Document:

<PAGE>

                                                                   Exhibit 10.20

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                                 LEASE AGREEMENT

                          Dated as of November 30, 2001

                                     between

                WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION,
                                not individually,
                         but solely as the Owner Trustee
                             under S&F Trust 1998-1,

                                    as Lessor

                                       and

                               SMART & FINAL INC.,

                                    as Lessee

--------------------------------------------------------------------------------

This Lease Agreement is subject to a security interest in favor of Fleet Capital
Corporation, as the agent for the Lenders and, respecting the Security
Documents, as the agent for the Lenders and the Holders, to the extent of their
interests (the "Agent") under a Security Agreement dated as of November 30,
                -----
2001, between Wells Fargo Bank Northwest, National Association, not
individually, but solely as the Owner Trustee under S&F Trust 1998-1 and the
Agent. This Lease Agreement has been executed in several counterparts. To the
extent, if any, that this Lease Agreement constitutes chattel paper (as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction), no security interest in this Lease Agreement may be created
through the transfer or possession of any counterpart other than the original
counterpart containing the receipt therefor executed by the Agent on the
signature page hereof.
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                                 Page
<S>                                                                                                              <C>
ARTICLE I.....................................................................................................    5
   1.1   Definitions..........................................................................................    5
   1.2   Interpretation.......................................................................................    5

ARTICLE II....................................................................................................    5
   2.1   Property.............................................................................................    5
   2.2   Lease Term...........................................................................................    6
   2.3   Title................................................................................................    6
   2.4   Lease Supplements....................................................................................    6

ARTICLE III...................................................................................................    6
   3.1   Rent.................................................................................................    6
   3.2   Payment of Basic Rent................................................................................    6
   3.3   Supplemental Rent....................................................................................    7
   3.4   Performance on a Non-Business Day....................................................................    7
   3.5   Rent Payment Provisions..............................................................................    7

ARTICLE IV....................................................................................................    7
   4.1   Taxes; Utility Charges...............................................................................    7

ARTICLE V.....................................................................................................    8
   5.1   Quiet Enjoyment......................................................................................    8

ARTICLE VI....................................................................................................    8
   6.1   Net Lease............................................................................................    8
   6.2   No Termination or Abatement..........................................................................    9

ARTICLE VII...................................................................................................    9
   7.1   Ownership of the Properties..........................................................................    9

ARTICLE VIII..................................................................................................   10
   8.1   Condition of the Properties..........................................................................   10
   8.2   Possession and Use of the Properties.................................................................   11
   8.3   Integrated Properties................................................................................   11

ARTICLE IX....................................................................................................   12
   9.1   Compliance With Legal Requirements, Insurance Requirements and Manufacturers' Specifications and
   Standards..................................................................................................   12

ARTICLE X.....................................................................................................   12
   10.1     Maintenance and Repair; Return....................................................................   12
   10.2     Environmental Inspection..........................................................................   13
</TABLE>

                                      A-4
<PAGE>

<TABLE>
<S>                                                                                                              <C>
ARTICLE XI....................................................................................................   14
   11.1     Modifications.....................................................................................   14
   11.2     Substitution......................................................................................   14

ARTICLE XII...................................................................................................   17
   12.1     Warranty of Title.................................................................................   17

ARTICLE XIII..................................................................................................   18
   13.1     Permitted Contests Other Than in Respect of Indemnities...........................................   18
   13.2     Impositions, Utility Charges, Other Matters; Compliance with Legal Requirements...................   18

ARTICLE XIV...................................................................................................   18
   14.1     Required Insurance................................................................................   18
   14.2     Coverage..........................................................................................   20
   14.3     Additional Insurance Requirements.................................................................   21

ARTICLE XV....................................................................................................   21
   15.1     Casualty and Condemnation.........................................................................   21
   15.2     Environmental Matters.............................................................................   23
   15.3     Notice of Environmental Matters...................................................................   24

ARTICLE XVI...................................................................................................   25
   16.1     Termination Upon Certain Events...................................................................   25
   16.2     Procedures........................................................................................   25

ARTICLE XVII..................................................................................................   25
   17.1     Lease Events of Default...........................................................................   25
   17.2     Surrender of Possession...........................................................................   28
   17.3     Reletting.........................................................................................   28
   17.4     Damages...........................................................................................   29
   17.5     [not used]........................................................................................   29
   17.6     Final Liquidated Damages..........................................................................   29
   17.7     Environmental Costs...............................................................................   30
   17.8     Waiver of Certain Rights..........................................................................   30
   17.9     Assignment of Rights Under Contracts..............................................................   30
   17.10    Remedies Cumulative...............................................................................   31

ARTICLE XVIII.................................................................................................   31
   18.1     Lessor's Right to Cure Lessee's Lease Defaults....................................................   31

ARTICLE XIX...................................................................................................   31
   19.1     Provisions Relating to Lessee's Exercise of its Purchase Option...................................   31
   19.2     No Purchase or Termination With Respect to Less than All of a Property............................   31

ARTICLE XX....................................................................................................   32
   20.1     Purchase Option or Sale Option--General Provisions................................................   32
   20.2     Lessee Purchase Option............................................................................   32
   20.3     Third Party Sale Option...........................................................................   33
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                              <C>
ARTICLE XXI...................................................................................................   34
   21.1     Optionee Unaffected...............................................................................   34

ARTICLE XXII..................................................................................................   34
   22.1     Sale Procedure....................................................................................   34
   22.2     Application of Proceeds of Sale...................................................................   36
   22.3     Indemnity for Excessive Wear......................................................................   37
   22.4     Appraisal Procedure...............................................................................   37
   22.5     Certain Obligations Continue......................................................................   38

ARTICLE XXIII.................................................................................................   38
   23.1     Holding Over......................................................................................   38

ARTICLE XXIV..................................................................................................   38
   24.1     Risk of Loss......................................................................................   38

ARTICLE XXV...................................................................................................   39
   25.1     Assignment........................................................................................   39
   25.2     Subleases.........................................................................................   39

ARTICLE XXVI..................................................................................................   39
   26.1     No Waiver.........................................................................................   39

ARTICLE XXVII.................................................................................................   40
   27.1     Acceptance of Surrender...........................................................................   40
   27.2     No Merger of Title................................................................................   40

ARTICLE XXVIII................................................................................................   40
   28.1     Lessee's Representations and Warranties...........................................................   40
   28.2     Affirmative Covenants.............................................................................   50
   28.3     Negative Covenants................................................................................   55
   28.4     Reporting Requirements............................................................................   61
   28.5     Financial Covenants...............................................................................   65

ARTICLE XXIX..................................................................................................   66
   29.1     Notices...........................................................................................   66

ARTICLE XXX...................................................................................................   66
   30.1     Miscellaneous.....................................................................................   66
   30.2     Amendments and Modifications......................................................................   66
   30.3     Successors and Assigns............................................................................   67
   30.4     Headings and Table of Contents....................................................................   67
   30.5     Counterparts......................................................................................   67
   30.6     GOVERNING LAW.....................................................................................   67
   30.7     [Not Used]........................................................................................   67
   30.8     Memoranda of Lease and Lease Supplements..........................................................   67
   30.9     Allocations between the Lenders and the Holders...................................................   67
   30.10    Limitations on Recourse...........................................................................   68
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                              <C>
   30.11    WAIVERS OF JURY TRIAL.............................................................................   68
   30.12    Exercise of Lessor Rights.........................................................................   68
   30.13    SUBMISSION TO JURISDICTION AND VENUE..............................................................   68
   30.14    USURY SAVINGS PROVISION...........................................................................   68
   30.15    Release of Collateral.............................................................................   69
</TABLE>

EXHIBITS
--------

EXHIBIT A - Form of Lease Supplement
EXHIBIT B - Form of Memorandum of Lease and Lease Supplement

SCHEDULES
---------

SCHEDULE 28.1(b) - Capital Stock of Subsidiaries of Borrower
SCHEDULE 28.1(d) - Approvals and Consents
SCHEDULE 28.1(h) - Litigation
SCHEDULE 28.1(j) - Pension Plans
SCHEDULE 28.1(l)(ii) - Environmental Matters
SCHEDULE 28.1(n) - Open Years
SCHEDULE 28.1(q)(i) - Surviving Debt
SCHEDULE 28.1(r)(i) - Owned Real Property
SCHEDULE 28.1(r)(ii) - Leased Real Property
SCHEDULE 28.1(s) - Existing Investments
SCHEDULE 28.1(t) - Intellectual Property
SCHEDULE 28.1(u) - Certain Agreements, Etc.
SCHEDULE 28.1(y) - Insurance
SCHEDULE 28.3(a) - Existing Liens
<PAGE>

                                LEASE AGREEMENT
                                ---------------

     THIS LEASE AGREEMENT dated as of November 30, 2001 (as amended, modified,
extended, supplemented, restated and/or replaced from time to time, this
"Lease") is between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national
 -----
banking association, having its principal office at 79 South Main Street, Salt
Lake City, Utah 84111, not individually, but solely as the Owner Trustee under
S&F Trust 1998-1, as lessor ("Lessor"), and SMART & FINAL INC., a Delaware
                              ------
corporation, having its principal place of business at 600 Citadel Drive,
Commerce, California 90040, as lessee ("Lessee").
                                        ------

                                   RECITALS:
                                   ---------

     A. WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to lease
from Lessor, each Property; and

     B. WHEREAS, subject to the terms and conditions of the Participation
Agreement the Term shall commence on the Closing Date.

     NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.

                                   ARTICLE I

     1.1  Definitions.
          -----------

     For purposes of this Lease, capitalized terms used in this Lease and not
otherwise defined herein shall have the meanings assigned to them in Appendix A
                                                                     ----------
to that certain Participation Agreement dated as of November 30, 2001 (the
"Participation Agreement") among Lessee, Lessor, the Guarantors, the Holders,
 -----------------------
the Lenders, and FLEET CAPITAL CORPORATION, as agent for the Lenders and,
respecting the Security Documents, as the agent for the Lenders and the Holders,
to the extent of their interests.

     1.2  Interpretation.
          --------------

     The rules of usage set forth in Appendix A to the Participation Agreement
                                     ----------
shall apply to this Lease.

