-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, l52ULeLFap2YAD3Eo+edNKUAUb3wuro+k5VVF5J7tV0NfzZcQeiLj+Fx1/JgdAC5 yPIfpkWI4X2+P+9uwpFFAQ== 0000893877-95-000032.txt : 19950428 0000893877-95-000032.hdr.sgml : 19950428 ACCESSION NUMBER: 0000893877-95-000032 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19950128 FILED AS OF DATE: 19950426 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15023 FILM NUMBER: 95531657 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-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 28, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 No.) 3800 SE 22nd Avenue Portland, Oregon 97202 (Address of principal executive offices) (Zip Code) (503) 232-8844 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each Exchange on Title of Class which registered -------------- ----------------------- Common Stock, $.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___ Aggregate market value of Common Stock held by nonaffiliates of the Registrant at March 1, 1995: $526,316,280 Number of shares of Common Stock outstanding at March 1, 1995: 26,586,440 Documents Incorporated by Reference ------------------------------------ Part of Form 10-K into Document which incorporated - -------- ---------------------- Portions of 1994 Annual Report Parts II and IV to Shareholders Portions of Proxy Statement for Part III 1995 Annual Meeting of Shareholders TABLE OF CONTENTS ------------------ Item of Form 10-K Page - ----------------- ---- PART I Item 1 - Business . . . . . . . . . . . . . . . . . . . . . . 1 Item 2 - Properties . . . . . . . . . . . . . . . . . . . . . 9 Item 3 - Legal Proceedings. . . . . . . . . . . . . . . . . . 10 Item 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . 10 Item 4(a) - Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . 11 PART II Item 5 - Market for the Registrant's Common Stock and Related Stockholder Matters. . . . . . . . . . . 12 Item 6 - Selected Financial Data. . . . . . . . . . . . . . . 13 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . 13 Item 8 - Financial Statements and Supplementary Data. . . . . 13 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . 13 PART III Item 10 - Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . 13 Item 11 - Executive Compensation . . . . . . . . . . . . . . . 13 Item 12 - Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . 13 Item 13 - Certain Relationships and Related Transactions . . . 13 PART IV Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . 14 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 PART I Item 1. Business. - ------ --------- General ------- Fred Meyer, Inc. (the "Company") is a leading regional retailer of a wide range of food, apparel, fine jewelry and products for the home. At January 28, 1995, the Company operated 131 stores in Oregon, Washington, Utah, Alaska, Idaho, Northern California, and Montana under the name "Fred Meyer." Of these stores, 100 are free-standing, multidepartment stores, averaging 140,814 square feet of retail space, that emphasize one-stop-shopping for necessities and items of everyday use. Of the 100 multidepartment stores, 86 contain food and nonfood departments, and 14 contain nonfood departments only. The multidepartment stores with food average 148,354 square feet. The Company's multidepartment stores accounted for approximately 99 percent and 94 percent, respectively, of the Company's total sales and operating income for the Company's 1994 fiscal year ended January 28, 1995. Of the 31 specialty stores, 26 are jewelry stores located in regional malls. The Company's multidepartment stores contain up to seven departments which include food, the home, apparel, home electronics, fine jewelry, health and beauty aids, and pharmacy. The Company's multidepartment stores are unique in the Pacific Northwest in combining food with a wide range of nonfood merchandise under one roof. For the 1994 fiscal year, food and nonfood sales were 38.3 percent and 61.7 percent of total sales, respectively. The Company's principal business strategy is to operate one-stop-shopping stores that provide convenient shopping for a broad selection of products in one location. Stores are organized into distinct departments that specialize in the sale of particular products. The Company believes that its business strategy has generated high per-store sales volume and frequent shopping by area residents, and that its departments achieve such sales volume because they are located within one-stop-shopping stores. The strength of the individual departments, with their breadth and depth of product selection, national and private label brands, and emphasis on products of everyday use, distinguishes the Company's stores from other retailers and enables it to compete successfully with supermarkets, drugstores, discount stores, mass merchandisers, department and specialty stores. The Company promotes cross-shopping by providing convenient access between departments, making each department a strong competitor in the market for its products and by facilitating easy customer checkout through a cash register system that allows customers to purchase merchandise from any department at any checkout location ("common checkout"). During the past several years, the Company has committed substantial capital and management resources to improve its one-stop-shopping strategy, allowing it to better serve its customers and respond to the many new competitors entering its markets. New competitors in the past five years include Wal-Mart, Food 4 Less, Cub Foods, Home Depot, HomeBase, Eagle, Sam's Club, Incredible Universe, Good Guys, and Circuit City. During the same period, the Company also faced increased competition from existing major national and regional retailers, including Safeway, Albertson's, Price/Costco, Lamonts, Mervyn's, PayLess, Penneys, Carrs, QFC, Kmart, Target, ShopKo, and Toys-R-Us. Notwithstanding the competitive environment and a slowdown in economic conditions in some of the Company's markets, the Company has been able to achieve total and comparable store sales growth averaging 7.2 percent and 2.2 percent, respectively, over the past five years (based on 52-week years). Total store sales for 1994 increased 5.0 percent, and comparable store sales decreased 2.0 percent over the prior year. Sales growth in the last half of 1994, and continuing into 1995, has been negatively affected by a strike which started on August 18, 1994 involving a multiemployer group of unionized food stores in the greater Portland, Oregon area, including 26 of the Company's stores, which were the only stores picketed. At approximately the same time, a series of strikes also began at the Company's Portland area distribution center, dairy plant, trucking operations, and main office. These strikes were settled during the period from September 23, 1994 to November 13, 1994. For additional information regarding the strikes, see "Employees" below and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." During the past five years, the Company implemented common checkout for the majority of its multidepartment stores to complement its storewide merchandising efforts. The Company also remodeled 29 multidepartment stores and redesigned and remodeled many food departments to include in-store bakeries, delicatessens, and service fish markets to respond to customer shopping preferences. Beginning in 1987, the Company implemented an everyday low pricing strategy in its food operations. In 1989, the Company reorganized its operating management structure and for each store designated a store director responsible for store operations and profitability and departmental cross-merchandising. In 1992 the Company augmented its store management structure by establishing a regional management structure of six regional management teams closely aligned with the stores in the regions. Since 1990, management focused increased attention on the Company's expenses. Through 1994 this focus decreased expenses as a percent of sales by 2.18 percent for advertising, store labor, store occupancy, and corporate support department expenses, offset in part by increases in information services ("IS") expenses of .89 percent, resulting in a net decrease of 1.29 percent. 1994's results were negatively affected by the strikes in the Portland area. The Company is continuing to pursue expense reductions as part of its efforts to improve its financial performance. The Company's capital expenditure budget for its 1995 fiscal year is $257,000,000 compared with capital expenditures of approximately $284,000,000 in 1994. Beginning in 1993, the Company implemented a plan to increase new store development in its existing markets and to increase the level of remodeling of existing stores. As a result, the Company plans to open at least six new multidepartment stores and remodel between six and nine existing stores in each of the five fiscal years beginning in 1995. Total retail space increased by approximately 6.0 percent per year in 1993 and 1994. The Company constructed a new flow-through retail service center in Chehalis, Washington in 1994 to distribute apparel, general merchandise, and music products, and will be opening a food distribution facility near Seattle, Washington in June 1995. In addition, the Company is continuing its program to replace and upgrade its old IS system with new architecture and application programs. The Company's new distribution facilities and new IS system are designed to improve operations, permit better inventory management and reduce distribution costs. The Company was incorporated in Delaware in 1981, as a successor to the business of a company which was incorporated in Oregon in 1923. The Company's principal executive offices are located at 3800 SE 22nd Avenue, Portland, Oregon 97202, and its telephone number is (503) 232-8844. References in this Form 10-K to the Company mean Fred Meyer, Inc., including its subsidiaries, unless the context requires otherwise. The following table sets forth certain statistical information with respect to the Company's operations for the periods indicated:
Fiscal Year Ended -------------------------------------------------------------------------------- January 28, January 29, January 30, February 1, February 2, 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- Percent of net sales: Nonfood sales 61.7% 62.5% 63.3% 63.7% 64.3% Food sales 38.3% 37.5% 36.7% 36.3% 35.7% Sales per square foot of selling space (weighted average) $304/4 $312 $304 $283 $269 Total stores sales growth 5.0%/4 4.4% 5.6% 9.2% 11.6%/1 Comparable store sales percentage increase:/2 Total Company (2.0%)/4 2.4% 3.0% 4.0% 3.6%/1 Food (3.0%)/4 3.4% 2.8% 4.5% 8.3%/1 Nonfood (1.4%)/4 1.9% 3.2% 3.8% 1.1%/1 Number of multidepartment stores: Operated at end of period 100 97 94 94 94 Opened 5 5 2 3 5 Closed 2 2 2 3 6 Remodeled 7 7 5 3 7 Number of specialty stores: Operated at end of period 31 30 29 28 28 Opened 3 2 4 -- -- Closed 2 1 3 -- 2 Remodeled -- -- -- -- -- Total number of stores: Operated at end of period 131 127 123 122 122 Opened 8 7 6 3 5 Closed 4 3 5 3 8 Remodeled 7 7 5 3 7 Total retail square feet: At beginning of period 13,423,000 12,646,000 12,679,000 12,213,000 11,743,000 Added by new stores opened 795,000 811,000 295,000 584,000 940,000 Added by remodeling of existing stores 174,000 80,000 39,000 63,000 24,000 Less closed stores 198,000 114,000 367,000/3 181,000 494,000 At end of period 14,194,000 13,423,000 12,646,000 12,679,000 12,213,000 __________________ 1 Excludes 53rd week in the year ended February 3, 1990 for comparison purposes. 2 Includes only sales of stores operating throughout each of the periods compared. 3 Includes square footage for 30 restaurants that were converted to tenant space. 4 Affected by a series of labor disputes in the greater Portland, Oregon area in 1994.
Business Strategy ----------------- The Company's principal business strategy is to operate one-stop-shopping stores that provide convenient shopping for a broad selection of products in one location. Stores are organized into distinct departments and sections within departments that specialize in the sale of particular products. The Company promotes cross-shopping through convenient access between departments, by making each department a strong competitor in the market for the products it sells and by providing easy customer checkout through its common checkout system that allows customers to purchase merchandise from any department at any checkout location. Breadth and Depth of Selection. In most of its stores, the Company ------------------------------ sells over 225,000 items, including a wide selection of food, apparel, and products for the home, with an emphasis on necessities and items of everyday use. The Company takes advantage of the stores' high and diverse customer traffic to sell many categories of goods which are purchased on a discretionary basis, such as fine jewelry, home electronics, and fashion apparel. Within many categories of apparel, products for the home, fine jewelry, and home electronics, the Company offers customers the breadth of selection normally afforded by department or specialty stores. Its selection of food and groceries is comparable to that of large supermarkets. The Company emphasizes the sale of popular brands and its own private label brands. Multidepartment Stores. The Company's large stores are organized ---------------------- into departments and sections within departments that specialize in the sale of particular products. The Company endeavors to create individual, recognizable identities for each department through specialized design, fixtures, and decor. In most stores, common checkout areas allow the checkout of items from the Company's many departments at any cash register and facilitates convenient shopping. Most of the Company's departments are self-service, except in areas where special assistance is required, such as service delicatessens, home electronics, fine jewelry, and pharmacy. Stores consist of up to seven departments which are comprised of a variety of specialty sections. Departments and specialty sections within the large Fred Meyer stores include full-service food, pharmacy, nutrition, housewares, domestics, paint and home decor items, plumbing and electrical items, hardware and tools, building materials, garden, floral, sporting goods, automotive, home office supplies and stationery, cards and books, toys, basic and fashion apparel for all ages, shoes, home electronics, and fine jewelry. Multidepartment stores that include food departments best represent the Company's strategy. In more recent years the Company has been adding food to previously nonfood multidepartment stores and replacing some of its older nonfood stores with new full-service stores including food departments. Store and Regional Management. In 1989, the Company reorganized ----------------------------- its operating management structure and for each store designated a store director responsible for store operations and profitability and departmental cross-merchandising. Departments within multidepartment stores are managed by merchandising managers, who report to store directors. Each store director and department manager is supported by a regional manager and other senior managers who specialize in the market for products sold in the stores. In 1992, the Company augmented its store management structure by establishing regional management teams that work closely with the stores in their region to enhance sales and profit opportunities. As a result of its specialized management structure, the Company believes that each store and each department within the store better serves its customers and is able to respond quickly to market changes. Location and Store Design. New store sites are determined based on ------------------------- a review of information on demographics and the competitive environment for the market area in which the proposed site is located. The Company's expansion focus is in existing areas of operation, primarily in or near well-populated residential areas. The Company determines store size and designs stores with a view toward making each store a very convenient, one-stop-shopping store in the area it serves. In 1992, the Company standardized its store design with two basic sizes of approximately 145,000 square feet and 165,000 square feet. In 1994, a 125,000 square foot store design was developed to facilitate entry into smaller markets. The Company anticipates using a given prototype depending on the market to be served and the size of the site being developed. The Company is flexible in its store design where land sites require specialized designs. Promotion and Advertising. The Company aggressively promotes sales ------------------------- for all departments through weekly advertising, primarily in local and area newspapers, radio and television. Advertising often features many high-demand products at competitive prices. Sale items are usually items regularly sold in the departments. The Company emphasizes everyday low prices in its food departments and for certain nonfood items, and generally offers promotional sale pricing in its nonfood departments. The Company believes that it is known for competitive pricing and its customer-friendly return policy. Information Services. In 1991, the Company began a program to -------------------- modernize its systems to better support its business. A new computer network was installed, allowing every store to be linked with the main office and distribution centers. In 1992, Quick Response inventory management was initiated through the introduction of automatic replenishment for certain goods and electronic data interchange systems with vendors. A new pharmacy system was added in multidepartment stores. In 1993, the Company continued Quick Response by installing a new distribution system and by beginning the implementation of new inventory and merchandise management systems. In 1994, the Company's Continuous Replenishment Program was strengthened by the implementation of new jewelry, music and video, and item performance systems. These modernized systems provide the Company with easy access to actionable information for better inventory turnover and control, reduced distribution costs, improved expense controls, and better customer service. In 1995, the Company expects to begin rolling out its new merchandising information system for nonfood departments, direct store delivery system for food departments, and an upgrade of its store register systems. Retail Operations ----------------- The Company's stores contain up to seven departments. Within each department is a variety of merchandise sections operated like specialty businesses. The following table sets forth the number of departments (and lists certain of the sections within the Home and Apparel departments) in the Company's 100 multidepartment stores at January 28, 1995: Food. . . . . . . . . . . . . . . . . . . . . . . . . . 86 Nonfood . . . . . . . . . . . . . . . . . . . . . . . .100 The Home . . . . . . . . . . . . . . . . . . . . . .100 Housewares, Domestics, and Home Decor Sporting Goods Garden Home Improvement and Automotive Toys Cards and Books Variety and Seasonal Home Electronics . . . . . . . . . . . . . . . . . .100 Apparel. . . . . . . . . . . . . . . . . . . . . . .100 Apparel Cosmetics Shoes Pharmacy . . . . . . . . . . . . . . . . . . . . . . 99 Health and Beauty Aids . . . . . . . . . . . . . . .100 Fine Jewelry . . . . . . . . . . . . . . . . . . . . 87 The Food Department is typically the same size as free-standing super food stores of competitors and carries a wide variety of national brands together with the Company's private label brands of grocery items which are Fred Meyer, President's Choice, and FMV (Fred Meyer Value). Beginning in 1992, the Company implemented a program to increase sales of its private label grocery items. As a result, sales of private label grocery items as a percentage of total grocery sales have increased to a current level of just over 20 percent from 12 percent in 1991. Private label items generally are sold at lower prices to the customer and generate higher margins for the Company than national brand products. The Company also carries fresh produce, meat, dairy products, nutritional products, bakery products, candy, and tobacco, all sold on a self-selection basis. Most food departments contain a nutrition section that includes name brand and generic natural foods, dairy products, juices, vitamins, supplements, sugar-free and fat-free products, and meat substitutes. Certain items, such as grains, nuts, fruits, and natural snacks, are also displayed in bulk to enable customers to buy any amount and package their own purchases. In many multidepartment stores, the Company operates in-store bakeries and service departments that offer fresh seafood, delicatessen and meat products. The Company's newer stores include sit-down eating areas near in-store delicatessens and international take-out departments. The following table sets forth the number of nutrition, in-store bakery, and service departments at January 28, 1995: Nutrition. . . . . . . . . . . . . . . . . . . . . . . 89 Bakery . . . . . . . . . . . . . . . . . . . . . . . . 83 Service Delicatessen . . . . . . . . . . . . . . . . . 83 Service Fish Market. . . . . . . . . . . . . . . . . . 61 Service Meat Market. . . . . . . . . . . . . . . . . . 34 The Home Department offers a wide selection of home decor, housewares, small appliances, domestics, furniture, sporting goods, greeting cards, books, floral products, power lawn mowers, garden tools, fertilizers and chemicals, toys, seasonal and holiday merchandise, hardware, tools, paint, building materials, plumbing and electrical fixtures, automotive supplies, and related accessories. Some of the national brands featured are Braun, Kitchen-Aid, Coleman, Rowenta, De Longhi, Glidden, and Weber. Home improvement, garden and automotive sections feature many items for the do-it-yourself customer. High quality private label products under our Northwest Home, Turf King and Kraft King labels complement our national brand offering. The Apparel Department offers moderately priced national brand and private label apparel, sportswear, cosmetics, accessories, and family and active shoes. Major national brands carried by the apparel departments include Levi's, Jockey, Maidenform, Vanity Fair, Nike, Reebok, Adidas, Gotcha, Eastland, Union Bay, Columbia Sportswear, Capezio, Lee, Bali, and Keds. High quality private label products such as Fred Bear, Katherine Bishop, and KB & Co. labels complement our national brand offering. The Company's private label sales in the Home and Apparel categories represents 12-13 percent of these categories' sales, with a goal of approximately 15 percent. The strategy employed in nonfood departments is to use private label products as entry-level price points. The Home Electronics Department offers the latest name-brand high-technology merchandise, such as televisions, audio components, camcorders, cellular phones, computers, computer software, and a large selection of video games. Some of the national brands featured are SONY, JBL, Pioneer, IBM, and Magnavox. It also offers a large selection of compact discs, tapes, and for-sale video, and includes a photo-finishing section. One-hour photo-finishing has also been added to selected locations. The Pharmacy Department sells a full line of name brand and generic prescription drugs dispensed by full-time licensed pharmacists and participates with all major third party HMO and PPO plans. The Health and Beauty Aids Department offers a wide selection of national and private label brands of health and beauty aid products. It also offers candy and confections and dietary food products. The Fine Jewelry Department offers an extensive selection of bridal jewelry and diamond fashion jewelry, including precious and semi-precious stones. It also offers name brand watches and an assortment of 14-carat gold chains and earrings. Most of the Company's multidepartment stores open from 7:00 a.m. to 9:00 a.m. and close between 10:00 p.m. and 11:00 p.m., seven days a week, including all holidays except Christmas. Most of the Company's multi- department store locations have unaffiliated tenants which offer goods and services complementing those offered by the Company, such as banks, optical centers, coffee shops, restaurants, self-service laundries, insurance agencies, and beauty and barber shops. The Company's specialty store hours vary depending on location. The Company honors most nationally recognized credit cards for sales in all of its departments. In addition, the Company has its own credit card program which is serviced by a national credit card processor and is generally on a nonrecourse basis. Beginning in 1992, the Company began accepting debit cards that do not require customer-activated personal identification number ("PIN") pads. Store Expansion and Development ------------------------------- The Company enlarges, remodels, closes or sells stores in light of their past performance or the Company's assessment of their potential. The Company continually evaluates its position in its various market areas to determine whether it should expand or consolidate its operations in those areas. In 1989 and 1990, the Company opened a total of nine new multidepartment stores and remodeled seventeen existing stores. In 1991 and 1992, new store openings, development, and remodeling activity declined to a combined total of five new multidepartment stores and eight remodels while the Company focused on reducing expenses and improving profitability. Beginning in 1993, the Company implemented a plan to increase new store development in its existing markets and to increase the level of remodeling of existing stores. During 1993, the Company opened five new multidepartment stores, one of which replaced an older store; closed two multidepartment stores (including the one store that was replaced); and remodeled seven stores. During 1994, the Company opened five new multidepartment stores, closed two multidepartment stores, and remodeled seven multidepartment stores. Generally, the Company plans to open at least six new multidepartment stores and remodel between six and nine existing stores in each of the five years beginning in 1995. In 1994, capital expenditures for new store development and remodels were approximately $172,000,000, compared with expenditures in 1993 of approximately $156,000,000. A portion of this increase reflects spending for stores to open in 1995. For 1995, the company anticipates its capital expenditures for new store development and remodels will be approximately $192,000,000. Total retail space increased 771,000 square feet during 1994, representing an increase of approximately 5.7 percent. New multidepartment store openings during the year 1994 were as follows:
Total Retail Space Location Square Footage Opened -------- -------------- --------------- Soldotna, Alaska . . . . . . . . . . . 156,000 April, 1994 Brookings, Oregon. . . . . . . . . . . 142,000 April, 1994 East Vancouver, Washington . . . . . . 165,000 July, 1994 Boise, Idaho . . . . . . . . . . . . . 163,000 August, 1994 Bonney Lake (Seattle), Washington. . . 165,000 September, 1994
Planned new multidepartment store openings during the year 1995 are as follows:
Total Retail Space Planned Location Square Footage Opening -------- -------------- --------------- Monroe, Washington . . . . . . . . . . 152,000 May, 1995 Lake City (Seattle), Washington. . . . 123,000 August, 1995 Renton (Seattle), Washington . . . . . 174,000 September, 1995 West Jordan (Salt Lake City), Utah . . 170,000 September, 1995 Salt Lake City, Utah . . . . . . . . . 173,000 September, 1995 Kennewick, Washington. . . . . . . . . 170,000 November, 1995 /TABLE Distribution and Processing --------------------------- The Company operates a centralized distribution facility in a complex at Clackamas, Oregon, near Portland, containing 1,528,000 square feet, and a 310,000 square-foot flow-through retail service center in Chehalis, Washington. Approximately two-thirds of the merchandise the Company sells is currently shipped from its Clackamas and Chehalis facilities, with the balance shipped directly by vendors to the Company's stores or, in the case of food products for its Idaho and Utah stores, purchased from a major wholesale supplier. As a result of its recent investment in IS systems and distribution facility improvements, the Company has been able to establish EDI and automated replenishment programs with many vendors. These "quick response" capabilities are designed to improve inventory management and reduce handling of inventory in the distribution process, which the Company believes will result in lower markdowns and lower distribution costs. The Company believes that its distribution and related IS systems provide it with several advantages. First, they permit its stores to maintain proper inventory levels for more than 190,000 items supplied through its central distribution centers. Second, centralized purchasing and distribution reduces the Company's cost of merchandise and related transportation costs. Third, because distribution can be made to stores frequently, the Company is able to reduce the in-store stockroom space and maximize the square footage available for retail selling. Fourth, the Company is able to lower its total level of inventory investment and related financing costs. The Company opened its new flow-through retail service center in April, 1994 in Chehalis, Washington to serve as the centralized processing facility for certain apparel, music, and other nonfood items. This facility eliminates approximately 370,000 square feet of leased warehouse space, including the Company's 122,000 square-foot Salt Lake City facility. It will also allow the Company to meet its nonfood distribution center needs past the year 2000. The Company's new Chehalis facility is designed to minimize the required handling and processing of goods received from vendors and distributed to the Company's stores. The Company believes that this flow-through system will enable it to improve inventory management and to further reduce the distribution costs for the goods shipped through this facility. In June 1995 the Company expects to open a new 600,000 square-foot centralized food distribution facility in Puyallup, Washington, near Seattle, to serve stores in the Puget Sound Region and Alaska. This facility will significantly reduce the cost of transporting goods into the Puget Sound and Alaska markets, and will afford the Company increased forward-buying opportunities for its food operations. The Company operates a large fleet of trucks for distribution of goods to its retail stores and operates a central bakery and dairy. Corporate Capital Expenditures ------------------------------ Total capital expenditures for 1994 were approximately $284,000,000, which includes one store the Company purchased from one of its lessors. The Company also completed construction of a new wing to its main office complex, permitting consolidation of its corporate offices into one facility from the three locations it previously occupied in the Portland, Oregon area. In addition to the new store and remodel program, the Company is initiating or continuing many capital projects aimed at improving operating efficiencies, including improvements to its distribution centers, central bakery, dairy plant, and continued IS enhancements. In 1995, the Company estimates total capital expenditures to be $257,000,000. During 1994, the Company incurred a charge of $15,978,000 ($9,906,000 after a deferred tax benefit of $6,072,000) related to the writedown of certain assets and other costs associated with the Company's decision to exit the northern California market, except for two jewelry mall locations. Competition ----------- The retail merchandising business is highly competitive and it is projected to become more competitive in the years to come. Because of the broad range of merchandise sold by the Company, it competes with many types of retail companies, including national, regional, and local supermarkets, discount stores, drug stores, conventional department stores and specialty stores. The Company's competitive position in the retail business varies by type of goods and the communities in which its stores are located. In the last few years, many new competitors have entered the markets in which the Company operates. New competitors in the past five years include Wal-Mart, Food 4 Less, Cub Foods, Home Depot, HomeBase, Eagle, Sam's Club, Incredible Universe, Good Guys, and Circuit City. During the same period, the Company also faced increased competition from existing major national and regional retailers, including Safeway, Albertson's, Costco, Lamonts, Mervyn's, PayLess, Penneys, Carrs, QFC, Kmart, Target, ShopKo and Toys-R-Us. Notwithstanding the competitive environment and a slowdown in economic conditions in some of the Company's markets, the Company has been able to achieve total and comparable store sales growth averaging 7.2 percent and 2.2 percent, respectively, over the past five years (based on 52-week years). These averages were negatively affected by a series of labor disputes in the greater Portland, Oregon area in 1994. The Company emphasizes customer satisfaction, large selections of high-quality popular products, and competitive pricing. In addition, the Company believes that the convenience, attractiveness and cleanliness of its stores, together with a sales staff knowledgeable in specialty areas, enhances its retail sales efforts. Employees --------- The Company employs approximately 27,000 full- and part-time employees. Approximately 50 percent of the Company's employees are represented by 32 different labor unions (or locals). These employees are covered by 110 different collective bargaining agreements, none of which covers more than 2,600 employees. Approximately 34 percent of the agreements will expire during 1995, including agreements covering employees in both large metropolitan and smaller non-metropolitan areas where the Company operates. The last work stoppages the Company experienced involved the multiemployer bargaining unit for food clerks, checkers, and meatcutters in Portland, Oregon, which lasted 88 days. At the same time, Company union employees at its distribution facilities, trucking operation, dairy and a small portion of its office employees went on strike. Coos Bay, Oregon nonfood employees went on strike in late 1994 and returned to work on January 14, 1995. There were no work stoppages in 1991, 1992 or 1993. The Company believes that it has good relations with the many unions representing its employees. In 1995, the Company reached agreement on its contracts covering nonfood and food workers in the Seattle/Tacoma area. While progress is being made on remaining contracts which expire in 1995, and the Company is optimistic about reaching agreements, no assurance can be given that the parties will be able to reach a final conclusion without the occurrence of a work stoppage. Item 2. Properties. - ------ ---------- As a part of the leveraged buyout transaction in which the Company was incorporated in 1981, Fred Meyer Real Estate Properties, Ltd., whose name was changed in 1991 to Real Estate Properties Limited Partnership ("Properties"), acquired the real estate assets of the corporation that was the predecessor to the Company. In 1986, the Company amended and restated 76 leases relating to 71 stores, its distribution center, and four other facilities. The leases provide, among other things: (1) fixed rent expense in the aggregate for accounting purposes over the initial term of the leases at levels below rent expense under the prior leases for the fiscal year ended January 30, 1988; (2) initial lease terms generally averaging 20 years; (3) future rent from certain unrelated subtenants to be paid to the Company; and (4) seven five-year renewal options under leases for the 36 leased properties owned by Metropolitan Life Insurance Company (the "Institutional Investor") at rents for the first five option periods below the average rents during the initial term, and an option for the Company to purchase any of the leased properties at the end of the initial term and at the end of each option period. Properties sold to the Institutional Investor its interest in 36 of the 76 properties which were leased to the Company. The Institutional Investor is also an investor in Properties and FMI Associates. At March 1, 1994, FMI Associates beneficially owned approximately 38.0 percent of the Company's common stock. Twenty-four store locations and four other facilities are owned by the Company and its subsidiaries. The balance of the Company's locations are leased from the Institutional Investor, Properties or third parties. All of the Company's stores and its distribution and processing facilities are in good condition. Of the Company's 100 multidepartment stores, 88 percent have either been built or received a major remodel in the last ten years. Additionally, the Company owns eighteen parcels of land. Thirteen are being held for development of future stores, and three in California and two in Washington are being held for sale. The following table as of January 28, 1995, summarizes the remaining lease years, assuming the exercise of all options, for store locations and the Company's distribution facilities, warehouses, and plants.
Distribution Facilities Store Locations Warehouses & Plants ------------------------- --------------------------- Remaining Number Square Ft. of % of Total Square Ft. of % of Total of Lease Years Retail Space Square Ft. Facility Space Square Ft. - ------------------- ------------ ---------- -------------- ---------- Less than 5 years 255,463 1.80% 100,104 4.14% 5 through 15 years 293,703 2.07% --- 0.00% 16 through 25 years 3,257,757 22.95% --- 0.00% Over 25 years 7,001,877 49.33% 1,527,875 63.20% ---------- ------- --------- ------- Total Leased 10,808,800 76.15% 1,627,979 67.34% ---------- ------- --------- ------- Owned Properties 3,385,390 23.85% 789,414 32.66% ---------- ------- --------- ------- Total 14,194,190 100.00% 2,417,393 100.00% ========== ======= ========= =======
Item 3. Legal Proceedings. - ------ ----------------- The Company and its subsidiaries are parties to various legal claims, actions, and complaints which have arisen in the ordinary course of business. Although the Company is unable to predict with certainty whether 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. Item 4. Submission of Matters to a Vote of Security Holders. - ------ --------------------------------------------------- Not applicable. Item 4(a). Executive Officers of the Registrant. - --------- ------------------------------------ As of March 1, 1995, the executive officers of the Company were as set forth below.
Original Date of Name Age Position Employment - ------------------ --- ------------------------------ ---------- Robert G. Miller 50 Chairman of the Board and 1991 Chief Executive Officer Cyril K. Green 63 President and Chief Operating 1947 Officer R. Eric Baltzell 54 Senior Vice President, Stores 1962 Roger A. Cooke 46 Senior Vice President, 1992 General Counsel and Secretary Edward A. Dayoob 55 Senior Vice President, 1973 Jewelry Group Curt A. Lerew, III 47 Senior Vice President, Food Group 1991 Keith W. Lovett 51 Senior Vice President, 1992 Human Resources Ronald J. McEvoy 47 Senior Vice President, 1991 Chief Information Officer Norman O. Myhr 47 Senior Vice President, 1978 Sales Promotion and Marketing Cheryl D. Perrin 56 Senior Vice President, 1976 Public Affairs Mary F. Sammons 48 Senior Vice President, 1973 General Group Kenneth Thrasher 45 Senior Vice President - Finance 1982 and Chief Financial Officer Scott L. Wippel 41 Senior Vice President, 1992 Corporate Facilities
The executive officers of the Company are elected annually for one year and hold office until their successors are elected and qualified. There are no family relationships among the executive officers of the Company. Mr. Miller became Chairman of the Board and Chief Executive Officer of the Company in August of 1991. Prior to that time he was employed by Albertson's, where his most recent positions were Executive Vice President of Retail Operations from 1989 to 1991, and Senior Vice President and Regional Manager from 1985 to 1989. Mr. Miller has more than 30 years of experience in the retail food industry. Mr. Green became President and Chief Operating Officer in 1972, and has been with the Company since 1947. He has held many positions with the Company prior to his election to President. Mr. Baltzell served as Vice President, Food Operations of the Company from 1982 until his election as Senior Vice President, Store Operations Division in June 1989. Mr. Cooke became Vice President, General Counsel and Secretary of the Company in August 1992. He was elected Senior Vice President in April 1993. From 1982 to 1992, he was an officer of Pan American World Airways, Inc., serving as Senior Vice President and General Counsel from 1990 to 1992. From 1973 to 1980, he was associated with the law firm Simpson Thacher and Bartlett. Mr. Dayoob served as Vice President, Jewelry Division of the Company from 1979 until his election as Senior Vice President, Photo Electronics and Jewelry Division in June 1989. This Division was renamed the Home Electronics and Jewelry Group in 1990. The Home Electronics Division was merged into the General Group in 1993. Mr. Lerew became Senior Vice President, Food Group in October 1991. Prior to that time he was employed by Albertson's, where his most recent positions were Senior Vice President and Regional Manager in 1991, Senior Vice President of Corporate Merchandising from 1990 to 1991, and Vice President, Western Washington Division, from 1987 to 1990. Mr. Lerew has more than 30 years of experience in the retail food industry. Mr. Lovett became Senior Vice President, Human Resources of the Company in February of 1992. Prior to that time he was employed by Eagle Food Centers, where he was Senior Vice President of Human Resources and Vice President of Industrial Relations. Mr. McEvoy became Senior Vice President, Chief Information Officer in charge of the Company's Information Services in July 1991. For the year prior to that, he worked for IBM United States as a business advisor in the retail industry. From 1987 to 1990, he was Senior Vice President for Management Information Systems (MIS) for J.B. Ivey. He held the same position from 1983 to 1987 with John Wanamaker. He also held various MIS and financial positions with Hecht's from 1969 to 1983. Mr. Myhr served as Vice President, Sales Promotion of the Company from 1982 until his election as Senior Vice President, Strategic Marketing in June 1989. He now serves as Senior Vice President, Sales Promotion and Marketing. Ms. Perrin served as Vice President, Government Affairs from 1985 until her election as Vice President, Public Affairs in 1988. She was elected Senior Vice President, Public Affairs in April 1992. Ms. Sammons served as Vice President within the Soft Goods Division of the Company from 1980 until her election as Senior Vice President, Soft Goods Division in January 1986. In June 1989, she was elected Senior Vice President, General Merchandise Division. This Division was renamed the General Group in 1990. Mr. Thrasher served as Vice President, Corporate Treasurer of the Company from 1982 until his election as Vice President - Finance, Chief Financial Officer, and Secretary in June 1987. He was elected Senior Vice President - Finance and Chief Financial Officer effective March 1989. Mr. Wippel became Vice President, Corporate Facilities in June 1992. He was elected Senior Vice President in April 1993. Prior to that, he was employed by Albertson's, where his most recent positions were Vice President of Real Estate from 1990 to 1992 and Director of Real Estate from 1988 to 1990. PART II Item 5. Market for the Registrant's Common Stock and Related - ------ ---------------------------------------------------- Stockholder Matters. ------------------- The information required by this item is included under "Common Stock Information" on page 12 of the Company's 1994 Annual Report to Shareholders and is incorporated herein by reference. Item 6. Selected Financial Data. - ------ ----------------------- The information required by this item is included under "Selected Financial Data" on pages 8 and 9 of the Company's 1994 Annual Report to Shareholders and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial - ------ ------------------------------------------------- Condition and Results of Operations. ----------------------------------- The information required by this item is included under "Management's Discussion and Analysis" on pages 10 through 12 of the Company's 1994 Annual Report to Shareholders and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. - ------ ------------------------------------------- The information required by this item is incorporated by reference from the Company's 1994 Annual Report to Shareholders as listed in Item 14 of Part IV of this Report. Item 9. Changes in and Disagreements with Accountants - ------ --------------------------------------------- on Accounting and Financial Disclosure. -------------------------------------- Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. - ------- -------------------------------------------------- Information with respect to directors of the Company is included under "Election of Directors" in the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders and is incorporated herein by reference. Information with respect to executive officers of the Company is included under Item 4(a) of Part I of this Report. Item 11. Executive Compensation. - ------- ---------------------- Information with respect to executive compensation is included under "Executive Compensation" in the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders and is incorporated herein by reference, except for items appearing under the subheadings "Compensation Committee Report on Executive Compensation" and "Comparison of Five Year Cumulative Total Return" which are not incorporated herein. Item 12. Security Ownership of Certain Beneficial Owners and Management. - ------- -------------------------------------------------------------- Information with respect to security ownership of certain beneficial owners and management is included under "Voting Securities and Principal Shareholders" and "Election of Directors" in the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. - ------- ---------------------------------------------- Information required by this item is included under "Certain Transactions" in the Company's Proxy Statement for its 1995 Annual Meeting of Shareholders and is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. - ------- ---------------------------------------------------------------- (a)(1) Financial Statements. -------------------- The following documents are included in the Company's 1994 Annual Report to Shareholders at the pages indicated and are incorporated herein by reference: Page in 1994 Annual Report to Shareholders ---------------------- Fred Meyer, Inc. and Subsidiaries: Consolidated Balance Sheets - January 28, 1995 and January 29, 1994 14-15 Statements of Consolidated Operations - Years Ended January 28, 1995, January 29, 1994, and January 30, 1993 13 Statements of Consolidated Cash Flows - Years Ended January 28, 1995, January 29, 1994, and January 30, 1993 16 Statements of Changes in Consolidated Stockholders' Equity - Years Ended January 30, 1993, January 29, 1994, and January 28, 1995 17 Notes to Consolidated Financial Statements 18-23 Independent Auditors' Report 24 (a)(2) Financial Statement Schedules. ----------------------------- All schedules are omitted as the required information is inapplicable or is presented in the financial statements or related notes thereto. (a)(3) Exhibits. -------- 3A Restated Certificate of Incorporation of Fred Meyer, Inc. Incorporated by reference to Exhibit 3A to the Company's Registration Statement on Form S-1, Registration No. 33-8574. 3B Amended and Restated Bylaws of Fred Meyer, Inc. Incorporated by reference to Exhibit 4B to the Company's Registration Statement on Form S-8, Registration No. 33-49638. 4A Specimen Stock Certificate. Incorporated by reference to Exhibit 4C to the Company's Registration Statement on Form S-3, Registration No. 33-67670. 4B Credit Agreement dated as of June 30, 1994, among Fred Meyer, Inc., various banks named therein, and Bank of America as Agent. 4C Term Promissory Notes in an original aggregate principal amount of $70,000,000, including the Intercreditor Agreement dated June 29, 1993 among the Company, and various banks and financial institutions named therein. Incorporated by reference to Exhibit 4E to the Company's Registration Statement on Form S-3, Registration No. 33-67670. 4D Note agreement dated as of June 1, 1994, in an original aggregate principal amount of $57,500,000, among Fred Meyer, Inc., and various life insurance companies. 4E Credit Agreement dated as of March 6, 1995, among Fred Meyer, Inc., various financial institutions named therein, and The Bank of Nova Scotia as Agent. *10A-1 Fred Meyer, Inc. 1983 Stock Option Plan, as amended. Incorporated by reference to Exhibit 10D to the Company's Annual Report on Form 10-K for the year ended January 28, 1989 (File No. 0-15023). *10A-2 Fred Meyer, Inc. 1990 Stock Incentive Plan, as amended. Incorporated by reference to Exhibit 28 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 18, 1990 (File No. 0-15023). *10B Fred Meyer, Inc. Bonus Plan Description, as amended. 10C Assumption Agreement and Unconditional Guaranty of Certain Obligations, dated December 11, 1981, among Fred Meyer, Inc., The Predecessor Company, DTC Acquisition Corporation, and Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate Properties, Ltd.). Incorporated by reference to Exhibit 10FF to the Company's Registration Statement on Form S-1, Registration No. 2-87139. *10D Non-Employee Directors Stock Compensation Plan, adopted November 17, 1992. Incorporated by reference to Exhibit 10F to the Company's Annual Report on Form 10-K for the year ended January 30, 1993. *10E Form of contract for Senior Executive Long-Term Disability Program. Incorporated by reference to Exhibit 10G to the Company's Annual Report on Form 10-K for the year ended January 30, 1993. *10F Fred Meyer Supplemental Income Plan dated January 1, 1994. Incorporated by reference to Exhibit 10H to the Company's Annual Report on Form 10-K for the year ended January 29, 1994. *10G Employment Agreement between Fred Meyer, Inc. and Robert G. Miller, as amended by Amendment No. 1. *10H Indemnity Agreement. Incorporated by reference to Exhibit 10I to the Company's Registration Statement on Form S-1, Registration No. 33-8574. 10I Form of Lease Agreement for substantially identical leases covering 36 stores and other locations leased by Fred Meyer, Inc. (or a wholly owned subsidiary) from Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate Properties, Ltd.) including form of Assignment of Master Lease wherein Fred Meyer Real Estate Properties, Ltd. (now Real Estate Properties Limited Partnership) assigned its interest to Metropolitan Life Insurance Company and a First Amendment to Lease Agreement, dated November 25, 1986, with appendices containing certain nonstandard provisions of the Lease Agreement and the First Amendment; Collateral Matters Agreement and Indemnification Agreement, each dated November 25, 1986, between Fred Meyer, Inc. and Metropolitan Life Insurance Company. Incorporated by reference to Exhibit 10I to the Company's Annual Report on Form 10-K for the year ended January 31, 1987 (File No. 0-15023). Memorandum of First Amendment to Lease Agreement, dated March 6, 1987, between Metropolitan Life Insurance Company ("Metropolitan"), Landlord and Fred Meyer, Inc., Tenant; and Assignment of Master Lease, dated March 6, 1987, between Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate Properties, Ltd.) (Assignor) and Metropolitan (Assignee) for Nampa, Idaho. Incorporated by reference to Exhibit 10I to the Company's Annual Report on Form 10-K for the year ended January 30, 1988 (File No. 0-15023). 10J Form of Lease Agreement for substantially identical leases covering 27 stores and other locations subleased by Fred Meyer, Inc. (or a wholly owned subsidiary) from Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate Properties, Ltd.) with appendices containing certain nonstandard provisions contained in the Lease Agreement. Incorporated by reference to Exhibit 10J to the Company's Annual Report on Form 10-K for the year ended January 31, 1987 (File No. 0-15023). Appendices containing certain additional nonstandard provisions. Incorporated by reference to Exhibit 10J to the Company's Annual Reports on Form 10-K for the years ended January 28, 1989, February 3, 1990, and February 2, 1991 (File No. 0-15023). Certain lease modifications for Burien, Washington facility. Incorporated by reference to Exhibit 10K to the Company's Annual Report on Form 10-K for the year ended January 30, 1993. Second Lease Modification Agreement for Cornelius store, dated as of August 16, 1994; and Second Lease Modification Agreement for Fairbanks store, dated as of March 18, 1994. 10K Form of Sublease, dated May 1, 1984, Fred Meyer Real Estate Properties, Ltd. (now Real Estate Properties Limited Partnership), Lessor to Fred Meyer, Inc., Lessee for the Stadium Parking Lot. Incorporated by reference to Exhibit 10J(6) to the Company's Registration Statement on Form S-1, Registration No. 33-8574. 10L Form of Sublease, dated May 1, 1984, Fred Meyer Real Estate Properties, Ltd. (now Real Estate Properties Limited Partnership), Lessor to Roundup Co., Lessee for Photo Plant Parking Lot. Incorporated by reference to Exhibit 10J(7) to the Company's Registration Statement on Form S-1, Registration No. 33-8574. 10M Lease Agreement, dated October 22, 1986, including Amendment, dated April 30, 1987, between Fred Meyer Real Estate Properties, Ltd. (now Real Estate Properties Limited Partnership), and Roundup Co. for Midway store. Incorporated by reference to Exhibit 10N to the Company's Annual Report on Form 10-K for the year ended January 31, 1987 (File No. 0-15023). 10N Lease Agreement, dated February 1, 1990, relating to additional property adjacent to Oak Grove store location between REC Resolution Co. as successor in interest to Vanoak Corporation, Lessor, and Fred Meyer, Inc., Lessee. Incorporated by reference to Exhibit 10P to the Company's Annual Report on Form 10-K for the year ended February 2, 1991 (File No. 0-15023). 10O Lease Agreement, dated February 19, 1987, including Addendum, dated September 16, 1987, between Fred Meyer, Inc., as Lessee, and REC Resolution Co. as successor in interest to Duane Company, as Lessor, for the Gateway store. Incorporated by reference to Exhibit 10Q to the Company's Annual Report on Form 10-K for the year ended January 30, 1988 (File No. 0-15023). Addendum No. 2 to Lease Agreement. Incorporated by reference to Exhibit 10Q to the Company's Annual Report on Form 10-K for the year ended February 2, 1991 (File No. 0-15023). 10P Lease Agreement, dated December 12, 1988, between Fred Meyer, Inc., as Lessee, and REC Resolution Co. as successor in interest to Fifth Avenue Corporation, as Lessor, for the Burlingame store. Incorporated by reference to Exhibit 10S to the Company's Annual Report on Form 10-K for the year ended January 28, 1989 (File No. 0-15023). 10Q Lease Cancellation Agreement between the Company and Real Estate Properties Limited Partnership, regarding termination of the lease of the photo plant facility, dated as of January 17, 1995. 10R Lease for Swan Island Parking Lot between the Company as lessee and Real Estate Properties Limited Partnership as lessor, dated November 16, 1994. 10S Lease Assignment Agreement between Real Estate Properties Limited Partnership (REPL) as assignor, and the Company as assignee, dated as of March 14, 1995, pursuant to which the Company has agreed to purchase the leasehold interest of REPL in the Hawthorne, Hazel Dell and Raleigh Hills stores; and a related Real Estate Purchase and Sale Agreement between REC Resolution Co. as seller and the Company as purchaser, dated as of March 14, 1995, pursuant to which the Company has agreed to purchase the fee interest of REC Resolution Co., (an affiliate of REPL) in the Hawthorne, Hazel Dell and Raleigh Hills stores. 11 Computation of Earnings per Common Share. 13 Portions of the Annual Report to Shareholders of the Company for the year ended January 28, 1995 are incorporated by reference herein. 21 List of Subsidiaries. Incorporated by reference to Exhibit 21 to the Company's Annual Report on Form 10-K for the year ended January 29, 1994. 23 Consent of Deloitte & Touche LLP. 24 Powers of Attorney. 27 Financial Data Schedule. - -------------- * This exhibit constitutes a management contract or compensatory plan or arrangement. (b) Reports on Form 8-K. ------------------- No reports on Form 8-K were filed by the Company during the last quarter of the year ended January 28, 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: April 26, 1995 By KENNETH THRASHER ------------------------------ Kenneth Thrasher, Chief Financial Officer, Senior Vice President - Finance Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 26, 1995. Signature Title --------- ----- (1) Principal Executive Officer ROBERT G. MILLER Chairman of the Board - ------------------------------ and Chief Executive Officer Robert G. Miller (2) Principal Financial Officer KENNETH THRASHER Chief Financial Officer, - ------------------------------ Senior Vice President - Finance Kenneth Thrasher (3) Principal Accounting Officer THOMAS R. HUGHES Vice President and Controller - ------------------------------ Thomas R. Hughes (4) Directors * JEROME KOHLBERG, JR. Director - ------------------------------ Jerome Kohlberg, Jr. * PAUL E. RAETHER Director - ------------------------------ Paul E. Raether * SAUL A. FOX Director - ------------------------------ Saul A. Fox * MICHAEL W. MICHELSON Director - ------------------------------ Michael W. Michelson * ROGER S. MEIER Director - ------------------------------ Roger S. Meier * A.M. GLEASON Director - ------------------------------ A.M. Gleason * By KENNETH THRASHER ------------------------- Kenneth Thrasher As Attorney in Fact EXHIBIT INDEX Sequential Exhibit Page Number Number - ------- ---------- 3A Restated Certificate of Incorporation of Fred Meyer, Inc. Incorporated by reference to Exhibit 3A to the Company's Registration Statement on Form S-1, Registration No. 33-8574. 3B Amended and Restated Bylaws of Fred Meyer, Inc. Incorporated by reference to Exhibit 4B to the Company's Registration Statement on Form S-8, Registration No. 33-49638. 4A Specimen Stock Certificate. Incorporated by reference to Exhibit 4C to the Company's Registration Statement on Form S-3, Registration No. 33-67670. 4B Credit Agreement dated as of June 30, 1994, among Fred Meyer, Inc., various banks named therein, and Bank of America as Agent. 4C Term Promissory Notes in an original aggregate principal amount of $70,000,000, including the Intercreditor Agreement dated June 29, 1993 among the Company, and various banks and financial institutions named therein. Incorporated by reference to Exhibit 4E to the Company's Registration Statement on Form S-3, Registration No. 33-67670. 4D Note agreement dated as of June 1, 1994, in an original aggregate principal amount of $57,500,000, among Fred Meyer, Inc., and various life insurance companies. 4E Credit Agreement dated as of March 6, 1995, among Fred Meyer, Inc., various financial institutions named therein, and The Bank of Nova Scotia as Agent. *10A-1 Fred Meyer, Inc. 1983 Stock Option Plan, as amended. Incorporated by reference to Exhibit 10D to the Company's Annual Report on Form 10-K for the year ended January 28, 1989 (File No. 0-15023). *10A-2 Fred Meyer, Inc. 1990 Stock Incentive Plan, as amended. Incorporated by reference to Exhibit 28 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 18, 1990 (File No. 0-15023). *10B Fred Meyer, Inc. Bonus Plan Description, as amended. 10C Assumption Agreement and Unconditional Guaranty of Certain Obligations, dated December 11, 1981, among Fred Meyer, Inc., The Predecessor Company, DTC Acquisition Corporation, and Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate Properties, Ltd.). Incorporated by reference to Exhibit 10FF to the Company's Registration Statement on Form S-1, Registration No. 2-87139. *10D Non-Employee Directors Stock Compensation Plan, adopted November 17, 1992. Incorporated by reference to Exhibit 10F to the Company's Annual Report on Form 10-K for the year ended January 30, 1993. *10E Form of contract for Senior Executive Long-Term Disability Program. Incorporated by reference to Exhibit 10G to the Company's Annual Report on Form 10-K for the year ended January 30, 1993. *10F Fred Meyer Supplemental Income Plan dated January 1, 1994. Incorporated by reference to Exhibit 10H to the Company's Annual Report on Form 10-K for the year ended January 29, 1994. *10G Employment Agreement between Fred Meyer, Inc. and Robert G. Miller, as amended by Amendment No. 1. *10H Indemnity Agreement. Incorporated by reference to Exhibit 10I to the Company's Registration Statement on Form S-1, Registration No. 33-8574. 10I Form of Lease Agreement for substantially identical leases covering 36 stores and other locations leased by Fred Meyer, Inc. (or a wholly owned subsidiary) from Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate Properties, Ltd.) including form of Assignment of Master Lease wherein Fred Meyer Real Estate Properties, Ltd. (now Real Estate Properties Limited Partnership) assigned its interest to Metropolitan Life Insurance Company and a First Amendment to Lease Agreement, dated November 25, 1986, with appendices containing certain nonstandard provisions of the Lease Agreement and the First Amendment; Collateral Matters Agreement and Indemnification Agreement, each dated November 25, 1986, between Fred Meyer, Inc. and Metropolitan Life Insurance Company. Incorporated by reference to Exhibit 10I to the Company's Annual Report on Form 10-K for the year ended January 31, 1987 (File No. 0-15023). Memorandum of First Amendment to Lease Agreement, dated March 6, 1987, between Metropolitan Life Insurance Company ("Metropolitan"), Landlord and Fred Meyer, Inc., Tenant; and Assignment of Master Lease, dated March 6, 1987, between Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate Properties, Ltd.) (Assignor) and Metropolitan (Assignee) for Nampa, Idaho. Incorporated by reference to Exhibit 10I to the Company's Annual Report on Form 10-K for the year ended January 30, 1988 (File No. 0-15023). 10J Form of Lease Agreement for substantially identical leases covering 27 stores and other locations subleased by Fred Meyer, Inc. (or a wholly owned subsidiary) from Real Estate Properties Limited Partnership (formerly Fred Meyer Real Estate Properties, Ltd.) with appendices containing certain nonstandard provisions contained in the Lease Agreement. Incorporated by reference to Exhibit 10J to the Company's Annual Report on Form 10-K for the year ended January 31, 1987 (File No. 0-15023). Appendices containing certain additional nonstandard provisions. Incorporated by reference to Exhibit 10J to the Company's Annual Reports on Form 10-K for the years ended January 28, 1989, February 3, 1990, and February 2, 1991 (File No. 0-15023). Certain lease modifications for Burien, Washington facility. Incorporated by reference to Exhibit 10K to the Company's Annual Report on Form 10-K for the year ended January 30, 1993. Second Lease Modification Agreement for Cornelius store, dated as of August 16, 1994; and Second Lease Modification Agreement for Fairbanks store, dated as of March 18, 1994. 10K Form of Sublease, dated May 1, 1984, Fred Meyer Real Estate Properties, Ltd. (now Real Estate Properties Limited Partnership), Lessor to Fred Meyer, Inc., Lessee for the Stadium Parking Lot. Incorporated by reference to Exhibit 10J(6) to the Company's Registration Statement on Form S-1, Registration No. 33-8574. 10L Form of Sublease, dated May 1, 1984, Fred Meyer Real Estate Properties, Ltd. (now Real Estate Properties Limited Partnership), Lessor to Roundup Co., Lessee for Photo Plant Parking Lot. Incorporated by reference to Exhibit 10J(7) to the Company's Registration Statement on Form S-1, Registration No. 33-8574. 10M Lease Agreement, dated October 22, 1986, including Amendment, dated April 30, 1987, between Fred Meyer Real Estate Properties, Ltd. (now Real Estate Properties Limited Partnership), and Roundup Co. for Midway store. Incorporated by reference to Exhibit 10N to the Company's Annual Report on Form 10-K for the year ended January 31, 1987 (File No. 0-15023). 10N Lease Agreement, dated February 1, 1990, relating to additional property adjacent to Oak Grove store location between REC Resolution Co. as successor in interest to Vanoak Corporation, Lessor, and Fred Meyer, Inc., Lessee. Incorporated by reference to Exhibit 10P to the Company's Annual Report on Form 10-K for the year ended February 2, 1991 (File No. 0-15023). 10O Lease Agreement, dated February 19, 1987, including Addendum, dated September 16, 1987, between Fred Meyer, Inc., as Lessee, and REC Resolution Co. as successor in interest to Duane Company, as Lessor, for the Gateway store. Incorporated by reference to Exhibit 10Q to the Company's Annual Report on Form 10-K for the year ended January 30, 1988 (File No. 0-15023). Addendum No. 2 to Lease Agreement. Incorporated by reference to Exhibit 10Q to the Company's Annual Report on Form 10-K for the year ended February 2, 1991 (File No. 0-15023). 10P Lease Agreement, dated December 12, 1988, between Fred Meyer, Inc., as Lessee, and REC Resolution Co. as successor in interest to Fifth Avenue Corporation, as Lessor, for the Burlingame store. Incorporated by reference to Exhibit 10S to the Company's Annual Report on Form 10-K for the year ended January 28, 1989 (File No. 0-15023). 10Q Lease Cancellation Agreement between the Company and Real Estate Properties Limited Partnership, regarding termination of the lease of the photo plant facility, dated as of January 17, 1995. 10R Lease for Swan Island Parking Lot between the Company as lessee and Real Estate Properties Limited Partnership as lessor, dated November 16, 1994. 10S Lease Assignment Agreement between Real Estate Properties Limited Partnership (REPL) as assignor, and the Company as assignee, dated as of March 14, 1995, pursuant to which the Company has agreed to purchase the leasehold interest of REPL in the Hawthorne, Hazel Dell and Raleigh Hills stores; and a related Real Estate Purchase and Sale Agreement between REC Resolution Co. as seller and the Company as purchaser, dated as of March 14, 1995, pursuant to which the Company has agreed to purchase the fee interest of REC Resolution Co., (an affiliate of REPL) in the Hawthorne, Hazel Dell and Raleigh Hills stores. 11 Computation of Earnings per Common Share. 13 Portions of the Annual Report to Shareholders of the Company for the year ended January 28, 1995 are incorporated by reference herein. 21 List of Subsidiaries. Incorporated by reference to Exhibit 21 to the Company's Annual Report on Form 10-K for the year ended January 29, 1994. 23 Consent of Deloitte & Touche LLP. 24 Powers of Attorney. 27 Financial Data Schedule. - -------------- * This exhibit constitutes a management contract or compensatory plan or arrangement. EX-4.B 2 EXHIBIT 4B EXHIBIT 4-B ================================================================= CREDIT AGREEMENT dated as of June 30, 1994 among FRED MEYER, INC., VARIOUS FINANCIAL INSTITUTIONS and CONTINENTAL BANK, as Agent ================================================================= TABLE OF CONTENTS PAGE SECTION 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . 1 1.1 Definitions. . . . . . . . . . . . . . . . . 1 1.2 Computations . . . . . . . . . . . . . . . . 9 1.3 Cross-References; Section Captions . . . . . 9 SECTION 2 COMMITMENTS OF THE LENDERS; TYPES OF LOANS; BORROWING AND CONVERSION PROCEDURES.. . . . . . . 9 2.1 Commitments. . . . . . . . . . . . . . . . . 10 2.2 Various Types of Loans . . . . . . . . . . . 10 2.3 Borrowing Procedures . . . . . . . . . . . . 10 2.4 Continuation and Conversion Procedures . . . 11 2.5 Warranty upon Conversion or Continuation . . 11 2.6 Conditions . . . . . . . . . . . . . . . . . 11 2.7 Pro Rata Treatment . . . . . . . . . . . . . 11 2.8 Commitments Several. . . . . . . . . . . . . 11 2.9 Extension of Termination Date. . . . . . . . 12 SECTION 3 NOTES EVIDENCING LOANS. . . . . . . . . . . . . . . 12 3.1 Notes. . . . . . . . . . . . . . . . . . . . 12 3.2 Recordkeeping. . . . . . . . . . . . . . . . 12 SECTION 4 INTEREST. . . . . . . . . . . . . . . . . . . . . . 13 4.1 Interest Rates . . . . . . . . . . . . . . . 13 4.2 Interest Payment Dates . . . . . . . . . . . 13 4.3 Setting and Notice of Eurodollar Rates . . . 13 4.4 Computation of Interest. . . . . . . . . . . 14 SECTION 5 FEES. . . . . . . . . . . . . . . . . . . . . . . . 14 5.1 Facility Fee . . . . . . . . . . . . . . . . 14 5.2 Agent's Fee. . . . . . . . . . . . . . . . . 14 SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS . . . . . . . . . . . . . . . . . . . 14 6.1 Reduction or Termination of the Commitments . 14 6.2 Prepayments . . . . . . . . . . . . . . . . . 14 SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES . . 15 7.1 Making of Payments. . . . . . . . . . . . . . 15 7.2 Application of Certain Payments . . . . . . . 15 7.3 Due Date Extension. . . . . . . . . . . . . . 15 7.4 Setoff. . . . . . . . . . . . . . . . . . . . 15 7.5 Proration of Payments . . . . . . . . . . . . 16 7.6 Taxes . . . . . . . . . . . . . . . . . . . . 16 SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS. . . . . . . . . . . . . . . . . . 18 8.1 Increased Costs. . . . . . . . . . . . . . . 18 8.2 Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . 19 8.3 Changes in Law Rendering Eurodollar Loans Unlawful . . . . . . . . . . . . . . 20 8.4 Funding Losses . . . . . . . . . . . . . . . 20 8.5 Right of Lenders to Fund through Other Offices. . . . . . . . . . . . . . . 21 PAGE 8.6 Discretion of Lenders as to Manner of Funding . . . . . . . . . . . . . . . . 21 8.7 Mitigation of Circumstances; Replacement of Affected Lender or Objecting Lender . . 21 8.8 Conclusiveness of Statements; Survival of Provisions . . . . . . . . . . . . . . . . 22 SECTION 9 WARRANTIES. . . . . . . . . . . . . . . . . . . . . 22 9.1 Organization, etc. . . . . . . . . . . . . . 22 9.2 Authorization; No Conflict . . . . . . . . . 22 9.3 Validity and Binding Nature. . . . . . . . . 23 9.4 Financial Information. . . . . . . . . . . . 23 9.5 No Material Adverse Change . . . . . . . . . 23 9.6 Litigation and Contingent Liabilities. . . . 23 9.7 Ownership of Properties; Liens . . . . . . . 24 9.8 Subsidiaries . . . . . . . . . . . . . . . . 24 9.9 Pension and Welfare Plans. . . . . . . . . . 24 9.10 Regulated Industry . . . . . . . . . . . . . 24 9.11 Regulations G, U and X . . . . . . . . . . . 24 9.12 Taxes. . . . . . . . . . . . . . . . . . . . 24 9.13 Environmental and Safety and Health Matters. 24 9.14 Compliance with Law. . . . . . . . . . . . . 25 9.15 Information. . . . . . . . . . . . . . . . . 25 SECTION 10 COVENANTS. . . . . . . . . . . . . . . . . . . . . 25 10.1 Reports, Certificates and Other Information. 25 10.1.1 Audit Report . . . . . . . . . . . . 25 10.1.2 Interim Reports. . . . . . . . . . . 26 10.1.3 Compliance Certificate . . . . . . . 26 10.1.4 Reports to SEC . . . . . . . . . . . 26 10.1.5 Notice of Default, Litigation and ERISA Matters. . . . . . . . . 26 10.1.6 Subsidiaries . . . . . . . . . . . . 27 10.1.7 Other Information. . . . . . . . . . 27 10.2 Books, Records and Inspections . . . . . . . 27 10.3 Insurance. . . . . . . . . . . . . . . . . . 27 10.4 Compliance with Law; Payment of Taxes and Liabilities. . . . . . . . . . . . . . . . 27 10.5 Maintenance of Existence, etc. . . . . . . . 28 10.6 Financial Ratios and Restrictions. . . . . . 28 10.6.1 Minimum Consolidated Tangible Net Worth. . . . . . . . . . . . . 28 10.6.2 Long-Term Liabilities to Net Worth Ratio. . . . . . . . . . . . 28 10.6.3 Fixed Charge Coverage Ratio. . . . . 28 10.7 Limitation on Liens. . . . . . . . . . . . . 28 10.8 Debt . . . . . . . . . . . . . . . . . . . . 30 10.9 Guaranties, Loans and Advances . . . . . . . 30 10.10 Mergers, Consolidations, Sales . . . . . . . 31 10.11 Company's and Subsidiaries' Stock. . . . . . 32 10.12 Unconditional Purchase Obligations . . . . . 32 10.13 Employee Benefit Plans . . . . . . . . . . . 32 10.14 Purchase or Redemption of Company's Securities; Dividend Restriction . . . . . 32 10.15 Use of Proceeds. . . . . . . . . . . . . . . 33 PAGE SECTION 11 CONDITIONS OF LENDING. . . . . . . . . . . . . . . 33 11.1 Initial Loan . . . . . . . . . . . . . . . . 33 11.1.1 Notes. . . . . . . . . . . . . . . . 34 11.1.2 Resolutions. . . . . . . . . . . . . 34 11.1.3 Consents, etc. . . . . . . . . . . . 34 11.1.4 Incumbency and Signature Certificates . . . . . . . . . . . 34 11.1.5 Opinion of Counsel for the Company . 34 11.1.6 Other. . . . . . . . . . . . . . . . 34 11.2 All Loans. . . . . . . . . . . . . . . . . . 34 11.2.1 No Default . . . . . . . . . . . . . 34 11.2.2 Confirmatory Certificate . . . . . . 35 SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT . . . . . . . . 35 12.1 Events of Default. . . . . . . . . . . . . . 35 12.1.1 Non-Payment of the Loans, etc. . . . 35 12.1.2 Non-Payment of Other Debt. . . . . . 35 12.1.3 Other Material Obligations . . . . . 35 12.1.4 Bankruptcy, Insolvency, etc. . . . . 35 12.1.5 Non-Compliance with Provisions of This Agreement . . . . . . . . . . 36 12.1.6 Warranties . . . . . . . . . . . . . 36 12.1.7 Pension Plans. . . . . . . . . . . . 36 12.1.8 Withdrawal Liability Under Multiemployer Plans. . . . . . . . 36 12.1.9 Judgments and Attachments. . . . . . 36 12.1.10 Change in Control. . . . . . . . . . 37 12.2 Effect of Event of Default . . . . . . . . . 37 SECTION 13 THE AGENT. . . . . . . . . . . . . . . . . . . . . 37 13.1 Authorization. . . . . . . . . . . . . . . . 37 13.2 Indemnification. . . . . . . . . . . . . . . 37 13.3 Exculpation. . . . . . . . . . . . . . . . . 38 13.4 Credit Investigation . . . . . . . . . . . . 38 13.5 Agent and Affiliates . . . . . . . . . . . . 38 13.6 Action on Instructions of the Required Lenders . . . . . . . . . . . . . 38 13.7 Funding Reliance . . . . . . . . . . . . . . 39 13.8 Resignation. . . . . . . . . . . . . . . . . 39 SECTION 14 GENERAL. . . . . . . . . . . . . . . . . . . . . . 40 14.1 Waiver; Amendments . . . . . . . . . . . . . 40 14.2 Confirmations. . . . . . . . . . . . . . . . 41 14.3 Notices. . . . . . . . . . . . . . . . . . . 41 14.4 Subsidiary References. . . . . . . . . . . . 41 14.5 Regulation U . . . . . . . . . . . . . . . . 41 14.6 Costs, Expenses and Taxes. . . . . . . . . . 41 14.7 Indemnification by the Company . . . . . . . 42 14.8 Successors and Assigns . . . . . . . . . . . 42 14.9 Assignments; Participations. . . . . . . . . 43 14.9.1 Assignments. . . . . . . . . . . . . 43 14.9.2 Participations . . . . . . . . . . . 44 14.10 Governing Law. . . . . . . . . . . . . . . . 45 14.11 Counterparts . . . . . . . . . . . . . . . . 45 14.12 Termination of Existing Credit Agreement . . 45 14.13 Forum Selection and Consent to Jurisdiction. 45 14.14 OREGON LEGAL NOTICE. . . . . . . . . . . . . 45 SCHEDULE I Commitments and Percentages SCHEDULE II Schedule of Subsidiaries EXHIBIT A Form of Note (Section 3.1) EXHIBIT B Form of Extension Request (Section 2.9) EXHIBIT C Form of Opinion of Counsel for the Company and the Guarantors (Section 11.1.5) EXHIBIT D Form of Assignment Agreement (Section 14.9) CREDIT AGREEMENT This CREDIT AGREEMENT, dated as of June 30, 1994 (as amended or otherwise modified from time to time, this "Agreement"), is entered into among FRED MEYER, INC., a Delaware corporation (the "Company"), the undersigned financial institutions (collectively the "Lenders" and individually each a "Lender") and CONTINENTAL BANK (in its individual capacity, together with its successors, "Continental"), as agent for the Lenders. In consideration of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto 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 by the Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any circumstance of the nature described in Section 8.2 or 8.3. Affected Loan - see Section 8.3. ------------- Agent means Continental in its capacity as agent for the ----- Lenders hereunder and any successor thereto in such capacity. 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. Assets Purchase Agreement means the Assets 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. -------------------- Business Day means any day (other than a Saturday or Sunday) ------------ on which banks are open for commercial banking business in Chicago, Illinois 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 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. 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 referred to in subsection 4.3 (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. Continental - see the Preamble. ----------- 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. 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. 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 corporation, trade or business --------------- that is, along with the Company, a member of a controlled group of trades or businesses, as described in section 414(b) and 414(c), respectively, of the Internal Revenue Code of 1986, as amended, or section 4001 of ERISA. Eurocurrency Reserve Percentage means, with respect to any ------------------------------- Eurodollar Loan for any Interest Period, a percentage (expressed as a decimal) equal to the daily average during such Interest Period of the percentage in effect on each day of such Interest Period, as prescribed by the Board of Governors of the Federal Reserve System (or any successor), for determining the aggregate maximum reserve requirements applicable to "Eurocurrency Liabilities" pursuant to Regulation D or any other then applicable regulation of such Board of Governors which prescribes reserve requirements applicable to "Eurocurrency Liabilities" as presently defined in Regulation D. 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 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 1/16 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 10:00 a.m., Chicago 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 upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula: Eurodollar Rate = Eurodollar Rate --------------- (Reserve Adjusted) 1-Eurocurrency Reserve Percentage Event of Default means any of the events described in ---------------- Section 12.1. Existing Credit Agreement - see Section 11.1. ------------------------- Extension Request - see Section 2.9. ----------------- Federal Funds Rate means, for any day, the rate set forth in ------------------ the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds Effective Rate". If such rate is not published in the Composite 3:30 p.m. Quotations for any Business Day, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m., New York City time, on such day by each of three leading brokers of Federal funds transactions in New York City, selected by the Agent. The rate for any day which is not a Business Day shall be the rate for the immediately preceding Business Day. Fiscal Quarter means any fiscal quarter of a Fiscal Year. -------------- 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 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 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 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 and/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, conversion or 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 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. ---- 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" as defined ------------------ in section 4001(a)(3) of ERISA which is maintained for employees of the Company or any ERISA Affiliate of the Company or more. Note - see Section 3.1. ---- Objecting Lender - see Section 2.9. ---------------- 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 and any ---- entity succeeding to any or all of its functions under ERISA. 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. 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 principal amount of all outstanding Loans). The Percentages of the Lenders as of the Effective Date are set forth on 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. Reference Lender means each of NationsBank, The Bank of New ---------------- York, The Bank of Nova Scotia and Continental. Reference Rate means at any time the rate per annum then -------------- most recently announced by Continental as its reference rate at Chicago, Illinois. Release means a "release", as such term is defined in ------- CERCLA. 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. 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. Termination Date means June 30, 1999, as such date is ---------------- extended from time to time pursuant to Section 2.9 or such other date on which the Commitments shall terminate pursuant to Section 6.1 or 12.2. 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. Unmatured Event of 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. Welfare Plan means a "welfare plan", as such term is defined ------------ in section 3(1) of ERISA. 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 or 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 (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 $400,000,000 (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 conversion pursuant to Section 2.3 or 2.4. Eurodollar Loans having the same Interest Period are sometimes called 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 and an integral multiple of $1,000,000. 2.3 Borrowing Procedures. The Company shall give written -------------------- or telephonic notice to the Agent of each proposed borrowing not later than (a) in the case of a Floating Rate borrowing, 11:00 a.m., Chicago time, on the proposed date of such borrowing, and (b) in the case of a Eurodollar borrowing, 11:00 a.m., Chicago time, at least three Business Days prior to the proposed date of such borrowing. Each such notice 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, the Agent shall advise each Lender thereof. Not later than 1:00 p.m., Chicago time, on the date of a proposed borrowing, each Lender shall provide the Agent at the principal office of the Agent in Chicago 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 shall pay over such funds to the Company on the requested borrowing date. Each borrowing shall be on a Business Day. Each borrowing shall be in an aggregate amount of at least $1,000,000, in the case of Floating Rate Loans, or $10,000,000, 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 to the Agent not later than (a) in the case of conversion into a Floating Rate Loan, 11:00 a.m., Chicago time, on the proposed date of such conversion, and (b) in the case of a conversion into or continuation of a Eurodollar Loan, 11:00 a.m., Chicago time, at least three Business Days prior to the proposed date of such conversion or continuation. Each such notice shall be effective upon receipt by the Agent and shall specify the date and amount of such conversion or continuation, 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, the Agent shall advise each Lender thereof. Subject to Section 2.6, 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 timely notice of continuation of a Eurodollar Loan, such Loan shall automatically convert to a Floating Rate Loan on the last day of the Interest Period therefor. 2.5 Warranty upon Conversion or Continuation. Each notice ---------------------------------------- of conversion or continuation pursuant to Section 2.4 shall automatically constitute a warranty by the Company to the Agent and each Lender to the effect that, on the date of such requested conversion or continuation, no Event of Default or Unmatured Event of Default shall exist. 2.6 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 Unmatured Event of Default exists. 2.7 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. 2.8 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 no Lender shall be responsible for the failure of any other Lender to make any Loan to be made by such other Lender. 2.9 Extension of Termination Date. On or before May 1 of ----------------------------- each year, commencing on May 1, 1995, 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 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. 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 at maturity. 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 at maturity. After maturity, accrued interest on all Loans shall be payable on demand. 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 11:00 a.m., Chicago time, two Business Days before such Interest Period, then the Eurodollar Rate shall be determined on the basis of the rate of the other Reference Lenders. 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 agrees to pay to the Agent ----------- for its own account such fees as are agreed to from time to time by the Company and the Agent. SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS. 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. 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 11:00 a.m., Chicago time, on the date of such prepayment, in the case of Floating Rate Loans, and not less than two 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 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. 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. SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES. 7.1 Making of Payments. 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 its office in Chicago not later than noon, Chicago 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. 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 Unmatured Event of 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 or 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 (as defined below) 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 so 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 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) In consideration of the Company's agreements in clause (a) of this Section 7.6, each Lender which is not organized under the laws of the United States or a State thereof hereby agrees (such Lender's "Exemption Agreement"), to the extent permitted by applicable law (including any applicable double taxation treaty of the jurisdiction of its incorporation and the jurisdiction in which its Eurodollar Office is located), to execute and deliver to the Company (i) on or before the first date on which any payment is to be made to such Lender hereunder, a United States Internal Revenue Service Form 1001 or 4224 (or successor form) and, if reasonably requested by the Company, Internal Revenue Service Form W-8 or W-9 (or successor form), as appropriate, in each case properly completed and claiming a complete exemption, from withholding or deduction for or on account of Recipient Taxes of such Lender, and (ii) a new Form 1001 or 4224 (or successor form) and, if reasonably requested by the Company, Internal Revenue Service Form W-8 or W-9 (or successor form), as appropriate, upon the expiration or obsolescence of any previously delivered Form. (c) 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. 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 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 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 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 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 conversion 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 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 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: 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 29, 1994 and unaudited consolidated financial statements as at May 21, 1994, 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 29, 1994 and the Company's Quarterly Report on Form 10-Q for the Fiscal Quarter ended May 21, 1994, no 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 and Welfare Plans. During the twelve ------------------------- consecutive-month period prior to the date of the execution and delivery of this Agreement or the making of any Loan hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which could result in the incurrence by the Company of any material liability, fine or penalty. 