICLE IX 9.1 Compliance With Legal Requirements and Insurance Requirements. Subject to the terms of Article XIII relating to permitted contests, Lessee, at its sole cost and expense, shall (i) comply with all material Legal Requirements (including without limitation all Environmental Laws) relating to the Properties, and all Insurance Requirements relating to the Properties, including the use, development, construction, operation, maintenance, repair, refurbishment and restoration thereof, whether or not compliance therewith shall require structural or extraordinary changes in the Improvements or 9 interfere with the use and enjoyment of the Properties, and (ii) procure, maintain and comply with all material licenses, permits, orders, approvals, consents and other authorizations required for the construction, use, maintenance and operation of the Properties and for the use, development, construction, operation, maintenance, repair and restoration of the Improvements. ARTICLE X 10.1 Maintenance and Repair; Return. (a) Lessee, at its sole cost and expense, shall maintain each Property in good condition, repair and working order (ordinary wear and tear excepted) and make all necessary repairs thereto, of every kind and nature whatsoever, whether interior or exterior, ordinary or extraordinary, structural or nonstructural or foreseen or unforeseen, in each case as required by all Legal Requirements, Insurance Requirement and manufacturer's specifications and standards and on a basis consistent with the operation and maintenance of other similar properties or equipment of Lessee as of the date hereof subject, however, to the provisions of Article XV with respect to Condemnation and Casualty. (b) Lessee shall not use or locate any component of any Property outside of any Approved State. Lessee shall not move or relocate any component of any Property beyond the boundaries of the Land (comprising part of the Property) described in the applicable Lease Supplement. (c) (Intentionally Omitted). (d) Upon reasonable advance notice, Lessor and its agents shall have the right to inspect each Property and all maintenance records with respect thereto at any reasonable time during normal business hours but shall not, in the absence of a Lease Event of Default, materially disrupt the business of Lessee. (e) If, at any time, the aggregate appraised value of Properties then subject to this Lease and with respect to which operations have not ceased as described in Section 8.2(a) for which the Lessor has received an Appraisal pursuant to the terms of Section 5.6 of the Participation Agreement is less than the lesser of $14,000,000 or the aggregate Property Cost of all Properties then subject to this Lease and with respect to which operations have not ceased as described in Section 8.2(a) (such lesser amount being hereafter referred to as the "Base Amount"), then the Lessee will cause an additional Appraisal or Appraisals to be immediately delivered to the Lessor in an amount sufficient to cause such aggregate appraised value to equal or exceed the Base Amount. In addition, Lessee shall cause 10 to be delivered to Lessor (at Lessee's sole expense) any additional Appraisals (or reappraisals) as Lessor may request if any one of Lessor, the Agent, any Lender or the Holder is required pursuant to any applicable Legal Requirement to obtain such an Appraisal (or reappraisal). Any such request by Lessor will identify the Person and the applicable Legal Requirement that necessitates the additional Appraisal (or reappraisal). Lessee may cause the additional Appraisal (or reappraisal) to be performed in a manner that satisfies the minimum requirements of such Legal Requirement, including, without limitation, if permitted by the Legal Requirement, providing a supplement or date-down to a previously provided Appraisal. The parties will cooperate on efforts to minimize the frequency and costs of such additional Appraisals (or reappraisals). (f) Lessor shall under no circumstances be required to build any improvements on any Property, make any repairs, replacements, alterations or renewals of any nature or description to any Property, make any expenditure whatsoever in connection with this Lease or maintain any Property in any way. Lessor shall not be required to maintain, repair or rebuild all or any part of any Property, and Lessee waives the right to (i) require Lessor to maintain, repair, or rebuild all or any part of any Property, or (ii) make repairs at the expense of Lessor pursuant to any Legal Requirement, Insurance Requirement, contract, agreement, covenants, condition or restriction at any time in effect. (g) Lessee shall, upon the expiration or earlier termination of this Lease with respect to a Property, if Lessee shall not have exercised its Purchase Option or Expiration Date Purchase Option with respect to such Property, surrender such Property to Lessor, or the third party purchaser, as the case may be, subject to Lessee's obligations under this Lease (including without limitation Sections 9.1, 10.1(a)-(f) , 10.2, 11.1, 12.1, 22.1 and 23.1) 10.2 Environmental Inspection. If Lessee has not given notice of exercise of its Expiration Date Purchase Option pursuant to Section 20.2, then not more than 120 days nor less than 60 days prior to the Expiration Date, Lessee shall, at its sole cost and expense, provide to Lessor a report by a reputable environmental consultant selected by Lessee, which report shall be in form and substance satisfactory to Lessor. ARTICLE XI 11.1 Modifications, Substitutions and Replacements. (a) Lessee may, either at its sole cost and expense or with the proceeds of Modification Advances made pursuant to the terms of the Participation Agreement during the Construction Period, at any time and from time to time 11 without the consent of Lessor make alterations, renovations, improvements and additions to the Property or any part thereof and substitutions and replacements there for (collectively, "Modifications"); provided, that: (i) except for any Modification required to be made pursuant to a Legal Requirement, no Modification shall materially impair the value, utility or useful life of the Property from that which existed immediately prior to such Modification; (ii) the Modification shall be done expeditiously and in a good and workmanlike manner; (iii) Lessee shall comply with all Legal Requirements (including all Environmental Laws) and Insurance Requirements applicable to the Modification, including the obtaining of all permits and certificates of occupancy, and the structural integrity of the Property shall not be adversely affected; (iv) to the extent required by Section 14.2(a), Lessee shall maintain builders' risk insurance at all times when a Modification is in progress; (v) subject to the terms of Article XIII relating to permitted contests, Lessee shall pay all costs and expenses and discharge any liens arising with respect to the Modification; and (vi) such Modification shall comply with the requirements of this Lease (including without limitation Sections 8.2 and 10.1). All Modifications financed by Lessor shall become the property of, and title thereto shall immediately and without further action vest in, the Lessor, when installed (and the Ground Lease shall expressly provide). All other Modifications shall become the property of, and title thereto shall immediately and without further action vest in, Lessor, on surrender of the Property, the earlier termination of this Lease or the occurrence of a Lease Default or Lease Event of Default under Section 17.1(j) of this Lease. (b) The construction process provided for in the Agency Agreement is acknowledged by Lessor and the Agent to be consistent with and in compliance with the terms and provisions of this Article XI. ARTICLE XII 12.1 Warranty of Title. (a) Lessee agrees that, except as otherwise provided herein and subject to the terms of Article XIII relating to permitted contests, Lessee shall not directly or indirectly create or allow to remain, and shall promptly discharge at its sole cost and expense, any Lien, defect, attachment, levy, title retention agreement or claim upon any Property or any Modifications or any Lien, attachment, levy or claim with respect to the Rent or with respect to any amounts held by the Agent pursuant to the Credit Agreement, other than Permitted Liens and Lessor Liens. Lessee shall promptly notify Lessor in the event it receives actual knowledge that a Lien other than a Permitted Lien or Lessor Lien has 12 occurred with respect to a Property, and Lessee represents and warrants to, and covenants with, Lessor that the Liens in favor of the Lessor created by the Operative Agreements are first priority perfected liens subject only to Permitted Liens. (b) Nothing contained in this Lease shall be construed as constituting the consent or request of Lessor, expressed or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to any Property or any part thereof. NOTICE IS HEREBY GIVEN THAT LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO ANY PROPERTY. ARTICLE XIII 13.1 Permitted Contests Other Than in Respect of Indemnities. Except to the extent otherwise provided for in Section 13 of the Participation Agreement, Lessee, on its own or on Lessor's behalf but at Lessee's sole cost and expense, may contest, by appropriate administrative or judicial proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any Legal Requirement, or utility charges payable pursuant to Section 4.1 or any Lien, attachment, levy, encumbrance or encroachment, and Lessor agrees not to pay, settle or otherwise compromise any such item, provided that (a) Lessee provides to Lessor such security or other assurances reasonably acceptable to Lessor that Lessee can and will satisfy the Lien and comply with the Legal Requirements in sufficient time to prevent any sale, forfeiture or loss by reason of such non-payment or noncompliance, (b) at no time during the permitted contest shall there be a risk of the imposition of criminal liability or material civil liability (in the case of a civil liability, unless Lessee provides to Lessor such security or other assurances reasonably acceptable to Lessor that Lessee can and will satisfy such liability) on Lessor, the Holder, the Agent or any Lender for failure to comply therewith; and (c) in the event that, at any time, there shall be a material risk of extending the application of such item beyond the end of the Term, then Lessee shall deliver to Lessor an Officer's Certificate certifying as to the matters set forth in clauses (a) and (b) of this Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute and deliver to Lessee such authorizations and other documents as may reasonably be required in connection with any such contest and, if reasonably requested by Lessee, shall join as a party therein at Lessee's sole cost and expense. 13 ARTICLE XIV 14.1 Public Liability and Workers' Compensation Insurance. During the Term of each Property, Lessee shall procure and carry, at Lessee's sole cost and expense, commercial general liability insurance for claims for injuries or death sustained by persons or damage to property while on the Properties or the premises where the Equipment is located and such other public liability coverages as are ordinarily procured by Persons who own or operate similar properties or equipment in similar businesses. Such insurance shall be on terms and in amounts that are no less favorable than insurance maintained by Lessee with respect to similar properties and equipment that it owns and that are in accordance with normal industry practice. The policies shall be endorsed to name Lessor, the Holder, the Agent and the Lenders as additional insureds. The policies shall also specifically provide that such policies shall be considered primary insurance which shall apply to any loss or claim before any contribution by any insurance which Lessor, the Holder, the Agent or the Lenders may have in force. Lessee shall, in the operation of the Properties, comply with the applicable workers' compensation laws and protect Lessor, the Holder, the Agent and the Lenders against any liability under such laws. 14.2 Hazard and Other Insurance. (a) During the Term for each Property, Lessee shall keep, or cause to be kept, such Property insured against loss or damage by fire and other risks and shall maintain builders' risk insurance during construction of any Improvements or Modifications on terms and in amounts that are no less favorable than insurance covering other similar properties owned by Lessee and that are in accordance with normal industry practice. The policies shall be endorsed to name Lessor, the Holder, the Agent and the Lenders, to the extent of their respective interests, as additional loss payees; provided, so long as no Lease Event of Default exists, any loss payable under the insurance policies required by this Section will be paid to Lessee and Lessee will have the sole authority to settle any such insurance claim without the need for prior approval by any such additional loss payee. (b) During the Term with respect to a Property the area in which such Property is located is designated a "flood-prone" area pursuant to the Flood Disaster Protection Act or 1973, or any amendments or supplements thereto, then Lessee shall comply with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973. In addition, Lessee will fully comply with the requirements of the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as each may be amended from time to time, and with any other Legal Requirement, concerning flood insurance to the extent that it apply to any such Property. 14 14.3 Coverage. (a) As of the date of this Lease and annually thereafter, Lessee shall furnish Lessor and the Agent with certificates showing the insurance required under Sections 14.1 and 14.2 to be in effect, naming Lessor, the Holder, the Agent and the Lenders as additional insureds and loss payees and evidencing the other requirements of this Article XIV. All such insurance shall be at the cost and expense of Lessee. Such certificates shall include a provision for thirty (30) days' advance written notice by the insurer to Lessor and the Agent in the event of cancellation or material alteration of such insurance. If a Lease Event of Default has occurred and is continuing and Lessor so requests, Lessee shall deliver to Lessor copies of all insurance policies required by Sections 14.1 and 14.2. (b) Lessee agrees that the insurance policy or policies required by Sections 14.1, 14.2(a) and 14.2(b) shall include an appropriate clause pursuant to which any such policy shall provide that it will not be invalidated by any act or omission of Lessee or to the extent Lessee waives, at any time, any or all rights of recovery against any party for losses covered by such policy. Lessee hereby waives any and all such rights against the Lessor, the Holder, the Agent and the Lenders to the extent of payments made to any such Person under any such policy. (c) Neither Lessor nor Lessee shall carry separate insurance concurrent in kind or form or contributing in the event of loss with any insurance required under this Article XIV, except that Lessor may carry separate liability insurance at Lessor's sole cost so long as (i) Lessee's insurance is designated as primary and in no event excess or contributory to any insurance Lessor may have in force which would apply to a loss covered under Lessee's policy and (ii) each such insurance policy will not cause Lessee's insurance required under this Article XIV to be subject to a coinsurance exception of any kind. (d) Lessee shall pay as they become due all premiums for the insurance required by Section 14.1 and Section 14.2, shall renew or replace each policy prior to the expiration date thereof or otherwise maintain the coverage required by such Sections without any lapse in coverage. (e) Any insurance required to be carried hereunder may contain such deductibles and/or self insurance consistent with industry standards and the then current practice of Lessee with respect to its other properties similar to the Properties. Any liability insurance required under Section 14.1 may be met through "blanket" policies of insurance. 15 ARTICLE XV 15.1 Casualty and Condemnation. (a) Subject to the provisions of this Article XV and Article XVI (in the event Lessee delivers, or is obligated to deliver, a Termination Notice), and prior to the occurrence and continuation of a Lease Default or Lease Event of Default, Lessee shall be entitled to receive (and Lessor hereby irrevocably assigns to Lessee all of Lessor's right, title and interest in) any award, compensation or insurance proceeds under Sections 14.2(a) or (b) hereof to which Lessee or Lessor may become entitled by reason of their respective interests in a Property (i) if all or a portion of such Property is damaged or destroyed in whole or in part by a Casualty or (ii) if the use, access, occupancy, easement rights or title to such Property or any part thereof is the subject of a Condemnation; provided, however, if a Lease Default or Lease Event of Default shall have occurred and be continuing such award, compensation or insurance proceeds shall be paid directly to Lessor or, if received by Lessee, shall be held in trust for Lessor, and shall be paid over by Lessee to Lessor and held in accordance with the terms of this paragraph (a). All amounts held by Lessor hereunder on account of any award, compensation or insurance proceeds either paid directly to Lessor or turned over to Lessor shall be held as security for the performance of Lessee's obligations hereunder for the duration of any applicable cure period. (b) Lessee may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award, compensation or insurance payment on account of any such Casualty or Condemnation and shall pay all expenses thereof. At Lessee's reasonable request, and at Lessee's sole cost and expense, Lessor and the Agent shall participate in any such proceeding, action, negotiation, prosecution or adjustment. Lessor and Lessee agree that this Lease shall control the rights of Lessor and Lessee in and to any such award, compensation or insurance payment. (c) If Lessee shall receive notice of a Casualty or a possible Condemnation of a Property or any interest therein where damage to the affected Property is estimated to equal or exceed ten percent (10%) of the Property Cost of such Property, Lessee shall give notice thereof to the Lessor and to the Agent promptly after the receipt of such notice. (d) In the event of a Casualty or a Condemnation (regardless of whether notice thereof must be given pursuant to paragraph (c)), this Lease shall terminate with respect to the applicable Property in accordance with Section 16.1 if Lessee, within sixty (60) days after such occurrence, delivers to Lessor and the Agent a notice to such effect. 16 (e) If pursuant to this Section 15.1 this Lease shall continue in full force and effect following a Casualty or Condemnation with respect to the affected Property, Lessee shall, at its sole cost and expense and using, if available, the proceeds of any award, compensation or insurance with respect to such Casualty or Condemnation (including, without limitation, any such award, compensation or insurance which has been received by the Agent and which should be turned over to Lessee pursuant to the terms of the Operative Agreements), promptly and diligently repair any damage to the applicable Property caused by such Casualty or Condemnation in conformity with the requirements of Sections 10.1 and 11.1, so as to restore the applicable Property to substantially the same condition, operation, function and value as existed immediately prior to such Casualty or Condemnation. In such event, title to the applicable Property shall remain with Lessor. (f) In no event shall a Casualty or Condemnation with respect to which this Lease remains in full force and effect under this Section 15.1 affect Lessee's obligations to pay Rent pursuant to Section 3.1. (g) Notwithstanding anything to the contrary set forth in Section 15.1(a) or Section 15.1(e), if during the Term with respect to a Property a Casualty occurs with respect to such Property or Lessee receives notice of a Condemnation with respect to such Property, and following such Casualty or Condemnation, Lessee is unable to use the remaining applicable Property in substantially the same manner as the Property was used prior to such Casualty or Condemnation and the applicable Property cannot reasonably be restored, repaired or replaced in a manner consistent with the requirements of this Lease by the earlier to occur of the Expiration Date or the date nine (9) months after the occurrence of such Casualty or Condemnation (if such Casualty or Condemnation occurs during the Term), to permit such use, then Lessee shall be required to exercise its Purchase Option with respect to the applicable Property on the next Payment Date (notwithstanding the limits on such exercise contained in Section 20.1), and pay Lessor the Purchase Option Price and any and all Rent then due and owing and all other amounts then due and owing (including without limitation amounts described in clause FIRST of Section 22.2); provided, if any Lease Default or Lease Event of Default has occurred and is continuing, Lessee shall also promptly (and in any event within three (3) Business Days) pay Lessor any award, compensation or insurance proceeds received on account of any Casualty or Condemnation with respect to any Property. Provided that no Lease Default or Lease Event of Default has occurred and is continuing, any Excess Proceeds shall be paid to Lessee. If a Lease Default has occurred and is continuing and any Loans, Holder Advance or other amounts are owing with respect thereto, then any Excess Proceeds (to the extent of any such Loans, Holder 17 Advance or other amounts owing with respect thereto) shall be paid to the Lessor. 