                                  ARTICLE II

     2.1  Property.
          --------

     Subject to the terms and conditions hereinafter set forth and contained in
the respective Lease Supplement relating to each Property, Lessor hereby leases
to Lessee and Lessee hereby leases from Lessor, each Property.
<PAGE>

     2.2  Lease Term.
          ----------

     The term of this Lease with respect to each Property (the "Term") shall
                                                                ----
begin upon the Closing Date (the "Term Commencement Date") and shall end on the
                                  ----------------------
date which is one day prior to the fifth anniversary of the Closing Date (the
                                                                          ---
"Expiration Date").
 ---------------

     2.3  Title.
          -----

     Each Property is leased to Lessee without any representation or warranty,
express or implied, by Lessor and subject to the rights of parties in possession
(if any), the existing state of title (including without limitation the
Permitted Liens) and all applicable Legal Requirements. Lessee shall in no event
have any recourse against Lessor for any defect in Lessor's title to any
Property or any interest of Lessee therein other than for Lessor Liens.

     2.4  Lease Supplements.
          -----------------

     On or prior to the Term Commencement Date, Lessee and Lessor shall each
execute and deliver a Lease Supplement for each Property in substantially the
form of Exhibit A hereto.
        ---------

                                  ARTICLE III

     3.1  Rent.
          ----

          (a) Lessee shall pay Basic Rent in arrears on each Payment Date, and
     on any date on which this Lease shall terminate with respect to any or all
     Properties during the Term. The Basic Rent attributable to a Property on
     each Payment Date is indicated on Schedule 2 to the applicable Lease
                                       ----------
     Supplement.

          (b) Basic Rent shall be due and payable in lawful money of the United
     States and shall be paid by wire transfer of immediately available funds on
     the due date therefor to such account or accounts at such bank or banks as
     Lessor shall from time to time direct.

          (c) Lessee's inability or failure to take possession of all or any
     portion of any Property when delivered by Lessor, whether or not
     attributable to any act or omission of Lessor, Lessee or any other Person
     or for any other reason whatsoever, shall not delay or otherwise affect
     Lessee's obligation to pay Rent for such Property in accordance with the
     terms of this Lease.

          (d) Lessee shall make all payments of Rent prior to 9:00 a.m., Los
     Angeles time, on the applicable date for payment of such amount.

     3.2  Payment of Basic Rent.
          ---------------------

     Basic Rent shall be paid absolutely net to Lessor or its designee, so that
this Lease shall yield to Lessor the full amount thereof, without setoff,
deduction or reduction.

                                        6
<PAGE>

     3.3  Supplemental Rent.
          -----------------

     Lessee shall pay to the Person entitled thereto any and all Supplemental
Rent when and as the same shall become due and payable, and if Lessee fails to
pay any Supplemental Rent within three days after the same is due, Lessor shall
have all rights, powers and remedies provided for herein or by law or equity or
otherwise in the case of nonpayment of Basic Rent. All such payments of
Supplemental Rent shall be in the full amount thereof, without setoff, deduction
or reduction. Lessee shall pay to the appropriate Person, as Supplemental Rent
due and owing to such Person, among other things, on demand, (a) any and all
payment obligations (except for amounts payable as Basic Rent) owing from time
to time under the Operative Agreements by any Person to the Agent, any Lender,
any Holder or any other Person, (b) interest at the applicable Overdue Rate on
any installment of Basic Rent not paid when due for the period for which the
same shall be overdue and on any payment of Supplemental Rent not paid when due
or demanded by the appropriate Person for the period from the due date or the
date of any such demand, as the case may be, until the same shall be paid and
(c) amounts referenced as Supplemental Rent obligations pursuant to Section 8.3
of the Participation Agreement. The expiration or other termination of Lessee's
obligations to pay Basic Rent hereunder shall not limit or modify the
obligations of Lessee with respect to Supplemental Rent. Unless expressly
provided otherwise in this Lease, in the event of any failure on the part of
Lessee to pay and discharge any Supplemental Rent as and when due, Lessee shall
also promptly pay and discharge any fine, penalty, interest or cost which may be
assessed or added for nonpayment or late payment of such Supplemental Rent, all
of which shall also constitute Supplemental Rent.

     3.4  Performance on a Non-Business Day.
          ---------------------------------

     If any Basic Rent is required hereunder on a day that is not a Business
Day, then such Basic Rent shall be due on the next succeeding Business Day. If
any Supplemental Rent is required hereunder on a day that is not a Business Day,
then such Supplemental Rent shall be due on the next succeeding Business Day.

     3.5  Rent Payment Provisions.
          -----------------------

     Lessee shall make payment of all Basic Rent and Supplemental Rent when due
regardless of whether any of the Operative Agreements pursuant to which same is
calculated and is owing shall have been rejected, avoided or disavowed in any
bankruptcy or insolvency proceeding involving any of the parties to any of the
Operative Agreements. Such provisions of such Operative Agreements and their
related definitions are incorporated herein by reference and shall survive any
termination, amendment or rejection of any such Operative Agreements.

                                   ARTICLE IV

     4.1  Taxes; Utility Charges.
          ----------------------

     Lessee shall pay or cause to be paid all Impositions with respect to the
Properties and/or the use, occupancy, operation, repair, access, maintenance or
operation thereof and all charges for electricity, power, gas, oil, water,
telephone, sanitary sewer service and all other rents, utilities and operating
expenses of any kind or type used in or on any Property and related real
property during the Term. Upon Lessor's request, Lessee shall provide from time
to time Lessor

                                        7
<PAGE>

with evidence of all such payments referenced in the foregoing sentence. Unless
a Lease Default or Lease Event of Default shall have occurred and be continuing,
Lessee shall be entitled to receive any credit or refund with respect to any
Imposition or utility charge paid by Lessee. Unless a Lease Default or Lease
Event of Default shall have occurred and be continuing, the amount of any credit
or refund received by Lessor on account of any Imposition or utility charge paid
by Lessee, net of the costs and expenses incurred by Lessor in obtaining such
credit or refund, shall be promptly paid over to Lessee. All charges for
Impositions or utilities imposed with respect to any Property for a period
during which this Lease expires or terminates shall be adjusted and prorated on
a daily basis between Lessor and Lessee, and each party shall pay or reimburse
the other for such party's pro rata share thereof.

                                   ARTICLE V

     5.1  Quiet Enjoyment.
          ---------------

     Subject to the rights of Lessor contained in Sections 17.2, 17.3 and 20.3
                                                  -------------  ----     ----
and the other terms of this Lease and the other Operative Agreements and so long
as no Lease Event of Default shall have occurred and be continuing, Lessee shall
peaceably and quietly have, hold and enjoy each Property for the applicable
Term, free of any claim or other action by Lessor or anyone rightfully claiming
by, through or under Lessor (other than Lessee) with respect to any matters
arising from and after the Term Commencement Date.

                                   ARTICLE VI

     6.1  Net Lease.
          ---------

     This Lease shall constitute a net lease, and the obligations of Lessee
hereunder are absolute and unconditional. Lessee shall pay all operating
expenses arising out of the use, operation and/or occupancy of each Property.
Any present or future law to the contrary notwithstanding, this Lease shall not
terminate, nor shall Lessee be entitled to any abatement, suspension, deferment,
reduction, setoff, counterclaim or defense with respect to the Rent, nor shall
the obligations of Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) for any
reason whatsoever, including without limitation by reason of: (a) any damage to
or destruction of any Property or any part thereof; (b) any taking of any
Property or any part thereof or interest therein by Condemnation or otherwise;
(c) any prohibition, limitation, restriction or prevention of Lessee's use,
occupancy or enjoyment of any Property or any part thereof, or any interference
with such use, occupancy or enjoyment by any Person or for any other reason; (d)
any title defect, Lien or any matter affecting title to any Property; (e) any
eviction by paramount title or otherwise; (f) any default by Lessor hereunder;
(g) any action for bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding relating to or affecting the Agent, any Lender,
Lessor, Lessee, any Holder or any Governmental Authority; (h) the impossibility
or illegality of performance by Lessor, Lessee or both; (i) any action of any
Governmental Authority or any other Person; (j) Lessee's acquisition of
ownership of all or part of any Property; (k) breach of any warranty or
representation with respect to any Property or any Operative Agreement; (l) any
defect in the condition, quality or fitness for use of any Property or any part
thereof, or (m) any other cause or circumstance whether similar or dissimilar to
the foregoing and whether or not Lessee shall have

                                        8
<PAGE>

notice or knowledge of any of the foregoing. The parties intend that the
obligations of Lessee hereunder shall be covenants, agreements and obligations
that are separate and independent from any obligations of Lessor hereunder and
shall continue unaffected unless such covenants, agreements and obligations
shall have been modified or terminated in accordance with an express provision
of this Lease. Lessor and Lessee acknowledge and agree that the provisions of
this Section 6.1 have been specifically reviewed and subjected to negotiation.
     -----------

     6.2  No Termination or Abatement.
          ---------------------------

     Lessee shall remain obligated under this Lease in accordance with its terms
and shall not take any action to terminate, rescind or avoid this Lease,
notwithstanding any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution or other proceeding affecting any Person or any
Governmental Authority, or any action with respect to this Lease or any
Operative Agreement which may be taken by any trustee, receiver or liquidator of
any Person or any Governmental Authority or by any court with respect to any
Person, or any Governmental Authority. Lessee hereby waives all right (a) to
terminate or surrender this Lease (except as permitted under the terms of the
Operative Agreements) or (b) to avail itself of any abatement, suspension,
deferment, reduction, setoff, counterclaim or defense with respect to any Rent.
Lessee shall remain obligated under this Lease in accordance with its terms and
Lessee hereby waives any and all rights now or hereafter conferred by statute or
otherwise to modify or to avoid strict compliance with its obligations under
this Lease. Notwithstanding any such statute or otherwise, Lessee shall be bound
by all of the terms and conditions contained in this Lease.

                                  ARTICLE VII

     7.1 Ownership of the Properties.
         ---------------------------

          (a) Lessor and Lessee intend that for federal and all state and local
     income tax purposes, bankruptcy purposes, regulatory purposes, commercial
     law and real estate purposes and all other purposes (other than for
     accounting purposes) (A) this Lease will be treated as a financing
     arrangement and (B) Lessee will be treated as the owner of the Properties
     and will be entitled to all tax benefits ordinarily available to owners of
     property similar to the Properties for such tax purposes. Notwithstanding
     the foregoing, neither party hereto has made, or shall be deemed to have
     made, any representation or warranty as to the availability of any of the
     foregoing treatments under applicable accounting rules, tax, bankruptcy,
     regulatory, commercial or real estate law or under any other set of rules.
     Lessee shall claim the cost recovery deductions associated with each
     Property, and Lessor shall not, to the extent not prohibited by Law, take
     on its tax return a position inconsistent with Lessee's claim of such
     deductions.