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- 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: 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 Unmatured Event of 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 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 (a) to the effect that such officer is not aware of any Event of Default or Unmatured Event of 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, periodic 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 an Unmatured Event of 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 institution of any steps by the Company, any of its Subsidiaries or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a lien under Section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Company furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Company of any material liability, fine or penalty, or any material increase in the contingent liability of the Company with respect to any post-retirement Welfare Plan benefit; 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. 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 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 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 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 on 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. 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 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. 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 Unmatured Event of 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 Unmatured Event of 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 Unmatured Event of 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 Unmatured Event of 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. 10.12 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 Employee Benefit Plans. Maintain, and cause each ---------------------- Subsidiary to maintain, each Pension Plan in compliance in all material respects with all applicable requirements of law and regulations, and make all required contributions to Multiemployer Plans. 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 Unmatured Event of 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) 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 Credit Agreement (the "Existing Credit Agreement") dated as of June 15, 1990 with various financial institutions and Continental, as agent, 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 (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 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 Boley Jones & Grey, counsel to the Company, substantially in the form of Exhibit C. 11.1.6 Other. Such other documents as the Agent or any ----- Lender may reasonably request. 11.2 All Loans. The obligation of each Lender to make each --------- Loan is subject to the following further conditions precedent that: 11.2.1 No Default. (a) No Event of Default or ---------- Unmatured Event of Default has occurred and is continuing or will result from the making of such Loan and (b) the warranties of the Company contained in Section 9 (excluding Sections 9.6 and 9.8) are true and correct in all material respects as of the date of such requested Loan, with the same effect as though made on such date. 11.2.2 Confirmatory Certificate. If requested by the Agent ------------------------ or any Lender, the Agent shall have received (in sufficient counterparts to provide one to each Lender) a certificate dated the date of such requested Loan and signed by a duly authorized officer of the Company as to the matters set out in Section 11.2.1 (it being understood that each request by the Company for the making of a Loan shall be deemed to constitute a warranty by the Company that the conditions precedent set forth in Section 11.2.1 will be satisfied at the time of the making of such Loan), together with such other documents as the Agent or any Lender may reasonably request in support thereof. 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 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 Pension Plans. (i) Institution of any steps by the ------------- Company or any other Person to terminate a Pension Plan if as a result of such termination the Company 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 $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. 12.1.8 Withdrawal Liability Under Multiemployer Plans. The ---------------------------------------------- Company or any ERISA Affiliate shall make a complete or partial withdrawal from a Multiemployer Plan and the plan sponsor of 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. 12.1.9 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. 12.1.10 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 Authorization. Each Lender authorizes the Agent to ------------- act on behalf of such Lender to the extent provided herein or any other document or instrument delivered hereunder or in connection herewith, and to take such other action as may be reasonably incidental thereto. 13.2 Indemnification. Each Lender agrees to reimburse and --------------- indemnify the Agent for, and hold the Agent harmless against, a share (determined in accordance with such Lender's Percentage) of any loss, damage, penalty, action, judgment, obligation, cost, disbursement, liability or expense (including reasonable attorneys' fees) which may at any time be incurred by the Agent (and for which the Agent is not reimbursed by the Company) arising out of or in connection with the performance of its obligations or the exercise of its powers hereunder or any other document or instrument delivered hereunder or in connection herewith, as well as the costs and expenses of defending against any claim against the Agent arising hereunder or thereunder, provided that no Lender shall be liable for any of the foregoing which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from the Agent's gross negligence or willful misconduct. The provisions of this Section 13.2 shall survive repayment of the Loans, cancellation of the Notes and any termination of this Agreement. 13.3 Exculpation. The Agent shall be entitled to rely upon ----------- advice of counsel concerning legal matters, and upon this Agreement and any schedule, certificate, statement, report, notice or other writing which it believes to be genuine or to have been presented by a proper person. Neither the Agent nor any of its directors, officers, employees or agents shall (i) be responsible for any recitals, representations or warranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of, this Agreement or any other instrument or document delivered hereunder or in connection herewith, (ii) be responsible for the validity, genuineness, perfection, effectiveness, enforceability, existence, value or enforcement of any collateral security, (iii) be under any duty to inquire into or pass upon any of the foregoing matters, or to make any inquiry concerning the performance by the Company or any other obligor of its obligations, or (iv) in any event, be liable as such for any action taken or omitted by it or them, except for its or their own gross negligence or willful misconduct. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, the Agent in its individual capacity. 13.4 Credit Investigation. Each Lender acknowledges that -------------------- it has made such inquiries and taken such care on its own behalf as would have been the case had such Lender's Commitment been granted and such Lender's Loans been made directly by such Lender to the Company without the intervention of the Agent or any other Lender. Each Lender agrees and acknowledges that the Agent makes no representations or warranties about the creditworthiness of the Company or any other party to this Agreement or with respect to the legality, validity, sufficiency or enforceability of this Agreement or any Note or the value of any security therefor. 13.5 Agent and Affiliates. The Agent in its individual -------------------- capacity shall have the same rights and powers hereunder as any other Lender and may exercise or refrain from exercising the same as though it were not the Agent, and the Agent and its affiliates may accept deposits from and generally engage in any kind of business with the Company or any affiliate thereof as if the Agent were not the Agent hereunder. 13.6 Action on Instructions of the Required Lenders. As to ---------------------------------------------- any matters not expressly provided for by this Agreement (including, without limitation, enforcement of this Agreement and collection of the Loans), the Agent shall not be required to exercise any discretion or take any action, but the Agent shall in all cases be fully protected in acting or refraining from acting upon the written instructions (i) from the Required Lenders, except for instructions which under the express provisions hereof must be received by the Agent from all Lenders, and (ii) in the case of such instructions, from all Lenders. In no event will the Agent be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. The relationship between the Agent and the Lenders is and shall be that of agent and principal only and nothing herein contained shall be construed to constitute the Agent a trustee for any holder of a Note or of a participation therein nor to impose on the Agent duties and obligations other than those expressly provided for herein. 13.7 Funding Reliance. (a) Unless the Agent receives ---------------- notice from a Lender by 1:00 p.m., Chicago time, on the day of a proposed borrowing that such Lender will not make available to the Agent the amount which would constitute its Percentage of such borrowing in accordance with Section 2.3, the Agent may assume that such Lender has made such amount available to the Agent and, in reliance upon such assumption, make a corresponding amount available to the Company. If and to the extent such Lender has not made any such amount available to the Agent, such Lender and the Company jointly and severally agree to repay such amount to the Agent forthwith on demand, together with interest thereon (i) in the case of the Company, the interest rate applicable to Loans comprising such borrowing and (ii) in the case of such Lender, the Federal Funds Rate (or, beginning on the third Business Day after demand, the rate set forth in clause (i)). Nothing set forth in this clause (a) shall relieve any Lender of any obligation it may have to make any Loan hereunder. (b) Unless the Agent receives notice from the Company prior to the due date for any payment hereunder that the Company does not intend to make such payment, the Agent may assume that the Company has made such payment and, in reliance upon such assumption, make available to each Lender its share of such payment. If and to the extent that the Company has not made any such payment to the Agent, each Lender which received a share of such payment shall repay such share (or the relevant portion thereof) to the Agent forthwith on demand, together with interest thereon at the Federal Funds Rate (or, beginning on the third Business Day after demand, at the Alternate Reference Rate). Nothing set forth in this clause (b) shall relieve the Company of any obligation it may have to make any payment hereunder. 13.8 Resignation. The Agent may resign as such at any time ----------- upon at least 30 days' prior notice to the Company and the Lenders. In the event of any such resignation, the Required Lenders (with, so long as no Event of Default or Unmatured Event of Default exists, the consent of the Company, which consent shall not be unreasonably delayed or withheld) shall as promptly as practicable appoint a successor Agent. If no successor shall have been so appointed, and shall have accepted such appointment, within 30 days after the giving of notice of such resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America having a combined capital, surplus and undivided profits of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from all further duties and obligations under this Agreement. After any resignation pursuant to this Section 13.8, the provisions of this Section 13 shall inure to the benefit of the retiring Agent as to any actions taken or omitted to be taken by it while it was Agent 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. Except as otherwise provided in Sections 2.3 ------- and 2.4, all notices hereunder shall be in writing (including, without limitation, facsimile transmission) and shall be sent to the applicable party at its address shown below its signature hereto or at such other address as such party may, by written notice received by the other party, have designated as its address for such purpose. Notices sent by facsimile transmission shall be deemed to have been given when receipt is confirmed by confirming transmission equipment or acknowledged by the addressee; notices sent by mail shall be deemed to have been given three Business Days after the date when sent by registered or certified mail, postage prepaid; and notices sent by hand delivery shall be deemed to have been given when received. For purposes of Sections 2.3 and 2.4, the Agent shall be entitled to rely on telephonic instructions from any person that the Agent in good faith believes is an authorized officer or employee of the Company, and the Company shall hold the Agent and each Lender harmless from any loss, cost or expense resulting from any such reliance. 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) 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) 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 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 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 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 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 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 Illinois applicable to contracts made and to be performed entirely within the State of Illinois. 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 Termination of Existing Credit Agreement. The ---------------------------------------- Company and all Lenders that are also "Banks" under and as defined in the Existing Credit Agreement agree that the "Commitments" under and as defined in the Existing Credit Agreement shall be terminated in their entirety on the date of the effectiveness of this Agreement. 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 ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS 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 ILLINOIS. 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 OREGON LEGAL NOTICE. WITHOUT LIMITING THE VALIDITY ------------------- OF THE CHOICE OF ILLINOIS 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. Delivered at Chicago, Illinois, as of the day and year first above written. FRED MEYER, INC. By MICHAEL H. DON ------------------------------ Vice President and Corporate Treasurer 3800 S.E. 22nd Avenue P.O. Box 42121 Portland, Oregon 97242 Attention: Michael H. Don Vice President and Corporate Treasurer Facsimile: 503-797-5299 CONTINENTAL BANK, individually and as Agent By ELIZABETH M. NOLAN ------------------------------ Vice President 231 South LaSalle Street Chicago, Illinois 60697 Attention: Elizabeth M. Nolan Vice President Facsimile: 312-765-2080 BANK OF AMERICA By /s/ ------------------------------ Vice President P.O. Box 37000 (94137) San Francisco, California 94104 Attention: James R. MacGregor Senior Vice President Facsimile: 415-622-4585 THE BANK OF CALIFORNIA, N.A. By /s/ ------------------------------ Senior Vice President P.O. Box 45000 San Francisco, California 94145 Attention: Thomas C. Ludlow Vice President Facsimile: 415-765-3146 THE BANK OF NEW YORK By ROBERT LOUK ------------------------------ Vice President 10990 Wilshire Boulevard, Suite 1700 Los Angeles, CA 90024 Attention: Mr. Robert Louk Vice President Facsimile: 310-996-8667 THE BANK OF NOVA SCOTIA By ERRETT HUMMEL ------------------------------ Account Officer 888 S.W. 5th Avenue, Suite 750 Portland, OR 97204-2098 Attention: Errett Hummel Account Officer Facsimile: 503-222-5502 BANK OF TOKYO, LTD. By M.W. KRINGLEN ------------------------------ Vice President 2300 Pacwest Center 1211 S.W. 5th Avenue Portland, OR 97204 Attention: Mr. M.W. Kringlen Vice President Facsimile: 503-227-5372 COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A, "RABOBANK NEDERLAND" NEW YORK BRANCH By ROBERT B. BENOIT ------------------------------ Senior Vice President 245 Park Avenue 36th Floor New York, NY 10167 Attention: Ms. Marla Lerner Facsimile: 212-916-7880 CREDIT LYONNAIS LOS ANGELES BRANCH By /s/ ------------------------------ Vice President 515 South Flower Street Los Angeles, CA 90071 Attention: Mr. Francois Coussot Vice President Facsimile: 213-623-3437 or 213-623-8067 CREDIT LYONNAIS CAYMAN ISLAND BRANCH By /s/ ------------------------------ Authorized Signatory c/o Credit Lyonnais Los Angeles Branch 515 South Flower Street Los Angeles, CA 90071 Attention: Mr. Francois Coussot Vice President Facsimile: 213-623-3437 or 213-623-8067 FIRST INTERSTATE BANK OF OREGON, N.A. By MARCIA J. JANNER ------------------------------ Vice President P.O. Box 3131 Portland, OR 97208-3131 Attention: Ms. Marcia J. Janner Vice President Facsimile: 503-225-4698 FIRST SECURITY BANK OF UTAH, N.A. By D. KEVIN IMLAY ------------------------------ Vice President 15 East 100 South, 2nd FL. Salt Lake City, Ut 84111 Attention: Mr. Kevin Imlay Vice President Facsimile: 801-246-5532 THE FUJI BANK, LTD. By /s/ ------------------------------ General Manager 601 California Street San Francisco, CA 94108 Attention: Mr. Michael Rogers Vice President Facsimile: 415-362-4613 THE HONG KONG AND SHANGHAI BANKING CORPORATION LIMITED By B. DANIEL DUTTON ------------------------------ Vice President 900 S.W. 5th Avenue, Suite 1550 Portland, OR 97204-1298 Attention: Mr. B. Daniel Dutton Vice President Facsimile: 503-242-2413 THE INDUSTRIAL BANK OF JAPAN, LTD. By /s/ ------------------------------ Deputy General Manager 555 California Street, Suite 1610 San Francisco, CA 94104 Attention: Mr. Clifford B. White Vice President Facsimile: 415-982-1917 KEY BANK OF WASHINGTON By BARRY BOOHER ------------------------------ Vice President P.O. Box 21145 Seattle, WA 98111-3145 Attention: Mr. Barry Booher Vice President Facsimile: 206-223-7834 NATIONSBANK OF TEXAS, N.A. By WILLIAM B. GUFFEY ------------------------------ Vice President 444 S. Flower Street, Suite 1500 Los Angeles, CA 90071 Attention: Mr. William B. Guffey Vice President Facsimile: 213-624-5815 SEATTLE FIRST NATIONAL BANK By /s/ ------------------------------ Asst. Vice President 701 Fifth Ave. - 12th Floor Seattle, WA 98104 Attention: Mr. Gordon H. Gray Vice President Facsimile: 206-358-3113 UNITED STATES NATIONAL BANK OF OREGON By ANN C. SMITH ------------------------------ Vice President P.O. Box 8837 Portland, OR 97208-8837 Attention: Ms. Ann C. Smith Vice President Facsimile: 503-275-5428 WEST ONE BANK, IDAHO By JAMES C. AALBERG ------------------------------ Vice President P.O. Box 2882 (97208) 234 S.W. Broadway Portland, OR 97205 Attention: Mr. James C. Aalberg Vice President Facsimile: 503-248-6939 SCHEDULE I COMMITMENTS AND PERCENTAGES
Lender Commitment Percentage - ------ ---------- ---------- Bank of America $25,000,000 6.25% The Bank of California, N.A. 15,000,000 3.75 The Bank of New York 25,000,000 6.25 The Bank of Nova Scotia 35,000,000 8.75 Bank of Tokyo, Ltd. 30,000,000 7.50 Continental Bank 30,000,000 7.50 Cooperatieve Centrale Raiffeinsen-Boerenleenbank B.A. 25,000,000 6.25 Credit Lyonnais Los Angeles 12,000,000 3.00 Branch and Credit Lyonnais Cayman Island Branch First Interstate Bank 30,000,000 7.50 of Oregon, N.A. First Security Bank of Utah, N.A. 15,000,000 3.75 The Fuji Bank, Ltd. 12,000,000 3.00 The Hong Kong and Shanghai Banking Corporation Limited 25,000,000 6.25 The Industrial Bank of Japan, Ltd. 12,000,000 3.00 Key Bank of Washington 12,000,000 3.00 NationsBank of Texas, N.A. 35,000,000 8.75 United States National 20,000,000 5.00 Bank of Oregon Seattle First National Bank 30,000,000 7.50 West One Bank, Idaho 12,000,000 3.00 ___________ ____ TOTAL $400,000,000 100% /TABLE SCHEDULE II SCHEDULE OF SUBSIDIARIES
Percentage Jurisdiction Owned By The Of Company And Subsidiary Organization Its Subsidiaries ---------- ------------ ---------------- B&B Stores, Inc. Montana 100% B&B Pharmacy, Inc. Montana 100% CB&S Advertising Agency, Inc. Oregon 100% Distribution Trucking Company Oregon 100% FM Holding Corporation Delaware 100% Grand Central, Inc. Utah 100% FM Retail Services, Inc. Washington 100% Fred Meyer (HK) Limited Hong Kong 100% Fred Meyer, Inc. (a Washington Corporation) Washington 100% Fred Meyer of Alaska, Inc. Alaska 100% Fred Meyer of California, Inc. California 100% Natur Glo, Inc. Oregon 100% Roundup Co. Washington 100%
EXHIBIT A FORM OF NOTE $__________ ___________, 199_ Chicago, Illinois FOR VALUE RECEIVED, the undersigned promises to pay to the order of __________________ at the principal office of Continental Bank (the "Agent"), in Chicago, Illinois, on the date set forth in the Credit Agreement referred to below, _______________________________________ Dollars ($__________) or, if less, the aggregate unpaid amount of all Loans made by the payee to the undersigned pursuant to the Credit Agreement (as shown in the records of the payee or, at the payee's option, on the schedule attached hereto and any continuation thereof). The undersigned further promises to pay interest on the unpaid principal amount of each Loan evidenced hereby from the date of such Loan until such Loan is paid in full, payable at the rate(s) and at the time(s) set forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, the Credit Agreement, dated as of June 30, 1994 (herein, as amended or otherwise modified from time to time, called the "Credit Agreement"), among the undersigned, certain financial institutions (including the payee) and the Agent, to which Credit Agreement reference is hereby made for a statement of the terms and provisions under which this Note may or must be paid prior to its due date or may have its due date accelerated. In addition to and not in limitation of the foregoing and the provisions of the Credit Agreement, the undersigned further agrees, subject only to any limitation imposed by applicable law, to pay all reasonable expenses, including reasonable attorneys' fees and legal expenses, incurred by the holder of this Note in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise. Each of the Company and each guarantor hereof waives demand, presentment, protest, diligence, notice of dishonor and any other formality in connection with this Note. This Note is made under and governed by the internal laws of the State of Illinois applicable to contracts made and to be performed entirely within such State. FRED MEYER, INC. By ______________________________ Vice President and Corporate Treasurer Schedule Attached to Note dated _______, 199_ of FRED MEYER, INC. _________ payable to the order of ____________________________. Date and Date and Amount of Amount of Loan or of Repayment or of conversion from conversion into Unpaid another type of another type of Interest Principal Notation Loan Loan Period Balance Made by 1. FLOATING RATE LOANS ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ 2. EURODOLLAR LOANS ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ EXHIBIT B FORM OF REQUEST FOR EXTENSION OF TERMINATION DATE [Date] [Name and Address of Lender] Pursuant to the Credit Agreement dated as of June 30, 1994 (the "Credit Agreement") among Fred Meyer, Inc. (the "Company"), various financial institutions and Continental Bank, as Agent, this represents the Company's request to extend the Termination Date (as defined in the Credit Agreement) to June 30, ____. Please indicate whether you consent to such extension of the Termination Date by signing the attached copy of this Extension Request in the space provided below and returning the same to the undersigned by June 1, ____. Very truly yours, FRED MEYER, INC. By: ___________________________ Title: ______________________ [Name of Lender] Date:_______________ ACCEPTS ____ REJECTS ____ By:___________________________ Title: ____________________ EXHIBIT C FORM OF OPINION OF COUNSEL [Letterhead of Stoel Rives Boley Jones & Grey] June , 1994 Continental Bank, individually and as Agent, and the other Lenders which are parties to the Credit Agreement referred to below 231 South LaSalle Street Chicago, Illinois 60697 Re: Credit Agreement dated as of June 30 , 1994 among Fred Meyer, Inc., various financial institutions and Continental Bank, as Agent ------------------------------------------------- Gentlemen: We have acted as counsel to Fred Meyer, Inc., a Delaware corporation (the "Company"), in connection with the Credit Agreement dated as of June 30, 1994 among the Company, various financial institutions (the "Lenders") and Continental Bank, as Agent (the "Credit Agreement"), and the initial loans made this date by the Lenders to the Company under the Credit Agreement. This opinion letter is rendered to you pursuant to Section 11.1.5 of the Credit Agreement. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings set forth in the Credit Agreement. For the purpose of rendering our opinions herein, we have examined (i) the Credit Agreement and the Notes, (ii) certificates of public officials and of officers of the Company, (iii) certified copies of the Company's Restated Certificate of Incorporation and Amended and Restated Bylaws, (iv) board of directors' resolutions of the Company authorizing the Company's participation in the transactions contemplated by the Credit Agreement, and (v) the agreements referred to as "material agreements" in the attached Officer's Certificate of the Company (the "Certificate"). We have also examined such other documents and records, and have made such investigations of law, as we have deemed necessary to enable us to render this opinion. As to the accuracy of certain factual matters, we have relied on certificates and written statements of officers of the Company and factual representations made by the Company within the Credit Agreement. For purposes of this opinion, "actual knowledge" means the conscious awareness of facts or other information by Gary R. Barnum or MardiLyn Saathoff, the persons at this firm principally involved with the transactions contemplated by the Credit Agreement. Based on the foregoing and subject to the qualifications below, we are of the opinion that: (1) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and operate its properties, to carry on its business as described in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 1994, to enter into the Credit Agreement, to issue the Notes and to carry out the transactions contemplated thereby. (2) The Credit Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and the Credit Agreement and the Notes have been duly executed and delivered by the Company and constitute legally valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. (3) None of the execution and delivery by the Company of the Credit Agreement, the consummation by the Company of the transactions contemplated by the Credit Agreement or compliance by the Company with the terms and conditions of the Credit Agreement and the Notes (a) conflicts with, results in a breach of, or constitutes a default under any of the terms, conditions or provisions of the Restated Certificate of Incorporation or Amended and Restated Bylaws of the Company or, to our actual knowledge, any "material agreement" referred to in the Certificate or judicial order by which the Company or any Subsidiary is bound, or (b) to our actual knowledge, results in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary under any such agreement or order. (4) Neither the execution and delivery of the Credit Agreement and the Notes nor the payment of the Notes conflicts with any present federal statute binding on the Company or any Delaware statute, rule or regulation contained in or promulgated under the General Corporation Law of the State of Delaware binding on the Company. (5) To our actual knowledge, no governmental consents, approvals, authorizations, registrations, declarations or filings are required by the Company in connection with the extensions of credit under the Credit Agreement. (6) The Company is not an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. For the purposes of our opinions set forth in paragraphs (2) and (3), we have assumed that all amounts owed by the Company under the existing Credit Agreement referred to in Section 10.1(a) of the Credit Agreement have been paid and that such existing Credit Agreement has been cancelled. The opinions set forth above are subject to (a) the effect of bankruptcy, insolvency, reorganization, moratorium, and other similar laws generally affecting creditors' rights and (b) the application of general principles of equity, including, without limitations, the right to specific performance. A court might not enforce certain covenants or allow acceleration of the due date of the Notes if it concludes that such enforcement or acceleration would be unreasonable or not undertaken in good faith under the then existing circumstances, but the inclusion of such remedies does not, in our opinion, affect the validity of the Credit Agreement or the Notes. In addition, no opinion is expressed herein as to Section 14.7 of the Credit Agreement. We express no opinion as to (a) the enforceability under certain circumstances of any provision imposing penalties, late payment charges or increases in interest rate upon delinquency in payment or the occurrence of Events of Default, (b) the enforceability of any choice of law provision, (c) the compliance with certain financial covenants under the "material agreements" set forth in the Certificate, or (d) the compliance with applicable anti-fraud provisions of federal or state securities laws. The opinions herein expressed are limited to the matters governed by the laws of the United States of America and the State of Oregon and, as to the opinions expressed in paragraphs (1), (2), and (4) above, the General Corporation Law of the State of Delaware, in each case as it exists at the date hereof, and we express no opinion as to the law of any other jurisdiction. In rendering the opinions set forth in paragraph (2) above, we have assumed, as to matters purported to be governed by the laws of the State of Illinois, that the laws of the State of Oregon and the State of Illinois do not differ in any material respect. This opinion is rendered only to the Agent and the Lenders and is solely for their benefit in connection with the above transactions. This opinion may not be relied upon by the Agent or any Lender for any other purpose or quoted to or relied upon by any other person, firm or corporation for any purpose without our prior written consent. Very truly yours, STOEL RIVES BOLEY JONES & GREY By: ----------------------------- Gary R. Barnum EXHIBIT D FORM OF ASSIGNMENT AGREEMENT Date:_________________ To: Fred Meyer, Inc. and Continental Bank, as Agent Re: Assignment under the Credit Agreement referred to below ------------------------------------------------------- Gentlemen and Ladies: We refer to Section 14.9 of the Credit Agreement dated as of June 30, 1994 (as amended or otherwise modified, the "Credit Agreement") among Fred Meyer, Inc. (the "Company"), various financial institutions and Continental Bank, as agent (the "Agent"). Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. (the "Assignor") hereby sells and assigns to (the "Assignee"), and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to % of all of the Loans and Commitments, such sale, purchase, assignment and assumption to be effective as of , 199 , or such later date on which the Company and the Agent shall have consented hereto (the "Effective Date"). After giving effect to such sale, purchase, assignment and assumption, the Assignee's Percentage for purposes of the Credit Agreement will be as set forth opposite the Assignee's name on the signature pages hereof. The Assignor hereby instructs the Agent to make all payments from and after the Effective Date in respect of the interest assigned hereby directly to the Assignee. The Assignor and the Assignee agree that all interest and fees accrued up to, but not including, the Effective Date are the property of the Assignor, and not the Assignee. The Assignee agrees that, upon receipt of any such interest or fees, the Assignee will promptly remit the same to the Assignor. The Assignee hereby confirms that it has received a copy of the Credit Agreement and the exhibits related thereto, together with copies of the documents which were required to be delivered under the Credit Agreement as a condition to the making of the initial Loans thereunder. The Assignee acknowledges and agrees that it (i) has made and will continue to make such inquiries and has taken and will take such care on its own behalf as would have been the case had its Commitment been granted and its Loans been made directly by the Assignee to the Company without the intervention of the Agent, the Assignor or any other Lender and (ii) has made and will continue to make, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it has deemed appropriate, its own credit analysis and decisions relating to the Credit Agreement. The Assignee further acknowledges and agrees that neither the Agent nor the Assignor has made any representation or warranty about the creditworthiness of the Company or any other party to the Credit Agreement or with respect to the legality, validity, sufficiency or enforceability of the Credit Agreement or any Note or the value of any security therefor. This assignment shall be made without recourse to the Assignor. The Assignor represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim. The Assignee represents and warrants to the Company and the Agent that, as of the date hereof, the Company will not be obligated to pay any greater amount under Section 7.6 or 8.1 of the Credit Agreement than the Company is obligated to pay to the Assignor under such Section. Except as otherwise provided in the Credit Agreement, effective as of the Effective Date: (a) the Assignee (i) shall be deemed automatically to have become a party to the Credit Agreement and have all the rights and obligations of a "Lender" under the Credit Agreement as if it were an original signatory thereto to the extent specified in the second paragraph hereof; and (ii) agrees to be bound by the terms and conditions set forth in the Credit Agreement as if it were an original signatory thereto; and (b) the Assignor shall be released from its obligations under the Credit Agreement to the extent specified in the second paragraph hereof. The Assignor and the Assignee hereby agree that the [Assignor] [Assignee] will pay to the Agent the processing fee referred to in Section 14.9 of the Credit Agreement. The payment of the processing fee shall be a condition to the effectiveness of this assignment. The Assignee hereby advises each of you of the following administrative details with respect to the assigned Loans and Commitment: (A) Address for Notices: Institution Name: Address: Attention: Telephone: Facsimile: (B) Payment Instructions: The Assignee has delivered to the Company and the Agent (or is delivering to the Company and the Agent concurrently herewith) the tax forms referred to in Section 7.6 of the Credit Agreement. Please evidence your receipt hereof and consent to the sale, assignment, purchase and assumption set forth herein by signing and returning counterparts hereof to the Assignor and the Assignee. Percentage = % [ASSIGNEE] By: ___________________________ Title: [ASSIGNOR] By: ___________________________ Title: ACKNOWLEDGED AND CONSENTED TO this ____ day of ________, 199_ CONTINENTAL BANK, as Agent By: ___________________________ Title: _____________________ ACKNOWLEDGED AND CONSENTED TO this _____ day of __________, 199__ FRED MEYER, INC. By: ________________________________ Title: _________________________ EX-4.D 3 EXHIBIT 4D EXHIBIT 4-D FRED MEYER, INC. COMPOSITE CONFORMED COPY OF THE NOTE AGREEMENT Re: $7,500,000 7.25% Senior Notes, Series A, Due July 15, 1999, $15,000,000 7.52% Senior Notes, Series B, Due July 15, 2001, $20,000,000 7.88% Senior Notes, Series C, Due July 15, 2004 and $15,000,000 7.98% Senior Notes, Series D, Due July 15, 2007 _________________________________________ Series A PPN 593098 A@5 Series B PPN 593098 B*6 Series C PPN 593098 B@4 Series D PPN 593098 B#2 Closing Date: July 19, 1994 ============================================================ Separate and several Note Agreements each dated as of June 1, 1994, in the form attached hereto, were entered into by Fred Meyer, Inc., a Delaware corporation, and each of the institutions named below, respectively. Each of said Note Agreements was executed on behalf of Fred Meyer, Inc. by Michael H. Don, Vice President and Corporate Treasurer. The separate Note Agreements were addressed to each of the institutions as shown on Schedule I attached thereto and were accepted by the officers of the respective institutions as shown below. PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY By: /s/ Paul M. Chute Managing Director THE VARIABLE ANNUITY LIFE INSURANCE COMPANY By: /s/ Julia S. Tucker Investment Officer THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By: /s/ Loren A. Haugland Vice President THE CANADA LIFE ASSURANCE COMPANY By: /s/ Brian J. Lynch Associate Treasurer CANADA LIFE INSURANCE COMPANY OF AMERICA By: /s/ Brian J. Lynch Assistant Treasurer CANADA LIFE INSURANCE COMPANY OF NEW YORK By: /s/ Brian J. Lynch Assistant Treasurer THE FRANKLIN LIFE INSURANCE COMPANY By: /s/ Daniel C. Leimbach Vice President By: /s/ Elizabeth E. Arthur Assistant Secretary KNIGHTS OF COLUMBUS By: /s/ Robert J. Lane Assistant Supreme Secretary SAFECO LIFE INSURANCE COMPANY By: /s/ Ronald Spaulding Vice President THE SECURITY MUTUAL LIFE INSURANCE COMPANY OF LINCOLN, NEBRASKA By: /s/ Kevin W. Hammond Vice President, Investments STANDARD INSURANCE COMPANY By: /s/ Vicki R. Chase Vice President - Securities WOODMEN ACCIDENT AND LIFE COMPANY By: /s/ M.F. Wilder Senior Vice President and Treasurer MUTUAL TRUST LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By: /s/ Loren A. Haugland Vice President SECURITY LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By: /s/ Loren A. Haugland Vice President NATIONAL TRAVELERS LIFE COMPANY By: MIMLIC Asset Management Company By: /s/ Loren A. Haugland Vice President COLORADO BANKERS LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By: /s/ Loren A. Haugland Vice President GUARANTEE RESERVE LIFE INSURANCE COMPANY By: MIMLIC Asset Management Company By: /s/ Loren A. Haugland Vice President =============================================================== FRED MEYER, INC. NOTE AGREEMENT Dated as of June 1, 1994 Re: $7,500,000 7.25% Senior Notes, Series A, Due July 15, 1999, $15,000,000 7.52% Senior Notes, Series B, Due July 15, 2001, $20,000,000 7.88% Senior Notes, Series C, Due July 15, 2004 and $15,000,000 7.98% Senior Notes, Series D, Due July 15, 2007 =============================================================== Table of Contents (Not a part of the Agreement) SECTION HEADING PAGE SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT . . . . . .1 Section 1.1. Description of Notes . . . . . . . . . . .1 Section 1.2. Commitment, Closing Date . . . . . . . . .2 Section 1.3. Other Agreements . . . . . . . . . . . . .3 SECTION 2. PREPAYMENT OF NOTES . . . . . . . . . . . . . .3 Section 2.1. Optional Prepayment with Premium . . . . .3 Section 2.2. Notice of Optional Prepayments . . . . . .3 Section 2.3. Application of Prepayments . . . . . . . .4 Section 2.4. Direct Payment . . . . . . . . . . . . . .4 SECTION 3. REPRESENTATIONS . . . . . . . . . . . . . . . .4 Section 3.1. Representations of the Company . . . . . .4 Section 3.2. Representations of the Purchaser . . . . .4 SECTION 4. CLOSING CONDITIONS. . . . . . . . . . . . . . .5 Section 4.1. Conditions . . . . . . . . . . . . . . . .5 Section 4.2. Waiver of Conditions . . . . . . . . . . .6 SECTION 5. COMPANY COVENANTS . . . . . . . . . . . . . . .7 Section 5.1. Corporate Existence, Etc . . . . . . . . .7 Section 5.2. Insurance. . . . . . . . . . . . . . . . .7 Section 5.3. Taxes, Claims for Labor and Materials; Compliance with Laws . . . . . . . . . . .7 Section 5.4. Maintenance, Etc . . . . . . . . . . . . .8 Section 5.5. Nature of Business . . . . . . . . . . . .8 Section 5.6. Consolidated Adjusted Net Worth. . . . . .8 Section 5.7. Limitations on Indebtedness. . . . . . . .8 Section 5.8. Limitation on Liens. . . . . . . . . . . .9 Section 5.9. Mergers, Consolidations and Sales of Assets. . . . . . . . . . . . . . . . 12 Section 5.10. Guaranties . . . . . . . . . . . . . . . 14 Section 5.11. Repurchase of Notes. . . . . . . . . . . 14 Section 5.12. Transactions with Affiliates . . . . . . 14 Section 5.13. Withdrawal from Multiemployer Plans and Termination of Pension Plans . . . . 14 Section 5.14. Redesignation of Subsidiaries. . . . . . 15 Section 5.15. Reports and Rights of Inspection . . . . 15 Section 5.16. Dividends. . . . . . . . . . . . . . . . 18 SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR . . . 18 Section 6.1. Events of Default. . . . . . . . . . . . 18 Section 6.2. Notice to Holders. . . . . . . . . . . . 20 Section 6.3. Acceleration of Maturities . . . . . . . 20 Section 6.4. Rescission of Acceleration . . . . . . . 21 SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS. . . . . . . 22 Section 7.1. Consent Required . . . . . . . . . . . . 22 Section 7.2. Solicitation of Holders. . . . . . . . . 22 Section 7.3. Effect of Amendment or Waiver. . . . . . 22 SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS. . . 22 Section 8.1. Definitions. . . . . . . . . . . . . . . 22 Section 8.2. Accounting Principles. . . . . . . . . . 30 Section 8.3. Directly or Indirectly . . . . . . . . . 30 SECTION 9. MISCELLANEOUS . . . . . . . . . . . . . . . . 30 Section 9.1. Registered Notes . . . . . . . . . . . . 30 Section 9.2. Exchange of Notes. . . . . . . . . . . . 31 Section 9.3. Loss, Theft, Etc. of Notes . . . . . . . 31 Section 9.4. Expenses, Stamp Tax Indemnity. . . . . . 31 Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. . . . . . . . . . . 32 Section 9.6. Notices. . . . . . . . . . . . . . . . . 32 Section 9.7. Successors and Assigns . . . . . . . . . 33 Section 9.8. Survival of Covenants and Representations. . . . . . . . . . . . . 33 Section 9.9. Severability . . . . . . . . . . . . . . 33 Section 9.10. Changes in GAAP. . . . . . . . . . . . . 33 Section 9.11. Governing Law. . . . . . . . . . . . . . 33 Section 9.12. Submission to Jurisdiction.. . . . . . . 33 Section 9.13. Captions . . . . . . . . . . . . . . . . 34 Signature. . . . . . . . . . . . . . . . . . . . . . . . . . 35 ATTACHMENTS TO NOTE AGREEMENT: Schedule I -- Names and Addresses of Purchasers and Amounts of Commitments Schedule II -- Description of Current Debt, Funded Debt (including Capitalized Leases), Liens, Subsidiaries and Pending Tax Matters Exhibit A-1 -- Form of 7.25% Senior Note, Series A, due July 15, 1999 Exhibit A-2 -- Form of 7.52% Senior Note, Series B, due July 15, 2001 Exhibit A-3 -- Form of 7.88% Senior Note, Series C, due July 15, 2004 Exhibit A-4 -- Form of 7.98% Senior Note, Series D, due July 15, 2007 Exhibit B -- Representations and Warranties of the Company Exhibit C -- Description of Special Counsel's Closing Opinion Exhibit D -- Description of Closing Opinion of Counsel to the Company Exhibit E -- Subordination Provisions Applicable to Subordinated Indebtedness FRED MEYER, INC. 3800 S.E. 22nd Avenue Portland, Oregon 97242 NOTE AGREEMENT Re: $7,500,000 7.25% Senior Notes, Series A, Due July 15, 1999, $15,000,000 7.52% Senior Notes, Series B, Due July 15, 2001, $20,000,000 7.88% Senior Notes, Series C, Due July 15, 2004 and $15,000,000 7.98% Senior Notes, Series D, Due July 15, 2007 Dated as of June 1, 1994 To the Purchaser named in Schedule I hereto which is a signatory of this Agreement Ladies and Gentlemen: The undersigned, Fred Meyer, Inc., a Delaware corporation (the "Company"), agrees with you as follows: SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT. Section 1.1. Description of Notes. (a) The Company will authorize the issue and sale of its 7.25% Senior Notes, Series A, due July 15, 1999 (the "Series A Notes") in an aggregate principal amount of $7,500,000, its 7.52% Senior Notes, Series B, due July 15, 2001 (the "Series B Notes") in an aggregate principal amount of $15,000,000, its 7.88% Senior Notes, Series C, due July 15, 2004 (the "Series C Notes") in an aggregate principal amount of $20,000,000, and its 7.98% Senior Notes, Series D, due July 15, 2007 (the "Series D Notes") in an aggregate principal amount of $15,000,000. The Series A Notes, the Series B Notes, the Series C Notes and the Series D Notes issued pursuant to this Agreement and the other separate agreements referred to in Section 1.3 are hereinafter collectively referred to as the "Notes." (b) The Series A Notes will be dated the date of issue, will bear interest from such date at the rate of 7.25% per annum, payable semiannually in arrears on the fifteenth day of January and July in each year (commencing January 15, 1995) and at maturity and will bear interest on overdue principal (including any overdue optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest at the Overdue Rate after the date due, whether by acceleration or otherwise, until paid. The Series A Notes shall mature on July 15, 1999 and shall be substantially in the form attached hereto as Exhibit A-1. The Series B Notes will be dated the date of issue, will bear interest from such date at the rate of 7.52% per annum, payable semiannually in arrears on the fifteenth day of January and July in each year (commencing January 15, 1995) and at maturity and will bear interest on overdue principal (including any overdue optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest at the Overdue Rate after the date due, whether by acceleration or otherwise, until paid. The Series B Notes shall mature on July 15, 2001 and shall be substantially in the form attached hereto as Exhibit A-2. The Series C Notes will be dated the date of issue, will bear interest from such date at the rate of 7.88% per annum, payable semiannually in arrears on the fifteenth day of January and July in each year (commencing January 15, 1995) and at maturity and will bear interest on overdue principal (including any overdue optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest at the Overdue Rate after the date due, whether by acceleration or otherwise, until paid. The Series C Notes shall mature on July 15, 2004 and shall be substantially in the form attached hereto as Exhibit A-3. The Series D Notes will be dated the date of issue, will bear interest from such date at the rate of 7.98% per annum, payable semiannually in arrears on the fifteenth day of January and July in each year (commencing January 15, 1995) and at maturity and will bear interest on overdue principal (including any overdue optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest at the Overdue Rate after the date due, whether by acceleration or otherwise, until paid. The Series D Notes shall mature on July 15, 2007 and shall be substantially in the form attached hereto as Exhibit A-4. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in Section 2 of this Agreement. You and the other purchasers named in Schedule I are hereinafter sometimes referred to as the "Purchasers". The terms which are capitalized herein shall have the meanings set forth in Section 8.1 unless the context shall otherwise require. Section 1.2. Commitment, Closing Date. Subject to the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, the Company agrees to issue and sell to you, and you agree to purchase from the Company, Notes of the series and in the aggregate principal amount set forth opposite your name on Schedule I hereto at a price of 100% of such principal amount on the Closing Date hereafter mentioned. Delivery of the Notes will be made at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against payment therefor in Federal Reserve or other funds current and immediately available at the principal office of _______ in the amount of the purchase price at 10:00 A.M., _______ time, on July 15, 1994 (the "Closing Date"). The Notes delivered to you on the Closing Date will be delivered to you in the form of a single registered Note of each series of Notes to be purchased by you, in the form attached hereto as Exhibit A-1, Exhibit A-2, Exhibit A-3 or Exhibit A-4, as the case may be, for the full amount of your purchase (unless different denominations are specified by you), registered in your name or in the name of such nominee, as may be specified in Schedule I attached hereto. Section 1.3. Other Agreements. Simultaneously with the execution and delivery of this Agreement, the Company is entering into similar agreements with the other Purchasers under which such other Purchasers agree to purchase from the Company the principal amount of Notes of the series set opposite such Purchasers' names in Schedule I, and your obligation and the obligations of the Company hereunder are subject to the execution and delivery of the similar agreements by the other Purchasers. This Agreement and said similar agreements with the other Purchasers are herein collectively referred to as the "Agreements". The obligations of each Purchaser shall be several and not joint and no Purchaser shall be liable or responsible for the acts of any other Purchaser. SECTION 2. PREPAYMENT OF NOTES. No prepayment of the Notes may be made except to the extent and in the manner provided in this Section. Section 2.1. Optional Prepayment with Premium. Upon compliance with Section 2.2, the Company shall have the privilege, at any time and from time to time, of prepaying the outstanding Notes, either in whole or in part (but if in part then in a minimum principal amount of $1,000,000), by payment of the principal amount of the Notes, or portion thereof to be prepaid, and accrued interest thereon to the date of such prepayment, together with a premium equal to the Make-Whole Amount, determined as of two Business Days prior to the date of such prepayment pursuant to this Section 2.1. The Company shall not prepay the Notes of any series pursuant to this Section 2.1 unless concurrently with such prepayment the Company shall prepay the same proportion of the Notes of each other series then outstanding so that the aggregate principal amount of the Notes of each series then prepaid bears the same relationship to the aggregate unpaid principal amount of the Notes of such series outstanding immediately prior to such prepayment as the proportion of the Notes of each other series then to be prepaid bears to the aggregate unpaid principal amount of the Notes of such series outstanding immediately prior to such prepayment. Section 2.2. Notice of Optional Prepayments. The Company will give notice of any prepayment of the Notes pursuant to Section 2.1 to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional prepayment specifying (a) such date, (b) the principal amount of the holder's Notes to be prepaid on such date, (c) that a premium may be payable, (d) the date when such premium will be calculated, (e) the estimated premium, and (f) the accrued interest applicable to the prepayment. Such notice of prepayment shall also certify all facts, if any, which are conditions precedent to any such prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with accrued interest thereon and the premium, if any, payable with respect thereto shall become due and payable on the prepayment date specified in said notice. Not later than two Business Days prior to the prepayment date specified in such notice, the Company shall provide each holder of a Note written notice of the premium, if any, payable in connection with such prepayment and, whether or not any premium is payable, a reasonably detailed computation of the Make-Whole Amount. Section 2.3. Application of Prepayments. All partial prepayments in respect of the Notes of any series shall be applied on all outstanding Notes of the same series ratably in accordance with the unpaid principal amounts thereof. Section 2.4. Direct Payment. Notwithstanding anything to the contrary contained in this Agreement or the Notes, in the case of any Note owned by you or your nominee or owned by any subsequent Institutional Holder which has given written notice to the Company requesting that the provisions of this Section 2.4 shall apply, the Company will punctually pay when due the principal thereof, interest thereon and premium, if any, due with respect to said principal, without any presentment thereof, directly to you, to your nominee or to such subsequent Institutional Holder at your address or your nominee's address set forth in Schedule I hereto or such other address as you, your nominee or such subsequent Institutional Holder may from time to time designate in writing to the Company or, if a bank account with a United States bank is designated for you or your nominee on Schedule I hereto or in any written notice to the Company from you, from your nominee or from any such subsequent Institutional Holder, the Company will make such payments in immediately available funds to such bank account, no later than 11:00 a.m. Chicago, Illinois time on the date due, marked for attention as indicated, or in such other manner or to such other account in any United States bank as you, your nominee or any such subsequent Institutional Holder may from time to time direct in writing. If for any reason whatsoever the Company does not make any such payment by such 11:00 a.m. transmittal time, such payment shall be deemed to have been made on the next following Business Day and such payment shall bear interest at the Overdue Rate. SECTION 3. REPRESENTATIONS. Section 3.1. Representations of the Company. The Company represents and warrants that all representations and warranties set forth in Exhibit B are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. Section 3.2. Representations of the Purchaser. (a) You represent, and in entering into this Agreement the Company understands, that you are acquiring the Notes for the purpose of investment and not with a view to the distribution thereof, and that you have no present intention of selling, negotiating or otherwise disposing of the Notes; it being understood, however, that the disposition of your property shall at all times be and remain within your control. (b) You further represent that either: (1) you are acquiring the Notes with assets from your general account and not with the assets of any separate account in which any employee benefit plan has any interest; (2) no part of the funds to be used by you to purchase the Notes constitutes assets allocated to any separate account maintained by you such that the application of such funds constitutes a prohibited transaction under Section 406 of ERISA; or (3) all or a part of such funds constitute assets of one or more separate accounts, trusts or a commingled pension trust maintained by you, and you have disclosed to the Company the names of such employee benefit plans whose assets in such separate account or accounts or pension trusts exceed 10% of the total assets or are expected to exceed 10% of the total assets of such account or accounts or trusts as of the date of such purchase and the Company has advised you in writing (and in making the representations set forth in this clause (3) you are relying on such advice) that the Company is not a party-in-interest nor are the Notes employer securities with respect to the particular employee benefit plan disclosed to the Company by you as aforesaid (for the purpose of this clause (3), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan). As used in this Section 3.2(b), the terms "separate account", "party-in-interest", "employer securities" and "employee benefit plan" shall have the respective meanings assigned to them in ERISA. SECTION 4. CLOSING CONDITIONS. Section 4.1. Conditions. Your obligation to purchase the Notes on the Closing Date shall be subject to the performance by the Company of its agreements hereunder which by the terms hereof are to be performed at or prior to the time of delivery of the Notes and to the following further conditions precedent: (a) Closing Certificate. You shall have received a certificate dated the Closing Date, signed by the President or a Vice President of the Company, the truth and accuracy of which shall be a condition to your obligation to purchase the Notes proposed to be sold to you and to the effect that (1) the representations and warranties of the Company set forth in Exhibit B hereto are true and correct on and with respect to the Closing Date, (2) the Company has performed all of its obligations hereunder which are to be performed on or prior to the Closing Date, and (3) no Default or Event of Default has occurred and is continuing. (b) Legal Opinions. You shall have received from Chapman and Cutler, who are acting as your special counsel in this transaction, and from Stoel Rives Boley Jones & Grey, counsel for the Company, their respective opinions dated the Closing Date, in form and substance satisfactory to you, and covering the matters set forth in Exhibits C and D, respectively, hereto. (c) Company's Existence and Authority. On or prior to the Closing Date, you shall have received, in form and substance reasonably satisfactory to you and your special counsel, such documents and evidence with respect to the Company as you may reasonably request in order to establish the existence and good standing of the Company and the authorization of the transactions contemplated by this Agreement. (d) Related Transactions. The Company shall have consummated the sale of the entire principal amount of the Notes scheduled to be sold on the Closing Date pursuant to this Agreement and the other agreements referred to in Section 1.3. (e) Private Placement Number. On or prior to the Closing Date, special counsel to the Purchasers shall have duly made the appropriate filings with Standard & Poor's CUSIP Service Bureau, as agent for the National Association of Insurance Commissioners, in order to obtain private placement numbers for each series of Notes. (f) Funding Instructions. At least three Business Days prior to the Closing Date, you shall have received written instructions executed by a Responsible Officer of the Company directing the manner of the payment of funds and setting forth (1) the name of the transferee bank, (2) such transferee bank's ABA number, (3) the account name and number into which the purchase price for the Notes is to be deposited, and (4) the name and telephone number of the account representative responsible for verifying receipt of such funds. (g) Special Counsel Fees. Concurrently with the delivery of the Notes to you on the Closing Date, the reasonable charges and disbursements of Chapman and Cutler, your special counsel, shall have been paid by the Company. (h) Legality of Investment. The Notes to be purchased by you shall be a legal investment for you under the laws of each jurisdiction to which you may be subject (without resort to any so-called "basket provisions" to such laws). (i) Satisfactory Proceedings. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation thereof, shall be satisfactory in form and substance to you and your special counsel, and you shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of said transactions. Section 4.2. Waiver of Conditions. If on the Closing Date the Company fails to tender to you the Notes to be issued to you on such date or if the conditions specified in Section 4.1 have not been fulfilled, you may thereupon elect to be relieved of all further obligations under this Agreement. Without limiting the foregoing, if the conditions specified in Section 4.1 have not been fulfilled, you may waive compliance by the Company with any such condition to such extent as you may in your sole discretion determine. Nothing in this Section 4.2 shall operate to relieve the Company of any of its obligations hereunder or to waive any of your rights against the Company. SECTION 5. COMPANY COVENANTS. From and after the Closing Date and continuing so long as any amount remains unpaid on any Note: Section 5.1. Corporate Existence, Etc. The Company will preserve and keep in full force and effect, and will cause each Restricted Subsidiary to preserve and keep in full force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business, provided that the foregoing shall not prevent any transaction permitted by Section 5.9. Section 5.2. Insurance. The Company will maintain, and will cause each Restricted Subsidiary to maintain, insurance coverage by financially sound and reputable insurers and in such forms and amounts (including deductibles) and against such risks as are (a) maintained by prudent corporations of established reputation engaged in the same or a similar business and owning and operating similar properties and, in the case of the Company, having as of the date of any determination thereof a "consolidated net worth" determined in accordance with GAAP approximately equal to the Consolidated Net Worth of the Company or (b) consistent with the Company's insurance practices existing on the Closing Date, including self-insurance, all as more fully set forth in Schedule II hereto. Section 5.3. Taxes, Claims for Labor and Materials; Compliance with Laws. (a) The Company will promptly pay and discharge, and will cause each Restricted Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Company or such Restricted Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Company or such Restricted Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any property of the Company or such Restricted Subsidiary; provided the Company or such Restricted Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (1) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Company or such Restricted Subsidiary or any material interference with the use thereof by the Company or such Restricted Subsidiary, and (2) the Company or such Restricted Subsidiary shall set aside, on its books, reserves deemed by it to be adequate with respect thereto. (b) The Company will promptly comply and will cause each Restricted Subsidiary to promptly comply with all laws, ordinances or governmental rules and regulations to which it is subject, including, without limitation, the Occupational Safety and Health Act of 1970, as amended, ERISA and all Environmental Laws, the violation of which could materially and adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Restricted Subsidiaries or would result in any Lien not permitted under Section 5.8. Section 5.4. Maintenance, Etc. The Company will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order and from time to time will make all necessary repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained. Section 5.5. Nature of Business. Neither the Company nor any Restricted Subsidiary will engage in or cease to engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Company and its Restricted Subsidiaries would be substantially changed from the distribution, either at retail or wholesale, of apparel, general merchandise and food and drug store products and in connection therewith or in furtherance of and as a supplement thereto operation of the businesses involved in the manufacture, distribution or sale of food, consumer products or services, and related businesses. Section 5.6. Consolidated Adjusted Net Worth. The Company will at all times keep and maintain Consolidated Adjusted Net Worth at an amount not less than $400,000,000. Section 5.7. Limitations on Indebtedness. (a) The Company will not create, assume, guarantee or otherwise incur or in any manner be or become liable in respect of any Funded Debt, and will not permit any Restricted Subsidiary to, create, assume, guarantee or otherwise incur or in any manner be or become liable in respect of any Indebtedness, except: (1) Funded Debt evidenced by the Notes; (2) Funded Debt of the Company and Indebtedness of Restricted Subsidiaries outstanding as of the Closing Date and described on Schedule II hereto; (3) Subordinated Funded Debt of the Company to a Restricted Subsidiary; (4) Indebtedness of a Restricted Subsidiary to the Company or to a Predominantly-owned Restricted Subsidiary; and (5) additional Funded Debt of the Company and Indebtedness of its Restricted Subsidiaries, provided that at the time of creation, issuance, assumption, guarantee or other incurrence thereof and after giving effect thereto and to the application of the proceeds thereof: (i) in the case of the issuance of any Funded Debt of the Company or a Restricted Subsidiary, Consolidated Funded Debt shall not exceed 60% of Consolidated Total Capitalization; provided that notwithstanding the foregoing, the Company and its Restricted Subsidiaries may incur Consolidated Funded Debt exceeding 60% but in no event exceeding 65% of Consolidated Total Capitalization ("Acquisition Funded Debt") for a period of not more than four consecutive fiscal quarters in any five consecutive fiscal year period if, but only if, 100% of the net proceeds of such Acquisition Funded Debt are applied to the acquisition of assets or capital stock of any Person engaged in one or more of the businesses engaged in by the Company or a Restricted Subsidiary as described in Section 5.5; and (ii) in the case of the issuance of any Funded Debt of the Company secured by Liens permitted by Section 5.8(a)(11) or the issuance of Indebtedness of a Restricted Subsidiary (other than Indebtedness of a Restricted Subsidiary secured by Liens permitted by Section 5.8(a)(8) or (10) and Indebtedness of a corporation which becomes a Restricted Subsidiary after the date hereof), the sum of (A) all Funded Debt of the Company secured by Liens permitted by Section 5.8(a)(11), plus (B) the aggregate amount of all Indebtedness of Restricted Subsidiaries incurred in accordance with the provisions of this clause (ii) shall not exceed 15% of Consolidated Total Assets. (b) Indebtedness issued or incurred in accordance with the limitations of Section 5.7(a) may be renewed, extended or refunded (without increase in principal amount remaining unpaid at the time of such renewal, extension or refunding), provided that at the time of such renewal, extension or refunding and after giving effect thereto, no Event of Default would exist. (c) Any corporation which becomes a Restricted Subsidiary after the date hereof shall for all purposes of Section 5.7(a)(5)(i) be deemed to have created, assumed or incurred at the time it becomes a Restricted Subsidiary all Indebtedness of such corporation existing immediately after it becomes a Restricted Subsidiary. Section 5.8. Limitation on Liens. (a) The Company will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, except: (1) Liens for property taxes or assessments or other governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, provided that payment thereof is not at the time required by Section 5.3; (2) Liens of or resulting from any litigation or legal proceeding which are currently being contested in good faith by appropriate proceedings unless the judgment they secure shall not have been stayed, bonded or discharged within 60 days; (3) Liens incidental to the conduct of business or the ownership of properties and assets (including Liens in connection with workers' compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature, in any such case incurred in the ordinary course of business and not in connection with the borrowing of money, which in any such case would not materially and adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Restricted Subsidiaries, taken as a whole; provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (4) 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 Restricted Subsidiaries or which customarily exist on properties of corporations 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 Restricted Subsidiaries; (5) Liens securing Indebtedness of a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (6) Liens existing as of the Closing Date and either described in Note 6 to the consolidated financial statements of the Company and its Subsidiaries for the fiscal year ended January 29, 1994 or described on Schedule II hereto; (7) Liens created or incurred under leases of real property owned by the Company in which the Company is the landlord, provided that (1) the rentals payable under any such lease are for fair rental value, (2) any such lease is entered into in (i) an "arm's-length" transaction and (ii) the ordinary course of the Company's business and (3) after giving effect to the execution, extension or renewal of any such lease, no Default or Event of Default would exist; (8) Liens created or incurred after the Closing Date given to secure the payment of the purchase price incurred in connection with the acquisition or purchase of real or personal property or the cost of construction or improvements to real or personal property, in any such case, useful and intended to be used in carrying on the business of the Company or a Restricted Subsidiary, provided that (i) the Lien shall attach solely to the real or personal property acquired, purchased, constructed or improved, (ii) such Lien shall have been created or incurred within 270 days after the date of acquisition or purchase or the date of completion of construction or improvement of such real or personal property, as the case may be, (iii) at the time of the imposition of the Lien, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such real or personal property, as the case may be (whether or not assumed by the Company or a Restricted Subsidiary) shall not exceed an amount equal to the lesser of the total acquisition or purchase price or cost of construction or improvement, as the case may be, or fair market value of such real or personal property (as determined in good faith by the Board of Directors of the Company), and (iv) all such Indebtedness shall have been incurred within the applicable limitations provided in Section 5.7(a)(5); (9) Liens affixed on real or personal property (including without limitation outstanding shares of capital stock and Indebtedness) of any entity at the time such entity becomes a Restricted Subsidiary given to secure the payment of the purchase price incurred in connection with the acquisition of such entity by the Company or a Restricted Subsidiary; provided that (i) the Lien shall attach solely to such real or personal property, (ii) such Lien shall have been created or incurred substantially concurrently with such acquisition or purchase, (iii) at the time of acquisition or purchase of such Restricted Subsidiary, the aggregate amount of Indebtedness secured by Liens on such real or personal property (whether or not assumed by the Company or such Restricted Subsidiary) shall not exceed an amount equal to the lesser of the purchase price or fair market value of such real property or such personal property (as determined in good faith by the Board of Directors of the Company), and (iv) all such Indebtedness shall have been incurred within the applicable limitations provided in Section 5.7(a)(5); (10) Liens on real or personal property existing (i) at the time of acquisition thereof, whether or not the Indebtedness secured thereby is assumed by the Company or any such Restricted Subsidiary, or (ii) on the property or outstanding shares of a corporation at the time such corporation is merged into or consolidated with the Company or any such Restricted Subsidiary or at the time of a sale, lease or other disposition of the properties or outstanding shares or Indebtedness of a corporation or firm as an entirety to the Company or any such Restricted Subsidiary; provided that the amount of Indebtedness secured by such Liens shall not exceed an amount equal to the lesser of the acquisition or purchase price or fair market value of such real or personal property; and provided further, that all such Indebtedness shall have been incurred within the limitations of Section 5.7(a)(5)(i); (11) Liens created or incurred after the Closing Date given to secure Indebtedness of the Company or any Restricted Subsidiary in addition to the Liens permitted by the preceding clauses (1) through (10) hereof, provided that all Indebtedness secured by such Liens shall have been incurred within the applicable limitations provided in Section 5.7(a)(5); and (12) Liens permitted by the preceding clause (5), (6), (7), (8), (9), (10) or (11) of this Section 5.8 which have been extended or renewed in respect of the same property theretofore subject to such Liens in connection with the extension, renewal or refunding of the Indebtedness secured thereby; provided that (i) such extension, renewal or refunding of Indebtedness shall be without increase in the principal amount remaining unpaid as of the date of such extension, renewal or refunding and (ii) such Liens shall attach solely to the same such property. (b) In the event that any property, asset or income or profits therefrom is subjected to a Lien in violation of this Section 5.8, the Company will make or cause to be made provision whereby the Notes will be secured equally and ratably with all other obligations secured thereby and concurrently therewith the Company shall furnish to the holders of the Notes an opinion to such effect in scope and form reasonably satisfactory to the holders of at least 66-2/3% of the principal amount of the Notes at the time outstanding of Stoel Rives Boley Jones & Grey or another independent counsel satisfactory to such holders, and in any case the Notes shall have the benefit, to the full extent that, and with such priority as, the holders may be entitled thereto under applicable law, of an equitable Lien on such property, asset, income or profits securing the Notes. Section 5.9. Mergers, Consolidations and Sales of Assets. (a) The Company will not, and will not permit any Restricted Subsidiary to, consolidate with or be a party to a merger with any other corporation, or sell, lease or otherwise dispose of all or substantially all of its assets; provided that: (1) any Restricted Subsidiary may merge or consolidate with or into the Company or any Predominantly-owned Restricted Subsidiary so long as in any merger or consolidation involving the Company, the Company shall be the surviving or continuing corporation; (2) the Company may consolidate or merge with or into any other corporation if (i) the corporation which results from such consolidation or merger (the "surviving corporation") is organized under the laws of any state of the United States or the District of Columbia, (ii) the due and punctual payment of the principal of and premium, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observation of all of the covenants in the Notes and this Agreement to be performed or observed by the Company are expressly assumed by the surviving corporation, by written agreement reasonably satisfactory in scope and form to the holders of 66-2/3% in aggregate principal amount of the outstanding Notes (provided that execution by the holders of the Notes of such agreement shall not be required), and (iii) at the time of such consolidation or merger and immediately after giving effect thereto, (A) no Default or Event of Default would exist and (B) the surviving corporation would be permitted by the provisions of Section 5.7(a)(5) to incur at least $1.00 of additional Consolidated Funded Debt; and (3) the Company may sell or otherwise dispose of all or substantially all of its assets to any Person if (i) the acquiring Person is a corporation organized under the laws of any state of the United States or the District of Columbia, (ii) the due and punctual payment of the principal of and premium, if any, and interest on all the Notes, according to their tenor, and the due and punctual performance and observance of all of the covenants in the Notes and in this Agreement to be performed or observed by the Company are expressly assumed by the acquiring corporation, by written agreement reasonably satisfactory in scope and form to the holders of 66-2/3% in aggregate principal amount of the outstanding Notes (provided that execution by the holders of the Notes of such agreement shall not be required), and (iii) at the time of such sale or disposition and immediately after giving effect thereto, (A) no Default or Event of Default would exist and (B) the acquiring corporation would be permitted by the provisions of Section 5.7(a)(5) to incur at least $1.00 of additional Consolidated Funded Debt. (b) The Company will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer, abandon or otherwise dispose of (any such sale, lease, transfer, abandonment or other disposition being herein referred to as a "Transfer") any assets (including stock of any Subsidiary); provided that the foregoing restrictions do not apply to: (1) Transfers in the ordinary course of business for fair value and except as provided in Section 5.9(a); or (2) the Transfer of assets of a Restricted Subsidiary to the Company or a Predominantly-owned Restricted Subsidiary; or (3) the Transfer of any real or personal property of the Company or a Restricted Subsidiary the book value of which at the time of such Transfer shall be less than $5,000,000; provided that in the opinion of a Responsible Officer of the Company (i) the Transfer is for fair value and is in the best interests of the Company and (ii) such Transfer is not part of a plan by the Company to divest itself of a substantial portion of its assets inconsistent with the purposes of this Section 5.9 (in which event such Transfer shall be made within the limitations of Section 5.9(a)(3) or (b)(5)); or (4) any Transfer of assets of the Company or a Restricted Subsidiary whenever it is determined in the good faith judgment of a Responsible Officer of the Company that such assets are obsolete, worn-out or without economic value to the Company or any of its Restricted Subsidiaries; or (5) any Transfer of such assets for cash or other property to a Person or Persons if all of the following conditions are met: (i) the assets (valued at net book value) do not, together with all other assets of the Company and its Restricted Subsidiaries previously Transferred during the same fiscal year in reliance upon this Section 5.9(b)(5), exceed 10% of Consolidated Total Assets determined as of the end of the immediately preceding fiscal quarter; (ii) in the good faith judgment of the Company's Board of Directors, the Transfer is for fair value and is in the best interests of the Company or such Restricted Subsidiary; (iii) immediately after the consummation of the transaction and after giving effect thereto, (A) no Default or Event of Default would exist, and (B) the Company would be permitted by the provisions of Section 5.7(a)(5) to incur at least $1.00 of additional Consolidated Funded Debt; and (iv) in the case of any Transfer of all or substantially all of the assets or stock of a Subsidiary or of any Indebtedness of a Subsidiary, immediately after the Transfer such Subsidiary shall have no Indebtedness of or continuing Investment in the capital stock of the Company or of any Subsidiary and any such Indebtedness or Investment shall have been discharged or acquired, as the case may be, by the Company or a Subsidiary; provided, however, that for purposes of the foregoing calculation, there shall not be included any assets (or portions of such assets) to the extent the proceeds are applied within 12 months of the date of Transfer of such assets to either (A) the acquisition of fixed assets useful and intended to be used in the operation of the Company and its Subsidiaries as described in Section 5.5 and having a fair market value (as determined in good faith by the Board of Directors of the Company) at least equal to that of the assets so Transferred and/or (B) the prepayment at any applicable prepayment premium of Funded Debt (other than Subordinated Funded Debt) of the Company. It is understood and agreed by the Company that any such proceeds paid and applied to the prepayment of the Notes as hereinabove provided shall be prepaid as and to the extent provided in Section 2.1. Section 5.10. Guaranties. The Company will not, and will not permit any Restricted Subsidiary to, become or be liable in respect of any Guaranty of Indebtedness except Guaranties of Indebtedness by the Company which are limited in amount to a maximum principal amount, any interest accrued thereon and any expenses incurred in connection therewith or which constitute Guaranties of Indebtedness incurred by any Restricted Subsidiary in compliance with the provisions of this Agreement. Section 5.11. Repurchase of Notes. Neither the Company nor any Subsidiary or Affiliate which is controlled by the Company, directly or indirectly, may repurchase or make any offer to repurchase any Notes unless an offer has been made to repurchase Notes, pro rata, from all holders of the Notes at the same time and upon the same terms. In case the Company or any Subsidiary or Affiliate which is controlled by the Company repurchases or otherwise acquires any Notes, such Notes shall immediately thereafter be cancelled and no Notes shall be issued in substitution therefor. Without limiting the foregoing, upon the purchase or other acquisition of any Notes by the Company, any Subsidiary or any such Affiliate, such Notes shall no longer be outstanding for purposes of any section of this Agreement relating to the taking by the holders of the Notes of any actions with respect hereto, including, without limitation, Section 6.3, Section 6.4 and Section 7.1. Section 5.12. Transactions with Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms which, when taken as a whole, are no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. Section 5.13. Withdrawal from Multiemployer Plans and Termination of Pension Plans. The Company will not and will not permit any Subsidiary to withdraw from any Multiemployer Plan if such withdrawal could result in withdrawal liability (as described in Part I of Subtitle E of Title IV of ERISA) or to terminate any Plan which in either case could materially and adversely affect the financial condition of the Company and its Restricted Subsidiaries or the ability of the Company to perform its obligations under this Agreement or the Notes. Section 5.14. Redesignation of Subsidiaries. The Company may designate or redesignate any Unrestricted Subsidiary as a Restricted Subsidiary by giving prompt written notice to the holders of the Notes that the Board of Directors of the Company has made such determination, provided, however, that no Unrestricted Subsidiary may be designated as a Restricted Subsidiary and no Restricted Subsidiary which at any time from and after the Closing Date had previously been designated as an Unrestricted Subsidiary may be designated as an Unrestricted Subsidiary if, at the time of such action and after giving effect thereto: (a) the Company would not be permitted by the provisions of Section 5.7(a)(5) to incur at least $1.00 of additional Consolidated Funded Debt, or (b) a Default or Event of Default would exist, and provided further, that any Restricted Subsidiary which at any time from and after the Closing Date had previously been designated as an Unrestricted Subsidiary and which is to be designated an Unrestricted Subsidiary may not thereafter be designated as a Restricted Subsidiary for a period of at least 366 days following the date of designation of such Restricted Subsidiary as an Unrestricted Subsidiary. Section 5.15. Reports and Rights of Inspection. (A) The Company will keep, and will cause each Restricted Subsidiary to keep, proper books of record and account, on a consolidated basis, in which full and correct entries will be made of all dealings or transactions of, or in relation to, the business and affairs of the Company and its Subsidiaries, in accordance with GAAP consistently applied (except for changes disclosed in the financial statements furnished to you pursuant to this Section 5.15 and concurred in by the independent public accountants referred to in Section 5.15(b)), and will furnish to you so long as you are the holder of any Note and to each other Institutional Holder of the then outstanding Notes (in duplicate if so specified below or otherwise requested): (a) Quarterly Statements. As soon as available and in any event within 90 days after the end of each quarterly fiscal period (except the last) of each fiscal year, copies of: (1) a consolidated balance sheet of the Company and its consolidated Subsidiaries as of the close of such quarterly fiscal period, setting forth in comparative form the consolidated figures for the fiscal year then most recently ended, (2) consolidated statements of operations of the Company and its consolidated Subsidiaries for such quarterly fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, in each case setting forth in comparative form the consolidated figures for the corresponding periods of the preceding fiscal year, and (3) a consolidated statement of cash flows of the Company and its consolidated Subsidiaries for the portion of the fiscal year ending with such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified (subject to normal year-end adjustments) as to fairness of presentation and consistency by a Responsible Officer of the Company; (b) Annual Statements. As soon as available and in any event within 120 days after the close of each fiscal year of the Company, copies of: (1) a consolidated balance sheet of the Company and its consolidated Subsidiaries as of the close of such fiscal year, and (2) consolidated statements of operations, changes in stockholders' equity and cash flows of the Company and its consolidated Subsidiaries for such fiscal year, in each case setting forth in comparative form the consolidated figures for the preceding fiscal year, all in reasonable detail and accompanied by a report thereon of a firm of independent public accountants of recognized national standing selected by the Company to the effect that the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of the end of the fiscal year being reported on and the consolidated results of the operations and cash flows for said year in conformity with GAAP and that the examination of such accountants in connection with such financial statements has been conducted in accordance with generally accepted auditing standards and included such tests of the accounting records and such other auditing procedures as said accountants deemed necessary in the circumstances; (c) Audit Reports. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Company or any Restricted Subsidiary and any management letter received from such accountants; (d) SEC and Other Reports. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Company to its creditors and stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Company or any Subsidiary with any securities exchange or the Securities and Exchange Commission or any successor agency, and copies of any orders in any proceedings to which the Company or any of its Subsidiaries is a party, issued by any governmental agency, Federal or state, having jurisdiction over the Company or any of its Subsidiaries; (e) ERISA Reports. Promptly upon the occurrence thereof, written notice of (1) a Reportable Event with respect to any Plan for which the requirement of notice to the PBGC within 30 days has not been waived (provided that the loss of qualification of a Plan and the failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA shall be a Reportable Event for which notice must be given regardless of the issuance of any waiver of the reporting requirement by the PBGC); (2) the institution of any steps by the Company, any ERISA Affiliate, the PBGC or any other Person to terminate any Plan under Sections 4041(c) or 4042 of ERISA; (3) the institution of any steps by the Company or any ERISA Affiliate to withdraw from any Plan which could result in a liability to the Company; (4) a non-exempt "prohibited transaction" within the meaning of Section 406 of ERISA in connection with any Plan; (5) any material increase in the contingent liability of the Company or any Restricted Subsidiary with respect to any post-retirement welfare liability; or (6) the taking of any action by, or the threatening of the taking of any action by, the Internal Revenue Service, the Department of Labor or the PBGC with respect to any of the foregoing; (f) Officer's Certificates. Within the periods provided in paragraphs (a) and (b) above, a certificate of a Responsible Officer of the Company stating that such officer has reviewed the provisions of this Agreement and setting forth: (1) the information and computations (in sufficient detail) required in order to establish whether the Company was in compliance with the requirements of Sections 5.6, 5.7, 5.8(a)(10) and 5.9(b)(5) at the end of the period covered by the financial statements then being furnished, and (2) whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists on the date of the certificate or existed at any time during the period covered by such financial statements any Default or Event of Default and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Company is taking and proposes to take with respect thereto; (g) Accountant's Certificates. Within the period provided in paragraph (b) above, a certificate of the accountants who render an opinion with respect to such financial statements, stating that they have reviewed this Agreement and stating further whether, in making their audit, such accountants have become aware of any Default or Event of Default under any of the terms or provisions of this Agreement insofar as any such terms or provisions pertain to or involve accounting matters or determinations, and if any such condition or event then exists, specifying the nature and period of existence thereof; and (h) Requested Information. With reasonable promptness, such other data and information as you or any such Institutional Holder may reasonably request. (B) Without limiting the foregoing, the Company will permit you, so long as you are the holder of any Note, and each Institutional Holder of the then outstanding Notes (or such agents as either you or such Institutional Holder may designate), to visit and inspect, under the Company's guidance, any of the properties of the Company or any Restricted Subsidiary, to examine all of their books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective officers, employees, and independent public accountants (and by this provision the Company authorizes said accountants to discuss with you the finances and affairs of the Company and its Restricted Subsidiaries), all at such reasonable times and as often as may be reasonably requested. Any visitation shall be at the sole expense of you or such Institutional Holder, unless a Default or Event of Default shall have occurred and be continuing or the holder of any Note or of any other evidence of Indebtedness of the Company or any Restricted Subsidiary gives any written notice or takes any other action with respect to a claimed default, in which case, any such visitation or inspection shall be at the sole expense of the Company. (C) If at any time Unrestricted Subsidiaries constitute 5% or more of Consolidated Total Assets or Unrestricted Subsidiaries contribute 5% or more of operating income of the Company and its Subsidiaries, then and in such event the Company shall for each quarterly and annual fiscal period thereafter deliver the financial statements referred to in clauses (a) and (b) of Section 5.15(A) on the basis of the Company and its Restricted Subsidiaries. Section 5.16. Dividends, Stock Purchases. The Company will not except as hereinafter provided: (a) declare or pay any dividends, either in cash or property, on any shares of its capital stock of any class (except dividends or other distributions payable solely in shares of common stock of the Company); (b) directly or indirectly, or through any Subsidiary or through any Affiliate of the Company, purchase, redeem or retire any shares of its capital stock of any class or any warrants, rights or options to purchase or acquire any shares of its capital stock (other than in exchange for or out of the net cash proceeds to the Company for the substantially concurrent issue or sale of shares of common stock of the Company or warrants, rights or options to purchase or acquire any shares of its common stock); or (c) make any other payment or distribution, either directly or indirectly or through any Subsidiary, in respect of its capital stock; if after giving effect thereto, an Event of Default would exist under Section 5.6, Section 5.7 or Section 5.9. SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR. Section 6.1. Events of Default. Any one or more of the following shall constitute an "Event of Default" as such term is used herein: (a) Default shall occur in the payment of interest on any Note when the same shall have become due and such default shall continue for more than five Business Days; or (b) Default shall occur in the making of any payment of the principal of any Note or premium, if any, thereon at the expressed or any accelerated maturity date or at any date fixed for prepayment; or (c) Default shall occur in the observance or performance of any covenant or agreement contained in Section 5.6 through Section 5.9 which is not remedied within ten Business Days after the first day on which a Responsible Officer of the Company first obtains knowledge of such default; or (d) Default shall occur in the observance or performance of any other provision of this Agreement which is not remedied within 30 days after the first day on which a Responsible Officer of the Company first obtains knowledge of such Default; provided that in the case of any Default pursuant to this Section 6.1(d) which cannot with due diligence be cured within such 30-day period, if the Company shall proceed promptly to cure the same and thereafter prosecute the curing of such Default with due diligence, the time within which to cure such Default shall be extended for such period as may be necessary to effect such cure but in no event more than 60 additional days; or (e) Default shall be made in the payment when due (whether by lapse of time, by declaration, by call for redemption or otherwise) of the principal of or interest on any Indebtedness for borrowed money (other than the Notes) under any indenture, agreement or other instrument under which any Indebtedness for borrowed money of the Company or any Restricted Subsidiary aggregating in excess of $10,000,000 is outstanding and such default or event shall occur at the maturity of, or result in the acceleration of, such Indebtedness for borrowed money of the Company or any Restricted Subsidiary and such acceleration shall not have been rescinded or annulled; or (f) Default or the happening of any event shall occur under any indenture, agreement or other instrument under which any Indebtedness for borrowed money (other than the Notes) of the Company or any Restricted Subsidiary aggregating in excess of $10,000,000 may be issued and such default or event shall occur at the maturity of, or result in the acceleration of, such Indebtedness for borrowed money of the Company or any Restricted Subsidiary and such acceleration shall not have been rescinded or annulled; or (g) Any representation or warranty made by the Company herein, or made by the Company in any statement or certificate furnished by the Company in connection with the consummation of the issuance and delivery of the Notes or furnished by the Company pursuant hereto, is untrue in any material respect as of the date of the issuance or making thereof; or (h) Final judgment or judgments for the payment of money aggregating in excess of $10,000,000 (net of insurance proceeds to the extent the insurer has acknowledged liability) is or are outstanding against the Company or any Material Restricted Subsidiary or against any property or assets of either and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of 60 days from the date of its entry; or (i) A custodian, liquidator, trustee or receiver is appointed for the Company or any Material Restricted Subsidiary or for the major part of the property of either and is not discharged within 60 days after such appointment; or (j) The Company or any Material Restricted Subsidiary becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors, or the Company or any Material Restricted Subsidiary applies for or consents to the appointment of a custodian, liquidator, trustee or receiver for the Company or such Material Restricted Subsidiary or for the major part of the property of either; or (k) Bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against the Company or any Material Restricted Subsidiary and, if instituted against the Company or any Material Restricted Subsidiary, are consented to or are not dismissed within 60 days after such institution. Section 6.2. Notice to Holders. When any Event of Default described in the foregoing Section 6.1 has occurred, or if the holder of any Note or of any other evidence of Indebtedness for borrowed money of the Company gives any notice or takes any other action with respect to a claimed default, the Company agrees to give notice promptly and in any event within five Business Days after a Responsible Officer of the Company first obtains knowledge of such event to all holders of the Notes then outstanding. Section 6.3. Acceleration of Maturities. When any Event of Default described in paragraph (a) or (b) of Section 6.1 has happened and is continuing, any holder of any Note may, by notice in writing sent to the Company in the manner provided in Section 9.6, declare the entire principal and all interest accrued on such Note to be, and such Note shall thereupon become due and payable as hereinafter provided, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of Default described in paragraphs (a) through (h), inclusive, of said Section 6.1 has happened and is continuing, the holder or holders of 66-2/3% or more of the principal amount of the Notes at the time outstanding may, by notice in writing to the Company in the manner provided in Section 9.6, declare the entire principal and all interest accrued on all Notes to be, and all Notes shall thereupon become due and payable as hereinafter provided, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. The Notes declared due and payable pursuant to foregoing sentences of this Section 6.3 shall be and become due and payable five Business Days following notice in writing sent to the Company in the manner provided in Section 9.6 as provided in foregoing sentences of this Section 6.3 (the "Acceleration Date"). When any Event of Default described in paragraph (i), (j) or (k) of Section 6.1 has occurred, then all outstanding Notes shall immediately become due and payable without presentment, demand or notice of any kind. Upon the Notes becoming due and payable as a result of any Event of Default as aforesaid, the Company will forthwith pay to the holders of the Notes the entire principal and interest accrued on the Notes and, to the extent not prohibited by applicable law, an amount as liquidated damages for the loss of the bargain evidenced hereby (and not as a penalty) equal to the Make-Whole Amount, determined as of the date on which the Notes shall so become due and payable; provided, however, that if prior to the Acceleration Date in respect of the occurrence of any Event of Default described in paragraphs (a) through (h) of Section 6.1, the provisions of Section 6.4(a), (b) and (c) shall have been satisfied but the declaration of acceleration of any Notes shall not have been rescinded and annulled pursuant to the provisions of Section 6.4, then and in such event the Company shall on the Acceleration Date pay to the holders of the Notes which have not rescinded such declaration of acceleration the entire principal and interest accrued on such Notes, without payment of any Make- Whole Amount. No course of dealing on the part of the holder or holders of any Notes nor any delay or failure on the part of any holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Company further agrees, to the extent permitted by law, to pay to the holder or holders of the Notes all costs and expenses incurred by them in the collection of any Notes upon any default hereunder or thereon, including reasonable compensation to such holder's or holders' attorneys for all services rendered in connection therewith. Section 6.4. Rescission of Acceleration. The provisions of Section 6.3 are subject to the condition that if the principal of and accrued interest on (1) any outstanding Note has been declared due and payable by reason of the occurrence of any Event of Default described in paragraph (a) or (b) of Section 6.1, the holder of such Note may, by written instrument filed with the Company, rescind and annul such declaration and the consequences thereof, and (2) all of the outstanding Notes have been declared immediately due and payable by reason of the occurrence of any Event of Default described in paragraphs (c) through (h), inclusive, of Section 6.1, the holders of 66-2/3% in aggregate principal amount of the Notes then outstanding may, by written instrument filed with the Company, rescind and annul such declaration and the consequences thereof, provided in each case that at the time such declaration is annulled and rescinded: (a) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under Section 6.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been made good, cured or waived pursuant to Section 7.1; and provided further, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereto. SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS. Section 7.1. Consent Required. Any term, covenant, agreement or condition of this Agreement may, with the consent of the Company, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Company shall have obtained the consent in writing of the holders of at least 66-2/3% in aggregate principal amount of outstanding Notes; provided that without the written consent of the holders of all of the Notes then outstanding, no such amendment or waiver shall be effective (a) which will change the time of payment of the principal of or the interest on any Note or change the principal amount thereof or reduce the rate of interest thereon, or (b) which will change any of the provisions with respect to optional prepayments, or (c) which will change the percentage of holders of the Notes required to consent to any such amendment or waiver of any of the provisions of this Section 7 or Section 6. Section 7.2. Solicitation of Holders. So long as there are any Notes outstanding, the Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company within 5 Business Days following the initial inquiry with respect thereto by the Company to any holder of the Notes and shall be afforded the opportunity of considering the same and shall be supplied by the Company with sufficient information to enable it to make an informed decision with respect thereto. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of Notes as consideration for or as an inducement to entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions of this Agreement or the Notes unless such remuneration is concurrently offered, on the same terms, ratably to the holders of all Notes then outstanding. Promptly and in any event within 30 days of the date of execution and delivery of any such waiver or amendment, the Company shall provide a true, correct and complete copy thereof to each of the holders of the Notes. Section 7.3. Effect of Amendment or Waiver. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Company, whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS. Section 8.1. Definitions. Unless the context otherwise requires, the terms hereinafter set forth when used herein shall have the following meanings and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined: "Affiliate" shall mean any Person (other than a Restricted Subsidiary) (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (b) which beneficially owns or holds 10% or more of any class of the Voting Stock of the Company or (c) 10% or more of the Voting Stock (or in the case of a Person which is not a corporation, 10% or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks in Portland, Oregon or New York, New York are required by law to close or are customarily closed. "Capitalized Lease" shall mean any lease the obligation for Rentals with respect to which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. "Capitalized Rentals" of any Person shall mean as of the date of any determination thereof the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which such Person is a lessee would be reflected as a liability on a consolidated balance sheet of such Person. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the regulations from time to time promulgated thereunder. "Company" shall mean Fred Meyer, Inc., a Delaware corporation, and any Person who succeeds to all, or substantially all, of the assets and business of Fred Meyer, Inc. "Consolidated Adjusted Net Worth" shall mean as of the date of any determination thereof the arithmetic sum of: (a) the amount of the capital stock accounts (net of treasury stock, at cost, but including preferred stock), plus (or minus in the case of a deficit) the surplus and retained earnings of the Company and its Restricted Subsidiaries as set forth in the consolidated financial statements of the Company as at the end of the fiscal quarter immediately preceding the date of such determination, MINUS (b) the net book value, after deducting any reserves applicable thereto, of all items of the following character which are included in the assets of the Company and its Restricted Subsidiaries, to wit: (1) the incremental increase in an asset resulting from any reappraisal, revaluation or write-up of assets, other than an increase to the extent permitted by GAAP, in any such case in connection with the acquisition of an asset or business by the Company or any of its Restricted Subsidiaries; and (2) (i) unamortized debt discount and expense and (ii) goodwill, patents, patent applications, permits, trademarks, trade names, copyrights, licenses, franchises, experimental expense, organizational expense, research and development expense and such other assets as are properly classified as "intangible assets" the fair market value of which is in excess of [$5,000,000] acquired by the Company or any of its Restricted Subsidiaries after the Closing Date; provided, however, that notwithstanding the foregoing, the Company may include in any determination of "Consolidated Adjusted Net Worth" the aggregate net value of capitalized software, prepaid royalties, patents, patent applications, trademarks, trade names, and copyrights and other intellectual property the fair market value of which is [$5,000,000] or less acquired after the Closing Date; all determined in accordance with GAAP. "Consolidated Funded Debt" shall mean, as of the date of any determination thereof, all Funded Debt of the Company and its Restricted Subsidiaries, determined on a consolidated basis eliminating intercompany items. "Consolidated Total Assets" shall mean, as of the date of any determination thereof, total assets of the Company and its Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Total Capitalization" shall mean, as of the date of any determination thereof, the sum of (a) Consolidated Funded Debt plus (b) Consolidated Adjusted Net Worth. "Default" shall mean any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default. "Environmental Law" shall mean any international, federal, state or local statute, law, regulation, order, consent decree, judgment, permit, license, code, covenant, deed restriction, common law, treaty, convention, ordinance or other requirement relating to public health, safety or the environment, including, without limitation, those relating to releases, discharges or emissions to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use and handling of polychlorinated biphenyls or asbestos, to the disposal, treatment, storage or management of hazardous or solid waste, or Hazardous Substances or crude oil, or any fraction thereof, or to exposure to toxic or hazardous materials, to the handling, transportation, discharge or release of gaseous or liquid Hazardous Substances and any regulation, order, notice or demand issued pursuant to such law, statute or ordinance, in each case applicable to the property of the Company and its Subsidiaries or the operation, construction or modification of any thereof, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Hazardous Materials Transportation Act, as amended, the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1976, the Safe Drinking Water Control Act, the Clean Air Act of 1966, as amended, the Toxic Substances Control Act of 1976, the Occupational Safety and Health Act of 1977, as amended, the Emergency Planning and Community Right-to-Know Act of 1986, the National Environmental Policy Act of 1975, the Oil Pollution Act of 1990 and any similar or implementing state law, and any state statute and any further amendments to these laws providing for financial responsibility for cleanup or other actions with respect to the release or threatened release of Hazardous Substances or crude oil, or any fraction thereof, and all rules, regulations, guidance documents and publications promulgated thereunder. "ERISA" shall mean 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 shall be construed to also refer to any successor sections. "ERISA Affiliate" shall mean any corporation, trade or business that is, along with the Company, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in section 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA. "Event of Default" shall have the meaning set forth in Section 6.1. "Funded Debt" of any Person shall mean (a) all Indebtedness of such Person for borrowed money or which has been incurred in connection with the acquisition of assets in each case having a final maturity of more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods more than one year from the date of origin), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, whether or not the obligation to make such payments shall constitute a current liability of the obligor under GAAP, (b) all Capitalized Rentals of such Person, and (c) all Guaranties by such Person of Funded Debt of others. "GAAP" shall mean generally accepted accounting principles at the time. "Guaranties" by any Person shall mean all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (b) to advance or supply funds (1) for the purchase or payment of such Indebtedness or obligation, or (2) to maintain working capital or any balance sheet or income statement condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, (c) to lease property or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness or obligation, or (d) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof; provided that (i) letters of credit issued for the benefit of the Company or a Restricted Subsidiary and used to finance the purchase of inventory or the construction of improvements otherwise subject to a construction contract and (ii) notes, bills and checks presented by the Company or a Restricted Subsidiary to banks for collection or deposit in the ordinary course of business upon customary credit terms may be excluded from any determination of "Guaranties". For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. "Hazardous Substance" shall mean any hazardous or toxic material, substance or waste, pollutant or contaminant which is regulated under any statute, law, ordinance, rule or regulation of any local, state, regional or federal authority having jurisdiction over the property of the Company and its Subsidiaries or its use, including but not limited to any material, substance or waste which is: (a) defined as a hazardous substance under Section 311 of the Federal Water Pollution Control Act (33 U.S.C. Section 1317), as amended; (b) regulated as a hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), as amended; (c) defined as a hazardous substance under Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), as amended; or (d) defined or regulated as a hazardous substance or hazardous waste under any rules or regulations promulgated under any of the foregoing statutes. "Indebtedness" of any Person shall mean and include all (a) obligations of such Person for borrowed money or which have been incurred in connection with the acquisition of property or assets, (b) obligations secured by any Lien upon property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations, provided that if such Person has not, directly or indirectly, assumed or otherwise become liable for the payment of such obligations, the amount of Indebtedness included in any calculation shall not exceed the net book value of the property or assets encumbered by the related Lien, (c) obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property, (d) Capitalized Rentals and (e) Guaranties of obligations of others of the character referred to in this definition; provided that in no event shall: (1) trade payables incurred in the ordinary course of business by the Company or a Restricted Subsidiary upon customary credit terms; and (2) lease obligations of the Company or any Restricted Subsidiary which do not constitute Capitalized Rentals in accordance with GAAP be included in any determination of "Indebtedness." "Investments" shall mean all investments, in cash or by delivery of property, made directly or indirectly in any Person, whether by acquisition of shares of capital stock, Indebtedness or other obligations or Securities or by loan, advance, capital contribution or otherwise; provided, however, that "Investments" shall not mean or include routine investments and property to be used or consumed in the ordinary course of business. "Institutional Holder" shall mean any of the following Persons: (a) any bank, savings and loan association, savings institution, trust company or national banking association, acting for its own account or in a fiduciary capacity, (b) any charitable foundation, (c) any insurance company, (d) any fraternal benefit society, (e) any pension, retirement or profit-sharing trust or fund within the meaning of Title I of ERISA or for which any bank, trust company, national banking association or investment adviser registered under the Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f) any investment company or business development company, as defined in the Investment Company Act of 1940, as amended, (g) any small business investment company licensed under the Small Business Investment Act of 1958, as amended, (h) any broker or dealer registered under the Securities Exchange Act of 1934, as amended, or any investment adviser registered under the Investment Adviser Act of 1940, as amended, (i) any government, any public employees' pension or retirement system, or any other government agency supervising the investment of public funds, (j) any other entity all of the equity owners of which are Institutional Holders or (k) any other Person which may be within the definition of "qualified institutional buyer" as such term is used in Rule 144A, as from time to time in effect, promulgated under the Securities Act of 1933, as amended. "Lien" shall mean any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting real property. The term "Lien" shall also include, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements. For the purposes of this Agreement, the Company or a Restricted Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capitalized Lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Lien. "Make-Whole Amount" shall mean in connection with any prepayment or acceleration of the Notes of any series the excess, if any, of (a) the aggregate present value as of the date of such prepayment or payment of each dollar of principal of the Notes of such series being prepaid or paid and the amount of interest (exclusive of interest accrued to the date of prepayment or payment) that would have been payable in respect of such dollar if such prepayment or payment had not been made, determined by discounting such amounts at the Reinvestment Rate (applied on a semiannual basis) from the respective dates on which they would have been payable, over (b) 100% of the principal amount of the outstanding Notes of such series being prepaid or paid. If the Reinvestment Rate (i) in the case of the Series A Notes is equal to or higher than 7.25%, (ii) in the case of the Series B Notes is equal to or higher than 7.52%, (iii) in the case of the Series C Notes is equal to or higher than 7.88% or (iv) in the case of the Series D Notes is equal to or higher than 7.98%, then the Make-Whole Amount with respect to the Notes of such series shall be zero. For purposes of any determination of the Make-Whole Amount: "Reinvestment Rate" shall mean (1) the sum of .50% plus the yield reported on page "USD" of the Bloomberg Financial Markets Services Screen (or, if not available, any other nationally recognized trading screen reporting on-line intraday trading in United States government Securities) at 11:00 a.m. (New York City, New York time) for the United States government Securities having a maturity (rounded to the nearest month) corresponding with the maturity date of the principal of the Notes of the series being prepaid or paid or (2) in the event no nationally recognized trading screen reporting on-line intraday trading in the United States government Securities is available, Reinvestment Rate shall mean the sum of .50% plus the arithmetic mean of the yields for the two columns under the heading "Week Ending" published in the Statistical Release under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the maturity date of the principal of the Notes of the series being prepaid or paid. If no published maturity exactly corresponds to the maturity date of the principal of the Notes of the series being prepaid or paid, yields for the two published maturities most closely corresponding to such maturity shall be calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of such relevant periods to the nearest month. For the purposes of calculating the "Reinvestment Rate", the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used. "Statistical Release" shall mean the then most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded U.S. Government Securities adjusted to constant maturities or, if such statistical release is not published at the time of any determination hereunder, then such other reasonably comparable index which shall be designated by the holders of 66-2/3% in aggregate principal amount of the outstanding Notes. "Material Restricted Subsidiary" shall mean any Restricted Subsidiary the net worth (computed in accordance with the definition of "Consolidated Adjusted Net Worth") of which constitutes at least 2.5% of Consolidated Adjusted Net Worth. "Multiemployer Plan" shall have the same meaning as in ERISA. "Overdue Rate" shall mean (i) 8.25% per annum in the case of the Series A Notes, (ii) 8.52% per annum in the case of the Series B Notes, (iii) 8.88% per annum in the case of the Series C Notes and (iv) 8.98% per annum in the case of the Series D Notes. "PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof. "Plan" shall mean a "pension plan," as such term is defined in ERISA, established or maintained by the Company or any ERISA Affiliate or as to which the Company or any ERISA Affiliate contributed or is a member or otherwise may have any liability. "Predominantly-owned" when used in connection with any Subsidiary shall mean a Subsidiary of which at least 80% of the issued and outstanding shares of stock (except shares required as directors' qualifying shares) shall be owned by the Company and/or one or more of its Predominantly-owned Subsidiaries. "Purchasers" shall have the meaning set forth in Section 1.1. "Rentals" shall mean and include as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Company or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "Reportable Event" shall have the same meaning as in ERISA. "Responsible Officer" shall mean the President, Chief Financial Officer, Treasurer or Chief Accounting Officer of the Company. "Restricted Subsidiary" shall mean any Subsidiary (a) which is organized under the laws of the United States or any State thereof; (b) which conducts substantially all of its business and has substantially all of its assets within the United States; and (c) which is not designated as an Unrestricted Subsidiary on Schedule II to this Agreement or in accordance with Section 5.15. "Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. "Subordinated Funded Debt" shall mean all Funded Debt of the Company which is at all times evidenced by a written instrument or instruments containing subordination provisions substantially in the form set forth in Exhibit E attached hereto, providing for the subordination thereof to other Indebtedness of the Company, including, without limitation, the Notes, or such other provisions as may be approved in writing by the holders of not less than 66-2/3% in aggregate principal amount of the outstanding Notes. The term "subsidiary" shall mean as to any particular parent corporation any corporation of which more than 50% (by number of votes) of the Voting Stock shall be beneficially owned, directly or indirectly, by such parent corporation. The term "Subsidiary" shall mean a subsidiary of the Company. "Transfer" shall have the meaning assigned thereto in Section 5.9(b). "Unrestricted Subsidiary" shall mean any Subsidiary which is designated as an Unrestricted Subsidiary in Schedule II to this Agreement or in accordance with Section 5.15. "Voting Stock" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions). Section 8.2. Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. Section 8.3. Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. SECTION 9. MISCELLANEOUS. Section 9.1. Registered Notes. The Company shall cause to be kept at its principal office a register for the registration and transfer of the Notes, and the Company will register or transfer or cause to be registered or transferred, as hereinafter provided, any Note issued pursuant to this Agreement. At any time and from time to time the holder of any Note which has been duly registered as hereinabove provided may transfer such Note upon surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the holder of such Note or its attorney duly authorized in writing. Prior to the presentation to the Company of a duly executed instrument of transfer and the Note (or, in the event of loss, theft, mutilation or destruction of the Note, presentation of a duly executed instrument of transfer in compliance with Section 9.3 hereof), the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement, notwithstanding any notice to the contrary. Payment of or on account of the principal, premium, if any, and interest on any Note shall be made to or upon the written order of such holder. Section 9.2. Exchange of Notes. At any time and from time to time, upon not less than ten days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to Section 9.1, this Section 9.2 or Section 9.3, and, upon surrender of such Note at its office, the Company will deliver in exchange therefor, without expense to such holder, except as set forth below, a Note for the same aggregate principal amount as the then unpaid principal amount of the Note so surrendered, or Notes in the denomination of $100,000 (or such lesser amount as shall constitute 100% of the Notes of such holder) or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, registered in the name of such Person or Persons as may be designated by such holder, and otherwise of the same form and tenor as the Notes so surrendered for exchange. The Company may require the payment of a sum sufficient to cover any stamp tax or governmental charge imposed upon such exchange or transfer. Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of any Note, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Company, or in the event of such mutilation upon surrender and cancellation of the Note, the Company will make and deliver without expense to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note. If the Purchaser or any subsequent Institutional Holder is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer of such owner, setting forth the fact of loss, theft or destruction and of its ownership of such Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Company. Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay directly all of your out-of-pocket expenses in connection with the preparation, execution and delivery of this Agreement and the transactions contemplated hereby, including but not limited to the reasonable charges and disbursements of Chapman and Cutler, your special counsel, in connection with the preparation, execution and delivery of this Agreement and the duplicating and printing costs and charges for shipping the Notes, adequately insured to you at your home office or at such other place as you may designate, and all such expenses relating to any amendments, waivers or consents initiated at the request of the Company at any time or by action of the holders of the Notes during the continuance of a Default or Event of Default (whether or not the same are actually executed and delivered), including, without limitation, any amendments, waivers, or consents resulting from any work-out, renegotiation or restructuring relating to the performance by the Company of its obligations under this Agreement and the Notes; provided however, that the Company shall be obligated to pay your out-of-pocket expenses only if the Company fails to proceed with the consummation of such transactions. The Company also agrees to pay, within ten Business Days of receipt thereof, supplemental statements of Chapman and Cutler for disbursements unposted or not incurred as of the Closing Date. The Company further agrees that it will pay and save you harmless against any and all liability with respect to stamp and other taxes, if any, which may be payable or which may be determined to be payable in connection with the execution and delivery of this Agreement or the Notes, whether or not any Notes are then outstanding. The Company agrees to protect and indemnify you against any liability for any and all brokerage fees and commissions payable or claimed to be payable to any Person (including BA Securities, Inc.) in connection with the transactions contemplated by this Agreement. You represent that you have not retained any broker or finder to arrange for the offer, sale or delivery of the Notes. Without limiting the foregoing, the Company agrees to pay the cost of obtaining the private placement numbers for each series of Notes and authorizes the submission of such information as may be required by Standard & Poor's CUSIP Service Bureau for the purpose of obtaining such number. Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies of the holder of any Note are cumulative to, and are not exclusive of, any rights or remedies any such holder would otherwise have. Section 9.6. Notices. All communications provided for hereunder shall be in writing and, if to you, delivered or mailed prepaid by registered or certified mail or overnight air courier, or by facsimile communication, in each case addressed to you at your address appearing on Schedule I to this Agreement or such other address as you or the subsequent holder of any Note initially issued to you may designate to the Company in writing, and if to the Company, delivered or mailed by registered or certified mail or overnight air courier, or by facsimile communication confirmed by registered or certified mail or overnight air courier, to the Company at 3800 S.E. 22nd Avenue, Portland, Oregon 97242, Attention: Vice President, Corporate Treasurer, or to such other address as the Company may in writing designate to you or to a subsequent holder of the Note initially issued to you; provided, however, that a notice to you by overnight air courier shall only be effective if delivered to you at a street address designated for such purpose in Schedule I, and a notice to you by facsimile communication shall only be effective if made by confirmed transmission to you at a telephone number designated for such purpose in Schedule I, or, in either case, as you or a subsequent holder of any Note initially issued to you may designate to the Company in writing. Section 9.7. Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to your benefit and to the benefit of your successors and assigns, including each successive holder or holders of any Notes. Section 9.8. Survival of Covenants and Representations. All covenants, representations and warranties made by the Company herein and in any certificates delivered pursuant hereto, whether or not in connection with the Closing Date, shall survive the closing and the delivery of this Agreement and the Notes. Section 9.9. Severability. Should any part of this Agreement for any reason be declared invalid or unenforceable, such decision shall not affect the validity or enforceability of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid or unenforceable portion thereof eliminated and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Agreement without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid or unenforceable. Section 9.10. Changes in GAAP. Each of the Purchasers and each other holder of the Notes by its acceptance thereof understands and agrees with the Company that in the event that a change in GAAP occurs which is the sole cause of a change in any of the calculations contemplated by this Agreement, including without limitation, calculations with regard to the covenants contained in Sections 5.6 through 5.9, then in such event the Purchasers and/or such holders, as the case may be, and the Company shall undertake to amend any affected provisions of this Agreement so as to preserve the intent and purpose thereof and to accommodate such change in GAAP and to enter into an amendment hereof to reflect the same. Section 9.11. Governing Law. This Agreement and the Notes issued and sold hereunder shall be governed by and construed in accordance with New York law, including all matters of construction, validity and performance. Section 9.12. Submission to Jurisdiction. Any legal action or proceeding with respect to this Agreement or the Notes or any document related thereto may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, the Company hereby accepts for itself and in respect of its property generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts. The Company hereby irrevocably and unconditionally waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have to the bringing of any action or proceeding in such respective jurisdiction. Section 9.13. Captions. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. FRED MEYER, INC. By ________________________________ Its Vice President and Corporate Treasurer Accepted as of _____________, 1994. [VARIATION] By ________________________________ Its SCHEDULE I ----------
PRINCIPAL AMOUNT SERIES NAMES AND ADDRESSES OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES PHOENIX HOME LIFE MUTUAL $15,000,000 Series D INSURANCE COMPANY One American Row Hartford, Connecticut 06115 Attention: Private Placements Division
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.98% Senior Notes, Series D, due 2007, PPN 593098 B# 2, principal, premium or interest") to: Chase Manhattan Bank (ABA #021 0000 21) BNF-SSG Private Income Processing/AC-9009000200 for credit to: Phoenix Home Life Mutual Insurance Company Account Number G-05143 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 06-0493340
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES THE VARIABLE ANNUITY LIFE $8,000,000 Series B INSURANCE COMPANY c/o American General $4,000,000 Series C Corporation P. O. Box 3247 Houston, Texas 77253-3247* Attention: Investment Research Department, A37-01 Facsimile Number: (713) 831-1366
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.52% Senior Notes, Series B, due 2001, PPN 593098 B* 6, principal or interest" or "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest", as the case may be) to: State Street Bank and Trust Company (ABA #011000028) Boston, Massachusetts 02101 Re: The Variable Annuity Life Insurance Company AC-0125-821-9 OBI=Description of payment Fund Number PA 54 Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: The Variable Annuity Life Insurance Company and PA 54 c/o State Street Bank and Trust Company State Street South Ann Hutchinson Offices, 2nd Fl. 108 Myrtle Street Two Newport Office Park North Quincy, Massachusetts 02171 Facsimile Number: (617) 985-4923 Duplicate payment notices and all other correspondences to be addressed as first provided above. *In the event that notices/communications are sent by courier (e.g., Federal Express) rather than U.S. Postal Service, the address should be changed to: 2929 Allen Parkway, Houston, Texas 77019, Attention: Private Placements, A37-01. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 74-1625348
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES THE MINNESOTA MUTUAL $8,000,000 Series C LIFE INSURANCE COMPANY 400 North Robert Street St. Paul, Minnesota 55101 Attention: Investment Department
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest") to: The First Bank National Association (ABA #091000022) Minneapolis, Minnesota BNF The Minnesota Mutual Life Insurance Company Account Number 1-801-10-00600-4 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 41-0417830
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES THE CANADA LIFE $6,000,000 Series A ASSURANCE COMPANY Investment Department, U-6 330 University Avenue Toronto, Ontario, Canada M5G 1R8 Attention: U.S. Private Placements Telefacsimile: (416) 597-9678 Confirmation: (416) 597-1456, ext. 5117
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.25% Senior Notes, Series A, due 1999, PPN 593098 A@ 5, principal, premium or interest") to: Ince & Co. c/o Morgan Guaranty Trust Company of New York (ABA #021000238) Account Number 999-99-024 Attention: Custody Collection for: The Canada Life Assurance Company Trust Account Number 41233 Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment to be addressed: Morgan Guaranty Trust Company 60 Wall Street New York, New York 10260 Attention: Patricia Ewing with duplicate notice to: The Canada Life Assurance Company 330 University Avenue Toronto, Ontario, Canada M5G 1R8 Attention: Supervisor, Securities Accounting Name of Nominee in which Notes are to be issued: Ince & Co. Taxpayer I.D. Number: 38-0397420
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES CANADA LIFE INSURANCE COMPANY $1,000,000 Series A OF AMERICA c/o The Canada Life Assurance Company Investment Department, U-6 330 University Avenue Toronto, Ontario, Canada M5G 1R8 Attention: U.S. Private Placements Telefacsimile: (416) 597-9678 Confirmation: (416) 597-1456, ext. 5117
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.25% Senior Notes, Series A, due 1999, PPN 593098 A@ 5, principal, premium or interest") to: Chemical Bank (ABA #021-000128) Account Number 544-755-102 For benefit of F/A/O AR80-77249 Attention: Mr. Tom Finn for: The Canada Life Insurance Company of America (CLICA) Trust Account AR80-77249 Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment to be addressed: Chemical Bank Institutional Client Services 4 New York Plaza-4th Floor New York, New York 10004 Attention: Mr. Michael Roman with duplicate notice to: The Canada Life Assurance Company 330 University Avenue Toronto, Ontario, Canada M5G 1R8 Attention: Supervisor, Securities Accounting Name of Nominee in which Notes are to be issued: Cummings & Co. Taxpayer I.D. Number: 38-2816473
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES CANADA LIFE INSURANCE COMPANY $500,000 Series A OF NEW YORK c/o The Canada Life Assurance Company Investment Department, U-6 330 University Avenue Toronto, Ontario, Canada M5G 1R8 Attention: U.S. Private Placements Telefacsimile: (416) 597-9678 Confirmation: (416) 597-1456, ext. 5117
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.25% Senior Notes, Series A, due 1999, PPN 593098 A@ 5, principal, premium or interest") to: Ince & Co. c/o Morgan Guaranty Trust Company of New York (ABA #021 000 238) Account Number 999-99-024 Attention: Custody Collection for: Canada Life Insurance Company of New York Custody Account Number 33370 Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment to be addressed: Morgan Guaranty Trust Company 15 Broad Street New York, New York 10015 Attention: Custody Collection Department with duplicate notice to: The Canada Life Assurance Company 330 University Avenue Toronto, Ontario, Canada M5G 1R8 Attention: Supervisor, Securities Accounting Name of Nominee in which Notes are to be issued: Ince & Co. Taxpayer I.D. Number: 13-269-0792
PRINCIPAL AMOUNT SERIES NAMES AND ADDRESSES OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES THE FRANKLIN LIFE $3,000,000 Series B INSURANCE COMPANY One Franklin Square Springfield, Illinois 62713 Attention: Investment Division
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.52% Senior Notes, Series B, due 2001, PPN 593098 B* 6, principal, premium or interest") to: Morgan Guaranty Trust Company of New York (ABA #0210- 0023-8) 23 Wall Street New York, New York 10015 Attention: Money Transfer Department for credit to: The Franklin Life Insurance Company Account Number 022-05-988 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 37-0281650
PRINCIPAL AMOUNT SERIES NAMES AND ADDRESSES OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES KNIGHTS OF COLUMBUS $3,000,000 Series B One Columbus Plaza New Haven, Connecticut 06507 Attention: Investment Department Telecopier Number: (203) 772-0037
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.52% Senior Notes, Series B, due 2001, PPN 593098 B* 6, principal, premium or interest") to: Morgan Guaranty Trust Company of New York (ABA #021000238) 60 Wall Street New York, New York 10260 for credit to: Knights of Columbus MGT Receipts Account Number 001-02-667 Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment to be addressed, Attention: Accounting Department. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 060416470
PRINCIPAL AMOUNT SERIES NAMES AND ADDRESSES OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES SAFECO LIFE $3,000,000 Series C INSURANCE COMPANY (for the account of Safeco Life Annuity) Investment Department, T-14 Safeco Plaza Seattle, Washington 98185 Attention: Keith Bunch (206) 545-3111 or Ron Spaulding Telecopier Number: (206) 545-3446
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest") to: US Trust/NYC/Trust (ABA #021001318) for credit to: Safeco Life Annuity Account Number 473633 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above with a copy of all such notices and communications to be addressed: Atwell & Co. c/o U.S. Trust Company P.O. Box 456, Wall Street Station New York, New York 10005 Name of Nominee in which Notes are to be issued: Atwell & Co. Taxpayer I.D. Number: 3-6065575
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES THE SECURITY MUTUAL LIFE $1,000,000 Series B INSURANCE COMPANY OF LINCOLN, NEBRASKA 200 Centennial Mall North Lincoln, Nebraska 68508 Attention: Investment Department
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.52% Senior Notes, Series B, due 2001, PPN 593098 B* 6, principal, premium or interest") to: National Bank of Commerce (ABA #1040-00045) 13th and "O" Streets Lincoln, Nebraska for credit to: Security Mutual Life Account Number 40-797-624 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 47-0293990
PRINCIPAL AMOUNT SERIES NAMES AND ADDRESSES OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES STANDARD INSURANCE COMPANY $1,000,000 Series C P.O. Box 711 Portland, Oregon 97207 Attention: Securities Department
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest") to: First Interstate Bank of Oregon/First Port Trust (ABA #123000123) 1300 S.W. Fifth Avenue, 10th Floor Portland, Oregon 97201 Attention: B. Harvey, Trust Operations for credit to: Standard Insurance Company Account Number 450010 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: STANCO
PRINCIPAL AMOUNT SERIES NAMES AND ADDRESSES OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES WOODMEN ACCIDENT AND $1,000,000 Series C LIFE COMPANY P.O. Box 82288 Lincoln, Nebraska 68501 Attention: Securities Division Telecopy Number: (402) 437-4392
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal funds (identifying each payment as "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest") to: FirsTier Bank Lincoln, N.A. (ABA #1040-0003-2) 13 and M Streets Lincoln, Nebraska 68508 for credit to: Woodmen Accident and Life Company General Fund, Account Number 092-909 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above; provided, however, all notices and communications delivered by overnight courier shall be addressed as follows: Woodmen Accident and Life Company 1526 K Street Lincoln, Nebraska 68508 Attention: Securities Division Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 47-0339220
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES MUTUAL TRUST LIFE $1,000,000 Series C INSURANCE COMPANY c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, Minnesota 55101 Attention: Client Administrator
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest") to: The Northern Trust Company (ABA #071000152) Chicago, Illinois for Credit Wire Account Number 5186041000 for further credit to: Mutual Trust Life Insurance Company Account Number 26-00621 Attention: MBS Department Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: ELL & Co. Taxpayer I.D. Number: 36-1516780
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES SECURITY LIFE INSURANCE COMPANY $500,000 Series C c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, Minnesota 55101 Attention: Investment Department
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest") to: First Bank N.A. (ABA #091-0000-22) Minneapolis, Minnesota for further credit to: First Trust N.A. Account Number 180121167365 for credit to: Security Life Insurance Company Account Number 10170060, TSU: 020 Attention: Peggy Sime (612) 244-0647 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: Var & Co. Taxpayer I.D. Number: 41-0808596
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES NATIONAL TRAVELERS LIFE COMPANY $500,000 Series C c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, Minnesota 55101
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest") to: First Bank N.A. (ABA #091-0000-22) Minneapolis, Minnesota for further credit to: First Trust N.A. Account Number 180121167365 TSU: 020 for credit to: National Travelers Life Company Account Number 12609110 Attention: Sheldon Sobro (612) 244-0648 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: Var & Co. Taxpayer I.D. Number: 42-0432940
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES COLORADO BANKERS LIFE $500,000 Series C INSURANCE COMPANY c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, Minnesota 55101 Attention: Client Administrator
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest") to: Bankers Trust Company (ABA #021-001-003) New York, New York for credit to Account Number 01419540 for further credit to: Colorado Bankers Life Insurance Company Account Number 098125 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: Salkeld & Co. Taxpayer I.D. Number: 84-0674027
PRINCIPAL AMOUNT SERIES NAME AND ADDRESS OF NOTES TO BE OF OF PURCHASERS PURCHASED NOTES GUARANTEE RESERVE LIFE $500,000 Series C INSURANCE COMPANY c/o MIMLIC Asset Management Company 400 Robert Street North St. Paul, Minnesota 55101 Attention: Client Administrator
Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Fred Meyer, Inc., 7.88% Senior Notes, Series C, due 2004, PPN 593098 B@ 4, principal, premium or interest") to: Mercantile National Bank of Indiana (ABA #0719-12813) Hammond, Indiana for credit to: Guarantee Reserve Life Insurance Company Account Number 17-74040 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: GANT & CO Taxpayer I.D. Number: 35-0815760 SCHEDULE II (to Note Agreement) SUBSIDIARIES OF THE COMPANY 1. RESTRICTED SUBSIDIARIES:
PERCENTAGE OF VOTING JURISDICTION STOCK OWNED BY NAME OF OF COMPANY AND EACH SUBSIDIARY INCORPORATION OTHER SUBSIDIARY B&B Stores, Inc. Montana 100% B&B Pharmacy, Inc. Montana 100% CB&S Advertising Agency, Inc. Oregon 100% Distribution Trucking Company Oregon 100% FM Holding Corporation Delaware 100% Grand Central, Inc. Utah 100% FM Retail Services, Inc. Washington 100% Fred Meyer, Inc. (a Washington Corporation) Washington 100% Fred Meyer of Alaska, Inc. Alaska 100% Fred Meyer of California, Inc. California 100% Natur Glo, Inc. Oregon 100% Roundup Co. Washington 100%
2. SUBSIDIARIES (OTHER THAN RESTRICTED SUBSIDIARIES):
PERCENTAGE OF VOTING JURISDICTION STOCK OWNED BY NAME OF OF COMPANY AND EACH SUBSIDIARY INCORPORATION OTHER SUBSIDIARY Fred Meyer (UK) Limited Hong Kong 100% (inactive)
DESCRIPTION OF DEBT AND CAPITALIZED LEASES 1. Indebtedness of Restricted Subsidiaries outstanding on the Closing Date and Liens (if any) securing any such Indebtedness are as follows: Roundup Co. Note and Trust Deed to $ 13,220,000 Nationwide Life Fred Meyer of Alaska, Note and Trust Deed to $ 16,981,969 Inc. Nationwide Life 2. Funded Debt (other than Capitalized Rentals) of the Company outstanding on the Closing Date and Liens (if any) securing any such Funded Debt are as follows: Unsecured Term Notes to Five Banks $ 70,000,000 Unsecured Zero Coupon Note to Prudential $ 28,335,620 Note and Trust Deed to Employers' Life $ 2,685,150 Note and Trust Deed to Nationwide Life $ 10,740,600 Unsecured Note to Rabobank $ 10,000,000 Unsecured Commercial Paper (as of July 8, 1994) $205,442,758 3. Capitalized Leases of the Company and its Restricted Subsidiaries outstanding on the Closing Date and Liens (if any) securing any such Capitalized Leases are as follows: Fred Meyer, Inc. to Duane Co. $ 6,950,000 Grand Central, Inc. to various investors $ 10,735,000 DESCRIPTION OF INSURANCE A. Liability Insurance: Subject to $2,000,000 self- insurance retention; $50,000,000 limit B. Workers Compensation Insurance: Self-insured in major states (Oregon and Washington); insurance carried for losses in excess of $350,000 per incident. C. Property Insurance: Values insured to replacement cost including business interruption. Deductibles per incident range up to $1,000,000 with a variety of sub- limits. Earthquake coverage subject to a deductible of 5% of values. EXHIBIT A-1 (to Note Agreement) FRED MEYER, INC. 7.25% Senior Note, Series A, Due July 15, 1999 PPN 593098 A@ 5 No. RA-__ July __, 1994 $ Fred Meyer, Inc., a Delaware corporation (the "Company"), for value received, hereby promises to pay to or registered assigns on the fifteenth day of July, 1999 the principal amount of Dollars ($_______________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 7.25% per annum from the date hereof until maturity, payable semiannually on the fifteenth day of January and July in each year (commencing on January 15, 1995) and at maturity. The Company agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate of 8.25% per annum after the due date, whether by acceleration or otherwise, until paid. Both the principal hereof and interest hereon are payable at the principal office of the Company in Portland, Oregon in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. If any amount of principal, premium, if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, such amount shall be payable on the immediately preceding Business Day. "Business Day" means any day other than a Saturday, Sunday or other day on which banks in Portland, Oregon or New York, New York are required by law to close or are customarily closed. This Note is one of the 7.25% Senior Notes, Series A, due July 15, 1999 (the "Notes") of the Company in the aggregate principal amount of $7,500,000 which, together with the Company's $15,000,000 aggregate principal amount of 7.52% Senior Notes, Series B, due July 15, 2001 (the "Series B Notes"), the Company's $20,000,000 aggregate principal amount of 7.88% Senior Notes, Series C, due July 15, 2004 (the "Series C Notes") and the Company's $15,000,000 aggregate principal amount of 7.98% Senior Notes, Series D, due July 15, 2007 (the "Series D Notes", said Series D Notes together with the Series A Notes, the Series B Notes and the Series C Notes are hereinafter referred to collectively as the "Notes"), are issued or to be issued under and pursuant to the terms and provisions of the separate Note Agreements, each dated as of June 1, 1994 (the "Note Agreements"), entered into by the Company with the original Purchasers therein referred to and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreements to all the benefits provided for thereby or referred to therein. Reference is hereby made to the Note Agreements for a statement of such rights and benefits. This Note and the other Notes outstanding under the Note Agreements may be declared due prior to their expressed maturity dates, in the events, on the terms and in the manner and amounts as provided in the Note Agreements. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in the Note Agreements. This Note is registered on the books of the Company and is transferable only by surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. This Note and said Note Agreements are governed by and construed in accordance with the laws of New York, including all matters of construction, validity and performance. FRED MEYER, INC. By ________________________________ Its Vice President and Corporate Treasurer EXHIBIT A-2 (to Note Agreement) FRED MEYER, INC. 7.52% Senior Note, Series B, Due July 15, 2001 PPN 593098 B* 6 No. RB-__ July __, 1994 $ FRED MEYER, INC., a Delaware corporation (the "Company"), for value received, hereby promises to pay to or registered assigns on the fifteenth day of July, 2001 the principal amount of Dollars ($_______________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 7.52% per annum from the date hereof until maturity, payable semiannually on the fifteenth day of January and July in each year (commencing on January 15, 1995) and at maturity. The Company agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate of 8.52% per annum after the due date, whether by acceleration or otherwise, until paid. Both the principal hereof and interest hereon are payable at the principal office of the Company in Portland, Oregon in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. If any amount of principal, premium, if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, such amount shall be payable on the immediately preceding Business Day. "Business Day" means any day other than a Saturday, Sunday or other day on which banks in Portland, Oregon or New York, New York are required by law to close or are customarily closed. This Note is one of the 7.52% Senior Notes, Series B, due July 15, 2001 (the "Notes") of the Company in the aggregate principal amount of $15,000,000 which, together with the Company's $7,500,000 aggregate principal amount of 7.25% Senior Notes, Series A, due July 15, 1999 (the "Series A Notes"), the Company's $20,000,000 aggregate principal amount of 7.88% Senior Notes, Series C, due July 15, 2004 (the "Series C Notes") and the Company's $15,000,000 aggregate principal amount of 7.98% Senior Notes, Series D, due July 15, 2007 (the "Series D Notes", said Series D Notes together with the Series A Notes, the Series B Notes and the Series C Notes are hereinafter referred to collectively as the "Notes"), are issued or to be issued under and pursuant to the terms and provisions of the separate Note Agreements, each dated as of June 1, 1994 (the "Note Agreements"), entered into by the Company with the original Purchasers therein referred to and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreements to all the benefits provided for thereby or referred to therein. Reference is hereby made to the Note Agreements for a statement of such rights and benefits. This Note and the other Notes outstanding under the Note Agreements may be declared due prior to their expressed maturity dates, in the events, on the terms and in the manner and amounts as provided in the Note Agreements. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in the Note Agreements. This Note is registered on the books of the Company and is transferable only by surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. This Note and said Note Agreements are governed by and construed in accordance with the laws of New York, including all matters of construction, validity and performance. FRED MEYER, INC. By ________________________________ Its Vice President and Corporate Treasurer EXHIBIT A-3 (to Note Agreement) FRED MEYER, INC. 7.88% Senior Note, Series C, Due July 15, 2004 PPN 593098 B@ 4 No. RC-__ July __, 1994 $ Fred Meyer, Inc., a Delaware corporation (the "Company"), for value received, hereby promises to pay to or registered assigns on the fifteenth day of July, 2004 the principal amount of Dollars ($_______________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 7.88% per annum from the date hereof until maturity, payable semiannually on the fifteenth day of January and July in each year (commencing on January 15, 1995) and at maturity. The Company agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate of 8.88% per annum after the due date, whether by acceleration or otherwise, until paid. Both the principal hereof and interest hereon are payable at the principal office of the Company in Portland, Oregon in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. If any amount of principal, premium, if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, such amount shall be payable on the immediately preceding Business Day. "Business Day" means any day other than a Saturday, Sunday or other day on which banks in Portland, Oregon or New York, New York are required by law to close or are customarily closed. This Note is one of the 7.88% Senior Notes, Series C, due July 15, 2004 (the "Notes") of the Company in the aggregate principal amount of $20,000,000 which, together with the Company's $7,500,000 aggregate principal amount of 7.25% Senior Notes, Series A, due July 15, 1999 (the "Series A Notes"), the Company's $15,000,000 aggregate principal amount of 7.52% Senior Notes, Series B, due July 15, 2001 (the "Series B Notes") and the Company's $15,000,000 aggregate principal amount of 7.98% Senior Notes, Series D, due July 15, 2007 (the "Series D Notes", said Series D Notes together with the Series A Notes, the Series B Notes and the Series C Notes are hereinafter referred to collectively as the "Notes"), are issued or to be issued under and pursuant to the terms and provisions of the separate Note Agreements, each dated as of June 1, 1994 (the "Note Agreements"), entered into by the Company with the original Purchasers therein referred to and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreements to all the benefits provided for thereby or referred to therein. Reference is hereby made to the Note Agreements for a statement of such rights and benefits. This Note and the other Notes outstanding under the Note Agreements may be declared due prior to their expressed maturity dates, in the events, on the terms and in the manner and amounts as provided in the Note Agreements. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in the Note Agreements. This Note is registered on the books of the Company and is transferable only by surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. This Note and said Note Agreements are governed by and construed in accordance with the laws of New York, including all matters of construction, validity and performance. FRED MEYER, INC. By ________________________________ Its Vice President and Corporate Treasurer EXHIBIT A-4 (to Note Agreement) FRED MEYER, INC. 7.98% Senior Note, Series D, Due July 15, 2007 PPN 593098 B# 2 No. RD-__ July __, 1994 $ FRED MEYER, INC., a Delaware corporation (the "Company"), for value received, hereby promises to pay to or registered assigns on the fifteenth day of July, 2007 the principal amount of DOLLARS ($_______________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 7.98% per annum from the date hereof until maturity, payable semiannually on the fifteenth day of January and July in each year (commencing on January 15, 1995) and at maturity. The Company agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate of 8.98% per annum after the due date, whether by acceleration or otherwise, until paid. Both the principal hereof and interest hereon are payable at the principal office of the Company in Portland, Oregon in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. If any amount of principal, premium, if any, or interest on or in respect of this Note becomes due and payable on any date which is not a Business Day, such amount shall be payable on the immediately preceding Business Day. "Business Day" means any day other than a Saturday, Sunday or other day on which banks in Portland, Oregon or New York, New York are required by law to close or are customarily closed. This Note is one of the 7.98% Senior Notes, Series D, due July 15, 2007 (the "Notes") of the Company in the aggregate principal amount of $15,000,000 which, together with the Company's $7,500,000 aggregate principal amount of 7.25% Senior Notes, Series A, due July 15, 1999 (the "Series A Notes"), the Company's $15,000,000 aggregate principal amount of 7.52% Senior Notes, Series B, due July 15, 2001 (the "Series B Notes") and the Company's $20,000,000 aggregate principal amount of 7.88% Senior Notes, Series C, due July 15, 2004 (the "Series C Notes", said Series C Notes together with the Series A Notes, the Series B Notes and the Series D Notes are hereinafter referred to collectively as the "Notes") are issued or to be issued under and pursuant to the terms and provisions of the separate Note Agreements, each dated as of June 1, 1994 (the "Note Agreements"), entered into by the Company with the original Purchasers therein referred to and this Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreements to all the benefits provided for thereby or referred to therein. Reference is hereby made to the Note Agreements for a statement of such rights and benefits. This Note and the other Notes outstanding under the Note Agreements may be declared due prior to their expressed maturity dates, in the events, on the terms and in the manner and amounts as provided in the Note Agreements. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in the Note Agreements. This Note is registered on the books of the Company and is transferable only by surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. This Note and said Note Agreements are governed by and construed in accordance with the laws of New York, including all matters of construction, validity and performance. FRED MEYER, INC. By ________________________________ Its Vice President and Corporate Treasurer EXHIBIT B (to Note Agreement) REPRESENTATIONS AND WARRANTIES The Company represents and warrants to you as follows: 1. Subsidiaries. Schedule II attached to the Agreements states the name of each of the Company's Subsidiaries, its jurisdiction of incorporation and the percentage of its Voting Stock owned by the Company and/or its Subsidiaries. Those Subsidiaries listed in Section 1 of said Schedule II constitute Restricted Subsidiaries. The Company and each Subsidiary has good and marketable title to all of the shares it purports to own of the stock of each Subsidiary, free and clear in each case of any Lien. All such shares have been duly issued and are fully paid and non-assessable. 2. Corporate Organization and Authority. The Company, and each Restricted Subsidiary, (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has all requisite power and authority and all necessary licenses and permits to own and operate its properties and to carry on its business as now conducted and as presently proposed to be conducted; and (c) is duly licensed or qualified and is in good standing as a foreign corporation in each jurisdiction wherein the nature of the business transacted by it or the nature of the property owned or leased by it makes such licensing or qualification necessary. 3. Business and Property. You have heretofore been furnished with a copy of the Private Placement Memorandum dated March 1994 (the "Memorandum") prepared by BA Securities, Inc. which generally sets forth the business conducted and proposed to be conducted by the Company and its Subsidiaries and the principal properties of the Company and its Subsidiaries. 4. Financial Statements. (a) The consolidated balance sheets of the Company and its consolidated Subsidiaries as of February 3, 1990, February 2, 1991, February 1, 1992, January 30, 1993 and January 29, 1994, and the related statements of consolidated operations, changes in consolidated stockholders' equity and consolidated cash flows for the fiscal years ended on said dates, each accompanied by a report thereon containing an opinion unqualified as to scope limitations imposed by the Company and otherwise without qualification except as therein noted, by Deloitte & Touche, have been prepared in accordance with GAAP consistently applied except as therein noted, are correct and complete and present fairly the financial position of the Company and its consolidated Subsidiaries as of such dates and the results of their operations and their cash flows for such periods. (b) Since January 29, 1994, there has been no change in the condition, financial or otherwise, of the Company and its consolidated Subsidiaries as shown on the consolidated balance sheet as of such date except changes in the ordinary course of business, none of which individually or in the aggregate has been materially adverse. 5. Indebtedness. Schedule II attached to the Agreements correctly describes all Indebtedness of Restricted Subsidiaries and all Funded Debt and Capitalized Leases of the Company and its Restricted Subsidiaries outstanding on the Closing Date. 6. Full Disclosure. Neither the financial statements referred to in paragraph 4 hereof nor the Agreements, the Memorandum or any other written statement furnished by the Company to you in connection with the negotiation of the sale of the Notes contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or herein not misleading. There is no fact peculiar to the Company or its Subsidiaries which the Company has not disclosed to you in writing which materially affects adversely or, so far as the Company can now foresee, will materially affect adversely the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Restricted Subsidiaries, taken as a whole. 7. Pending Litigation. There are no proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Restricted Subsidiary in any court or before any governmental authority or arbitration board or tribunal which involve the possibility of materially and adversely affecting the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Restricted Subsidiaries. 8. Title to Properties. The Company and each Restricted Subsidiary has good and marketable title in fee simple (or its equivalent under applicable law) to all material parcels of real property and has good title to all the other material items of property it purports to own, including that reflected in the most recent balance sheet referred to in paragraph 4 hereof, except as sold or otherwise disposed of in the ordinary course of business and except for Liens permitted by the Agreements. 9. Patents and Trademarks. The Company and each Restricted Subsidiary owns or possesses all the patents, trademarks, trade names, service marks, copyrights, licenses and rights with respect to the foregoing necessary for the present and planned future conduct of its business, without any known conflict with the rights of others. 10. Sale is Legal and Authorized. The sale of the Notes and compliance by the Company with all of the provisions of the Agreements and the Notes-- (a) are within the corporate powers of the Company; (b) will not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the Certificate of Incorporation or By-laws of the Company or any indenture or other agreement or instrument to which the Company is a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any property of the Company; and (c) have been duly authorized by proper corporate action on the part of the Company (no action by the stockholders of the Company being required by law, by the Certificate of Incorporation or By-laws of the Company or otherwise), executed and delivered by the Company and the Agreements and the Notes constitute the legal, valid and binding obligations, contracts and agreements of the Company enforceable in accordance with their respective terms. 11. No Defaults. No Default or Event of Default has occurred and is continuing. The Company is not in default in the payment of principal or interest on any Indebtedness for borrowed money and is not in default under any instrument or instruments or agreements under and subject to which any Indebtedness for borrowed money has been issued and no event has occurred and is continuing under the provisions of any such instrument or agreement which with the lapse of time or the giving of notice, or both, would constitute an event of default thereunder. 12. Governmental Consent. No approval, consent or withholding of objection on the part of any regulatory body, state, Federal or local, is necessary in connection with the execution and delivery by the Company of the Agreements or the issuance, sale or delivery of the Notes or compliance by the Company with any of the provisions of the Agreements or the Notes. 13. Taxes. All tax returns required to be filed by the Company or any Restricted Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees and other governmental charges upon the Company or any Restricted Subsidiary or upon any of their respective properties, income or franchises which are shown to be due and payable in such returns have been paid. For all taxable years ending on or before February 3, 1990, the Federal income tax liability of the Company and its Restricted Subsidiaries has been satisfied and either the period of limitations on assessment of additional Federal income tax has expired or the Company and its Restricted Subsidiaries have entered into an agreement with the Internal Revenue Service closing conclusively the total tax liability for the taxable year. The Company does not know of any proposed additional tax assessment against it for which adequate provision has not been made on its accounts, and no material controversy in respect of additional Federal or state income taxes due since said date is pending or to the knowledge of the Company threatened. The provisions for taxes on the books of the Company and each Restricted Subsidiary are adequate for all open years, and for its current fiscal period. 14. Use of Proceeds. The net proceeds from the sale of the Notes will be used to refinance commercial paper and other short-term Indebtedness (characterized on the Company's balance sheet as Funded Debt in accordance with GAAP). None of the transactions contemplated in the Agreements (including, without limitation thereof, the use of proceeds from the issuance of the Notes) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Neither the Company nor any Subsidiary owns or intends to carry or purchase any "margin stock" within the meaning of said Regulation G. None of the proceeds from the sale of the Notes will be used to purchase, or refinance any borrowing the proceeds of which were used to purchase, any "security" within the meaning of the Securities Exchange Act of 1934, as amended. 15. Private Offering. Neither the Company, directly or indirectly, nor any agent on its behalf has offered or will offer the Notes or any similar Security to or has solicited or will solicit an offer to acquire the Notes or any similar Security from or has otherwise approached or negotiated or will approach or negotiate in respect of the Notes or any similar Security with any Person other than the Purchasers and not more than 125 other institutional investors, each of whom was offered a portion of the Notes at private sale for investment. Neither the Company, directly or indirectly, nor any agent on its behalf has offered or will offer the Notes or any similar Security to or has solicited or will solicit an offer to acquire the Notes or any similar Security from any Person so as to bring the issuance and sale of the Notes within the provisions of Section 5 of the Securities Act of 1933, as amended. 16. ERISA. Based, to the extent relevant, upon the accuracy of the representations of the Purchasers set forth in Section 3.2(b) of the Agreements, the consummation of the transactions provided for in the Agreements and compliance by the Company with the provisions thereof and the Notes issued thereunder will not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended. Each Plan complies in all material respects with all applicable statutes and governmental rules and regulations, and (a) no Reportable Event has occurred and is continuing with respect to any Plan, (b) neither the Company nor any ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or instituted steps to do so, and (c) no steps have been instituted to terminate any Plan. No condition exists or event or transaction has occurred in connection with any Plan which could result in the incurrence by the Company or any ERISA Affiliate of any material liability, fine or penalty. No Plan maintained by the Company or any ERISA Affiliate, nor any trust created thereunder, has incurred any "accumulated funding deficiency" as defined in Section 302 of ERISA nor does the present value of all benefits vested under all Plans exceed, as of the last annual valuation date, the value of the assets of the Plans allocable to such vested benefits. Neither the Company nor any ERISA Affiliate has any contingent liability with respect to any post-retirement "welfare benefit plan" (as such term is defined in ERISA) except as has been disclosed to the Purchasers. 17. Compliance with Law. (a) Neither the Company nor any Restricted Subsidiary (1) is in violation of any law, ordinance, franchise, governmental rule or regulation to which it is subject; or (2) has failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of its property or to the conduct of its business, which violation or failure to obtain would materially affect adversely the business, prospects, profits, properties or condition (financial or otherwise) of the Company and its Restricted Subsidiaries, taken as a whole, or impair the ability of the Company to perform its obligations contained in the Agreements or the Notes. Neither the Company nor any Restricted Subsidiary is in default with respect to any order of any court or governmental authority or arbitration board or tribunal. (b) Without limiting the provisions of clause (a) of this paragraph 17, the Company and its Subsidiaries are in compliance with all applicable Environmental Laws the failure to comply with which would materially affect adversely the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or the ability of the Company to perform its obligations under the Agreements or the Notes. 18. Investment Company Act. The Company is not, and is not directly or indirectly controlled by or acting on behalf of any Person which is, required to register as an "investment company" under the Investment Company Act of 1940, as amended. 19. Foreign Assets Control Regulations, etc. The Company and its Subsidiaries are not by reason of being a "national" of "designated foreign country" or a "specially designated national" within the meaning of the Regulations of the Office of Foreign Assets Control, United States Treasury Department (31 C.F.R., Subtitle B, Chapter V), or for any other reason, subject to any restriction or prohibition under, or in violation of, any Federal statue or Presidential Executive Order, or any rules or regulations of any department, agency or administrative body promulgated under any such statute or order, concerning trade or other relations with any foreign country or any citizen or national thereof or the ownership or operation of any property. EXHIBIT C (to Note Agreement) DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION The closing opinion of Chapman and Cutler, special counsel to the Purchasers, called for by Section 4.1 of the Note Agreements, shall be dated the Closing Date and addressed to the Purchasers, shall be satisfactory in form and substance to the Purchasers and shall be to the effect that: 1. The Company is a corporation, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and the corporate authority to execute and deliver the Note Agreements and to issue the Notes. 2. The Note Agreements have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by the Company and constitute the legal, valid and binding contracts of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 3. The Notes have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Agreements does not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. The opinion of Chapman and Cutler shall also state that the opinion of Stoel Rives Boley Jones & Grey is satisfactory in scope and form to Chapman and Cutler and that, in their opinion, the Purchasers are justified in relying thereon. In rendering the opinion set forth in paragraph 1 above, Chapman and Cutler may rely solely upon an examination of the Certificate of Incorporation certified by, and a certificate of good standing of the Company from, the Secretary of State of the State of Delaware, the By-laws of the Company and the general business corporation law of the State of Delaware. The opinion of Chapman and Cutler is limited to the laws of the State of New York, the general business corporation law of the State of Delaware and the Federal laws of the United States. With respect to matters of fact upon which such opinion is based, Chapman and Cutler may rely on appropriate certificates of public officials and officers of the Company. EXHIBIT D (to Note Agreement) DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY The closing opinion of Stoel Rives Boley Jones & Grey, counsel for the Company, which is called for by Section 4.1 of the Note Agreements, shall be dated the Closing Date and addressed to the Purchasers, shall be satisfactory in scope and form to the Purchasers and shall be to the effect that: 1. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and the corporate authority to execute and perform the Note Agreements and to issue the Notes and has the full corporate power and the corporate authority to conduct the activities in which it is now engaged and is in good standing or of current status as a foreign corporation, as the case may be, in each jurisdiction set forth in the certificate of the Company attached to this opinion (the "Company Certificate") as a jurisdiction where the Company has material assets or conducts a material portion of its business. 2. Each Subsidiary is a corporation duly organized, validly existing and in good standing or of current status, as the case may be, under the laws of its jurisdiction of incorporation and is in good standing or of current status as a foreign corporation, as the case may be, in each jurisdiction set forth in the Company Certificate as a jurisdiction where such Subsidiary has material assets or conducts a material portion of its business. All of the issued and outstanding shares of capital stock of each such Subsidiary are owned of record by the Company, by one or more Subsidiaries, or by the Company and one or more Subsidiaries. 3. Each Note Agreement has been duly authorized by all necessary corporate action on the part of the Company, has been duly executed and delivered by the Company and constitutes the legal, valid and binding contract of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The Notes have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 5. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal, state or local, is necessary in connection with the execution and delivery of the Note Agreements or the Notes. 6. The issuance and sale of the Notes and the execution, delivery and performance by the Company of the Note Agreements do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Lien upon any of the property of the Company pursuant to the provisions of the Certificate of Incorporation or By-laws of the Company or any agreement or other instrument listed as a "Material Agreement" in the Company Certificate attached to this opinion. 7. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Agreements does not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. 