15.2 Environmental Matters. Promptly upon Lessee's actual knowledge of the presence of Hazardous Substances in any portion of any Property or Properties in concentrations and conditions that constitute an Environmental Violation and which, in the reasonable opinion of Lessee, the cost to undertake any legally required response, clean up, remedial or other action will or might result in a cost to Lessee of more than $100,000, Lessee shall notify Lessor in writing of such condition. In the event of any Environmental Violation (regardless of whether notice thereof must be given), Lessee shall, not later than thirty (30) days after Lessee has actual knowledge of such Environmental Violation, either deliver to Lessor a Termination Notice with respect to the applicable Property or Properties pursuant to Section 16.1, if applicable, or, at Lessee's sole cost and expense, promptly and diligently commence any response, clean up, remedial or other action (including the pursuit by Lessee of appropriate action against any off-site or third party source for contamination, as appropriate) necessary to remove, cleanup or remediate the Environmental Violation in accordance with all Environmental Laws. If Lessee does not deliver a Termination Notice with respect to such Property pursuant to Section 16.1, Lessee shall, upon completion of remedial action by Lessee, cause to be prepared by a reputable environmental consultant acceptable to Lessor a report describing the Environmental Violation and the actions taken by Lessee (or its agents) in response to such Environmental Violation, and a statement by the consultant that the Environmental Violation has been remedied in full compliance with applicable Environmental Law. Not less than sixty (60) days prior to any time that Lessee elects to cease operations with respect to any Property in excess of that permitted by Section 8.2(a) hereof or to remarket any Property pursuant to Section 20.2 hereof or any other provision of any Operative Agreement, Lessee shall deliver a Phase I environmental survey respecting such Property satisfactory in form and substance to the Lessor. 15.3 Notice of Environmental Matters. Promptly, but in any event within five (5) Business Days from the date Lessee has actual knowledge thereof, Lessee shall provide to Lessor written notice of any material pending or threatened claim, action or proceeding involving any Environmental Law or any Release on or in connection with any Property or Properties. All such notices shall describe in reasonable detail the nature of the claim, action or proceeding and Lessee's proposed response thereto. In addition, Lessee shall provide to Lessor, within ten (10) Business Days of receipt, copies of all material written communications with any Governmental Authority relating to any Environmental Law in connection with any Property. Lessee shall also promptly provide such detailed reports of any such material environmental claims as may reasonably be requested by Lessor. 18 ARTICLE XVI 16.1 Termination Upon Certain Events. If any of the following occur: (i) Lessee has delivered a notice pursuant to Section 15.1(d) that following the applicable Casualty or Condemnation this Lease shall terminate with respect to the affected Property, or (ii) Lessee has delivered notice pursuant to the second sentence of Section 15.2 that, due to the occurrence of an Environmental Violation, this Lease shall terminate with respect to the affected Property, then Lessee shall be obligated to deliver, within thirty (30) days of its receipt of notice of the applicable Condemnation or the occurrence of the applicable Casualty or Environmental Violation, a written notice to the Lessor in the form described in Section 16.2(a) (a "Termination Notice") of the termination of this Lease with respect to the applicable Property. 16.2 Procedures. (a) A Termination Notice shall contain: (i) notice of termination of this Lease with respect to the affected Property on a Payment Date not more than sixty (60) days after Lessor's receipt of such Termination Notice (the "Termination Date"); and (ii) a binding and irrevocable agreement of Lessee to pay the Termination Value for the applicable Property, any and all Rent then due and owing and all other amounts then due and owing (including without limitation amounts described in clause FIRST of Section 22.2) and purchase such Property on such Termination Date. (b) On each Termination Date, Lessee shall pay to Lessor the Termination Value for the applicable Property, any and all Rent then due and owing and all other amounts then due and owing (including without limitation amounts described in clause FIRST of Section 22.2) theretofore accruing, and Lessor shall convey such Property or the remaining portion thereof, if any, to Lessee (or Lessee's designee), all in accordance with Section 19.1, as well as any Net Proceeds with respect to the Casualty or Condemnation giving rise to the termination of this Lease with respect to such Property theretofore received by Lessor; provided, that if a Lease Event of Default shall have occurred and be continuing and any Loans or Holder Advance are owing with respect thereto or under this Lease, then any Excess Proceeds shall be paid to Lessor. ARTICLE XVII 17.1 Lease Events of Default. If any one or more of the following events (each a "Lease Event of Default") shall occur: (a) Lessee shall fail to make payment of (i) any Basic Rent (except as set forth in clause (ii)) within five (5) days after the same has become due and payable or (ii) any 19 Purchase Option Price or Termination Value, on the date any such payment is due, or any payment of Basic Rent or Supplemental Rent due on the due date of any such payment of Purchase Option Price or Termination Value, or any amount due on the Expiration Date; (b) Lessee shall fail to make payment of any Supplemental Rent (other than Supplemental Rent referred to in Section 17.1(a) (ii)) due and payable within ten (10) Business Days after receipt of notice thereof; (c) Lessee shall fail to maintain insurance as required by Article XIV of this Lease and such failure shall remain uncured for a period of thirty (30) days after receipt of written notice thereof; (d) Lessee shall fail to observe or perform any term, covenant or condition of Lessee under this Lease or any other Operative Agreement to which Lessee is a party other than those set forth in Sections 17.1(a), (b), (c) or (g) hereof, or any representation or warranty made by Lessee set forth in this Lease or in any other Operative Agreement or in any document entered into in connection herewith or therewith or in any document, certificate or financial or other statement delivered in connection herewith or therewith shall be false or inaccurate in any material way, and if such failure or misrepresentation or breach of warranty is capable of being cured, it shall remain uncured for a period of thirty (30) days after receipt of written notice from Lessor thereof; provided, if such failure or misrepresentation or breach of warranty is capable of being cured but cannot be cured within such thirty-day period, so long as Lessee is diligently pursuing such cure, Lessee shall have an additional period, not exceeding 60 days, within which to effect such cure; (e) an Agency Agreement Event of Default shall have occurred and be continuing; (f) a failure by Lessee to pay any Imposition, in whole or in part, or to observe any Legal Requirement, regarding any Property imposed by any governmental entity or agency thereunder, subject to Lessee's rights relating to permitted contests under Section 13.1 and if such failure is capable of being cured, it remains uncured for a period of thirty (30) days after receipt of written notice from Lessor thereof; provided, if such a failure is capable of being cured but cannot be cured within such thirty-day period, so long as Lessee is diligently pursuing such cure, Lessee shall have an additional period, not exceeding 60 days, within which to effect such cure; (g) Lessee shall fail to observe or perform any term, covenant or condition incorporated by reference herein pursuant to Article XXVIII hereof and such failure shall 20 remain uncured for a period of thirty (30) days (or such shorter or longer cure period subsequently available under the 1994 Credit Agreement with respect to an event of default thereunder regarding the Incorporated Covenants) after receipt of written notice from Lessor thereof; (h) Any default shall occur under the terms applicable to any Debt of Lessee or any Subsidiary of Lessee in an aggregate amount (for all Debt so affected) exceeding $5,000,000 and such default shall (a) consist of the failure to pay such Debt when due (subject to any applicable grace period), whether by acceleration or otherwise, or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such Debt to become due and payable prior to its expressed maturity; (i) Any default shall occur in the payment when due of any obligation of $5,000,000 or more of Lessee or any Subsidiary of Lessee with respect to any material purchase or lease of goods or services (except only to the extent that the existence of any such default is being contested by Lessee or such Subsidiary in good faith and by appropriate proceedings and appropriate reserves have been made in respect of such default), and continuance of such default for 30 days after notice thereof from the Lessor; (j) Lessee or any Material Subsidiary becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; or Lessee or any Material Subsidiary applies for, consents to, or acquiesces in the appointment of a trustee, receiver or other custodian for Lessee or such Material Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for Lessee or any Material Subsidiary or for a substantial part of any property of Lessee or any Material Subsidiary and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is commenced in respect of Lessee or any Material Subsidiary, and if such case or proceeding is not commenced by Lessee or such Material Subsidiary, it is consented to or acquiesced in by Lessee or such Material Subsidiary, or remains for 60 days undismissed; or Lessee or any Material Subsidiary takes any corporate action to authorize, or in furtherance of, any of the foregoing; (k) (i) Institution of any steps by Lessee or any other Person to terminate a Pension Plan if as a result of such termination Lessee could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of 21 $5,000,000, or (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA; (l) Lessee or any ERISA Affiliate shall make a complete or partial withdrawal from a Multiemployer Plan and the plan sponsor or such Multiemployer Plan shall notify such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $5,000,000, unless and only for as long as such liability shall be contested in good faith and such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (m) Any money judgment, writ or warrant or attachment or similar process involving in any case a final judgment in an amount in excess of $5,000,000 shall be entered or filed against Lessee or any Material Subsidiary or any of their respective assets and shall remain unsatisfied, undischarged, unvacated, unbonded or unstayed for a period of 60 days or in any event later than five days prior to the date of any proposed sale thereunder; (n) Any Change in Control shall occur; or (o) Any Operative Agreement to which Lessee or the Construction Agent is a party shall cease to be enforceable (other than in accordance with its terms) against such party or such party shall claim in writing that such is the case. then, in any such event, (i) all Construction Period Properties shall automatically become Properties that are subject to the terms of this Lease as more specifically provided in Section 2.2 and thereafter all references hereunder to "Property" or "Properties" and all obligations of the Lessee with respect to the Properties (including specifically without limitation the obligations of the Lessee contained in this Article XVII) shall be deemed to include such Construction Period Properties, and (ii) Lessor may, in addition to the other rights and remedies provided for in this Article XVII and in Section 18.1, terminate this Lease by giving Lessee five (5) days notice of such termination (provided that such Event of Default is continuing at the end of such five-day period), and this Lease shall terminate, and all rights of Lessee under this Lease shall cease. Lessee shall, to the fullest extent permitted by law, pay as Supplemental Rent all costs and expenses incurred by or on behalf of Lessor, including without limitation reasonable fees and expenses of counsel, as a result of any Lease Event of Default hereunder. As used in this Lease, a "notice" of a Lease Default or a Lease Event of Default shall mean a written notice to Lessee pursuant to Section 29.1, which specifies (i) the Lease Default or the Lease Event of Default and (ii) that it is intended as a notice of a Lease Default or a Lease Event of Default. 22 17.2 Surrender of Possession. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessee shall, upon thirty (30) days written notice, surrender to Lessor possession of the Properties. Lessor may enter upon and repossess the Properties by such means as are available at law or in equity, and may remove Lessee and all other Persons and any and all personal property and Lessee's equipment and personalty and severable Modifications from the Properties. Lessor shall have no liability by reason of any such entry, repossession or removal performed in accordance with applicable law. Upon the written demand of Lessor, Lessee shall return the Properties promptly to Lessor, in the manner and condition required by, and otherwise in accordance with the provisions of, Section 22.1(c) hereof. 17.3 Reletting. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessor may, but shall be under no obligation to, relet any or all of the Properties, for the account of Lessee or otherwise, for such term or terms (which may be greater or less than the period which would otherwise have constituted the balance of the Term) and on such conditions (which may include concessions or free rent) and for such purposes as Lessor may determine, and Lessor may collect, receive and retain the rents resulting from such reletting. Lessor shall not be liable to Lessee for any failure to relet any Property or for any failure to collect any rent due upon such reletting. 17.4 Damages. Neither (a) the termination of this Lease as to all or any of the Properties pursuant to Section 17.1; (b) the repossession of all or any of the Properties; nor (c) the failure of Lessor to relet all or any of the Properties, the reletting of all or any portion thereof, nor the failure of Lessor to collect or receive any rentals due upon any such reletting, shall relieve Lessee of its liabilities and obligations hereunder, all of which shall survive any such termination, repossession or reletting. If any Lease Event of Default shall have occurred and be continuing and notwithstanding any termination of this Lease pursuant to Section 17.1, Lessee shall forthwith pay to Lessor all Rent and other sums due and payable hereunder to and including the date of such termination. Thereafter, on the days on which the Basic Rent or Supplemental Rent, as applicable, are payable under this Lease or would have been payable under this Lease if the same had not been terminated pursuant to Section 17.1 and until the end of the Term hereof or what would have been the Term in the absence of such termination, Lessee shall pay Lessor, as current liquidated damages (it being agreed that it would be impossible accurately to determine actual damages) an amount equal to the Basic Rent and Supplemental Rent that are payable under this Lease or would have been payable by Lessee hereunder if this Lease had not been terminated pursuant to Section 17.1, less the net proceeds, if any, which are actually received by Lessor with respect to the period in question of any 23 reletting of any Property or any portion thereof; provided that Lessee's obligation to make payments of Basic Rent and Supplemental Rent under this Section 17.4 shall continue only so long as Lessor shall not have received the amounts specified in Section 17.6. In calculating the amount of such net proceeds from reletting, there shall be deducted all of Lessor's, the Holder's, the Agent's and any Lenders' reasonable expenses in connection therewith, including repossession costs, brokerage or sales commissions, fees and expenses for counsel and any necessary repair or alteration costs and expenses incurred in preparation for such reletting. To the extent Lessor receives any damages pursuant to this Section 17.4, such amounts shall be regarded as amounts paid on account of Rent. 17.5 Power of Sale. Without limiting any other remedies set forth in this Lease, in the event that a court of competent jurisdiction rules that this Lease constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties, then the Lessor and the Lessee agree that the Lessee has granted, pursuant to Section 7.1(b) hereof and each Lease Supplement, a Lien against the Properties WITH POWER OF SALE, and that, upon the occurrence and during the continuance of any Lease Event of Default, the Lessor shall have the power and authority, to the extent provided by law, after prior notice and lapse of such time as may be required by law, to foreclose its interest (or cause such interest to be foreclosed) in all or any part of the Properties. 17.6 Final Liquidated Damages. If a Lease Event of Default shall have occurred and be continuing, whether or not this Lease shall have been terminated pursuant to Section 17.1 and whether or not Lessor shall have collected any current liquidated damages pursuant to Section 17.4, Lessor shall have the right to recover, by demand to Lessee and at Lessor's election, and Lessee shall pay to Lessor, as and for final liquidated damages, but exclusive of the indemnities payable under Section 13 of the Participation Agreement, and in lieu of all current liquidated damages beyond the date of such demand (it being agreed that it would be impossible accurately to determine actual damages) the sum of (a) the Termination Value for all Properties remaining under this Lease, plus (b) all other amounts owing in respect of Rent and Supplemental Rent theretofore accruing under this Lease. Upon payment of the amount specified pursuant to the first sentence of this Section 17.6, Lessee shall be entitled to receive from Lessor, either at Lessee's request or upon Lessor's election, in either case at Lessee's cost, a transfer and assignment of Lessor's entire right, title and interest in and to the Properties, the Improvements, Fixtures, Modifications and Equipment. To effect such transfer and assignment, Lessor shall execute, acknowledge (where required) and deliver to Lessee each of the following: (i) a special or limited warranty Deed conveying the Property (to the extent it is real property) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (ii) a Bill of Sale conveying the Property (to the extent it is personal property) to 24 Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (iii) any real estate tax affidavit or other document required by law to be executed and filed in order to record the Deed; and (iv) a FIRPTA affidavit. Subject to the foregoing, the Properties shall be conveyed to Lessee (or Lessee's designee) "AS IS" and in their then present physical condition. If any statute or rule of law shall limit the amount of such final liquidated damages to less than the amount agreed upon, Lessor shall be entitled to the maximum amount allowable under such statute or rule of law; provided, however, Lessee shall not be entitled to receive an assignment of Lessor's interest in the Properties, the Improvements, Fixtures, Modifications or Equipment or documents unless Lessee shall have paid in full the Termination Value and all other amounts due and owing hereunder and under the other Operative Agreements. 