          (b) For all purposes described in Section 7.1(a), Lessor and Lessee
                                            --------------
     intend this Lease to constitute a financing and not a true lease. In order
     to secure the obligations of Lessee now existing or hereafter arising under
     any and all Operative Agreements, Lessee hereby conveys, grants, assigns,
     transfers, hypothecates, mortgages and sets over to Lessor, for the benefit
     of all Financing Parties, a first priority security interest in and lien on
     all right, title and interest of Lessee (now owned or hereafter acquired)
     in and to all Properties to the extent such is personal property. Lessor
     and Lessee further intend and

                                        9
<PAGE>

     agree that, for the purpose of securing the obligations of Lessee now
     existing or hereafter arising under the Operative Agreements, this Lease
     shall be a security agreement within the meaning of Article 9 of the
     Uniform Commercial Code respecting all personal property that is part of
     the Properties and all proceeds (including without limitation insurance
     proceeds) thereof. Lessee shall promptly take such actions as Lessor may
     reasonably request (including without limitation the filing of UCC
     Financing Statements) to ensure that the lien and security interest in the
     personal property that is part of the Properties will be a perfected lien
     and security interest of first priority under applicable law and will be
     maintained as such throughout the Term.

                                  ARTICLE VIII

     8.1  Condition of the Properties.
          ---------------------------

     LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY "AS-IS,
                                                                      ------
WHERE-IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY
--------
LESSOR (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR OF LESSOR
LIENS) AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE, (B) THE
RIGHTS OF ANY PARTIES IN POSSESSION THEREOF (IF ANY), (C) ANY STATE OF FACTS
REGARDING ITS PHYSICAL CONDITION OR WHICH AN ACCURATE SURVEY MIGHT SHOW, (D) ALL
APPLICABLE LEGAL REQUIREMENTS AND (E) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY
EXIST ON THE DATE HEREOF AND/OR THE DATE OF THE APPLICABLE LEASE SUPPLEMENT.
NEITHER LESSOR NOR THE AGENT NOR ANY LENDER NOR ANY HOLDER HAS MADE OR SHALL BE
DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR OF LESSOR
LIENS) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE,
VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR
FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY OTHER
REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND NEITHER LESSOR NOR THE AGENT
NOR ANY LENDER NOR ANY HOLDER SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT
DEFECT THEREON OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY
WITH ANY LEGAL REQUIREMENT. LESSEE HAS OR PRIOR TO THE TERM COMMENCEMENT DATE
WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH PROPERTY AND THE
IMPROVEMENTS THEREON (IF ANY), IS OR WILL BE (INSOFAR AS LESSOR, THE AGENT, EACH
LENDER AND EACH HOLDER ARE CONCERNED) SATISFIED WITH THE RESULTS OF ITS
INSPECTIONS AND IS ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE RESULTS
OF ITS OWN INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE
PRECEDING SENTENCE, AS BETWEEN LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS,
ON THE ONE HAND, AND LESSEE, ON THE OTHER HAND, ARE TO BE BORNE BY LESSEE.

                                       10
<PAGE>

     8.2  Possession and Use of the Properties.
          ------------------------------------

          (a) At all times during the Term, each Property shall be a Permitted
     Facility and shall be used by Lessee in the ordinary course of its
     business. Lessee shall pay, or cause to be paid, all charges and costs
     required in connection with the use of the Properties as contemplated by
     this Lease. Lessee shall not commit or permit any waste of the Properties
     or any part thereof.

          (b) The address specified for notices to Lessee by the reference in
     Section 29.1 is the principal place of business and chief executive office
     ------------
     of Lessee, and Lessee will provide Lessor with prior written notice of any
     change of location of its principal place of business, chief executive
     office or its state of formation. Regarding a particular Property, each
     Lease Supplement correctly identifies the initial location of the related
     Equipment and Improvements and contains an accurate legal description for
     the related parcel of Land. The Equipment and Improvements will be located
     at the location identified in the applicable Lease Supplement, but if no
     Lease Default or Lease Event of Default has occurred and is continuing,
     Lessee may relocate any item of Equipment to another Property. At each time
     Lessee is required to deliver financial statements under Article XXVIII,
                                                              --------------
     Lessee will notify Lessor in writing of the location of all Equipment that
     it has moved from one Property to another during the applicable fiscal
     quarter.

          (c) Lessee will not attach or incorporate any item of Equipment to or
     in any other item of equipment or personal property or to or in any real
     property in a manner that could give rise to the assertion of any Lien on
     such item of Equipment by reason of such attachment or the assertion of a
     claim that such item of Equipment has become a fixture and is subject to a
     Lien in favor of a third party that is prior to the Liens thereon created
     by the Operative Agreements.

          (d) On the Term Commencement Date, Lessor and Lessee shall execute for
     each Property a Lease Supplement containing an Equipment Schedule that has
     a general description of the Equipment related to the Property and an
     Improvement Schedule that has a general description of the Improvements
     related to the Property and a legal description of the Land to be leased
     hereunder as of such date. Simultaneously with the execution and delivery
     of each Lease Supplement, the Equipment, Improvements and Land, and the
     remainder of such Property, shall be deemed to have been accepted by Lessee
     for all purposes of this Lease and to be subject to this Lease.

          (e) At all times during the Term, Lessee will comply with all
     obligations under and (to the extent no Lease Default or Lease Event of
     Default exists and provided that such exercise will not impair the value,
     utility or remaining useful life of any Property) shall be permitted to
     exercise all rights and remedies under, all operation and easement
     agreements and related or similar agreements applicable to the Properties.

     8.3  Integrated Properties
          ---------------------

     For the duration of the Term, Lessee shall, at its sole cost and expense,
cause each Property to have situated on it all of the equipment, facilities,
rights, other personal property and

                                       11
<PAGE>

other real property necessary or appropriate to operate, utilize, maintain and
control a Permitted Facility in a commercially reasonable manner.

                                   ARTICLE IX

     9.1  Compliance With Legal Requirements, Insurance Requirements and
          --------------------------------------------------------------
          Manufacturers' Specifications and Standards.
          -------------------------------------------

     Subject to the terms of Article XIII relating to permitted contests,
                             ------------
Lessee, at its sole cost and expense, shall (a) comply in all material respects
with all applicable Legal Requirements (including without limitation all
Environmental Laws) and all Insurance Requirements relating to the Properties,
(b) procure, maintain and comply with all licenses, permits, orders, approvals,
consents and other authorizations required for the acquisition, installation,
testing, use, development, construction, operation, maintenance, repair,
refurbishment and restoration of the Properties and (c) comply with all
manufacturers' specifications and standards, including without limitation the
acquisition, installation, testing, use, development, construction, operation,
maintenance, repair, refurbishment and restoration of the Properties, whether or
not compliance therewith shall require structural or extraordinary changes in
any Property or interfere with the use and enjoyment of any Property, unless the
failure to procure, maintain and comply with such items identified in
subparagraphs (b) and (c), individually or in the aggregate, shall not have and
could not reasonably be expected to have a Material Adverse Effect. Lessor
agrees to take such actions as may be reasonably requested by Lessee in
connection with the compliance by Lessee of its obligations under this Section
                                                                       -------
9.1.
---

                                   ARTICLE X

     10.1 Maintenance and Repair; Return.
          ------------------------------

          (a) Lessee, at its sole cost and expense, shall maintain each Property
     in good condition, repair and working order (ordinary wear and tear
     excepted) and in the repair and condition as when originally delivered to
     Lessor and make all necessary repairs thereto and replacements thereof, of
     every kind and nature whatsoever, whether interior or exterior, ordinary or
     extraordinary, structural or nonstructural or foreseen or unforeseen, in
     each case as required by Section 9.1 and on a basis consistent with the
                              -----------
     operation and maintenance of properties or equipment comparable in type and
     function to the applicable Property, such that such Property is capable of
     being immediately utilized by a third party and in compliance with standard
     industry practice subject, however, to the provisions of Article XV with
                                                              ----------
     respect to Casualty and Condemnation.

          (b) Lessee shall not use or locate any component of any Property
     outside of an Approved State therefor. Lessee shall not move or relocate
     any component of any Property beyond the boundaries of the Land (comprising
     part of such Property) described in the applicable Lease Supplement, except
     (i) for the temporary removal of Equipment and other personal property for
     repair or replacement and (ii) as provided in Section 8.2(b).
                                                   --------------

          (c) If any component of any Property becomes worn out, lost,
     destroyed, damaged beyond repair or otherwise permanently rendered unfit
     for use, Lessee, at its

                                       12
<PAGE>

     own expense, will within a reasonable time replace such component with a
     replacement component which is free and clear of all Liens (other than
     Permitted Liens and Lessor Liens) and has a value, utility and useful life
     at least equal to the component replaced (assuming the component replaced
     had been maintained and repaired in accordance with the requirements of
     this Lease). All components which are added to any Property shall
     immediately become the property of (and title thereto shall vest in) Lessor
     and shall be deemed incorporated in such Property and subject to the terms
     of this Lease as if originally leased hereunder.

          (d) Upon reasonable advance notice, Lessor and its agents shall have
     the right to inspect each Property and all maintenance records with respect
     thereto at any reasonable time during normal business hours but shall not,
     in the absence of a Lease Event of Default, materially disrupt the business
     of Lessee.

          (e) Lessee shall cause to be delivered to Lessor (at Lessee's sole
     expense) one or more additional Appraisals (or reappraisals) of any
     Property as Lessor may request (i) if any one of Lessor, the Agent, the
     Trust Company, any Lender or any Holder is required pursuant to any
     applicable Legal Requirement to obtain such Appraisals (or reappraisals)
     and (ii) upon the occurrence of any Lease Event of Default.

          (f) Lessor shall under no circumstances be required to build any
     improvements or install any equipment on any Property, make any repairs,
     replacements, alterations or renewals of any nature or description to any
     Property, make any expenditure whatsoever in connection with this Lease or
     maintain any Property in any way. Lessor shall not be required to maintain,
     repair or rebuild all or any part of any Property, and Lessee waives the
     right to (i) require Lessor to maintain, repair, or rebuild all or any part
     of any Property, or (ii) make repairs at the expense of Lessor pursuant to
     any Legal Requirement, Insurance Requirement, contract, agreement,
     covenant, condition or restriction at any time in effect.