8. The issuance of the Notes and the use of the proceeds of the sale of the Notes in accordance with the provisions of and contemplated by the Note Agreements do not violate or conflict with Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 9. There is no litigation pending or, to the best knowledge of such counsel, threatened which in such counsel's opinion could reasonably be expected to have a materially adverse effect on the Company's business or assets or which would impair the ability of the Company to issue and deliver the Notes or to comply with the provisions of the Note Agreements. The opinion of Stoel Rives Boley Jones & Grey shall cover such other matters relating to the sale of the Notes as the Purchasers may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Company and, with respect to the opinion numbered (7) upon, to the extent relevant, the accuracy of the representations of the Purchasers set forth in Section 3.2(a) of the Note Agreements. EXHIBIT E (to Note Agreement) SUBORDINATION PROVISIONS APPLICABLE TO SUBORDINATED FUNDED DEBT (a) The indebtedness evidenced by the subordinated notes*, any renewals or extensions thereof, premium, if any, interest (including, without limitation, any such interest accruing subsequent to the filing by or against the Company of any proceeding brought under Chapter 11 of the Bankruptcy Code (11 U.S.C. Section 100 et seq.)) and any fees, charges, expenses or other sums payable under or in respect of the agreements pursuant to which such subordinated notes were issued, shall at all times be wholly and unconditionally subordinate and junior in right of payment to all principal, premium, if any, and interest (including, without limitation, any such interest accruing subsequent to the filing by or against the Company of any proceeding brought under Chapter 11 of the Bankruptcy Code (11 U.S.C. Section 100 et seq.) whether or not such interest is allowed as a claim pursuant to the provisions of such Chapter) and all other fees, charges, expenses and other sums payable in respect of (1) the Company's $7,500,000 aggregate principal amount 7.25% Senior Notes, Series A, due July 15, 1999 (the "Series A Notes"), the Company's $15,000,000 aggregate principal amount 7.52% Senior Notes, Series B, due July 15, 2001 (the "Series B Notes"), the Company's $20,000,000 aggregate principal amount 7.88% Senior Notes, Series C, due July 15, 2004 (the "Series C Notes") and the Company's $15,000,000 aggregate principal amount 7.98% Senior Notes, Series D, due June 15, 2007 (the "Series D Notes," said Series D Notes together with the Series A Notes, the Series B Notes and the Series C Notes being hereinafter collectively referred to as the "Notes") issued pursuant to the separate and several Note Agreements, each dated as of June 1, 1994 between the Company and, respectively, Phoenix Home Life Mutual Insurance Company, The Variable Annuity Life Insurance Company, The Minnesota Mutual Life Insurance Company, The Canada Life Assurance Company, Canada Life Insurance Company of America, Canada Life Insurance Company of New York, The Franklin Life Insurance Company, Knights of Columbus, SAFECO Life Insurance Company, The Security Mutual Life Insurance Company of Lincoln, Nebraska, Standard Insurance Company, Woodmen Accident and Life Company, Mutual Trust Life Insurance Company, Security Life Insurance Company, National Travelers Life Company, Colorado Bankers Life Insurance Company and Guarantee Reserve Life Insurance Company, and (2) any other indebtedness for money borrowed of the Company not expressed to be subordinate or junior to any other indebtedness of the Company (the indebtedness described in the preceding clauses (1) and (2) is hereinafter called "Superior Indebtedness"), in the manner and with the force and effect hereafter set forth: ____________________ * Or debentures or other designation as may be appropriate. (1) In the event of (i) any liquidation, dissolution or other winding up of the Company, voluntary or involuntary, (ii) any execution, sale, receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization, composition or other similar proceeding relative to the Company or its property, (iii) any general assignment by the Company for the benefit of creditors, or (iv) any distribution, division, marshalling or application of any of the properties or assets of the Company or the proceeds thereof to creditors, voluntary or involuntary, and whether or not involving legal proceedings, then and in any event: (A) all principal, premium, if any, any interest and all other sums owing on all Superior Indebtedness shall first be paid in full in cash before any payment or distribution of any kind or character, whether in cash, property or securities (other than in securities, including equity securities, or other evidences of indebtedness, the payment of which is unconditionally subordinated to the payment of all Superior Indebtedness which may at the time be outstanding) shall be made on indebtedness evidenced by the subordinated notes; (B) all principal and interest on the subordinated notes shall forthwith become due and payable, and any payment or distribution of any kind or character, whether in cash, property or securities (other than securities, including equity securities or other evidences of indebtedness, the payment of which is unconditionally subordinated to the payment of all Superior Indebtedness which may at the time be outstanding), which would otherwise (but for the terms hereof) be payable or deliverable in respect of the subordinated notes, shall be paid or delivered directly to the holders of the Superior Indebtedness, for application to the payment of the Superior Indebtedness, until all Superior Indebtedness shall have been paid in full, and the holders of the subordinated notes at the time outstanding irrevocably authorize, empower and direct all receivers, trustees, liquidators, conservators, fiscal agents and others having authority in the premises to effect all such payments and deliveries; (C) any payment or distribution of any kind or character, whether in cash, property or securities (other than in securities, including equity securities or other evidences of indebtedness, the payment of which is unconditionally subordinated to the payment of all Superior Indebtedness which may at the time be outstanding) which shall be made upon or in respect of the subordinated notes shall be paid over to the holders of Superior Indebtedness, pro rata, for application and payment thereof unless and until such Superior Indebtedness shall have been paid or satisfied in full; and (D) notwithstanding the foregoing provisions, if for any reason whatsoever any payment or distribution of any kind or character, whether in cash, property or securities (other than in securities, including equity securities or other evidences of indebtedness, the payment of which is unconditionally subordinated to the payment of all Superior Indebtedness which may at the time be outstanding), should be received by a holder of the subordinated notes before all such Superior Indebtedness is paid in full, such payment or distribution shall be held in trust for the benefit of, and shall be immediately paid or delivered by such holder to, as the case may be, the holders of such Superior Indebtedness remaining unpaid, or their representative or representatives, for application to the payment of all such Superior Indebtedness, pro rata, unless and until such Superior Indebtedness shall have been paid or satisfied in full. (2) In the event that the subordinated notes are declared or become due and payable because of the occurrence of any event of default hereunder (or under the agreement or indenture, as appropriate) or otherwise than at the option of the Company, under circumstances when the foregoing clause (1) shall not be applicable, then each holder of any Superior Indebtedness then outstanding shall have the right to declare immediately due and payable all or any part of the Superior Indebtedness owing and payable to such holder and the holders of the subordinated notes shall be entitled to payments only after there shall first have been paid in full in cash all Superior Indebtedness outstanding at the time the subordinated notes so become due and payable because of any such event. (3) In case either (i) default in respect of the payment of the principal of, premium if any, or interest on any Superior Indebtedness, or (ii) any other default on any Superior Indebtedness as a result of which the holders thereof shall then be entitled to accelerate such Superior Indebtedness shall in either such case have occurred and be continuing with respect to any Superior Indebtedness, unless and until all Superior Indebtedness shall have been paid in full in cash, the Company will not, and will not permit any subsidiary to, directly or indirectly, make or agree to make, and neither the holder nor any assignee or successor holder of any subordinated notes will demand, accept or receive, (A) any payment in cash, property, securities (other than in securities, including equity securities or other evidences of indebtedness, the payment of which is unconditionally subordinated to the payment of all Superior Indebtedness which may at the time be outstanding) or otherwise, direct or indirect, of or on account of any principal of, premium, if any, interest or any other sum owing in respect of any subordinated notes, or (B) any payment for the purpose of any redemption, purchase or other acquisition, direct or indirect, of any subordinated notes, and no such payments shall be due. (b) If any payment or distribution of any kind or character (whether in cash, securities or other property) or any security shall be received by any holder of the subordinated notes in contravention of any of the terms of this Section ___, such payment or distribution or security shall be held in trust for the benefit of, and shall be paid over or delivered and transferred to, holders of the Superior Indebtedness pro rata for application to the payment of all Superior Indebtedness remaining unpaid, to the extent necessary to pay all such Superior Indebtedness in full in cash. In the event of the failure of any holder of the subordinated notes to endorse or assign any such payment, distribution or security, any holder of the Superior Indebtedness or such holder's representative is hereby irrevocably authorized to endorse or assign the same. (c) The holder of each subordinated note undertakes and agrees for the benefit of each holder of Superior Indebtedness to execute, verify, deliver and file any proofs of claim within 30 days before the expiration of the time to file the same which any holder of Superior Indebtedness may at any time require in order to prove and realize upon any rights or claims pertaining to the subordinated notes and to effectuate the full benefit of the subordination contained herein; and upon failure of the holder of any subordinated note so to do, any such holder of Superior Indebtedness shall be deemed to be irrevocably appointed the agent and attorney-in-fact of the holder of such note to execute, verify, deliver and file any such proofs of claim. (d) No right of any holder of any Superior Indebtedness to enforce subordination as herein provided shall at any time or in any way be affected or impaired by any failure to act on the part of the Company or the holders of Superior Indebtedness, or by any noncompliance by the Company with any of the terms, provisions and covenants of the subordinated notes or the agreement under which they are issued, regardless of any knowledge thereof that any such holder of Superior Indebtedness may have or be otherwise charged with. (e) No holder of any subordinated notes will sell, assign, pledge, encumber or otherwise dispose of any of its subordinated notes unless such sale, assignment, pledge, encumbrance or disposition is made expressly subject to the foregoing provisions. (f) The Company agrees, for the benefit of the holders of Superior Indebtedness, that in the event that any subordinated note is declared due and payable before its expressed maturity because of the occurrence of a default hereunder, (1) the Company will give prompt notice in writing of such happening to the holders of Superior Indebtedness, (2) all Superior Indebtedness shall forthwith become immediately due and payable upon demand, regardless of the expressed maturity thereof and (3) the holders of such subordinated notes shall not be entitled to receive any payment or distribution in respect thereof or applicable thereto until all Superior Indebtedness at the time outstanding shall have been paid in full. (g) The subordination effected by the foregoing provisions and the rights created thereby of the holders of the Superior Indebtedness shall not be affected by (1) any amendment of or addition or supplement to any Superior Indebtedness or any instrument or agreement relating thereto, (2) any exercise or non-exercise of any right, power or remedy under or in respect of any Superior Indebtedness or any instrument or agreement relating thereto, or (3) the giving or denial of any waiver, consent, release, indulgence, extension, renewal, modification or delay or the taking or nontaking of any other action, inaction or omission, in respect of any Superior Indebtedness or any instrument or agreement relating thereto or to any securities relating thereto or any guarantee thereof, whether or not any holder of any subordinated notes shall have had notice or knowledge of any of the foregoing. EX-4.E 4 EXHIBIT 4E EXHIBIT 4-E ================================================================= CREDIT AGREEMENT dated as of March 6, 1995 among FRED MEYER, INC., VARIOUS FINANCIAL INSTITUTIONS and THE BANK OF NOVA SCOTIA, as Agent ================================================================= TABLE OF CONTENTS ----------------- SECTION 1 DEFINITIONS AND INTERPRETATION. . . . . . . . . . . 1 1.1 Definitions . . . . . . . . . . . . . . . . . . . . 1 1.2 Computations; Changes in GAAP . . . . . . . . . . . 11 1.3 Cross-References; Section Caption . . . . . . . . . 11 SECTION 2 COMMITMENTS OF THE LENDERS; TYPES OF LOANS; BORROWING AND CONVERSION PROCEDURES.. . . . . . . . 12 2.1 Syndicated Loans. . . . . . . . . . . . . . . . . . 12 2.1.1 Commitments. . . . . . . . . . . . . . . . 12 2.1.2 Types of Syndicated Loans. . . . . . . . . 12 2.1.3 Borrowing Procedures . . . . . . . . . . . 12 2.1.4 Continuation and Conversion Procedures . . 13 2.1.5 Warranty upon Conversion or Continuation . 13 2.1.6 Conditions . . . . . . . . . . . . . . . . 13 2.1.7 Pro Rata Treatment . . . . . . . . . . . . 13 2.1.8 Commitments Several. . . . . . . . . . . . 13 2.2 Competitive Bid Loans . . . . . . . . . . . . . . . 14 2.2.1 The Company May Request Offers . . . . . . 14 2.2.2 Types of Competitive Bid Loans . . . . . . 14 2.2.3 Bid Procedure. . . . . . . . . . . . . . . 14 2.2.4 Borrowing Procedure. . . . . . . . . . . . 18 2.2.5 Repayment of Competitive Bid Loans . . . . 18 2.2.6 No Effect on Commitment. . . . . . . . . . 18 2.3 Extension of Termination Date . . . . . . . . . . . 18 SECTION 3 NOTES EVIDENCING LOANS. . . . . . . . . . . . . . . 19 3.1 Notes . . . . . . . . . . . . . . . . . . . . . . . 19 3.1.1 Syndicated Loan Notes. . . . . . . . . . . 19 3.1.2 Competitive Bid Loan Notes . . . . . . . . 19 3.2 Recordkeeping . . . . . . . . . . . . . . . . . . . 19 SECTION 4 INTEREST. . . . . . . . . . . . . . . . . . . . . . 19 4.1 Interest Rates. . . . . . . . . . . . . . . . . . . 19 4.1.1 Syndicated Loans . . . . . . . . . . . . . 19 4.1.2 Competitive Bid Loans. . . . . . . . . . . 20 4.2 Interest Payment Dates. . . . . . . . . . . . . . . 20 4.3 Setting and Notice of Eurodollar Rates and Eurodollar Competitive Bid Rates. . . . . . . . . . 20 4.4 Computation of Interest . . . . . . . . . . . . . . 21 SECTION 5 FEES. . . . . . . . . . . . . . . . . . . . . . . . 21 5.1 Facility Fee. . . . . . . . . . . . . . . . . . . . 21 5.2 Agent's Fee . . . . . . . . . . . . . . . . . . . . 21 SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS . . . . . . . . . . . . . . . . . . . . 21 6.1 Reduction or Termination of the Commitments . . . . 21 6.2 Prepayments . . . . . . . . . . . . . . . . . . . . 22 SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES . . 22 7.1 Making of Payments. . . . . . . . . . . . . . . . . 22 7.2 Application of Certain Payments . . . . . . . . . . 22 7.3 Due Date Extension. . . . . . . . . . . . . . . . . 22 7.4 Setoff. . . . . . . . . . . . . . . . . . . . . . . 23 7.5 Proration of Payments on Syndicated Loans . . . . . 23 7.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS. . . . . . . . . . . . . . . . . . 25 8.1 Increased Costs . . . . . . . . . . . . . . . . . . 25 8.2 Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . . . . . . 26 8.3 Changes in Law Rendering Eurodollar Loans Unlawful. . . . . . . . . . . . . . . . . . . . . . 26 8.4 Funding Losses. . . . . . . . . . . . . . . . . . . 27 8.5 Right of Lenders to Fund through Other Offices. . . 27 8.6 Discretion of Lenders as to Manner of Funding . . . 27 8.7 Mitigation of Circumstances; Replacement of Affected Lender or Objecting Lender . . . . . . . . 28 8.8 Conclusiveness of Statements; Survival of Provisions. . . . . . . . . . . . . . . . . . . . . 28 SECTION 9 WARRANTIES. . . . . . . . . . . . . . . . . . . . . 29 9.1 Organization, etc . . . . . . . . . . . . . . . . . 29 9.2 Authorization; No Conflict. . . . . . . . . . . . . 29 9.3 Validity and Binding Nature . . . . . . . . . . . . 29 9.4 Financial Information . . . . . . . . . . . . . . . 29 9.5 No Material Adverse Change. . . . . . . . . . . . . 29 9.6 Litigation and Contingent Liabilities . . . . . . . 30 9.7 Ownership of Properties; Liens. . . . . . . . . . . 30 9.8 Subsidiaries. . . . . . . . . . . . . . . . . . . . 30 9.9 Pension and Welfare Plans . . . . . . . . . . . . . 30 9.10 Regulated Industry. . . . . . . . . . . . . . . . . 30 9.11 Regulations G, U and X. . . . . . . . . . . . . . . 30 9.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . 30 9.13 Environmental and Safety and Health Matters . . . . 31 9.14 Compliance with Law . . . . . . . . . . . . . . . . 31 9.15 Information . . . . . . . . . . . . . . . . . . . . 31 SECTION 10 COVENANTS. . . . . . . . . . . . . . . . . . . . . 31 10.1 Reports, Certificates and Other Information . . . . 31 10.1.1 Audit Report . . . . . . . . . . . . . . . 31 10.1.2 Interim Reports. . . . . . . . . . . . . . 32 10.1.3 Compliance Certificate . . . . . . . . . . 32 10.1.4 Reports to SEC . . . . . . . . . . . . . . 32 10.1.5 Notice of Default, Litigation and ERISA Matters. . . . . . . . . . . . . . . . . . 32 10.1.6 Subsidiaries . . . . . . . . . . . . . . . 32 10.1.7 Other Information. . . . . . . . . . . . . 33 10.2 Books, Records and Inspections. . . . . . . . . . . 33 10.3 Insurance . . . . . . . . . . . . . . . . . . . . . 33 10.4 Compliance with Law; Payment of Taxes and Liabilities . . . . . . . . . . . . . . . . . . . . 33 10.5 Maintenance of Existence, etc . . . . . . . . . . . 33 10.6 Financial Ratios and Restrictions . . . . . . . . . 33 10.6.1 Minimum Consolidated Tangible Net Worth. . 33 10.6.2 Long-Term Liabilities to Net Worth Ratio . 34 10.6.3 Fixed Charge Coverage Ratio. . . . . . . . 34 10.7 Limitation on Liens . . . . . . . . . . . . . . . . 34 10.8 Debt. . . . . . . . . . . . . . . . . . . . . . . . 35 10.9 Guaranties, Loans and Advances. . . . . . . . . . . 36 10.10 Mergers, Consolidations, Sales. . . . . . . . . . . 36 10.11 Company's and Subsidiaries' Stock . . . . . . . . . 37 10.12 Unconditional Purchase Obligations. . . . . . . . . 37 10.13 Employee Benefit Plans. . . . . . . . . . . . . . . 37 10.14 Purchase or Redemption of Company's Securities; Dividend Restriction. . . . . . . . . . . . . . . . 37 10.15 Use of Proceeds . . . . . . . . . . . . . . . . . . 38 SECTION 11 CONDITIONS OF LENDING . . . . . . . . . . . . . . . 38 11.1 Initial Loan. . . . . . . . . . . . . . . . . . . . 38 11.1.1 Notes. . . . . . . . . . . . . . . . . . . 38 11.1.2 Resolutions. . . . . . . . . . . . . . . . 38 11.1.3 Consents, etc. . . . . . . . . . . . . . . 38 11.1.4 Incumbency and Signature Certificates. . . 39 11.1.5 Opinion of Counsel for the Company . . . . 39 11.1.6 Other. . . . . . . . . . . . . . . . . . . 39 11.2 All Loans . . . . . . . . . . . . . . . . . . . . . 39 11.2.1 No Default . . . . . . . . . . . . . . . . 39 11.2.2 Confirmatory Certificate . . . . . . . . . 39 SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT. . . . . . . . . 39 12.1 Events of Default . . . . . . . . . . . . . . . . . 39 12.1.1 Non-Payment of the Loans, etc. . . . . . . 39 12.1.2 Non-Payment of Other Debt. . . . . . . . . 39 12.1.3 Other Material Obligations . . . . . . . . 40 12.1.4 Bankruptcy, Insolvency, etc. . . . . . . . 40 12.1.5 Non-Compliance with Provisions of This Agreement. . . . . . . . . . . . . . . . . 40 12.1.6 Warranties . . . . . . . . . . . . . . . . 40 12.1.7 Pension Plans. . . . . . . . . . . . . . . 40 12.1.8 Withdrawal Liability Under Multiemployer Plans. . . . . . . . . . . . . . . . . . . 41 12.1.9 Judgments and Attachments. . . . . . . . . 41 12.1.10 Change in Control . . . . . . . . . . . . . 41 12.2 Effect of Event of Default. . . . . . . . . . . . . 41 SECTION 13 THE AGENT . . . . . . . . . . . . . . . . . . . . . 41 13.1 Authorization . . . . . . . . . . . . . . . . . . . 41 13.2 Indemnification . . . . . . . . . . . . . . . . . . 41 13.3 Exculpation . . . . . . . . . . . . . . . . . . . . 42 13.4 Credit Investigation. . . . . . . . . . . . . . . . 42 13.5 Agent and Affiliates. . . . . . . . . . . . . . . . 42 13.6 Action on Instructions of the Required Lenders. . . 42 13.7 Funding Reliance. . . . . . . . . . . . . . . . . . 43 13.8 Resignation . . . . . . . . . . . . . . . . . . . . 43 SECTION 14 GENERAL . . . . . . . . . . . . . . . . . . . . . . 44 14.1 Waiver; Amendments. . . . . . . . . . . . . . . . . 44 14.2 Confirmations . . . . . . . . . . . . . . . . . . . 44 14.3 Notices . . . . . . . . . . . . . . . . . . . . . . 44 14.4 Subsidiary References . . . . . . . . . . . . . . . 45 14.5 Regulation U. . . . . . . . . . . . . . . . . . . . 45 14.6 Costs, Expenses and Taxes . . . . . . . . . . . . . 45 14.7 Indemnification by the Company. . . . . . . . . . . 45 14.8 Successors and Assigns. . . . . . . . . . . . . . . 46 14.9 Assignments; Participations . . . . . . . . . . . . 46 14.9.1 Assignments. . . . . . . . . . . . . . . . 46 14.9.2 Participations . . . . . . . . . . . . . . 47 14.10 Governing Law . . . . . . . . . . . . . . . . . . . 48 14.11 Counterparts. . . . . . . . . . . . . . . . . . . . 48 14.12 Forum Selection and Consent to Jurisdiction . . . . 48 14.13 Maximum Interest Rate . . . . . . . . . . . . . . . 49 14.14 Waiver of Jury Trial. . . . . . . . . . . . . . . . 49 14.15 Oregon Legal Notice . . . . . . . . . . . . . . . . 50 SCHEDULE I Commitments and Percentages SCHEDULE II Schedule of Subsidiaries EXHIBIT A Form of Competitive Bid Quote Request (Section 2.2.3) EXHIBIT B Form of Invitation for Competitive Bid Quotes (Section 2.2.3) EXHIBIT C Form of Competitive Bid Quote (Section 2.2.3) EXHIBIT D Form of Competitive Bid Loan Acknowledgment (Section 2.2.3) EXHIBIT E Form of Competitive Bid Loan Confirmation (Section 2.2.3) EXHIBIT F Form of Extension Request (Section 2.3) EXHIBIT G Form of Syndicated Loan Note (Section 3.1) EXHIBIT H Form of Competitive Bid Loan Note (Section 3.1) EXHIBIT I Form of Opinion of Counsel for the Company (Section 11.1.5) EXHIBIT J Form of Assignment Agreement (Section 14.9.1) CREDIT AGREEMENT ---------------- This CREDIT AGREEMENT, dated as of March 6, 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 undersigned financial institutions (collectively the "Lenders" and individually each a "Lender") and THE BANK OF NOVA SCOTIA, by and through its Portland, Oregon Branch (in its individual capacity, together with its successors, "Scotiabank"), as agent for the Lenders. In consideration of the mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto 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 by the Company to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the occurrence of any circumstance of the nature described in Section 8.2 or 8.3. Affected Loan - see Section 8.3. Agent means Scotiabank in its capacity as agent for the Lenders hereunder and any successor thereto in such capacity. Agreement - see the Preamble. Alternate Base Rate means at any time the greater of (a) the Federal Funds Rate plus 0.50% and (b) the Base Rate. Alternate Base Rate Loan means any Loan which bears interest at or by reference to the Alternate Base Rate. Assets Purchase Agreement means the Assets 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. Base Rate means at any time the rate per annum then most recently announced by Scotiabank as its Base Rate at Portland, Oregon. Business Day means any day (other than a Saturday or Sunday) on which banks are open for commercial banking business in New York, New York and Portland, Oregon and, in the case of a Business Day which relates to a Eurodollar Loan or a Eurodollar Competitive Bid Loan, on which dealings are carried on 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. 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 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. Commitment as to any Lender means the commitment of such Lender to make Syndicated Loans hereunder, as adjusted from time to time pursuant to Section 2.2.2(b), Section 6.1 or Section 14.9. The amount of the initial Commitment of each Lender is set forth on Schedule I. Commitment Amount - see Section 2.1.1. Company - see the Preamble. Competitive Bid Borrowing - see Section 2.2.3. Competitive Bid Loan - see Section 2.2. Competitive Bid Loan Acknowledgment - see Section 2.2.3. Competitive Bid Loan Confirmation - see Section 2.2.3. Competitive Bid Loan Limit - see Section 2.2.3. Competitive Bid Loan Note - see Section 3.1.2. Competitive Bid Quote - see Section 2.2.3 Competitive Bid Quote Request - see Section 2.2.3. 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) 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 referred to in subsection 4.3 (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. 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. 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. 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 corporation, trade or business that is, along with the Company, a member of a controlled group of trades or businesses, as described in section 414(b) and 414(c), respectively, of the Internal Revenue Code of 1986, as amended, or section 4001 of ERISA. Eurocurrency Reserve Percentage means, with respect to any Eurodollar Loan or Eurodollar Competitive Bid Loan for any Interest Period, a percentage (expressed as a decimal) equal to the daily average during such Interest Period of the percentage in effect on each day of such Interest Period, as prescribed by the Board of Governors of the Federal Reserve System (or any successor), for determining the aggregate maximum reserve requirements applicable to "Eurocurrency Liabilities" pursuant to Regulation D or any other then applicable regulation of such Board of Governors which prescribes reserve requirements applicable to "Eurocurrency Liabilities" as presently defined in Regulation D. Eurodollar Auction means a solicitation of Competitive Bid Quotes setting forth Eurodollar Margins based on the Eurodollar Competitive Bid Rate (Reserve Adjusted) pursuant to Section 2.2. Eurodollar Competitive Bid Loans means Competitive Bid Loans the interest rate on which are determined on the basis of Eurodollar Competitive Bid Rates (Reserve Adjusted) pursuant to a Eurodollar Auction. Eurodollar Competitive Bid Rate means with respect to any Eurodollar Competitive Bid Loan for any Interest Period, the average (rounded upward, if necessary, to the next higher 1/16 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 four Business Days prior to the beginning of such Interest Period by major banks in the interbank eurodollar market as at or about 8:00 a.m., Portland 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 Competitive Bid Borrowing for the Interest Period. Eurodollar Competitive Bid Rate (Reserve Adjusted) - means, with respect to any Eurodollar Competitive Bid Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula: Eurodollar Competitive Bid Rate = Eurodollar Competitive Bid Rate (Reserve Adjusted) --------------------------------- 1-Eurocurrency Reserve Percentage Eurodollar Loan means any Loan which bears interest at a rate determined by reference to the Eurodollar Rate (Reserve Adjusted). Eurodollar Margin - see Section 2.2.3(c). 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 Eurodollar Rate or Eurodollar Competitive Bid 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 1/16 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 8:00 a.m., Portland 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 upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the following formula: Eurodollar Rate = Eurodollar Rate (Reserve Adjusted) ------------------ 1-Eurocurrency Reserve Percentage Event of Default means any of the events described in Section 12.1. Excluded Taxes - see Section 7.6 Exemption Agreement - see Section 7.6 Exemption Representation - see Section 7.6 Extension Request - see Section 2.3. Federal Funds Rate means, for any day, the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds Effective Rate". If such rate is not published in the Composite 3:30 p.m. Quotations for any Business Day, the rate for such day will be the arithmetic mean of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m., New York City time, on such day by each of three leading brokers of Federal funds transactions in New York City, selected by the Agent. The rate for any day which is not a Business Day shall be the rate for the immediately preceding Business Day. Fiscal Quarter means any fiscal quarter of a Fiscal Year. 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 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 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 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. GAAP means those generally accepted accounting principles as in effect from time to time in the United States of America. Group - see Section 2.1.2. 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 and/or currency risk or changes in commodity prices. Indemnified Liabilities - see Section 14.7 Interest Period means (a) with respect to any Eurodollar Loan, the period commencing on and including the date such Loan is made or is converted from an Alternate Base Rate Loan, or on the last day of the immediately preceding Interest Period for such Loan, and ending on, but excluding, the numerically corresponding day in the first, second, third or sixth calendar month thereafter, as the Company shall specify in the related notice of borrowing, conversion or continuation pursuant to Section 2.1.3 or 2.1.4; provided, however, that (i) 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); (ii) each Interest Period that commences on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month shall end on the last Business Day of the appropriate subsequent calendar month; and (iii) the Company may not select any Interest Period which extends beyond the scheduled Termination Date; (b) with respect to any Eurodollar Competitive Bid Loan, the period commencing on and including the date such Eurodollar Competitive Bid Loan is made and ending on, but excluding, the numerically corresponding day in the first, second, or third calendar month thereafter, as the Company may select as provided in Section 2.2; provided, however, that (i) 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); (ii) each Interest Period that commences on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month shall end on the last Business Day of the appropriate subsequent calendar month; and (iii) the Company may not select any Interest Period which extends beyond the scheduled Termination Date; and (c) with respect to any Set Rate Loan, the period commencing on the date such Set Rate Loan is made and ending on any Business Day at least seven and no more than 90 days thereafter, as the Company may select as provided in Section 2.2; provided, however, that the Company may not select any Interest Period which extends beyond the scheduled Termination Date. Invitation for Competitive Bid Quote - see Section 2.2.3. Lender - see the Preamble. Lender Party - see Section 14.7 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. Loans when used without a modifying adjective, means, collectively, Syndicated Loans and Competitive Bid Loans. 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" as defined in section 4001(a)(3) of ERISA which is maintained for employees of the Company or any ERISA Affiliate of the Company or more. New York means, unless otherwise stated, New York City, New York, United States of America. Notes when used without a modifying adjective, means, collectively, Syndicated Loan Notes and Competitive Bid Loan Notes. Objecting Lender - see Section 2.3. 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 and any entity succeeding to any or all of its functions under ERISA. 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. 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 principal amount of all outstanding Loans). The Percentages of the Lenders as of the Effective Date are set forth on 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. Portland means Portland, Oregon, United States of America. Quotation Date - see Section 2.2.3(a)(v) Recipient Taxes - see Section 7.6 Reference Lender means each of First Interstate Bank of Oregon, N.A. and Scotiabank. Release means a "release", as such term is defined in CERCLA. Required Lenders means Lenders having an aggregate Percentage of 66-2/3% or more. Scotiabank - see the Preamble. SEC means the Securities and Exchange Commission. Set Rate - see Section 2.2.3(c)(iv). Set Rate Auction means a solicitation of a Competitive Bid Quote setting forth Set Rates pursuant to Section 2.2. Set Rate Loans means Competitive Bid Loans the interest rates on which are determined on the basis of Set Rates pursuant to a Set Rate Auction. 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. 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. Syndicated Loan - see Section 2.1.1. Syndicated Loan Note - see Section 3.1.1. Taxes - see Section 7.6 Termination Date means 364 days after the Effective Date as such date is extended from time to time pursuant to Section 2.3 or such other date on which the Commitments shall terminate pursuant to Section 6.1 or 12.2. Type of Competitive Bid Loan or Borrowing - see Section 2.2.2. The types of Competitive Bid Loans or borrowings under this Agreement are as follows: Eurodollar Competitive Bid Loans or borrowings and Set Rate Loans or borrowings. Type of Syndicated Loan or Borrowing - see Section 2.1.2. The types of Syndicated Loans or borrowings under this Agreement are as follows: Alternate Base Rate Loans or borrowings and Eurodollar Loans or borrowings. Unmatured Event of 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. Welfare Plan means a "welfare plan", as such term is defined in section 3(i) of ERISA. 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 or 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 Syndicated Loans. ---------------- 2.1.1 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 (collectively the "Syndicated Loans" and individually each a "Syndicated 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 Syndicated 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 Syndicated Loans which all Lenders shall be committed to have outstanding hereunder (the "Commitment Amount") shall not at any time exceed $100,000,000 (as such amount is reduced from time to time pursuant to Section 6.1 and Section 2.2.2(b)). 2.1.2 Types of Syndicated Loans. Each Syndicated ------------------------- Loan shall be either an Alternate Base Rate Loan or a Eurodollar Loan (each a "type" of Syndicated Loan), as the Company shall specify in the related notice of borrowing or conversion pursuant to Section 2.1.3 or 2.1.4. Eurodollar Loans having the same Interest Period are sometimes called a "Group" or collectively "Groups". Alternate Base Rate Loans and Eurodollar Loans may be outstanding at the same time, provided that (i) not more than eight different Groups of Eurodollar Loans shall be outstanding at any one time and (ii) the aggregate principal amount of each Group of Eurodollar Loans shall at all times (including after giving effect to any conversion or continuation of any Syndicated Loans) be at least $5,000,000 and an integral multiple of $1,000,000. 2.1.3 Borrowing Procedures. The Company shall give -------------------- written or telephonic notice to the Agent of each proposed borrowing not later than (a) in the case of an Alternate Base Rate borrowing, 9:00 a.m., Portland time, on the proposed date of such borrowing, and (b) in the case of a Eurodollar borrowing, 9:00 a.m., Portland time, at least three Business Days prior to the proposed date of such borrowing. Each such notice 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, the Agent shall advise each Lender thereof. (The Company shall deliver written confirmation of each telephonic notice or send such confirmation by facsimile transmission to the Agent as soon as practicable on the same day such notice is given.) Not later than 12:00 noon, Portland time, on the date of a proposed borrowing, each Lender shall provide the Agent at the principal office of the Agent in Portland 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 shall pay over such funds to the Company on the requested borrowing date. Each borrowing shall be on a Business Day. Each borrowing shall be in an aggregate amount of at least $1,000,000, in the case of Alternate Base Rate Loans, or $5,000,000, in the case of Eurodollar Loans, and shall be in an integral multiple of $1,000,000. 2.1.4 Continuation and Conversion Procedures. -------------------------------------- Subject to the provisions of the last sentence of Section 2.1.2, the Company may convert all or any part of any outstanding Syndicated Loan into a Syndicated 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 Syndicated Loan, by giving written or telephonic notice to the Agent not later than (a) in the case of conversion into an Alternate Base Rate Loan, 9:00 a.m., Portland 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., Portland time, at least three Business Days prior to the proposed date of such conversion or continuation. Each such notice shall be effective upon receipt by the Agent and shall specify the date and amount of such conversion or continuation, 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, the Agent shall advise each Lender thereof. (The Company shall deliver written confirmation of each telephonic notice or send such confirmation by facsimile transmission to the Agent as soon as practicable on the same day such notice is given.) Subject to Section 2.1.6, 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 timely notice of continuation of a Eurodollar Loan, such Loan shall automatically convert to an Alternate Base Rate Loan on the last day of the Interest Period therefor. 2.1.5 Warranty upon Conversion or Continuation. ---------------------------------------- Each notice of conversion or continuation pursuant to Section 2.1.4 shall automatically constitute a warranty by the Company to the Agent and each Lender to the effect that, on the date of such requested conversion or continuation, no Event of Default or Unmatured Event of Default shall exist. 2.1.6 Conditions. Notwithstanding any other ---------- provision of this Agreement, no Lender shall be obligated to make any Syndicated 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 Unmatured Event of Default exists. 2.1.7 Pro Rata Treatment. All borrowings, ------------------ conversions and repayments of Syndicated Loans shall be effected so that after giving effect thereto each Lender will have a pro rata share (according to its Percentage) of all types of Syndicated Loans. 2.1.8 Commitments Several. The failure of any ------------------- Lender to make a requested Syndicated Loan on any date shall not relieve any other Lender of its obligation (if any) to make a Syndicated Loan on such date, but no Lender shall be responsible for the failure of any other Lender to make any Syndicated Loan to be made by such other Lender. 2.2 Competitive Bid Loans. --------------------- 2.2.1 The Company May Request Offers. In addition ------------------------------ to borrowings of Syndicated Loans provided for in Section 2.1, at any time prior to the Termination Date the Company may, as set forth in this Section 2.2, request the Lenders to make offers to make Competitive Bid Loans to the Company in Dollars. The Lenders may, but shall have no obligation to, make such offers and the Company may, but shall have no obligation to, accept any such offers in the manner set forth in this Section 2.2. 2.2.2 Types of Competitive Bid Loans. Competitive ------------------------------ Bid Loans may be Eurodollar Competitive Bid Loans or Set Rate Loans (each a "type" of Competitive Bid Loan), provided that: (a) there may not be Interest Periods for both Syndicated Loans and Competitive Bid Loans outstanding at the same time which have expiration dates occurring on more than 12 different dates; and (b) the aggregate principal amount of all Competitive Bid Loans, together with the aggregate principal amount of all Syndicated Loans, at any one time outstanding shall not exceed the Commitment Amount at such time. 2.2.3 Bid Procedure. ------------- (a) When the Company wishes to request offers to make Competitive Bid Loans, it shall give the Agent notice (a "Competitive Bid Quote Request") so as to be received no later than 9:00 a.m. Portland time on (x) the fourth Business Day prior to the date of borrowing proposed therein, in the case of a Eurodollar Auction or (y) the Business Day immediately preceding the date of borrowing proposed therein, in the case of a Set Rate Auction (or, in any such case, such other time and date as the Company and the Agent may agree). Upon receipt of a Competitive Bid Quote Request, the Agent shall promptly notify the Lenders by an invitation for bid in substantially the form of Exhibit B (an "Invitation for Competitive Bid Quotes"). The Company may request offers to make Competitive Bid Loans for up to three different Interest Periods in a single notice; provided that the request for each separate Interest Period shall be deemed to be a separate Competitive Bid Quote Request for a separate borrowing (a "Competitive Bid Borrowing"). Each Competitive Bid Quote Request shall be substantially in the form of Exhibit A and shall specify as to each Competitive Bid Borrowing: (i) the proposed date of such borrowing, which shall be a Business Day; (ii) the amount of such Competitive Bid Borrowing, which shall be at least $5,000,000 (or a larger multiple of $1,000,000) but shall not cause the limits specified in Section 2.2.2 hereof to be violated; (iii) the duration of the Interest Period applicable thereto; (iv) whether the Competitive Bid Quotes requested for a particular Interest Period are seeking quotes for Eurodollar Competitive Bid Loans or Set Rate Loans; and (v) if the Competitive Bid Quotes requested are seeking quotes for Set Rate Loans, the date on which the Competitive Bid Quotes are to be submitted if the date is before the proposed date of borrowing (the date on which such Competitive Bid Quotes are to be submitted is called the "Quotation Date"). Except as otherwise provided in this Section 2.2.3(a), not more than three Competitive Bid Quote Requests shall be given within any six consecutive Business Days (or such other number of days as the Company and the Agent may agree). (b) Each Lender may submit one or more Competitive Bid Quotes ("Competitive Bid Quotes" and individually, a "Competitive Bid Quote"), each containing an offer to make a Competitive Bid Loan in response to any Competitive Bid Quote Request; provided that, if the Company's request under Section 2.2.3(a) specified more than one Interest Period, such Lender may make a single submission containing one or more Competitive Bid Quotes for each such Interest Period. Each Competitive Bid Quote must be submitted to the Agent not later than (x) 2:00 p.m. Portland time on the fourth Business Day prior to the proposed date of borrowing, in the case of a Eurodollar Auction or (y) 10:00 a.m. Portland time on the Quotation Date, in the case of a Set Rate Auction (or, in any such case, such other time and date as the Company and the Agent may agree); provided that any Competitive Bid Quote may be submitted by the Lender acting as Agent (or its Eurodollar Office) only if the Lender acting as Agent (or such Eurodollar Office) notifies the Company of the terms of the offer contained therein no later than (x) 1:00 p.m. Portland time on the fourth Business Day prior to the proposed date of borrowing, in the case of a Eurodollar Auction or (y) 9:45 a.m. Portland time on the Quotation Date, in the case of a Set Rate Auction. (c) Each Competitive Bid Quote shall be substantially in the form of Exhibit C and shall specify: (i) the proposed date of borrowing and the Interest Period therefor; (ii) the principal amount of the Competitive Bid Loan for which each such offer is being made, which principal amount shall be at least $5,000,000 (or a larger multiple of $1,000,00); provided that the aggregate principal amount of all Competitive Bid Loans for which a Lender submits Competitive Bid Quotes (x) may be greater or less than the Commitment of such Lender but (y) may not exceed the principal amount of the Competitive Bid Borrowing for a particular Interest Period for which offers were requested; (iii) in the case of a Eurodollar Auction, the margin above or below the applicable Eurodollar Competitive Bid Rate (Reserve Adjusted) (the "Eurodollar Margin") offered for each such Competitive Bid Loan, expressed as a percentage (rounded upwards, if necessary, to the nearest 1/10,000th of 1%) to be added to or subtracted from the applicable Eurodollar Competitive Bid Rate (Reserve Adjusted); (iv) in the case of a Set Rate Auction, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/10,000th of 1%) offered for each such Competitive Bid Loan (the "Set Rate"); and (v) the identity of the quoting Lender. Unless otherwise agreed by the Agent and the Company, no Competitive Bid Quote shall contain qualifying, conditional or similar language or propose terms other than or in addition to those set forth in the applicable Competitive Bid Quote Request and, in particular, no Competitive Bid Quote may be conditioned upon acceptance by the Company of all (or some specified minimum) of the principal amount of the Competitive Bid Loan for which such Competitive Bid Quote is being made, provided that the submission by any Lender containing more than one Competitive Bid Quote may be conditioned on the Company not accepting offers contained in such submission that would result in such Lender making Competitive Bid Loans pursuant thereto in excess of a specified aggregate amount set forth in the Competitive Bid Quote (the "Competitive Bid Loan Limit"). (d) The Agent shall (x) in the case of a Set Rate Auction, as promptly as practicable after the Competitive Bid Quote is submitted (but in any event not later than 10:15 a.m. Portland time on the Quotation Date) or (y) in the case of a Eurodollar Auction, by 4:00 p.m. Portland time on the day a Competitive Bid Quote is submitted, notify the Company of the terms (i) of any Competitive Bid Quote submitted by a Lender that is in accordance with Sections 2.2.3(b) and 2.2.3(c), and (ii) of any Competitive Bid Quote that amends, modifies or is otherwise inconsistent with a previous Competitive Bid Quote submitted by such Lender with respect to the same Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall be disregarded by the Agent unless such subsequent Competitive Bid Quote is submitted solely to correct a manifest error in such former Competitive Bid Quote. The Agent's notice to the Company shall specify (A) the aggregate principal amount of the Competitive Bid Borrowing for which offers have been received and (B) the respective principal amounts and Eurodollar Margins or Set Rates, as the case may be, so offered by each Lender (identifying the Lender that made each Competitive Bid Quote). (e) Not later than (x) 4:00 p.m. Portland time on the third Business Day prior to the proposed date of borrowing, in the case of a Eurodollar Auction, or (y) 11:00 a.m. Portland time on the Quotation Date, in the case of a Set Rate Auction (or, in any such case, such other time and date as the Company and the Agent may agree), the Company shall notify the Agent of its acceptance or nonacceptance of the offers so notified to it pursuant to Section 2.2.3(d) (which notice shall be substantially in the form of Exhibit D (a "Competitive Bid Loan Acknowledgment") and shall specify the aggregate principal amount of offers from each Lender for each Interest Period that are accepted, it being understood that the failure of the Company to give such notice by such time shall constitute nonacceptance) and the Agent shall promptly notify each affected Lender. The notice from the Agent shall be in substantially the form of Exhibit E (a "Competitive Bid Loan Confirmation") and shall also specify the aggregate principal amount of offers for each Interest Period that were accepted and the lowest and highest Eurodollar Margins and Set Rates that were accepted for each Interest Period. The Company may accept any Competitive Bid Quote in whole or in part (provided that any Competitive Bid Quote accepted in part shall be at least $5,000,000 or a larger multiple of $1,000,000, unless otherwise required in order to pro rate Competitive Bid Quotations as set forth below in this Section 2.2.3(e)); provided that (i) the aggregate principal amount of each Competitive Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Quote Request; (ii) the aggregate principal amount of each Competitive Bid Borrowing shall be at least $5,000,000 (or a larger multiple of $1,000,000) but shall not cause the limits specified in Section 2.2.2 to be violated; (iii) acceptance of offers for each Interest Period may, subject to Section 2.2.3(e)(iv) below, be made only in ascending order of Eurodollar Margins or Set Rates, as the case may be, in each case beginning with the lowest rate so offered; (iv) the aggregate principal amount of each Competitive Bid Borrowing from any Lender may not exceed any applicable Competitive Bid Loan Limit of such Lender. If offers are made by two or more Lenders with the same Eurodollar Margins or Set Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which offers are accepted for the related Interest Period, the principal amount of Competitive Bid Loans in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible in proportion to the aggregate principal amount of such offers. Determinations by the Company of the amounts of Competitive Bid Loans shall be conclusive in the absence of manifest error. 2.2.4 Borrowing Procedure. Any Lender whose offer ------------------- to make any Competitive Bid Loan has been accepted in accordance with the terms and conditions of this Section 2.2 shall, not later than 12:00 noon Portland time on the date specified for the making of such Loan, make the amount of such Loan available to the Agent in immediately available funds, for account of the Company. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Company on such date by depositing the same, in immediately available funds, in an account of the Company designated by the Company. 2.2.5 Repayment of Competitive Bid Loans. The ---------------------------------- Company shall pay to the Agent for the account of each Lender that makes any Competitive Bid Loan the principal amount of such Competitive Bid Loan, and such Competitive Bid Loan shall mature, on the last day of the Interest Period for such Competitive Bid Loan. 2.2.6 No Effect on Commitment. The amount of ----------------------- Competitive Bid Loans made by any Lender shall not reduce such Lender's obligations under Section 2.1. 2.3 Extension of Termination Date. During the period ----------------------------- from and including the day which is 90 days before the Termination Date to and including the day which is 60 days before the Termination Date (other than a Termination Date pursuant to Section 6.1 or 12.2), 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 Request") in the form of Exhibit F, requesting an extension of the Termination Date for a period of 364 days. On or before the day which is 30 days after 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 during such 30-day period, 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 364 days effective on the day following the Termination Date. If any Lender (an "Objecting Lender") rejects, or is deemed not to have consented to, an Extension Request during the 30-day notice period, the Termination Date shall not be so extended; provided that if Lenders with an aggregate Percentage of less than 25% are Objecting Lenders, then the Termination Date shall be so extended if, on or before the Termination Date, 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 ----- promissory notes as follows: 3.1.1 Syndicated Loan Notes. The Syndicated 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 "Syndicated Loan Note" and collectively for all Lenders the "Syndicated Loan Notes") substantially in the form set forth in Exhibit G, 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). 3.1.2 Competitive Bid Loan Notes. The Competitive -------------------------- Bid 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 "Competitive Bid Loan Note" and collectively for all Lenders the "Competitive Bid Loan Notes") substantially in the form set forth in Exhibit H, 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. 3.2 Recordkeeping. Each Lender shall record in its ------------- records, or at its option on the schedules attached to its Syndicated Loan Note and Competitive Bid Loan Note, the date and amount of each Syndicated Loan and Competitive Bid Loan, as the case may be, made by such Lender, each repayment or conversion (if applicable) thereof and, in the case of each Eurodollar Loan and Competitive Bid 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 Notes. 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 Syndicated Loan Note or Competitive Bid Loan Note to repay the principal amount of the Syndicated Loans and Competitive Bid Loans evidenced by such Notes together with all interest accruing thereon. SECTION 4 INTEREST. 4.1 Interest Rates. The Company promises to pay interest -------------- on the unpaid principal amount of each Loan as follows: 4.1.1 Syndicated Loans. The Company promises to ---------------- pay interest on the unpaid principal amount of each Syndicated Loan for the period commencing on and including the date of such Syndicated Loan to but excluding the date such Syndicated Loan is paid in full, as follows: (a) at all times while such Syndicated Loan is an Alternate Base Rate Loan, at a rate per annum equal to the Alternate Base Rate from time to time in effect; and (b) at all times while such Syndicated 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 0.305%. 4.1.2 Competitive Bid Loans. The Company promises --------------------- to pay interest on the unpaid principal amount of each Competitive Bid Loan for the period commencing on and including the date of such Competitive Bid Loan to but excluding the date such Competitive Bid Loan is paid in full, as follows: (a) if such Competitive Bid Loan is a Eurodollar Competitive Bid Loan, the Eurodollar Competitive Bid Rate (Reserve Adjusted) for such Loan for the Interest Period thereafter plus (or minus) the Eurodollar Margin quoted by the Lender making such Loan in accordance with Section 2.2; and (b) if such Competitive Bid Loan is a Set Rate Loan, the Set Rate for such Loan for the Interest Period therefor quoted by the Lender making such Loan in accordance with Section 2.2. 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 Base Rate from time to time in effect plus 1%. 4.2 Interest Payment Dates. Accrued interest on each ---------------------- Alternate Base Rate Loan shall be payable on the last day of each January, April, July and October and at maturity. Accrued interest on each Eurodollar Loan and Competitive Bid 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 at maturity. After maturity, accrued interest on all Loans shall be payable on demand. 4.3 Setting and Notice of Eurodollar Rates and Eurodollar ----------------------------------------------------- Competitive Bid Rates. The applicable Eurodollar Rate and - --------------------- Eurodollar Competitive Bid 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 or Eurodollar Competitive Bid 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 or Eurodollar Competitive Bid 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 definitions of Eurodollar Rate and Eurodollar Competitive Bid Rate). If, as to any Interest Period, any Reference Lender is unable or fails to notify the Agent of its applicable Eurodollar Rate by 11:00 a.m., Portland time, two Business Days before such Interest Period, or its applicable Eurodollar Competitive Bid Rate by 11:00 a.m., Portland time, four Business Days before such Interest Period, then the Eurodollar Rate or Eurodollar Competitive Bid Rate, as the case may be, shall be determined on the basis of the rate of the other Reference Lender. 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 Alternate Base Rate Loans bearing interest at the Alternate Base Rate, 365 or 366 days, as appropriate). The applicable interest rate for each Alternate Base Rate Loan shall change simultaneously with each change in the Alternate Base 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 0.120% 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 agrees to pay to the Agent ----------- for its own account such fees as are agreed to from time to time by the Company and the Agent. SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS. 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 Commitment Amount 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 $5,000,000 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. 6.2 Prepayments. The Company may from time to time ----------- prepay Syndicated 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 11:00 a.m., Portland time, on the date of such prepayment, in the case of Alternate Base Rate Loans, and not less than two Business Days prior to the date of such prepayment, in the case of Eurodollar Loans, in each case specifying the Syndicated Loans to be prepaid and the date (which shall be a Business Day) and amount of prepayment, (b) each partial prepayment of Syndicated Loans shall be in an aggregate principal amount of at least $5,000,000 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. After giving effect to any prepayment of Eurodollar Loans, each Group of Eurodollar Loans shall be at least $5,000,000 and an integral multiple of $1,000,000. Competitive Bid Loans shall not be prepaid. SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES. 7.1 Making of Payments. All payments of principal of or ------------------ interest on the Syndicated Loan Notes and Competitive Bid Loan Notes, and of all fees, shall be made by the Company to the Agent in immediately available funds at its office in Portland not later than 12:00 noon, Portland 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 payments on Syndicated Loan Notes received in collected funds by the Agent for the account of such Lender. The Agent shall promptly remit to a Lender that made a Competitive Bid Loan all payments on the applicable Competitive Bid Loan Note 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 Syndicated Loans or Competitive Bid Loans as the Company shall direct by notice to be received by the Agent on or before the date of such payment. In the absence of such notice, the Agent shall apply such payment first to such Syndicated Loans then due as the Agent shall determine in its discretion, and second, if all outstanding Syndicated Loans then due have been paid in full, to all outstanding Competitive Bid Loans, such payment to be prorated among such Competitive Bid Loans based upon the ratio of the principal amount of a Lender's outstanding Competitive Bid Loans to the principal amount of all outstanding Competitive Bid Loans. 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 or Eurodollar Competitive Bid 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. 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 Unmatured Event of 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 on Syndicated Loans. 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 Syndicated Loan 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 Syndicated Loan Notes (other than any non-pro rata interest payment resulting from a Syndicated 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 Syndicated Loan 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 or 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 (as defined below) 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 so 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 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) In consideration of the Company's agreements in clause (a) of this Section 7.6, each Lender which is not organized under the laws of the United States or a State thereof hereby agrees (such Lender's "Exemption Agreement"), to the extent permitted by applicable law (including any applicable double taxation treaty of the jurisdiction of its incorporation and the jurisdiction in which its Eurodollar Office is located), to execute and deliver to the Company (i) on or before the first date on which any payment is to be made to such Lender hereunder, a United States Internal Revenue Service Form 1001 or 4224 (or successor form) and, if reasonably requested by the Company, Internal Revenue Service Form W-8 or W-9 (or successor form), as appropriate, in each case properly completed and claiming a complete exemption, from withholding or deduction for or on account of Recipient Taxes of such Lender, and (ii) a new Form 1001 or 4224 (or successor form) and, if reasonably requested by the Company, Internal Revenue Service Form W-8 or W-9 (or successor form), as appropriate, upon the expiration or obsolescence of any previously delivered Form. (c) 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. 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 or Eurodollar Competitive Bid Loans, its Notes or its obligation to make Eurodollar Loans or Eurodollar Competitive Bid Loans, or shall change the basis of taxation of payments to any Lender of the principal of or interest on its Eurodollar Loans or Eurodollar Competitive Bid Loans or any other amounts due under this Agreement in respect of its Eurodollar Loans or Eurodollar Competitive Bid Loans or its obligation to make Eurodollar Loans or Eurodollar Competitive Bid 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 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 or Eurodollar Competitive Bid Loans, its Notes or its obligation to make Eurodollar Loans or Eurodollar Competitive Bid 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 Eurodollar Competitive Bid 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 Notes 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 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 either Reference Lender that deposits in Dollars (in the applicable amounts) are not being offered to such Reference Lender 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 Eurodollar 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 an Alternate Base 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 Alternate Base 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 an Alternate Base Rate Loan. Each Alternate Base 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 or Eurodollar Competitive Bid Loan, but excluding any loss of margin), as reasonably determined by such Lender, as a result of (a) any payment or prepayment or conversion of any Eurodollar Loan of such Lender (including, without limitation, any conversion pursuant to Section 8.3) or (b) any failure of the Company to borrow or convert any Eurodollar Loans on a date specified therefor in a notice of borrowing or conversion pursuant to this Agreement (other than as a result of a default by such Lender or the Agent), or to borrow any Eurodollar Competitive Bid Loan reflected in a Competitive Bid Loan Acknowledgment (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 or Eurodollar Competitive Bid 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 and Eurodollar Competitive Bid 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 or the Eurodollar Competitive Bid Rate, as the case may be, 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 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 Notes 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 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: 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, Bylaws 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 29, 1994 and unaudited consolidated financial statements as at November 5, 1994, 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. The Company's confidential operating results dated February 25, 1995 for the Fiscal Year ended January 28, 1995, copies of which have been furnished to the Lenders, were prepared by the Company with the best information available as of the date such report was prepared. 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 29, 1994 and the Company's Quarterly Report on Form 10-Q for the Fiscal Quarter ended November 5, 1994, no 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 and Welfare Plans. During the twelve- ------------------------- consecutive-month period prior to the date of the execution and delivery of this Agreement or the making of any Loan hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which could result in the incurrence by the Company of any material liability, fine or penalty. 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- 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: 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 Unmatured Event of 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 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 (a) to the effect that such officer is not aware of any Event of Default or Unmatured Event of 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, periodic 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 an Unmatured Event of 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 institution of any steps by the Company, any of its Subsidiaries or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a lien under Section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Company furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Company of any material liability, fine or penalty, or any material increase in the contingent liability of the Company with respect to any post-retirement Welfare Plan benefit; 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. 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 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 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 or on the cost of the construction, extension or improvement of any new or existing asset, provided that such Lien is created contemporaneously with, or within 270 days after, such acquisition, completion of such construction, such 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 or 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. 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 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. 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 Unmatured Event of 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 Unmatured Event of 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 Unmatured Event of 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 Unmatured Event of 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. 10.12 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 Employee Benefit Plans. Maintain, and cause each ---------------------- Subsidiary to maintain, each Pension Plan in compliance in all material respects with all applicable requirements of law and regulations, and make all required contributions to Multiemployer Plans. 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 Unmatured Event of 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) 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 evidence, reasonably satisfactory to the Agent, that 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 (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 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 Boley Jones & Grey, counsel to the Company, substantially in the form of Exhibit I. 11.1.6 Other. Such other documents as the Agent or ----- any Lender may reasonably request. 11.2 All Loans. The obligation of each Lender to make --------- each Loan is subject to the following further conditions precedent that: 11.2.1 No Default. (a) No Event of Default or ---------- Unmatured Event of Default has occurred and is continuing or will result from the making of such Loan and (b) the warranties of the Company contained in Section 9 (excluding Sections 9.6 and 9.8) are true and correct in all material respects as of the date of such requested Loan, with the same effect as though made on such date. 11.2.2 Confirmatory Certificate. If requested by ------------------------ the Agent or any Lender, the Agent shall have received (in sufficient counterparts to provide one to each Lender) a certificate dated the date of such requested Loan and signed by a duly authorized officer of the Company as to the matters set out in Section 11.2.1 (it being understood that each request by the Company for the making of a Loan shall be deemed to constitute a warranty by the Company that the conditions precedent set forth in Section 11.2.1 will be satisfied at the time of the making of such Loan), together with such other documents as the Agent or any Lender may reasonably request in support thereof. 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 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 Pension Plans. (i) Institution of any steps ------------- by the Company or any other Person to terminate a Pension Plan if as a result of such termination the Company 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 $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. 12.1.8 Withdrawal Liability Under Multiemployer Plans. ---------------------------------------------- The Company or any ERISA Affiliate shall make a complete or partial withdrawal from a Multiemployer Plan and the plan sponsor of 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. 12.1.9 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. 12.1.10 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 Authorization. Each Lender authorizes the Agent to ------------- act on behalf of such Lender to the extent provided herein or in any other document or instrument delivered hereunder or in connection herewith, and to take such other action as may be reasonably incidental thereto. 13.2 Indemnification. Each Lender agrees to reimburse and --------------- indemnify the Agent for, and hold the Agent harmless against, a share (determined in accordance with such Lender's Percentage) of any loss, damage, penalty, action, judgment, obligation, cost, disbursement, liability or expense (including reasonable attorneys' fees) which may at any time be incurred by the Agent (and for which the Agent is not reimbursed by the Company) arising out of or in connection with the performance of its obligations or the exercise of its powers hereunder or any other document or instrument delivered hereunder or in connection herewith, as well as the costs and expenses of defending against any claim against the Agent arising hereunder or thereunder, provided that no Lender shall be liable for any of the foregoing which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from the Agent's gross negligence or willful misconduct. The provisions of this Section 13.2 shall survive repayment of the Loans, cancellation of the Notes and any termination of this Agreement. 13.3 Exculpation. The Agent shall be entitled to rely ----------- upon advice of counsel concerning legal matters, and upon this Agreement and any schedule, certificate, statement, report, notice or other writing which it believes to be genuine or to have been presented by a proper person. Neither the Agent nor any of its directors, officers, employees or agents shall (i) be responsible for any recitals, representations or warranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of, this Agreement or any other instrument or document delivered hereunder or in connection herewith, (ii) be responsible for the validity, genuineness, perfection, effectiveness, enforceability, existence, value or enforcement of any collateral security, (iii) be under any duty to inquire into or pass upon any of the foregoing matters, or to make any inquiry concerning the performance by the Company or any other obligor of its obligations, or (iv) in any event, be liable as such for any action taken or omitted by it or them, except for its or their own gross negligence or willful misconduct. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, the Agent in its individual capacity. 13.4 Credit Investigation. Each Lender acknowledges that -------------------- it has made such inquiries and taken such care on its own behalf as would have been the case had such Lender's Commitment been granted and such Lender's Loans been made directly by such Lender to the Company without the intervention of the Agent or any other Lender. Each Lender agrees and acknowledges that the Agent makes no representations or warranties about the creditworthiness of the Company or any other party to this Agreement or with respect to the legality, validity, sufficiency or enforceability of this Agreement or any Note or the value of any security therefor. 13.5 Agent and Affiliates. The Agent in its individual -------------------- capacity shall have the same rights and powers hereunder as any other Lender and may exercise or refrain from exercising the same as though it were not the Agent, and the Agent and its affiliates may accept deposits from and generally engage in any kind of business with the Company or any affiliate thereof as if the Agent were not the Agent hereunder. 13.6 Action on Instructions of the Required Lenders. As ---------------------------------------------- to any matters not expressly provided for by this Agreement (including, without limitation, enforcement of this Agreement and collection of the Loans), the Agent shall not be required to exercise any discretion or take any action, but the Agent shall in all cases be fully protected in acting or refraining from acting upon the written instructions (i) from the Required Lenders, except for instructions which under the express provisions hereof must be received by the Agent from all Lenders, and (ii) in the case of such instructions, from all Lenders. In no event will the Agent be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. The relationship between the Agent and the Lenders is and shall be that of agent and principal only and nothing herein contained shall be construed to constitute the Agent a trustee for any holder of a Note or of a participation therein nor to impose on the Agent duties and obligations other than those expressly provided for herein. 13.7 Funding Reliance. (a) Unless the Agent receives ---------------- notice from a Lender by 12:00 noon, Portland time, on the day of a proposed borrowing that such Lender will not make available to the Agent the amount which would constitute its Percentage of such borrowing in accordance with Section 2.1.3, the Agent may assume that such Lender has made such amount available to the Agent and, in reliance upon such assumption, make a corresponding amount available to the Company. If and to the extent such Lender has not made any such amount available to the Agent, such Lender and the Company jointly and severally agree to repay such amount to the Agent forthwith on demand, together with interest thereon (i) in the case of the Company, the interest rate applicable to Loans comprising such borrowing and (ii) in the case of such Lender, the Federal Funds Rate (or, beginning on the third Business Day after demand, the rate set forth in clause (i)). Nothing set forth in this clause (a) shall relieve any Lender of any obligation it may have to make any Loan hereunder. (b) Unless the Agent receives notice from the Company prior to the due date for any payment hereunder that the Company does not intend to make such payment, the Agent may assume that the Company has made such payment and, in reliance upon such assumption, make available to each Lender its share of such payment. If and to the extent that the Company has not made any such payment to the Agent, each Lender which received a share of such payment shall repay such share (or the relevant portion thereof) to the Agent forthwith on demand, together with interest thereon at the Federal Funds Rate (or, beginning on the third Business Day after demand, at the Alternate Base Rate). Nothing set forth in this clause (b) shall relieve the Company of any obligation it may have to make any payment hereunder. 13.8 Resignation. The Agent may resign as such at any ----------- time upon at least 30 days' prior notice to the Company and the Lenders. In the event of any such resignation, the Required Lenders (with, so long as no Event of Default or Unmatured Event of Default exists, the consent of the Company, which consent shall not be unreasonably delayed or withheld) shall as promptly as practicable appoint a successor Agent. If no successor shall have been so appointed, and shall have accepted such appointment, within 30 days after the giving of notice of such resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America having a combined capital, surplus and undivided profits of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from all further duties and obligations under this Agreement. After any resignation pursuant to this Section 13.8, the provisions of this Section 13 shall inure to the benefit of the retiring Agent as to any actions taken or omitted to be taken by it while it was Agent 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 Commitment Amount, (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. Except as otherwise provided in Sections ------- 2.1.3 and 2.1.4, all notices hereunder shall be in writing (including, without limitation, facsimile transmission) and shall be sent to the applicable party at its address shown below its signature hereto or at such other address as such party may, by written notice received by the other party, have designated as its address for such purpose. Notices sent by facsimile transmission shall be deemed to have been given when receipt is confirmed by confirming transmission equipment or acknowledged by the addressee; notices sent by mail shall be deemed to have been given three Business Days after the date when sent by registered or certified mail, postage prepaid; and notices sent by hand delivery shall be deemed to have been given when received. For purposes of Sections 2.1.3 and 2.1.4, the Agent shall be entitled to rely on telephonic instructions from any person that the Agent in good faith believes is an authorized officer or employee of the Company, and the Company shall hold the Agent and each Lender harmless from any loss, cost or expense resulting from any such reliance. 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) 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) 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 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 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 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 Syndicated Loans and Commitment (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lender's Syndicated Loans) in a minimum aggregate amount equal to the lesser of (i) the assigning Lender's remaining Commitment and (ii) $5,000,000; 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; (b) no assignment and delegation may be made to any Person if the assigning Lender would be assigning and delegating its entire Commitment and, at the time of such assignment and delegation, the assigning Lender would have any Competitive Bid Loan outstanding; and (c) 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 J (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 in clause (c) 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 assignment and delegation, the Company shall execute and deliver to the Agent (for delivery to the Assignee and the Assignor, as applicable) a new Syndicated Loan Note in the principal amount of the Assignee's Commitment and, if the assigning Lender has retained a Commitment hereunder, a replacement Syndicated Loan Note in the principal amount of the Commitment retained by the assigning Lender (such Syndicated Loan Note to be in exchange for, but not in payment of, the predecessor Syndicated Loan Note held by such assigning Lender). Each such Syndicated Loan 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 Syndicated Loans and its Syndicated Loan 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 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 ------------- GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. 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 Forum Selection and Consent to Jurisdiction. ANY ------------------------------------------- LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE, MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. 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. 14.13 Maximum Interest Rate. It is the express intention --------------------- of the Agent, each Lender and the Company that nothing contained in this Agreement, any Note, or in any other loan document shall require the Company, or any other person obligated under this Agreement or any Note to pay any interest (before or after an Event of Default, as scheduled, compounded, or otherwise accrued or charged) hereunder or under any Note at a rate exceeding the maximum permissible rate under applicable law. If the Company should pay or the Agent or any Lender should collect or receive any interest in excess of the rate specified in the preceding sentence, such payment shall be deemed to be the property of the Company in all regards, and shall be held by the Agent or the Lender, as the case may be, for the benefit of the Company, and shall be repaid to the Company with interest accrued thereon from the date of receipt by the Agent or the Lender, as the case may be, to the date of repayment to the Company, at the overnight Federal Funds Rate as determined by the Agent. 14.14 Waiver of Jury Trial. THE COMPANY, THE AGENT AND -------------------- EACH LENDER HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY RELATED DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM OR RELATING TO ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 14.15 Oregon Legal Notice. WITHOUT LIMITING THE VALIDITY ------------------- OF THE CHOICE OF NEW YORK LAW PROVIDED HEREIN, UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE LENDERS AFTER THE 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. Delivered at Portland, Oregon, as of the day and year first above written. FRED MEYER, INC. By MICHAEL H. DON ----------------------------------- Vice President and Corporate Treasurer 3800 S.E. 22nd Avenue P.O. Box 42121 Portland, Oregon 97242 Attention: Michael H. Don Vice President and Corporate Treasurer Facsimile: 503-797-5299 THE BANK OF NOVA SCOTIA, individually and as Agent By ERRETT HUMMEL ----------------------------------- Title Relationship Manager -------------------------------- 888 S.W. Fifth Ave., Suite 750 Portland, Oregon 97204 Attention: Errett Hummel Relationship Manager Facsimile: 503-222-5502 FIRST INTERSTATE BANK OF OREGON, N.A. By MARCIA J. JANNER ------------------------------------ Marcia J. Jannner, Vice President 1300 S.W. Fifth Avenue, T-19 Portland, Oregon 97201 Attention: Marcia J. Janner Vice President Facsimile: 503-225-3162 WEST ONE BANK, IDAHO By JAMES C. AALBERG ----------------------------------- James C. Aalberg, Vice President P.O. Box 8247 Boise, Idaho 83733 Attention: Trudy Jackson Assistant Vice President Facsimile: 208-383-7563 CREDIT SUISSE By DAVID WORTHINGTON ----------------------------------- David Worthington Title MSM -------------------------------- By MARILOU PANELZUELA ----------------------------------- Marilou Palenzuela Title MSM -------------------------------- 633 W. Fifth St., 64th Floor Los Angeles, California 90071 Attention: Rita Asa Facsimile: 213-955-8245 BANQUE NATIONALE DE PARIS, by and through its San Francisco, California Agency By KATHIE WOLFE ----------------------------------- Title VP -------------------------------- 180 Montgomery Street San Francisco, California 94104 Attention: Donald A. Hart Treasurer Facsimile: 415-989-9041 SCHEDULE I COMMITMENTS AND PERCENTAGES Lender Commitment Percentage - ------ ---------- ---------- The Bank of Nova Scotia $ 35,000,000 35% First Interstate Bank of Oregon, N.A. $ 20,000,000 20% West One Bank, Idaho $ 15,000,000 15% Credit Suisse $ 15,000,000 15% Banque Nationale de Paris $ 15,000,000 15% ----------- ---- TOTAL $100,000,000 100% SCHEDULE II SCHEDULE OF SUBSIDIARIES Percentage Jurisdiction Owned By The Of Company and Subsidiary Organization Its Subsidiaries - ---------- ------------ ---------------- B&B Stores, Inc. Montana 100% B&B Pharmacy, Inc. Montana 100% CB&S Advertising Agency, Inc. Oregon 100% Distribution Trucking Company Oregon 100% FM Holding Corporation Delaware 100% Grand Central, Inc. Utah 100% FM Retail Services, Inc. Washington 100% Fred Meyer (HK) Limited Hong Kong 100% Fred Meyer, Inc. (a Washington corporation) Washington 100% Fred Meyer of Alaska, Inc. Alaska 100% Fred Meyer of California, Inc. California 100% Natur Glo, Inc. Oregon 100% Roundup Co. Washington 100% EXHIBIT A FORM OF COMPETITIVE BID QUOTE REQUEST _____________________, 19____ The Bank of Nova Scotia 888 S.W. Fifth Avenue, Suite 750 Portland, Oregon 97204 Attention: Jay Daughenbaugh Facsimile: (503) 222-5502 Telephone: (503) 222-4396 This instrument constitutes a Competitive Bid Quote Request under, and as defined by, the Credit Agreement dated as of March 6, 1995 (as amended or modified and in effect from time to time, the "Credit Agreement") among the undersigned Fred Meyer, Inc., a Delaware corporation (the "Company"), the Lenders which are parties thereto, and The Bank of Nova Scotia, as Agent. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. The Company hereby requests Competitive Bid Loan(s), subject to the terms of the Credit Agreement, as follows: (a) Date of borrowing (the "Borrowing Date") (which is a Business Day): _________________, 19___. Quotation Date for Set Rate Loans if before the Borrowing Date: ________________, 19___. (b) Aggregate principal amount of Competitive Bid Loans requested: $_____________ ("Maximum Request"). (c) Number of Competitive Bid Loans requested and principal amounts thereof: _________________ Competitive Bid Loan(s) in the amount of $________________, $_______________ and $________________, respectively. ___________________ At least one (1) Business Day after the delivery of this Competitive Bid Quote Request in the case of a Set Rate Auction and at least four (4) Business Days after delivery of this Competitive Bid Quote Request in the case of a Eurodollar Auction. Subject to the terms of the Credit Agreement, a minimum of $5,000,000 and, for amounts in excess thereof, an integral multiple of$1,000,000. (d) Interest Period(s) and its/their maturity date(s): Principal Amount Maturity Date Type of Loan ---------------- ------------- ------------ $ $ $ The Company hereby represents and warrants that immediately following the making of the Competitive Bid Loan(s) requested above: (1) the aggregate principal amount of all outstanding Syndicated Loans will be $________________; (2) the aggregate principal amount of all outstanding Competitive Bid Loans will be $______________; and (3) the sum of items (1) and (2) above will be $____________, which is equal to or less than the Commitment Amount of $_______________. The Company further certifies and warrants that at the time hereof the applicable conditions precedent under Section 11 have been satisfied. The Company agrees that if prior to the time of the Competitive Bid Loan related hereto, any matter certified to, confirmed, represented or warranted herein by it will not be true and correct at such time as if then made, it will immediately so notify the Agent. IN WITNESS WHEREOF, the Company has caused this Competitive Bid Quote Request to be executed and delivered by its duly authorized officer this _____ day of _______________, 19____. FRED MEYER, INC. By: ______________________________________ Name: ____________________________________ Title: ___________________________________ ___________________ Subject to the terms of the Credit Agreement, a minimum of $5,000,000 and, for amounts in excess thereof, an integral multiple of $1,000,000. For each Interest Period for a Set Rate Loan, no earlier than seven (7) days after the Borrowing Date requested herein, and no later than the earlier of (a) ninety (90) days after such Borrowing Date, and (b) the Termination Date. For each Interest Period for a Eurodollar Competitive Bid Loan, subject to the terms of the Credit Agreement, a period commencing on the Borrowing Date requested herein and ending on, but excluding, the numerically corresponding day in the first, second, or third calendar thereafter; provided that the Interest Period shall in no event extend beyond the Termination Date. Set Rate Loan (SRL) or Eurodollar Competitive Bid Loan (ECL). EXHIBIT B FORM OF INVITATION FOR COMPETITIVE BID QUOTES _____________________, 19____ To: [Name of Lender] Re: Invitation for Competitive Bid Quotes to Fred Meyer, Inc. (the "Company") Pursuant to Section 2.2.3 of the Credit Agreement dated as of March 6, 1995 (as amended or modified and in effect from time to time, the "Credit Agreement") among the Company, the Lenders which are parties thereto, and the undersigned, as Agent, we are pleased on behalf of the Company to invite you to submit Competitive Bid Quotes to the Company for the following proposed Competitive Bid Loans: Date of Borrowing: ________________________________, 19____
Eurodollar Competitive Bid Rate Principal Amount Interest Period Type of Loan (Reserve Adjusted) - ---------------- --------------- ---------------- ---------------------- 1. 2. 3.