17.7 Lessee's Purchase Option During Default. If Lessee exercises its Purchase Option in accordance with Section 20.1 with respect to a Property while a Lease Default or Lease Event of Default is continuing, the exercise of such Purchase Option shall be deemed to have cured such Lease Default or Lease Event of Default to the extent such Lease Default or Lease Event of Default is no longer continuing with respect to any other Property remaining subject to this Lease after the exercise of the Purchase Option. 17.8 Waiver of Certain Rights. If this Lease shall be terminated pursuant to Section 17.1, Lessee waives, to the fullest extent permitted by law, (a) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (b) any right of redemption, re-entry or possession; (c) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt; and (d) any other rights which might otherwise limit or modify any of Lessor's rights or remedies under this Article XVII. 17.9 Assignment of Rights Under Contracts. If a Lease Event of Default shall have occurred and be continuing, and whether or not this Lease shall have been terminated pursuant to Section 17.1, Lessee shall upon Lessor's demand immediately assign, transfer and set over to Lessor all of Lessee's right, title and interest in and to each agreement executed by Lessee in connection with the purchase, construction, development, use or operation of the Properties (including, without limitation, all right, title and interest of Lessee with respect to all warranty, performance, service and indemnity provisions), as and to the extent that the same relate to the purchase, construction, use and operation of the Properties. 17.10 Remedies Cumulative. The remedies herein provided shall be cumulative and in addition to (and not in limitation of) any other remedies available at law, equity or otherwise, including, without limitation, any mortgage foreclosure remedies. 25 ARTICLE XVIII 18.1 Lessor's Right to Cure Lessee's Lease Defaults. Lessor, without waiving or releasing any obligation or Lease Event of Default, may (but shall be under no obligation to) remedy any Lease Event of Default for the account and at the sole cost and expense of Lessee, including the failure by Lessee to maintain the insurance required by Article XIV, and may, to the fullest extent permitted by law, and notwithstanding any right of quiet enjoyment in favor of Lessee, enter upon any Property, or real property owned or leased by Lessee and take all such action thereon as may be necessary or appropriate therefor. No such entry shall be deemed an eviction of any lessee. All reasonable out-of-pocket costs and expenses so incurred (including without limitation reasonable fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by Lessor, shall be paid by Lessee to Lessor on demand. ARTICLE XIX 19.1 Provisions Relating to Lessee's Exercise of its Purchase Option. Subject to Section 19.2, in connection with any termination of this Lease with respect to any Property pursuant to the terms of Section 16.2, or in connection with Lessee's exercise of its Purchase Option or Expiration Date Purchase Option, upon the date on which this Lease is to terminate with respect to the applicable Property or upon the Expiration Date with respect to the applicable Property, and upon tender by Lessee of the amounts set forth in Sections 16.2(b), 20.1 or 20.2, as applicable, Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's cost and expense an assignment and transfer of Lessor's entire interest in the applicable Property (which shall include an assignment of all of Lessor's right, title and interest in and to any Net Proceeds not previously received by Lessor). To effect such transfer and assignment, Lessor shall execute, acknowledge (where required) and deliver to Lessee each of the following: (i) a special or limited warranty Deed conveying the Property (to the extent it is real property) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (ii) a Bill of Sale conveying the Property (to the extent it is personal property) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (iii) any real estate tax affidavit or other document required by law to be executed and filed in order to record the Deed; and (iv) a FIRPTA affidavit. Subject to the foregoing, the applicable Property shall be conveyed to Lessee "AS IS" "WHERE IS" and in then present physical condition. 19.2 No Termination With Respect to Less than All of a Property. Lessee shall not be entitled to exercise its Purchase Option separately with respect to portions of a Property consisting of Land, Equipment and Improvements but shall be 26 required to exercise its Purchase Option with respect to such entire Property. ARTICLE XX 20.1 Purchase Options. Provided that no Lease Default of the types specified in Sections 17.1(a), (b) or (j) or Lease Event of Default shall have occurred and be continuing (unless such Lease Event of Default involves a single Property and can be cured by the exercise of the option to purchase by Lessee of such Property and such Property is referenced in the Purchase Notice (referenced below)), and subject to Section 19.2, Lessee shall have the option (the "Purchase Option), exercisable by giving Lessor no less than sixty (60) days irrevocable written notice (the "Purchase Notice") of Lessee's election to exercise such option as to any Property, on any anniversary of the Basic Term Commencement Date for such Property (or if all Properties are to be acquired on any such anniversary), to purchase all or one or more Properties on such date specified in such Purchase Notice at a price equal to the Termination Value for such Property or Properties (which the parties do not intend to be a "bargain" purchase price), and Lessee at such time shall also pay any and all Rent then due and owing and all other amounts then due and owing (including without limitation amounts, if any, described in clause FIRST of Section 22.2) (such Termination Value, Rent and other amounts being hereafter referred to as the "Purchase Option Price"); provided, however, that unless the Lessor otherwise consents or the Purchase Option is exercised after the Construction Period Termination Date with respect to all of the Properties, the Purchase Option may not be exercised by the Lessee if, after giving effect to such exercise, the Maximum Property Cost of the purchased Properties (together with all other Properties purchased by Lessee pursuant to this Section 20.1) would be greater than 35% of the greatest Maximum Property Cost applicable at any time during the Term. If Lessee exercises its Purchase Option pursuant to this Section 20.1, Lessor shall transfer to Lessee all of Lessor's right, title and interest in and to such Property as of the date specified in the Purchase Notice upon receipt of the Purchase Option Price, amounts, if any, referred to in clause FIRST of Section 22.2 and all Rent and other amounts then due and payable under this Lease and any other Operative Agreement. To effect any transfer and assignment by Lessor to Lessee under this Section 20.1, Lessor shall execute, acknowledge (where required) and deliver to Lessee each of the following: (i) a special or limited warranty Deed conveying the Property (to the extent it is real property) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (ii) a Bill of Sale conveying the Property (to the extent it is personal property) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (iii) any real estate tax affidavit or other document required by law to be executed and filed in order to record the Deed; and (iv) a FIRPTA affidavit. For purposes of this Lease and the other Operative Agreements, any and all 27 amounts paid by Lessee pursuant to the provisions of Section 10.3(f) of the Participation Agreement shall be deemed to be amounts paid and received pursuant to this Section 20.1. Lessee may assign its rights under this Section 20.1 to another Person; provided, Lessee shall remain liable for all obligations of Lessee hereunder respecting Property remaining subject to the terms of this Lease subsequent to such assignment as if such assignment had not occurred. 20.2 Expiration Date Purchase or Sale Option. Not less than 90 days and no more than 180 days prior to the Expiration Date, Lessee may give Lessor and Agent written notice (the "Expiration Date Election Notice") that Lessee is electing to exercise the Expiration Date Purchase Option or the option of Lessee to remarket and sell the Properties pursuant to Section 22.1. If Lessee does not give an Expiration Date Election Notice at least 90 days and not more than 180 days prior to the then current Expiration Date, then Lessee shall be obligated to repurchase the Properties pursuant to Section 20.1. If any Property is the subject of remediation efforts respecting Hazardous Substances at the Expiration Date which could materially and adversely impact the Fair Market Sales Value of such Property, then Lessee shall be obligated to repurchase each such Property pursuant to Section 20.1. Prior to the Expiration Date, Lessee may rescind its election to remarket the Properties pursuant to Section 22.1 and elect instead the Expiration Date Purchase Option. If Lessee shall either (i) elect, or be deemed to have elected, to exercise the Expiration Date Purchase Option or (ii) elect to remarket the Properties pursuant to Section 22.1 and fail to cause all of the Properties to be sold on the Expiration Date in accordance with the terms of Sections 20.1 or 22.1, respectively, then in either case, on the Expiration Date Lessee shall pay to Lessor an amount equal to the Termination Value for all the Properties (which the parties do not intend to be a "bargain" purchase) and, upon receipt of such amount plus all Rent and other amounts then due and payable under this Lease and under any other Operative Agreement (including without limitation the amounts described in clause FIRST of Section 22.2), Lessor shall transfer to Lessee all of Lessor's right, title and interest in and to the Properties in accordance with Section 19.1. 20.3 Lessor's Transfer Option. If, on the Construction Period Termination Date, there are fewer than four (4) Properties then subject to the terms of this Lease, then Lessor shall have the option to give Lessee irrevocable written notice that Lessor, on a Payment Date that is not less than thirty (30) days after the date of such written notice, shall transfer and convey all of its right, title and interest in and to any or all of the Properties to Lessee. On any transfer and conveyance date specified by Lessor pursuant to this Section 20.3, (i) Lessor shall transfer and convey all of its right, title and interest in and to any or all of the Properties previously specified to Lessee, (ii) Lessee shall accept such transfer and conveyance of right, title and interest in and to the respective Property or Properties and (iii) Lessee shall pay the Termination Value for 28 such respective Property or Properties and all Rent and other amounts then due and payable under this Lease and under any other Operative Agreement (including without limitation all costs and expenses referred to in clause FIRST of Section 22.2), in accordance with Section 19.1. ARTICLE XXI 21.1 Renewal. Provided that no Lease Event of Default shall have occurred and be continuing and provided that the Lenders agree at such time to extend the Maturity Date to a date that is identical to the final day of the Extended Term, at the Basic Term Expiration Date, Lessee may renew this Lease (the "Renewal Option") for the Extended Term upon not more than 180 days and not less than 90 days prior written notice to Lessor, with respect to all Property, other than Property which Lessee shall have elected to purchase pursuant to Section 20.1. Unless otherwise agreed, any such renewal of this Lease for the Extended Term shall be on the same terms and conditions as set forth in this Lease for the original Term (which the parties do not intend to be a "bargain" renewal), subject in any case to renegotiation of the rental rate applicable during the Extended Term. ARTICLE XXII 22.1 Sale Procedure. (a) During the Marketing Period, Lessee, on behalf of any assignee of Lessee pursuant to Section 25.1 or the Lessor, shall obtain bids for the cash purchase of all of the Properties in connection with a sale to one or more purchasers to be consummated on the Expiration Date for the highest price available (subject to the proviso in the next sentence), shall notify Lessor promptly of the name and address of each prospective purchaser and the cash price which each prospective purchaser shall have offered to pay for any Property and shall provide Lessor with such additional information about the bids and the bid solicitation procedure as Lessor may reasonably request from time to time. Lessor may reject any and all bids and may assume sole responsibility for obtaining bids by giving Lessee written notice to that effect; provided, however, that notwithstanding the foregoing, Lessor may not reject the bids for the Properties submitted by the Lessee if such bids, in the aggregate, are greater than or equal to the sum of the Limited Recourse Amount for all of the Properties, plus all amounts, if any, referred to in clause FIRST of Section 22.2 and represent bona fide offers from one or more third party purchasers. If the price which a prospective purchaser or purchasers shall have offered to pay for the Properties is less than the sum of the Limited Recourse Amount plus all costs and expenses referred to in clause FIRST of Section 22.2, Lessor may elect to retain all the 29 Properties by giving Lessee prior written notice of Lessor's election to retain the Properties, and upon receipt of such notice, Lessee shall surrender, or cause to be surrendered, the Properties to Lessor pursuant to Section 10.1. Unless Lessor shall have elected to retain the Properties pursuant to the preceding sentence, Lessee shall arrange for Lessor to sell the Properties, for cash on the Expiration Date to the purchaser or purchasers identified by Lessee or Lessor, as the case may be. To effect such transfer and assignment, Lessor shall execute, acknowledge (where required) and deliver to Lessee each of the following: (i) a special or limited warranty Deed conveying the Property (to the extent it is real property) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (ii) a Bill of Sale conveying the Property (to the extent it is personal property) to Lessee free and clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor Liens; (iii) any real estate tax affidavit or other document required by law to be executed and filed in order to record the Deed; and (iv) a FIRPTA affidavit. Lessee shall surrender, or cause to be surrendered, the Property so sold or subject to such documents to each purchaser in the condition specified in Section 10.1. Neither party shall take any action or fail to take any action (where action is required under the Operative Agreements) which would have the effect of discouraging bona fide third party bids for any Property. If all of the Properties are not either (i) sold on the Expiration Date in accordance with the terms of this Section 22.1, or (ii) retained by the Lessor pursuant to an affirmative election made by the Lessor pursuant to the third sentence of this Section 22.1(a), then the Lessee shall be obligated to pay the Lessor on the Expiration Date an amount equal to the Termination Value for all of the Properties (plus all Rent and other amounts then due and payable under this Lease and any other Operative Agreements) in accordance with the terms of Section 20.2. (b) If the Properties are sold on the Expiration Date to one or more third party purchasers in accordance with the terms of Section 22.1(a) and the aggregate purchase price paid for the Properties minus the sum of all amounts, if any, referred to in clause FIRST of Section 22.2 is less than the sum of the aggregate Termination Values for all of the Properties plus all Rent and other amounts then due and payable under this Lease and under any other Operative Agreements (hereinafter such difference shall be referred to as the "Deficiency Balance"), then the Lessee hereby unconditionally promises to pay to the Lessor on the Expiration Date the lesser of (i) the Deficiency Balance, or (ii) the Maximum Residual Guarantee Amount for all of the Properties. If the Properties are retained by the Lessor pursuant to an affirmative election made by the Lessor pursuant to the third sentence of Section 22.1(a), then the Lessee hereby unconditionally promises to pay to the Lessor 30 on the Expiration Date an amount equal to the aggregate Maximum Residual Guaranty Amounts for all of the Properties. (c) In the event the Properties are either sold to a third party purchaser on the Expiration Date or retained by the Lessor in connection with an affirmative election by the Lessor pursuant to the third sentence of Section 22.1(a), then in either case on the Expiration Date the Lessee shall provide, or cause to be provided, Lessor or such third party purchaser, with (i) all permits, certificates of occupancy, governmental licenses and authorizations (to the extent such licenses or authorizations are transferable) necessary to use and operate such Property for its intended purposes, (ii) such easements, licenses, rights-of-way and other rights and privileges in the nature of an easement as are reasonably necessary or desirable in connection with the use, repair, access to or maintenance of such Property for its intended purpose or otherwise as the Lessor shall reasonably request, and (iii) a services agreement covering such services as Lessor or such third party purchaser may request in order to use and operate the Property for its intended purposes at such rates (not in excess of arm's- length fair market rates) as shall be acceptable to Lessee and Lessor or such third party purchaser. All assignments, licenses, easements, agreements and other deliveries required by clauses (i) and (ii) of this paragraph (c) shall be in form satisfactory to the Lessor or such third party purchaser, as applicable, and shall be fully assignable (including both primary assignments and assignments given in the nature of security) without payment of any fee, cost or other charge. 22.2 Application of Proceeds of Sale. The Lessor shall apply the proceeds of sale of any Property in the following order of priority: (i) FIRST, to pay or to reimburse Lessor for the payment of all reasonable costs and expenses, if any, incurred by Lessor in connection with the sale; (ii) SECOND, so long as the Credit Agreement is in effect and the Holder Advance or any amount is owing to the Holder under any Operative Agreement, to the Agent to be applied pursuant to inter-creditor provisions between the Lenders and the Holder contained in Section 8 of the Credit Agreement and any other applicable provisions of the Operative Agreements; and (iii) THIRD, to the Lessee. 22.3 (intentionally omitted). 22.4 (intentionally omitted). 