          (g) Lessee shall, upon the expiration or earlier termination of this
     Lease with respect to a Property, if Lessee shall not have exercised its
     Purchase Option with respect to such Property and purchased such Property,
     surrender such Property (i) pursuant to the exercise of the applicable
     remedies upon the occurrence of a Lease Event of Default, to Lessor or (ii)
     pursuant to the second paragraph of Section 22.1(a) hereof, to Lessor or
                                         ---------------
     the third party purchaser, as the case may be, subject to Lessee's
     obligations under this Lease (including without limitation the obligations
     of Lessee at the time of such surrender under Sections 9.1, 10.1(a) through
                                                   ------------  -------
     (f), 10.2, 11.1, 12.1, 22.1 and 23.1).
     ---  ----  ----  ----  ----     ----

     10.2 Environmental Inspection.
          -------------------------

     If Lessee has not given notice of exercise of its Purchase Option on the
Expiration Date pursuant to Section 20.1 or for whatever reason Lessee does not
                            ------------
purchase a Property in accordance with the terms of this Lease, then not more
than 120 days nor less than 60 days prior to the Expiration Date, Lessee at its
expense shall cause to be delivered to Lessor a Phase I environmental site
assessment recently prepared (no more than 30 days prior to the date of
delivery) by the Environmental Consultant, and in form, scope and content
satisfactory to Lessor

                                       13
<PAGE>

and the Majority Holders acting in good faith. Lessee shall cause a Phase II
environmental site assessment, if requested by Lessor or the Majority Holders,
and any necessary remediation resulting therefrom to be completed before the
Expiration Date.

                                   ARTICLE XI

     11.1 Modifications.
          -------------

          (a) Lessee at its sole cost and expense, at any time and from time to
     time without the consent of Lessor may make modifications, alterations,
     renovations, improvements and additions to any Property or any part thereof
     and substitutions and replacements therefor (collectively,
     "Modifications"), and Lessee shall make any and all Modifications required
      -------------
     to be made pursuant to all Legal Requirements, Insurance Requirements and
     manufacturer's specifications and standards; provided, that: (i) no
                                                  --------
     Modification shall materially impair the value, utility or useful life of
     any Property from that which existed immediately prior to such
     Modification; (ii) each Modification shall be done expeditiously and in a
     good and workmanlike manner; (iii) no Modification shall adversely affect
     the structural integrity of any Property; (iv) to the extent required by
     Section 14.1(d), Lessee shall maintain builders' risk insurance at all
     ---------------
     times when a Modification is in progress; (v) subject to the terms of
     Article XIII relating to permitted contests, Lessee shall pay all costs and
     ------------
     expenses and discharge any Liens arising with respect to any Modification;
     (vi) each Modification shall comply with the requirements of this Lease
     (including without limitation Sections 8.2 and 10.1); and (vii) no
                                   ------------     ----
     Improvement shall be demolished or otherwise rendered unfit for use unless
     Lessee shall finance the proposed replacement Modification outside of this
     lease facility; provided, further, Lessee shall not make any Modification
                     --------  -------
     (unless required by any Legal Requirement) to the extent any such
     Modification, individually or in the aggregate, shall have or could
     reasonably be expected to have a Material Adverse Effect. All Modifications
     shall immediately and without further action upon their incorporation into
     the applicable Property (1) become property of Lessor, (2) be subject to
     this Lease and (3) be titled in the name of Lessor. Lessee shall not remove
     or attempt to remove any Modification from any Property. Lessee, at its own
     cost and expense, will pay for the repairs of any damage to any Property
     caused by the removal or attempted removal of any Modification.

          (b)  [not used]

     11.2 Substitution.
          ------------

          (a) If no Lease Default or Lease Event of Default has occurred and is
     continuing, subject to the consent of the Majority Secured Parties (which
     shall not be unreasonably withheld or delayed) and subject to the terms and
     conditions set forth in this Section 11.2, Lessee may, upon not less than
                                  ------------
     90 days' prior written notice to Lessor, which notice shall be accompanied
     by an Officer's Certificate of Lessee, signed by Lessee's chief financial
     officer, certifying that either (i) a Governmental Authority has threatened
     to take by eminent domain or otherwise the Property to be replaced or (ii)
     specified important business considerations exist which require a sale of
     such Property to a Person unrelated to Lessee, and further certifying that
     the Replacement Property

                                       14
<PAGE>

     (defined below) will have on the Replacement Closing Date (as defined
     below) a value of at least $1,000,000 and a value, residual value,
     remaining useful life and utility at least as great as, and will be in as
     good condition as, the Property it replaces, and which notice shall state
     whether the Property to be replaced is to be transferred on, or prior to,
     the Replacement Closing Date, and, if such transfer is to occur prior to
     the Replacement Closing Date such notice shall specify the reason therefor,
     the date for such transfer and a date (which may not be more than 60 days
     after the date the Property is transferred or the fourth anniversary of
     Lease Commencement Date) by which the Replacement Closing Date will occur,
     cause Lessor to substitute a property (the "Replacement Property") for such
                                                 --------------------
     Property in accordance with either (i) Section 11.2(b) and Section 11.2(c),
                                            ---------------     ---------------
     if the Property being replaced is transferred on the Replacement Closing
     Date, or (ii) Section 11.2(b) and Section 11.2(d), if the Property being
                   ---------------     ---------------
     replaced is transferred prior to the Replacement Closing Date. Each
     Replacement Property must be a substantially similar property having a
     value of at least $1,000,000 and a value, residual value, remaining useful
     life and utility, and be in good condition, as determined by the Appraisal
     Procedure (at the expense of Lessee), at least equal to the replaced
     Property, it being assumed for these purposes that each such Property had
     been maintained in the condition and repair required hereunder. Lessee's
     right to cause Lessor to substitute Replacement Properties for existing
     Properties shall be limited to Replacement Properties with an aggregate
     value of no more than $5,000,000 over the Term. The date on which a
     Replacement Property is substituted for a Property is referred to as the
     "Replacement Closing Date."

          (b) Lessee's right to cause Lessor to substitute a Replacement
     Property for a Property shall be subject to the satisfaction, on the
     Replacement Closing Date, at Lessee's sole cost and expense, of the
     conditions set forth in Section 5.3 of the Participation Agreement and of
     the following conditions:

               (i)   The Agent's receipt of a survey of the Replacement Property
in form and substance satisfactory to the Agent;

               (ii)  an assignment to Lessor of any and all warranties,
indemnities and claims against dealers, manufacturers, contractors or
subcontractors relating to the Replacement Property;

               (iii) on or before the Replacement Closing Date, Lessor shall
have received such documents and evidence with respect to Lessee, Lessor and the
owner of such Replacement Property as Lessor may reasonably request in order to
establish the consummation of the transactions contemplated by this Section
                                                                    -------
11.2, the taking of all necessary corporate action in connection therewith and
----
compliance with the conditions set forth in this Section 11.2, in each case in
                                                 ------------
form and substance reasonably satisfactory to the Lessor;

               (iv) Lessor shall have received satisfactory evidence as to the
compliance with Article XIV hereof with respect to the Replacement Property;
                -----------

                                       15
<PAGE>

               (v)   on the Replacement Closing Date, Lessor shall receive good
title to the Replacement Property free and clear of Liens (other than Permitted
Liens of the types referred to in Appendix A to the Participation Agreement);

               (vi)  if requested by Lessor, Lessor and its authorized
representatives shall have been afforded access to the Replacement Property at a
mutually agreeable time prior to the Replacement Closing Date in order to
conduct an inspection of the Replacement Property; and

               (vii) the Replacement Property shall include existing
Improvements that will be immediately occupied by the Lessee.

          (c) If the Property being replaced is transferred on the Replacement
     Closing Date, upon fulfillment of the conditions set forth in Section
                                                                   -------
     11.2(b), such Replacement Property shall become a "Property" under and
     -------
     subject to this Lease for all purposes. With respect to the Property that
     was replaced by a Replacement Property, (i) all obligations of Lessee
     hereunder to pay Basic Rent for such Property shall terminate, (ii) the
     Property will no longer be subject to this Lease, and (ii) so long as a
     Lease Default or Lease Event of Default has not occurred and is not
     continuing, Lessor shall transfer, without recourse or warranty (except as
     to the absence of Lessor Liens) and on an "AS-IS, WHERE-IS" basis, all
     right, title and interest of Lessor in and to such Property to or at the
     direction of Lessee, and shall furnish to or at the direction of Lessee,
     and at Lessee's sole cost and expense, a Deed evidencing such transfer. If
     the sale price of the Property being replaced is less than the sale price
     of the Replacement Property, Lessee shall pay the shortfall, and if the
     sale price of the Property being replaced is greater than the sale price of
     the Replacement Property, Lessor will apply the excess amount to Lessee's
     obligations (including the obligation to pay Prepayment Fees) under the
     Operative Agreements, whether or not then due, in any order and in such
     portions as Lessor elects, or hold such excess or such amount as security
     for Lessee's obligations under this Lease and invest it at Lessee's sole
     risk in Permitted Investments, or both.

          (d) If the Property being replaced is transferred prior to the
     Replacement Closing Date, so long as a Lease Default or Lease Event of
     Default shall not have occurred and be continuing, Lessor shall transfer on
     the date specified for such transfer, without recourse or warranty (except
     as to the absence of Lessor Liens) and on an "AS-IS, WHERE-IS" basis, all
     right, title and interest of Lessor in and to the Property, and shall
     furnish to the transferee, at Lessee's sole cost and expense, a Deed
     evidencing such transfer, against payment to Lessor of an amount equal to
     the greater of (i) the net cash proceeds of such transfer or (ii) the
     portion of the Termination Value attributable to the Property, plus the
     Prepayment Fee attributable to the Property, whereupon the Property will no
     longer be subject to this Lease, but Lessee's obligation to pay Basic Rent
     for the Property shall continue. Lessor shall hold the amount paid to it as
     security for Lessee's obligations under this Lease and under the other
     Operative Agreements and invest the amount at Lessee's sole risk in
     Permitted Investments. On the Replacement Closing Date, Lessor will apply
     the amount held together with all earnings and less all losses and
     expenses, to the purchase price of the Replacement Property, and Lessee
     shall pay any shortfall, whereupon the Replacement Property shall become a
     "Property" under and

                                       16
<PAGE>

     subject to this Lease for all purposes. If and to the extent such amount
     exceeds the purchase price of the Replacement Property or if the
     Replacement Closing Date does not occur by the date specified therefor in
     Lessee's notice, Lessor will apply such excess or such amount to Lessee's
     obligations (including the obligation to pay Termination Value and
     Prepayment Fees) under the Operative Agreements, whether or not then due,
     in any order and in such portions as Lessor elects, or hold such excess or
     such amount as security for Lessee's obligations under this Lease and
     invest it at Lessee's sole risk in Permitted Investments, or both.