Your Competitive Bid Quote must comply with Section 2.2.3 of the Credit Agreement and the foregoing terms in which the Competitive Bid Quote Request was made. Terms not otherwise expressly defined herein shall have the meaning set forth in the Credit Agreement. Please respond to this invitation by no later than [10:00 a.m./ 2:00 p.m.] Portland time on __________________________, 19_____. THE BANK OF NOVA SCOTIA, as Agent By:_________________________________________ Authorized Officer ___________________ Set Rate Loan (SRL) or Eurodollar Competitive Bid Rate Loan (ECL). Applicable to Eurodollar Competitive Bid Loans. Set Rate Loan. Eurodollar Competitive Bid Loan. EXHIBIT C FORM OF COMPETITIVE BID QUOTE COMPETITIVE BID QUOTE FROM _________________________ (Contact Person: _________________________) (Telephone No.: ___________________) The Bank of Nova Scotia 888 S.W. Fifth Avenue, Suite 750 Portland, Oregon 97205 Attention: Jay Daughenbaugh Facsimile: (503) 222-5502 Telephone: (503) 222-4396 This instrument constitutes an irrevocable Competitive Bid Quote for one or more Competitive Bid Loans under, and as defined by, the Credit Agreement dated as of March 6, 1995 (as amended or modified and in effect from time to time, the "Credit Agreement") among Fred Meyer, Inc. a Delaware corporation (the "Company"), the various financial institutions (including the undersigned (the "Lender")) which are parties thereto, and The Bank of Nova Scotia, as Agent. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. (1) The Company's related Competitive Bid Quote Request inviting this Competitive Bid Quote has requested Competitive Bid Loan(s), subject to the terms of the Credit Agreement, in the aggregate principal amount of $_______________ ("Maximum Request") with a date of borrowing of ______________________, 19____ (the "Borrowing Date"). (2) The Lender hereby offers to make the following Competitive Bid Loan(s) on the Borrowing Date provided that the Company may accept bids for such Loans up to $_____________ in the aggregate ("Maximum Offer"): ___________________ Name of Lender Submitting Bid. Principal Amount Maturity Date Type Set Eurodollar - -------------------- of Interest of Rate Competitive Bid Period Loan -------- Rate (Reserve ------------- -------- Adjusted) +/- Eurodollar Margin --------------------- $ $ $
(3) The Lender acknowledges that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement, irrevocably obligate(s) the Lender to make the Competitive Bid Loan(s) for which any offer(s) are accepted by the Company, in whole or in part, in accordance with the terms of the Credit Agreement. Dated: ______________________ _____________________________________ By: _________________________________ Name: _______________________________ Title: ______________________________ ___________________ A minimum of $5,000,000, and, for amounts in excess thereof, an integral multiple of $1,000,000 for each Competitive Bid Loan. Set Rate Loan (SRL) or Eurodollar Competitive Bid Rate Loan (ECL). Insert the rate of interest per annum (expressed to the nearest 1/10,000 of 1%). Name of Lender submitting Competitive Bid Quote. EXHIBIT D FORM OF COMPETITIVE BID LOAN ACKNOWLEDGMENT The Bank of Nova Scotia 888 S.W. Fifth Avenue, Suite 750 Portland, Oregon 97205 Attention: Jay Daughenbaugh This instrument constitutes a Competitive Loan Acknowledgment under, and as defined by, the Credit Agreement dated as of March 6, 1995 (as amended or modified and in effect from time to time, the "Credit Agreement") among Fred Meyer, Inc., a Delaware corporation (the "Company"), the Lenders which are parties thereto, and The Bank of Nova Scotia, as Agent. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. Pursuant to Section 2.2.3(e) of the Credit Agreement, the Company hereby confirms its [acceptance of the Competitive Bid Quote] [acceptance of a portion of the Competitive Bid Quote ("Portion")] dated ________________, 19____, for the Competitive Bid Loan(s) to take place on ______________________, 19___, on the following terms: A. Competitive Bid Loan. -------------------- 1. Principal Amount of Competitive Bid Loan $____________________ 2. Type of Competitive Bid Loan ____________________ 3. Competitive Bid Loan maturity date ____________, 19____ 4. Amount of, and (a) Set Rate or (b) Eurodollar Competitive Bid Rate (Reserve Adjusted) +/- Eurodollar Margin for, each Portion [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% B. Competitive Bid Loan. -------------------- 1. Principal Amount of Competitive Bid Amount $___________________ 2. Type of Competitive Bid Loan ___________________ 3. Competitive Bid Loan maturity date ___________, 19____ 4. Amount of, and (a) Set Rate or (b) Eurodollar Competitive Bid Rate (Reserve Adjusted) +/- Eurodollar Margin for, each Portion [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% C. Competitive Bid Loan. -------------------- 1. Principal Amount of Competitive Bid Loan $___________________ 2. Type of Competitive Bid Loan ___________________ 3. Competitive Bid Loan maturity date ___________, 19____ 4. Amount of, and (a) Set Rate or (b) Eurodollar Competitive Bid Rate (Reserve Adjusted) +/- Eurodollar Margin for, each Portion [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% The Company hereby confirms to each Lender that the above-described Competitive Bid Quote, or Portion(s) thereof, were accepted or rejected in accordance with Section 2.2.3 of the Credit Agreement. The Company hereby further certifies and warrants that at the time hereof the applicable conditions precedent under Section 11 have been satisfied. The undersigned hereby confirms that the proposed Competitive Loan is to be made available to it in accordance with Section 2.2.4 of the Credit Agreement. The Company hereby represents and warrants that immediately following the making of the Competitive Bid Loan(s): (1) the aggregate principal amount of all outstanding Syndicated Loans will be $________________; (2) the aggregate principal amount of all outstanding Competitive Bid Loans will be $______________; and (3) the sum of items (1) and (2) above will be $_______________, which is equal to or less than the Commitment Amount of $____________. __________________ Repeat as necessary. Except to the extent, if any, that prior to the time of the Competitive Bid Loan related hereto the Agent has received written notice to the contrary from the Company, each matter certified to in the Competitive Bid Quote Request related hereto shall be deemed once again to be certified as true and correct at the date of such Borrowing as if then made. The Company has caused this Competitive Bid Loan Acknowledgment to be executed and delivered, and the certification and warranties contained herein to be made, by its authorized officer this _____ day of __________________________, 19____. FRED MEYER, INC. By: ______________________________________ Name: ____________________________________ Title: ___________________________________ EXHIBIT E FORM OF COMPETITIVE BID LOAN CONFIRMATION ______________________, 19____ To all Lenders Submitting Competitive Bid Quotes Under the Credit Agreement. This instrument constitutes a Competitive Loan Confirmation under, and as defined by, the Credit Agreement dated as of March 6, 1995 (as amended or modified and in effect from time to time, the "Credit Agreement") among Fred Meyer, Inc., a Delaware corporation (the "Company"), the Lenders which are parties thereto, and The Bank of Nova Scotia, as Agent. Terms not otherwise expressly defined herein shall have the meanings set forth in the Credit Agreement. The Company delivered to the Lender a Competitive Bid Quote Request on _________________, 19____, and the following Bid(s) were accepted on _________________, 19___ (the "Competitive Bid Loan Acceptance Date") on the following terms: A. Competitive Bid Loan. -------------------- 1. Principal Amount of Competitive Bid Loan $____________________ 2. Type of Competitive Bid Loan ____________________ 3. Competitive Bid Loan maturity date ____________, 19____ 4. Amount of, and (a) Set Rate or (b) Eurodollar Competitive Bid Rate (Reserve Adjusted) +/- Eurodollar Margin for, each Portion [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% B. Competitive Bid Loan. -------------------- 1. Principal Amount of Competitive Bid Amount $___________________ 2. Type of Competitive Bid Loan ___________________ 3. Competitive Bid Loan maturity date ___________, 19____ 4. Amount of, and (a) Set Rate or (b) Eurodollar Competitive Bid Rate (Reserve Adjusted) +/- Eurodollar Margin for, each Portion [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% C. Competitive Bid Loan. -------------------- 1. Principal Amount of Competitive Bid Loan $___________________ 2. Type of Competitive Bid Loan ___________________ 3. Competitive Bid Loan maturity date ___________, 19____ 4. Amount of, and (a) Set Rate or (b) Eurodollar Competitive Bid Rate (Reserve Adjusted) +/- Eurodollar Margin for, each Portion [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% [Bidding Lender] $__________ at _____% D. The aggregate outstanding balance of all Competitive Bid Loans is $____________________. THE BANK OF NOVA SCOTIA, as Agent By: ______________________________________ Name: ____________________________________ Title: ___________________________________ ___________________ Repeat as necessary. After giving effect to the Competitive Bid Loan(s) being confirmed. EXHIBIT F FORM OF REQUEST FOR EXTENSION OF TERMINATION DATE [Date] [Name and Address of Lender] Pursuant to the Credit Agreement dated as of March 6, 1995 (as amended or otherwise modified, the "Credit Agreement") among Fred Meyer, Inc. (the "Company"), various financial institutions and The Bank of Nova Scotia, by and through its Portland, Oregon Branch, as Agent, this represents the Company's request to extend the Termination Date (as defined in the Credit Agreement) by 364 days. Please indicate whether you consent to such extension of the Termination Date by signing the attached copy of this Extension Request in the space provided below and returning the same to the undersigned within 30 days of the date of this request. Very truly yours, FRED MEYER, INC. By: ______________________________________ Title: ___________________________________ [Name of Lender] Date: ____________________ ACCEPTS _______ REJECTS _______ By: _______________________________ Title:_____________________________ EXHIBIT G FORM OF SYNDICATED LOAN NOTE $_______________________ _________________, 199___ Portland, Oregon FOR VALUE RECEIVED, FRED MEYER, INC., a Delaware corporation (the "Company") promises to pay to the order of ___________________________ at the principal office of THE BANK OF NOVA SCOTIA (the "Agent") in Portland, Oregon, on the date(s) set forth in the Credit Agreement referred to below, ___________________ Dollars ($______________) or, if less, the aggregate unpaid amount of all Syndicated Loans made by the payee to the Company pursuant to the Credit Agreement (as shown in the records of the payee or, at the payee's option, on the schedule attached hereto). The Company further promises to pay interest on the unpaid principal amount of each Loan evidenced hereby from the date of such Loan until such Loan is paid in full, payable at the rate(s) and at the time(s) set forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, the Credit Agreement, dated as of March 6, 1995 (herein, as amended or otherwise modified from time to time, called the "Credit Agreement"), among the Company, certain financial institutions (including the payee) and the Agent, to which Credit Agreement reference is hereby made for a statement of the terms and provisions under which this Note may or must be paid prior to its due date or may have its due date accelerated. In addition to and not in limitation of the foregoing and the provisions of the Credit Agreement, the Company further agrees, subject only to any limitation imposed by applicable law, to pay all reasonable expenses, including reasonable attorneys' fees and legal expenses, incurred by the holder of this Note in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise, and whether or not litigation is actually commenced. In the event the holder of this Note is made a party to any litigation because of the existence of the indebtedness evidenced by this Note, the Company shall reimburse the holder for its costs and reasonable attorneys' fees incurred with respect to such litigation. In the event litigation is commenced by a party hereto to enforce or interpret any provision of this Note, or to collect any amount due hereunder, the prevailing party in such litigation shall be entitled to receive, in addition to all other sums and relief, its reasonable costs and attorneys' fees, incurred both at and in preparation for trial and any appeal or review, such amount to be set by the court(s) before which the matter is heard. The Company also agrees to pay any attorneys' fee incurred by the holder of this Note in connection with any bankruptcy or similar proceedings wherein the Company is the debtor. Except as set forth in the Credit Agreement, each of the Company and each guarantor hereof waives demand, presentment, protest, diligence, notice of dishonor and any other formality in connection with this Note. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. FRED MEYER, INC. By _______________________________________ Vice President and Corporate Treasurer Schedule attached to Note dated _____________________, 199____, of FRED MEYER, INC. ________________ payable to the order of ______________ __________________________. Date and Date and Amount of Amount of Loan or of Repayment or of Conversion from Conversion into Unpaid Another Type of Another Type of Interest Principal Notation Loan Loan Period Balance Made by 1. ALTERNATE BASE RATE LOANS ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 2. EURODOLLAR LOANS ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ EXHIBIT H FORM OF COMPETITIVE BID LOAN NOTE $100,000,000 _________________, 199___ Portland, Oregon FOR VALUE RECEIVED, FRED MEYER, INC., a Delaware corporation (the "Company"), promises to pay to the order of ___________________________ at the principal office of THE BANK OF NOVA SCOTIA (the "Agent") in Portland, Oregon, on the date(s) set forth in the Credit Agreement referred to below, One Hundred Million and No/100 Dollars ($100,000,000) or, if less, the aggregate unpaid amount of all Competitive Bid Loans made by the payee to the Company pursuant to the Credit Agreement (as shown in the records of the payee or, at the payee's option, on the schedule attached hereto). The Company further promises to pay interest on the unpaid principal amount of each Loan evidenced hereby from the date of such Loan until such Loan is paid in full, payable at the rate(s) and at the time(s) set forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, the Credit Agreement, dated as of March 6, 1995 (herein, as amended or otherwise modified from time to time, called the "Credit Agreement"), among the Company, certain financial institutions (including the payee) and the Agent, to which Credit Agreement reference is hereby made for a statement of the terms and provisions under which this Note may or must be paid prior to its due date or may have its due date accelerated. In addition to and not in limitation of the foregoing and the provisions of the Credit Agreement, the Company further agrees, subject only to any limitation imposed by applicable law, to pay all reasonable expenses, including reasonable attorneys' fees and legal expenses, incurred by the holder of this Note in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise, and whether or not litigation is actually commenced. In the event the holder of this Note is made a party to any litigation because of the existence of the indebtedness evidenced by this Note, the Company shall reimburse the holder for its costs and reasonable attorneys' fees incurred with respect to such litigation. In the event litigation is commenced by a party hereto to enforce or interpret any provision of this Note, or to collect any amount due hereunder, the prevailing party in such litigation shall be entitled to receive, in addition to all other sums and relief, its reasonable costs and attorneys' fees, incurred both at and in preparation for trial and any appeal or review, such amount to be set by the court(s) before which the matter is heard. The Company also agrees to pay any attorneys' fee incurred by the holder of this Note in connection with any bankruptcy or similar proceedings wherein the Company is the debtor. Except as set forth in the Credit Agreement, each of the Company and each guarantor hereof waives demand, presentment, protest, diligence, notice of dishonor and any other formality in connection with this Note. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. FRED MEYER, INC. By _______________________________________ Vice President and Corporate Treasurer Schedule attached to Note dated _____________________, 199____, of FRED MEYER, INC. $100,000,000 payable to the order of ______________________ __________________. Date and Date and Unpaid Amount of Amount of Principal Notation Loan Repayment Balance Made by 1. SET RATE LOANS ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 2. EURODOLLAR COMPETITIVE BID LOANS ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ EXHIBIT I FORM OF OPINION OF COUNSEL [Letterhead of Stoel Rives Boley Jones & Grey] March ____, 1995 The Bank of Nova Scotia, by and through its Portland, Oregon Branch, individually and as Agent, and the other Lenders which are parties to the Credit Agreement referred to below 888 S.W. Fifth Avenue, Suite 750 Portland, Oregon 97204 Re: Credit Agreement dated as of March 6, 1995 among Fred Meyer, Inc., various financial institutions and The Bank of Nova Scotia, as Agent ------------------------------------------------ Gentlemen: We have acted as counsel to Fred Meyer, Inc., a Delaware corporation (the "Company"), in connection with the Credit Agreement dated as of March 6, 1995 among the Company, various financial institutions (the "Lenders") and The Bank of Nova Scotia, by and through its Portland, Oregon Branch, as Agent (the "Credit Agreement"). This opinion letter is rendered to you pursuant to Section 11.1.5 of the Credit Agreement. Unless otherwise defined herein, capitalized terms used herein shall have the respective meanings set forth in the Credit Agreement. For the purpose of rendering our opinions herein, we have examined (i) the Credit Agreement and the Notes, (ii) certificates of public officials and of officers of the Company, (iii) certified copies of the Company's Restated Certificate of Incorporation and Amended and Restated Bylaws, (iv) resolutions of the Company's Board of Directors authorizing the Company's participation in the transactions contemplated by the Credit Agreement, and (v) the agreements referred to as "material agreements" in the attached Officer's Certificate of the Company (the "Certificate"). We have also examined such other documents and records, and have made such investigations of law, as we have deemed necessary to enable us to render this opinion. As to the accuracy of certain factual matters, we have relied on certificates and written statements of officers of the Company and factual representations made by the Company within the Credit Agreement. For purposes of this opinion, "actual knowledge" means the conscious awareness of facts or other information by Gary R. Barnum or Katherine Fritchman, the persons at this firm principally involved with the transactions contemplated by the Credit Agreement. Based on the foregoing and subject to the qualifications below, we are of the opinion that: (1) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own and operate its properties, to carry on its business as described in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 1994, to enter into the Credit Agreement, to issue the Notes and to carry out the transactions contemplated thereby. (2) The Credit Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and the Credit Agreement and the Notes have been duly executed and delivered by the Company and constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. (3) None of the execution and delivery by the Company of the Credit Agreement and the Notes, the consummation by the Company of the transactions contemplated by the Credit Agreement or compliance by the Company with the terms and conditions of the Credit Agreement and the Notes (a) conflicts with, results in a breach of, or constitutes a default under any of the terms, conditions or provisions of the Restated Certificate of Incorporation or Amended and Restated Bylaws of the Company or, to our actual knowledge, any "material agreement" referred to in the Certificate or judicial order by which the Company or any Subsidiary is bound, or (b) to our actual knowledge, results in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary under any such agreement or order. (4) Neither the execution and delivery of the Credit Agreement and the Notes nor the payment of the Notes conflicts with any present federal statute binding on the Company or any Delaware statute, rule or regulation contained in or promulgated under the General Corporation Law of the State of Delaware binding on the Company. (5) To our actual knowledge, no governmental consents, approvals, authorizations, registrations, declarations or filings are required by the Company in connection with the extensions of credit under the Credit Agreement. (6) The Company is not an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. The opinions set forth above are subject to (a) the effect of bankruptcy, insolvency, reorganization, moratorium, and other similar laws generally affecting creditors, rights and (b) the application of general principles of equity, including, without limitations, the right to specific performance. A court might not enforce certain covenants or allow acceleration of the due date of the Notes if it concludes that such enforcement or acceleration would be unreasonable or not undertaken in good faith under the then existing circumstances, but the inclusion of such remedies does not, in our opinion, affect the validity of the Credit Agreement or the Notes. In addition, no opinion is expressed herein as to Section 14.7 of the Credit Agreement. We express no opinion as to (a) the enforceability under certain circumstances of any provision imposing penalties, late payment charges or increases in interest rate upon delinquency in payment or the occurrence of Events of Default, (b) the enforceability of any choice of law provision, (c) the compliance with certain financial covenants under the "material agreements" set forth in the Certificate, or (d) the compliance with applicable anti-fraud provisions of federal or state securities laws. The opinions herein expressed are limited to matters governed by the laws of the United States of America and the State of Oregon and, as to the opinions expressed in paragraphs (1), (2), and (4) above, the General Corporation Law of the State of Delaware, in each case as it exists at the date hereof, and we express no opinion as to the law of any other jurisdiction. In rendering the opinions set forth in paragraph (2) above, we have assumed, as to matters purported to be governed by the laws of the State of New York, that the laws of the State of Oregon and the State of New York do not differ in any material respect. This opinion is rendered only to the Agent and the Lenders and is solely for their benefit in connection with the above transactions. This opinion may not be relied upon by the Agent or any Lender for any other purpose or quoted to or relied upon by any other person, firm or corporation for any purpose without our prior written consent. Very truly yours, STOEL RIVES BOLEY JONES & GREY By _________________________________________ Gary R. Barnum EXHIBIT J FORM OF ASSIGNMENT AGREEMENT Date:___________________ To: Fred Meyer, Inc. and The Bank of Nova Scotia, as Agent Re: Assignment under the Credit Agreement referred to below ------------------------------------------------------- Gentlemen and Ladies: We refer to Section 14.9.1 of the Credit Agreement dated as of March 6, 1995 (as amended or otherwise modified, the "Credit Agreement") among Fred Meyer, Inc. (the "Company"), various financial institutions and The Bank of Nova Scotia, by and through its Portland, Oregon Branch, as agent (the "Agent"). Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. ____________________ (the "Assignor") hereby sells and assigns to ______________ (the "Assignee"), and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to _______% of all of the Syndicated Loans and Commitments, such sale, purchase, assignment and assumption to be effective as of ___________________, 199_, or such later date on which the Company and the Agent shall have consented hereto (the "Effective Date"). After giving effect to such sale, purchase, assignment and assumption, the Assignee's Percentage for purposes of the Credit Agreement will be as set forth opposite the Assignee's name on the signature pages hereof. The Assignor hereby instructs the Agent to make all payments from and after the Effective Date in respect of the interest assigned hereby directly to the Assignee. The Assignor and the Assignee agree that all interest and fees accrued up to, but not including, the Effective Date are the property of the Assignor, and not the Assignee. The Assignee agrees that, upon receipt of any such interest or fees, the Assignee will promptly remit the same to the Assignor. The Assignee hereby confirms that it has received a copy of the Credit Agreement and the exhibits and schedules related thereto, together with copies of the documents which were required to be delivered under the Credit Agreement as a condition to the making of the initial Loans thereunder. The Assignee acknowledges and agrees that it (i) has made and will continue to make such inquiries and has taken and will take such care on its own behalf as would have been the case had its Commitment been granted and its Syndicated Loans been made directly by the Assignee to the Company without the intervention of the Agent, the Assignor or any other Lender and (ii) has made and will continue to make, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it has deemed appropriate, its own credit analysis and decisions relating to the Credit Agreement. The Assignee further acknowledges and agrees that neither the Agent nor the Assignor has made any representation or warranty about the creditworthiness of the Company or any other party to the Credit Agreement or with respect to the legality, validity, sufficiency or enforceability of the Credit Agreement or any Note or the value of any security therefor. This assignment shall be made without recourse to the Assignor. The Assignor represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim. The Assignee represents and warrants to the Company and the Agent that, as of the date hereof, the Company will not be obligated to pay any greater amount under Section 7.6 or 8.1 of the Credit Agreement than the Company is obligated to pay to the Assignor under such Section. Except as otherwise provided in the Credit Agreement, effective as of the Effective Date: (a) the Assignee (i) shall be deemed automatically to have become a party to the Credit Agreement and have all the rights and obligations of a "Lender" under the Credit Agreement as if it were an original signatory thereto to the extent specified in the second paragraph hereof; and (ii) agrees to be bound by the terms and conditions set forth in the Credit Agreement as if it were an original signatory thereto; and (b) the Assignor shall be released from its obligations under the Credit Agreement to the extent specified in the second paragraph hereof. The Assignor and the Assignee hereby agree that the [Assignor] [Assignee] will pay to the Agent the processing fee referred to in Section 14.9.1 of the Credit Agreement. The payment of the processing fee shall be a condition to the effectiveness of this assignment. The Assignee hereby advises each of you of the following administrative details with respect to the assigned Loans and Commitment: (A) Address for Notices: Institution Name: Address: Attention: Telephone: Facsimile: (B) Payment Instructions: The Assignee has delivered to the Company and the Agent (or is delivering to the Company and the Agent concurrently herewith) the tax forms referred to in Section 7.6 of the Credit Agreement. Please evidence your receipt hereof and consent to the sale, assignment, purchase and assumption set forth herein by signing and returning counterparts hereof to the Assignor and the Assignee. Percentage = ____% [ASSIGNEE] By:____________________________________ Title: [ASSIGNOR] By:____________________________________ Title: ACKNOWLEDGED AND CONSENTED TO this _____ day of ____________, 199_ THE BANK OF NOVA SCOTIA, as Agent By:____________________________________ Title:_________________________________ ACKNOWLEDGED AND CONSENTED TO this _____ day of ____________, 199_ FRED MEYER, INC. By:____________________________________ Title:_________________________________ EX-10.B 5 EXHIBIT 10B EXHIBIT 10-B FRED MEYER, INC. BONUS PLAN DESCRIPTION AS AMENDED TO JANUARY 28, 1995 INTRODUCTION: The Fred Meyer, Inc. Bonus Plan compensates selected employees based on goals and objectives determined periodically by the Company. Under the Bonus Plan, bonuses are allocated based on programs prescribed for each of two categories of participants: (1) Regional and Store bonusable participants, and (2) all other bonusable participants. REGIONAL AND STORE BONUSABLE PARTICIPANTS PROGRAM: Awards for regional and store bonusable participants are based upon predetermined and preapproved objectives for store contribution income and corporate pretax income. Each quarter and year the Company sets objectives for sales, contribution income and pretax income based upon the Company's projections, each region/store manager's projections and historical results. These objectives are reviewed and approved by the Company's Compensation Committee. The actual bonus awarded each quarter and for the year is based on a predefined percentage of the participant's regular salary for the year, as adjusted for actual versus budgeted results. Budgeted results give rise to a target bonus, while greater than budgeted results give rise to a larger bonus (up to 237.5 percent of target bonus), and lower than budgeted results will result in a smaller bonus (as low as 0 percent of target bonus). A portion of each participant's bonus is generally calculated on how well the participant's area of responsibility does, and a smaller portion is based on how well the Company does. The Company portion is capped at 200 percent and the store/region portion is capped at 250 percent. ALL OTHER BONUSABLE PARTICIPANTS PROGRAM: The program applicable to all other management/ supervisory and other bonusable participants not included in the regional and store program is based on the following formula: The bonus paid is based on the Company's objectives for sales, pretax income, and various departmental budgets as prepared by the department's management, and approved by the Compensation Committee. The bonus amount paid is determined as a percentage of each participant's salary (target bonus), adjusted upward or downward based on performance. Participants can achieve a maximum of 200 percent of their target bonus for exceeding their performance goals or a minimum of 0 percent of target bonus for lower than predefined results. A portion of a participant's bonus is generally based on his/her department's results, with the larger portion based on the Company's pretax income results. Both the department and Company portion is capped at 200 percent. Twenty percent of the target bonus of the Chairman, the President and all Senior Vice Presidents is deferred into the Company's Capital Bonus Plan. The Capital Bonus Plan measures the return on assets invested in new stores and major remodels to determine the actual payment of the deferred portion of the participant's bonus. Payments are made after the second and third full years' results under that Plan. YEAR-END REVIEW AND PAYMENT: Bonuses are generally paid in April following the year in which performance goals are measured. The Compensation Committee approves the final amount of total bonuses to be paid and the amount paid to executive officers prior to such payment. The Compensation Committee of the Board of Directors can approve discretionary amounts resulting from unusual circumstances affecting the Company. SUPERIOR PERFORMANCE BONUS PLAN: Vice Presidents, Senior Vice Presidents, the Chief Operating Officer and Chief Executive Officer are eligible to receive stock bonuses based on the Company achieving superior performance levels as approved in advance by the Compensation Committee of the Board of Directors. The number of shares paid as a bonus, which vest one-third per year over a three-year period, is based on the ratio of shareholder value added as a percent of total assets. EX-10.G 6 EXHIBIT 10G EXHIBIT 10G EMPLOYMENT AGREEMENT (AS AMENDED BY AMENDMENT NO. 1) DATED: August 27, 1991 BETWEEN: FRED MEYER, INC. 3800 SE 22nd Avenue Portland, OR 97242 "Company" AND: ROBERT G. MILLER 4375 South Shore Boulevard Lake Oswego, OR 97035 "Employee" The parties agree as follows: 1. General. ------- This Agreement sets forth the terms upon which Employee shall be employed by the Company. Notwithstanding the foregoing, the Company may terminate the Employee's employment at any time, and Employee's employment hereunder will be considered "at will," subject to the Company's providing the benefits hereinafter specified in accordance with the terms hereof. 2. Employment. ---------- Employee shall be employed by Company on a full-time basis to perform duties as Chief Executive Officer and Chairman of the Board of the Company. 3. Compensation and Disability Benefits. ------------------------------------ 3.1 Salary. For services performed during the term ------ of Employee's employment with the Company, the Company shall pay Employee an annual salary (prorated for any portion of a year), payable in equal periodic installments not less than monthly, of $500,000, subject to annual review by the Compensation Committee of the Board of Directors of the Company. 3.2 Bonus. Employee will be eligible to participate ----- in the Company's bonus plan on the same basis as other executives. Employee's bonuses for the Company's 1994 fiscal year and for fiscal years thereafter will be up to 100 percent of his annual salary, to be determined upon the achievement of financial objectives approved in advance by the Company's Board of Directors. 3.3 Insurance/Profit Sharing. Employee shall be ------------------------ entitled to participate as an executive officer in all existing Company insurance, profit sharing and other benefit plans in which executive officers may participate, including the Company's Excess Deferral Plan, on the same basis as other executive officers of the Company. 3.4 Long Term Disability Benefits. The Company will ----------------------------- provide to Employee the long term disability benefits described in Appendix A to this Agreement. This benefit is in addition to benefits under any group plan purchased by the Employee. In the event of Total Disability as defined in Appendix A, Employee's salary provided for in Paragraph 3.1, above, will be continued during the elimination period. 3.5 Retiree Medical Benefits. After termination of ------------------------ Employee's employment for any reason after reaching age 55, the Company will pay Employee or his present spouse if she survives him, as applicable, a medical supplement to the extent determined as follows: (a) The supplement shall compensate for the premium value to Employee of medical coverage comparable to that provided under the Company's program applicable to retirees generally (the Fred Meyer Plan) during any period in which the following applies: (1) Neither Employee nor his surviving spouse is eligible for coverage under the Fred Meyer Plan. (2) Neither Employee nor his surviving spouse is eligible under a plan of a successor employer for medical benefits that are reasonably comparable to benefits under the Fred Meyer Plan. (3) Employee is at least 55 years old. (b) The supplement shall not exceed the smallest of the following amounts, as applicable, reduced by the employee cost applicable at the time under the Fred Meyer Plan (references to Employee shall include his present spouse): (1) The cost of COBRA continuation coverage available from the Company that Employee could have received by timely election. (2) The cost to Employee for coverage if Employee had timely exercised all available conversion rights under the Company's medical program for active employees. (3) The cost to Employee of the coverage actually in effect for Employee from time to time to the extent the coverage is reasonably comparable to coverage under the Fred Meyer Plan at the time. (c) The supplement shall be paid only with respect to benefits Employee would have received under the Fred Meyer Plan if Employee had terminated when eligible under that Plan. (d) The supplement shall be paid in cash to Employee or his surviving spouse or, at the Company's election, by direct payment of the appropriate portion of the cost of coverage. The amount paid shall constitute compensation income to Employee or his surviving spouse, shall be reported on IRS form W-2 and any applicable state form, and shall be subject to all applicable state and federal withholding as non-qualified deferred compensation. 4. Severance. --------- 4.1 In the event Employee is terminated by the Company for any reason other than for "cause," death or permanent disability, employee shall be entitled to payment of two years of compensation at Employees last determined salary (payable on the Company's normal payroll dates and without interest). 4.2 "Cause" is defined for the purposes of this Agreement as (a) embezzlement or fraud against the Company; (b) conviction of a felony which in the judgment of the Board of Directors of the Company adversely affects the business or reputation of the Company; (c) conduct in wanton and knowing disregard of corporate policy; or (d) willful and continuous failure, in the judgment of the Board of Directors, to perform substantially the reasonably assigned duties with the Company after written notice and reasonable opportunity to perform. 5. Pension and Benefits. -------------------- 5.1 Normal Retirement Benefit. Employee's normal ------------------------- retirement benefit shall be a pension starting at the end of the first month after age 62 and continuing for Employee's life equal to $10,805 per month. The benefit shall be reduced by 5 percent for each year by which Employee's total completed years of employment is less than 14, as shown on the following Schedule: Accrued Benefit --------------- Completed Years Employment Pension Amount of Employment Year End per month at 62 - --------------- ---------- --------------- 2 8/31/93 $ 4,322 3 8/31/94 4,862 4 8/31/95 5,402 5 8/31/96 5,943 6 8/31/97 6,483 7 8/31/98 7,023 8 8/31/99 7,564 9 8/31/00 8,104 10 8/31/01 8,644 11 8/31/02 9,184 12 8/31/03 9,724 13 8/31/04 10,265 14 8/31/05 10,805 5.2 Early Retirement Benefit. If employment is ------------------------ terminated by Employee or Company for any reason before normal retirement date, Employee may elect to receive the accrued normal retirement benefit starting at the end of any month after age 55. If benefits start before the end of the first month after age 62, the amount from the Schedule in 5.1 shall be reduced 5/12 of one percent for each month by which the benefit starts early. 5.3 Spouse's Death Benefit. If Employee dies ---------------------- leaving a surviving spouse to whom he is now married, the spouse shall receive a monthly pension for her life as follows: (a) If Employee had retired and was receiving benefits or dies during the first month for which benefits were to be paid, one half of Employee's monthly benefit shall continue to the spouse. (b) If (a) does not apply, the spouse may elect to start a benefit as of the end of any month after the later of the date of death or the date Employee would have reached age 55. The benefit shall be one half of the amount Employee would have received if he had terminated just before death and elected to start benefits at the date benefits start to the spouse. 5.4 Additional Benefit. Retirement and Spouse's ------------------ death benefit under 5.1 through 5.3 shall be in addition to and shall not reduce or be reduced by any benefits under the Supplemental Income Plan, the Excess Deferral Plan, the Profit Sharing Plan or any other plan maintained by the Company or an affiliate. 6. Miscellaneous Benefits. ---------------------- 6.1 Club Membership. The Company shall pay the cost --------------- of one club membership for Employee during the term of Employee's employment with the Company. 6.2 Automobile. The Company will provide an ---------- automobile for Employee's use while he is employed by the Company. The Company will also pay all operating expenses associated with the automobile. 6.3 Vacation. Employee will be entitled to five -------- weeks of vacation annually. 6.4 Medical Expenses. Beginning on the date ---------------- Employee commences employment with the Company, the Company will provide reimbursement for medical expenses of Employee and his dependents under the Company's medical reimbursement plan, without any waiting or qualification period and without exclusions for any existing conditions. 7. Successors and Assigns; Entire Agreement. ---------------------------------------- 7.1 The rights and benefits of Employee under this Agreement are personal to him and, except as may be set forth herein, may not be transferred or assigned voluntarily or involuntarily. 7.2 This Agreement shall be binding on the Company, its successors and assigns, including any person acquiring control of the Company's business and operations. 7.3 This Agreement contains the entire agreement and understanding by and between the Employee and the Company with respect to the employment of Employee and the payments provided for in this Agreement shall be in lieu of any other claims of Employee relating to his employment or benefits, including claims relating to termination of employment. 8. Applicable Law. -------------- This Agreement shall be construed in accordance with the laws of the State of Oregon. AGREEMENT DATED AUGUST 27, 1991 EXECUTED AS FOLLOWS: - --------------------------------------------------- FRED MEYER, INC. By KENNETH THRASHER, SR. V.P. ------------------------------- ROBERT G. MILLER ---------------------------------- Robert G. Miller AMENDMENT NO. 1 DATED AUGUST 1, 1994 EXECUTED AS FOLLOWS: - -------------------------------------------------------- FRED MEYER, INC. By ROGER A. COOKE ------------------------------- Executed: July 14, 1994 ROBERT G. MILLER ---------------------------------- Robert G. Miller Executed: July 19, 1994 EX-10.J 7 EXHIBIT 10J EXHIBIT 10-J SECOND LEASE MODIFICATION AGREEMENT THIS SECOND LEASE MODIFICATION AGREEMENT ("Agreement") is made and entered into this 16th day of August, 1994, by and between REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon limited partnership ("Landlord"), and FRED MEYER, INC., a Delaware corporation, ("Tenant"). R E C I T A L S This Agreement is made with reference to the following facts and objectives: A. As of October 22, 1986, Landlord (formerly Fred Meyer Real Estate Properties, Ltd.) and Tenant entered into a lease for the real property located at 2200 Baseline Street, Cornelius, Oregon (the "Original Lease"), and more particularly described in the lease. The Original Lease has been amended by Lease Modification Agreement dated February 7, 1992. Such documents are hereinafter collectively referred to as the "Lease". B. Landlord and Tenant desire to amend and modify the Lease as set forth below. C. Capitalized terms not otherwise defined in this Agreement shall have the same meaning as set forth in the Lease. NOW, THEREFORE, in consideration of the foregoing facts and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant hereby amend and modify the Lease as follows: 1. Term; Fixed Rent. Schedule A-2 to the Lease is hereby ---------------- ------------ deleted and Schedule A-2.1, attached hereto and incorporated -------------- herein by reference, is substituted in lieu thereof. 2. Effective Date. The provisions of this Agreement shall -------------- be effective as of May 1, 1994. 4. Ratification. Except as herein modified, the Lease is ------------ unchanged and remains in full force and effect. 5. Successors and Assigns. Each and all of the covenants, ---------------------- terms, agreements and obligations of this Agreement shall extend to and bind and inure to the benefit of the successors and/or assigns of said parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the respective dates set opposite their signatures below, but this Agreement on behalf of such party shall be deemed to have been dated as of the date first above written. LANDLORD: 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 Date: August 31, 1994 By DAVID W. RAMUS --------- -------------------------------- David W. Ramus -------------------------------- (typed or printed name) Its Vice President ---------------------------- TENANT: FRED MEYER, INC., a Delaware corporation Date: August 9, 1994 By SCOTT L. WIPPEL -------- -------------------------------- Scott L. Wippel -------------------------------- (typed or printed name) Its Senior Vice President ---------------------------- SCHEDULE A-2.1 TO LEASE DATED OCTOBER 22, 1986, AS AMENDED, BETWEEN REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, LANDLORD, AND FRED MEYER, INC., TENANT 1. Primary Term Expiration Date. December 30, 2012. ---------------------------- 2. Annual Rent During Primary Term. ------------------------------- 2.1 Fixed Rent. The Fixed Rent shall be as follows: Period Annual Fixed Rent ------ ----------------- 1. 05/01/1994 - 12/31/1997 $475,000 2. 01/01/1998 - 12/31/2002 $484,462 3. 01/01/2003 - 12/31/2007 $494,872 4. 01/01/2008 - 12/31/2012 $506,323 2.2 Percentage Rent. One-half percent (1/2%) of sales over Eighteen Million Dollars ($18 Million). 3. Renewal Options. Two (2) ten (10)-year Renewal Terms. --------------- 4. Annual Rent During Renewal Terms. -------------------------------- 4.1 Fixed Rent. 4.1.1 The Fixed Rent during the first Renewal Term shall be Five Hundred Sixty Thousand Dollars ($560,000.00) plus the amount of annual base rent paid under the Underlying Lease in excess of Ninety-Four Thousand Six Hundred Forty-Seven Dollars ($94,647.00); 4.1.2 The Fixed Rent during the second Renewal Term shall be Six Hundred Forty-Five Thousand Dollars ($645,000.00) plus the amount of annual base rent paid under the Underlying Lease in excess of Ninety-Four Thousand Six Hundred Forty-Seven Dollars ($94,647.00). 4.2 Percentage Rent. One-half percent (1/2%) of sales over Eighteen Million Dollars ($18 Million). EX-10.J 8 EXHIBIT 10J EXHIBIT 10-J SECOND LEASE MODIFICATION AGREEMENT THIS SECOND LEASE MODIFICATION AGREEMENT ("Agreement") is made and entered into this 13th day of April, 1994, by and between REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon limited partnership ("Landlord"), and FRED MEYER OF ALASKA, INC., an Alaska corporation ("Tenant"). R E C I T A L S This Agreement is made with reference to the following facts and objectives: A. As of October 22, 1986, Landlord (formerly Fred Meyer Real Estate Properties, Ltd.) and Tenant entered into a lease for the real property located at 19 College Road, Fairbanks, Alaska (the "Original Lease"), and more particularly described in the lease. The Original Lease has been amended by Lease Modification Agreement dated February 7, 1992. Such documents are hereinafter collectively referred to as the "Lease". B. Landlord and Tenant desire to amend and modify the Lease as set forth below. C. Capitalized terms not otherwise defined in this Agreement shall have the same meaning as set forth in the Lease. NOW, THEREFORE, in consideration of the foregoing facts and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant hereby amend and modify the Lease as follows: 1. Term; Fixed Rent. Schedule A to the Lease is hereby ---------------- ---------- deleted and Schedule A-1, attached hereto and incorporated herein ------------ by reference, is substituted in lieu thereof. 2. Option to Cancel. At any time during the Primary Term, ---------------- Tenant shall have the option to cancel the Lease upon delivery of written notice (the "Cancellation Notice") and payment of a lease cancellation fee (the "Lease Cancellation Fee") calculated in accordance with Schedule B attached hereto and incorporated ---------- herein. Upon Tenant's exercise of the option to cancel, the Lease shall terminate on the last day of the eighteenth (18th) full calendar month following delivery of the Cancellation Notice (the "Early Termination Date"). The Lease Cancellation Fee shall be due and payable on the Early Termination Date. 3. Effective Date. The provisions of this Agreement shall -------------- be effective as of February 1, 1994. 4. Ratification. Except as herein modified, the Lease is ------------ unchanged and remains in full force and effect. 5. Successors and Assigns. Each and all of the covenants, ---------------------- terms, agreements and obligations of this Agreement shall extend to and bind and inure to the benefit of the successors and/or assigns of said parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the respective dates set opposite their signatures below, but this Agreement on behalf of such party shall be deemed to have been dated as of the date first above written. LANDLORD: 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 Date: March 29, 1994 By PETER F. BECHEN -------- -------------------------------- Peter F. Bechen ----------------------------------- (typed or printed name) Its Vice President ------------------------------- TENANT: FRED MEYER OF ALASKA, INC., an Alaska corporation Date: April 13, 1994 By SCOTT L. WIPPEL -------- ----------------------------------- Scott L. Wippel ----------------------------------- (typed or printed name) Its Senior Vice President ------------------------------- Date: __________, 1994 By ________________________________ ___________________________________ (typed or printed name) Its _______________________________ SCHEDULE A-1 TO LEASE DATED OCTOBER 22, 1986, AS AMENDED, BETWEEN REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, LANDLORD, AND FRED MEYER OF ALASKA, INC., TENANT 1. Primary Term Expiration Date. June 29, 2009. ---------------------------- 2. Annual Rent During Primary Term. ------------------------------- 2.1 Fixed Rent. Three Hundred Sixty-Two Thousand Nine Hundred Sixty Dollars ($362,960.00). 2.2 Percentage Rent. None. 3. Renewal Options. One (1) ten (10)-year Renewal Term. --------------- 4. Annual Rent During Renewal Term. ------------------------------- 4.1 Fixed Rent. Four Hundred Fifty-Three Thousand Seven Hundred Dollars ($453,700.00), plus the amount of annual base rent paid under the Underlying Lease in excess of One Hundred Nine Thousand Three Hundred Twenty-Two and 45/100 Dollars ($109,322.45). (This amount includes the adjustment to the Fixed Rent, pursuant to Paragraph 5 below, that occurs on the commencement of the Renewal Term; however, the Fixed Rent will still adjust pursuant to Paragraph 5 below as a result of any other adjustments in the base rent under the Underlying Lease during the Renewal Term.) 4.2 Percentage Rent. None. 5. Adjustments To Fixed Rent. During the Primary Term and ------------------------- the Renewal Term, if any, the Fixed Rent amount is subject to adjustment on the same basis and in the same dollar amount of any adjustment in the base rental required to be paid under the Underlying Lease in effect as of February 1, 1994. (The Fixed Rent shall not be adjusted as a result of any subsequent modifications of the Underlying Lease.) For example, if the rent under the Underlying Lease increased by Fifty Thousand Dollars ($50,000.00) per annum, then the Fixed Rent under the Lease would increase by Fifty Thousand Dollars ($50,000.00). SCHEDULE B TO LEASE DATED OCTOBER 22, 1986, AS AMENDED, BETWEEN REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, LANDLORD, AND FRED MEYER OF ALASKA, INC., TENANT LEASE CANCELLATION FEE SCHEDULE EX-10.Q 9 EXHIBIT 10Q EXHIBIT 10Q LEASE CANCELLATION AGREEMENT THIS LEASE CANCELLATION AGREEMENT (this "Agreement") is made as of this 17th day of January, 1995, by and between REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon limited partnership ("Lessor"), and FRED MEYER, INC., a Delaware ("Lessee"). RECITALS This Agreement is entered into with reference to and upon the basis of the following facts, understandings and agreements: A. By a certain Lease Agreement dated October 22, 1986, Lessor's predecessor demised to Lessee certain real property and the improvements located thereon which real property is more particularly described in Exhibit A, attached hereto and --------- incorporated herein by reference (the "Property") Said Lease Agreement was subsequently amended by Lease Modification Agreement dated February 7, 1992. Said Lease Agreement, as amended, is hereinafter referred to as the "Lease". B. Lessor has entered into an agreement to sell the Property to Walter W. McMonies, Jr. and Nancy E. Duhnkrack (collectively "Buyer") which agreement is conditioned upon the cancellation of the Lease and the investigation, and, if necessary, remediation of certain environmental matters on the Property. C. Following negotiations, Lessor and Lessee have reached agreement to terminate the Lease effective as of and concurrent with the close of escrow transferring fee title to the Property to the Buyer, provided that, and as a condition to termination, Lessee performs certain environmental investigations and, if necessary, remediation. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, receipt of which is hereby acknowledged, Lessor and Lessee hereby agree as follows: 1. Effective Date. This Agreement and each and every -------------- provision hereof shall be effective as of the date first hereinabove written (the "Effective Date"). 2. Agreement to Cancel Lease. ------------------------- (a) Subject to and on the terms and conditions herein set forth, Lessor and Lessee hereby agree to cancel the Lease, which cancellation shall be effective as of the date of Closing of the sale of the Property by Lessor to Buyer (the "Closing Date"). (b) The cancellation of the Lease shall be accomplished through an escrow (the "Escrow") which Lessor has established or will establish with First American Title Insurance Company (the "Escrow Holder") at 200 S. W. Market Street, Suite 1776, Portland, Oregon 97201-5786, Attention: Mitch Steeves. (c) Cancellation of this Lease shall occur on the Closing Date. In the event the Closing Date has not occurred within ninety (90) days of the Effective Date, Lessee may terminate this Agreement by delivering written notice thereof to Lessor and the Lease shall remain in full force and effect, without modification, and neither party shall have any further liability hereunder. 3. Consideration. The consideration which Lessee shall ------------- provide to Lessor for the cancellation of the Lease shall be Two Hundred Seventy-Five Thousand Dollars ($275,000.00), which Lessee shall pay to Lessor through Escrow on the Closing Date. 4. Remediation Condition. Termination of the Lease is --------------------- expressly conditioned upon Lessee performing or causing to be performed the environmental remediation specified in clauses (a) through (c) below at the Property (collectively, the "Remediation") to the satisfaction of Lessor: (a) Remediation of all environmental contamination disclosed in the Service Agreement dated August 31, 1994 between Hahn and Associates, Inc. and Lessee, a copy of which is attached hereto as Exhibit B and incorporated herein by reference (the --------- "Hahn Agreement"); (b) Completion of additional investigations as detailed in the Hahn Agreement, and remediation of any environmental contamination disclosed by such additional investigations; and (c) Abatement of all asbestos in the building located on the Property. Upon completion of the Remediation, Lessee shall deliver to Lessor the reports of its environmental consultants showing that the Remediation has been completed in accordance with the laws of the State of Oregon and with generally accepted environmental practice in the State of Oregon. Lessor shall forward such information to Buyer within thirty (30) days following receipt by Lessor of such reports, and Lessor shall, after consulting with Buyer, either approve or disapprove the environmental condition of the Property. In the event Lessor disapproves the environmental condition of the Property, Lessor shall give Lessee written notice thereof, which notice shall specify in reasonable detail the reason for such disapproval. Failure to give written notice of disapproval within thirty-five (35) days or receipt of such reports shall be deemed approval. In the event of disapproval, termination of the Lease is conditioned upon Lessee taking such steps or performing such additional remediation as is necessary to satisfy Lessor's objections. If at any time Lessee determines that completion of the Remediation (or performance of any additional work requested by Lessor based on review of the reports as provided above) to Lessor's satisfaction would be too costly or difficult, Lessee shall so notify Lessor, in which case this Agreement shall be terminated, and the Lease shall continue in full force and effect without modification; provided, however, that Lessor may preserve this Agreement by notifying Lessee, within ten (10) days of receipt of Lessee's termination notice, that Lessee waives the condition specified in this Section 4, in which case the Lease --------- shall be terminated in accordance with this Agreement despite the nonsatisfaction of such condition. 5. Mutual General Releases; Reciprocal Indemnities. ----------------------------------------------- As of the Closing Date, Lessor and Lessee each hereby waive, release and discharge each other from any further obligation or liability whatsoever under the Lease, whether known or unknown, suspected or unsuspected, or foreseeable or unforeseeable. The mutual releases given hereunder are intended to and shall be full and general releases of any and all claims, rights, demands, actions, causes of action, indebtedness, obligations, damages, and liabilities of every kind, nature and character whatsoever, whether or not known, suspected or claimed, of which either party hereto ever had, now has, or may hereafter have against the other by reason of any act, omission, matter, cause, or thing, including but not limited to any act, omission, cause, matter or thing directly or indirectly arising out of or in connection with the Lease excepting the environmental condition of the Property. Each of the parties hereto expressly waives any benefits due to it under the provisions of any law which provides, in pertinent part that a general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. The parties understand that the facts in respect of which the release made in this instrument is given may hereafter turn out to be other than or different from the facts in that connection now known or believed by the parties to be true; and the parties hereby accept and assume the risk of all facts turning out to be different and agree that this release shall be and remain in all respects effective and not subject to termination or recision by virtue of any such difference in facts. 6. Successors and Assigns. This Agreement shall bind and ---------------------- inure to the benefit of each of the parties hereto and their respective heirs, personal representatives, successors and assigns. 7. Governing Law. This Agreement and the rights and ------------- obligations of the parties hereunder shall be construed and governed in accordance with the laws of the State of Oregon. 8. Attorneys' Fees. In the event either party brings an --------------- action at law or in equity to interpret, enforce, or seek redress for the breach of this Agreement, the prevailing party in such action shall be entitled to recover from the other its attorneys' fees and all costs and fees (including expert witness fees and all cost of appeal) incurred in said action in addition to all other appropriate relief. 9. Integration; Modification; Waivers. This Agreement ---------------------------------- constitutes the complete agreement and understanding by and between the parties with respect to the subject matter hereof and supersedes any and all prior representations, understandings and agreements, whether written or oral. This Agreement may be modified only by an instrument in writing signed by each of the parties hereto. No provision of this Agreement may be waived, except in a writing signed by the party to be charged with waiver. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the respective dates set opposite their signatures below, but this Agreement on behalf of such party shall be deemed to have been dated as of the date first above written. LESSOR: 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 Date: January 18, 1995 By RICHARD P. BUONO -------------------------------------- Richard P. Buono -------------------------------------- (typed or printed name) Its Vice President ------------------------------------- LESSEE: FRED MEYER, INC. a Delaware corporation Date: January 17, 1995 By SCOTT L. WIPPEL -------------------------------------- Scott L. Wippel -------------------------------------- (typed or printed name) Its Senior Vice President - Corporate Facilities ------------------------------------- Date: __________, 1995 By ______________________________________ _________________________________________ (typed or printed name) Its _____________________________________ (Acknowledgments on next page) (Acknowledgment for Lessor) STATE OF ______________ ) ) ss. County of _____________ ) On __________, 1995, before me, ___________________________, Notary Public, personally appeared ____________________________ _____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/ their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. ________________________________________ Notary Public in and for said County and State My Commission Expires: _________________ (Acknowledgment for Lessee) STATE OF ______________ ) ) ss. County of _____________ ) On __________, 1995, before me, ___________________________, Notary Public, personally appeared ____________________________ _____________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/ their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. ________________________________________ Notary Public in and for said County and State My Commission Expires: _________________ EXHIBIT "A" Legal Description PARCEL I: - -------- Beginning at the Southeast corner of Lot 19, Block 277, COUCH'S ADDITION TO THE CITY OF PORTLAND; thence North 100.11 feet; thence West 100 feet; thence South 100.11 feet; thence East 100 feet to the beginning, being part of Lot 16, Block 276 and parts of Lots 19 and 20, Block 277, COUCH'S ADDITION TO THE CITY OF PORTLAND, and part of Block 28, KINGS SECOND ADDITION TO THE CITY OF PORTLAND, in the City of Portland, County of Multnomah and State of Oregon. PARCEL II: - --------- The following described real property in the City of Portland, County of Multnomah and State of Oregon, bounded and described as follows, to wit: Part of Lot 16, Block 276, COUCH'S ADDITION TO THE CITY OF PORTLAND, according to plat filed in the Office of the County Clerk of Multnomah County, Oregon by Board of School Trustees on the 9th day of September, 1905, recorded in Volume 326, page 75, and tract adjoining the said parcel of real property being otherwise described by metes and bounds as follows: Commencing on the East line of NW 20th Avenue, formerly N. 19th Street in the City of Portland at the Southwest corner of the tract of parcel of real property heretofore conveyed by the Board of School Trustees, a corporation, to Frances A. Gill, said point being 176.25 feet South of the South line of NW Everett Street; running thence East along the South line of the Frances A. Gill tract, 100 feet; thence South parallel with the East line of NW 20th Avenue, 50 feet; thence West parallel with the South line of NW Everett Street 100 feet to the East line of NW 20th Avenue; thence North along the East line of NW 20th Avenue, 50 feet to the place of beginning. PARCEL III: - ---------- Lot 17, Block 276, Subdivision of Blocks 276, 277 and 278, COUCH'S ADDITION TO THE CITY OF PORTLAND, in the City of Portland, County of Multnomah and State of Oregon. EXHIBIT B Copy of Agreement Property No. 304-01/TW-2 Portland, Oregon EX-10.R 10 EXHIBIT 10R EXHIBIT 10R LEASE DATED: November 16, 1994 BETWEEN: REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon limited partnership LANDLORD AND: FRED MEYER, INC., a Delaware corporation TENANT Tenant wishes to lease from Landlord the following described property, hereinafter referred to as "the Premises": Approximately 3,490 square feet of warehouse space located in North Basin-Swan Island Warehouse, 3205 N. Webster, Portland, Oregon 97217 and as further described on the attached Exhibit A. If the Premises consist of a portion but not all of a building, the building housing the Premises is hereinafter referred to as "the Building." Landlord leases the Premises to Tenant for a term of 60 months commencing December 1, 1994 and continuing through November 31, 1999 at a base rent of Two Thousand and No/100 Dollars ($2,000.00) per month. Rent for the first month of the lease term has been paid upon execution of this lease. All rent, including base rent together with the charges, taxes and expenses to be paid to Landlord specified in paragraphs 3 and 4 of this lease, is payable in advance on the first day of each calendar month. If Landlord consents, Tenant may occupy the Premises prior to such commencement date upon payment of rent on a prorated basis and compliance with all terms of this lease. Delivery of possession shall occur when the Premises are occupied by Tenant or are ready to be occupied by Tenant with all work to be performed by Landlord substantially completed. No notice shall be required from Landlord if the Premises are ready on the date set for commencement of the term or on the first business day thereafter. If Landlord is unable to deliver possession of the Premises to Tenant because of strikes, acts of God, or any other cause beyond Landlord's control, then Tenant may take possession when Landlord notifies Tenant that the Premises are ready for possession, and the term of this lease shall commence on the first day of the first month following such date and continue for the specified number of months thereafter, notwithstanding the commencement and termination dates stated above. Tenant shall owe no rent until the Premises are ready for possession. Landlord shall have no liability for such delays in delivery of possession, and neither party shall have the right to terminate except that Landlord may cancel this lease without liability if permission to construct, use, or furnish necessary utilities to the Premises is denied or revoked by any governmental agency or public utility with such authority. This lease is subject to the following additional terms to which the parties agree: 1. Use of the Premises. (a) Tenant shall use the Premises only for the purpose of conducting the following business: Truck maintenance and parking for trucks. If such use is prevented by any law or governmental regulation, Tenant may use the Premises for other reasonable uses. (b) In connection with its use, Tenant shall at its expense comply with all applicable laws, ordinances, and regulations of any public authority, including those requiring alteration of the Premises because of Tenant's specific use; shall create no nuisance nor allow any objectionable liquid, odor, or noise to be emitted from the Premises; shall store no gasoline or other highly combustible materials on the Premises which would violate any applicable fire code or regulation nor conduct any operation that will increase Landlord's fire insurance rates for the Premises; and shall not overload the floors or electrical circuits of the Premises. Landlord shall have the right to approve the installation of any power-driven machinery by Tenant and may select a qualified electrician whose opinion will control regarding electrical circuits and a qualified engineer or architect whose opinion will control regarding floor loads. Allowable ground floor load shall be 300 pounds per square foot. (c) Tenant may erect a sign stating its name, business, and product after first securing Landlord's written approval of the size, color, design, wording, and location, and all necessary governmental approvals. No signs shall be painted on the Building or exceed the height of the Building. All signs installed by Tenant shall be removed upon termination of this lease with the sign location restored to its former state. (d) Tenant shall make no alterations, additions, or improvements to the Premises or change the color of the exterior without Landlord's prior written consent and without a valid building permit issued by the appropriate governmental agency. Upon termination of this lease, any such alterations, additions, or improvements (including without limitation all electrical, lighting, plumbing, heating and air-conditioning equipment, doors, windows, partitions, drapery, carpeting, shelving, counters, and physically attached fixtures) shall at once become part of the realty and belong to Landlord unless the terms of the applicable consent provide otherwise, or Landlord requests that part or all of the additions, alterations, or improvements be removed. In such case, Tenant shall at its sole cost and expense promptly remove the specified additions, alterations, or improvements and repair and restore the Premises to its original condition. 2. Security Deposit. Tenant has deposited with Landlord the sum of $2,000.00, hereinafter referred to as "the Security Deposit," to secure the faithful performance by Tenant of each term, covenant, and condition of this lease. If Tenant shall at any time fail to make any payment or fail to keep or perform any term, covenant, and condition on its part to be made or performed or kept under this lease, Landlord may, but shall not be obligated to and without waiving or releasing Tenant from any obligation under this lease, use, apply or retain the whole or any part of the Security Deposit (i) to the extent of any sum due to Landlord; or (ii) to make any required payment on Tenant's behalf; or (iii) to compensate Landlord for any loss, damage, attorneys' fees, or expense sustained by Landlord due to Tenant's default. In such event, Tenant shall, within 5 days of written demand by Landlord, remit to Landlord sufficient funds to restore the Security Deposit to its original sum; Tenant's failure to do so shall be a material breach of this lease. Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on such deposit. Should Tenant comply with all of the terms, covenants, and conditions of this lease and at the end of the term of this lease leave the Premises in the condition required by this lease, then the Security Deposit, less any sums owing to Landlord, shall be returned to Tenant (or, at Landlord's option, to the last assignee of Tenant's interests hereunder) within 30 days after the termination of this lease and vacancy of the Premises by Tenant. 3. Utility Charges; Maintenance. (a) Tenant shall pay when due all charges for electricity, natural gas, water, garbage collection, janitorial service, sewer, and all other utilities of any kind furnished to the Premises during the lease term. If charges are not separately metered or stated, Landlord shall apportion the utility charges on an equitable basis. Landlord shall have no liability resulting from any interruption of utility services caused by fire or other casualty, strike, riot, vandalism, the making of necessary repairs or improvements, or any other cause beyond Landlord's reasonable control. Tenant shall control the temperature in the Premises to prevent freezing of any sprinkler system. (b) Landlord shall repair and maintain the roof, gutters, downspouts, exterior walls, building structure, foundation, exterior paved areas, and curbs of the Premises in good condition. Except for such obligations of Landlord, Tenant shall keep the Premises neatly maintained and in good order and repair. Tenant's responsibility shall include maintenance and repair of the electrical system, plumbing, drainpipes to sewers, air-conditioning and heating systems, overhead and personnel doors, and the replacement of all broken or cracked glass with glass of the same quality. Tenant shall refrain from any discharge that will damage the septic tank or sewers serving the Premises. (c) If the Premises have a separate entrance, Tenant shall keep the sidewalks abutting the Premises or the separate entrance free and clear of snow, ice, debris, and obstructions of every kind. 4. Taxes, Assessments, and Operating Expenses. (a) In conjunction with monthly rent payments, Tenant shall each month pay a sum representing Tenant's proportionate share of real property taxes and operating expenses for the Premises. Such amount shall annually be estimated by Landlord in good faith to reflect actual or anticipated costs. Upon termination of this lease or at periodic intervals during the term hereof, Landlord shall compute its actual costs for such expenses during such period. Any overpayment by Tenant shall be credited to Tenant, and any deficiency shall be paid by Tenant within 15 days after receipt of Landlord's statement. Landlord's records of expenses for taxes and operating expenses may be inspected by Tenant at reasonable times and intervals. (b) Tenant's proportionate share of real property taxes shall mean that percentage of the total assessment affecting the Premises which is the same as the percentage which the rentable area of the Premises bears to the total rentable area of all buildings covered by the tax statement. Tenant's proportionate share of operating expenses for the Building shall be computed by dividing the rentable area of the Premises by the total rentable area of the Building. If in Landlord's reasonable judgment either of these methods of allocation results in an inappropriate allocation to Tenant, Landlord shall select some other reasonable method of determining Tenant's proportionate share. (c) Real property taxes charged to Tenant hereunder shall include all general real property taxes assessed against the Premises or payable during the lease term, installment payments on Bancrofted special assessments, and any rent tax, tax on Landlord's interest under this lease, or any tax in lieu of the foregoing, whether or not any such tax is now in effect. Tenant shall not, however, be obligated to pay any tax based upon Landlord's net income. (d) Operating expenses charged to Tenant hereunder shall include all usual and necessary costs of operating and maintaining the Premises, Building, and any surrounding common areas including, but not limited to, the cost of all utilities or services not paid directly by Tenant, property insurance, property management, maintenance and repair of landscaping, parking areas, and any other common facilities. Operating expenses shall not include roof replacement or correction of structural deficiencies of the Building. 5. Parking and Storage Areas. (a) Tenant, its employees, and customers shall have the exclusive right to use any private parking spaces immediately adjacent to the Premises. Tenant shall control the use of such parking spaces so that there will be no unreasonable interference with the normal traffic flow, and shall permit no parking on any landscaped or unpaved surface. Under no circumstances shall trucks serving the Premises be permitted to block streets. (b) Tenant shall not store any materials, supplies, or equipment outside in any unapproved or unscreened area. If Tenant erects any visual barriers for storage areas, Landlord shall have the right to approve the design and location. Trash and garbage receptacles shall be kept covered at all times. 6. Tenant's Indemnification; Liability Insurance. (a) Tenant shall not allow any liens to attach to the Premises as a result of its activities. Tenant shall indemnify and defend Landlord from any claim, liability, damage, or loss arising out of any activity on the Premises by Tenant, its agents, or invitees or resulting from Tenant's failure to comply with any term of this lease. (b) Tenant shall carry general liability insurance on an occurrence basis with combined single limits of not less than $1,000,000. Such insurance shall be provided by an insurance carrier reasonably acceptable to Landlord and shall be evidenced by a certificate delivered to Landlord stating that the coverage will not be canceled or materially altered without 10 days' advance written notice to Landlord. Landlord shall be named as an additional insured on such policy. 