31 22.5 Certain Obligations Continue. During the Marketing Period, the obligation of Lessee to pay Rent with respect to the Properties (including the installment of Basic Rent due on the Expiration Date) shall continue undiminished until payment in full to Lessor of the sale proceeds, if any, the Maximum Residual Guarantee Amount and all other amounts due to Lessor with respect to all Properties. Lessor shall have the right, but shall be under no duty, to solicit bids, to inquire into the efforts of Lessee to obtain bids or otherwise to take action in connection with any such sale, other than as expressly provided in this Article XXII. 22.6 Sale of Undeveloped Pads. Provided that no Lease Default or Lease Event of Default shall have occurred and be continuing, Lessee shall have the option, exercisable by giving Lessor no less than thirty (30) days written notice of Lessee's election to transfer and convey any undeveloped Land (excluding any de minimis site improvements) regarding any Property on the following terms and conditions: (a) the Person to whom the transfer and conveyance is made shall not be an Affiliate of Lessee; (b) the purchase price for such Land shall be equal to or greater than the Fair Market Sales Value thereof and shall be promptly paid to Lessor (and in any event within three (3) Business Days after such transfer and conveyance); (c) the applicable Property, excluding such Land transferred and conveyed therefrom, shall (on and after the date of such transfer and conveyance) satisfy all of the terms and conditions of the Operative Agreements and (d) all Rent and other amounts due and payable by Lessee under any Operative Agreement shall be paid on or prior to the date of such transfer and conveyance. ARTICLE XXIII 23.1 Holding Over. If Lessee shall for any reason remain in possession of a Property after the expiration or earlier termination of this Lease as to such Property (unless such Property is conveyed to Lessee), such possession shall be as a tenancy at sufferance during which time Lessee shall continue to pay Supplemental Rent that would be payable by Lessee hereunder were the Lease then in full force and effect with respect to the Property and Lessee shall continue to pay Basic Rent at 110% of the Basic Rent that would otherwise be due and payable at such time. Such Basic Rent shall be payable from time to time upon demand by Lessor and such additional 10% amount shall be applied by the Lessor to the payment of the Loans pursuant to the Credit Agreement and the Holder Advance pursuant to the Trust Agreement pro rata between the Loans and the Holder Advance. During any period of tenancy at sufferance, Lessee shall, subject to the second preceding sentence, be obligated to perform and observe all of the terms, covenants and conditions of this Lease, but shall have no rights hereunder other than the right, to the extent given by law to tenants at sufferance, to continue their occupancy and use of such Property. Nothing contained in this Article XXIII shall constitute the consent, express or implied, 32 of Lessor to the holding over of Lessee after the expiration or earlier termination of this Lease as to any Property (unless such Property is conveyed to Lessee) and nothing contained herein shall be read or construed as preventing Lessor from maintaining a suit for possession of such Property or exercising any other remedy available to Lessor at law or in equity. ARTICLE XXIV 24.1 Risk of Loss. During the Term, unless Lessee shall not be in actual possession of the Property in question solely by reason of Lessor's exercise of its remedies of dispossession under Article XVII, the risk of loss or decrease in the enjoyment and beneficial use of such Property as a result of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed by Lessee, and Lessor shall in no event be answerable or accountable therefor. ARTICLE XXV 25.1 Assignment. (a) Without the consent of the Lessor, Lessee may assign, subject to Section 25.1(b), this Lease and its rights hereunder in whole or in part to any Person provided the aggregate Property Cost of all such Properties under assignment, at the time such assignment becomes effective, does not exceed 25% of the aggregate Property Cost of all Properties then subject to this Lease. Lessee may not assign this Lease or its rights hereunder in whole or in part in addition to that referenced in the preceding sentence without first obtaining the prior written consent of the Lessor. Each assignment hereunder shall be made in the normal course of Lessee's business, on commercially reasonable terms and at market rates. (b) No such assignment or other relinquishment of possession to any Property shall in any way discharge or diminish any of the obligations of Lessee to Lessor hereunder and Lessee shall remain directly and primarily liable under this Lease as to any assignment regarding this Lease. 25.2 Subleases. (a) Without the consent of the Lessor, Lessee may sublet, subject to Section 25.2(c), any Property or portion thereof to (i) any wholly-owned Subsidiary of Lessee or (ii) any Person (which is not a wholly-owned Subsidiary of Lessee) provided the aggregate Property Cost of all such Properties under sublease to Persons (which are not wholly- owned Subsidiaries of Lessee), at the time such sublease becomes effective, does not exceed 25% of the aggregate 33 Property Cost of all Properties then subject to this Lease. Lessee may not sublet any Property or portion thereof in addition to that referenced in the preceding sentence without first obtaining the prior written consent of the Lessor. Each sublease hereunder shall be made in the normal course of Lessee's business, on commercially reasonable terms and at market rates. Each sublease may be for a term less than, equal to or greater than the Term, as extended from time to time. (b) Promptly following the execution and delivery of any sublease permitted by this Article XXV, Lessee shall notify Lessor and the Agent of the execution of such sublease. As of the date of each Lease Supplement, Lessee shall lease the respective Properties described in such Lease Supplement from Lessor, and any existing tenant respecting such Property shall automatically be deemed to be a subtenant of Lessee and not a tenant of Lessor. (c) No such sublease or other relinquishment of possession to any Property shall in any way discharge or diminish any of Lessee's obligations to Lessor hereunder and Lessee shall remain directly and primarily liable under this Lease as to the Property, or portion thereof, so sublet. ARTICLE XXVI 26.1 No Waiver. No failure by Lessor or Lessee to insist upon the strict performance of any term hereof or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Lease, and this Lease shall continue in full force and effect with respect to any other then existing or subsequent default. ARTICLE XXVII 27.1 Acceptance of Surrender. No surrender to Lessor of this Lease or of all or any portion of any Property or of any part of any thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by Lessor and, prior to the payment or performance of all obligations under the Credit Documents, the Agent, and no act by Lessor or the Agent or any representative or agent of Lessor or the Agent, other than a written acceptance, shall constitute an acceptance of any such surrender. 27.2 No Merger of Title. There shall be no merger of this Lease or of the leasehold estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or 34 indirectly, in whole or in part, (a) this Lease or the leasehold estate created hereby or any interest in this Lease or such leasehold estate, (b) any right, title or interest in any Property, (c) any Notes, or (d) a beneficial interest in Lessor. ARTICLE XXVIII 28.1 Incorporation of Covenants. Reference is made to that certain Credit Agreement dated as of June 30, 1994 (the "1994 Credit Agreement") among the Lessee, Continental Bank, as Agent, and the other financial institutions party thereto. Further reference is made to the covenants contained in Section 10 of the 1994 Credit Agreement (hereinafter referred to as the "Incorporated Covenants"). The Lessee agrees with the Lessor that the Incorporated Covenants (and all other relevant provisions of the Credit Agreement related thereto) are hereby incorporated by reference into this Lease to the same extent and with the same effect as if set forth fully herein, without giving effect to any waiver, amendment, modification or replacement of the 1994 Credit Agreement or any term or provision of the Incorporated Covenants occurring subsequent to the date of this Lease, except to the extent otherwise specifically provided in the following provisions of this paragraph. In the event a waiver is granted under the 1994 Credit Agreement or an amendment or modification is executed with respect to the 1994 Credit Agreement, and such waiver, amendment and/or modification affects the Incorporated Covenants, then such waiver, amendment or modification shall be effective with respect to the Incorporated Covenants as incorporated by reference into this Lease only if consented to in writing by the Lessor and the Majority Lenders. In the event of any replacement of the 1994 Credit Agreement with a similar credit facility (the "New Facility") the covenants contained in the New Facility which correspond to the covenants contained in Section 10 of the 1994 Credit Agreement shall become the Incorporated Covenants hereunder only if consented to in writing by the Lessor and the Majority Lenders and, if such consent is not granted or if the 1994 Credit Agreement is terminated and not replaced, then the covenants contained in Section 10 of the 1994 Credit Agreement (together with any modifications or amendments approved in accordance with this paragraph) shall continue to be the Incorporated Covenants hereunder. ARTICLE XXIX 29.1 Notices. All notices required or permitted to be given under this Lease shall be in writing. Notices may be served by certified or registered mail, postage paid with return receipt requested; by private courier, prepaid; by telex, facsimile, or other telecommunication device capable of transmitting or creating a written record; or personally. Mailed notices shall be deemed delivered five days after mailing, properly addressed. 35 Couriered notices shall be deemed delivered when delivered as addressed, or if the addressee refuses delivery, when presented for delivery notwithstanding such refusal. Telex or telecommunicated notices shall be deemed delivered when receipt is either confirmed by confirming transmission equipment or acknowledged by the addressee or its office. Personal delivery shall be effective when accomplished. Unless a party changes its address by giving notice to the other party as provided herein, notices shall be delivered to the parties at the following addresses: If to Lessee: Fred Meyer, Inc. 3800 S.E. 22nd Avenue P.O. Box 42121 Portland, Oregon 97242 Attention: Michael H. Don, Vice President and Corporate Treasurer Telephone: (503) 797-5300 Telecopier: (503) 797-5299 If to Lessor: First Security Bank of Utah, N.A. 79 South Main Street Salt Lake City, Utah 84111 Attention: Mr. Val T. Orton Corporate Trust Counsel Telephone: (801) 246-5300 Telecopy: (801) 246-5053 with a copy to the Agent: NationsBank of Texas, N.A. 901 Main Street, 13th Floor P.O. Box 831000 Dallas, Texas 75283-1000 Attention: Ms. Molly Oxford Assistant Vice President Telephone: (214) 508-3255 Telecopy: (214) 508-2515 or such additional parties and/or other address as such party may hereafter designate, and shall be effective upon receipt or refusal thereof. ARTICLE XXX 30.1 Miscellaneous. Anything contained in this Lease to the contrary notwithstanding, all claims against and liabilities of Lessee or Lessor arising from events commencing prior to the expiration or earlier termination of this Lease shall survive 36 such expiration or earlier termination. If any provision of this Lease shall be held to be unenforceable in any jurisdiction, such unenforceability shall not affect the enforceability of any other provision of this Lease and such jurisdiction or of such provision or of any other provision hereof in any other jurisdiction. 30.2 Amendments and Modifications. Neither this Lease, any Lease Supplement nor any provision hereof may be amended, waived, discharged or terminated except by an instrument in writing in recordable form signed by Lessor and Lessee. 30.3 Successors and Assigns. All the terms and provisions of this Lease shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 30.4 Headings and Table of Contents. The headings and table of contents in this Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 30.5 Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same instrument. 30.6 GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON. 30.7 Calculation of Rent. All calculation of Basic Rent payable hereunder (to the extent computed with reference to the Eurodollar Rate) shall be computed based on the actual number of days elapsed over a year of 360 days. 30.8 Memoranda of Lease and Lease Supplements. This Lease shall not be recorded; provided, Lessor and Lessee shall promptly record (a) a memorandum of this Lease and the applicable Lease Supplement (in substantially the form of Exhibit B-1 attached hereto) regarding (i) each Improved Property promptly after the acquisition thereof in the local filing office with respect thereto and (ii) each Property which is not an Improved Property promptly after the commencement of the Basic Term therefor in the local filing office with respect thereto, and (b) a memorandum of this Lease (in substantially the form of Exhibit B-2 attached hereto) regarding each Property which is not an Improved Property promptly after the acquisition thereof in the local filing office with respect thereto, in all cases at Lessee's cost and expense, and as required under applicable law to sufficiently evidence this Lease or any such Lease Supplement in the applicable real estate filing records. 30.9 Allocations between the Lenders and the Holder. Notwithstanding any other term or provision of this Lease to the contrary, the allocations of the proceeds of the Properties and any and all other Rent and other amounts received hereunder shall be subject to the inter-creditor provisions between the Lenders and the Holder contained in the Operative Agreement (or as 37 otherwise agreed among the Lenders and the Holder from time to time). 30.10 Limitations on Recourse. Notwithstanding anything contained in this Lease to the contrary, Lessee agrees to look solely to Lessor's estate and interest in the Properties (and in no circumstance to the Agent, the Lenders, the Holder or otherwise to Lessor) for the collection of any judgment requiring the payment of money by Lessor in the event of liability by Lessor, and no other property or assets of Lessor or any shareholder, owner or partner (direct or indirect) in or of Lessor, or any director, officer, employee, beneficiary, Affiliate of any of the foregoing shall be subject to levy, execution or other enforcement procedure for the satisfaction of the remedies of Lessee under or with respect to this Lease, the relationship of Lessor and Lessee hereunder or Lessee's use of the Properties or any other liability of Lessor to Lessee. Nothing in this Section shall be interpreted so as to limit the terms of Sections 6.1 or 6.2. 30.11 Estoppel Certificates. Upon twenty (20) days' prior notice of the request, either party will execute, acknowledge and deliver to the other party a certificate stating (a) that this Lease is unmodified and in full force and effect (or, if there have been modifications, that this Lease is in full force and effect as modified, and setting forth such modifications), (b) the dates to which Rent and other sums payable hereunder have been paid, and (c) either that to the knowledge of the party no default exists under this Lease or specifying each such default of which the party has knowledge. A party shall not be obligated, except as provided herein, to update any certificate once delivered. 30.12 Decision Making by Parties. Wherever a party's consent, approval, decision or determination is required under this Lease, such consent or approval shall be given or decision or determination shall be made in writing and in a commercially reasonable manner. No change in Rent, the rights of the parties or the economic terms of this Lease shall be required as a condition to granting of consent. Any denial of consent will include in reasonable detail the reason for denial or aspect of the request that was not acceptable. 30.13 Limited Power of Attorney. To the extent required by Lessee, Lessor hereby agrees to provide Lessee with a Limited Power of Attorney permitting Lessee to act on behalf of Lessor in connection with (i) consenting to all Subleases referenced in Section 25.2 of this Lease (respecting up to, but not to exceed, 25% of the aggregate Property Costs of all Properties then subject to the Lease), (ii) executing all easements, use, restrictive covenant, assessment or bonding agreements referenced in the first paragraph of Section 10.5 of the Participation Agreement and (iii) selling undeveloped Land as is more specifically described in Section 22.6 of this Lease (provided, all such sales shall be conducted in compliance with the terms of 38 such Section 22.6, without modification of such provisions pursuant to the utilization of the Limited Power of attorney by Lessee); provided, the Limited Power of Attorney may be utilized only to the extent (x) no Default or Event of Default shall have occurred or be continuing at the time of the contemplated exercise of the Limited Power of Attorney and (y) such Sublease, easement, use, restrictive covenant, assessment or bonding agreement or document of sale shall be made in the normal course of the Lessee's business, at market rates, on commercially reasonable terms and accomplished in a manner so as not to diminish the value of any Property in any material respect. To the extent any Event of Default has occurred and is continuing or the Lessee has received written notice of the occurrence of any Default, the Limited Power of Attorney shall immediately terminate and be void and of no further force or effect unless reinstated in writing by the Lessor and acknowledged and agreed to by the Holder and the Agent. Each action taken by the Lessee under the Limited Power of Attorney shall automatically, without further action, be deemed to be a representation and warranty as of such date that the conditions set forth in the first sentence of this Section 30.13 are satisfied in full as of such date. 30.14 Submission To Jurisdiction; Waivers. Each of the parties hereto hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Lease and the other Operative Agreements to which it is a party, or for recognition and enforcement of any judgement in respect thereof, to the non- exclusive general jurisdiction of the Courts of the State of Oregon, the courts of the United States of America for the District of Oregon, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail) postage prepaid, to such party at its address set forth in Section 29.1 or at such other address of which the parties hereto shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal 39 action or proceeding referred to in this Section 30.14 any special, exemplary or punitive damages. 30.15 WAIVERS OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE LESSOR AND THE LESSEE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE OR ANY OTHER OPERATIVE AGREEMENT TO WHICH SUCH ENTITY IS A PARTY AND FOR ANY COUNTERCLAIM THEREIN. [Signature pages follow] IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed and delivered as of the date first above written. FRED MEYER, INC. By: MICHAEL H. DON -------------------------------- Name: Michael H. Don ------------------------------ Title: V.P. & Treasurer ----------------------------- FIRST BANK OF UTAH, N.A., not individually, but solely as Owner Trustee under the FM Trust 1995-1 By: GREG A. HAWLEY -------------------------------- Name: Greg A. Hawley ------------------------------ Title: Assistant Vice President ----------------------------- Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as the date hereof NationsBank of Texas, N.A., as Agent By: _______________________ Name: William Guffey Title: Vice President EXHIBIT A TO THE LEASE ------------ LEASE SUPPLEMENT NO. ___ THIS LEASE SUPPLEMENT NO. ___ (this "Lease Supplement") dated as of [________________________] between FIRST SECURITY BANK OF UTAH, N.A., a national banking association, not individually, but solely as Owner Trustee under the FM Trust 1995-1, as lessor (the "Lessor"), and FRED MEYER, INC., as lessee (the "Lessee"). WHEREAS, the Lessor is the owner or will be owner of the Property described on Schedule I hereto (the "Leased Property") and wishes to lease the same to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Rules of Usage. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Participation Agreement, dated as of May 5, 1995, among the Lessee, the Lessor, not individually, except as expressly stated therein, but solely as Owner Trustee under the FM Trust 1995-1, NationsBank of Texas, N.A., as the Holder, the various banks and banking institutions which are parties thereto from time to time and NationsBank of Texas, N.A., as Agent for the Lenders. SECTION 2. The Properties. Attached hereto as Schedule I is the description of the Leased Property, with an Equipment Schedule attached hereto as Schedule I-A, an Improvement Schedule attached hereto as Schedule I-B and a legal description of the Land for such Project attached hereto as Schedule I-C. Effective upon the execution and delivery of this Lease Supplement by the Lessor and the Lessee, the Leased Property shall be subject to the terms and provisions of the Lease. SECTION 3. Ratification; Incorporation by Reference. Except as specifically modified hereby, the terms and provisions of the Lease and the Operative Agreements are hereby ratified and confirmed and remain in full force and effect. The Lease is hereby incorporated herein by reference as though restated herein in its entirety. SECTION 4. Original Lease Supplement. The single executed original of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. SECTION 5. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF OREGON. SECTION 6. Mortgage; Power of Sale. Without limiting any other remedies set forth in the Lease, in the event that a court of competent jurisdiction rules that the Lease constitutes a mortgage, deed of trust or other secured financing as is the intent of the parties, then the Lessor and the Lessee agree that the Lessee hereby grants a Lien against the Leased Property WITH POWER OF SALE, and that, upon the occurrence and during the continuance of any Lease Event of Default, the Lessor shall have the power and authority, to the extent provided by law, after prior notice and lapse of such time as may be required by law, to foreclose its interest (or cause such interest to be foreclosed) in all or any part of the Leased Property. SECTION 7. Counterpart Execution. This Lease Supplement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] [If necessary, modify to put in recordable form.] IN WITNESS WHEREOF, each of the parties have caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date first above written. FIRST SECURITY BANK OF UTAH, N.A., not individually, but solely as Owner Trustee under the FM Trust 1995-1, as Lessor By: _______________________________ Name: _____________________________ Title: ____________________________ FRED MEYER, INC., as Lessee By: _______________________________ Name: _____________________________ Title: ____________________________ Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as the date hereof. NATIONSBANK OF TEXAS, N.A., as Agent By: __________________________ Name: ________________________ Title: _______________________ [Conform to State Law Requirements] ACKNOWLEDGEMENTS ---------------- STATE OF ) ) ss. County of ) The foregoing instrument was acknowledged before me, the undersigned Notary Public, in the County of ___________, on this ___ day of ______________, 19__ by _______________________________ of FIRST SECURITY BANK OF UTAH, N.A., a national banking association, of and on behalf of the national banking association. ____________________________________ (NOTARIAL SEAL) Notary Public for __________________ Residing at: _______________________ My commission expires: _____________ STATE OF OREGON ) ) ss. County of ) On this ___ day of __________, 19__, before me, _____________________ [notary's name], a Notary Public of the State of Oregon, duly commissioned and sworn, personally appeared ______________________ to me personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the written instrument as the ______________________ of FRED MEYER, INC., a Delaware corporation, of and on behalf of such corporation and acknowledged to me that such corporation executed the same. _____________________________________ (NOTARIAL SEAL) Notary Public for the State of Oregon Residing at: ________________________ My commission expires: ______________ STATE OF ________________) ) ss: COUNTY OF _______________) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ________________ this _____ day of ______________, by ________________, as __________________ of First Security Bank of Utah, N.A., not individually, but solely as Owner Trustee under the FM Trust 1995-1, on behalf of the Owner Trustee. [Notarial Seal] ________________________________ Notary Public My commission expires: _________ Residing at: ___________________ ________________________________ STATE OF ________________) ) ss: COUNTY OF _______________) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ________________ this _____ day of ______________, by ________________, as _______________ of FRED MEYER, INC., a Delaware corporation, on behalf of the corporation. [Notarial Seal] ________________________________ Notary Public My commission expires: __________ Residing at: ___________________ ________________________________ STATE OF ________________) ) ss: COUNTY OF _______________) The foregoing Lease Supplement was acknowledged before me, the undersigned Notary Public, in the County of ________________ this _____ day of ______________, by ________________, as _______________ of NATIONSBANK OF TEXAS, N.A., a national banking association, as Agent. [Notarial Seal] ________________________________ Notary Public My commission expires: __________ Residing at: ___________________ ________________________________ A-1 - --------------------------------------------------------------------------- Appendix A Rules of Usage and Definitions - --------------------------------------------------------------------------- I. Rules of Usage The following rules of usage shall apply to this Appendix A and the Operative Agreements (and each appendix, schedule, exhibit and annex to the foregoing) unless otherwise required by the context or unless otherwise defined therein: (a) Except as otherwise expressly provided, any definitions set forth herein or in any other document shall be equally applicable to the singular and plural forms of the terms defined. (b) Except as otherwise expressly provided, references in any document to articles, sections, paragraphs, clauses, annexes, appendices, schedules or exhibits are references to articles, sections, paragraphs, clauses, annexes, appendices, schedules or exhibits in or to such document. (c) The headings, subheadings and table of contents used in any document are solely for convenience of reference and shall not constitute a part of any such document nor shall they affect the meaning, construction or effect of any provision thereof. (d) References to any Person shall include such Person, its successors and permitted assigns and transferees. (e) Except as otherwise expressly provided, reference to any agreement means such agreement as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof. (f) Except as otherwise expressly provided, references to any law includes any amendment or modification to such law and any rules or regulations issued thereunder or any law enacted in substitution or replacement therefor. (g) When used in any document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. A-2 (h) References to "including" means including without limiting the generality of any description preceding such term and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters to matters similar to those specifically mentioned. (i) References herein to "attorney's fees", "legal fees", "costs of counsel" or other such references shall be deemed to include the allocated cost of in-house counsel. (j) Each of the parties to the Operative Agreements and their counsel have reviewed and revised, or requested revisions to, the Operative Agreements, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in the construing and interpretation of the Operative Agreements and any amendments or exhibits thereto. II. Definitions "ABR" shall have the meaning specified in Section 1.1 of the Credit Agreement. "acquire" or "purchase" shall mean, with respect to any Property, the acquisition, lease or purchase of such Property by the Owner Trustee from any Person. "Acquisition Advance" shall mean an advance of funds to pay Property Acquisition Costs and other amounts related thereto pursuant to Section 5.3 of the Participation Agreement. "Advance" shall mean a Construction Advance or Modification Advance or an Acquisition Advance. "Affiliate" shall have the meaning specified in Section 1.1 of the Credit Agreement. "After Tax Basis" shall mean, with respect to any payment to be received, the amount of such payment increased so that, after deduction of the amount of all taxes required to be paid by the recipient calculated at the then maximum marginal rates generally applicable to Persons of the same type as the recipients (less any tax savings realized as a result of the payment of the indemnified amount) with respect to the receipt by the recipient of such amounts, such increased payment (as so reduced) is equal to the payment otherwise required to be made. "Agency Agreement" shall mean the Agency Agreement, dated as of the Initial Closing Date, between the Construction Agent and the Owner Trustee. "Agency Agreement Event of Default" shall mean an "Event of Default" as defined in Section 5.1 of the Agency Agreement. A-3 "Agent" or "Administrative Agent" shall mean NationsBank of Texas, N.A., as Administrative Agent for the Lenders pursuant to the Credit Agreement, or any successor agent appointed in accordance with the terms of the Credit Agreement. "Allocated Interest" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Applicable Margin" shall have the meaning given such term in Section 1.1 of the Credit Agreement. "Appraisal" shall mean, with respect to any Property an appraisal to be delivered in connection with a Property Closing Date or in accordance with the terms of Section 10.1(e) of the Lease, in each case prepared by a reputable appraiser reasonably acceptable to the Agent, which in the judgment of counsel to the Agent, complies with all of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules and regulations adopted pursuant thereto, and all other applicable Legal Requirements, with such appraisal to be performed by an appraiser selected by the Agent after consultation with Lessee. "Approved States" shall mean Washington, Oregon, Utah and Idaho, and any other state approved in writing by the Lessor and the Agent. "Appurtenant Rights" shall mean (i) all agreements, easements, rights of way or use, rights of ingress or egress, privileges, appurtenances, tenements, hereditaments and other rights and benefits at any time belonging or pertaining to the Land underlying any Improvements, or the Improvements, including, without limitation, the use of any streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or contiguous to the Land and (ii) all permits, licenses and rights, whether or not of record, appurtenant to such Land. "Available Commitment" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Base Amount" shall have the meaning specified in Section 10.1 of the Lease. "Basic Rent" shall mean, the sum of (i) the Loan Basic Rent and (ii) the Lessor Basic Rent, calculated as of the applicable date on which Basic Rent is due. "Basic Term" shall have the meaning specified in Section 2.2 of the Lease. "Basic Term Commencement Date" shall have the meaning specified in Section 2.2 of the Lease. "Basic Term Expiration Date" shall have the meaning specified in Section 2.2 of the Lease. A-4 "Bill of Sale" shall mean a Bill of Sale regarding Equipment in form and substance satisfactory to the Holder and the Agent. "Borrowing Date" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Business Day" shall mean a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina, Dallas, Texas, Los Angeles, California, San Francisco, California, New York, New York or Portland, Oregon, are authorized or required by law to close; provided, however, that when used in connection with a Loan bearing interest based on the Eurodollar Rate, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Lease" means any lease of property (whether real, personal or mixed) which would, in accordance with GAAP, be required to be classified and accounted for on the books of the lessee as a capital lease. "Casualty" shall mean any damage or destruction of all or any portion of a Property as a result of a fire or other casualty. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986. "Certificate" shall mean a Certificate in favor of the Holder regarding the Holder Commitment of the Holder issued pursuant to the terms and conditions of the Trust Agreement in favor of the Holder. "Certifying Party" shall have the meaning specified in Section 26.1 of the Lease. "Change in Control" means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, as amended) of outstanding shares of voting stock of Lessee representing in excess of 50% of voting control of Company, which Person or Persons have beneficial ownership of less than 5% of the outstanding shares of voting stock of Lessee as of the date of the Participation Agreement. "Claims" shall mean any and all obligations, liabilities, losses, actions, suits, penalties, claims, demands, costs and expenses (including, without limitation, reasonable attorney's fees and expenses) of any nature whatsoever. "Closing Date" shall mean the Initial Closing Date and each Property Closing Date. A-5 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute hereto. "Collateral" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Commitment" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Commitment Fee Payment Date" shall mean each Specified Interest Payment Date and the last day of the Commitment Period, or such earlier date as the Commitments shall terminate as provided in the Credit Agreement. "Commitment Fee Rate" shall mean, with respect to the Commitments, a rate equal to 15 basis points (0.15%) per annum for the Commitment Period. "Commitment Period" shall mean the period from the Initial Closing Date to and including the Construction Period Termination Date, or such earlier date as the Commitments shall terminate as provided in the Credit Agreement. "Company" shall have the meaning specified in Section 7.3 of the Participation Agreement. "Completion" shall mean, with respect to a Property, such time as final completion of the Improvements on such Property has been achieved in accordance with the Plans and Specifications, the Agency Agreement and/or the Lease, and in compliance with all material Legal Requirements and Insurance Requirements and (unless not required in connection with the construction, renovation and/or modification of Improvements on Improved Property) a certificate of occupancy has been issued with respect to such Property by the appropriate governmental entity. "Completion Date" shall mean, with respect to a Property, the earlier of (i) the date on which Completion for such Property has occurred and (ii) the Construction Period Termination Date. "Condemnation" shall mean any taking or sale of the use, access, occupancy, easement rights or title to any Property or any part thereof, wholly or partially (temporarily or permanently), by or on account of any actual or threatened eminent domain proceeding or other taking of action by any Person having the power of eminent domain, including an action by a Governmental Authority to change the grade of, or widen the streets adjacent to, any Property or alter the pedestrian or vehicular traffic flow to any Property so as to result in a change in access to such Property, or by or on account of an eviction by paramount title or any transfer made in lieu of any such proceeding or action. "Construction Advance" shall mean an advance of funds to pay Property Costs and other amounts related thereto with respect to A-6 Unimproved Property pursuant to Section 5.4 or 5.5 of the Participation Agreement. "Construction Agent" shall mean Fred Meyer, Inc., a Delaware corporation, as construction agent under the Agency Agreement. "Construction Budget" shall mean, as to any Property, the aggregate of Land acquisition costs and the estimated cost of constructing and developing any Improvements, on a Property by Property basis, as determined by the Construction Agent or the Lessee, as the case may be, in its reasonable, good faith judgment, specifying the acquisition cost for Land and the projected hard costs relating to Improvements and soft costs relating to Improvements. "Construction Commencement Date" shall mean, with respect to Improvements, the date on which construction of such Improvements commences pursuant to the Agency Agreement. "Construction Period" shall mean, with respect to a Property, the period commencing on the Construction Commencement Date for such Property and ending on the Completion Date for such Property. "Construction Period Property" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Construction Period Termination Date" shall mean the second annual anniversary of the Initial Closing Date, as such date may be extended for up to six (6) additional months to the extent that a delay in construction is caused by a Force Majeure Event. "Control" shall mean (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to any Person, the possession directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "Co-Owner Trustee" shall have the meaning specified in Section 9.2 of the Trust Agreement. "Credit Agreement" shall mean the Credit Agreement, dated as of the Initial Closing Date, among the Lessor, the Agent and the Lenders, as specified therein. "Credit Agreement Default" shall mean any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Credit Agreement Event of Default. "Credit Agreement Event of Default" shall mean any event or condition defined as an "Event of Default" in Section 6 of the Credit Agreement. A-7 "Credit Documents" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Debt" of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under Capital Leases which have been recorded as liabilities on a balance sheet of such Person, (c) all obligations of such Person to pay the deferred purchase price of property or services (other than current accounts payable in the ordinary course of business), (d) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person (it being understood that if such Person has not assumed or otherwise become personally liable for any such indebtedness, the amount of the Debt of such Person in connection therewith shall be limited to the lesser of the face amount of such indebtedness or the fair market value of all property of such Person securing such indebtedness), (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and banker's acceptances issued for the account of such Person, (f) all obligations of such Person in respect of Hedging Arrangements, (g) all Suretyship Liabilities of such Person and (h) all Debt (as defined above) of any partnership in which such Person is a general partner. The amount of the Debt of any Person in respect of Hedging Arrangements shall be deemed to be the unrealized net loss position of such Person thereunder (determined for each counterparty individually, but netted for all Hedging Arrangements maintained with such counterparty). "Deed" shall mean a special or limited warranty deed regarding Land and/or Improvements in form and substance satisfactory to the Owner Trustee and the Agent. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Employee Benefit Plan" or "Plan" shall mean an employee benefit plan (within the meaning of Section 3(3) of ERISA, including any Multiemployer Plan), or any "plan" as defined in Section 4975(e)(1) of the Code and as interpreted by the Internal Revenue Service and the Department of Labor in rules, regulations, releases or bulletins in effect on any Closing Date. "Environmental Claims" shall mean any investigation, notice, violation, demand, allegation, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or private in nature) arising (a) pursuant to, or in connection with, an actual or alleged violation of, any Environmental Law, (b) in connection with any Hazardous Substance, (c) from any abatement, removal, remedial, corrective, or other response action in connection with a Hazardous Material, Environmental Law, or other order of a A-8 Tribunal or (d) from any actual or alleged damage, injury, threat, or harm to health, safety, natural resources, or the environment. "Environmental Laws" shall mean any Law, permit, consent, approval, license, award, or other authorization or requirement of any Tribunal relating to emissions, discharges, releases, threatened releases of any Hazardous Substance into ambient air, surface water, ground water, publicly owned treatment works, septic system, or land, or otherwise relating to the handling, storage, treatment, generation, use, or disposal of Hazardous Substances, pollution or to the protection of health or the environment, including without limitation CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., and state statutes analogous thereto. "Environmental Violation" shall mean any activity, occurrence or condition that violates or threatens (if the threat requires remediation under any Environmental Law and is not remediated during any grace period allowed under such Environmental Law) to violate or results in or threatens (if the threat requires remediation under any Environmental Law and is not remediated during any grace period allowed under such Environmental Law) to result in noncompliance with any Environmental Law. "Equipment" shall mean equipment, apparatus, furnishings, fittings and personal property of every kind and nature whatsoever purchased, leased or otherwise acquired using the proceeds of the Loans or the Holder Advance by the Construction Agent, the Lessee or the Lessor as specified or described in either a Requisition or a Lease Supplement, whether or not now or subsequently attached to, contained in or used or usable in any way in connection with any operation of any Improvements or other improvements to Land. "Equipment Schedule" shall mean (a) each Equipment schedule attached to the applicable Requisition and (b) each Equipment Schedule attached to the applicable Lease Supplement as Schedule I-A. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean each entity required to be aggregated with any Lessee pursuant to the requirements of Section 414(b) or (c) of the Code. "Eurocurrency Reserve Requirements" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Eurodollar Holder Advance" shall mean the Holder Advance bearing a Holder Yield based on the Eurodollar Rate. A-9 "Eurodollar Rate" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Eurodollar Reserve Rate" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Event of Default" shall mean a Lease Event of Default, an Agency Agreement Event of Default or a Credit Agreement Event of Default. "Excepted Payments" shall mean: (a) all indemnity payments (including indemnity payments made pursuant to Section 13 of the Participation Agreement), whether made by adjustment to Basic Rent or otherwise, to which the Owner Trustee, the Holder or any of their respective Affiliates, agents, officers, directors or employees is entitled; (b) any amounts (other than Basic Rent, Termination Value, or Purchase Option Price) payable under any Operative Agreement to reimburse the Owner Trustee, the Trust Company, the Holder or any of their respective Affiliates (including the reasonable expenses of the Owner Trustee, the Trust Company and the Holder incurred in connection with any such payment) for performing or complying with any of the obligations of the Lessee under and as permitted by any Operative Agreement; (c) any amount payable to the Holder by any transferee of such interest of the Holder as the purchase price of the Holder's interest in the Trust Estate (or a portion thereof); (d) any insurance proceeds (or payments with respect to risks self-insured or policy deductibles) under liability policies other than such proceeds or payments payable to the Agent; (e) any insurance proceeds under policies maintained by the Owner Trustee or the Holder; (f) Transaction Expenses or other amounts or expenses paid or payable to or for the benefit of the Owner Trustee or the Holder; (g) all right, title and interest of the Holder or the Owner Trustee to any Property or any portion thereof or any other property to the extent any of the foregoing has been released from the Liens of the Security Documents and the Lease pursuant to the terms thereof; (h) upon termination of the Credit Agreement pursuant to the terms thereof, all remaining property covered by the Lease or Security Documents; (i) all payments in respect of the Holder Yield; A-10 (j) any payments in respect of interest to the extent attributable to payments referred to in clauses (a) through (i) above; and (k) any rights of either the Owner Trustee or Trust Company to demand, collect, sue for or otherwise receive and enforce payment of any of the foregoing amounts. "Excepted Rights" shall mean the rights retained by the Owner Trustee pursuant to Section 8.2(a)(i) of the Credit Agreement and all right, title and interest of Owner Trustee in the Shared Rights. "Excess Proceeds" shall mean the excess, if any, of the aggregate of all awards, compensation or insurance proceeds payable in connection with a Casualty or Condemnation over the Termination Value paid by the Lessee pursuant to the Lease with respect to such Casualty or Condemnation. "Excluded Taxes" shall have the meaning specified in Section 13.2(e) of the Participation Agreement. "Exemption Agreement" shall have the meaning specified in Section 12.2(e) of the Participation Agreement. "Exemption Representation" shall have the meaning specified in Section 13.2(e) of the Participation Agreement. "Expiration Date" shall mean the Basic Term Expiration Date or the last day of the Extended Term, if applicable. "Expiration Date Election Notice" shall have the meaning specified in Section 20.2 of the Lease. "Expiration Date Purchase Option" shall mean the Lessee's option to purchase all (but not less than all) of the Properties on the Expiration Date. "Extended Term" shall mean the five year period which immediately follows the end of the Basic Term and expires on May 5, 2005 with respect to which Lessee has exercised its Renewal Option pursuant to Section 21.1 of the Lease. "Facility" shall mean a facility used for the treatment, storage or disposal of Hazardous Substances. "Fair Market Sales Value" shall mean, with respect to any Property, the amount, which in any event, shall not be less than zero, that would be paid in cash in an arms-length transaction between an informed and willing purchaser and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, such Property. Fair Market Sales Value of any Property shall be determined based on the assumption that, except for purposes of Section 17 of the Lease, such Property is in the condition and state of repair required under A-11 Section 10.1 of the Lease and the Lessee is in compliance with the other requirements of the Operative Agreements. "Fixtures" shall mean all fixtures relating to the Improvements, including all components thereof, located in or on the Improvements, together with all replacements, modifications, alterations and additions thereto. "FM Trust 1995-1" shall mean the grantor trust created pursuant to the terms and conditions of the Trust Agreement. "Force Majeure Event" shall mean any event beyond the control of the Construction Agent, including, but not limited to, strikes, lockouts, adverse soil conditions, acts of God, adverse weather conditions, inability to obtain labor or materials, governmental activities, civil commotion and enemy action; but excluding any event, cause or condition that results from the Construction Agent's financial condition. "GAAP" shall mean the principles of accounting set forth in pronouncements of the Financial Accounting standards Board, the American Institute of Certified Public Accountants, as such principles are from time to time supplemented and amended. "Governmental Action" shall mean all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, written interpretations, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Legal Requirement, and shall include, without limitation, all environmental and operating permits and licenses that are required for the contemplated use, occupancy, zoning and operations of any Property. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Ground Lease" shall mean a ground lease respecting any Property owned by Lessee or a wholly-owned Subsidiary of Lessee in form and substance satisfactory to Lessor (i) having a 99 year term and payments set at $1.00 per year or (ii) subject to such other terms and conditions as are reasonably satisfactory to Lessor, Lessee and the Agent. "Hedging Arrangement" means any interest rate swap, cap or collar agreement, currency swap agreement, commodity swap agreement or other arrangement designed to hedge interest rate and/or currency risk or changes in commodity prices. "Hazardous Substance" shall mean any of the following: (i) any petroleum or petroleum product, explosives, radioactive materials, asbestos, formaldehyde, polychlorinated biphenyls, A-12 lead and radon gas; (ii) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste, or pollutant, in each case whether naturally occurring, man-made or the by-product of any process, that is toxic, harmful or hazardous to the environment or human health or safety as determined in accordance with any Environmental Law; or (iii) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste or pollutant that would support the assertion of any claim under any Environmental Law, whether or not defined as hazardous as such under any Environmental Law. The term "Hazardous Substances" shall not include (a) cleaning products, landscape fertilizers and other products in the ordinary quantities that are customarily used in the ordinary course of business of operating and maintaining commercial properties or (b) products held in sealed containers for sale to customers. "Holder" shall mean NationsBank of Texas, N.A. and the several banks and other financial institutions which are from time to time holders of Certificates in connection with the FM Trust 1995-1. "Holder Advance" shall have the meaning specified in section 2 of the Participation Agreement. "Holder Amount" shall mean as of any date, the aggregate amount of the Holder Advance made by the Holder to the Trust Estate pursuant to Section 2 of the Participation Agreement and Section 3.1 of the Trust Agreement less any payments of the Holder Advance received by the Holder pursuant to Section 3.4 of the Trust Agreement. "Holder Applicable Margin" shall mean the Applicable Margin plus, in each case, .575%. "Holder Commitment" shall mean $3,000,000. "Holder Overdue Rate" shall mean the lesser of (i) the Overdue Interest, as defined in the Credit Agreement, plus .575% and (ii) the highest rate permitted by applicable law. "Holder Property Cost" shall mean with respect to each Property, at any date of determination, an amount equal to the product of (a) a fraction, the numerator of which is the Property Cost for such individual Property and the denominator of which is the aggregate Property Cost for all Properties which are then subject to the terms and conditions of the Operative Agreements multiplied by (b) the outstanding Holder Advance. "Holder Up-Front Fee" shall have the meaning specified in Section 9.4 of the Participation Agreement. "Holder Yield" shall mean the Eurodollar Reserve Rate plus the Holder Applicable Margin; provided, however, (i) upon delivery of the notice described in Section 3.7(c) of the Trust A-13 Agreement, the outstanding Holder Advance of the Holder shall bear a yield at the ABR applicable from time to time from and after the dates and during the periods specified in Section 3.7(c) of the Trust Agreement, and (ii) upon the delivery by the Holder of the notice described in Section 3.8(c) of the Trust Agreement, the Holder Advance of the Holder shall bear a yield at the ABR applicable from time to time after the dates and during the periods specified in Section 3.8(c) of the Trust Agreement. "Impositions" shall mean, except to the extent described in the following sentence, any and all liabilities, losses, expenses, costs, charges and Liens of any kind whatsoever for fees, taxes, levies, imposts, duties, charges, assessments or withholdings ("Taxes"), including (i) real and personal property taxes, including personal property taxes on any property covered by the Lease that is classified by Governmental Authorities as personal property, and real estate or ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes and other similar taxes (including rent taxes and intangibles taxes); (iii) any excise taxes; (iv) real estate transfer taxes, conveyance taxes, stamp taxes and documentary recording taxes and fees; (v) taxes that are or are in the nature of franchise, income, value added, privilege and doing business taxes, license and registration fees; (vi) assessments on any Property, including all assessments for public improvements or benefits, whether or not such improvements are commenced or completed within the Term; and (vii) any tax, Lien, assessment or charge asserted, imposed or assessed by the PBGC or any governmental authority succeeding to or performing functions similar to, the PBGC; and in each case all interest, additions to tax and penalties thereon, which at any time prior to, during or with respect to the Term or in respect of any period for which the Lessee shall be obligated to pay Supplemental Rent, may be levied, assessed or imposed by any Governmental Authority upon or with respect to (a) any Property or any part thereof or interest therein; (b) the leasing, financing, refinancing, demolition, construction, substitution, subleasing, assignment, control, condition, occupancy, servicing, maintenance, repair, ownership, possession, activity conducted on, delivery, insuring, use, operation, improvement, transfer of title, return or other disposition of such Property or any part thereof or interest therein; (c) the Notes or other indebtedness with respect to any Property or any part thereof or interest therein; (d) the rentals, receipts or earnings arising from any Property or any part thereof or interest therein; (e) the Operative Agreements, the performance thereof, or any payment made or accrued pursuant thereto; (f) the income or other proceeds received with respect to any Property or any part thereof or interest therein upon the sale or disposition thereof; (g) any contract (including the Agency Agreement) relating to the construction, acquisition or delivery of the Improvements or any part thereof or interest therein; (h) the issuance of the Notes; or (i) otherwise in connection with the transactions contemplated by the Operative Agreements. A-14 The term "Imposition" shall not mean or include: (i) Taxes and impositions (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are imposed on a Indemnified Person (other than Lessor) by the United States federal government that are based on or measured by the net income (including taxes based on capital gains, and minimum taxes or any tax imposed by Code Section 59A) of such Indemnified Person; provided, that this clause (i) shall not be interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (ii) Taxes and impositions (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are imposed on any Indemnified Person (other than Lessor) by any state or local jurisdiction or taxing authority within any state or local jurisdiction and that are in the nature of franchise taxes or are based upon or measured by the overall gross or net income or overall gross or net receipts of such Indemnified Person except that this clause (ii) shall not apply to (and thus shall not exclude) any such Taxes imposed on an Indemnified Person by a state (or any local taxing authority thereof or therein) to the extent that (A) such Taxes would not have been imposed but for the location, possession or use of any Property in such jurisdiction, and (B) in the case of Taxes based upon overall gross or net income or overall gross or net receipts, such Taxes would not have been imposed had the transactions described in the Operative Agreements been structured as a standard financing arrangement (i.e, with the Indemnity Provider (x) being the borrower of funds advanced by the Lenders and the Holder, (y) holding title to each Property, and (z) being treated as the owner of each Property for both financial accounting and federal income tax purposes) rather than as a tax retention operating lease (it being understood that any such indemnity would be payable only to the extent of the net harm incurred by such Indemnified Person from such Taxes, taking into account any incremental tax benefit in another tax jurisdiction resulting from payment of such Taxes); provided, that this clause (ii) shall not be interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (iii) any Tax or imposition to the extent, but only to such extent, it relates to any act, event or omission that occurs after the termination of the Lease and redelivery or sale of the property in accordance with the terms of the Lease (but not any Tax or imposition that relates to such termination, redelivery or sale and/or to any period prior to such termination, redelivery or sale); or A-15 (iv) any Taxes which are imposed on an Indemnified Person as a result of the gross negligence or wilful misconduct of such Indemnified Person itself (as opposed to gross negligence or wilful misconduct imputed to such Indemnified Person), but not Taxes imposed as a result of ordinary negligence of such Indemnified Person; Any Tax or imposition excluded from the defined term "Imposition" in any one of the foregoing clauses (i) through (v) shall not be construed as constituting an Imposition by any provision of any other of the aforementioned clauses. "Improved Property" shall mean a Property acquired by the Lessor which contains Improvements that are suitable as of the Property Closing Date for occupancy by the Lessee and the operation by the Lessee of a Store therein. "Improvements" shall mean, with respect to the construction, renovation and/or Modification of a Store, all buildings, structures, Fixtures, and other improvements of every kind existing at any time and from time to time on or under the Land purchased, leased or otherwise acquired using the proceeds of the Loans or the Holder Advance, together with any and all appurtenances to such buildings, structures or improvements, including sidewalks, utility pipes, conduits and lines, parking areas and roadways, and including all Modifications and other additions to or changes in the Improvements at any time, including without limitation (a) any Improvements existing as of the Property Closing Date as such Improvements may be referenced on the applicable Requisition and (b) any Improvements made subsequent to such Property Closing Date. "Incorporated Covenants" shall have the meaning specified in Section 28.1 of the Lease Agreement. "Indebtedness" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Indemnified Person" shall mean the Lessor, the Owner Trustee, in its individual and its trust capacity, the Agent, the Holder, the Lenders and their respective successors, assigns, directors, shareholders, partners, officers, employees, agents and Affiliates. "Indemnity Provider" shall mean, respecting each Property, the Construction Agent from the date of the Participation Agreement to and including the Basic Term Commencement Date for such Property and the Lessee for the duration of the Term for such Property. "Initial Closing Date" shall mean the date of the Participation Agreement. "Initial Construction Advance" shall mean any initial Advance (which may be either a Construction Advance or a A-16 Modification Advance) to pay for: (i) Property Costs for construction of any Improvements; (ii) the Property Costs of restoring or repairing any Property which is required to be restored or repaired in accordance with Section 15.1(e) of the Lease; and (iii) the costs of any Modifications in accordance with Section 11.1 of the Lease. "Insurance Requirements" shall mean all terms and conditions of any insurance policy either required by the Lease to be maintained by the Lessee or required by the Agency Agreement to be maintained by the Construction Agent, and all requirements of the issuer of any such policy and, regarding self insurance, any other requirements of Lessee. "Interest Period" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended, together with the rules and regulations promulgated thereunder. "Land" shall mean a parcel of real property described on (a) the Requisition issued by the Construction Agent on the Property Closing Date relating to such parcel and (b) Schedule I-C to each applicable Lease Supplement executed and delivered in accordance with the requirements of Section 2.4 of the Lease. "Law" shall mean any statute, law, ordinance, regulation, rule, order, writ, injunction or decree of any Tribunal. "Lease" or "Lease Agreement" shall mean the Lease Agreement (Tax Retention Operating Lease) dated as of the Initial Closing Date, between the Lessor and the Lessee, together with any Lease Supplements thereto, as such Lease Agreement may from time to time be supplemented, amended or modified in accordance with the terms thereof. "Lease Default" shall mean any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Lease Event of Default. "Lease Event of Default" shall have the meaning specified in Section 17.1 of the Lease. "Lease Supplement" shall mean each Lease Supplement substantially in the form of Exhibit A to the Lease, together with all attachments and schedules thereto, as such Lease Supplement may be supplemented, amended or modified from time to time. "Lease Term Debt Percentage" shall mean, as of the date of determination, a percentage equal to 1.000 minus the Lease Term Holder Percentage. "Lease Term Holder Percentage" shall mean, as of the date of determination, a percentage equal to $3,000,000 divided by the A-17 aggregate Property Costs for all Properties after the Completion thereof and with respect to any Improved Property, after the acquisition thereof. "Legal Requirements" shall mean as to any Person all foreign, Federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting such Person and all foreign, Federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and impositions affecting any Property or the taxation, demolition, construction, use or alteration of such Property, whether now or hereafter enacted and in force, including any that require repairs, modifications or alterations in or to any Property or in any way limit the use and enjoyment thereof (including all building, zoning and fire codes and the Americans with Disabilities Act of 1990, 42 U.S.C. Section 12101 et. seq., and any other similar Federal, state or local laws or ordinances and the regulations promulgated thereunder) and any that may relate to environmental requirements (including all Environmental Laws), and all permits, certificates of occupancy, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments which are either of record or known to the Lessee affecting any Property, the Appurtenant Rights and any easements, licenses or other agreements entered into pursuant to Section 12.2 of the Lease. "Lender Commitment Fee" shall have the meaning specified in Section 9.5(a) of the Participation Agreement. "Lender Financing Statements" shall mean UCC financing statements and fixture filings appropriately completed and executed for filing in the applicable jurisdiction in order to procure a security interest in favor of the Agent in any Equipment or in any Improvements. "Lender Up-Front Fee" shall have the meaning specified in Section 9.4 of the Participation Agreement. "Lenders" shall mean the several banks and other financial institutions from time to time party to the Credit Agreement. "Lessee" shall have the meaning set forth in the Lease. "Lessor" shall mean the Owner Trustee, not in its individual capacity, but as Lessor under the Lease. "Lessor Basic Rent" shall mean the scheduled Holder Yield due on the Holder Advance on any Specified Interest Payment Date pursuant to the Trust Agreement (but not including interest on overdue amounts under the Trust Agreement or otherwise). "Lessor Financing Statements" shall mean UCC financing statements and fixture filings appropriately completed and A-18 executed for filing in the applicable jurisdictions in order to protect the Lessor's interest under the Lease to the extent the Lease is a security agreement or a mortgage. "Lessor Lien" shall mean any Lien, true lease or sublease or disposition of title arising as a result of (a) any claim against the Lessor or Trust Company, in its individual capacity, not resulting from the transactions contemplated by the Operative Agreements, (b) any act or omission of the Lessor or Trust Company, in its individual capacity, which is not required by the Operative Agreements or is in violation of any of the terms of the Operative Agreements, (c) any claim against the Lessor or Trust Company, in its individual capacity, with respect to Taxes or Transaction Expenses against which the Lessee is not required to indemnify Lessor or Trust Company, in its individual capacity, pursuant to Section 13 of the Participation Agreement or (d) any claim against the Lessor arising out of any transfer by the Lessor of all or any portion of the interest of the Lessor in the Properties, the Trust Estate or the Operative Agreements other than the transfer of title to or possession of any Properties by the Lessor pursuant to and in accordance with the Lease, the Credit Agreement or the Participation Agreement or pursuant to the exercise of the remedies set forth in Article XVII of the Lease. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien, option or charge of any kind. "Limited Power of Attorney" shall mean the Limited Power of Attorney dated as of the Initial Closing Date given by the Owner Trustee in favor of the Company and in form and substance satisfactory to the Agent, the Holder, the Owner Trustee and the Company. "Limited Recourse Amount" shall mean with respect to the Properties on an aggregate basis, an amount equal to the sum of the Termination Values with respect to all of the Properties on each Payment Date, less the Maximum Residual guarantee Amount as of such date with respect to the Properties. "Loans" shall have the meaning specified in Section 2.1 of the Credit Agreement. "Loan Basic Rent" shall mean the interest due on the Loans on any Specified Interest Payment Date pursuant to the Credit Agreement (but not including interest on (i) any such Loan prior to the Basic Term Commencement Date with respect to the Property to which such Loan relates or (ii) any overdue amounts under Section 2.7(b) of the Credit Agreement or otherwise). "Loan Property Cost" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Majority Lenders" shall have the meaning specified in Section 1.1 of the Credit Agreement. A-19 "Marketing Period" shall mean, if the Lessee have not given the Expiration Date Election Notice in accordance with Section 20.2 of the Lease, the period commencing on the date 90 days prior to the applicable Expiration Date and ending on such Expiration Date. "Material Adverse Effect" shall mean a material adverse effect on (a) the ability of the Lessee or any Subsidiary to perform its respective obligations under any Operative Agreement to which it is a party, (b) the validity or enforceability of any Operative Agreement or the rights and remedies of the Agent, the Lenders, the Holder, or the Lessor thereunder, (c) the validity, priority or enforceability of any Lien on any Property created by any of the Operative Agreements, or (d) the value, utility or useful life of any Property or the use, or ability of the Lessee to use, any Property for the purpose for which it was intended. "Material Subsidiary" means any Subsidiary of Lessee which either (a) has assets which constitute 5% or more of the consolidated assets of Lessee and its Subsidiaries or (b) has revenues during its most recently-ended fiscal year which constitute more than 5% of the consolidated revenues of Lessee and its Subsidiaries during the most recently-ended fiscal year of Lessee. "Maturity Date" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Maximum Property Cost" shall mean the aggregate amount of the Property Costs for all Properties subject to the Lease as of the applicable determination date. "Maximum Residual Guarantee Amount" shall mean an amount equal to the product of the aggregate Property Cost for all of the Properties times 89 1/2%. "Modification Advance" shall mean an advance of funds to pay Property Costs and other amounts related thereto with respect to Improved Property pursuant to Section 5.4 or 5.5 of the Participation Agreement. "Modifications" shall have the meaning specified in Section 11.1(a) of the Lease. "Mortgage Instrument" shall mean any mortgage, deed of trust or any other instrument executed by the Owner Trustee in favor of the Agent and evidencing a Lien on a Property, in form and substance substantially in the form attached as Exhibit J to the Participation Agreement. "Multiemployer Plan" shall mean any plan described in Section 4001(a)(3) of ERISA to which contributions are or have been made or required by the Lessee or any of its Subsidiaries or ERISA Affiliates. A-20 "Multiple Employer Plan" shall mean a plan to which the Lessee or any ERISA Affiliate and at least one other employer other than an ERISA Affiliate is making or accruing an obligation to make, or has made or accrued an obligation to make, contributions. "Net Proceeds" shall mean all amounts paid in connection with any Casualty or Condemnation, and all interest earned thereon, less the expense of claiming and collecting such amounts, including all costs and expenses in connection therewith for which the Agent or Lessor are entitled to be reimbursed pursuant to the Lease. "1994 Credit Agreement" shall have the meaning specified in Section 28.1 of the Lease. "Notes" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Occupational Safety and Health Law" shall mean the Occupational Safety and Health Act of 1970 and any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating or relating to, or imposing liability or standards of conduct concerning, employee health and/or safety, as now or at any time hereafter in effect. "Officer's Certificate" shall mean a certificate signed by any individual holding the office of vice president or higher, which certificate shall certify as true and correct the subject matter being certified to in such certificate. "Operative Agreements" shall mean the following: the Participation Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the Credit Agreement, the Notes, the Lease (and a memorandum thereof in a form reasonably acceptable to the Agent), each Lease Supplement (and a memorandum thereof in a form reasonably acceptable to the Agent), the Security Agreement and each Mortgage Instrument. "Overdue Rate" shall mean (i) with respect to Basic Rent, and any other amount owed under or with respect to the Credit Agreement or the Security Documents, the rate specified in Section 2.7(b) of the Credit Agreement, (ii) with respect to Lessor Basic Rent, the Holder Yield and any other amount owed under or with respect to the Trust Agreement, the applicable rate specified in the Trust Agreement, and (iii) with respect to any other amount, the amount specified in Section 2.7(b) of the Credit Agreement. "Owner Trustee" shall mean First Security Bank of Utah, N.A., not individually, except as expressly stated in the various Operative Agreements, but solely as Owner Trustee under the FM Trust 1995-1, and any successor or replacement Owner Trustee expressly permitted under the Operative Agreements. A-21 "Participation Agreement" shall mean the Participation Agreement dated as of May 5, 1995, among the Lessee, the Owner Trustee, not in its individual capacity except as expressly stated therein, the Holder, the Lenders and the Agent, as such Participation Agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof or of any other Operative Agreement. "Payment Date" shall mean any Specified Interest Payment Date and any date on which interest or Holder Yield in connection with a prepayment of principal on the Loans or of the Holder Advance is due under the Credit Agreement or the Trust Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation created by Section 4002(a) of ERISA or any successor thereto. "Permitted Exceptions" shall mean: (i) Liens of the types described in clauses (i), (ii) and (v) of the definition of Permitted Liens; (ii) Liens for Taxes not yet due; and (iii) all encumbrances, exceptions, restrictions, easements, rights of way, servitudes, encroachments and irregularities in title, other than Liens which, in the reasonable assessment of the Agent, do not materially impair the use of the Property for its intended purpose. "Permitted Liens" shall mean: (i) the respective rights and interests of the parties to the Operative Agreements as provided in the Operative Agreements; (ii) the rights of any sublessee, assignee or other transferee expressly permitted by the terms of the Lease; (iii) Liens for Taxes that either are not yet due or are being contested in accordance with the provisions of Section 13.1 of the Lease; (iv) Liens arising by operation of law, materialmen's, mechanics', workmen's, repairmen's, employees', carriers', warehousemen's and other like Liens relating to the construction of the Improvements or in connection with any modifications or arising in the ordinary course of business for amounts that either are not more than 30 days past due or are being diligently contested in good faith by appropriate proceedings, so long as such proceedings satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 13.1 of the Lease; A-22 (v) Liens of any of the types referred to in clause (iv) above that have been bonded for not less than the full amount in dispute (or as to which other security arrangements satisfactory to the Lessor and the Agent have been made), which bonding (or arrangements) shall comply with applicable Legal Requirements, and shall have effectively stayed any execution or enforcement of such Liens; (vi) Liens arising out of judgments or awards with respect to which appeals or other proceedings for review are being prosecuted in good faith and for the payment of which adequate reserves have been provided as required by GAAP or other appropriate provisions have been made, so long as such proceedings have the effect of staying the execution of such judgments or awards and satisfy the conditions for the continuation of proceedings set forth in Section 13.1 of the Lease; (vii) Liens in favor of municipalities to the extent agreed to by the Lessor; and (viii) Permitted Exceptions. "Pension Plan" means a "pension plan", as such term is defined in section 3(2) of ERISA, which is subject to title IV of ERISA (other than a Multiemployer Plan), and to which the Company or any ERISA Affiliate may have any liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, governmental authority or any other entity. "Plans and Specifications" shall mean, with respect to Improvements, the plans and specifications for such Improvements to be constructed or already existing as such Plans and Specifications may be amended, modified or supplemented from time to time. "Prime Lending Rate" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Property" shall mean, with respect to each Store that is acquired, constructed and/or renovated pursuant to the terms of the Operative Agreements, the Land and each item of Equipment and the various Improvements, in each case located on such Land. "Property Acquisition Cost" shall mean the cost to Lessor to purchase a Property on a Property Closing Date. A-23 "Property Closing Date" shall mean each date on which the Lessor purchases or leases (pursuant to Ground Lease) a Property. "Property Cost" shall mean with respect to a Property the aggregate amount of Advances for such Property (as such amounts shall be increased equally among all Properties respecting the Loans in regard to Section 9.1 of the Participation Agreement extended from time to time to pay for the Transaction Expenses, fees, expenses and other disbursements referenced in Sections 9.1(a) and (b) of the Participation Agreement). "Purchase Notice" shall have the meaning given to such term in Section 20.1 of the Lease. "Purchase Option" shall have the meaning given to such term in Section 20.1 of the Lease. "Purchase Option Price" shall have the meaning given to such term in Section 20.1 of the Lease. "Recipient Taxes" shall have the meaning specified in Section 13.2(e) of the Participation Agreement. "Release" shall mean any release, pumping, pouring, emptying, injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or emission of a Hazardous Substance. "Renewal Option" shall have the meaning specified in Section 21.1 of the Lease. "Rent" shall mean, collectively, the Basic Rent and the Supplemental Rent, in each case payable under the Lease. "Reportable Event" shall have the meaning specified in ERISA. "Requested Funds" shall mean any funds requested by the Lessee or the Construction Agent, as applicable, in accordance with Section 5 of the Participation Agreement. "Requirement of Law" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Requisition" shall have the meaning specified in Section 4.2 of the Participation Agreement. "Responsible Officer" shall mean the Chairman or Vice Chairman of the Board of Directors, the Chairman or Vice Chairman of the Executive Committee of the Board of Directors, the President, any Senior Vice President or Executive Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer, except that when used with respect to the Trust Company or the Owner Trustee, "Responsible Officer" shall also include the Cashier, any Assistant Cashier, A-24 any Trust Officer or Assistant Trust Officer, the Controller and any Assistant Controller or any other officer of the Trust Company or the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Scheduled Interest Payment Date" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. "Security Agreement" shall mean the Security Agreement, dated as of the Initial Closing Date between the Owner Trustee and the Agent. "Security Documents" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Shared Rights" shall mean the rights retained by the Lessor, but not to the exclusion of the Agent, pursuant to Section 8.2(a)(ii) of the Credit Agreement. "Specialized Equipment" shall mean Equipment which is not, and is not intended to be, affixed to or a component of any of the various Improvements or Land subject to the Operative Agreements. "Specified Interest Payment Date" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Store" means a combination supermarket and general merchandise multidepartment store that is substantially similar to stores owned and/or leased by the Lessee as of the Initial Closing Date. "Subsidiary" shall have the meaning specified in Section 1.1 of the Credit Agreement. "Supplemental Rent" shall mean all amounts, liabilities and obligations (other than Basic Rent) which the Lessee assumes or agrees to pay to Lessor, the Holder, the Administrative Agent or any other Person under the Lease or under any of the other Operative Agreements including, without limitation, payments of Purchase Option Price, Termination Value and the Maximum Residual Guarantee Amount and all indemnification amounts, liabilities and obligations. "Suretyship Liability" means any agreement, undertaking or other contractual arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by A-25 direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or otherwise to invest in a debtors or otherwise to assure a creditor against loss) any indebtedness, obligation or other liability (including accounts payable) of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person's obligation under any Suretyship Liability shall (subject to any limitation set forth therein) be deemed to be the principal amount of the indebtedness, obligation or other liability guaranteed thereby. "Taxes" shall have the meaning specified in the definition of Impositions; provided, solely for purposes of Section 13.2(e) of the Participation Agreement "Taxes" shall have the meaning specified in such Section 13.2(e). "Term" shall mean the Basic Term and each Extended Term, if any. "Termination Date" shall have the meaning specified in Section 16.2(a) of the Lease. "Termination Event" shall mean (a) with respect to any Plan, the occurrence of a Reportable Event or an event described in Section 4062(e) of ERISA, (b) the withdrawal of the Lessee or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, (c) the distribution of a notice of intent to terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2) or 4041A of ERISA, (d) the institution of proceedings to terminate a Plan or Multiemployer Plan by the PBGC under Section 4042 of ERISA, (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (f) the complete or partial withdrawal of the Lessee or any ERISA Affiliate from a Multiemployer Plan. "Termination Notice" shall have the meaning specified in Section 16.1 of the Lease. "Termination Value" shall mean, as of any Payment Date, (a) with respect to all Properties, an amount equal to the sum of (i) the aggregate outstanding principal of the Notes, plus (ii) the aggregate Holder Property Cost, in each case as of the applicable Payment Date and (b) with respect to a particular Property, an amount equal to the product of the Termination Value of all the Properties as of such Payment Date times a fraction, the numerator of which is the Property Cost as of such Payment Date allocable to the particular Property in question and the denominator of which is the aggregate Property Cost for all the Properties as of such Payment Date. A-26 "Total Condemnation" shall mean a Condemnation that involves a taking of Lessor's entire title to a Property. "Transaction Expenses" shall mean all reasonable costs and expenses incurred in connection with the preparation, execution and delivery of the Operative Agreements and the transactions contemplated by the Operative Agreements including without limitation: (a) the reasonable fees, out-of-pocket expenses and disbursements of counsel in negotiating the terms of the Operative Agreements and the other transaction documents, preparing for the closings under, and rendering opinions in connection with, such transactions and in rendering other services customary for counsel representing parties to transactions of the types involved in the transactions contemplated by the Operative Agreements; (b) any and all other reasonable fees, charges or other amounts payable to the Lenders, Agent, the Holder, the Owner Trustee or any broker which arises under any of the Operative Agreements; (c) any other reasonable fee, out-of-pocket expenses, disbursement or cost of any party to the Operative Agreements or any of the other transaction documents; and (d) any and all Taxes and fees incurred in recording or filing any Operative Agreement or any other transaction document, any deed, declaration, mortgage, security agreement, notice or financing statement with any public office, registry or governmental agency in connection with the transactions contemplated by the Operative Agreement. "Tribunal" shall mean any state, commonwealth, federal, foreign, territorial, or other court or government body, subdivision agency, department, commission, board, bureau or instrumentality of a governmental body. "Trust Agreement" shall mean the Trust Agreement dated as of the Initial Closing Date between the Holder and the Owner Trustee. "Trust Company" shall mean First Security Bank of Utah, N.A., in its individual capacity, and any successor owner trustee under the Trust Agreement in its individual capacity. "Trust Estate" shall have the meaning specified in Section 2.2 of the Trust Agreement. "UCC Financing Statements" shall mean collectively the Lender Financing Statements and the Lessor Financing Statements. "Unfunded Amount" shall have the meaning specified in Section 3.2 of the Agency Agreement. A-27 "Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial Code as in effect in any applicable jurisdiction. "Unimproved Property" shall mean a Property acquired by the Lessor which either consists entirely of Land or consists of Land and Improvements but the existing Improvements are not suitable as of the Property Closing Date for occupancy by the Lessee and the operation by the Lessee of a Store therein. "Up-Front Fee" shall mean the fee payable by Lessee to Lessor on or prior to the Initial Closing Date pursuant to the terms and conditions of Section 9.4 of the Participation Agreement. "Voting Power" shall mean, with respect to securities issued by any Person, the combined voting power of all securities of such person which are issued and outstanding at the time of determination and which are entitled to vote in the election of directors or such Person, other than securities having such power only by reason of the happening of a contingency. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part 1 of Subtitle E of Title IV of ERISA. "Work" shall mean the furnishing of labor, materials, components, furniture, furnishings, fixtures, appliances, machinery, equipment, tools, power, water, fuel, lubricants, supplies, goods and/or services with respect to any Property. LEASE SUPPLEMENT NO. 1 THIS LEASE SUPPLEMENT NO. 1 (this "Lease Supplement") dated as of May 3, 1995 between FIRST SECURITY BANK OF UTAH, N.A., a national banking association, not individually, but solely as Owner Trustee under the FM Trust 1995-1, as lessor (the "Lessor"), and FRED MEYER, INC., as lessee (the "Lessee"). WHEREAS, the Lessor is the owner or will be owner of the Property described on Schedule I hereto (the "Leased Property") and wishes to lease the same to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Rules of Usage. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Participation Agreement, dated as of May 3, 1995, among the Lessee, the Lessor, not individually, except as expressly stated therein, but solely as Owner Trustee under the FM Trust 1995-1, NationsBank of Texas, N.A., as the Holder, the various banks and banking institutions which are parties thereto from time to time and NationsBank of Texas, N.A., as Agent for the Lenders. SECTION 2. The Properties. Attached hereto as Schedule I is the description of the Leased Property, with an Equipment Schedule attached hereto as Schedule I-A, an Improvement Schedule attached hereto as Schedule I-B and a legal description of the Land for such Project attached hereto as Schedule I-C. Effective upon the execution and delivery of this Lease Supplement by the Lessor and the Lessee, the Leased Property shall be subject to the terms and provisions of the Lease. SECTION 3. Ratification; Incorporation by Reference. Except as specifically modified hereby, the terms and provisions of the Lease and the Operative Agreements are hereby ratified and confirmed and remain in full force and effect. The Lease is hereby incorporated herein by reference as though restated herein in its entirety. SECTION 4. Original Lease Supplement. The single executed original of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or 2 possession of any counterpart other than the Original Executed Counterpart. SECTION 5. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF OREGON. SECTION 6. Counterpart Execution. This Lease Supplement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. FIRST SECURITY BANK OF UTAH, N.A., not individually, but solely as Owner Trustee under the FM Trust 1995-1, as Lessor By: C. SCOTT NIELSEN ------------------------------ Name: C. Scott Nielsen ---------------------------- Title: Asst. Vice President --------------------------- FRED MEYER, INC., as Lessee By: MICHAEL H. DON ------------------------------ Name: Michael H. Don ---------------------------- Title: Vice President/Treasurer --------------------------- Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as the date hereof. NATIONSBANK OF TEXAS, N.A., as Agent By: WILLIAM GUFFEY ------------------------------- Name: William Guffey ----------------------------- Title: Vice President ---------------------------- SCHEDULE I TO LEASE SUPPLEMENT NO. 1 SCHEDULE I-A TO LEASE SUPPLEMENT NO. 1 (Equipment) None SCHEDULE I-B TO LEASE SUPPLEMENT NO. 1 (Improvements) SCHEDULE I-C TO LEASE SUPPLEMENT NO. 1 (Land) LEASE SUPPLEMENT NO. 2 THIS LEASE SUPPLEMENT NO. 2 (this "Lease Supplement") dated as of May 3, 1995 between FIRST SECURITY BANK OF UTAH, N.A., a national banking association, not individually, but solely as Owner Trustee under the FM Trust 1995-1, as lessor (the "Lessor"), and FRED MEYER, INC., as lessee (the "Lessee"). WHEREAS, the Lessor is the owner or will be owner of the Property described on Schedule I hereto (the "Leased Property") and wishes to lease the same to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Rules of Usage. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Participation Agreement, dated as of May 3, 1995, among the Lessee, the Lessor, not individually, except as expressly stated therein, but solely as Owner Trustee under the FM Trust 1995-1, NationsBank of Texas, N.A., as the Holder, the various banks and banking institutions which are parties thereto from time to time and NationsBank of Texas, N.A., as Agent for the Lenders. SECTION 2. The Properties. Attached hereto as Schedule I is the description of the Leased Property, with an Equipment Schedule attached hereto as Schedule I-A, an Improvement Schedule attached hereto as Schedule I-B and a legal description of the Land for such Project attached hereto as Schedule I-C. Effective upon the execution and delivery of this Lease Supplement by the Lessor and the Lessee, the Leased Property shall be subject to the terms and provisions of the Lease. SECTION 3. Ratification; Incorporation by Reference. Except as specifically modified hereby, the terms and provisions of the Lease and the Operative Agreements are hereby ratified and confirmed and remain in full force and effect. The Lease is hereby incorporated herein by reference as though restated herein in its entirety. SECTION 4. Original Lease Supplement. The single executed original of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or 2 possession of any counterpart other than the Original Executed Counterpart. SECTION 5. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF OREGON. SECTION 6. Counterpart Execution. This Lease Supplement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. FIRST SECURITY BANK OF UTAH, N.A., not individually, but solely as Owner Trustee under the FM Trust 1995-1, as Lessor By: C. SCOTT NIELSEN ------------------------------ Name: C. Scott Nielsen ---------------------------- Title: Asst. Vice President --------------------------- FRED MEYER, INC., as Lessee By: MICHAEL H. DON ------------------------------ Name: Michael H. Don ---------------------------- Title: Vice President/Treasurer --------------------------- Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as the date hereof. NATIONSBANK OF TEXAS, N.A., as Agent By: WILLIAM GUFFEY ------------------------------- Name: William Guffey ----------------------------- Title: Vice President ---------------------------- SCHEDULE I-A TO LEASE SUPPLEMENT NO. 2 (Equipment) None SCHEDULE I-B TO LEASE SUPPLEMENT NO. 2 (Improvements) SCHEDULE I-C TO LEASE SUPPLEMENT NO. 2 (Land) RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Moore & Van Allen, P.L.L.C. NationsBank Corporate Center 100 North Tryon Street, Floor 47 Charlotte, NC 28202-4003 - --------------------------------------------------------------------- LEASE ASSIGNMENT AGREEMENT (Assignment of Lessor's Interest - Hawthorne Sublease and Assignment of Lessee's Interest - Hawthorne Master Lease) This Lease Assignment Agreement (this "Agreement"), dated as of May 11, 1995 between REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon limited partnership whose address is Suite 200, 15115 SW Sequoia Parkway, Portland, OR 97224 ("Assignor"), and FIRST SECURITY BANK OF UTAH, N.A., not individually, but solely as Owner Trustee under the FM Trust 1995-1 ("Assignee"), recites and provides as follows: Assignor currently leases the real property located in Portland, Multnomah County, Oregon, described in the attached Exhibit A, from REC Resolution Company, Inc., an Oregon corporation ("REC"), pursuant to a lease agreement dated as of February 5, 1963 (the "Hawthorne Master Lease"). Assignor subleases the Hawthorne Property to Fred Meyer, Inc., a Delaware corporation, pursuant to a lease agreement dated as of October 22, 1986 (the "Hawthorne Sublease"). The Hawthorne Master Lease and the Hawthorne Sublease are, collectively, the "Lease Agreements." FOR good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor hereby sells, assigns, transfers, conveys and delivers to Assignee all of Assignor's right, title and interest in and to the Hawthorne Master Lease (as lessee) and the Hawthorne Sublease (as lessor). The rights conveyed hereby are referred to herein as the "Leasehold Interests". Assignee hereby accepts the foregoing assignment, but without assumption of any liability or obligation of any kind under the Lease Agreements, which liabilities and obligations will be terminated contemporaneously with the consummation of such assignment. Neither the assignment nor acceptance of the Leasehold Interests will be construed as an assumption of the Lease Agreements. Assignee assumes no liabilities or obligations of Assignor of any nature whatsoever, whether or not accrued or affixed, absolute or contingent, known or unknown, 2 determined or determinable, or incurred prior to, on or after the effective date of such assignment (the "Closing Date"). Assignor represents, warrants and covenants to and with Assignee that: (1) Assignor has good and indefeasible title to the Leasehold Interests, subject to no encumbrances created or suffered by Assignor other than the matters identified on Exhibit B hereto; (2) Assignor has the full right, power and authority to assign the Leasehold Interests to Assignee in accordance herewith; and (3) Assignor will defend Assignee's right, title and interest in and to the Leasehold Interests from and against any claim by, through or under Assignor. Assignee is, concurrently with the assignments pursuant to this Agreement, acquiring fee title to the property covered by the Hawthorne Master Lease from REC, together with the interest of REC as the lessor under the Hawthorne Master Lease (the "REC Interests"). The parties acknowledge that, upon consummation of the assignments under this Agreement, and Assignee's acquisition of the REC Interests, the Hawthorne Master Lease will be terminated by merger of estates, and will thereafter have no force or effect. This Agreement shall bind and inure to the benefit of, and be enforceable by, the parties hereto and their respective successors, heirs, and permitted assigns. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement binding on all the parties. Each party agrees, at the request of the other party, at any time and from time to time after the date hereof, to execute and deliver all such further documents, and to take and forbear from all such action, as may be reasonably necessary or appropriate in order more effectively to perfect the transfers of rights contemplated herein or otherwise to confirm or carry out the provisions of this Agreement. EXECUTED effective the date first written above. ASSIGNOR: REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon limited partnership, by FMGP Associates, an Oregon limited partnership, its general partner, by FMGP Incorporated, a Delaware corporation, its general partner By: PETER F. BECHEN ----------------------------------- Title: President -------------------------------- ASSIGNEE: FIRST SECURITY BANK OF UTAH, N.A., not individually, but solely as Owner Trustee under the FM Trust 1995-1 By: VAL T. ORTON ----------------------------------- Title: Vice President -------------------------------- 3 STATE OF UTAH ) ) ss. COUNTY OF SALT LAKE ) This instrument was acknowledged before me this 9th day of May, 1995, by Val T. Orton, as Vice President of FIRST SECURITY BANK OF UTAH, N.A., on behalf of said association, not individually, but solely as Owner Trustee under the FM Trust 1995-1. MELE V. FONUA ----------------------------------- Notary Public for State of Utah My Commission Expires: Oct. 3, 1998 STATE OF OREGON ) ) ss. COUNTY OF Washington ) On this 28 day of April, 1995, before me, the undersigned, a Notary Public in and for the State of Oregon, duly commissioned and sworn, personally appeared Peter F. Bechen, to me known to be the person who signed as President of FMGP INCORPORATED, a Delaware corporation, the corporation that executed the within and foregoing instrument as the general partner of FMGP ASSOCIATES, an Oregon limited partnership, itself the limited partnership that executed the within and foregoing instrument as a general partner of REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon limited partnership, and acknowledged said instrument to be the free and voluntary act and deed of said corporation, and that said corporation executed the same, pursuant to its bylaws or a resolution of its board of directors, as the general partner of said limited partnership; and that said limited partnership executed the same as a general partner of said partnership, and that said partnership executed the same. JENNIFER SEIFERT NOTARY PUBLIC in and for the State of Oregon My Appointment Expires: Mar. 28, 1997 Exhibit A - Legal Description Order No. 759048 REVISED EXHIBIT "A" PARCEL I: Lots 1-16, inclusive, Block 1, SUNNYSIDE ADDITION, in the City of Portland, County of Multnomah and State of Oregon. TOGETHER WITH that portion vacated of SE Madison Street which inured thereto by reason of Ordinance vacating SE Madison Street recorded December 4, 1970 in Book 762, page 1551. PARCEL II: Lots 1-16, inclusive, Block 2, SUNNYSlDE ADDITION, in the City of Portland, County of Multnomah and State of Oregon. EXCEPT the East 12 feet of Lots 8 and 9 of said Block 2, described in deeds to the City of Portland, recorded October 16, 1962 in Book 2139, page 424 and Book 2139, page 428. TOGETHER WITH that portion of vacated SE Madison Street which inured thereto by reason of Ordinance vacating SE Madison Street recorded December 4, 1970 in book 762, page 1551. EXHIBIT B EXCEPTIONS TO TITLE - HAWTHORNE 1. Conditions and Restrictions contained in Ordinance No. 93277, of the City of Portland, a copy of which was Recorded : January 9, 1951 in Book 1453, page 142 2. Conditions and Restrictions contained in Ordinance No. 94128, of the City of Portland, a copy of which was Recorded : May 21, 1951 in Book 1477, page 355 3. Conditions and Restrictions contained in Ordinance No. 98444, of the City of Portland, a copy of which was Recorded : May 22, 1953 in Book 1602, page 361 4. Conditions and Restrictions contained in Ordinance No. 98964, of the City of Portland, a copy of which was Recorded : August 17, 1953 Book 1616, page 370 5. Conditions and Restrictions contained in Ordinance No. 115437, of the City of Portland, a copy of which was Recorded : July 9, 1962 in Book 2124, page 408 6. Any rights, interests or claims which may exist or arise by reason of the matters noted in the survey dated January 30, 1995 by Westlake Consultants, Inc., Job No. 720-04. 7. Subleases and tenancies affecting the Property that were created or suffered by Fred Meyer, Inc. as lessee. 8. Reservation of utilities in vacated street area and the right to maintain the same as set forth in Ordinance No. 131479, a copy of which was Recorded : December 4, 1970 in Book 762, page 1551 9. Conditions and Restrictions contained in Ordinance No. 132582, of the City of Portland, a copy of which was Recorded : May 17, 1971 in Book 787, page 1632 LEASE SUPPLEMENT NO. 3 THIS LEASE SUPPLEMENT NO. 3 (this "Lease Supplement") dated as of May 3, 1995 between FIRST SECURITY BANK OF UTAH, N.A., a national banking association, not individually, but solely as Owner Trustee under the FM Trust 1995-1, as lessor (the "Lessor"), and FRED MEYER, INC., as lessee (the "Lessee"). WHEREAS, the Lessor is the owner or will be owner of the Property described on Schedule I hereto (the "Leased Property") and wishes to lease the same to Lessee; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions; Rules of Usage. For purposes of this Lease Supplement, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in Appendix A to the Participation Agreement, dated as of May 3, 1995, among the Lessee, the Lessor, not individually, except as expressly stated therein, but solely as Owner Trustee under the FM Trust 1995-1, NationsBank of Texas, N.A., as the Holder, the various banks and banking institutions which are parties thereto from time to time and NationsBank of Texas, N.A., as Agent for the Lenders. SECTION 2. The Properties. Attached hereto as Schedule I is the description of the Leased Property, with an Equipment Schedule attached hereto as Schedule I-A, an Improvement Schedule attached hereto as Schedule I-B and a legal description of the Land for such Project attached hereto as Schedule I-C. Effective upon the execution and delivery of this Lease Supplement by the Lessor and the Lessee, the Leased Property shall be subject to the terms and provisions of the Lease. SECTION 3. Ratification; Incorporation by Reference. Except as specifically modified hereby, the terms and provisions of the Lease and the Operative Agreements are hereby ratified and confirmed and remain in full force and effect. The Lease is hereby incorporated herein by reference as though restated herein in its entirety. SECTION 4. Original Lease Supplement. The single executed original of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt of the Agent therefor on or following the signature page thereof shall be the original executed counterpart of this Lease Supplement (the "Original Executed Counterpart"). To the extent that this Lease Supplement constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease Supplement may be created through the transfer or 2 possession of any counterpart other than the Original Executed Counterpart. SECTION 5. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF OREGON. SECTION 6. Counterpart Execution. This Lease Supplement may be, executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement to be duly executed by an officer thereunto duly authorized as of the date and year first above written. FIRST SECURITY BANK OF UTAH, N.A., not individually, but solely as Owner Trustee under the FM Trust 1995-1, as Lessor By: C. SCOTT NIELSEN ------------------------------ Name: C. Scott Nielsen ---------------------------- Title: Asst. Vice President --------------------------- FRED MEYER, INC., as Lessee By: MICHAEL H. DON ------------------------------ Name: Michael H. Don ---------------------------- Title: Vice President/Treasurer --------------------------- Receipt of this original counterpart of the foregoing Lease Supplement is hereby acknowledged as the date hereof. NATIONSBANK OF TEXAS, N.A., as Agent By: WILLIAM GUFFEY ------------------------------- Name: William Guffey ----------------------------- Title: Vice President ---------------------------- SCHEDULE I TO LEASE SUPPLEMENT NO. 3 SCHEDULE I-A TO LEASE SUPPLEMENT NO. 3 (Equipment) None SCHEDULE I-B TO LEASE SUPPLEMENT NO. 3 (Improvements) SCHEDULE I-C TO LEASE SUPPLEMENT NO. 3 (Land) EX-11 5 EXHIBIT 11 EXHIBIT 11 FRED MEYER, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts) (Unaudited) 12 Weeks Ended 40 Weeks Ended ------------------ ------------------ Nov. 4, Nov. 5, Nov. 4, Nov. 5, 1995 1994 1995 1994 -------- -------- -------- -------- Weighted average number of shares outstanding.............. 26,704 26,548 26,676 26,500 Weighted average number of shares under option............. 2,467 3,521 2,772 3,609 Shares assumed to have been purchased under the treasury stock method........... (917) (1,513) (1,075) (1,449) ------ ------- ------ ------ Weighted average number of common and common equivalent shares outstanding.............. 28,254 28,556 28,373 28,660 ====== ======= ====== ====== Net income........................ $(2,309) $(36,579) $11,447 $(1,400) ====== ======= ====== ====== Earnings per common share......... $ (.08) $ (1.28) $ .40 $ (.05) ====== ======= ====== ====== EX-27 6 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 9-MOS FEB-03-1996 NOV-04-1995 41,735 0 24,928 0 620,441 742,167 1,520,015 512,159 1,772,285 461,915 674,014 270 0 0 550,867 1,772,285 2,462,530 2,462,530 1,765,782 649,997 0 0 28,288 18,463 7,016 11,447 0 0 0 11,447 $.40 $.40
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