                                  ARTICLE XII

     12.1 Warranty of Title.
          -----------------

          (a) Lessee shall cause title in each Property (including without
     limitation all Equipment, all Improvements, all replacement components to
     each Property and all Modifications) immediately and without further action
     to vest in and become the property of Lessor and to be subject to the terms
     of this Lease from and after the date hereof or such date of incorporation
     into any Property. Subject to the terms of Article XIII relating to
                                                ------------
     permitted contests, Lessee shall not directly or indirectly create or allow
     to remain, and shall promptly discharge at its sole cost and expense, any
     Lien, defect, attachment, levy, title retention agreement or claim upon any
     Property, any component thereof or any Modifications or any Lien,
     attachment, levy or claim with respect to the Rent or with respect to any
     amounts held by Lessor, the Agent, any Lender or any Holder pursuant to any
     Operative Agreement, other than Permitted Liens and Lessor Liens. Lessee
     shall promptly notify Lessor in the event it receives actual knowledge that
     a Lien other than a Permitted Lien or Lessor Lien has occurred with respect
     to a Property, the Rent or any other such amounts, and Lessee represents
     and warrants to, and covenants with, Lessor that the Liens in favor of
     Lessor and/or the Agent created by the Operative Agreements are (and until
     the Financing Parties under the Operative Agreements have been paid in full
     shall remain) first priority perfected Liens subject only to Permitted
     Liens and Lessor Liens. At all times during the Term, Lessee shall (i)
     cause a valid, perfected, first priority Lien on each applicable Property
     to be in place in favor of the Agent (for the benefit of the Lenders and
     the Holders) and (ii) file, or cause to be filed, all necessary documents
     under the applicable real property law and Article 9 of the Uniform
     Commercial Code to perfect such title and Liens.

          (b) Nothing contained in this Lease shall be construed as constituting
     the consent or request of Lessor, expressed or implied, to or for the
     performance by any contractor, mechanic, laborer, materialman, supplier or
     vendor of any labor or services or for the furnishing of any materials for
     any construction, alteration, addition, repair or demolition of or to any
     Property or any part thereof. NOTICE IS HEREBY GIVEN THAT LESSOR IS NOT AND
     SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE
     FURNISHED TO LESSEE, OR TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF
     THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC'S OR OTHER LIEN FOR ANY SUCH
     LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF
     LESSOR IN AND TO ANY PROPERTY.

                                       17
<PAGE>

                                  ARTICLE XIII

     13.1 Permitted Contests Other Than in Respect of Indemnities.
          -------------------------------------------------------

     Except to the extent otherwise provided for in Section 11 of the
Participation Agreement, Lessee, on its own or on Lessor's behalf but at
Lessee's sole cost and expense, may contest, by appropriate administrative or
judicial proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any Legal Requirement,
Imposition or utility charge payable pursuant to Section 4.1 or any Lien,
                                                 -----------
attachment, levy, encumbrance or encroachment, and Lessor agrees not to pay,
settle or otherwise compromise any such item, provided that (a) the commencement
                                              --------
and continuation of such proceedings shall suspend the collection of any such
contested amount from, and suspend the enforcement thereof against, the
applicable Properties, Lessor, each Holder, the Agent and each Lender; (b) there
shall not be imposed a Lien (other than Permitted Liens and Lessor Liens) on any
Property and no part of any Property nor any Rent would be in any danger of
being sold, forfeited, lost or deferred; (c) at no time during the permitted
contest shall there be a risk of the imposition of criminal liability or
material civil liability on Lessor, any Holder, the Agent or any Lender for
failure to comply therewith; and (d) in the event that, at any time, there shall
be a material risk of extending the application of such item beyond the end of
the Term, then Lessee shall deliver to Lessor an Officer's Certificate
certifying as to the matters set forth in clauses (a), (b) and (c) of this
Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute and
------------
deliver to Lessee such authorizations and other documents as may reasonably be
required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.

     13.2 Impositions, Utility Charges, Other Matters; Compliance with Legal
          ------------------------------------------------------------------
          Requirements.
          ------------

     Except with respect to Impositions, Legal Requirements, utility charges and
such other matters referenced in Section 13.1 which are the subject of ongoing
                                 ------------
proceedings contesting the same in a manner consistent with the requirements of
Section 13.1, Lessee shall cause (a) all Impositions, utility charges and such
------------
other matters to be timely paid, settled or compromised, as appropriate, with
respect to each Property and (b) each Property to comply with all applicable
Legal Requirements.

                                  ARTICLE XIV

     14.1 Required Insurance.
          ------------------

     Lessee will keep insured all of the Properties against loss or damage of
the kinds and in the amounts customarily insured against by Persons engaged in
the same or similar business for properties similarly situated, and carry such
other insurance as is usually carried by such Persons; provided that with
                                                       --------
respect to each Property, in any event, Lessee will maintain the following.

          (a) Commercial General Liability Insurance. Lessee shall maintain
              --------------------------------------
     insurance against claims for bodily injury, death, products/completed
     operations liability and third-party property damage occurring on, in or
     about such Property (including adjoining

                                       18
<PAGE>

     streets and sidewalks) and any claims arising out of the ownership,
     operation, maintenance, condition and use of such Property, with a combined
     single limit of $1,000,000 per occurrence and $2,000,000 in the aggregate
     per location. Such coverage shall be written on an occurrence form with
     deductibles not to exceed $100,000 per occurrence and $2,000,000 in
     aggregate per annum.

          (b) Workers' Compensation Insurance. Lessee shall comply with the
              -------------------------------
     applicable workers' compensation laws and protect Owner Trustee, Lessor,
     Agent and each other Financing Party against any liability under such laws.
     Employers' liability insurance shall include limits of liability of not
     less than $100,000 per accident, $100,000 per person by disease, and
     $500,000 policy limit by disease.

          (c) Umbrella Coverage. Lessee shall maintain umbrella or excess
              -----------------
     liability insurance in limits of no less than $50,000,000. The policy shall
     specifically identify each of the liability policies described above on the
     schedule of underlying coverage and shall provide coverage that at least
     follows the form of each of the underlying policies. Required limits may be
     achieved by any combination of primary and excess policies.

          (d) Property Insurance. Lessee shall maintain insurance covering
              ------------------
     losses to real and personal property, including rental value, boiler &
     machinery, business interruption and electronic data processing (including
     hardware, software and media), such coverage to be written on an "all risk
     basis," including fire, lightning, windstorm (if commercially reasonable to
     obtain), hail, explosion, riot and civil commotion, aircraft and vehicles,
     smoke, flood (if commercially reasonable to obtain), earthquake (if
     commercially reasonable to obtain) and other risks which at the time are
     included under usual and customary extended coverage endorsements in
     amounts sufficient to prevent the Lessor and the Lessee from becoming a
     co-insurer of any loss, but in any event not less than the actual
     replacement value of the buildings and improvements on such Property;
     provided, however, that any deductible under such insurance policies shall
     --------  -------
     not be in excess of the deductibles under Lessee's property insurance
     coverage in effect on the Closing Date; and, provided further, that the
                                                  -------- -------
     Lessee may provide for property insurance against such claims under a
     blanket property insurance policy of at least $100,000,000 coverage per
     occurrence and $100,000,000 aggregate per annum covering all premises
     owned, leased or occupied by the Lessee including such Property; and
     provided, finally that earthquake coverage shall be in amount equal to the
     --------  -------
     probable maximum loss coverage as determined by a nationally recognized
     broker.

          (e) Builder's Risk Insurance. During the construction of any
              ------------------------
     Modification to such Property, Lessee shall also maintain, for the benefit
     of Lessor, all-risk Builders' Risk Insurance in an amount equal to the
     greater of the replacement value of such Property and Modification
     (assuming that such Property was in the condition required by the terms of
     this Lease immediately prior to such loss) and the then outstanding
     Termination Value of such Property; provided, however, that any deductible
                                         --------  -------
     amounts shall not exceed the deductibles under Lessee's property insurance
     coverage in effect on the Closing Date; and provided, further that
                                                 --------  -------
     earthquake coverage shall be in the amount equal to the probable maximum
     loss coverage as determined by a nationally recognized broker.

                                       19
<PAGE>

          (f) Flood Insurance. If such Property is located in a special flood
              ---------------
     hazard area (as defined in National Flood Insurance Reform Act), Lessee
     shall maintain flood insurance, for the benefit of Lessor, Agent and the
     other Financing Parties, in an amount at least equal to the then
     outstanding Termination Value of such Property, subject to deductibles not
     in excess of the deductibles under Lessee's flood insurance coverage in
     effect on the Closing Date. Prior to the date hereof and from time to time
     upon Lessor's request, Lessee shall deliver to Lessor evidence reasonably
     satisfactory to Lessor for such Property establishing whether such Property
     is located in a special flood hazard area.

          (g) Other Insurance. Lessee shall maintain such other insurance,
              ---------------
     including malpractice or professional liability insurance, automobile
     liability (if applicable) and business interruption insurance, in each case
     as is generally carried by owners of similar properties in such amounts and
     against such risks as are then customary for properties similar in use.

     14.2 Coverage.
          --------

          (a) As of the date of this Lease and annually thereafter during the
     Term, Lessee shall furnish the Agent (on behalf of Lessor and the other
     beneficiaries of such insurance coverage) with certificates prepared by the
     insurers or insurance broker of Lessee, together with a letter from the
     insurance broker, showing the insurance required under Section 14.1 to be
                                                            ------------
     in effect, with (to the extent of their respective interests) the Trust,
     the Owner Trustee, the Agent, the Holders and the Lenders as additional
     insureds, with the Agent as the loss payee and evidencing the other
     requirements of this Article XIV; provided, so long as no Lease Default or
                          -----------  --------
     Lease Event of Default exists, any loss payable under the insurance
     policies required under Section 14.1(b) for losses up to $1,000,000 will be
                             ---------------
     paid to Lessee. All such insurance shall be at the cost and expense of
     Lessee and provided by nationally recognized, financially sound insurance
     companies having A (X) or better rating by A.M. Best's Key Rating Guide.
     This requirement shall be reviewed annually prior to the renewal or
     replacement of the insurance required hereunder, and any waiver of this
     requirement shall be at the sole discretion of the Agent. The Agent agrees
     that American Empire (currently rated A VIII by A.M. Best) and US Fire
     (currently rated A- XI by A.M. Best), two of the insurance companies of
     Lessee as to the coverages required under Section 14.1(b), are acceptable
     insurance companies for purposes of the coverages required under Section
     14.1(b) so long as the limits of their coverages are not increased above
     their current limits and their A.M. Best ratings do not decline from the
     ratings in effect on the Closing Date. Lessee shall cause such certificates
     to include a provision for 30 days' (10 days' in the event of non-payment
     of premium) advance written notice by the insurer to the Agent (on behalf
     of Lessor and the other beneficiaries of such insurance coverage) in the
     event of cancellation, non-renewal or material alteration of such
     insurance. If a Lease Default or Lease Event of Default has occurred and is
     continuing and the Agent (on behalf of Lessor and the other beneficiaries
     of such insurance coverage) so requests, Lessee shall deliver to the Agent
     (on behalf of Lessor and the other beneficiaries of such insurance
     coverage) copies of all insurance policies required by Section 14.1.
                                                            ------------

                                       20
<PAGE>

          (b) Lessee agrees that the insurance policy or policies required by
     Section 14.1 shall include an appropriate clause pursuant to which any such
     ------------
     policy shall provide that it will not be invalidated against any Financing
     Party should Lessee or any contractor, as the case may be, waive, at any
     time, any or all rights of recovery against any party for losses covered by
     such policy or due to any breach of warranty, fraud, action, inaction or
     misrepresentation by Lessee or any Person acting on behalf of Lessee.
     Lessee hereby waives any and all such rights against Lessor, the Holders,
     the Agent and the Lenders to the extent of payments made to any such Person
     under any such policy.