7. Property Damage; Subrogation Waiver. (a) If fire or other casualty causes damage to the Building or the Premises in an amount exceeding 30 percent of the full construction-replacement cost of the Building or Premises, respectively, Landlord may elect to terminate this lease as of the date of the damage by notice in writing to Tenant within 30 days after such date. Otherwise, Landlord shall promptly repair the damage and restore the Premises to their former condition as soon as practicable. Rent shall be reduced during the period to the extent the Premises are not reasonably usable for the use permitted by this lease because of such damage and required repairs. (b) Landlord shall be responsible for insuring the Building, and Tenant shall be responsible for insuring its personal property and trade fixtures located on the Premises. (c) Neither party shall be liable to the other for any loss or damage caused by water damage, sprinkler leakage, or any of the risks covered by a standard fire insurance policy with extended coverage and sprinkler leakage endorsements, and there shall be no subrogated claim by one party's insurance carrier against the other party arising out of any such loss. 8. Condemnation. If a condemning authority takes the entire Premises or a portion sufficient to render the remainder unsuitable for Tenant's use, then either party may elect to terminate this lease effective on the date that title passes to the condemning authority. Otherwise, Landlord shall proceed as soon as practicable to restore the remaining Premises to a condition comparable to that existing at the time of the taking. Rent shall be abated during the period of restoration to the extent the Premises are not reasonably usable by Tenant, and rent shall be reduced for the remainder of the term in an amount equal to the reduction in rental value of the Premises caused by the taking. All condemnation proceeds shall belong to Landlord. 9. Assignment and Subletting. (a) Tenant shall not assign its interest under this lease nor sublet the Premises without first obtaining Landlord's consent in writing. This provision shall apply to all transfers by operation of law or through mergers and changes in control of Tenant. No assignment shall relieve Tenant of its obligation to pay rent or perform other obligations required by this lease and no one assignment or subletting shall be a consent to any further assignment or subletting. (b) Subject to the above limitations on transfer of Tenant's interest, this lease shall bind and inure to the benefit of the parties, their respective heirs, successors, and assigns. 10. Default. Any of the following shall constitute a default by Tenant under this lease: (a) Tenant's failure to pay rent or any other charge under this lease within 10 days after it is due, or failure to comply with any other term or condition within 20 days following written notice from Landlord specifying the noncompliance. If such noncompliance cannot be cured within the 20-day period, this provision shall be satisfied if Tenant commences correction within such period and thereafter proceeds in good faith and with reasonable diligence to effect compliance as soon as possible. (b) Tenant's insolvency; assignment for the benefit of its creditors; Tenant's voluntary petition in bankruptcy or adjudication as bankrupt, or the appointment of a receiver for Tenant's properties. 11. Remedies for Default. In case of default as described in paragraph 10 above, Landlord shall have the right to the following remedies which are intended to be cumulative and in addition to any other remedies provided under applicable law: (a) Terminate this lease without relieving Tenant from its obligation to pay damages. (b) Retake possession of the Premises by summary proceedings or otherwise, in which case Tenant's liability to Landlord for damages shall survive the tenancy. Landlord may, after such retaking of possession, relet the Premises upon any reasonable terms. No such reletting shall be construed as an acceptance of a surrender of Tenant's leasehold interest. (c) Recover damages caused by Tenant's default which shall include reasonable attorneys' fees at trial and on any appeal therefrom. Landlord may sue periodically to recover damages as they occur throughout the lease term, and no action for accrued damages shall bar a later action for damages subsequently accruing. Landlord may elect in any one action to recover accrued damages plus damages attributable to the remaining term of the lease equal to the difference between the rent under this lease and the reasonable rental value of the Premises for the remainder of the term, discounted to the time of judgment at the rate of 6 percent per annum. (d) Make any payment or perform any obligation required of Tenant so as to cure Tenant's default, in which case Landlord shall be entitled to recover all amounts so expended from Tenant, plus interest at the rate of 10 percent per annum from the date of the expenditure. 12. Surrender on Termination. (a) On expiration or early termination of this lease, Tenant shall deliver all keys to Landlord, have final utility readings made on the date of move out, and surrender the Premises clean and free of debris inside and out, with all mechanical, electrical, and plumbing systems in good operating condition, all signing removed and defacement corrected, and all repairs called for under this lease completed. The Premises shall be delivered in the same condition as at the commencement of the term, subject only to depreciation and wear from ordinary use. Tenant shall remove all of its furnishings and trade fixtures that remain its property and restore all damage resulting from such removal. Failure to remove said property shall be an abandonment of same, and Landlord may dispose of it in any manner without liability. (b) If Tenant fails to vacate the Premises when required, including failure to remove all its personal property, Landlord may elect either: (i) to treat Tenant as a tenant from month to month, subject to all provisions of this lease except the provision for term and at a base rental of 120 percent of that specified in this lease; or (ii) to eject Tenant from the Premises and recover damages caused by wrongful holdover. 13. Landlord's Liability. (a) Landlord warrants that so long as Tenant complies with all terms of this lease it shall be entitled to peaceable and undisturbed possession of the Premises free from any eviction or disturbance by Landlord or persons claiming through Landlord. (b) All persons dealing with Pacific Realty Associates, L.P. ("Partnership") must look solely to the property and assets of Partnership for the payment of any claim against Partnership or for the performance of any obligation of Partnership as neither the general partner, limited partners, employees, nor agents of Partnership assume any personal liability for obligations entered into on behalf of Partnership (or its predecessors in interest) and their respective properties shall not be subject to the claims of any person in respect of any such liability or obligation. As used herein, the words "property and assets of partnership" exclude any rights of Partnership for the payment of capital contributions or other obligations to it by the general partner or any limited partner in such capacity. 14. Mortgage or Sale by Landlord; Estoppel Certificates. (a) This lease is and shall be prior to any mortgage or deed of trust ("Encumbrance") recorded after the date of this lease and affecting the Building and the land upon which the Building is located. However, if any lender holding an Encumbrance secured by the Building and the land underlying the Building requires that this lease be subordinate to the Encumbrance, then Tenant agrees that this lease shall be subordinate to the Encumbrance if the holder thereof agrees in writing with Tenant that so long as Tenant performs its obligations under this lease no foreclosure, deed given in lieu of the foreclosure, or sale pursuant to the terms of the Encumbrance, or other steps or procedures taken under the Encumbrance shall affect Tenant's rights under this lease. If the foregoing condition is met, Tenant shall execute the written agreement and any other documents required by the holder of the Encumbrance to accomplish the purposes of this paragraph. (b) If the Building is sold as a result of foreclosure of any Encumbrance thereon or otherwise transferred by Landlord or any successor, Tenant shall attorn to the purchaser or transferee, and the transferor shall have no further liability hereunder. (c) Either party shall within 20 days after notice from the other execute and deliver to the other party a certificate stating whether or not this lease has been modified and is in full force and effect and specifying any modifications or alleged breaches by the other party. The certificate shall also state the amount of monthly base rent, the dates to which rent has been paid in advance, and the amount of any security deposit or prepaid rent. Failure to deliver the certificate within the specified time shall be conclusive upon the party of whom the certificate was requested that the lease is in full force and effect and has not been modified except as may be represented by the party requesting the certificate. 15. Disputes - Attorneys' Fees. In the event of any litigation arising out of this lease, the prevailing party shall be entitled to recover from the other party, in addition to all other relief provided by law or judgement, its reasonable costs and attorneys' fees incurred both at and in preparation for trial and any appeal or review, such amount to be as determined by the court(s) before which the matter is heard. Disputes between the parties which are to be litigated shall be tried before a judge without a jury. 16. Severability. If any provision of this lease is held to be invalid, unenforceable or illegal the remaining provisions shall not be affected and shall be enforced to the fullest extent permitted by law. 17. Interest and Late Charges. Rent not paid within 10 days of when due shall bear interest from the date due until paid at the rate of 10 percent per annum. Landlord may at its option impose a late charge of $.05 for each $1.00 of rent for rent payments made more than 10 days late in addition to interest and other remedies available for default. 18. General Provisions. (a) Waiver by either party of strict performance of any provision of this lease shall not be a waiver of nor prejudice the party's right otherwise to require performance of the same provision or any other provision. (b) Subject to the limitations on transfer of Tenant's interest, this lease shall bind and inure to the benefit of the parties, their respective heirs, successors, and assigns. (c) Landlord shall have the right to enter upon the Premises at any time to determine Tenant's compliance with this lease, to make necessary repairs to the Building or the Premises, or to show the Premises to any prospective tenant or purchasers. During the last two months of the term, Landlord may place and maintain upon the Premises notices for leasing or sale of the Premises. (d) If this lease commences or terminates at a time other than the beginning or end of one of the specified rental periods, then the rent (including Tenant's share of real property taxes, if any) shall be prorated as of such date, and in the event of termination for reasons other than default all prepaid rent shall be refunded to Tenant or paid on its account. (e) Notices between the parties relating to this lease shall be in writing, effective when delivered, or if mailed, effective on the second day following mailing, postage prepaid, to the address for the party stated in this lease or to such other address as either party may specify by notice to the other. Rent shall be payable to Landlord at the same address and in the same manner. 19. Tenant Improvements. The Premises shall be taken by Tenant in "as-is" condition with existing improvements configured generally as shown on the attached Exhibit A except that Tenant shall, at its expense, install a fence as shown on Exhibit A. IN WITNESS WHEREOF, the duly authorized representatives of the parties have executed this lease as of the day and year first written above. REAL ESTATE PROPERTIES LIMITED FRED MEYER, INC., PARTNERSHIP, an Oregon limited a Delaware corporation partnership By FMGP Associates, an Oregon limited partnership, its General Partner By FMGP Incorporated, a Delaware corporation, its General Partner By DAVID W. RAMUS By SCOTT L. WIPPEL ----------------------- --------------------------- David W. Ramus Name _________________________ Vice President Title ________________________ By ______________________ Name ______________________ Title _____________________ Address for Notices/ Address for Legal Notices Rent Payments to Landlord: to Tenant: 15115 S.W. Sequoia Parkway, ______________________________ Suite 200 ______________________________ Portland, Oregon 97224-7199 ______________________________ Address for Invoices to Tenant: ______________________________ ______________________________ ______________________________ EX-10.S 11 EXHIBIT 10S EXHIBIT 10S ===================================================================== REAL ESTATE PURCHASE AND SALE AGREEMENT between REC RESOLUTION COMPANY SELLER AND FRED MEYER, INC. PURCHASER Concerning property known as the Hazel Dell Fred Meyer Development in Vancouver, Washington, the Hawthorne Fred Meyer Development in Portland, Oregon, and the Raleigh Hills Fred Meyer Development in Washington County, Oregon ===================================================================== TABLE OF CONTENTS ----------------- Page ---- 1. PURCHASE AND SALE OF THE PROPERTIES . . . . . . . . . . .1 2. TOTAL PURCHASE PRICE. . . . . . . . . . . . . . . . . . .2 3. EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . .2 4. PRECONDITIONS TO PURCHASER'S OBLIGATIONS. . . . . . . . .2 4.1 Investigations and Contingency Period. . . . . . . .2 4.2 Title. . . . . . . . . . . . . . . . . . . . . . . .2 4.3 Hazardous or Toxic Materials . . . . . . . . . . . .3 4.4 No Material Changes. . . . . . . . . . . . . . . . .4 5. CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . .4 6. LEGAL LOT . . . . . . . . . . . . . . . . . . . . . . . .4 7. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . .4 7.1 Closing Date . . . . . . . . . . . . . . . . . . . .4 7.2 Manner and Place of Closing. . . . . . . . . . . . .5 7.3 Prorations . . . . . . . . . . . . . . . . . . . . .5 7.4 Conveyance of Properties . . . . . . . . . . . . . .5 7.5 FIRPTA . . . . . . . . . . . . . . . . . . . . . . .5 7.6 Events of Closing. . . . . . . . . . . . . . . . . .5 7.7 Title Insurance. . . . . . . . . . . . . . . . . . .6 7.8 Lease. . . . . . . . . . . . . . . . . . . . . . . .6 8. REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . .6 8.1 Seller's Representations, Warranties and Covenants. . . . . . . . . . . . . . . . . . . .6 8.2 Environmental Remediation - Raleigh Hills. . . . . .7 8.3 Purchaser's Representations and Warranties . . . . .9 9. CONDUCT UNTIL CLOSING; SELLER'S COOPERATION; DISCLAIMER. . . . . . . . . . . . . . . . . . . . . . . .9 10. FAILURE TO CLOSE. . . . . . . . . . . . . . . . . . . . .9 10.1 Seller's Remedies. . . . . . . . . . . . . . . . . .9 10.2 Purchaser's Remedies . . . . . . . . . . . . . . . .9 11. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . .9 11.1 Binding Effect; Assignment . . . . . . . . . . . . .9 11.2 Time of Essence. . . . . . . . . . . . . . . . . . 10 11.3 Notices. . . . . . . . . . . . . . . . . . . . . . 10 11.4 Waiver . . . . . . . . . . . . . . . . . . . . . . 10 11.5 Attorneys' Fees. . . . . . . . . . . . . . . . . . 10 11.6 Prior Agreements . . . . . . . . . . . . . . . . . 10 11.7 Applicable Law . . . . . . . . . . . . . . . . . . 10 11.8 Brokers. . . . . . . . . . . . . . . . . . . . . . 11 11.9 Changes in Writing . . . . . . . . . . . . . . . . 11 11.10 Counterparts. . . . . . . . . . . . . . . . . . . 11 11.12 Survival. . . . . . . . . . . . . . . . . . . . . 11 11.13 Effect of Extensions and Modifications; Backup Offers . . . . . . . . . . . . . . . . . . 11 11.14 Oregon Statutory Disclaimer . . . . . . . . . . . 11 11.15 Disclaimer; Duty to Disclose. . . . . . . . . . . 11 11.16 Representations; Condition of Properties. . . . . 12 11.17 Related Agreement . . . . . . . . . . . . . . . . 12 11.18 Certain Obligations . . . . . . . . . . . . . . . 12 12. APPROVAL BY SELLER. . . . . . . . . . . . . . . . . . . 12 EXHIBIT A-1 Legal Description of Hawthorne Property EXHIBIT A-2 Legal Description of Hazel Dell Property EXHIBIT A-3 Legal Description of Raleigh Hills Property EXHIBIT B - Reports EXHIBIT C - Form of Lease Assignment REAL ESTATE PURCHASE AND SALE AGREEMENT --------------------------------------- (Hawthorne, Hazel Dell and Raleigh Hills) This REAL ESTATE PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of March 10, 1995, between REC RESOLUTION COMPANY, an Oregon corporation ("Seller"), and FRED MEYER, INC., a Delaware corporation, or its assign ("Purchaser"), recites and provides as follows: RECITALS A. Seller, as successor to Fifth Avenue Corporation, owns the real property located in Portland, Multnomah County, Oregon, described in the attached Exhibit A-1 (the "Hawthorne Property"). The Hawthorne Property is currently leased by Seller to Real Estate Properties Limited Partnership, an Oregon limited partnership ("REPL"), pursuant to a lease agreement dated as of February 5, 1963 (the "Hawthorne Master Lease"). REPL 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"). B. Seller, as successor to Vanoak Corporation, owns the real property located in Vancouver, Washington, described in the attached Exhibit A-2 (the "Hazel Dell Property"). The Hazel Dell Property is currently leased by Seller to REPL, pursuant to two lease agreements dated as of October 2, 1962, and March 1, 1978 (collectively, the "Hazel Dell Master Lease"). REPL subleases the Hazel Dell Property to Roundup Co., a Washington corporation, pursuant to a lease agreement dated as of October 22, 1986 (the "Hazel Dell Sublease"). C. Seller, as successor to Fourth Avenue Corporation, owns the real property located in Washington County, Oregon, described in the attached Exhibit A-3 (the "Raleigh Hills Property"). The Raleigh Hills Property is currently leased by Seller to REPL, pursuant to a lease agreement dated as of March 3, 1966 (the "Raleigh Hills Master Lease"). REPL subleases the Raleigh Hills Property to Purchaser pursuant to a lease agreement dated as of October 22, 1986 (the "Raleigh Hills Sublease"). D. The Hawthorne Property, the Hazel Dell Property, and the Raleigh Hills Property, together with all buildings and other improvements located thereon and all rights and appurtenances belonging thereto or in any way appertaining thereto and all right, title and interest of Seller in and to any and all roads, streets, alleys and ways, bounding such property are collectively referred to herein as the "Properties." The Hawthorne Master Lease, the Hazel Dell Master Lease and the Raleigh Hills Master Lease are sometimes collectively referred to as the "Master Leases." The Hawthorne Sublease, the Hazel Dell Sublease and the Raleigh Hills Sublease are sometimes collectively referred to as the "Subleases." E. Seller desires to sell the Properties to Purchaser, and Purchaser desires to purchase the Properties from Seller, on the terms and conditions set forth in this Agreement. Agreements NOW, THEREFORE, for value received and in consideration of the mutual promises set forth in this Agreement, the parties agree as follows: 1. PURCHASE AND SALE OF THE PROPERTIES. Seller agrees to sell the Properties to Purchaser, and Purchaser agrees to purchase the Properties from Seller, on the terms and conditions set forth in this Agreement. 2. TOTAL PURCHASE PRICE. The total purchase price for the Properties is FIFTEEN MILLION FOUR HUNDRED FIFTY THOUSAND DOLLARS ($15,450,000). The purchase price is allocated among the various portions of the Properties as follows:
Land Improvements Total ---- ------------ ----- Hazel Dell Property $1,133,600.00 $1,866,400.00 $3,000,000.00 Hawthorne Property $1,119,588.00 $1,880,412.00 $3,000,000.00 Raleigh Hills Property $2,918,820.00 $6,531,180.00 $9,450,000.00
3. EFFECTIVE DATE. The "Effective Date" for purposes of this Agreement is the date that this Agreement is mutually executed and delivered. 4. PRECONDITIONS TO PURCHASER'S OBLIGATIONS. The close of escrow and Purchaser's obligation to purchase the Properties are subject to the satisfaction, not later than the Closing Date (unless otherwise provided), of the following conditions, and the obligations of the parties with respect to such conditions are as set forth in this Section 4. The conditions set forth in this Section 4 are solely for the benefit of Purchaser and may be waived only by Purchaser. Purchaser shall at all times have the right to waive any condition. Such waiver or waivers shall be in writing to Seller. 4.1 Investigations and Contingency Period. Purchaser shall be satisfied, in its sole and absolute judgment, that the Properties suit its needs (including, but not limited to, the physical condition of the Properties, the zoning and other laws and regulations applicable to the Properties, the available access to public streets, utilities and infrastructure, and the economic viability of the Purchaser's intended use) and Purchaser shall have obtained such senior management and board of director approvals of this transaction as Purchaser may deem necessary or desirable. Purchaser shall have until the date 90 days after the Effective Date (or until such earlier date as Purchaser may elect in writing by waiving the right to terminate under this Section) (the "Contingency Period") to determine whether the conditions precedent set forth in this Section 4.1 have been satisfied or waived. If Purchaser fails to notify Seller within the Contingency Period that such conditions are waived or satisfied, then this Agreement shall terminate and neither party shall have any further obligations hereunder. 4.2 Title. At closing Seller shall convey fee simple title to the Properties by special warranty deeds, subject to no encumbrances created or suffered by Seller other than nondelinquent real property taxes, and other matters which may be approved in writing by Purchaser in accordance with this Section. (a) Title Report, Survey, Etc. Purchaser shall within 10 days after the Effective Date obtain current preliminary title reports on the Properties, from First American Title Insurance Company ("Title Company"). Purchaser shall also, as promptly as possible and in any event within 45 days after the Effective Date, obtain current ALTA surveys of the Properties meeting Purchaser's survey requirements. The cost of the surveyor's work will be paid by Purchaser. (b) Title Approval Procedure. (1) Within 20 days after receipt of all of the title reports and surveys, Purchaser will review such materials and notify Seller in writing of Purchaser's approval (or disapproval) of any exceptions shown in the title reports, other than an exception for current property taxes, and of such surveys. Failure to notify Seller than an item is approved shall be deemed to be disapproval of such item. In the event of such disapproval: (i) Seller shall be obligated to remove (or commit to remove) any disapproved lien or other financial encumbrance (a "Lien"), at or prior to closing; and (ii) Seller agrees to exert its best efforts to remove any other disapproved matter (but Seller is not absolutely obligated to remove a disapproved matter other than a Lien). (2) Seller shall have 20 days from the date that items are disapproved or deemed disapproved to eliminate any disapproved title exceptions or survey matters (or as to any Liens, to commit in writing to eliminate such Liens at or prior to closing). If Seller is unable to eliminate a disapproved title exception or survey matter within such twenty-day period, despite Seller's best efforts to do so, either party may elect to rescind this Agreement by notice to the other party within ten days after the expiration of the twenty-day period. In such event, all obligations of the parties under this Agreement shall thereafter cease. Purchaser may preserve this Agreement, however, if Purchaser notifies Seller within twenty days after delivery of a notice of termination by Seller, that either: (a) Purchaser waives its objection to the relevant encumbrance(s); or (b) as to encumbrances that can be removed by the payment of money, Purchaser intends at closing to pay the amount necessary to remove such encumbrances. If Purchaser so preserves this Agreement, this Agreement shall remain in full force and effect, and Purchaser will receive a credit at closing in the amount of any sum paid by Purchaser to remove such encumbrances on title. (3) As to any exceptions to title placed of record or first identified after issuance of the preliminary title report or revealed by any supplemental report, there shall be a 10-day period for Purchaser to review and approve or disapprove such exceptions on the same basis as provided above. (4) With respect to the Raleigh Hills Property, the parties are aware that boundary line questions in three locations have been identified on a preliminary survey. Seller shall use its best efforts to resolve such questions to the satisfaction of Purchaser and the title company, such that the title company will issue extended coverage title insurance insuring the surveyed border of the Property without exception for boundary line matters or encroachments. Purchaser shall cooperate in such efforts. Final resolution of such matters to Purchaser's satisfaction is a condition to Purchaser's obligation to close. 4.3 Hazardous or Toxic Materials. Exhibit B sets forth a complete list of all written soils, environmental or other reports or studies in Seller's possession concerning any hazardous waste or hazardous substances (as defined in Section 8.1) on, in or under the Properties or any underground storage tanks on the Properties (collectively, the "Reports"). In addition, Seller has made available to Buyer for inspection other documents ("Environmental Documents") relating to hazardous substances on, in or under the Property as further described in Exhibit B. Seller has provided or will promptly provide complete copies of the Reports and any other such reports discovered by Seller after the date hereof. During the Contingency Period, Purchaser will cause to be conducted such investigations or audits of the environmental condition of the Properties as Purchaser deems prudent. Purchaser will on request provide to Seller copies of any reports prepared by third parties in connection with such investigations or audits. In the event that, prior to the Closing Date, any hazardous substances in amounts or of kinds that violate or could give rise to liability under environmental laws (as defined in Section 8.1) are discovered on, in, or under any of the Properties, or any underground storage tanks are discovered on any of the Properties, Purchaser may elect, within ten days after learning of the discovery of such matter, to terminate this Agreement by notice to the Seller; provided, however, that Seller may preserve this Agreement by notifying Purchaser (within 10 days after receipt of the Purchaser's termination notice) that Seller commits at its expense to perform any remediation necessary to correct the problem to the satisfaction of Purchaser (in Purchaser's discretion) and any governmental agency with jurisdiction over the Properties, and the parties thereafter document such remediation commitment in a manner acceptable to Purchaser. If this Agreement is so terminated, the parties shall thereafter have no further obligations under this Agreement. 4.4 No Material Changes. At the Closing Date, there shall have been no material adverse changes in the condition of or legal requirements applicable to the Properties (provided that the condemnation activities affecting the Hazel Dell Property referenced in Section 5.2 of this Agreement shall not be deemed a material adverse change). 5. CONDEMNATION. 5.1 Subject to Section 5.2, if, prior to closing, any part of the Properties is condemned or appropriated by public authority or any party exercising the right of eminent domain, or is threatened thereby, then this Agreement shall, at the election of the Purchaser, become null and void. In the event the Purchaser elects not to terminate this Agreement, the purchase price shall not be affected, but Purchaser shall be entitled to all proceeds of such award (or, if the award is made prior to closing, Seller shall receive such proceeds but Purchaser shall receive a credit against the purchase price in the net amount of such proceeds). Seller will promptly notify Purchaser as to the commencement of any such action or any communication from a condemning authority that a condemnation or appropriation is contemplated, and will cooperate with Purchaser in the response to or defense of such actions, and permit Purchaser to participate fully in, and approve any settlement of, any such proceedings. 5.2 Purchaser acknowledges that proposals exist (1) to close the access to the Hazel Dell Property from 78th Street, and (2) to condemn a portion of the Hazel Dell Property in connection with the construction of light rail facilities. Such condemnation actions shall not constitute grounds to terminate this Agreement. Purchaser and Seller agree to cooperate and exert their best efforts to avoid closure of such access, including, if Purchaser deems it appropriate, institution of legal proceedings; provided, Seller shall not be required to incur out of pocket costs in connection with such efforts. Purchaser shall have the right to direct such efforts and proceedings, and legal proceedings so instituted shall be at Purchaser's expense. Proceeds from any such condemnation or access closure shall be handled as provided in Section 5.1. 6. LEGAL LOT. If any of the Properties is not currently a separate legal lot or lots and tax parcel(s), Seller (with the cooperation of Purchaser) shall complete and obtain final approval of any necessary plat, partition, lot line adjustment or subdivision, so that as of closing the Property will be a separate legal lot or lots and tax parcel or parcels. Any conditions imposed in connection with such action must be acceptable to Purchaser. The costs incurred will be paid by Seller. 7. CLOSING. 7.1 Closing Date. This transaction will be closed (the "Closing") on a date to be selected by Purchaser and reasonably acceptable to Seller, but not later than 15 days after expiration of the Contingency Period and not earlier than March 1, 1995 (the "Closing Date"). 7.2 Manner and Place of Closing. This transaction will be closed by an escrow officer of First American Title Insurance Company (or other Title Company selected pursuant to Section 4.2) (the "Escrow Officer") at its office in Portland, Oregon, or at such other place as the parties may mutually select. Closing shall take place in the manner and in accordance with the provisions set forth in this Agreement. 7.3 Prorations. There shall be no prorations of taxes or expenses, as Purchaser or Purchaser's subsidiary is under the Subleases responsible for taxes and expenses, and is entitled to all income derived from, the Properties, other than rent owing under the Master Leases. Rent owing under the Master Leases shall be prorated as of 12:01 a.m. on the Closing Date, with Seller entitled to such rents through such time and Purchaser entitled to such rents commencing on the Closing Date and thereafter. 7.4 Conveyance of Properties. Conveyance of the Properties shall be by statutory special warranty deeds. All municipal, county, state and federal transfer and documentary stamp taxes shall be paid by Seller at the time of closing. The conveyance shall be free from all liens and encumbrances of any kind, without exceptions, unless otherwise specified herein or approved pursuant to Section 4.2, and except for the lien of real estate taxes not yet payable, so as to convey to Purchaser good and marketable title to all the Properties. The conveyance will be free of all tenancies other than (1) the rights of REPL pursuant to the Master Leases, and the occupancy of Fred Meyer, Inc., or Roundup Co., pursuant to the Subleases; and (2) subleases, rental agreements or licenses in which Fred Meyer, Inc., or its subsidiary is the sublessor, landlord or licensor. Seller shall also assign to Purchaser its interest as lessor under the Master Leases, pursuant to a lease assignment in the form of Exhibit C. In addition, the parties will execute a cross-easement agreement with respect to certain adjacent property owned by Seller, in the form of Exhibit D, which shall be a permitted encumbrance on title. 7.5 FIRPTA. Seller shall deliver to Purchaser at closing an affidavit that Seller is not a "foreign person" under FIRPTA, in form satisfactory to Purchaser. 7.6 Events of Closing. Provided the Escrow Officer has received the sums and is in a position to cause the title insurance policy to be issued as described below, this transaction will be closed on the Closing Date as follows: (a) Purchaser shall pay the total purchase price for the Properties in immediately available funds, adjusted for the charges and credits set forth in this section. (b) Any liens or other encumbrances on title required by this Agreement to be paid or removed by Seller at closing shall be paid and satisfied or removed of record at Seller's expense. (c) Seller shall convey the real property to Purchaser by special warranty deed(s), subject to no encumbrances created or suffered by Seller other than the encumbrances accepted pursuant to Section 4.2 and the lien for real estate taxes not yet payable. (d) Title Company will commit to issue the policy described in Section 7.7, upon recordation of the closing documents. (e) The parties will execute any additional documentation required with respect to the matters described in Sections 7.4 and 7.5. (f) The Escrow Officer will record the deed(s) and the lease termination agreements, if any. (g) The escrow fee shall be paid equally by the parties. Any real estate excise or transfer tax will be paid by Seller. The recording fees for the deeds will be paid by Purchaser. Seller shall be charged with the premium (including any sales or excise tax) for the title insurance policies to be delivered to Purchaser, except that Purchaser shall be responsible for the portion of the premium (including any sales or excise tax) attributable to extended coverage if Purchaser elects to obtain it, and for the cost of any endorsements requested by Purchaser. (h) There are no brokerage fees. (i) If any other closing costs not specifically provided for herein are due at closing of this transaction, each party shall pay such closing costs as are normally and customarily the responsibility of such party. In addition to any other items required to be paid by either party pursuant to this Agreement, each party shall pay its own attorneys' fees. 7.7 Title Insurance. As soon as possible after the Closing Date, Seller shall cause the Title Company to furnish Purchaser with a standard policy of title insurance in the amount of the total purchase price for each property, in form acceptable to Purchaser, subject only to exceptions for the matters accepted by Purchaser pursuant to Section 4.2 or referenced in Section 7.4. At Purchaser's option, such policies shall be in ALTA extended coverage form (full or partial), in which case Seller and Purchaser will execute such affidavits as may be necessary to obtain the extended coverage. Extra title premiums attributable to extended coverage shall be Purchaser's expense. 7.8 Lease. If Purchaser elects to assign this Agreement and the right to purchase the Properties to a third party that will lease the Properties to Seller, the parties will execute any additional documentation necessary to implement such assignment and lease, provided that Seller shall not be required to incur any additional expense or any material risk in connection therewith. 8. REPRESENTATIONS, WARRANTIES AND COVENANTS. 8.1 Seller's Representations, Warranties and Covenants. Seller represents and warrants to Purchaser that: (a) To the Seller's actual knowledge and without independent investigation, and except as disclosed on the Reports: (1) there are no hazardous substances (as defined below) on, within, under or upon the Properties, in amounts or of kinds that in their current condition pose a threat to human health or the environment or pose a risk of liability under environmental laws (provided, however, that due to the age of the improvements on the Properties, there may be asbestos containing materials used in the construction of such improvements); and (2) there are no underground storage tanks within the Properties. Seller does hereby assign to Purchaser (effective at and as of the Closing Date) any and all environmental warranties, indemnification agreements and rights of action Seller may have against third parties (if any) relating to the presence of any such hazardous substances or underground tanks. As used in this Agreement, the term "environmental laws" includes any and all state, federal and local statutes, regulations, and ordinances to which the Properties are subject and relating to the protection of human health and the environment, as well as any judgments, orders, injunctions, awards, decrees, covenants, conditions, or other restrictions or standards relating to same; and the term "hazardous substances" includes all hazardous and toxic substances, wastes, or materials, including without limitation all substances, wastes, and materials containing either petroleum, including crude oil or any fraction thereof, or any of the substances referenced in Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601(14), and similar or comparable state or local laws. (b) Except as disclosed to Purchaser in writing (and other than the potential condemnation affecting the Hazel Dell Property referenced in Section 5.2 above), Seller has received no written notice of any condemnation, environmental, zoning or other land-use regulation proceedings which would detrimentally affect the use and operation of the Properties or the value of the Properties, nor has Seller received notice of any special assessment proceedings affecting the Properties. (c) There is no litigation pending or to the Seller's actual knowledge threatened against Seller that arises out of the ownership of the Properties and would be binding on the Purchaser or might detrimentally affect the use or operation of the Properties for its intended purpose or the value of the Properties or adversely affect the ability of Seller to perform its obligations under this Agreement. (d) The persons who have executed this Agreement have been duly authorized to do so by Seller. All documents delivered at closing will be executed by a duly authorized person. Seller has a good and legal right to enter into this Agreement and to perform all covenants of Seller contained in this Agreement in accordance with its terms. 8.2 Environmental Remediation - Raleigh Hills. The terms of this Section 8.2 shall apply only with respect to the Raleigh Hills Property. (a) The groundwater underneath the northeast corner of the Raleigh Hills Property has been impacted by petroleum related contamination that migrated from underground storage tanks and related piping formerly located on Seller's adjacent property (the "Flying A Property"). The scope of such contamination (the "L.P. Bush Contamination") is set forth in the environmental reports, studies and tests prepared by Hahn and Associates (copies of which are in the possession of Joan Snyder of Stoel Rives Boley Jones and Grey, Purchaser's counsel) and are listed on Exhibit B. L.P. Bush Company (the former tenant of the Flying A Property) is remediating the ground water contamination pursuant to a groundwater treatment plan also in the possession of Joan Snyder. Seller covenants that Seller shall diligently use its best efforts to complete or cause to be completed the remediation of the L.P. Bush Contamination, in a manner complying with all applicable laws, at no cost to Purchaser. Such remediation shall initially be conducted by Neal Shaw, subject to monitoring by Hahn and Associates, or shall be conducted by Geo Engineers, Inc. or another environmental consulting firm and/or contractor reasonably acceptable to Purchaser. Such remediation will be "complete" when Purchaser receives (1) a certification from the consultant that the remediation is complete; and (2) a so-called "no further action" letter from the Oregon Department of Environmental Quality (DEQ), in form and substance reasonably acceptable to Purchaser, and not conditioned on or requiring the imposition of use restrictions or other institutional controls on the Raleigh Hills Property. Upon receipt of such certification and letter, Seller's obligations under this subsection shall be deemed satisfied. (b) The soils and groundwater underneath the southern portion of the Raleigh Hills Property adjacent to property currently leased to Union Oil of California ("Unocal") and owned by Seller (the "Unocal Property") may be impacted by petroleum related contamination that has migrated or is migrating from underground storage tanks and related piping located on the Unocal Property. Unocal is currently studying whether such contamination has occurred. Seller has previously provided Purchaser with copies of reports Seller has received from Unocal discussing Unocal's investigation of petroleum contamination on the Unocal Property and the Raleigh Hills Property; such reports are listed on Exhibit B. Seller covenants that it shall undertake and complete or cause to be undertaken and completed the remediation of any contamination of the Raleigh Hills Property (or the groundwater underneath the Raleigh Hills Property) from petroleum related contamination that may have migrated from the Unocal Property as of the Closing Date, or that migrates from the Unocal Property after the Closing Date (the "Unocal Contamination"). Such remediation must be conducted by Unocal under the supervision of Geo Engineers, Inc, or an environmental consulting firm and/or contractor reasonably acceptable to Purchaser. Such remediation will be "complete" when Purchaser receives (1) a certification from the consultant that the remediation is complete; and (2) a so-called "no further action" letter from DEQ, in form and substance reasonably acceptable to Purchaser, and not conditioned on or requiring the imposition of use restrictions or other institutional controls on the Raleigh Hills Property. Upon receipt of such certification and letter, Seller's obligations under this subsection shall be deemed satisfied. (c) Seller shall have a nonexclusive right of entry onto the Raleigh Hills Property after Closing in order to perform remediation activities necessary to comply with Seller's obligations under subsections 8.2(a) and (b) above, including without limitation the installation of groundwater wells and treatment systems. Seller's remediation activities on the Raleigh Hills Property shall be undertaken in such a manner as to minimize interference with Purchaser's use and operation of the Raleigh Hills Property, and the business operations of Purchaser's tenants, and in any event shall not materially restrict the access to, or the parking areas available for, any building on the Raleigh Hills Property. All such activities shall be conducted in strict accordance with applicable law. Upon completion of its remediation activities (or, where appropriate, any phase thereof), Seller shall restore or cause to be restored the Raleigh Hills Property to substantially the condition existing prior to such activities (including without limitation proper capping and legal abandonment of any wells). Seller shall indemnify, defend (with counsel reasonably approved by Purchaser) and hold harmless Purchaser and its officers, directors, employees, agents, successors and assigns from and against any suits, actions, legal or administrative proceedings, demands, claims, liabilities, fines, penalties, losses, injuries, damages, costs (including the cost of complying with any judicial or governmental order) and expenses (including attorneys' fees in connection with any administrative proceeding, trial, appeal or petition for review) arising out of or in any way connected with Seller's remediation activities on the Raleigh Hills Property. (d) With respect to environmental contamination that is not covered by the provisions of subsections 8.2(a) and (b) above, and except as limited by subsection 8.2(e) below with respect to claims for diminution in value, nothing in this Agreement either waives or alters any statutory or other remedy at law available to any party. (e) Purchaser hereby waives, releases, acquits and forever discharges Seller and its officers, directors, partners, employees, agents, and any other person acting on behalf of Seller, from and against any and all claims, actions, causes of action, demands, rights, damages expenses or compensation whatsoever, for diminution in the value of the Raleigh Hills Property caused by the presence of petroleum related contamination in, on, underneath or adjacent to the Raleigh Hills Property; provided, however, that such release of claims for diminution in value shall not be construed to release Seller from its obligations to complete the L.P. Bush Contamination or the Unocal Contamination as set forth in subsections 8.2(a) and (b) above. For purposes of this paragraph, claims for diminution in value include claims arising from difficulty of financing or selling the Raleigh Hills Property. (f) Seller shall not be in default of its obligations set forth in subsections 8.2(a) and (b), in the event Seller is unable to obtain the required no further action letter(s) from DEQ becuase other governmental entities or other third parties refuse to cooperate or to authorize Seller to take the actions required by DEQ to obtain the no further action letter(s). 8.3 Purchaser's Representations and Warranties. Purchaser represents and warrants to Seller that the persons who have executed this Agreement have been duly authorized to do so by Purchaser (subject to the provisions of Section 4.1 and 12). All documents delivered at closing will be executed by a duly authorized person. Purchaser has a good and legal right to enter into this Agreement and to perform all covenants of Purchaser contained in this Agreement in accordance with its terms. 9. CONDUCT UNTIL CLOSING; SELLER'S COOPERATION; DISCLAIMER. From the date of this Agreement until the Closing Date, Seller shall cause all liens on the Properties incurred by Seller to be paid current, and will not further mortgage or encumber the Properties or increase the amount of any current indebtedness on the Properties. No provision of this Agreement or previous (or subsequent) conduct or activities of the parties will be construed: (i) as making either party an agent, principal, partner or joint venturer with the other party, (ii) as creating any express or implied obligation for Purchaser to operate the Properties as a Fred Meyer retail facility or otherwise, or (iii) as making either party responsible for payment or reimbursement of any costs incurred by the other, whether or not such development occurs (except as may be expressly set forth herein or in its attached exhibits). WHETHER AND HOW PURCHASER MAY DEVELOP, REDEVELOP OR OPERATE THE PROPERTIES POST-CLOSING IS AT PURCHASER'S DISCRETION. SELLER WILL NOT HAVE ANY CLAIM AGAINST (OR RIGHT TO RECOVER ANY DAMAGES OR COSTS FROM) PURCHASER IN THE EVENT PURCHASER DOES NOT DEVELOP, REDEVELOP OR CONTINUE TO OPERATE THE PROPERTIES. 10. FAILURE TO CLOSE. 10.1 Seller's Remedies. In the event that this transaction fails to close on account of Purchaser's fault or inability to close, and Purchaser has not exercised any right to terminate or rescind this Agreement as provided herein, Purchaser shall pay to Seller the sum of $25,000 as full liquidated damages. SUCH AMOUNT HAS BEEN AGREED BY THE PARTIES TO BE REASONABLE COMPENSATION AND THE EXCLUSIVE REMEDY FOR PURCHASER'S DEFAULT, SINCE THE PRECISE AMOUNT OF SUCH COMPENSATION WOULD BE DIFFICULT TO DETERMINE. Seller hereby waives any right to specific enforcement of this Agreement, and any right to sue for damages (including lost profits or consequential damages) other than the liquidated damages provided for in this Section. The parties are initialing this Section for purposes of acknowledging and agreeing to such exclusive remedy and liquidated damages provision. Initials of: Seller DWR Purchaser SLW ----- ----- 10.2 Purchaser's Remedies. In the event that the transaction fails to close on account of Seller's fault or Seller's inability to deliver title acceptable to Purchaser pursuant to Section 4.2, Purchaser shall be entitled to such remedies for breach of contract as may be available under applicable law, including (without limitation) the remedy of specific performance, collection of damages, recovery of costs and attorneys' fees. 11. GENERAL PROVISIONS. 11.1 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties, and their respective heirs, personal representatives, successors, and assigns. Purchaser reserves the right to assign the right to purchase the Properties to any third party at closing. Purchaser also reserves the right to assign the Agreement at or prior to closing to an entity that will lease the Properties to Purchaser. Unless otherwise agreed, however, no such assignment shall release Purchaser from its obligations under this Agreement, or increase Seller's obligations in any respect. 11.2 Time of Essence. Time is of the essence of each and every provision of this Agreement. 11.3 Notices. All demands or notices required or permitted to be given under this Agreement shall be in writing. Notices may be served by certified or registered mail, postage paid with return receipt requested; by facsimile, or other telecommunication device capable of transmitting or creating a written record (provided that a copy is also sent by U.S. Mail, first class); or personally. Mailed notices shall be deemed delivered five (5) days after mailing, properly addressed. 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: Seller: REC RESOLUTION COMPANY Suite 200 15115 SW Sequoia Parkway Portland, OR 97224 Attn: Dave Ramus Facsimile No.: (503) 624-7755 Purchaser: Fred Meyer, Inc. P.O. Box 42121 Portland, Oregon 97242-0121 (Street Address - 3800 S.E. 22nd Avenue, Portland, Oregon 97202) Attn: Scott L. Wippel Facsimile No.: (503) 797-3539 11.4 Waiver. Failure of either party at any time to require performance of any provision of this Agreement shall not limit the party's right to enforce the provision. Waiver of any breach of any provision shall not be a waiver of any succeeding breach of the provision or a waiver of the provision itself or any other provision. 11.5 Attorneys' Fees. In the event suit or action is instituted to interpret or enforce the terms of this Agreement or to rescind this Agreement, the prevailing party shall be entitled to recover from the other party such sum as the court may adjudge reasonable as attorneys' fees at trial, on any appeal, and on any petition for review, in addition to all other sums provided by law. 11.6 Prior Agreements. This Agreement supersedes and replaces all written and oral agreements previously made or existing between the parties (including, without limitation, all previous letters of intent and addenda thereto and all verbal agreements and understandings). 11.7 Applicable Law. This Agreement shall be construed, applied and enforced in accordance with the laws of the State of Oregon (provided, as to the equitable remedies of Purchaser with respect to the Hazel Dell Property, Washington law shall apply). 11.8 Brokers. Each party will defend, indemnify, and hold the other party harmless from any claim, loss, or liability made or imposed by any other party claiming a commission or fee in connection with this transaction and arising out of its own conduct. 11.9 Changes in Writing. This Agreement and any of its terms may only be changed, waived, discharged or terminated by a written instrument signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 11.10 Counterparts. This Agreement may be executed simultaneously or in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. 11.11 Invalidity of Provisions. In the event any provision of this Agreement is declared invalid or is unenforceable for any reason, such provision shall be deleted from such document and shall not invalidate any other provision contained in the document. 11.12 Survival. All representations, warranties and obligations of the parties in this Agreement shall survive the Closing Date and delivery of the deed contemplated in this Agreement and be fully enforceable thereafter. 11.13 Effect of Extensions and Modifications; Backup Offers. Any amendment to this agreement (including any extension of time for waiver of conditions or closing) shall be deemed to be a modification of the continuing existing agreement, rather than a rescission or termination of such agreement. Seller will not accept any "backup", "standby" or other additional offers to purchase the Properties without Purchaser's written consent. In any event, any such additional offer shall be subordinate to this Agreement as it may be extended or modified. 11.14 Oregon Statutory Disclaimer. The following disclaimer applies to the Hawthorne Property and the Raleigh Hills Property: THE PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE WITHIN A FIRE PROTECTION DISTRICT PROTECTING STRUCTURES. THE PROPERTY IS SUBJECT TO LAND USE LAWS AND REGULATIONS, WHICH, IN FARM OR FOREST ZONES, MAY NOT AUTHORIZE CONSTRUCTION OR SITING A RESIDENCE AND WHICH LIMIT LAWSUITS AGAINST FARMING OR FOREST PRACTICES AS DEFINED IN ORS 30.930 IN ALL ZONES. BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY APPROVED USES AND EXISTENCE OF FIRE PROTECTION FOR STRUCTURES. 11.15 Disclaimer; Duty to Disclose. As to any reports or other materials provided by one party to the other party herein, the party providing such reports or materials is not warranting (and will not be liable or responsible for) the accuracy, fitness or usability of such reports or materials or any recommendations or conclusions stated therein. All representations and warranties of the parties in this Agreement are limited to the best of the party's actual knowledge, without independent investigation or examination. If either party obtains actual knowledge prior to the Closing Date of a fact which would make any of the representations and warranties in this Agreement false, such party will notify the other party of such fact. A party will not be deemed in breach of a representation or warranty in this Agreement or liable to the other party for any claimed misrepresentation in this Agreement after the Closing Date unless the party had actual knowledge on the Closing Date that the representation or warranty was false and failed to disclose to the other party the fact known to the party which made the representation or warranty false. 11.16 Representations; Condition of Properties. Purchaser or Purchaser's affiliate has heretofore operated and occupied the Properties and has thoroughly and completely examined and is fully aware of the physical condition of the Properties as well as any governmental permits or approvals required in connection with Purchaser's use of the Properties, the suitability of the Properties for Purchaser's intended use, the availability of utilities and services, the applicable zoning, building, housing and other ordinances, restrictions, laws, and regulations affecting the Properties or other matters. Except as otherwise specifically set forth in this Agreement or in any instrument delivered at Closing, Purchaser accepts the land and property and all other aspects of the Properties in their present condition, AS IS, without any representations or warranties by Seller, expressed or implied. Purchaser acknowledges that Purchaser has ascertained for itself the value and condition of the Properties and Purchaser is not relying on, nor has Purchaser been influenced by, any representation of Seller regarding the value or condition of the Properties. 11.17 Related Agreement. Purchaser is party to a Leasehold Assignment Agreement, dated on or about the date hereof, pursuant to which Purchaser intends to acquire the leasehold interest of REPL in the Properties (the "Related Agreement"), which the parties thereto intend to close simultaneously with closing under this Agreement. Purchaser's obligation to close under this Agreement is subject to the performance by REPL of REPL's obligations under the Related Agreement, such that a simultaneous closing may occur. Seller's obligation to close under this Agreement is subject to the performance by Purchaser of Purchaser's obligations under the Related Agreement, such that a simultaneous closing may occur. 11.18 Certain Obligations. Under the terms of the Subleases, Purchaser is obligated to (i) maintain the Properties (Paragraph 9.1) and (ii) cause the Properties to comply with all legal requirements (Paragraph 6.2). In addition to Purchaser's acknowledgment that it is accepting the Properties AS IS, Purchaser hereby waives, releases, acquits and forever discharges Seller and its officers, directors, partners, employees, agents, and any other person acting on behalf of Seller, from any and all claims, actions, causes of action, demands, rights, damages expenses or compensation whatsoever, arising from any defects in the Properties, to the extent such defects would have been Purchaser's responsibility to remedy under the Subleases. 12. APPROVAL BY SELLER. Seller will have until 5 p.m. (Pacific Time) on March 21, 1995 in which to execute and return to Purchaser a fully signed counterpart of this Agreement. Neither the delivery of this Agreement to Seller for execution nor the delivery of any signed Agreement to Purchaser will create a binding contract, or contract by estoppel or otherwise, between the parties. Purchaser will have 10 days after receipt of this Agreement signed by Seller to execute and deliver or transmit (by facsimile or otherwise) to Seller at its address hereunder a fully executed counterpart of this Agreement, and if not executed and delivered within such time period, this Agreement will be null and void and neither party will thereafter have any obligation or liability to the other party pursuant to this Agreement. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed as of the date set forth above. SELLER: REC RESOLUTION COMPANY, an Oregon corporation By: DAVID W. RAMUS --------------------------------------- Title: David W. Ramus ------------------------------- Date Executed: 3/13/95 ----------------------- PURCHASER: FRED MEYER, INC., a Delaware corporation By: SCOTT L. WIPPEL --------------------------------------- Scott L. Wippel, Senior Vice President --------------------------------------- Date Executed: 3/14/95 ----------------------- EXHIBIT A-1 ----------- Legal Description - Hawthorne Property 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, SUNNYSIDE 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 A-2 ----------- Legal Description - Hazel Dell Property PARCEL I - -------- BEGINNING at an iron pipe set at the Northeast corner of Lot 20, Alexander Tracts in the Northeast quarter of Section 10, Township 2 North, Range 1 East, Willamette Meridian; thence South 5 59'15" West along the East line of said Lot 20 a distance of 111.00 feet to a railroad spike marking the Southeast corner thereof; thence South 88 degrees 17'00" West along the South line of said Lot 20, a distance of 292.01 feet to the East right of way line of SR 5; thence North 1 degree 43'00" West along the East right of way line of said SR 5 a distance of 110.00 feet to the North line of said Lot 20; thence North 88 degrees 17'00" East along the North line of said Lot 20 a distance of 306.90 feet to the point of beginning. PARCEL II - --------- That portion of the Northeast quarter of the Northeast quarter of Section 10, Township 2 North, Range 1 East of the Willamette Meridian, in Clark County, Washington, described as follows: BEGINNING at a point that is South 89 degrees 05' West 71.35 feet and South 5 degrees 59'15" West 284.33 feet fron the Northeast corner of said Section 10, said point of beginning also being on the Westerly line of N.E. Highway 99; thence continuing South 5 degrees 59'l5" West along the Westerly line of said N.E. Highway 99, a distance of 823.54 feet to the Northeast corner of the Alexander Tract, according to the plat thereof, recorded in Volume "E" of Plats, page 1 records of said County; thence South 88 degrees 17'00" West along the North line of said Alexander tracts, a distance of 306.90 feet to the Easterly right of way line of Primary State Highway No. 1 as conveyed to the State of Washington by deed recorded under Auditor's File No. G 200257; thence North 3 degrees 45' East along said Easterly right of way line to an inner corner in said Easterly line; thence North 88 degrees 27'15" East 11.10 feet to the West line of that tract conveyed to Vanoak Corporation by deed recorded under Auditor's File No. G 628799; thence South 12 degrees 42'15" East along the West line of said Vanoak tract, a distance of 76.72 feet to the Southwest corner thereof; thence North 89 degrees 04' East along the South line of said Vanoak tract, 134.36 feet to the Southeast corner thereof; thence South 5 degrees 59'l5" West along the Southerly extension of the East line of said Vanoak tract, 126.76 feet; thence South 84 degrees 00'45" East 180.00 feet to the point of beginning. PARCEL III - ---------- That certain portion of the Northeast quarter of the Northeast quarter of Section 10, Township 2 North, Range 1 East, Willamette Meridian in the County of Clark and State of Washington, more particularly described as follows: BEGINNING at a point that is South 46.88 feet and West 422.41 feet fron the Northeast corner of said Section 10, said point being the intersection of the Southerly line of N.E. 78th Street and the Easterly line of Primary State Highway No. 1 and running thence South 12 degrees 42'15" East 96.71 feet; thence North 89 degrees 05' East 134.36 feet; thence North 5 degrees 59' East 98.26 feet to the Southerly line of N.E. 78th Street; thence South 88 degrees 05'15" West, along said Street, 165.96 feet to the point of beginning. EXCEPTING from the above described Parcel III the North 10 feet thereof conveyed to Clark County, Washington, a municipal corporation by deed recorded June 17, 1985, as Auditor's File No. 8506170112. EXHIBIT A-3 ----------- Legal Description - Raleigh Hills Property A tract of land located in Section 13, Township 1 South, Range 1 West of the Willamette Meridian, in the County of Washington and State of Oregon, and more particularly described as follows: Commencing at the intersection of the Southerly line of the Beaverton Hillsdale Highway (County Road No. 669) and the West line of the Northeast quarter of the said Section 13, which intersection is on the Westerly line of that tract of land conveyed to Harry M. Baker and wife by deed recorded in Deed Book 288, page 103, Washington County Deed Records; thence South 01 degrees 24'40" West along the Westerly line of the said Baker tract a distance of 204.68 feet to the Southeast corner of that tract of land conveyed to Portland Federal Savings and Loan Association by that Warranty Deed recorded in Deed Book 459, page 264, Washington County Deed Records, and the true point of beginning of this description; thence South 01 degrees 24'40" West along the West line of the said Baker tract a distance of 63.32 feet to the Southwest corner thereof; thence South 01 degrees 24'40" West along the West line of that tract of land conveyed to George Krueger and wife by deed recorded in Book 229, page 651, Washington County Deed Records, a distance of 184.60 feet to an angle point therein and to the most Easterly Southeast corner of that tract of land leased to United States National Bank of Oregon, as described in that Memorandum of Lease recorded in Book 646, page 295, Washington County Deed Records; thence South 27 degrees 04'50" West along the Southerly line thereof, a distance of 66.70 feet to the most Southerly Southeast corner thereof; thence South 75 degrees 43'50" West a distance of 60.00 feet to the Southwest corner thereof; thence 155.22 feet along the arc of a 1,145.92 foot radius circular curve to the left (long chord is 153.11 feet and bears South 41 degrees 50'43" East) to a point of compound curve; thence 168.03 feet along the arc of a 174.50 foot radius circular curve to the left (long chord is 161.98 feet and bears South 72 degrees 32'32" East) to a point in the Northwesterly line of SW Scholls Ferry Road, said point being South 56 degrees 16'30" West a distance of 23.33 feet from the Southwesterly line of the said Krueger tract; thence Southwesterly along the Northwesterly line of SW Scholls Ferry Road, South 56 degrees 16'30" West a distance of 74.38 feet to the most Easterly corner of that tract of land conveyed to the State of Oregon by deed recorded in Book 430, page 45, of the Washington County Deed Records; thence South 61 degrees 21'30" West along the Northwesterly line of the said State of Oregon tract a distance of 293.40 feet to an angle point therein; thence North 77 degrees 08'30" West along the Northerly line, thereof, a distance of 64.00 feet to an angle point therein; thence South 56 degrees 16'30" West along the Northwesterly line thereof, a distance of 40.00 feet to an angle point therein; thence South 04 degrees 41'30" West along the West line, thereof, a distance of 16.09 feet to the most Easterly corner of that tract of land leased to the Union Oil Company of California as described in that lease recorded in Book 502, page 456, of the Washington County Deed Records; thence North 33 degrees 43'30" West along the Northeasterly line, thereof, a distance of 44.63 feet to the most Northerly corner thereof; thence South 55 degrees 16'30" West along the Northwesterly line thereof, a distance of 153.50 feet to the most Westerly corner thereof; thence South 33 degrees 43'30" East along the Southwesterly line, thereof, a distance of 5.84 feet to the most Easterly Northeast corner of that tract of land conveyed to CAY, Incorporated, an Oregon corporation, as described in Book 511, page 494 of the Washington County Deed Records; thence along the Northeast line of the said CAY, Incorporated tract 100.21 feet along the arc of a 100.00 foot radius circular curve to the right (long chord is 96.07 feet and bears North 66 degrees 51'10" West) to a point of tangency; thence North 38 degrees 08'40" West along the East line of the said CAY, Incorporated tract, a distance of 394.78 feet to an angle point therein; thence North 88 degrees 39'20" West along the North line, thereof, a distance of 87.05 feet to a point on the West line of that tract of land conveyed to Hollywood Company as described in Book 439, page 706 of the Washington County Deed Records; thence North 01 degrees 41'20" East along the West line of the said Hollywood Company tract a distance of 618.03 feet to the South line of the said Beaverton Hillsdale Highway; thence South 88 degrees 32'40" East along said South line a distance of 710.00 feet to a point that is 100.00 feet West of the West line of the Northeast quarter of the said Section 13; thence South 01 degrees 24'40" West parallel to and 100.00 feet West of said Baker Westerly line a distance of 204.88 feet to the Southwest corner of the said Portland Federal Savings and Loan Association tract; thence South 88 degrees 32'40" East along the South line of the said Portland Federal Savings and Loan Association tract a distance of 100.00 feet to the true point of beginning of this description. EXCEPTING THEREFROM that portion as described in deed to Washington County, a political subdivision of the State of Oregon, recorded August 27, 1990 as Fee No. 90-46313. EXHIBIT B --------- RALEIGH HILLS FLYING A SERVICE STATION 7550 SW Beaverton-Hillsdale Highway Portland, Oregon 1. A Report on Underground Storage Tank Decommissioning and Soil Cleanup, dated March 1, 1993. 2. A Report on Third Quarter Groundwater Monitoring, dated March 22, 1993. 3. A Report on Additional Subsurface Investigation, dated January 21, 1994. RALEIGH HILLS UNOCAL SERVICE STATION l. Report of Remedial Action dated December 22, 1989. 2. Site Contamination Study dated November 9, 1990. 3. Drywell Removal Report dated July 15, 1992. 4. Results of Quarterly Ground Water Monitoring dated October 1992, February 1994, April 1994, and August 1994. EXHIBIT C - LEASE ASSIGNMENT FORM --------------------------------- RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: _______________________ P.O. Box 42121 Portland, Oregon 97242 Attn: RTC MO/CLD LEASE ASSIGNMENT AGREEMENT This Lease Assignment Agreement (this "Agreement"), dated as of _______________, between REC RESOLUTION COMPANY, an Oregon corporation whose address is Suite 200, 15115 SW Sequoia Parkway, Portland, OR 97224 ("Assignor"), and ______________________, a Delaware corporation, whose address is ____________________ ("Assignee"), recites and provides as follows: 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 each of the lease agreements referenced on Exhibit A hereto (the "Lease Agreements"). The rights conveyed hereby are referred to herein as the "Leasehold Interests". Assignee hereby accepts the foregoing assignment. Assignee agrees to assume Assignor's obligations under the Lease Agreements, provided, however, that Assignee does not assume, and Assignor shall remain fully responsible for, and agrees to discharge, any obligations or liabilities under such Lease Agreements that either (i) are not disclosed on the face of the copies of such Lease Agreements provided by Assignor to Assignee, or (ii) accrued or arose from or out of a set of facts existing prior to the date hereof ("Assignor's Liabilities"). Assignee will indemnify, defend and hold harmless Assignor from and against liabilities, costs, expenses and damages, including attorneys' fees, arising from Assignee's failure to perform its obligations hereunder, except for liabilities that arise from Assignor's failure to perform its obligations hereunder or to discharge Assignor's Liabilities. Assignee assumes no liabilities or obligations of Assignor of any nature whatsoever, whether or not accrued or affixed, absolute or contingent, known or unknown, determined or determinable, or incurred prior to, on or after 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. 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. [signature and acknowledgment forms] EXHIBIT D - EASEMENT AGREEMENT ------------------------------ RECORDING REQUESTED | BY AND WHEN RECORDED | RETURN TO: | | FRED MEYER, INC. | P.O. Box 42121 | Portland, Oregon 97242 | Attn: RTC MO/CLD | ===================================================================== CROSS EASEMENT AGREEMENT DATE: ___________________ PARTIES: __________________________, a Delaware corporation ("Buyer"), whose address is _________________, as owner of the property described in Exhibit "A," attached hereto and incorporated herein by this reference ("Buyer's Property"); AND: REC RESOLUTION COMPANY, an Oregon corporation ("REC"), whose address is Suite 200, 15115 SW Sequoia Parkway, Portland, OR 97224, as owner of the property described in Exhibit "B," attached hereto and incorporated herein by this reference ("REC's Property"). RECITALS: The parties to this agreement intend to create permanent, mutual, reciprocal easements and a mutual right-of-way for access purposes. Such easements shall be appurtenant to and shall benefit Buyer's Property and REC's Property. For purposes of this agreement, references to "Property" mean Buyer's Property or REC's Property, as the context may require. Buyer and REC, and their respective successors and assigns, are sometimes referred to as "Owners" for purposes of this Agreement. The parties therefore agree as follows. AGREEMENTS: SECTION 1. GRANT OF EASEMENTS; ESTABLISHMENT OF RIGHT-OF-WAY 1.1 The parties hereby grant and convey to each other permanent mutual reciprocal rights-of-way on, over, across, and along the real property described in Exhibits "A-1" and "B-1", attached hereto and incorporated herein by this reference. Such easements shall form a continuous right-of-way as described in Exhibits "A-1" and "B-1." Buyer hereby specifically grants to REC such easement rights respecting the property described in Exhibit "A-1," which shall be appurtenant to and benefit Parcel B. REC reciprocally grants to Buyer such easement rights respecting the property described in Exhibit "B-1," which shall be appurtenant to and benefit Parcel A. The property subject to the easements created hereby is sometimes referred to below as the "Easement Property". 1.2 Such easements and right-of-way may be used for vehicular and pedestrian ingress and egress purposes by the parties to this agreement. Neither party shall have the right to park, load or unload any vehicle in the right-of-way, other than under emergency conditions. Use of the right-of-way shall be on a regular, continuous, nonexclusive, nonpriority basis, benefiting the parties, their successors, assigns, lessees, mortgagees, invitees, guests, customers, agents and employees. However, neither party's rights hereunder shall lapse in the event of that party's failure to use the easement and right-of- way on a continuous basis. SECTION 3. MAINTENANCE AND REPAIR; TAXES AND INSURANCE 3.1 The cost of periodic maintenance and necessary repairs to the Easement Property shall be borne exclusively by Buyer as to the property described in attached Exhibit "A-1" and exclusively by REC as to the property described in attached Exhibit "B-1." Such maintenance and repairs shall be performed by the respective parties on a prompt, diligent and regular basis in accordance with the generally accepted street and road maintenance standards then existing under the laws of Washington County, Oregon, including but not limited to prompt patching or filling of damage to the pavement and resurfacing at least every 10 years. Required maintenance shall include the removal of snow, ice and debris as soon as practicable after their occurrence. 3.2 Subject to paragraph 3.3 below, if a party fails to perform any such necessary maintenance and repairs as required, the other party, upon 15 days' prior written notice to the nonperforming party, may cause such work to be done with a right of reimbursement for all sums necessarily and properly expended to remedy such failure. If the nonperforming party fails to pay such reimbursement on demand, the party causing such work to be done shall have the immediate right to record a lien against the nonperforming party's property benefited by this agreement. The parties agree that such lien shall be treated as a construction lien pursuant to ORS Chapter 87, subject to foreclosure and priority as set forth in the construction lien statutes. 3.3 If the Easement Property becomes impassable or ingress or egress is unreasonably impeded or curtailed because of a party's failure to maintain the Easement Property as required herein, the other party may demand by written notice that remedial work be performed immediately. If such work is not so performed the other party shall have the rights of cure, reimbursement and lien as set forth in paragraph 3.2. 3.4 Each party shall pay when due all real property taxes, assessments or other charges against the land to which each party holds fee title and which is part of the Easement Property. There shall be no right of contribution from the other party for such items. SECTION 4. DECISION MAKING Whenever the consent or approval of any Owner is required, such consent or approval shall be exercised only in the following manner. The Owners (if consisting of more than one [1] person) of a Property shall agree among themselves and designate in writing to the Owners and of the other Property a single person who is entitled to cast the vote for that Property. If the Owners of any such Property cannot agree who shall be entitled to cast the single vote of that Property, or if the Owners fail to designate the single person who is entitled to cast the vote for that Property within thirty (30) days after receipt of request for same from any Owner, then the Owner that owns the largest portion of that Property shall be entitled to vote, and the exercise of such right in good faith shall be binding on all other Owners of that Property. SECTION 5. CONDEMNATION 5.1 In the event that the Easement Property or any part thereof is taken by power of eminent domain, or is conveyed under threat of condemnation and such taking will render the Easement Property unusable for vehicular ingress and egress, this agreement shall terminate. If such taking does not render the Easement Property so unusable, the obligations of a the parties shall be abated to the extent of such taking, but this agreement shall otherwise continue in full force and effect. 5.2 The net proceeds from a condemnation or taking shall be allocated to the Owner of the property taken. 5.3 No Owner shall voluntarily agree to close the access from the Easement Property to the adjoining public street without the consent of all Owners. If any governmental authority, by condemnation or otherwise, eliminates or reduces any access between a public street and the Easement Property, the Owner thereof shall make every reasonable effort to obtain alternative access from such Owner's property to the public street. SECTION 6. EFFECT OF THE AGREEMENT The easement granted hereunder shall run with the land as to all property burdened and benefited by such easement, including any division or partition of such property. The rights, covenants and obligations contained in this agreement shall bind, burden and benefit each party's successors and assigns, lessees, mortgagees (or beneficiaries under a deed of trust) as to REC's Property or Buyer's Property, or any portion thereof, as the case may be. SECTION 7. MISCELLANEOUS This Agreement sets forth the entire agreement of the parties with respect to the subject matter hereof. This Agreement may only be amended in writing signed by all Owners (provided, if either REC's Property or Buyer's Property has more than one Owner, then the person entitled to cast the Property's vote under Section 6 shall be authorized to execute an amendment on behalf of all Owners of such Property), and any such amendment must be recorded in the real estate records of Washington County, Oregon, in order to be effective. [Signature Lines] [Acknowledgments] Exhibits: A Buyer's Property A-1 Easement Property on Buyer's Property B REC's Property B-1 Easement Property on REC's Property EX-10.S 12 EXHIBIT 10S EXHIBIT 10S ===================================================================== LEASEHOLD ASSIGNMENT AGREEMENT between REAL ESTATE PROPERTIES LIMITED PARTNERSHIP Assignor AND FRED MEYER, INC. Assignee Concerning the Assignor's leasehold interests in the Hazel Dell Fred Meyer Development in Vancouver, Washington, the Hawthorne Fred Meyer Development in Portland, Oregon, and the Raleigh Hills Fred Meyer Development in Washington County, Oregon ===================================================================== TABLE OF CONTENTS ----------------- Page ---- 1. SALE AND ASSIGNMENT OF THE LEASEHOLD INTERESTS . . . . . . . .1 2. CONSIDERATION. . . . . . . . . . . . . . . . . . . . . . . . .2 3. EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . .2 4. PRECONDITIONS TO ASSIGNEE'S OBLIGATIONS. . . . . . . . . . . .2 4.1 Investigations and Contingency Period . . . . . . . . . .2 4.2 Conveyance; Title Review. . . . . . . . . . . . . . . . .2 4.3 Hazardous or Toxic Materials. . . . . . . . . . . . . . .3 4.4 No Material Changes . . . . . . . . . . . . . . . . . . .4 5. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . .4 6. [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . .4 7. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . .4 7.1 Closing Date. . . . . . . . . . . . . . . . . . . . . . .4 7.2 Manner and Place of Closing . . . . . . . . . . . . . . .4 7.3 Prorations. . . . . . . . . . . . . . . . . . . . . . . .5 7.4 Conveyance of Leasehold Interests . . . . . . . . . . . .5 7.5 FIRPTA. . . . . . . . . . . . . . . . . . . . . . . . . .5 7.6 Events of Closing . . . . . . . . . . . . . . . . . . . .5 7.7 Title Insurance . . . . . . . . . . . . . . . . . . . . .6 7.8 Lease . . . . . . . . . . . . . . . . . . . . . . . . . .6 8. REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . . . . . . . .6 8.1 Assignor's Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . .6 8.2 Assignee's Representations and Warranties . . . . . . . .7 9. CONDUCT UNTIL CLOSING; ASSIGNOR'S COOPERATION; DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . . .7 10. FAILURE TO CLOSE . . . . . . . . . . . . . . . . . . . . . . .8 10.1 Assignor's Remedies . . . . . . . . . . . . . . . . . . .8 10.2 Assignee's Remedies . . . . . . . . . . . . . . . . . . .8 11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . .8 11.1 Binding Effect; Assignment. . . . . . . . . . . . . . . .8 11.2 Time of Essence . . . . . . . . . . . . . . . . . . . . .8 11.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . .8 11.4 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . .9 11.5 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . .9 11.6 Prior Agreements. . . . . . . . . . . . . . . . . . . . .9 11.7 Applicable Law. . . . . . . . . . . . . . . . . . . . . .9 11.8 Brokers . . . . . . . . . . . . . . . . . . . . . . . . .9 11.9 Changes in Writing. . . . . . . . . . . . . . . . . . . .9 11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . .9 11.12 Survival . . . . . . . . . . . . . . . . . . . . . . . .9 11.13 Effect of Extensions and Modifications; Backup Offers. . . . . . . . . . . . . . . . . . . . . .9 11.14 Disclaimer; Duty to Disclose . . . . . . . . . . . . . 10 11.15 Representations; Condition of Properties . . . . . . . 10 11.16 Related Agreement. . . . . . . . . . . . . . . . . . . 10 11.17 Certain Obligations. . . . . . . . . . . . . . . . . . 10 11.18 Indemnity. . . . . . . . . . . . . . . . . . . . . . . 10 12. APPROVAL BY ASSIGNOR . . . . . . . . . . . . . . . . . . . . 11 EXHIBIT A-1 Legal Description of Hawthorne Property EXHIBIT A-2 Legal Description of Hazel Dell Property EXHIBIT A-3 Legal Description of Raleigh Hills Property EXHIBIT B- Reports EXHIBIT C- Form of Lease Assignment LEASEHOLD ASSIGNMENT AGREEMENT ------------------------------ (Hawthorne, Hazel Dell and Raleigh Hills) This LEASEHOLD ASSIGNMENT AGREEMENT (this "Agreement"), dated as of March 10, 1995, between REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon limited partnership ("Assignor"), and FRED MEYER, INC., a Delaware corporation, or its assign ("Assignee"), recites and provides as follows: RECITALS A. Assignor currently leases the real property located in Portland, Multnomah County, Oregon, described in the attached Exhibit A-1 (the "Hawthorne Property") 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"). B. Assignor currently leases the real property located in Vancouver, Clark County, Washington, described in the attached Exhibit A-2 (the "Hazel Dell Property") from REC, pursuant to two lease agreements dated as of October 2, 1962, and March 1, 1978 (collectively, the "Hazel Dell Master Lease"). Assignor subleases the Hazel Dell Property to Roundup Co., a Washington corporation, pursuant to a lease agreement dated as of October 22, 1986 (the "Hazel Dell Sublease"). C Assignor currently leases the real property located in Washington County, Oregon, described in the attached Exhibit A-3 (the "Raleigh Hills Property") from REC, pursuant to a lease agreement dated as of March 3, 1966 (the "Raleigh Hills 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 "Raleigh Hills Sublease"). D. The Hawthorne Property, the Hazel Dell Property, and the Raleigh Hills Property, together with all buildings and other improvements located thereon and all rights and appurtenances belonging thereto or in any way appertaining thereto and all right, title and interest of Assignor in and to any and all roads, streets, alleys and ways, bounding such property are collectively referred to herein as the "Properties." The Hawthorne Master Lease, the Hazel Dell Master Lease and the Raleigh Hills Master Lease are sometimes collectively referred to as the "Master Leases." The Hawthorne Sublease, the Hazel Dell Sublease and the Raleigh Hills Sublease are sometimes collectively referred to as the "Subleases." E. Assignor desires to sell and assign to Assignee the Assignor's interests under the Master Leases and the Subleases to Assignee, and Assignee desires to purchase and assume such interests from Assignor, on the terms and conditions set forth in this Agreement. Agreements NOW, THEREFORE, for value received and in consideration of the mutual promises set forth in this Agreement, the parties agree as follows: 1. SALE AND ASSIGNMENT OF THE LEASEHOLD INTERESTS. Assignor agrees to sell and assign to Assignee, and Assignee agrees to purchase and assume from Assignor, the interests of Assignor as lessee under the Master Leases and the interests of Assignor as sublessor under the Subleases, on the terms and conditions set forth in this Agreement. The interests to be sold and assigned pursuant to this Agreement are referred to below as the "Leasehold Interests". 2. CONSIDERATION. The total cash consideration to be paid by Assignee for the assignment of the Leasehold Interests is NINE MILLION ONE HUNDRED THOUSAND DOLLARS ($9,100,000). The consideration is allocated among the various portions of the Leasehold Interests as follows:
Land Improvements Total ---- ------------ ----- Hazel Dell Property $1,133,600.00 $1,866,400.00 $3,000,000.00 Hawthorne Property $783,712.00 $1,316,288.00 $2,100,000.00 Raleigh Hills Property $1,235,480.00 $2,764,520.00 $4,000,000.00
3. EFFECTIVE DATE. The "Effective Date" for purposes of this Agreement is the date that this Agreement is mutually executed and delivered. 4. PRECONDITIONS TO ASSIGNEE'S OBLIGATIONS. The close of escrow and Assignee's obligation to purchase and assume the Leasehold Interests are subject to the satisfaction, not later than the Closing Date (unless otherwise provided), of the following conditions, and the obligations of the parties with respect to such conditions are as set forth in this Section 4. The conditions set forth in this Section 4 are solely for the benefit of Assignee and may be waived only by Assignee. Assignee shall at all times have the right to waive any condition. Such waiver or waivers shall be in writing to Assignor. 4.1 Investigations and Contingency Period. Assignee shall be satisfied, in its sole and absolute judgment, that the Leasehold Interests suit its needs and that the acquisition of the Leasehold Interests can be financed in a manner acceptable to Assignee, and Assignee shall have obtained such senior management and board of director approvals of this transaction as Assignee may deem necessary or desirable. Assignee shall have until the date 90 days after the Effective Date (or until such earlier date as Assignee may elect in writing by waiving the right to terminate under this Section) (the "Contingency Period") to determine whether the conditions precedent set forth in this Section 4.1 have been satisfied or waived. If Assignee fails to notify Assignor within the Contingency Period that such conditions are waived or satisfied, then this Agreement shall terminate and neither party shall have any further obligations hereunder. 4.2 Conveyance; Title Review. At closing Assignor shall assign and convey the Leasehold Interests to Assignee pursuant to lease assignments in the form attached as Exhibit C. (a) Title Report, Survey, Etc. Assignee shall within 10 days after the Effective Date obtain current preliminary title reports on the Leasehold Interests, from First American Title Insurance Company ("Title Company"). Assignee shall also, as promptly as possible and in any event within 45 days after the Effective Date, obtain current ALTA surveys of the Properties meeting Assignee's survey requirements. The cost of the surveyor's work will be paid by Assignee. (b) Title Approval Procedure. (1) Within 20 days after receipt of all of the title reports and surveys, Assignee will review such materials and notify Assignor in writing of Assignee's approval (or disapproval) of any exceptions shown in the title reports, other than an exception for current property taxes, and of such surveys. Failure to notify Assignor than an item is approved shall be deemed to be disapproval of such item. In the event of such disapproval: (i) Assignor shall be obligated to remove (or commit to remove) any disapproved lien or other financial encumbrance (a "Lien"), at or prior to closing; and (ii) Assignor agrees to exert its best efforts to remove any other disapproved matter (but Assignor is not absolutely obligated to remove a disapproved matter other than a Lien). (2) Assignor shall have 20 days from the date that items are disapproved or deemed disapproved to eliminate any disapproved title exceptions or survey matters (or as to any Liens, to commit in writing to eliminate such Liens at or prior to closing). If Assignor is unable to eliminate a disapproved title exception or survey matter within such twenty-day period, despite Assignor's best efforts to do so, either party may elect to rescind this Agreement by notice to the other party within ten days after the expiration of the twenty-day period. In such event, all obligations of the parties under this Agreement shall thereafter cease. Assignee may preserve this Agreement, however, if Assignee notifies Assignor within twenty days after delivery of a notice of termination by Assignor, that either: (a) Assignee waives its objection to the relevant encumbrance(s); or (b) as to encumbrances that can be removed by the payment of money, Assignee intends at closing to pay the amount necessary to remove such encumbrances. If Assignee so preserves this Agreement, this Agreement shall remain in full force and effect, and Assignee will receive a credit at closing in the amount of any sum paid by Assignee to remove such encumbrances on title. (3) As to any exceptions to title placed of record or first identified after issuance of the preliminary title report or revealed by any supplemental report, there shall be a 10-day period for Assignee to review and approve or disapprove such exceptions on the same basis as provided above. (4) With respect to the Raleigh Hills Property, the parties are aware that boundary line questions in three locations have been identified on a preliminary survey. Assignor shall use its best efforts to resolve such questions to the satisfaction of Assignee and the title company, such that the title company will issue extended coverage title insurance insuring the surveyed border of the Property without exception for boundary line matters or encroachments. Assignee shall cooperate in such efforts. Final resolution of such matters to Assignee's satisfaction is a condition to Assignee's obligation to close. (c) Master Leases. Within 10 days after the Effective Date, Assignor shall deliver to Assignee true and complete copies of the Master Leases together with all amendments, supplements or addenda thereto. Assignee shall review the Master Leases as part of its due diligence review during the Contingency Period. 4.3 Hazardous or Toxic Materials. Exhibit B sets forth a complete list of all written soils, environmental or other reports or studies in Assignor's possession concerning any hazardous waste or hazardous substances (as defined in Section 8.1) on, in or under the Properties or any underground storage tanks on the Properties (collectively, the "Reports"). In addition, Assignor has made available to Assignee for inspection other documents ("Environmental Documents") relating to hazardous substances on, in or under the Property as further described in Exhibit B. Assignor has provided or will promptly provide complete copies of the Reports and any other such reports discovered by Assignor after the date hereof. During the Contingency Period, Assignee will cause to be conducted such investigations or audits of the environmental condition of the Properties as Assignee deems prudent. Assignee will on request provide to Assignor copies of any reports prepared by third parties in connection with such investigations or audits. In the event that, prior to the Closing Date, any hazardous substances in amounts or of kinds that violate or could give rise to liability under environmental laws (as defined in Section 8.1) are discovered on, in, or under any of the Properties, or any underground storage tanks are discovered on any of the Properties, Assignee may elect, within ten days after learning of the discovery of such matter, to terminate this Agreement by notice to the Assignor; provided, however, that Assignor may preserve this Agreement by notifying Assignee (within 10 days after receipt of the Assignee's termination notice) that Assignor commits at its expense to perform any remediation necessary to correct the problem to the satisfaction of Assignee (in Assignee's discretion) and any governmental agency with jurisdiction over the Properties, and the parties thereafter document such remediation commitment in a manner acceptable to Assignee. If this Agreement is so terminated, the parties shall thereafter have no further obligations under this Agreement. 4.4 No Material Changes. At the Closing Date, there shall have been no material adverse changes in the condition of or legal requirements applicable to the Properties (provided that the condemnation activities affecting the Hazel Dell Property referenced in Section 5.2 of this Agreement shall not be deemed a material adverse change). 5. CONDEMNATION. 5.1 Subject to Section 5.2, if, prior to closing, any part of the Property is condemned or appropriated by public authority or any party exercising the right of eminent domain, or is threatened thereby, then this Agreement shall, at the election of the Assignee, become null and void. In the event the Assignee elects not to terminate this Agreement, the consideration to be paid by Assignor shall not be affected, but Assignee shall be entitled to all proceeds of such award attributable to the Leasehold Interests (or, if the award is made prior to closing, Assignor shall receive such proceeds but Assignee shall receive a credit against the consideration to be paid in the net amount of such proceeds). Assignor will promptly notify Assignee as to the commencement of any such action or any communication from a condemning authority that a condemnation or appropriation is contemplated, and will cooperate with Assignee in the response to or defense of such actions, and permit Assignee to participate fully in, and approve any settlement of, any such proceedings. 5.2 Assignee acknowledges that proposals exist (1) to close the access to the Hazel Dell Property from 78th Street, and (2) to condemn a portion of the Hazel Dell Property in connection with the construction of light rail facilities. Such condemnation actions shall not constitute grounds to terminate this Agreement. Assignee and Assignor agree to cooperate and exert their best efforts to avoid closure of such access, including, if Assignee deems it appropriate, institution of legal proceedings; provided, Assignor shall not be required to incur out of pocket costs in connection with such efforts. Assignee shall have the right to direct such efforts and proceedings, and legal proceedings so instituted shall be at Assignee's expense. Proceeds from any such condemnation or access closure shall be handled as provided in Section 5.1. 6. [RESERVED] 7. CLOSING. 7.1 Closing Date. This transaction will be closed (the "Closing") on a date to be selected by Assignee and reasonably acceptable to Assignor, but not later than 15 days after expiration of the Contingency Period and not earlier than March 1, 1995 (the "Closing Date"). 7.2 Manner and Place of Closing. This transaction will be closed by an escrow officer of First American Title Insurance Company (or other Title Company selected pursuant to Section 4.2) (the "Escrow Officer") at its office in Portland, Oregon, or at such other place as the parties may mutually select. Closing shall take place in the manner and in accordance with the provisions set forth in this Agreement. 7.3 Prorations. There shall be no prorations of taxes or expenses, as Assignee or Assignee's subsidiary is under the Subleases responsible for taxes and expenses, and is entitled to all income derived from, the Properties other than rent owing under the Master Leases and the Subleases. Rent owing under the Master Leases and the Subleases shall be prorated as of 12:01 a.m. on the Closing Date, with Assignor entitled to the rents under the Subleases and obligated with respect to the rents under the Master Leases through such time, and with Assignee obligated with respect to the rents under the Subleases through such time. 7.4 Conveyance of Leasehold Interests. Conveyance of the Leasehold Interests shall be by delivery of lease assignment agreements in the form attached as exhibit C. All municipal, county, state and federal transfer and documentary stamp taxes, if any, shall be paid by Assignor at the time of closing. The assignment shall be free of encumbrances of any kind, without exceptions, unless otherwise specified herein or approved pursuant to Section 4.2, and except for the lien of real estate taxes not yet payable, so as to convey to Assignee good and marketable title to the Leasehold Interests. The conveyance will be free of all tenancies other than (1) the occupancy of Fred Meyer, Inc., or Roundup Co., pursuant to the Subleases; and (2) subleases, rental agreements or licenses in which Fred Meyer, Inc., or its subsidiary is the sublessor, landlord or licensor. 7.5 FIRPTA. Assignor shall deliver to Assignee at closing an affidavit that Assignor is not a "foreign person" under FIRPTA, in form satisfactory to Assignee. 7.6 Events of Closing. Provided the Escrow Officer has received the sums and is in a position to cause the title insurance policy to be issued as described below, this transaction will be closed on the Closing Date as follows: (a) Assignee shall pay the total cash consideration for the Leasehold Interests in immediately available funds, adjusted for the charges and credits set forth in this section. (b) Any liens or other encumbrances on title required by this Agreement to be paid or removed by Assignor at closing shall be paid and satisfied or removed of record at Assignor's expense. (c) Assignor and Assignee shall execute and deliver the lease assignment agreements contemplated by Section 7.4. (d) Title Company will commit to issue the policy described in Section 7.7, upon recordation of the closing documents. (e) The parties will execute any additional documentation required with respect to the matters described in Sections 7.4 and 7.5. (f) The Escrow Officer will record the lease assignment agreement(s). (g) The escrow fee shall be paid equally by the parties. Any real estate excise or transfer tax will be paid by Assignor. The recording fees for the lease assignment agreements will be paid by Assignee. Assignor shall be charged with the premium (including any sales or excise tax) for the title insurance policies to be delivered to Assignee, except that Assignee shall be responsible for the portion of the premium (including any sales or excise tax) attributable to extended coverage if Assignee elects to obtain it, and for the cost of any endorsements requested by Assignee. (h) There are no brokerage fees. (i) If any other closing costs not specifically provided for herein are due at closing of this transaction, each party shall pay such closing costs as are normally and customarily the responsibility of such party. In addition to any other items required to be paid by either party pursuant to this Agreement, each party shall pay its own attorneys' fees. 7.7 Title Insurance. As soon as possible after the Closing Date, Assignor shall cause the Title Company to furnish Assignee with a standard policy of title insurance in the amount of the total cash consideration for each Leasehold Interest, in form acceptable to Assignee, subject only to exceptions for the matters accepted by Assignee pursuant to Section 4.2. At Assignee's option, such policies shall be in ALTA extended coverage form (full or partial), in which case Assignor and Assignee will execute such affidavits as may be necessary to obtain the extended coverage. Extra title premiums attributable to extended coverage shall be Assignee's expense. 7.8 Lease. If Assignee elects to assign this Agreement and the right to purchase the Leasehold Interests to a third party that will lease the Properties to Assignor, the parties will execute any additional documentation necessary to implement such assignment and lease, provided that Assignor shall not be required to incur any additional expense or any material risk in connection therewith. 8. REPRESENTATIONS, WARRANTIES AND COVENANTS. 8.1 Assignor's Representations, Warranties and Covenants. Assignor represents and warrants to Assignee that: (a) To the Assignor's actual knowledge and without independent investigation, and except as disclosed on the Reports: (1) there are no hazardous substances (as defined below) on, within, under or upon the Properties, in amounts or of kinds that in their current condition pose a threat to human health or the environment or pose a risk of liability under environmental laws (provided, however, that due to the age of the improvements on the Properties, there may be asbestos containing materials used in the construction of such improvements); and (2) there are no underground storage tanks within the Properties. Assignor does hereby assign to Assignee (effective at and as of the Closing Date) any and all environmental warranties, indemnification agreements and rights of action Assignor may have against third parties (if any) relating to the presence of any such hazardous substances or underground tanks. As used in this Agreement, the term "environmental laws" includes any and all state, federal and local statutes, regulations, and ordinances to which the Properties are subject and relating to the protection of human health and the environment, as well as any judgments, orders, injunctions, awards, decrees, covenants, conditions, or other restrictions or standards relating to same; and the term "hazardous substances" includes all hazardous and toxic substances, wastes, or materials, including without limitation all substances, wastes, and materials containing either petroleum, including crude oil or any fraction thereof, or any of the substances referenced in Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601(14), and similar or comparable state or local laws. (b) Except as disclosed to Assignee in writing (and other than the potential condemnation affecting the Hazel Dell Property referenced in Section 5.2 above), Assignor has received no written notice of any condemnation, environmental, zoning or other land-use regulation proceedings which would detrimentally affect the use and operation of the Properties or the value of the Properties nor has Assignor received notice of any special assessment proceedings affecting the Properties. (c) There is no litigation pending or to the Assignor's actual knowledge threatened against Assignor that arises out of the ownership of the Leasehold Interests and would be binding on the Assignee or might detrimentally affect the use or operation of the Properties for their intended purpose or the value of the Leasehold Interests or adversely affect the ability of Assignor to perform its obligations under this Agreement. (d) The persons who have executed this Agreement have been duly authorized to do so by Assignor. All documents delivered at closing will be executed by a duly authorized person. Assignor has a good and legal right to enter into this Agreement and to perform all covenants of Assignor contained in this Agreement in accordance with its terms. (e) The copies of the Master Leases provided to Assignee by Assignor have been and/or will be true and complete. There are no liabilities or obligations binding on holder of the Leasehold Interests that are not reflected in the copies of the Master Leases to be provided by Assignor. As of Closing, Assignor's interest in the Master Leases, the Subleases and the rentals due or to become due thereunder will be free of any assignments, encumbrances or liens, except for encumbrances accepted by Assignee pursuant to Section 4.2. No leasing or brokerage fees or commissions of any nature whatsoever are currently or shall become due or owing at or after Closing to any person, firm, corporation, or entity with respect to the Master Leases, the Subleases, or the Leasehold Interests. 8.2 Assignee's Representations and Warranties. Assignee represents and warrants to Assignor that the persons who have executed this Agreement have been duly authorized to do so by Assignee (subject to the provisions of Section 4.1 and 12). All documents delivered at closing will be executed by a duly authorized person. Assignee has a good and legal right to enter into this Agreement and to perform all covenants of Assignee contained in this Agreement in accordance with its terms. 9. CONDUCT UNTIL CLOSING; ASSIGNOR'S COOPERATION; DISCLAIMER. From the date of this Agreement until the Closing Date, Assignor shall cause all liens on the Leasehold Interests incurred by Assignor to be paid current, and will not further mortgage or encumber the Leasehold Interests or increase the amount of any current indebtedness on the Leasehold Interests. No provision of this Agreement or previous (or subsequent) conduct or activities of the parties will be construed: (i) as making either party an agent, principal, partner or joint venturer with the other party, (ii) as creating any express or implied obligation for Assignee to operate the Properties as a Fred Meyer retail facility or otherwise, or (iii) as making either party responsible for payment or reimbursement of any costs incurred by the other, whether or not such development occurs (except as may be expressly set forth herein or in its attached exhibits). WHETHER AND HOW ASSIGNEE MAY DEVELOP, REDEVELOP OR OPERATE THE PROPERTIES POST-CLOSING IS AT ASSIGNEE'S DISCRETION. ASSIGNOR WILL NOT HAVE ANY CLAIM AGAINST (OR RIGHT TO RECOVER ANY DAMAGES OR COSTS FROM) ASSIGNEE IN THE EVENT ASSIGNEE DOES NOT DEVELOP, REDEVELOP OR CONTINUE TO OPERATE THE PROPERTIES. 10. FAILURE TO CLOSE. 10.1 Assignor's Remedies. In the event that this transaction fails to close on account of Assignee's fault or inability to close, and Assignee has not exercised any right to terminate or rescind this Agreement as provided herein, Assignee shall pay to Assignor the sum of $25,000 as full liquidated damages. SUCH AMOUNT HAS BEEN AGREED BY THE PARTIES TO BE REASONABLE COMPENSATION AND THE EXCLUSIVE REMEDY FOR Assignee'S DEFAULT, SINCE THE PRECISE AMOUNT OF SUCH COMPENSATION WOULD BE DIFFICULT TO DETERMINE. Assignor hereby waives any right to specific enforcement of this Agreement, and any right to sue for damages (including lost profits or consequential damages) other than the liquidated damages provided for in this Section. The parties are initialing this Section for purposes of acknowledging and agreeing to such exclusive remedy and liquidated damages provision. Initials of: Assignor _____ Assignee _____ 10.2 Assignee's Remedies. In the event that the transaction fails to close on account of Assignor's fault or Assignor's inability to deliver title acceptable to Assignee pursuant to Section 4.2, Assignee shall be entitled to such remedies for breach of contract as may be available under applicable law, including (without limitation) the remedy of specific performance, collection of damages, recovery of costs and attorneys' fees. 11. GENERAL PROVISIONS. 11.1 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties, and their respective heirs, personal representatives, successors, and assigns. Assignee reserves the right to assign the right to purchase the Leasehold Interests to any third party at closing. Assignee also reserves the right to assign the Agreement at or prior to closing to an entity that will lease the Leasehold Interests to Assignee. Unless otherwise agreed, however, no such assignment shall release Assignee from its obligations under this Agreement, or increase Assignor's obligations in any respect. 11.2 Time of Essence. Time is of the essence of each and every provision of this Agreement. 11.3 Notices. All demands or notices required or permitted to be given under this Agreement shall be in writing. Notices may be served by certified or registered mail, postage paid with return receipt requested; by facsimile, or other telecommunication device capable of transmitting or creating a written record (provided that a copy is also sent by U.S. Mail, first class); or personally. Mailed notices shall be deemed delivered five (5) days after mailing, properly addressed. 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: Assignor: REAL ESTATE PROPERTIES LIMITED PARTNERSHIP Suite 200 15115 SW Sequoia Parkway Portland, OR 97224 Attn: Dave Ramus Facsimile No. (503) 624-7755 Assignee: Fred Meyer, Inc. P.O. Box 42121 Portland, Oregon 97242-0121 (Street Address - 3800 S.E. 22nd Avenue, Portland, Oregon 97202) Attn: Scott L. Wippel Facsimile No.: (503) 797-3539 11.4 Waiver. Failure of either party at any time to require performance of any provision of this Agreement shall not limit the party's right to enforce the provision. Waiver of any breach of any provision shall not be a waiver of any succeeding breach of the provision or a waiver of the provision itself or any other provision. 11.5 Attorneys' Fees. In the event suit or action is instituted to interpret or enforce the terms of this Agreement or to rescind this Agreement, the prevailing party shall be entitled to recover from the other party such sum as the court may adjudge reasonable as attorneys' fees at trial, on any appeal, and on any petition for review, in addition to all other sums provided by law. 11.6 Prior Agreements. This Agreement supersedes and replaces all written and oral agreements previously made or existing between the parties (including, without limitation, all previous letters of intent and addenda thereto and all verbal agreements and understandings). 11.7 Applicable Law. This Agreement shall be construed, applied and enforced in accordance with the laws of the State of Oregon (provided, as to the equitable remedies of Assignee with respect to the Hazel Dell Property, Washington law shall apply). 11.8 Brokers. Each party will defend, indemnify, and hold the other party harmless from any claim, loss, or liability made or imposed by any other party claiming a commission or fee in connection with this transaction and arising out of its own conduct. 11.9 Changes in Writing. This Agreement and any of its terms may only be changed, waived, discharged or terminated by a written instrument signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 11.10 Counterparts. This Agreement may be executed simultaneously or in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. 11.11 Invalidity of Provisions. In the event any provision of this Agreement is declared invalid or is unenforceable for any reason, such provision shall be deleted from such document and shall not invalidate any other provision contained in the document. 11.12 Survival. All representations, warranties and obligations of the parties in this Agreement shall survive the Closing Date and delivery of the lease assignment agreements contemplated in this Agreement and be fully enforceable thereafter. 11.13 Effect of Extensions and Modifications; Backup Offers. Any amendment to this agreement (including any extension of time for waiver of conditions or closing) shall be deemed to be a modification of the continuing existing agreement, rather than a rescission or termination of such agreement. Assignor will not accept any "backup", "standby" or other additional offers to purchase the Leasehold Interests without Assignee's written consent. In any event, any such additional offer shall be subordinate to this Agreement as it may be extended or modified. 11.14 Disclaimer; Duty to Disclose. As to any reports or other materials provided by one party to the other party herein, the party providing such reports or materials is not warranting (and will not be liable or responsible for) the accuracy, fitness or usability of such reports or materials or any recommendations or conclusions stated therein. All representations and warranties of the parties in this Agreement are limited to the best of the party's actual knowledge, without independent investigation or examination. If either party obtains actual knowledge prior to the Closing Date of a fact which would make any of the representations and warranties in this Agreement false, such party will notify the other party of such fact. A party will not be deemed in breach of a representation or warranty in this Agreement or liable to the other party for any claimed misrepresentation in this Agreement after the Closing Date unless the party had actual knowledge on the Closing Date that the representation or warranty was false and failed to disclose to the other party the fact known to the party which made the representation or warranty false. 11.15 Representations; Condition of Properties. Assignee or Assignee's affiliate has heretofore operated and occupied the Properties and has thoroughly and completely examined and is fully aware of the physical condition of the Properties as well as any governmental permits or approvals required in connection with Assignee's use of the Properties, the suitability of the Properties for Assignee's intended use, the availability of utilities and services, the applicable zoning, building, housing and other ordinances, restrictions, laws, and regulations affecting the Properties or other matters. Except as otherwise specifically set forth in this Agreement or in any instrument delivered at Closing, Assignee accepts the land and property and all other aspects of the Properties in their present condition, AS IS, without any representations or warranties by Assignor, expressed or implied. Assignee acknowledges that Assignee has ascertained for itself the value and condition of the Properties and Assignee is not relying on, nor has Assignee been influenced by, any representation of Assignor regarding the value or condition of the Properties. 11.16 Related Agreement. Assignee is party to a Real Estate Purchase and Sale Agreement, dated on or about the date hereof, pursuant to which Assignee intends to acquire the fee interest of REC in the Properties (the "Related Agreement"), which the parties thereto intend to close simultaneously with closing under this Agreement. Assignee's obligation to close under this Agreement is subject to the performance by REC of REC's obligations under the Related Agreement, such that a simultaneous closing may occur. Assignor's obligation to close under this Agreement is subject to the performance by Assignee of Assignee's obligations under the Related Agreement, such that a simultaneous closing may occur. 11.17 Certain Obligations. Under the terms of the Subleases, Assignee is obligated to (i) maintain the Properties (Paragraph 9.1) and (ii) cause the Properties to comply with all legal requirements (Paragraph 6.2). In addition to Assignnee's acknowledgment that it is accepting the Properties AS IS, Assignee hereby waives, releases, acquits and forever discharges Assignor and its officers, directors, partners, employees, agents, and any other person acting on behalf of Assignor, from any and all claims, actions, causes of action, demands, rights, damages expenses or compensation whatsoever, arising from any defects in the Properties, to the extent such defects would have been Assignee's responsibility to remedy under the Subleases. 11.18 Indemnity. Paragraph 12.2 of each Sublease requires Assignee to indemnify Assignor against claims for injury to persons and damage to property occurring on the Properties. The parties acknowledge that Assignee's indemnity obligation to Assignor under Paragraph 12.2 of the Subleases shall survive the assignment or termiantion of the Subleases or both, and furhter agrees that such obligation shall extend to REC, as if REC were the landlord under the Subleases. 12. APPROVAL BY ASSIGNOR. Assignor will have until 5 p.m. (Pacific Time) on March 21, 1995 in which to execute and return to Assignee a fully signed counterpart of this Agreement. Neither the delivery of this Agreement to Assignor for execution nor the delivery of any signed Agreement to Assignee will create a binding contract, or contract by estoppel or otherwise, between the parties. Assignee will have 10 days after receipt of this Agreement signed by Assignor to execute and deliver or transmit (by facsimile or otherwise) to Assignor at its address hereunder a fully executed counterpart of this Agreement, and if not executed and delivered within such time period, this Agreement will be null and void and neither party will thereafter have any obligation or liability to the other party pursuant to this Agreement. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed as of the date set forth 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: DAVID W. RAMUS ---------------------------------------- Title: David W. Ramus ------------------------------------- Date Executed: 3/13/95 ----------------------------- Assignee: FRED MEYER, INC., a Delaware corporation By: SCOTT L. WIPPEL ---------------------------------------- Scott L. Wippel, Senior Vice President ---------------------------------------- Date Executed: 3/14/95 ----------------------------- EXHIBIT A-1 ----------- Legal Description - Hawthorne Property 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, SUNNYSIDE 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 A-2 ----------- Legal Description - Hazel Dell Property PARCEL I - -------- BEGINNING at an iron pipe set at the Northeast corner of Lot 20, Alexander Tracts in the Northeast quarter of Section 10, Township 2 North, Range 1 East, Willamette Meridian; thence South 5 degrees 59'15" West along the East line of said Lot 20 a distance of 111.00 feet to a railroad spike marking the Southeast corner thereof; thence South 88 degrees 17'00" West along the South line of said Lot 20, a distance of 292.01 feet to the East right of way line of SR 5; thence North 1 degree 43'00" West along the East right of way line of said SR 5 a distance of 110.00 feet to the North line of said Lot 20; thence North 88 degrees 17'00" East along the North line of said Lot 20 a distance of 306.90 feet to the point of beginning. PARCEL II - --------- That portion of the Northeast quarter of the Northeast quarter of Section 10, Township 2 North, Range 1 East of the Willamette Meridian, in Clark County, Washington, described as follows: BEGINNING at a point that is South 89 degrees 05' West 71.35 feet and South 5 degrees 59'15" West 284.33 feet fron the Northeast corner of said Section 10, said point of beginning also being on the Westerly line of N.E. Highway 99; thence continuing South 5 degrees 59'l5" West along the Westerly line of said N.E. Highway 99, a distance of 823.54 feet to the Northeast corner of the Alexander Tract, according to the plat thereof, recorded in Volume "E" of Plats, page 1 records of said County; thence South 88 degrees 17'00" West along the North line of said Alexander tracts, a distance of 306.90 feet to the Easterly right of way line of Primary State Highway No. 1 as conveyed to the State of Washington by deed recorded under Auditor's File No. G 200257; thence North 3 degrees 45' East along said Easterly right of way line to an inner corner in said Easterly line; thence North 88 degrees 27'15" East 11.10 feet to the West line of that tract conveyed to Vanoak Corporation by deed recorded under Auditor's File No. G 628799; thence South 12 degrees 42'15" East along the West line of said Vanoak tract, a distance of 76.72 feet to the Southwest corner thereof; thence North 89 degrees 04' East along the South line of said Vanoak tract, 134.36 feet to the Southeast corner thereof; thence South 5 degrees 59'l5" West along the Southerly extension of the East line of said Vanoak tract, 126.76 feet; thence South 84 degrees 00'45" East 180.00 feet to the point of beginning. PARCEL III - ---------- That certain portion of the Northeast quarter of the Northeast quarter of Section 10, Township 2 North, Range 1 East, Willamette Meridian in the County of Clark and State of Washington, more particularly described as follows: BEGINNING at a point that is South 46.88 feet and West 422.41 feet fron the Northeast corner of said Section 10, said point being the intersection of the Southerly line of N.E. 78th Street and the Easterly line of Primary State Highway No. 1 and running thence South 12 degrees 42'15" East 96.71 feet; thence North 89 degrees 05' East 134.36 feet; thence North 5 degrees 59' East 98.26 feet to the Southerly line of N.E. 78th Street; thence South 88 degrees 05'15" West, along said Street, 165.96 feet to the point of beginning. EXCEPTING from the above described Parcel III the North 10 feet thereof conveyed to Clark County, Washington, a municipal corporation by deed recorded June 17, 1985, as Auditor's File No. 8506170112. EXHIBIT A-3 ----------- Legal Description - Raleigh Hills Property A tract of land located in Section 13, Township 1 South, Range 1 West of the Willamette Meridian, in the County of Washington and State of Oregon, and more particularly described as follows: Commencing at the intersection of the Southerly line of the Beaverton Hillsdale Highway (County Road No. 669) and the West line of the Northeast quarter of the said Section 13, which intersection is on the Westerly line of that tract of land conveyed to Harry M. Baker and wife by deed recorded in Deed Book 288, page 103, Washington County Deed Records; thence South 01 degrees 24'40" West along the Westerly line of the said Baker tract a distance of 204.68 feet to the Southeast corner of that tract of land conveyed to Portland Federal Savings and Loan Association by that Warranty Deed recorded in Deed Book 459, page 264, Washington County Deed Records, and the true point of beginning of this description; thence South 01 degrees 24'40" West along the West line of the said Baker tract a distance of 63.32 feet to the Southwest corner thereof; thence South 01 degrees 24'40" West along the West line of that tract of land conveyed to George Krueger and wife by deed recorded in Book 229, page 651, Washington County Deed Records, a distance of 184.60 feet to an angle point therein and to the most Easterly Southeast corner of that tract of land leased to United States National Bank of Oregon, as described in that Memorandum of Lease recorded in Book 646, page 295, Washington County Deed Records; thence South 27 degrees 04'50" West along the Southerly line thereof, a distance of 66.70 feet to the most Southerly Southeast corner thereof; thence South 75 degrees 43'50" West a distance of 60.00 feet to the Southwest corner thereof; thence 155.22 feet along the arc of a 1,145.92 foot radius circular curve to the left (long chord is 153.11 feet and bears South 41 degrees 50'43" East) to a point of compound curve; thence 168.03 feet along the arc of a 174.50 foot radius circular curve to the left (long chord is 161.98 feet and bears South 72 degrees 32'32" East) to a point in the Northwesterly line of SW Scholls Ferry Road, said point being South 56 degrees 16'30" West a distance of 23.33 feet from the Southwesterly line of the said Krueger tract; thence Southwesterly along the Northwesterly line of SW Scholls Ferry Road, South 56 degrees 16'30" West a distance of 74.38 feet to the most Easterly corner of that tract of land conveyed to the State of Oregon by deed recorded in Book 430, page 45, of the Washington County Deed Records; thence South 61 degrees 21'30" West along the Northwesterly line of the said State of Oregon tract a distance of 293.40 feet to an angle point therein; thence North 77 degrees 08'30" West along the Northerly line, thereof, a distance of 64.00 feet to an angle point therein; thence South 56 degrees 16'30" West along the Northwesterly line thereof, a distance of 40.00 feet to an angle point therein; thence South 04 degrees 41'30" West along the West line, thereof, a distance of 16.09 feet to the most Easterly corner of that tract of land leased to the Union Oil Company of California as described in that lease recorded in Book 502, page 456, of the Washington County Deed Records; thence North 33 degrees 43'30" West along the Northeasterly line, thereof, a distance of 44.63 feet to the most Northerly corner thereof; thence South 55 degrees 16'30" West along the Northwesterly line thereof, a distance of 153.50 feet to the most Westerly corner thereof; thence South 33 degrees 43'30" East along the Southwesterly line, thereof, a distance of 5.84 feet to the most Easterly Northeast corner of that tract of land conveyed to CAY, Incorporated, an Oregon corporation, as described in Book 511, page 494 of the Washington County Deed Records; thence along the Northeast line of the said CAY, Incorporated tract 100.21 feet along the arc of a 100.00 foot radius circular curve to the right (long chord is 96.07 feet and bears North 66 degrees 51'10" West) to a point of tangency; thence North 38 degrees 08'40" West along the East line of the said CAY, Incorporated tract, a distance of 394.78 feet to an angle point therein; thence North 88 degrees 39'20" West along the North line, thereof, a distance of 87.05 feet to a point on the West line of that tract of land conveyed to Hollywood Company as described in Book 439, page 706 of the Washington County Deed Records; thence North 01 degrees 41'20" East along the West line of the said Hollywood Company tract a distance of 618.03 feet to the South line of the said Beaverton Hillsdale Highway; thence South 88 degrees 32'40" East along said South line a distance of 710.00 feet to a point that is 100.00 feet West of the West line of the Northeast quarter of the said Section 13; thence South 01 degrees 24'40" West parallel to and 100.00 feet West of said Baker Westerly line a distance of 204.88 feet to the Southwest corner of the said Portland Federal Savings and Loan Association tract; thence South 88 degrees 32'40" East along the South line of the said Portland Federal Savings and Loan Association tract a distance of 100.00 feet to the true point of beginning of this description. EXCEPTING THEREFROM that portion as described in deed to Washington County, a political subdivision of the State of Oregon, recorded August 27, 1990 as Fee No. 90-46313. EXHIBIT B --------- RALEIGH HILLS FLYING A SERVICE STATION 7550 SW Beaverton-Hillsdale Highway Portland, Oregon 1. A Report on Underground Storage Tank Decommissioning and Soil Cleanup, dated March 1, 1993. 2. A Report on Third Quarter Groundwater Monitoring, dated March 22, 1993. 3. A Report on Additional Subsurface Investigation, dated January 21, 1994. RALEIGH HILLS UNOCAL SERVICE STATION l. Report of Remedial Action dated December 22, 1989. 2. Site Contamination Study dated November 9, 1990. 3. Drywell Removal Report dated July 15, 1992. 4. Results of Quarterly Ground Water Monitoring dated October 1992, February 1994, April 1994, and August 1994. EXHIBIT C - LEASE ASSIGNMENT FORM --------------------------------- RECORDING REQUESTED | BY AND WHEN RECORDED | RETURN TO: | | _______________________ | P.O. Box 42121 | Portland, Oregon 97242 | Attn: RTC MO/CLD | LEASE ASSIGNMENT AGREEMENT This Lease Assignment Agreement (this "Agreement"), dated as of _______________, between REAL ESTATE PROPERTIES LIMITED PARTNERSHIP, an Oregon corporation whose address is Suite 200, 15115 SW Sequoia Parkway, Portland, OR 97224 ("Assignor"), and ______________________, a Delaware corporation, whose address is ___________________________ ("Assignee"), recites and provides as follows: 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 each of the lease agreements referenced on Exhibit A hereto (the "Lease Agreements"). The rights conveyed hereby are referred to herein as the "Leasehold Interests". Assignee hereby accepts the foregoing assignment. Assignee agrees to assume Assignor's obligations under the Lease Agreements, provided, however, that Assignee does not assume, and Assignor shall remain fully responsible for, and agrees to discharge, any obligations or liabilities under such Lease Agreements that either (i) are not disclosed on the face of the copies of such Lease Agreements provided by Assignor to Assignee, or (ii) accrued or arose from or out of a set of facts existing prior to the date hereof ("Assignor's Liabilities"). Assignee will indemnify, defend and hold harmless Assignor from and against liabilities, costs, expenses and damages, including attorneys' fees, arising from Assignee's failure to perform its obligations hereunder, except for liabilities that arise from Assignor's failure to perform its obligations hereunder or to discharge Assignor's Liabilities. Assignee assumes no liabilities or obligations of Assignor of any nature whatsoever, whether or not accrued or affixed, absolute or contingent, known or unknown, determined or determinable, or incurred prior to, on or after 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. 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. [signature and acknowledgment forms] EX-11 13 EXHIBIT 11 EXHIBIT 11 FRED MEYER, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (in thousands, except per share amounts) (unaudited)
52 Weeks Ended ------------------------------ Jan. 28, Jan. 29, Jan. 30, 1995 1994 1993 ------- ------- ------- Weighted average number of shares outstanding. . . . . . . . . . 26,514 25,878 24,874 Weighted average number of shares under option . . . . . . . . . 3,452 4,032 4,108 Shares assumed to have been purchased under the treasury stock method. . . . . . . . . . (1,341) (1,535) (1,536) ----- ----- ----- Weighted average number of common and common equivalent shares outstanding. . . . . . 28,625 28,375 27,446 ====== ====== ====== Net income before the effect of an accounting change. . . . . . . . . $7,168 $70,904 $60,587 Effect of an accounting change . . . . . . --- (2,588) --- ----- ------ ------ Net income (loss). . . . . . . . . . . . . $7,168 $68,316 $60,587 ===== ====== ====== Earnings per common share on: Net income before the effect of an accounting change. . . . . . . . $.25 $2.50 $2.21 Effect of an accounting change . . . . . --- (0.09) --- --- ---- ---- Net Income . . . . . . . . . . . . . . . . $.25 $2.41 $2.21 === ==== ====
EX-13 14 EXHIBIT 13 EXHIBIT 13
SELECTED FINANCIAL DATA (1995-1992) (page 1 of 3) Fiscal Year Ended ------------------------------------------------------------- (In thousands, except per-share data and January 28, January 29, January 30, February 1, statistical information) 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT DATA Net sales . . . . . . . . . . . . . . . . . . . . $3,128,432 $2,979,082 $2,853,962 $2,702,721 Gross margin. . . . . . . . . . . . . . . . . . . 866,034 890,375/5 857,086 809,900 Operating and administrative expenses . . . . . . 823,742 761,627 752,004 731,892 Writedown of California assets/restructuring charge (reversal) . . . . . . . . . . . . . . . 15,978/3 -- -- (8,289)/8 Income from operations. . . . . . . . . . . . . . 26,314/4 128,748/5 105,082 86,297/9 Interest expense, net of interest income/1. . . . 14,753 8,246 8,912 15,302 Income (loss) before income taxes . . . . . . . . 11,561/4 120,502 96,170 70,995/8,9 Provision for (benefit from) income taxes . . . . 4,393/4 49,598/6 35,583 25,768 Net income (loss) before cumulative effect of accounting change or extraordinary item . . . . 7,168/4 70,904/5,6 60,587 45,227/8,9 Cumulative effect of accounting change. . . . . . -- (2,588)/7 -- -- Extraordinary item. . . . . . . . . . . . . . . . -- -- -- -- ---------- ---------- ---------- ---------- Net income (loss) . . . . . . . . . . . . . . . . $ 7,168/4 $ 68,316/5,6,7 $ 60,587 $ 45,227/8,9 ========== ========== ========== ========== Earnings (loss) per common share: Net income (loss) before cumulative effect of accounting change or extraordinary item . . . $.25/4 $2.50/5,6 $2.21 $1.80/8,9 Cumulative effect of accounting change. . . . . -- (.09)/7 -- -- Extraordinary item. . . . . . . . . . . . . . . -- -- -- -- ---- ----- ----- ----- Net income (loss) . . . . . . . . . . . . . . . $.25/4 $2.41/5,6,7 $2.21 $1.80/8,9 ==== ===== ===== ===== BALANCE SHEET DATA Total assets. . . . . . . . . . . . . . . . . . . $1,562,672 $1,326,076 $1,081,627 $974,780 Capitalization: Long-term debt. . . . . . . . . . . . . . . . . $540,166 $321,398 $195,837 $240,968 Lease obligations . . . . . . . . . . . . . . . 63,229 65,955 70,313 67,387 Stockholders' equity. . . . . . . . . . . . . . 538,620 527,686 450,128 335,154 ---------- ---------- ---------- -------- Total . . . . . . . . . . . . . . . . . . . . $1,142,015 $915,039 $716,278 $643,509 ========== ========== ========== ======== STATISTICAL INFORMATION Percent of net sales: Nonfood sales . . . . . . . . . . . . . . . . . 61.7% 62.5% 63.3% 63.7% Food sales. . . . . . . . . . . . . . . . . . . 38.3% 37.5% 36.7% 36.3% Total stores sales growth . . . . . . . . . . . . 5.0% 4.4% 5.6% 9.2% Comparable stores sales percentage increase (decrease)/2 . . . . . . . . . . . . . (2.0)% 2.4% 3.0% 4.0% Long-term debt as a percent of total capitalization. . . . . . . . . . . . . . 52.8% 42.3% 37.2% 47.9% Net income (loss) as a percent of net sales . . . .2%/4 2.3%/5,6,7 2.1% 1.7% Number of multidepartment and specialty stores opened during year. . . . . . . . . . . . . . . 8 7 6 3 Number of multidepartment and specialty stores closed during year. . . . . . . . . . . . . . . 4 3 5 3 Number of multidepartment and specialty stores operated at end of year . . . . . . . . . . . . 131 127 123 122 Total retail square feet at end of year . . . . . 14,194,000 13,423,000 12,646,000 12,679,000 Selling square feet at end of year. . . . . . . . 10,490,000 9,999,000 9,471,000 9,657,000 Sales per selling square foot (weighted average). . . . . . . . . . . . . . . $304 $312 $304 $283 Common shares outstanding (weighted average). . . 28,625,000 28,375,000 27,446,000 25,182,000 - ----------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA (1991-1988) (page 2 of 3) Fiscal Year Ended ----------------------------------------------------------- (In thousands, except per-share data and February 2, February 3, January 28, January 30, statistical information) 1991 1990 1989 1988 - --------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT DATA Net sales . . . . . . . . . . . . . . . . . . . . $2,476,055 $2,284,535 $2,073,544 $1,847,843 Gross margin. . . . . . . . . . . . . . . . . . . 741,720 671,044 610,415 547,157 Operating and administrative expenses . . . . . . 674,212 620,953 544,225 485,822 Writedown of California assets/restructuring charge (reversal) . . . . . . . . . . . . . . . -- 49,277/8 -- -- Income from operations. . . . . . . . . . . . . . 67,508 814/11 66,190 61,335 Interest expense, net of interest income/1. . . . 15,974 13,947 9,291 7,449 Income (loss) before income taxes . . . . . . . . 51,534 (13,133)/11 56,899 53,886 Provision for (benefit from) income taxes . . . . 17,951 (6,285) 20,238 21,850 Net income (loss) before cumulative effect of accounting change or extraordinary item . . . . 33,583 (6,848)/11 36,661 32,036 Cumulative effect of accounting change. . . . . . -- -- -- -- Extraordinary item. . . . . . . . . . . . . . . . -- -- -- -- ---------- ---------- ---------- ---------- Net income (loss) . . . . . . . . . . . . . . . . $ 33,583 $ (6,848)/11 $ 36,661 $ 32,036 ========== ========== ========== ========== Earnings (loss) per common share: Net income (loss) before cumulative effect of accounting change or extraordinary item . . . $1.37 $(.28)/11 $1.50 $1.31 Cumulative effect of accounting change. . . . . -- -- -- -- Extraordinary item. . . . . . . . . . . . . . . -- -- -- -- ----- ----- ----- ----- Net income (loss) . . . . . . . . . . . . . . . $1.37 $(.28)/11 $1.50 $1.31 ===== ===== ===== ===== BALANCE SHEET DATA Total assets. . . . . . . . . . . . . . . . . . . $905,756 $796,894 $686,806 $626,522 Capitalization: Long-term debt. . . . . . . . . . . . . . . . . $232,881 $188,441 $ 92,180 $ 87,730 Lease obligations . . . . . . . . . . . . . . . 67,664 66,393 50,774 46,904 Stockholders' equity. . . . . . . . . . . . . . 285,299 251,546 258,188 221,056 -------- -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . $585,844 $506,380 $401,142 $355,690 ======== ======== ======== ======== STATISTICAL INFORMATION Percent of net sales: Nonfood sales . . . . . . . . . . . . . . . . . 64.3% 66.8% 68.2% 67.6% Food sales. . . . . . . . . . . . . . . . . . . 35.7% 33.2% 31.8% 32.4% Total stores sales growth . . . . . . . . . . . . 11.6%/10 8.4%/10 12.2% 9.5% Comparable stores sales percentage increase (decrease)/2 . . . . . . . . . . . . . 3.6%/10 4.5%/10 7.9% 6.6% Long-term debt as a percent of total capitalization. . . . . . . . . . . . . . 51.3% 50.3% 35.6% 37.9% Net income (loss) as a percent of net sales . . . 1.4% (.3)%/11 1.8% 1.7% Number of multidepartment and specialty stores opened during year. . . . . . . . . . . . . . . 5 15 14 8 Number of multidepartment and specialty stores closed during year. . . . . . . . . . . . . . . 8 2 1 2 Number of multidepartment and specialty stores operated at end of year . . . . . . . . . . . . 122 125 112 99 Total retail square feet at end of year . . . . . 12,213,000 11,743,000 10,925,000 10,494,000 Selling square feet at end of year. . . . . . . . 9,361,000 9,056,000 8,388,000 8,064,000 Sales per selling square foot (weighted average). . . . . . . . . . . . . . . $269 $261/10 $253 $239 Common shares outstanding (weighted average). . . 24,500,000 24,801,000 24,470,000 24,403,000 - --------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA (1987-1985) (page 3 of 3) Fiscal Year Ended ------------------------------------------- (In thousands, except per-share data and January 31, February 1, February 2, statistical information) 1987 1986 1985 - ----------------------------------------------------------------------------------------------------- INCOME STATEMENT DATA Net sales . . . . . . . . . . . . . . . . . . . . $1,688,208 $1,583,796 $1,449,108 Gross margin. . . . . . . . . . . . . . . . . . . 487,829 447,960 395,419 Operating and administrative expenses . . . . . . 430,469 397,841 354,914 Writedown of California assets/restructuring charge (reversal) . . . . . . . . . . . . . . . -- -- -- Income from operations. . . . . . . . . . . . . . 57,360 50,119 40,505 Interest expense, net of interest income/1. . . . 11,945 17,652 19,565 Income (loss) before income taxes . . . . . . . . 45,415 32,467 20,940 Provision for (benefit from) income taxes . . . . 21,350 13,000 8,000 Net income (loss) before cumulative effect of accounting change or extraordinary item . . . . 24,065 19,467 12,940 Cumulative effect of accounting change. . . . . . -- -- -- Extraordinary item. . . . . . . . . . . . . . . . (1,530)/12 -- 2,649/14 ---------- ---------- ---------- Net income (loss) . . . . . . . . . . . . . . . . $ 22,535 $ 19,467 $ 15,589 ========== ========== ========== Earnings (loss) per common share: Net income (loss) before cumulative effect of accounting change or extraordinary item . . . $1.15 $1.06 $.73 Cumulative effect of accounting change. . . . . -- -- -- Extraordinary item. . . . . . . . . . . . . . . (.07)/12 -- .15/14 ----- ----- ---- Net income (loss) . . . . . . . . . . . . . . . $1.08 $1.06 $.88 ===== ===== ==== BALANCE SHEET DATA Total assets. . . . . . . . . . . . . . . . . . . $533,986 $568,531 $538,847 Capitalization: Long-term debt. . . . . . . . . . . . . . . . . $ 76,874 $130,940 $175,375 Lease obligations . . . . . . . . . . . . . . . 36,093 89,236 89,297 Stockholders' equity. . . . . . . . . . . . . . 186,692 98,395 78,584 -------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . $299,659 $318,571 $343,256 ======== ======== ======== STATISTICAL INFORMATION Percent of net sales: Nonfood sales . . . . . . . . . . . . . . . . . 66.1% 65.6% 63.5% Food sales. . . . . . . . . . . . . . . . . . . 33.9% 34.4% 36.5% Total stores sales growth . . . . . . . . . . . . 6.6% 11.2%/13 17.3%/13 Comparable stores sales percentage increase (decrease)/2 . . . . . . . . . . . . . 4.3% 4.1%/13 4.4%/13 Long-term debt as a percent of total capitalization. . . . . . . . . . . . . . 37.7% 69.1% 77.1% Net income (loss) as a percent of net sales . . . 1.3% 1.2% 1.1% Number of multidepartment and specialty stores opened during year. . . . . . . . . . . . . . . 1 4 23/15 Number of multidepartment and specialty stores closed during year. . . . . . . . . . . . . . . 1 1 1 Number of multidepartment and specialty stores operated at end of year . . . . . . . . . . . . 93 93 90 Total retail square feet at end of year . . . . . 9,738,000 9,536,000 8,919,000 Selling square feet at end of year. . . . . . . . 7,497,000 7,309,000 6,772,000 Sales per selling square foot (weighted average). . . . . . . . . . . . . . . $228 $228 $226/13 Common shares outstanding (weighted average). . . 20,870,000 18,355,000 17,790,000 - ---------------------------------------------------------------------------------------------------- /1 Interest income was $885, $707, $544, $517, $467, $482, $336, $350, $1,679, $2,983, and $3,090. Excludes interest expense related to occupancy. /2 Includes only sales of stores operating throughout each of the periods compared. /3 In 1994, the Company recorded a pretax charge of $15,978 to writedown to their estimated net realizable value one multidepartment store and three land parcels in California. /4 Excluding the writedown of California assets of $15,978, income from operations, income before income taxes, provision for income taxes, net income and earnings per common share would be $42,292; $27,539; $10,465; $17,074; and $.60, respectively; and net income as a percent of sales would be .6%. /5 Includes a nonrecurring LIFO credit of $6,178. /6 Includes $3,588 from the resolution of an IRS audit, ($2,286) related to the LIFO credit, and a 38% tax rate. /7 Effect of adopting Statement of Financial Accounting Standards No. 109 relating to income taxes. /8 In 1989, the Company took a pretax charge of $49,277 related to closing some of its stores and for conversion of its management information systems from Honeywell to IBM. In 1991, the Company reversed $8,289 of this charge based on a decision not to close as many stores as previously provided for. /9 Excluding the benefit from the restructuring charge reversal of $8,289 and a charge against expenses for previously capitalized software development costs of $8,748, income from operations, net income, and earnings per common share would be $86,756; $45,516; and $1.81, respectively. /10 Excludes 53rd week in the fiscal year ended February 3, 1990. /11 Excluding the restructuring charge of $49,277, income from operations, net income, earnings per common share, and net income as a percent of net sales would be $50,091; $24,197; $.98; and 1.1%, respectively. /12 Prepayment costs of $1,530 ($.07 per share) from early extinguishment of 17% Senior and Subordinated Notes, net of taxes. /13 Excludes 53rd week in the fiscal year ended February 2, 1985. /14 Extraordinary gain of $2,649 ($.15 per share) arising from the disposition of a limited partnership interest in Properties. /15 Includes 21 nonfood stores acquired from Grand Central, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion summarizes Fred Meyer, Inc.'s (the "Company") operating results for the fiscal year ended January 28, 1995 ("1994") compared with the fiscal year ended January 29, 1994 ("1993") and for 1993 compared with the fiscal year ended January 30, 1993 ("1992"). Also included are discussions of the Company's liquidity, capital resources, effect of LIFO, effect of inflation, recent accounting changes, stock data, and dividend policy. This discussion and analysis should be read in conjunction with the Company's consolidated financial statements. RESULTS OF OPERATIONS--1994 COMPARED WITH 1993 Net sales for 1994 increased $149,350,000 or 5.0% over 1993. This increase reflects openings of five full-size multidepartment stores, three jewelry stores in malls, and the addition of food to four nonfood stores, offset by the closure of two multidepartment stores and two specialty stores. Comparable store sales decreased 2.0% for 1994, with food comparable store sales down 3.0% and nonfood comparable store sales decreasing 1.4%. This decrease reflects the effect of an 88-day food industry strike in the greater Portland, Oregon and Vancouver, Washington area, in which the Company's stores were the only stores picketed, plus strikes at the Company's Portland area distribution center, trucking operations, dairy and main office. These labor disputes were all settled early in the fourth quarter. Excluding the stores affected by the strikes, total comparable store sales increased 1.5%, with food comparable store sales up 1.7% and nonfood comparable store sales up 1.3%. Food sales as a percent of net sales were 38.3% and 37.5%, respectively, for 1994 and 1993. The increase in food sales as a percent of net sales was primarily due to an increase in the number of the Company's stores that sell food. Gross margin as a percent of net sales was 27.7% in 1994 compared with 29.9% in 1993. This decrease is primarily due to the impact of the strikes and high markdowns that were taken during the promotional Christmas period. 1993's gross margin was favorably affected by a one-time LIFO credit of $6,178,000. Operating and administrative expenses increased 8.2% to $823,742,000 in 1994 from $761,627,000 in 1993, and as a percent of net sales were 26.3% in 1994 compared with 25.6% in 1993. Expenses as a percent of sales increased in the areas of labor and fixed costs due to lower sales volumes in the stores affected by the strikes. The Company recognized a $15,978,000 charge to its 1994 operating results reflecting its decision to exit the California market except for its two jewelry locations. The charge represents a writedown of assets to their estimated realizable value for the assumed sale of the Company's one multidepartment store and three land parcels in California. Net interest expense was $14,753,000 for 1994 and $8,246,000 for 1993, an increase of 78.9%. This increase reflects higher interest rates, and increased debt due to an increased capital spending plan for accelerated growth, and the strikes. The effective tax rate was 38.0% for 1994 and 41.2% for 1993. The effective tax rate for 1993 was 38.0% when excluding the impact of a tax settlement. Net income was $7,168,000 for 1994 and $68,316,000 for 1993. This decrease is primarily the result of the above-mentioned strikes. Excluding the effect of the writedown of California assets, 1994 net income was $17,074,000. RESULTS OF OPERATIONS--1993 COMPARED WITH 1992 Net sales for 1993 increased $125,120,000 or 4.4% over 1992. This increase reflects sales growth at existing stores, inflation, openings of five full-size multidepartment stores and two specialty stores in malls, and adding food to two nonfood stores. This increase was offset by the closure of two multidepartment stores without food departments and one specialty store. Comparable store sales increased 2.4% for 1993. Food sales as a percent of net sales were 37.5% and 36.7%, respectively, for 1993 and 1992. The increase in food sales as a percent of net sales was primarily due to an increase in the number of the Company's stores that sell food. Food comparable store sales increased 3.4% and nonfood comparable store sales increased 1.9%. Gross margin as a percent of net sales was 29.9% in 1993 compared with 30.0% in 1992. The LIFO charge decreased from $4,167,000 in 1992 to $2,890,000 in 1993, primarily as a result of lower inflation rates. Additionally, 1993's gross margin was favorably affected by a one-time LIFO credit of $6,178,000. Excluding the effect of this one-time LIFO credit, 1993 gross margin as a percent of net sales was 29.7%. Gross margins decreased primarily due to lower nonfood pricing as a result of the Company's expense control efforts, start-up costs associated with expansion of its soft goods and hardlines distribution capabilities, and soft apparel sales. [Graphic Bar Chart Graph Title: SG&A Expenses as a Percent of Sales X-Axis Information: 1990-1994 Y-Axis Information: 20-28% Specific Data Points: 1990 1991 1992 1993 1994 ----- ------ ----- ----- ------ 27.23 26.76* 26.35 25.57 26.33* * Excludes nonrecurring items.] [Graphic Bar Chart Graph Title: Income from Operations X-Axis Information: 1990-1994 Y-Axis Information: $0-$125 (dollars in millions) Specific Data Points: 1990 1991 1992 1993 1994 ----- ----- ----- ----- ----- 67.5 86.8* 105.1 122.6* 42.3* * Excludes nonrecurring items.] [Graphic Bar Chart Graph Title: Net Income as a Percent of Net Sales X-Axis Information: 1990-1994 Y-Axis Information: 0.0-2.5% Specific Data Points: 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- 1.4 1.7* 2.1 2.4* 0.6* * Excludes nonrecurring items.] Operating and administrative expenses as a percent of net sales decreased to 25.6% in 1993 compared with 26.3% in 1992. This expense ratio decrease was primarily related to lower store occupancy costs, corporate overhead expenses, and advertising costs as a percent of net sales. Total operating and administrative expenses increased 1.3% to $761,627,000 in 1993 from $752,004,000 in 1992. Net interest expense was $8,246,000 for 1993 and $8,912,000 for 1992, a 7.5% decrease. The decrease primarily reflects lower interest rates. The effective tax rate was 41.2% for 1993 and 37.0% for 1992. This increase is the result of an accrual of $3,588,000 for amounts related to paid and anticipated taxes which may be required as a result of the resolution of an IRS audit, taxes on the one-time LIFO credit, and the higher federal statutory tax rates applied retroactively from January 30, 1993. Excluding the impact of the tax audit settlement, the effective tax rate for 1993 was 38.0%. Before reflecting three nonrecurring accounting adjustments and an accounting change in 1993, net income increased 17.0% to $70,881,000; and earnings per share were $2.50 for 1993, assuming a 38% tax rate for 1993 versus 37% in 1992. On a reported basis, net income for 1993 increased 12.8% to $68,316,000 from $60,587,000 in 1992, after reflecting the accounting change and three accounting adjustments that resulted in a reduction in net income of $2,565,000 and $.09 in earnings per share in 1993. Reported earnings per share were $2.41 for 1993 based on 28,375,000 shares outstanding, compared with $2.21 for the prior year's period based on 27,446,000 shares outstanding. LIQUIDITY AND CAPITAL RESOURCES The Company funded its working capital and capital expenditure needs in 1994 through internally generated cash flow, supplemented by borrowings under committed and uncommitted bank lines of credit and unrated commercial paper. During 1992, the Company sold 2,000,000 shares of common stock in a public offering, resulting in net proceeds to the Company of $46,558,000. 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 will bear interest at a spread above LIBOR or certificate of deposit rates. Proceeds from the public offering and floating rate notes were used to reduce commercial paper borrowings. 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% and 7.98%. The Company entered into a new credit facility in 1994 with several domestic and foreign banks for a committed line of credit which provides for borrowings of up to $400,000,000. This agreement continues through June 30, 1999, at which time the agreement terminates and any outstanding amounts must be paid in full. In addition to this committed credit facility, the Company had $45,000,000 of uncommitted money market lines of credit with several foreign banks and had $130,000,000 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 January 28, 1995 the Company had unrated commercial paper outstanding in the amount of approximately $324,921,000, borrowings under uncommitted borrowing facilities of $35,000,000, and a total of approximately $40,079,000 available for borrowings that would be supported by its committed credit facilities. On March 6, 1995, the Company entered into a new 364-day credit facility with several domestic and foreign banks for an additional committed line of credit which provides for borrowings of up to $100,000,000. After 364 days, the agreement terminates and any outstanding amounts must be paid in full unless extended. 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 January 28, 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% and 7.595% 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 5.0% and 9.0% 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 parties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counterparties. [Graphic Bar Chart Graph Title: Net Earnings Per Common Share X-Axis Information: 1990-1994 Y-Axis Information: $0.00-$2.50 (in dollars) Specific Data Points: 1990 1991 1992 1993 1994 ---- ----- ---- ----- ---- 1.37 1.81* 2.21 2.50* .60* * Excludes nonrecurring items.] [Graphic Bar Chart Graph Title: Stockholders' Equity X-Axis Information: 1990-1994 Y-Axis Information: $0-$600 (dollars in millions) Specific Data Points: 1990 1991 1992 1993 1994 ----- ----- ----- ----- ----- 285.3 335.2 450.1 527.7 538.6] [Graphic Bar Chart Graph Title: Store Square Footage at Year-End X-Axis Information: 1990-1994 Y-Axis Information: 0-15 (square feet in millions) Specific Data Points: 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- 12.2 12.7 12.6 13.4 14.2] During 1994, the Company opened five new multidepartment stores and closed two multidepartment stores. Seven stores underwent major remodels, four of which included the addition of new food departments to previously nonfood stores. Also in 1994, the Company completed construction of an addition to its corporate offices and a flow-through retail service center in Chehalis, Washington to distribute apparel, general merchandise, and music products. Other capital projects in 1994 included improvements to the main distribution center, central bakery, and dairy plants and continuation of the Company's MIS improvement program. The Company began construction of six additional multidepartment stores, and a new food distribution center near Seattle, Washington which are scheduled to open in 1995. At least seven major remodels are planned for completion in 1995, three of which will include the addition of food departments. 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, budgeted at $257,000,000. 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. EFFECT OF LIFO During each year, the Company estimates annual LIFO expense for the year 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 soft goods 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). At year-end, the Company makes the final adjustment reflecting the difference between the Company's prior quarterly estimates and actual LIFO expense for the year. EFFECT OF INFLATION While management believes that some portion of the increase in sales is due to inflation, it is difficult to segregate and to measure the effects of inflation because of changes in the types of merchandise sold year-to-year and other pricing and competitive influences. By attempting to control costs and efficiently utilize resources, the Company strives to minimize the effects of inflation on its operations. RECENT ACCOUNTING CHANGES In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes. This Statement requires companies to adjust deferred tax liabilities and assets for changes in tax rates and other tax law provisions in the period the new tax law is enacted and to recognize certain deferred tax liabilities. The Company adopted this accounting standard for its fiscal year beginning January 31, 1993. As a result of the adoption of this accounting standard, the Company recorded a charge to earnings of $2,588,000 to provide for book and tax basis differences of certain capital assets, inventory, and depreciation arising in connection with the Company being taken private in 1981 and the Company's acquisition of Grand Central, Inc. in 1984. COMMON STOCK INFORMATION The Company's common stock began trading on the New York Stock Exchange (NYSE) under the symbol "FMY" on September 9, 1992. Prior to that it was quoted in the NASDAQ National Market System under the symbol "MEYR." At January 28, 1995, the Company had 1,300 shareholders of record. After becoming privately held in 1981, the Company began trading publicly after its initial public offering on October 23, 1986. On April 14, 1992 the Company increased the number of shares outstanding with the sale of an additional 2,000,000 shares of its common stock in a public offering, in addition to 2,000,000 shares sold by a major stockholder. In 1993 a major stockholder sold 3,450,000 shares in a public offering, including approximately 505,000 shares resulting from the exercise of a stock option. The Company has not paid dividends since its incorporation in 1981, and it is the current policy of the Board of Directors that all available cash flow be used for reinvestment in the business of the Company and for the reduction of debt.