          (c) Neither Lessor nor Lessee shall carry separate insurance
     concurrent in kind or form or contributing in the event of loss with any
     insurance required under this Article XIV, except that Lessor may carry
                                   -----------
     separate liability insurance at Lessor's sole cost so long as (i) Lessee's
     insurance is designated as primary and in no event excess or contributory
     to any insurance Lessor may have in force which would apply to a loss
     covered under Lessee's policy and (ii) each such insurance policy will not
     cause Lessee's insurance required under this Article XIV to be subject to a
                                                  -----------
     coinsurance exception of any kind.

          (d) Lessee shall pay as they become due all premiums for the insurance
     required by Section 14.1, shall renew or replace each policy prior to the
                 ------------
     expiration date thereof or otherwise maintain the coverage required by
     Section 14.1 without any lapse in coverage.
     ------------

     14.3 Additional Insurance Requirements.
          ---------------------------------

     Not in limitation of any provision of the Operative Agreements but in
addition thereto, Lessee shall obtain any and all additional insurance policies
(including without limitation with respect to Condemnation) with regard to the
Properties or otherwise with respect to the transactions contemplated by the
Operative Agreements as reasonably requested from time to time by Lessor.

                                   ARTICLE XV

     15.1 Casualty and Condemnation.
          -------------------------

          (a) Subject to the provisions of this Article XV and Article XVI (in
                                                ----------     -----------
     the event Lessee delivers, or is obligated to deliver or is deemed to have
     delivered, a Termination Notice), and prior to the occurrence and
     continuation of a Lease Default or Lease Event of Default, Lessee shall be
     entitled to receive (and Lessor hereby irrevocably assigns to Lessee all of
     Lessor's right, title and interest in) any condemnation proceeds, award,
     compensation or insurance proceeds under Section 14.1 hereof to which
                                              ------------
     Lessee or Lessor may become entitled by reason of their respective
     interests in a Property (i) if all or a portion of such Property is damaged
     or destroyed in whole or in part by a Casualty or (ii) if the use, access,
     occupancy, easement rights or title to such Property or any part thereof is
     the subject of a Condemnation; provided, however, if a Lease Default or
                                    --------  -------
     Lease Event of Default shall have occurred and be continuing or if such
     award, compensation or insurance proceeds shall exceed $1,000,000, then
     such award, compensation or insurance

                                       21
<PAGE>

     proceeds shall be paid directly to Lessor or, if received by Lessee, shall
     be held in trust for Lessor, and shall be paid over by Lessee to Lessor and
     held in accordance with the terms of this Article XV. All amounts held by
                                               ----------
     Lessor hereunder on account of any award, compensation or insurance
     proceeds either paid directly to Lessor or turned over to Lessor shall be
     applied in any order Lessor elects to Lessee's obligations hereunder and
     under the other Operative Agreements and when all such obligations of
     Lessee with respect to such matters (and all other obligations of Lessee
     which should have been satisfied pursuant to the Operative Agreements as of
     such date) have been satisfied, all amounts so held by Lessor shall be paid
     over to Lessee or such other Person entitled thereto.

          (b) If no Lease Default or Lease Event of Default has occurred and is
     continuing, Lessee may appear in any proceeding or action to negotiate,
     prosecute, adjust or appeal any claim for any award, compensation or
     insurance payment on account of any such Casualty or Condemnation and shall
     pay all expenses thereof. At Lessee's reasonable request, and at Lessee's
     sole cost and expense, Lessor and the Agent shall participate in any such
     proceeding, action, negotiation, prosecution or adjustment. Lessor and
     Lessee agree that this Lease shall control the rights of Lessor and Lessee
     in and to any such award, compensation or insurance payment.

          (c) a Casualty or a Condemnation of a Property occurs or any interest
     therein where damage to the affected Property is estimated to equal or
     exceed twenty-five percent (25%) of the Property Cost of such Property,
     Lessee shall promptly give notice thereof to Lessor. In the event such a
     Casualty or Condemnation occurs (regardless of whether Lessee gives notice
     thereof), then Lessee shall be deemed to have delivered a Termination
     Notice to Lessor and the provisions of Sections 16.1 and 16.2 shall apply.
                                            -------------     ----

          (d) In the event of a Casualty or a Condemnation (regardless of
     whether notice thereof must be given pursuant to paragraph (c)), this Lease
     shall terminate with respect to the applicable Property in accordance with
     Section 16.1 if Lessee, within 30 days after such occurrence, delivers to
     ------------
     Lessor a notice to such effect.

          (e) If pursuant to this Section 15.1 this Lease shall continue in full
                                  ------------
     force and effect following a Casualty or Condemnation with respect to the
     affected Property, Lessee shall, at its sole cost and expense (subject to
     reimbursement in accordance with Section 15.1(a)) promptly and diligently
                                      --------------
     repair any damage to the applicable Property caused by such Casualty or
     Condemnation in conformity with the requirements of Sections 10.1 and 11.1,
                                                         -------------     ----
     using the as-built Plans and Specifications or manufacturer's
     specifications for the applicable Improvements, Equipment or other
     components of the applicable Property (as modified to give effect to any
     subsequent Modifications, any Condemnation affecting the applicable
     Property and all applicable Legal Requirements), so as to restore the
     applicable Property to the same or a greater remaining economic value,
     useful life, utility, condition, operation and function as existed
     immediately prior to such Casualty or Condemnation (assuming all
     maintenance and repair standards have been satisfied). In such event, title
     to the applicable Property shall remain with Lessor.

                                       22
<PAGE>

          (f) In no event shall a Casualty or Condemnation affect Lessee's
     obligations to pay Rent pursuant to Article III.
                                         -----------

          (g) Notwithstanding anything to the contrary set forth in Section
                                                                    --------
     15.1(a) or Section 15.1(e), if during the Term a Casualty occurs with
     -------    ---------------
     respect to a Property or Lessee receives notice of a Condemnation with
     respect to a Property, and following such Casualty or Condemnation, the
     applicable Property cannot reasonably be restored, repaired or replaced on
     or before the day 180 days prior to the Expiration Date or the date nine
     months after the occurrence of such Casualty or Condemnation (if such
     Casualty or Condemnation occurs during the Term) to the same or a greater
     remaining economic value, useful life, utility, condition, operation and
     function as existed immediately prior to such Casualty or Condemnation
     (assuming all maintenance and repair standards have been satisfied) or on
     or before such day such Property is not in fact so restored, repaired or
     replaced, then Lessee shall be required to exercise its Purchase Option for
     such Property on the next Payment Date (notwithstanding the limits on such
     exercise contained in Section 20.2) and pay Lessor the Termination Value
                           ------------
     for such Property, together with the amount described in
     clause (i) of the definition of "Prepayment Fee" attributable to the
     Property; provided, if any Default or Event of Default has occurred and is
               --------
     continuing, Lessee shall also promptly  (and in any event within
     three Business Days) pay Lessor any award, compensation or insurance
     proceeds received on account of any Casualty or Condemnation with respect
     to any Property; provided, further,  that if no Default or
                      --------  -------
     Event of Default has occurred and is continuing, any Excess Proceeds shall
     be paid to Lessee.

          (h) [not used]

     15.2 Environmental Matters.
          ---------------------

          (a) Except as provided in Section 15.2(b) below as to the requirements
     of Section 8.3(q) and Schedule 8.3(q) of the Participation Agreement,
     promptly upon Lessee's actual knowledge of the presence of any Hazardous
     Substance in any portion of any Property or Properties in concentrations
     and conditions that constitute an Environmental Violation and which, in the
     reasonable opinion of Lessee, the cost to undertake any legally required
     response, clean up, remedial or other action will or might result in a cost
     to Lessee of more than $100,000, Lessee shall notify Lessor in writing of
     such condition. In the event of any Environmental Violation (regardless of
     whether notice thereof must be given), Lessee shall, not later than 30 days
     after Lessee has actual knowledge of such Environmental Violation, either
     deliver to Lessor a Termination Notice with respect to the applicable
     Property or Properties pursuant to Section 16.1, if applicable, or, at
     Lessee's sole cost and expense, promptly and diligently undertake and
     diligently complete any response, clean up, remedial or other action
     (including without limitation the pursuit by Lessee of appropriate action
     against any off-site or third party source for contamination) necessary to
     remove, cleanup or remediate the Environmental Violation in accordance with
     all Environmental Laws. Any such undertaking shall be completed in
     accordance with prudent industry standards within 60 days after commencing
     the undertaking and in any event before the expiration or earlier
     termination of the Term. If Lessee does not deliver a Termination Notice
     with respect to such

                                       23
<PAGE>

     Property pursuant to Section 16.1, Lessee shall, upon completion of
     remedial action by Lessee, cause to be prepared by the Environmental
     Consultant a report describing the Environmental Violation and the actions
     taken by Lessee (or its agents) in response to such Environmental
     Violation, and a statement by the consultant that the Environmental
     Violation has been remedied in full compliance with applicable
     Environmental Law. Not less than 60 days prior to any time that Lessee
     elects to cease operations with respect to any Property or to remarket any
     Property, Lessee at its expense (i) shall cause to be delivered to Lessor a
     Phase I environmental site assessment respecting such Property prepared
     within 30 days of its delivery to Lessor by the Environmental Consultant
     and in form, scope and content reasonably satisfactory to the Majority
     Secured Parties in its reasonable discretion and (ii) shall cause a Phase
     II environmental site assessment, if necessary, in form, scope and content
     reasonably satisfactory to the Majority Secured Parties, and any necessary
     remediation resulting therefrom to be completed before the Expiration Date.

          (b) Lessee shall cause to be delivered to Lessor, at Lessee's sole
     cost and expense, the Phase II environmental site assessments as required
     pursuant to Section 8.3(q) and Schedule 8.3(q) of the Participation
     Agreement. Each such assessment shall be prepared by an environmental
     consultant reasonably acceptable to Lessee and the Majority Secured Parties
     and shall be in form, scope and content reasonably satisfactory to the
     Majority Secured Parties. If any such assessment concludes that there is
     the presence of any Hazardous Substance or recommends that any further
     action be taken, Lessee shall, at Lessee's sole cost and expense, promptly
     and diligently undertake and diligently complete such action (including
     without limitation the pursuit by Lessee of appropriate action against any
     off-site or third party source for contamination) as the Majority Secured
     Parties may reasonably request.

          (c) Notwithstanding any other provision of any Operative Agreement, if
     Lessee fails to comply with any of the foregoing obligations regarding the
     environmental site assessments and remediation with respect to a Property,
     Lessee shall be obligated to purchase the Property for its Termination
     Value plus the Prepayment Fee attributable to the Property, and shall not
     be permitted to exercise (and Lessor shall have no obligation to honor any
     such exercise) any rights under any Operative Agreement regarding a sale of
     the Property to a Person other than Lessee.

     15.3 Notice of Environmental Matters.
          -------------------------------

     Promptly, but in any event within five Business Days from the date Lessee
has actual knowledge thereof, Lessee shall provide to Lessor written notice of
any pending or threatened claim, action or proceeding involving any
Environmental Law or any Release on or in connection with any Property or
Properties. All such notices shall describe in reasonable detail the nature of
the claim, action or proceeding and Lessee's proposed response thereto. In
addition, Lessee shall provide to Lessor, within five Business Days of receipt,
copies of all material written communications with any Governmental Authority
relating to any Environmental Law in connection with any Property. Lessee shall
also promptly provide such detailed reports of any such material environmental
claims as may reasonably be requested by Lessor.

                                       24
<PAGE>

                                  ARTICLE XVI

     16.1 Termination Upon Certain Events.
          -------------------------------

     If Lessee has delivered, or is deemed to have delivered, written notice of
a termination of this Lease with respect to the applicable Property to Lessor in
the form described in Section 16.2(a) (a "Termination Notice") pursuant to the
                      ---------------     ------------------
provisions of this Lease, then following the applicable Casualty, Condemnation
or Environmental Violation, this Lease shall terminate with respect to the
affected Property on the applicable Termination Date.

     16.2 Procedures.
          -----------

          (a) A Termination Notice shall contain: (i) notice of termination of
     this Lease with respect to the affected Property on a Payment Date not more
     than 60 days after Lessor's receipt of such Termination Notice (the
     "Termination Date"); and (ii) a binding and irrevocable agreement of Lessee
      ----------------
     to pay the Termination Value and the amount described in clause (i) of the
     definition of "Prepayment Fee" for the applicable Property and purchase
     such Property on such Termination Date.

          (b) On each Termination Date, Lessee shall pay to Lessor the
     Termination Value and the amount described in clause (i) of the definition
     of "Prepayment Fee" for the applicable Property, and Lessor shall convey
     such Property or the remaining portion thereof, if any, to Lessee (or
     Lessee's designee), all in accordance with Section 20.2.
                                                ------------

                                  ARTICLE XVII

     17.1 Lease Events of Default.
          -----------------------

     If any of the following events (each a "Lease Event of Default") occurs:
                                             ----------------------

          (a) Lessee fails to pay (i) any Basic Rent (except as set forth in
     clause (ii)) within three Business Days after the same has become due or
     (ii) any Termination Value, on the date it is due, or any payment of Basic
     Rent or Supplemental Rent or any fee due on the date of any payment of
     Termination Value, or any amount due on the Expiration Date;

          (b) Lessee fails to pay any Supplemental Rent (other than Supplemental
     Rent referred to in Section 17.1(a)(ii)) or any other Credit Party fails to
                         -------------------
     pay any amount under any Operative Agreement within three days after it
     receives notice that such amount is due;

          (c) Lessee fails to maintain insurance as required by Article XIV of
                                                                -----------
     this Lease or to deliver any requisite annual certificate with respect
     thereto within 10 days of the date such certificate is due under the terms
     hereof;

          (d) (i) Lessee fails to observe or perform any term, covenant,
     obligation or condition of Lessee under (A) Section 28.4 of this Lease if
     such failure continues for 10 days after the earlier of the date on which
     any officer of Lessee becomes aware of such or

                                       25
<PAGE>

     the date Lessee receives notice thereof from any Financial Party or (B) any
     other provision of this Lease or any other Operative Agreement to which
     Lessee is a party other than those set forth in Sections 17.1(a), (b), or
                                                     ----------------  ---
     (c), or any other Credit Party fails to observe or perform any term,
     ---
     covenant, obligation or condition of such Credit Party under any Operative
     Agreement other than those set forth in Section 17.1(a), (b) or (c) and
                                             ---------------  ---    ---
     such failure shall continue for 30 days after notice thereof to the Lessee
     or such Credit Party, or (ii) any representation or warranty made by Lessee
     or any other Credit Party set forth in this Lease or in any other Operative
     Agreement or in any document entered into in connection herewith or
     therewith or in any document, certificate or financial or other statement
     delivered in connection herewith or therewith shall prove to be incorrect
     in any material respect when made or deemed made;

          (e) any Credit Party defaults or breaches any other obligation to any
     Financing Party;

          (f) any Credit Party or any Subsidiary of any Credit Party defaults
     (beyond applicable periods of grace and/or notice and cure) in the payment
     when due (whether by scheduled maturity, required prepayment, acceleration,
     demand or otherwise) of any principal of or interest on any Indebtedness
     having an outstanding principal amount of at least $5,000,000 in the
     aggregate (but excluding Indebtedness outstanding under the Lessee Credit
     Agreement) or any other event occurs or condition exists under any
     agreement or instrument relating to any such Indebtedness, if the effect of
     such event or condition is to accelerate, or to permit the acceleration of,
     the maturity of such Indebtedness or otherwise to cause, or to permit the
     holder thereof to cause, such Indebtedness to mature; or any such
     Indebtedness is declared to be due and payable or required to be prepaid or
     redeemed (other than by a regularly scheduled required prepayment or
     redemption), purchased or defeased, or an offer to prepay, redeem, purchase
     or defease such Indebtedness is required to be made, in each case prior to
     the stated maturity thereof;

          (g) the liquidation or dissolution of any Credit Party, or the
     suspension of the business of Lessee for 10 days or any other Credit Party
     for 30 days, or the filing by any Credit Party of a voluntary petition or
     an answer seeking reorganization, arrangement, readjustment of its debts or
     for any other relief under the Bankruptcy Code or under any other
     insolvency act or law, state or federal, now or hereafter existing, or any
     other action of any Credit Party indicating its consent to, approval of or
     acquiescence in, any such petition or proceeding; the application by any
     Credit Party for, or the appointment by consent or acquiescence of any
     Credit Party of a receiver, a trustee or a custodian of any Credit Party
     for all or a substantial part of its property; the making by any Credit
     Party of any assignment for the benefit of creditors; the inability of any
     Credit Party or the admission by any Credit Party in writing of its
     inability to pay its debts as they mature; or any Credit Party taking any
     corporate action to authorize any of the foregoing;

          (h) the filing of an involuntary petition against any Credit Party in
     bankruptcy or seeking reorganization, arrangement, readjustment of its
     debts or for any other relief under the Bankruptcy Code or under any other
     insolvency act or law, state or federal, now or hereafter existing; or the
     involuntary appointment of a receiver, a trustee or a

                                       26
<PAGE>

     custodian of any Credit Party for all or a substantial part of its
     property, and the continuance of any such event for 60 days undismissed,
     unstayed, unbonded or undischarged;

          (i) the adjudication of any Credit Party as bankrupt or insolvent;

          (j) the entering of any order in any proceedings against any Credit
     Party or any Subsidiary of any Credit Party decreeing the dissolution,
     divestiture or split-up of any Credit Party or any Subsidiary of any Credit
     Party, and such order remains in effect for more than 60 days;

          (k) any report, certificate, financial statement or other instrument
     delivered to Lessor by or on behalf of any Credit Party pursuant to the
     terms of this Lease or any other Operative Agreement is, or contains any
     representation or warranty that is, false or misleading in any material
     respect when made or delivered;

          (l) any Lessee Credit Agreement Event of Default has occurred and is
     continuing and has not been waived;

          (m) any judgments or orders for the payment of money in excess of
     $5,000,000 individually or $10,000,000 in the aggregate is rendered against
     any Credit Party or of its Subsidiary of a Credit Party and either (i)
     enforcement proceedings are commenced by any creditor upon the issuance of
     a unit of attachment, execution or similar process against any substantial
     part of the property of any Credit Party related to such judgment or order
     or (ii) there is any period of 60 consecutive days during which a stay of
     enforcement of such judgment or order, by reason of a pending appeal or
     otherwise, is not in effect;

          (n) there shall occur one or more ERISA Events which individually or
     in the aggregate results in or reasonably could be expected to result in a
     Material Adverse Effect; or there exists any fact or circumstance that
     reasonably could be expected to result in the imposition of a Lien or
     security interest under Section 412(n) of the Internal Revenue Code or
     under ERISA on the assets of Lessee and its Subsidiaries;

          (o) (i) if at any time when Casino is not the single largest
     shareholder of Lessee, any Person or two or more Persons acting in concert
     (other than Casino) acquires beneficial ownership (within the meaning of
     Rule 13d-3 of the Securities and Exchange Commission under the Securities
     Exchange Act of 1934), directly or indirectly, of Voting Stock of Lessee
     representing 33-1/3% or more of the combined voting power of all Voting
     Stock of Lessee; or (ii) the majority of the seats (other than vacant
     seats) on the board of directors of Lessee cease to be occupied by Persons
     who either (a) were members of the board of directors of Lessee on the
     Closing Date or (b) were nominated for election by the board of directors
     (or any committee thereof) of Lessee, a majority of whom were directors on
     the Closing Date or whose election or nomination for election was
     previously approved by a majority of such directors; or (iii) any Person or
     two or more Persons acting in concert (other than Casino) shall have
     acquired by contract or otherwise, or shall have entered into a contract or
     arrangement that, upon consummation,