Price Ranges of Common Stock --------------------------------------------------- 1994 1993 1992 --------------- ---------------- --------------- Fiscal Quarter High Low High Low High Low - ---------------------------------------------------------------------- First $421/2 $355/8 $337/8 $277/8 $291/4 $231/2 Second 383/4 35 355/8 291/4 271/2 223/4 Third 373/8 311/4 37 31 291/2 243/4 Fourth 353/4 291/4 381/2 341/2 337/8 29 - ----------------------------------------------------------------------
[Graphic Bar Chart Graph Title: Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as a Percent of Sales X-Axis Information: 1990-1994 Y-Axis Information: 0.00-7.00% Specific Data Points: 1990 1991 1992 1993 1994 ----- ----- ----- ----- ----- 4.40 5.29* 6.44 6.88* 4.70* * Excludes nonrecurring items.] [Graphic Bar Chart Graph Title: Fixed Charge Coverage Ratio X-Axis Information: 1990-1994 Y-Axis Information: 0.0-2.5 Specific Data Points: 1990 1991 1992 1993 1994 ---- ----- ---- ----- ----- 1.76 1.84* 2.23 2.44* 1.91* * Excludes nonrecurring items.] [Graphic Bar Chart Graph Title: Long-Term Debt as Percent of Total Capitalization X-Axis Information: 1990-1994 Y-Axis Information: 0.0-60.0% Specific Data Points: 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- 51.3 47.9 37.2 42.3 52.8 * Excludes nonrecurring items.]
STATEMENTS OF CONSOLIDATED OPERATIONS Fiscal Year Ended --------------------------------------- January 28, January 29, January 30, (In thousands, except per-share data) 1995 1994 1993 - ---------------------------------------------------------------------------------------- Net Sales. . . . . . . . . . . . . . . . . . . . $3,128,432 $2,979,082 $2,853,962 -------------------------------------- Cost of Goods Sold: General. . . . . . . . . . . . . . . . . . . . . 2,255,732 2,082,989 1,991,187 Related party lease (Note 3) . . . . . . . . . . 5,579 5,579 5,579 Interest related to occupancy (Note 5) . . . . . 1,087 139 110 -------------------------------------- Total cost of goods sold . . . . . . . . . . . . 2,262,398 2,088,707 1,996,876 -------------------------------------- Gross Margin . . . . . . . . . . . . . . . . . . 866,034 890,375 857,086 Operating and Administrative Expenses: General. . . . . . . . . . . . . . . . . . . . . 754,875 692,354 680,885 Related party leases (Notes 3 and 8) . . . . . . 57,036 57,942 59,876 Interest related to occupancy (Note 5) . . . . . 11,831 11,331 11,243 -------------------------------------- Total operating and administrative expenses. . . 823,742 761,627 752,004 -------------------------------------- Writedown of California Assets (Note 4). . . . . 15,978 -- -- -------------------------------------- Income From Operations . . . . . . . . . . . . . 26,314 128,748 105,082 Interest Expense, Net of interest income of $885, $707, and $544 . . . . . . . . . . . . . 14,753 8,246 8,912 -------------------------------------- Income Before Income Taxes . . . . . . . . . . . 11,561 120,502 96,170 Provision For Income Taxes (Note 6). . . . . . . 4,393 49,598 35,583 -------------------------------------- Net Income Before Cumulative Effect of Accounting Change 7,168 70,904 60,587 Cumulative Effect of Accounting Change (Notes 2 and 6). . . . . . . . . . . . . . . . -- (2,588) -- -------------------------------------- Net Income . . . . . . . . . . . . . . . . . . . $ 7,168 $ 68,316 $ 60,587 ========== ========== ========== Earnings Per Common Share: Net income before cumulative effect of accounting change. . . . . . . . . . . . . . . $.25 $2.50 $2.21 Cumulative effect of accounting change . . . . . -- (.09) -- -------------------------------- Net Income . . . . . . . . . . . . . . . . . . . $.25 $2.41 $2.21 ==== ===== ===== Weighted Average Number of Common Shares Outstanding 28,625 28,375 27,446 ====== ====== ====== - ---------------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS ASSETS January 28, January 29, (In thousands) 1995 1994 - --------------------------------------------------------------------------- Current Assets: Cash and cash equivalents. . . . . . . . . . $ 34,868 $ 34,054 Receivables (Note 2) . . . . . . . . . . . . 20,025 19,406 Inventories (Note 2) . . . . . . . . . . . . 514,473 477,568 Prepaid expenses and other . . . . . . . . . 42,092 44,168 Income taxes receivable. . . . . . . . . . . 15,021 -- Current portion of deferred taxes (Note 6) . 15,116 7,828 ----------------------------- Total current assets . . . . . . . . . . . . 641,595 583,024 ----------------------------- Property and Equipment: Buildings, fixtures and equipment. . . . . . 1,164,953 950,952 Property held under capital leases (Note 8). 18,209 19,818 Land . . . . . . . . . . . . . . . . . . . . 159,393 120,913 ----------------------------- Total property and equipment . . . . . . . . 1,342,555 1,091,683 Less accumulated depreciation and amortization . . . . . . . . . . . . . 446,116 372,345 ----------------------------- Property and equipment--net. . . . . . . . . 896,439 719,338 ----------------------------- Other Assets: Goodwill--net (Note 2) . . . . . . . . . . . 5,215 5,523 Other. . . . . . . . . . . . . . . . . . . . 19,423 18,191 ----------------------------- Total other assets . . . . . . . . . . . . . 24,638 23,714 ----------------------------- Total assets . . . . . . . . . . . . . . . . $1,562,672 $1,326,076 ========== ========== - --------------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY January 28, January 29, (In thousands) 1995 1994 - --------------------------------------------------------------------------- Current Liabilities: Outstanding checks (Note 2). . . . . . . . . $ 81,341 $ 72,373 Accounts payable . . . . . . . . . . . . . . 230,703 223,841 Current portion of long-term debt and lease obligations (Notes 5 and 8). . . . . 1,623 1,749 Income taxes payable . . . . . . . . . . . . -- 18,660 Accrued expenses: Compensation . . . . . . . . . . . . . . . . 43,119 41,100 Insurance and other. . . . . . . . . . . . . 35,295 32,564 ----------------------------- Total current liabilities. . . . . . . . . . 392,081 390,287 ----------------------------- Long-term Debt (Note 5). . . . . . . . . . . 540,166 321,398 ----------------------------- Capital Lease Obligations (Note 8) . . . . . 13,823 14,895 ----------------------------- Deferred Lease Transactions (Note 8) . . . . 45,655 48,254 ----------------------------- Deferred Income Taxes (Note 6) . . . . . . . 22,258 18,496 ----------------------------- Other Long-term Liabilities (Notes 8 and 10) . . . . . . . . . . . . . 10,069 5,060 ----------------------------- Commitments and Contingencies (Notes 2, 8, and 12) . . . . . . . . . . . . . . . . ----------------------------- Stockholders' Equity (Note 7): Preferred stock, $.01 par value (authorized, 5,000 shares; outstanding, none) . . . . . -- -- Common stock, $.01 par value (authorized, 100,000 shares; issued, 1994--26,858 shares, and 1993--26,705 shares; outstanding, 1994--26,568 shares, and 1993--26,415 shares) . . . . . . . . . . . 268 267 Additional paid-in capital . . . . . . . . . 197,087 193,719 Unearned compensation. . . . . . . . . . . . (130) (527) Treasury stock--290 shares . . . . . . . . . (3,896) (3,896) Retained earnings. . . . . . . . . . . . . . 345,291 338,123 ----------------------------- Total stockholders' equity . . . . . . . . . 538,620 527,686 ----------------------------- Total liabilities and stockholders' equity . $1,562,672 $1,326,076 ========== ========== - --------------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
STATEMENTS OF CONSOLIDATED CASH FLOWS Fiscal Year Ended --------------------------------------- January 28, January 29, January 30, (In thousands) 1995 1994 1993 - ---------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net income. . . . . . . . . . . . . . . . . . . $ 7,168 $ 68,316 $ 60,587 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment . . . . . . . . . . . . . . . 89,474 70,547 66,958 Writedown of California assets. . . . . . . . 15,978 -- -- Deferred lease transactions . . . . . . . . . (2,599) 3,469 4,768 Deferred income taxes . . . . . . . . . . . . (3,526) (5,708) (189) Other liabilities . . . . . . . . . . . . . . (347) 721 1,533 Inventories . . . . . . . . . . . . . . . . . (37,358) (51,490) (22,803) Other current assets. . . . . . . . . . . . . 1,552 71 (16,281) Accounts payable and accrued expenses . . . . 11,613 37,124 32,854 Income taxes. . . . . . . . . . . . . . . . . (33,681) 3,242 13,687 Other . . . . . . . . . . . . . . . . . . . . 1,766 (8,164) 45 -------------------------------------- Net cash provided by operating activities . . . 50,040 118,128 141,159 -------------------------------------- Cash Flows from Financing Activities: Proceeds from stock offering. . . . . . . . . . -- -- 45,608 Issuance of other common stock--net . . . . . . 3,369 8,647 8,779 Collection of notes receivable. . . . . . . . . 364 264 1,092 Increase in notes receivable. . . . . . . . . . (213) (1,402) (114) Increase (decrease) in outstanding checks . . . 8,968 1,962 (11,960) Long-term financing: Borrowings. . . . . . . . . . . . . . . . . . 258,871 126,310 2,941 Repayments. . . . . . . . . . . . . . . . . . (40,093) (1,015) (51,761) -------------------------------------- Net cash provided by (used in) financing activities. . . . . . . . . . . . . 231,266 134,766 (5,415) -------------------------------------- Cash Flows from Investing Activities: Net purchases of investment securities. . . . . (935) (1,745) (3,705) Purchases of property and equipment . . . . . . (284,193) (253,920) (144,628) Proceeds from sale of property and equipment. . 4,636 4,941 14,485 -------------------------------------- Net cash used for investing activities. . . . . (280,492) (250,724) (133,848) -------------------------------------- Net Increase in Cash and Cash Equivalents for the Year. . . . . . . . . . . . . . . . . 814 2,170 1,896 Cash and Cash Equivalents, Beginning of Year. . 34,054 31,884 29,988 -------------------------------------- Cash and Cash Equivalents, End of Year. . . . . $ 34,868 $ 34,054 $ 31,884 ========= ========= ========== Supplemental Disclosure of Cash Flow Information Cash paid during the year for: Interest (including interest capitalized of $2,520, $1,689, and $406) . . . . . . . . . $31,022 $17,984 $18,193 Income taxes. . . . . . . . . . . . . . . . . 40,757 53,197 21,514 - ---------------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY Common Stock ------------------- Additional Number of Paid-in Unearned Treasury Retained (In thousands) Shares Amount Capital Compensation Stock Earnings Total - --------------------------------------------------------------------------------------------------------------------------------- Balance, February 1, 1992. . . . . . . . . . . . 22,918 $232 $130,912 $(1,439) $(3,771) $209,220 $335,154 Issuance/purchase of common stock: Stock issuance . . . . . . . . . . . . . . . . . 2,000 20 45,588 -- -- -- 45,608 Stock options exercised. . . . . . . . . . . . . 649 6 6,773 -- -- -- 6,779 Stock awards . . . . . . . . . . . . . . . . . . -- -- 2 -- -- -- 2 Stock bonuses/sale . . . . . . . . . . . . . . . 9 1 247 (248) -- -- -- Treasury stock . . . . . . . . . . . . . . . . . (4) -- -- -- (125) -- (125) Tax benefit from stock options . . . . . . . . . -- -- 1,558 -- -- -- 1,558 Amortization of unearned compensation. . . . . . -- -- -- 565 -- -- 565 Net income . . . . . . . . . . . . . . . . . . . -- -- -- -- -- 60,587 60,587 -------------------------------------------------------------------------------- Balance, January 30, 1993. . . . . . . . . . . . 25,572 259 185,080 (1,122) (3,896) 269,807 450,128 Issuance of common stock: Stock options exercised. . . . . . . . . . . . . 843 8 7,185 -- -- -- 7,193 Tax benefits from stock options. . . . . . . . . -- -- 1,454 -- -- -- 1,454 Amortization of unearned compensation. . . . . . -- -- -- 595 -- -- 595 Net income . . . . . . . . . . . . . . . . . . . -- -- -- -- -- 68,316 68,316 ------------------------------------------------------------------------------- Balance, January 29, 1994. . . . . . . . . . . . 26,415 267 193,719 (527) (3,896) 338,123 527,686 Issuance of common stock: Stock options exercised. . . . . . . . . . . . . 153 1 2,611 -- -- -- 2,612 Tax benefits from stock options. . . . . . . . . -- -- 757 -- -- -- 757 Amortization of unearned compensation. . . . . . -- -- -- 397 -- -- 397 Net income . . . . . . . . . . . . . . . . . . . -- -- -- -- -- 7,168 7,168 ------------------------------------------------------------------------------- Balance, January 28, 1995. . . . . . . . . . . . 26,568 $268 $197,087 $(130) $(3,896) $345,291 $538,620 ====== ==== ======== ====== ======== ======== ======== - --------------------------------------------------------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY Fred Meyer, Inc., a Delaware corporation, and its subsidiaries (the "Company") operate a chain of 131 retail stores offering a wide range of food, products for the home, apparel, fine jewelry, and home improvement items, with emphasis on necessities and items of everyday use. The stores are located in Oregon, Washington, Utah, Alaska, Idaho, northern California, and Montana and include 100 free-standing, multidepartment stores and 31 specialty stores. On December 11, 1981, the Company and a related newly formed Oregon limited partnership, Fred Meyer Real Estate Properties, Ltd. whose name was changed in 1991 to Real Estate Properties Limited Partnership ("Properties") purchased substantially all of the assets and the business of Fred Meyer, Inc., an Oregon corporation, and its wholly owned subsidiaries (the "Predecessor Company"). The Company acquired the operating business and certain assets and assumed certain liabilities of the Predecessor Company, and Properties acquired all of the Predecessor Company's interests in real property and assumed the indebtedness thereon. The Predecessor Company ceased operations immediately after the sale and the Company began operations on December 12, 1981. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation--The accompanying financial statements include the consolidated accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated. Fiscal Year--The Company's fiscal year is generally 52 weeks, but periodically consists of 53 weeks, because the fiscal year ends on the Saturday closest to January 31. Fiscal years 1994, 1993, and 1992 ended on January 28, 1995, January 29, 1994, and January 30, 1993, respectively. Unless otherwise stated, references to years in this report relate to fiscal years rather than to calendar years. Segment Reporting--The Company's operations consist of one segment, retail sales. Cash and Cash Equivalents--The Company considers all highly liquid debt and equity instruments purchased with an original maturity of three months or less to be cash equivalents. Receivables--Receivables are reported net of allowances for potential uncollected accounts of $1,255,000 and $632,000 at January 28, 1995 and January 29, 1994, respectively. Inventories--Inventories consist principally of items held for sale in its retail operations and substantially all inventories are stated at the lower of last-in, first-out (LIFO) cost or market. If the first-in, first-out method, which approximates replacement cost, had been used in determining inventory values, they would have been $54,876,000, and $51,675,000 higher at January 28, 1995 and January 29, 1994, respectively. Property and Equipment--Property and equipment is stated at cost. Depreciation on buildings and equipment is provided using the straight-line method over the estimated useful lives of the related assets of three to 31 years. Amortization of property under capital leases is provided using the straight-line method over the related lease terms of 24 to 52 years. Goodwill--Goodwill is being amortized on a straight-line basis over 30 years. Management periodically evaluates the recoverability of goodwill based upon current and anticipated net income and undiscounted future cash flows. Accumulated amortization was $4,044,000 and $3,736,000 at January 28, 1995 and January 29, 1994, respectively. Investment Securities--As of January 28, 1995, the Company adopted SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. SFAS No. 115 requires the classification of securities at acquisition into one of three categories: held to maturity, available for sale, or trading. At January 28, 1995, the carrying value of all debt and equity securities approximated their aggregate fair value. Debt securities are classified as held to maturity and are included in Other Assets. Equity securities are classified as trading securities and are included in Cash and Cash Equivalents. Outstanding Checks--Checks that have not yet cleared the bank and that are issued against bank accounts with a zero bank balance are included in current liabilities. Pre-opening Costs--All noncapital expenditures incurred in connection with the opening of new or acquired stores and other facilities or remodeling of existing stores are expensed as incurred. Income Taxes--Deferred income taxes are provided for those items included in the determination of income or loss in different periods for financial reporting and income tax purposes. Targeted jobs and other tax credits are recognized in the year realized. Effective January 31, 1993, the Company adopted SFAS No. 109, Accounting for Income Taxes. Accordingly, the Company has changed its method of accounting for income taxes from the deferred method used in prior years to the method prescribed by SFAS No. 109. Under SFAS No. 109, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. Prior years' financial statements have not been restated for the accounting change (see Note 6). 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 the outstanding stock options (ranging in exercise price from $3.24 to $41.25 per share), which was determined using the treasury stock method. Reclassifications--Certain prior year amounts have been reclassified to conform to current year presentation. The reclassifications have no effect on reported net income. 3. RELATED-PARTY TRANSACTIONS At January 28, 1995, the Company leased or subleased, under operating leases, 24 store locations, and other miscellaneous property from Properties and its wholly owned subsidiaries, which have certain common ownership with the Company. Payments under these leases and those terminated during the year were $19,734,000, $21,290,000, and $23,368,000 in 1994, 1993, and 1992, respectively. The Company also leases 35 store locations and a distribution center from an institutional investor, who is a major beneficial shareholder of the Company's stock. Rents paid to this shareholder on these properties were $46,070,000, $39,573,000, and $38,476,000 in 1994, 1993, and 1992, respectively. Total rents included in operating and administrative expenses for locations leased or subleased from related parties were based on the average rental paid during the primary term of the leases. This does not include the Company's main distribution center, which is included in cost of goods sold. On October 30, 1992, the Company purchased property totaling $3,000,000 from Properties and its wholly owned subsidiaries which have certain common ownership with the Company. Prior to this purchase, the Company paid rent on this property of $393,000 in 1992. 4. WRITEDOWN OF CALIFORNIA ASSETS During 1994, the Company incurred a charge of $15,978,000 ($9,906,000 after a deferred tax benefit of $6,072,000) related to the writedown of certain assets and other costs associated with the Company's decision to exit the northern California market except for two mall jewelry locations. 5. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands): 1994 1993 - ----------------------------------------------------------------------------------------- Commercial paper with maturities through July 1995, classified as long-term, interest rates of 5.35% to 6.75% at January 28, 1995. . . . . . . . . . . . . . . . . . . . . . . . $324,921 $160,911 Uncommitted bank borrowings, due January 30, 1995, interest rates of 5.80% to 5.83% at January 28, 1995 . . . . . . . 35,000 -- Long-term notes secured by trust deeds, due through 2012, fixed interest rates from 9.00% to 9.52% . . . . . . . . . . 43,298 43,943 Long-term notes, unsecured: Due 1997 through 1998, interest rate is periodically reset, 7.00% at January 28, 1995. . . . . . . . . . . . . . . . . . . . 70,000 70,000 Due 1996, fixed interest rate of 7.74% . . . . . . . . . . . . . . 10,000 10,000 Senior notes, due 1999 through 2007, fixed interest rates from 7.25% to 7.98%. . . . . . . . . . . . . . . . . . . . . . . . 57,500 -- Zero coupon notes, fixed interest rate of 9.30%. . . . . . . . . . . -- 37,024 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 269 ------------------- Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540,916 322,147 Less current portion . . . . . . . . . . . . . . . . . . . . . . . . (750) (749) ------------------- Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $540,166 $321,398 ======== ======== - -----------------------------------------------------------------------------------------
The Company has the ability to support commercial paper, uncommitted bank borrowings, and other debt on a long-term basis through its Credit Agreement and therefore, based upon management's intent, has classified $359,921,000 of these borrowings as long-term debt. On June 30, 1994, the Company entered into a new expanded Credit Agreement with Bank of America as agent, which now provides for, among other things: (1) a revolving credit commitment of $400,000,000 with payment of the unpaid balance at June 30, 1999; (2) interest at a spread over LIBOR on such borrowings or various other pricing options; and (3) a facility fee of .15% of the amount of the commitment. The Agreement requires the maintenance of specified ratios and restricts the amounts of cash dividends paid. At January 28, 1995, $2,867,000 of retained earnings was available for payment of dividends or repurchase of Company stock in the following year, based on 40% of net income for the year ended January 28, 1995. After year end, the Company entered into a separate, additional bank Credit Agreement with The Bank of Nova Scotia as agent. The facility provides for $100,000,000 of additional committed borrowing capacity with an ultimate maturity in March 1996. This facility may be extended upon request of the Company and acceptance by the participating banks. The terms and covenants contained in the facility are substantially similar to those contained in the $400,000,000 Credit Agreement, but with a facility fee of .12%. The Company has established uncommitted lines of credit with international banks for $45,000,000 and has uncommitted bid lines of credit with certain banks within its committed bank group for $130,000,000. These lines, which generally have terms of one year, allow the Company to borrow from the banks at mutually agreed upon rates, usually below the rates offered under the 1994 Credit Agreement. The Company has unrated commercial paper programs with maturities ranging from one to 270 days in amounts up to a maximum of $400,000,000. The Company also has available letters of credit lines for $32,500,000, of which $13,908,000 had been issued at January 28, 1995. In 1990 and 1991, the Company financed the land and building portions of three new stores with an insurance company. The notes require regular payments based on a 25-year amortization and can be called by the insurance company or repaid by the Company, without premium, after 10 years. During 1993, the Company placed $70,000,000 of unsecured, five-year notes with five domestic and international banks. The floating rate notes bear interest at a spread over LIBOR or other pricing indices at the Company's option for durations of one month to six months. Interest on the notes is paid quarterly. During 1994, the Company placed $57,500,000 of senior notes with several life insurance companies. The notes become due at various times between 1999 and 2007. Interest is paid semiannually. 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 January 28, 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% and 7.595% 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 5.0% and 9.0% 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 parties to the interest rate swap agreements. However, the Company does not anticipate nonperformance by the counterparties. After 1990, the Company changed its primary method of financing land and buildings from leasing to ownership. In order to consistently reflect the financial cost of the investment in real estate under different financial arrangements, the Company reclassifies interest associated with stores and distribution centers into the operating and administrative expenses and cost of goods sold in its financial statements. Annual estimated long-term debt maturities for the five fiscal years subsequent to January 28, 1995 are: 1995, $750,000; 1996, $10,793,000; 1997, $11,366,000; 1998, $60,447,000; 1999, $368,455,000; and thereafter, $89,105,000. 6. INCOME TAXES
The provision for income taxes includes the following (in thousands): 1994 1993 1992 - ------------------------------------------------------------------------- Current . . . . . . . . . . . . . . . . . . . $7,919 $57,894 $35,772 Deferred. . . . . . . . . . . . . . . . . . . (3,526) (8,296) (189) -------------------------- Total . . . . . . . . . . . . . . . . . . . . $4,393 $49,598 $35,583 ====== ======= ======= - -------------------------------------------------------------------------
A reconciliation between the statutory federal income tax rate to the provision for income taxes is as follows (in thousands): 1994 1993 1992 - ------------------------------------------------------------------------- Federal income taxes at the statutory rate. . $4,046 $42,176 $32,698 Settlement of certain IRS audits. . . . . . . -- 3,588 -- Deferred income taxes increase in statutory rate. . . . . . . . . . . . . . . -- 219 -- State income taxes. . . . . . . . . . . . . . 347 3,615 2,885 Targeted jobs and other tax credits . . . . . (1,194) (926) (1,180) Other, net. . . . . . . . . . . . . . . . . . 1,194 926 1,180 -------------------------- Provision for income taxes. . . . . . . . . . $4,393 $49,598 $35,583 ====== ======= ======= - -------------------------------------------------------------------------
As a result of the adoption of SFAS 109, 1993 consolidated net income was decreased by $2,588,000 (see Note 2).
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at January 28, 1995 and January 29, 1994 are as follows (in thousands): 1994 1993 - --------------------------------------------------------------------------- Deferred tax assets: Capitalized inventory costs . . . . . . . . . . . . $ 6,851 $ 6,332 Accrued expenses. . . . . . . . . . . . . . . . . . 19,328 17,710 Restructuring related charges . . . . . . . . . . . 9,481 4,154 Deferred lease transactions . . . . . . . . . . . . 17,349 18,337 AMT credit. . . . . . . . . . . . . . . . . . . . . 5,110 -- Other . . . . . . . . . . . . . . . . . . . . . . . 7,864 6,860 -------------------- Total deferred tax assets . . . . . . . . . . . . 65,983 53,393 -------------------- Deferred tax liabilities: Accumulated depreciation. . . . . . . . . . . . . . 50,502 41,712 Prepaid expenses. . . . . . . . . . . . . . . . . . 12,212 12,785 LIFO inventory. . . . . . . . . . . . . . . . . . . 10,411 9,564 -------------------- Total deferred tax liabilities. . . . . . . . . . 73,125 64,061 -------------------- Net deferred income taxes . . . . . . . . . . . . . . $ 7,142 $ 10,668 -------------------- Current deferred income taxes--asset. . . . . . . . . $(15,116) $( 7,828) Noncurrent deferred income taxes--liability . . . . . 22,258 18,496 -------------------- Net deferred income taxes . . . . . . . . . . . . . . $ 7,142 $ 10,668 ======== ======== - ---------------------------------------------------------------------------
In 1992, under the prior method of accounting, the deferred income tax provision included the following (in thousands): 1992 - --------------------------------------------------------------- Depreciation. . . . . . . . . . . . . . . . . . . . . $ 3,122 Restructuring charge. . . . . . . . . . . . . . . . . 4,073 Rental expense. . . . . . . . . . . . . . . . . . . . (1,827) Purchase discounts received in advance. . . . . . . . (1,177) Computer system development costs capitalized . . . . (6,516) Other . . . . . . . . . . . . . . . . . . . . . . . . 2,136 ------- Total deferred income tax benefit . . . . . . . . . . $ (189) ======= - ---------------------------------------------------------------
7. STOCKHOLDERS' EQUITY Stock Incentive Plans--At January 28, 1995, 2,373,015 shares of common stock were reserved for issuance to employees, including officers and directors, and nonemployee agents, consultants, and advisors, under stock incentive plans. These plans provide for the granting of incentive stock options, nonqualified stock options, stock bonuses, stock appreciation rights, cash bonus rights, and performance units. Under the terms of the plans, the option price is determined by the Board of Directors at the time the option is granted. The option price for incentive stock options cannot be less than the fair value of the Company's stock on the day prior to the date of grant. Nonqualified stock options may not be granted at less than 50% of the fair value on the day prior to the date of grant.
Stock Options--Activity under the plans was as follows (in thousands, except per share data): Option Price (Market Price at Date of Grant) ---------------------------------- Shares Per Share Total - ----------------------------------------------------------------------------------- Shares under option: Balance, January 30, 1993. . . . . . . . . . . 1,825 $12.125-30.875 $34,331 Options granted. . . . . . . . . . . . . . . 706 30.625-36.750 23,265 Options exercised. . . . . . . . . . . . . . (339) 12.125-27.250 (5,856) Options cancelled. . . . . . . . . . . . . . (39) 12.125-32.750 (1,089) ----- ------- Balance, January 29, 1994. . . . . . . . . . . 2,153 12.125-36.750 50,651 Options granted. . . . . . . . . . . . . . . 404 29.625-41.250 14,629 Options exercised. . . . . . . . . . . . . . (152) 12.125-32.750 (2,612) Options cancelled. . . . . . . . . . . . . . (47) 14.250-41.250 (1,611) ----- ------- Balance, January 28, 1995. . . . . . . . . . . 2,358 12.125-41.250 $61,057 ===== ======= Shares exercisable, January 28, 1995 . . . . 1,315 12.125-36.750 Shares available for option: January 29, 1994 . . . . . . . . . . . . . . . 372 January 28, 1995 . . . . . . . . . . . . . . . 15 - ------------------------------------------------------------------------------------
Other Option--The Company's principal stockholder, FMI Associates, holds an option, which expires in 1996, that initially allowed for a purchase of up to 2,364,300 shares of the Company's common stock at $3.24 per share for an aggregate of $7,668,000. In 1992, 292,792 shares were exercised, resulting in a balance of 2,071,508 shares for an aggregate of $6,718,404. In 1993, 505,067 shares were exercised, resulting in a balance of 1,566,441 shares for an aggregate of $5,080,349. No shares under the option were exercised in 1994. Management Bonus--In 1992, the Company awarded a stock bonus to a corporate officer for 5,000 shares totaling $124,000. Shares issued vest annually over five years. Nonemployee Directors Stock Compensation Plan--In 1992, the Company purchased 4,016 shares of its common stock at market prices for the benefit of two of its nonemployee directors in lieu of a portion of current and future board of director fee payments. The shares total $125,000 and vest annually over five years. 8. LEASES The Company leases or subleases a substantial portion of the real property used in its operations. At October 22, 1986, the leases and subleases for a distribution center, 71 store locations, and certain other properties were amended and restated to provide, among other things, an initial lease term of 20 years for 36 locations (with cash rents of $38,476,000 for the first seven years and $46,070,000 for the remaining 13 years). The average rent over the primary lease term is charged to rent expense. As a result of the above transaction: (1) five previously capitalized leases qualified as operating leases, resulting in a decrease in property held under capital leases and capital lease obligations of $53,678,000 and $72,160,000 respectively, with the resulting $18,482,000 gain deferred and amortized over the 20-year lease period; and (2) the difference between the amount of the cash rent paid and the expense charged to operations on the 36 locations described above is included in deferred lease transactions. In 1992, the Company amended leases for nine store locations, with cash rent escalating over the term of the leases. The difference between cash rent paid and the expense charged to operations is included in deferred lease transactions. The average rent over the primary lease term, which is lower than the prior rents paid, is charged to rent expense. At January 28, 1995, deferred lease transactions consisted of $10,856,000 unamortized gain on capital leases, $33,971,000 of excess of rent expense over cash rents for the aforementioned leases, and unamortized deferred gain on a sale-leaseback transaction of $828,000. The lease terms of certain operating leases require the payment of executory costs such as property taxes, utilities, insurance, and maintenance. Certain leases provide for percentage rents. Portions of the properties are subleased to others for periods of from one to 20 years.
At January 28, 1995, minimum rentals under noncancelable leases for future fiscal years were (in thousands): Operating Capitalized Less Net Fiscal Year Leases Leases Subleases Rentals - ------------------------------------------------------------------------------------------- 1995. . . . . . . . . . . . . . . . . . $ 82,826 $ 1,808 $ 6,856 $ 77,778 1996. . . . . . . . . . . . . . . . . . 78,106 1,808 4,912 75,002 1997. . . . . . . . . . . . . . . . . . 76,498 1,848 4,125 74,221 1998. . . . . . . . . . . . . . . . . . 74,878 1,969 3,058 73,789 1999. . . . . . . . . . . . . . . . . . 73,693 1,969 2,319 73,343 2000 and thereafter . . . . . . . . . . 615,004 30,800 16,699 629,105 ---------- ------- ------- ---------- Total . . . . . . . . . . . . . . . . . $1,001,005 40,202 $37,969 $1,003,238 ========== ======= ========== Less imputed interest . . . . . . . . . (26,272) ------- Present value of minimum rental payments . . . . . . . . . . . 13,930 Less current portion. . . . . . . . . . (107) ------- Capitalized lease obligations . . . . . $13,823 ======= - -------------------------------------------------------------------------------------------
As of January 28, 1995, the leases for nine store locations and certain equipment were accounted for as capital leases. The amounts representing interest expense on these capital lease obligations were included in operating and administrative expenses and were $1,848,000, $2,112,000, and $2,261,000 in 1994, 1993, and 1992, respectively. Accumulated amortization of property under capital leases was $6,098,000, $6,072,000, and $7,708,000 at January 28, 1995, January 29, 1994, and January 30, 1993, respectively.
Rent expense under operating leases including executory costs, and payments under capital leases were as follows (in thousands): 1994 1993 1992 - --------------------------------------------------------------------------------------- Gross rent expense. . . . . . . . . . . . . . . . $101,163 $104,892 $113,894 Rent income from subleases. . . . . . . . . . . . (12,803) (11,582) (10,332) ------------------------------------ Net rent expense. . . . . . . . . . . . . . . . . 88,360 93,310 103,562 Payments under capital leases . . . . . . . . . . 1,947 2,178 2,370 ------------------------------------ Total . . . . . . . . . . . . . . . . . . . . . . $ 90,307 $ 95,488 $105,932 ======== ======== ======== - ---------------------------------------------------------------------------------------
Included in gross rent expense for 1994, 1993 and 1992 were contingent rents of $1,421,000, $1,650,000, and $1,845,000, respectively. In 1989, the Company incurred a restructuring charge in connection with management's decision to replace or close certain stores and to convert the Company's MIS hardware from Honeywell to IBM. The decision to close certain stores was subsequently reassessed by management, and in 1991 revisions were made to the amounts accrued. At January 28, 1995, included in other long-term liabilities, were future net rentals under noncancelable leases for closed stores and for outdated computer hardware as follows (in thousands):
Less Estimated Estimated Subleases/ Net Fiscal Year Leases Discounts Rentals - ------------------------------------------------------------------------- 1995. . . . . . . . . . . . . . . . . . $ 1,590 $ 824 $ 766 1996. . . . . . . . . . . . . . . . . . 1,492 824 668 1997. . . . . . . . . . . . . . . . . . 1,344 830 514 1998. . . . . . . . . . . . . . . . . . 1,344 830 514 1999. . . . . . . . . . . . . . . . . . 1,332 830 502 2000 and thereafter . . . . . . . . . . 7,441 5,889 1,552 ------- ------- ------ Total . . . . . . . . . . . . . . . . . $14,543 $10,027 $4,516 ======= ======= ======
9. EMPLOYEE BENEFIT PLANS Employees' Profit-sharing Plan--Profit-sharing contributions under this Plan, which covers the Company's nonunion employees, are made to a trust fund held by a third-party trustee. Contributions are based on the Company's pretax income, as defined, at rates determined by the Board of Directors and are not to exceed amounts deductible under applicable provisions of the Internal Revenue Code. In 1994, the Company added a 1% basic contribution to all eligible employees' accounts each year subject to normal plan vesting. The Company expensed $5,891,000, $3,944,000, and $3,248,000 in 1994, 1993, and 1992, respectively for these contributions. Multi-employer Pension Plan--The Company contributes to multi-employer pension plan trusts at specified rates in accordance with collective bargaining agreements. Contributions to the trusts were $8,498,000, $9,667,000, and $9,157,000 in 1994, 1993, and 1992, respectively. The Company's relative positions in these plans with respect to the actuarial present value of the accumulated benefit obligation and the projected benefit obligation, net assets available for benefits, and the assumed rates of return used by the plans are not determinable. Employee Stock Purchase Plan--In April 1992, the Company implemented a noncontributory employee stock purchase plan. The plan allows employees to purchase stock in the Company via payroll deductions. The Company pays all brokerage fees associated with the purchase of the stock. The plan is available to all employees over age 18 who have completed six months of continuous employment with the Company. Supplemental Retirement Program--In January 1994, the Company implemented a supplemental retirement program for senior management, selected vice presidents, and selected key individuals. Program provisions are as follows: Senior Management--The plan is funded with life insurance contracts on the lives of the participants. The Company is the owner of the contracts and makes annual contributions of $25,000 per participant. Total contributions were $325,000 in 1994 and 1993. Retirement age under the plan is normally 62 with an alternative age of 65, at which point the Company will make 15 annual benefit payments to the executive. Selected Vice Presidents and Selected Key Individuals--The Company will contribute annually a percentage of each participant's gross salary. The plan is funded with life insurance contracts on participants 54 years old and younger and variable annuity contracts for participants 55 years old and older. Each participant is the owner of his/her respective contract. 10. OTHER POSTRETIREMENT BENEFITS For employees who qualified prior to January 1, 1994, the Company sponsored a retiree health plan for postretirement health care coverage with eligibility requirements and benefits varying by region of the Company. Under this plan, the Company contributes 100% of the premiums for retired salaried employees qualifying under eligibility requirements which specify minimum age and years of continuous service at age 60 with 25 years of service, age 62 with 20 years of service, and age 65 with 15 years of service. For retired salaried and hourly employees between the ages of 62 to 65 years and having completed minimum continuous service of 15 years, the retiree pays premiums at current employee rates. As of January 1, 1994, the Company changed the eligibility requirements and benefits available under the retiree health plan. For all salaried and non-union hourly employees in all regions who retire after January 1, 1994, eligibility requirements changed to a minimum of 60 years of age with 10 years of continuous service. Under the revised plan, the retiree pays premiums at current employee rates.
The following table sets forth the plan's funded status, reconciled with the amount shown in the Company's balance sheet: January 28, 1995 January 29, 1994 - ------------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Current retirees. . . . . . . . . . . . . . . . . $ 1,231,478 $ 1,415,454 Fully eligible plan participants. . . . . . . . . 656,973 715,869 Other active plan participants. . . . . . . . . . 2,331,405 2,902,136 ----------------------------------- Accumulated postretirement benefit obligation in excess of plan assets. . . . . . . . . . . . . 4,219,856 5,033,459 Unrecognized transition obligation, transition date 1/31/93 and 2/1/92. . . . . . . . (1,420,100) (1,503,635) Unrecognized prior service cost . . . . . . . . . (366,138) (407,792) Unrecognized net gain/(loss). . . . . . . . . . . 657,774 (841,184) ----------------------------------- Accrued postretirement benefit cost . . . . . . . $ 3,091,392 $ 2,280,848 =================================== Net periodic postretirement benefit cost included the following components: Service cost--benefits attributed to service during the period . . . . . . . . . . . . . $353,305 $297,804 Interest cost on accumulated postretirement benefit obligation. . . . . . . . . . . . . 372,483 462,477 Amortization of transition obligation over 20 years . . . . . . . . . . . . . . . 125,189 125,783 Amortization of unrecognized loss . . . . . . 27,897 25,551 ----------------------------------- Net periodic postretirement benefit cost. . . . . $878,874 $911,615 =================================== - -------------------------------------------------------------------------------------
The assumed health care cost trend rates used in measuring the accumulated postretirement benefit obligation were as follows: Under Medicare Retirement Age--8% for one year, then grading down to 4.5% over the next seven years Medicare Retirement Age and Over--7% for one year, then grading down to 4.5% over the next five years The health care cost trend rate assumption has a significant effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of January 28, 1995 and the aggregate of the service and interest cost components of the net periodic postretirement benefit cost for 1994 as follows: - ------------------------------------------------------------------------------ Increase in accumulated postretirement benefit obligation. . . . . . $707,931 Increase in service and interest costs . . . . . . . . . . . . . . . 154,060 - ------------------------------------------------------------------------------ The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 8%. 11. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments has been determined by the Company using available market information and valuation methodologies as shown below. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could actually realize. Management is not aware of any factors that would significantly change the estimated fair value amounts shown below. A comprehensive revaluation for purposes of these financial statements has not been performed since January 28, 1995, and current estimates of fair value may differ from the amounts presented herein. There are no financial instruments that potentially subject the Company to concentrations of credit risk.
The estimated fair values of the Company's financial instruments are as follows (in thousands): January 28, 1995 -------------------- Carrying Estimated Amount Fair Value - ------------------------------------------------------------------------------ Financial assets: Cash and cash equivalents. . . . . . . . . . . . . . . $ 34,868 $ 34,868 Receivables. . . . . . . . . . . . . . . . . . . . . . 20,025 20,025 Prepaid expenses and other . . . . . . . . . . . . . . 42,092 42,092 Other long-term assets . . . . . . . . . . . . . . . . 19,423 19,370 Financial liabilities: Outstanding checks . . . . . . . . . . . . . . . . . . 81,341 81,341 Accounts payable . . . . . . . . . . . . . . . . . . . 230,703 230,703 Long-term debt and interest rate agreements. . . . . . 540,916 539,068 - ------------------------------------------------------------------------------
Cash and Cash Equivalents, Receivables, Prepaid Expenses and Other--The carrying amounts of these items are a reasonable estimate of their fair value. Other Long-term Assets--The fair value of debt and equity investments (primarily municipal securities) is estimated using quoted market prices. Outstanding Checks and Accounts Payable--The carrying amounts of these items are a reasonable estimate of their fair value. Long-term Debt and Interest Rate Agreements--The fair value of notes, mortgages, and real estate assessments payable is estimated by discounting expected future cash flows. The discount rate used is the rate currently available to the Company for issuance of debt with similar terms and remaining maturities. For commercial paper and bid lines of credit under the revolving credit agreement (see Note 5), the carrying amounts are a reasonable estimate of their fair value. The fair value of interest rate swap and cap agreements is the estimated amount at which they could be settled. At January 28, 1995, the Company could settle these agreements for a $3,851,000 gain, which is included in the estimated fair value of long-term debt. 12. 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.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) 1994 Fiscal Quarters 1993 Fiscal Quarters (In thousands, except -------------------------------------------- --------------------------------------------- per-share data) Fourth Third Second First Fourth Third Second First - --------------------------------------------------------------------------------------------------------------------------------- Net sales . . . . . . . . . . . . . $831,997 $626,804 $737,284 $932,347 $807,777 $644,527 $674,719 $852,059 Gross margin. . . . . . . . . . . . 220,508/1 152,358 221,733 271,435 247,492/3 189,897 206,863/4 246,123 Income (loss) from operations . . . 18,511/1 (54,799)/2 33,746 28,856 50,775/3 17,900 35,567/4 24,506 Net income (loss) before cumulative effect of accounting change . . . 8,568/1 (36,579)/2 19,193 15,986 30,034/3 9,897 16,962/4,5 14,011 Cumulative effect of accounting change. . . . . . . . . . . . . . -- -- -- -- -- -- -- (2,588)/6 Net income (loss) . . . . . . . . . 8,568/1 (36,579)/2 19,193 15,986 30,034/3 9,897 16,962/4,5 11,423/6 ======== ======= ========= ======== ======== ======== ======== ======== Earnings (loss) per common share: Net income (loss) before cumulative effect of accounting change . . . $.30/1 $(1.28)/2 $.67 $.56 $1.05/3 $.35 $.60/4,5 $ .50 Cumulative effect of accounting change. . . . . . . . . . . . . . -- -- -- -- -- -- -- (.09)/6 ---- ------ ---- ---- ----- ---- ---- ----- Net income (loss) . . . . . . . . . $.30/1 $(1.28)/2 $.67 $.56 $1.05/3 $.35 $.60/4,5 $ .41/6 ==== ====== ==== ==== ===== ==== ==== ===== Weighted average number of shares outstanding . . . . . . . . . . . 28,510 28,556 28,676 28,725 28,571 28,495 28,338 28,165 - --------------------------------------------------------------------------------------------------------------------------------- /1 The LIFO adjustment in the fourth quarter of 1994 increased gross margin and income from operations by $2,549; net income by $1,580; and earnings per common share by $.06. /2 The writedown of California assets in the third quarter of 1994 decreased income from operations by $15,978; net income by $9,906; and earnings per common share by $.35. /3 The LIFO adjustment in the fourth quarter of 1993 increased gross margin and income from operations by $4,493; net income by $2,786; and earnings per common share by $.10. /4 In the second quarter of 1993, a change in the LIFO computation increased gross margin by $6,178; net income by $3,892; and earnings per common share by $.14. /5 In the second quarter of 1993, resolution of certain IRS audits and a charge for recently enacted federal statutory tax rates, applied retroactively to January 31, 1993, decreased net income by $4,368 and earnings per common share by $.15. /6 In the first quarter of 1993, the Company adopted SFAS No. 109 which decreased net income by $2,588 and earnings per common share by $.09.
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of Fred Meyer, Inc. has the responsibility for preparing the accompanying financial statements and for their integrity and objectivity. The statements were prepared in accordance with generally accepted accounting principles. The financial statements include amounts that are based on management's best estimates and judgments. Management also prepared other information in the annual report and is responsible for its accuracy and consistency with the financial statements. The Company's financial statements have been audited by Deloitte & Touche LLP, independent auditors. Management has made available to Deloitte & Touche LLP all the Company's financial records and related data, as well as the minutes of shareholders' and directors' meetings. Management has established and maintains an internal control structure that provides reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition and the prevention and detection of fraudulent financial reporting. The internal control structure provides for the appropriate division of responsibility, which is monitored for compliance. The Company maintains an internal auditing program that assesses the effectiveness of the internal control structure and recommends improvements. Deloitte & Touche LLP also considered the internal control structure in connection with its audit. Management has considered the internal auditors' and Deloitte & Touche LLP's recommendations concerning the Company's internal control structure and has taken the appropriate actions to respond to these recommendations. The Company's principles of business conduct address, among other things, potential conflicts of interests and compliance with laws, including those relating to financial disclosure and the confidentiality of proprietary information. The Board of Directors pursues its responsibility for the quality of the Company's financial reporting primarily through its Audit Committee, which is comprised of outside directors. The Audit Committee meets approximately three times a year with management, the corporate internal audit manager, and the independent auditors to ensure that each is meeting its responsibilities and to discuss matters concerning internal controls and accounting and financial reporting. The corporate internal audit manager and independent auditors have unrestricted access to the Audit Committee. KENNETH THRASHER Kenneth Thrasher Senior Vice President, Finance and Chief Financial Officer INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors of Fred Meyer, Inc.: We have audited the accompanying consolidated balance sheets of Fred Meyer, Inc. and subsidiaries as of January 28, 1995 and January 29, 1994, and the related statements of consolidated operations, changes in consolidated stockholders' equity, and consolidated cash flows for each of the three fiscal years in the period ended January 28, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Fred Meyer, Inc. and subsidiaries at January 28, 1995 and January 29, 1994, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 28, 1995, in conformity with generally accepted accounting principles. As discussed in Note 6 to the consolidated financial statements, the Company changed its method of accounting for income taxes in the fiscal year ended January 29, 1994. DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Portland, Oregon March 6, 1995 DIRECTORS Saul A. Fox/3 (41, 1986)* General Partner, Kohlberg Kravis Roberts & Co. San Francisco, California A.M. Gleason/1 (64, 1992) Vice Chairman of the Board PacifiCorp (diversified public utility) Portland, Oregon Jerome Kohlberg, Jr. (69, 1981) General Partner, Kohlberg & Co. New York, New York Roger S. Meier/1,2,3 (69, 1985) President, AMCO, Inc. (investment enterprise) Portland, Oregon Michael W. Michelson/2,3 (43, 1981) General Partner, Kohlberg Kravis Roberts & Co. San Francisco, California Robert G. Miller/2 (50, 1991) Chairman of the Board and Chief Executive Officer Fred Meyer, Inc. Portland, Oregon Paul E. Raether (48, 1986) General Partner, Kohlberg Kravis Roberts & Co. New York, New York /1 Audit Committee /2 Executive Committee /3 Compensation Committee * Age as of March 1, 1995 and year joined Board MANAGEMENT COMMITTEE Robert G. Miller (50, 1991)* Chairman of the Board and Chief Executive Officer Cyril K. Green (63, 1947) President and Chief Operating Officer R. Eric Baltzell (54, 1962) Senior Vice President, Stores Roger A. Cooke (46, 1992) Senior Vice President, General Counsel and Secretary Edward A. Dayoob (55, 1973) Senior Vice President, Jewelry Group Curt A. Lerew, III (47, 1991) Senior Vice President, Food Group Keith W. Lovett (51, 1992) Senior Vice President, Human Resources Ronald J. McEvoy (47, 1991) Senior Vice President, Chief Information Officer Norman O. Myhr (47, 1978) Senior Vice President, Sales Promotion and Marketing Cheryl D. Perrin (56, 1976) Senior Vice President, Public Affairs Mary F. Sammons (48, 1973) Senior Vice President, General Group Kenneth Thrasher (45, 1982) Senior Vice President, Finance and Chief Financial Officer Scott L. Wippel (41, 1992) Senior Vice President, Corporate Facilities * Age as of March 1, 1995 and year joined Fred Meyer SHAREHOLDER INFORMATION Annual Meeting The Annual Meeting of Shareholders will be held at 1:00 p.m. on Tuesday, June 27, 1995 at the Red Lion Inn (East), Jantzen Beach, 909 N. Hayden Island Drive, Portland, Oregon. Stock Listing Fred Meyer, Inc.'s common stock is traded on the New York Stock Exchange (NYSE). The ticker symbol is FMY and the Dow Jones newspaper quotation is under FredMeyer or FrMeyer. Form 10-K A copy of the company's Form 10-K, as filed with the Securities and Exchange Commission, may be obtained at no cost by writing: Shareholder Relations, Fred Meyer, Inc., P.O. Box 42121, Portland, Oregon 97242. Independent Auditors Deloitte & Touche LLP Portland, Oregon Transfer Agent and Registrar Chemical Trust Company of California Securityholder Relations Department 50 California Street, 10th Floor San Francisco, California 94111 Toll-free telephone: 1-800-647-4273 EX-23 15 EXHIBIT 23 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-13912, 33-22572, 33-31798, 33-36163, and 33-49638 all on Form S-8 and Registration Statement No. 33-51177 on Form S-3, of our reports dated March 6, 1995 (our report on the financial statement expresses an unqualified opinion and includes an explanatory paragraph relating to a change in method of accounting for income taxes in the fiscal year ended January 29, 1994), appearing in and incorporated by reference in the Annual Report on Form 10-K of Fred Meyer, Inc. for the year ended January 28, 1995. DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP April 26, 1995 EX-24 16 EXHIBIT 24 EXHIBIT 24 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director of Fred Meyer, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each of them, his true and lawful attorney and agent, to do any and all acts and things and execute in his name as an officer or director of the Company the Annual Report on Form 10-K for the year ended January 28, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission; and the undersigned does hereby ratify and confirm all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof. Any one of said attorneys or agents shall have, and may exercise, all powers conferred. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 10th day of April, 1995. SAUL A. FOX ---------------------------------- Saul A. Fox POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director of Fred Meyer, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each of them, his true and lawful attorney and agent, to do any and all acts and things and execute in his name as an officer or director of the Company the Annual Report on Form 10-K for the year ended January 28, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission; and the undersigned does hereby ratify and confirm all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof. Any one of said attorneys or agents shall have, and may exercise, all powers conferred. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 10th day of April, 1995. A. M. GLEASON ---------------------------------- A. M. Gleason POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director of Fred Meyer, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each of them, his true and lawful attorney and agent, to do any and all acts and things and execute in his name as an officer or director of the Company the Annual Report on Form 10-K for the year ended January 28, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission; and the undersigned does hereby ratify and confirm all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof. Any one of said attorneys or agents shall have, and may exercise, all powers conferred. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 12th day of April, 1995. JEROME KOHLBERG,JR. ---------------------------------- Jerome Kohlberg, Jr. POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director of Fred Meyer, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each of them, his true and lawful attorney and agent, to do any and all acts and things and execute in his name as an officer or director of the Company the Annual Report on Form 10-K for the year ended January 28, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission; and the undersigned does hereby ratify and confirm all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof. Any one of said attorneys or agents shall have, and may exercise, all powers conferred. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 12th day of April, 1995. ROBERT G. MILLER ---------------------------------- Robert G. Miller POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director of Fred Meyer, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each of them, his true and lawful attorney and agent, to do any and all acts and things and execute in his name as an officer or director of the Company the Annual Report on Form 10-K for the year ended January 28, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission; and the undersigned does hereby ratify and confirm all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof. Any one of said attorneys or agents shall have, and may exercise, all powers conferred. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 12th day of April, 1995. ROGER S. MEIER ---------------------------------- Roger S. Meier POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director of Fred Meyer, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each of them, his true and lawful attorney and agent, to do any and all acts and things and execute in his name as an officer or director of the Company the Annual Report on Form 10-K for the year ended January 28, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission; and the undersigned does hereby ratify and confirm all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof. Any one of said attorneys or agents shall have, and may exercise, all powers conferred. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 12th day of April, 1995. MICHAEL W. MICHELSON ---------------------------------- Michael W. Michelson POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS that the undersigned, an officer and/or director of Fred Meyer, Inc., a Delaware corporation (the "Company"), does hereby constitute and appoint Robert G. Miller, Kenneth Thrasher and Roger A. Cooke, and each of them, his true and lawful attorney and agent, to do any and all acts and things and execute in his name as an officer or director of the Company the Annual Report on Form 10-K for the year ended January 28, 1995 and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission; and the undersigned does hereby ratify and confirm all that said attorneys and agents and each of them shall do or cause to be done by virtue hereof. Any one of said attorneys or agents shall have, and may exercise, all powers conferred. IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney this 10th day of April, 1995. PAUL E. RAETHER ---------------------------------- Paul E. Raether EX-27 17 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 YEAR JAN-28-1995 JAN-28-1995 34,868 0 20,025 0 514,473 641,595 1,342,555 446,116 1,562,672 392,081 540,166 268 0 0 538,352 1,562,672 3,128,432 3,128,432 2,262,398 823,742 15,978 0 14,753 11,561 4,393 7,168 0 0 0 7,168 .25 .25
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