                                       27
<PAGE>

     will result in its or their acquisition of, the power to exercise, directly
     or indirectly, a controlling influence over the management or policies of
     Lessee, other than any contract or arrangement with respect to acquisition
     of Voting Interests of Lessee (it being understood that such acquisition of
     Voting Interests is governed by clause (i) of this paragraph);

          (p) any Operative Agreement ceases to be in full force and effect as
     to any Credit Party; or

          (q) except as to any Credit Party which is released in connection with
     the Operative Agreements, the guaranty given by any Guarantor under the
     Participation Agreement or any material provision thereof ceases to be in
     full force and effect, or any Guarantor or any Person acting by or on
     behalf of such Guarantor denies or disaffirms such Guarantor's obligations
     under such guaranty, or any Guarantor defaults in the due performance or
     observance of any term, covenant or agreement on its part to be performed
     or observed pursuant to any guaranty;

then Lessor may, in addition to the other rights and remedies provided for in
this Article XVII and in Section 18.1, terminate this Lease by giving Lessee
     ------------        ------------
five days notice of such termination (provided, notwithstanding the foregoing,
this Lease shall be deemed to be automatically terminated without the giving of
notice upon the occurrence of a Lease Event of Default under Sections 17.1(g),
                                                             ----------------
(h) or (i)), and this Lease shall terminate, and all rights of Lessee under this
---    ---
Lease shall cease. Lessee shall, to the fullest extent permitted by law, pay as
Supplemental Rent all costs and expenses incurred by or on behalf of Lessor or
any other Financing Party, including without limitation reasonable fees and
expenses of counsel, as a result of any Lease Event of Default hereunder.

     17.2 Surrender of Possession.
          -----------------------

     If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
                                                                 ------------
Lessee shall, upon 30 days' written notice, surrender to Lessor possession of
the Properties. Lessor may enter upon and repossess the Properties by such means
as are available at law or in equity, and may remove Lessee and all other
Persons and any and all Equipment and severable Modifications from the
Properties. Lessor shall have no liability by reason of any such entry,
repossession or removal performed in accordance with applicable law. Upon the
written demand of Lessor, Lessee shall return the Properties promptly to Lessor,
in the manner and condition required by, and otherwise in accordance with the
provisions of, Section 22.1(c).
               ---------------

     17.3 Reletting.
          ---------

     If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
                                                                 ------------
Lessor may, but shall be under no obligation to, relet any or all of the
Properties, for the account of Lessee or otherwise, for such term or terms
(which may be greater or less than the period which would otherwise have
constituted the balance of the Term) and on such conditions (which may include
concessions or free rent) and for such purposes as Lessor may determine, and
Lessor may collect, receive and

                                       28
<PAGE>

retain the rents resulting from such reletting. Lessor shall not be liable to
Lessee for any failure to relet any Property or for any failure to collect any
rent due upon such reletting.

     17.4 Damages.
          -------

     Neither (a) the termination of this Lease as to all or any of the
Properties pursuant to Section 17.1; (b) the repossession of all or any of the
                       ------------
Properties; nor (c) the failure of Lessor to relet all or any of the Properties,
the reletting of all or any portion thereof, nor the failure of Lessor to
collect or receive any rentals due upon any such reletting, shall relieve Lessee
of its liabilities and obligations hereunder, all of which shall survive any
such termination, repossession or reletting. If any Lease Event of Default shall
have occurred and be continuing and notwithstanding any termination of this
Lease pursuant to Section 17.1, Lessee shall forthwith pay to Lessor all Rent
                  ------------
and other sums due and payable hereunder to and including without limitation the
date of such termination. Thereafter, on the days on which the Basic Rent or
Supplemental Rent, as applicable, are payable under this Lease or would have
been payable under this Lease if the same had not been terminated pursuant to
Section 17.1 and until the end of the Term or what would have been the Term in
------------
the absence of such termination, Lessee shall pay Lessor, as current liquidated
damages (it being agreed that it would be impossible accurately to determine
actual damages) an amount equal to the Basic Rent and Supplemental Rent that are
payable under this Lease or would have been payable by Lessee hereunder if this
Lease had not been terminated pursuant to Section 17.1, less the net proceeds,
                                          ------------
if any, which are actually received by Lessor with respect to the period in
question of any reletting of any Property or any portion thereof; provided, that
                                                                  --------
Lessee's obligation to make payments of Basic Rent and Supplemental Rent under
this Section 17.4 shall continue only so long as Lessor shall not have received
     ------------
the amounts specified in Section 17.6. In calculating the amount of such net
                         ------------
proceeds from reletting, there shall be deducted all of Lessor's, any Holder's,
the Agent's and any Lender's reasonable expenses in connection therewith,
including without limitation repossession costs, brokerage or sales commissions,
fees and expenses for counsel and any necessary repair or alteration costs and
expenses incurred in preparation for such reletting. To the extent Lessor
receives any damages pursuant to this Section 17.4, such amounts shall be
                                      ------------
regarded as amounts paid on account of Rent. Lessee specifically acknowledges
and agrees that its obligations under this Section 17.4 shall be absolute and
                                           ------------
unconditional under any and all circumstances and shall be paid and/or
performed, as the case may be, without notice or demand and without any
abatement, reduction, diminution, setoff, defense, counterclaim or recoupment
whatsoever.

     17.5 [not used]
           --------

     17.6 Final Liquidated Damages.
          ------------------------

     If a Lease Event of Default shall have occurred and be continuing, whether
or not this Lease shall have been terminated pursuant to Section 17.1 and
                                                         ------------
whether or not Lessor shall have collected any current liquidated damages
pursuant to Section 17.4, Lessor shall have the right to recover, by demand to
            ------------
Lessee and at Lessor's election, and Lessee shall pay to Lessor, as and for
final liquidated damages, but exclusive of the indemnities payable under Section
11 of the Participation Agreement (which, if requested, shall be paid
concurrently), and in lieu of all current liquidated damages beyond the date of
such demand (it being agreed that it would be impossible accurately to determine
actual damages) the Termination Value, together with the

                                       29
<PAGE>

amount described in clause (i) of the definition of "Prepayment Fee." Upon
payment of the amount specified pursuant to the first sentence of this Section
                                                                       -------
17.6, Lessee shall be entitled to receive from Lessor, either at Lessee's
----
request or upon Lessor's election, in either case at Lessee's cost, an
assignment of Lessor's entire right, title and interest in and to the
Properties, Improvements, Fixtures, Modifications, Equipment and all components
thereof, in each case in recordable form and otherwise in conformity with local
custom and free and clear of the Lien of this Lease (including without
limitation the release of any memoranda of Lease and/or the Lease Supplement
recorded in connection therewith) and any Lessor Liens. The Properties shall be
conveyed to Lessee "AS-IS, WHERE-IS" and in their then present physical
condition. If any statute or rule of law shall limit the amount of such final
liquidated damages to less than the amount agreed upon, Lessor shall be entitled
to the maximum amount allowable under such statute or rule of law; provided,
                                                                   --------
however, Lessee shall not be entitled to receive an assignment of Lessor's
-------
interest in the Properties, the Improvements, Fixtures, Modifications, Equipment
or the components thereof unless Lessee shall have paid in full the Termination
Value. Lessee specifically acknowledges and agrees that its obligations under
this Section 17.6 shall be absolute and unconditional under any and all
     ------------
circumstances and shall be paid and/or performed, as the case may be, without
notice or demand and without any abatement, reduction, diminution, setoff,
defense, counterclaim or recoupment whatsoever.

     17.7 Environmental Costs.
          -------------------

     If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
                                                                 ------------
Lessee shall pay directly to any third party (or at Lessor's election, reimburse
Lessor) for the cost of any environmental testing and/or remediation work
undertaken respecting any Property, as such testing or work is deemed
appropriate in the reasonable judgment of Lessor and the Majority Secured
Parties. Lessee shall pay all amounts referenced in the immediately preceding
sentence within 10 days of any request by Lessor for such payment. The
provisions of this Section 17.7 shall not limit the obligations of Lessee under
                   ------------
any Operative Agreement regarding indemnification obligations, environmental
testing, remediation and/or work.

     17.8 Waiver of Certain Rights.
          ------------------------

     If this Lease shall be terminated pursuant to Section 17.1, Lessee waives,
                                                   ------------
to the fullest extent permitted by Law, (a) any notice of re-entry or the
institution of legal proceedings to obtain re-entry or possession; (b) any right
of redemption, re-entry or possession; (c) the benefit of any laws now or
hereafter in force exempting property from liability for rent or for debt; and
(d) any other rights which might otherwise limit or modify any of Lessor's
rights or remedies under this Article XVII.
                              ------------

     17.9 Assignment of Rights Under Contracts.
          ------------------------------------

     If a Lease Event of Default shall have occurred and be continuing, and
whether or not this Lease shall have been terminated pursuant to Section 17.1,
                                                                 ------------
Lessee shall upon Lessor's demand immediately assign, transfer and set over to
Lessor all of Lessee's right, title and interest in and to each agreement
executed by Lessee in connection with the acquisition, installation, testing,
use, development, construction, operation, maintenance, repair, refurbishment
and

                                       30
<PAGE>

restoration of the Properties (including without limitation all right, title and
interest of Lessee with respect to all warranty, performance, service and
indemnity provisions), as and to the extent that the same relate to the
acquisition, installation, testing, use, development, construction, operation,
maintenance, repair, refurbishment and restoration of the Properties or any of
them.

     17.10 Remedies Cumulative.
           -------------------

     The remedies herein provided shall be cumulative and in addition to (and
not in limitation of) any other remedies available at law, equity or otherwise,
including without limitation any mortgage foreclosure remedies.

                                 ARTICLE XVIII

     18.1 Lessor's Right to Cure Lessee's Lease Defaults.
          ----------------------------------------------

     Lessor, without waiving or releasing any obligation or Lease Event of
Default, may (but shall be under no obligation to) remedy any Lease Event of
Default for the account and at the sole cost and expense of Lessee, including
without limitation the failure by Lessee to maintain the insurance required by
Article XIV and may, to the fullest extent permitted by law, and notwithstanding
-----------
any right of quiet enjoyment in favor of Lessee, enter upon any Property, and
take all such action thereon as may be necessary or appropriate therefor. No
such entry shall be deemed an eviction of any lessee. All out-of-pocket costs
and expenses so incurred (including without limitation fees and expenses of
counsel), together with interest thereon at the Overdue Rate from the date on
which such sums or expenses are paid by Lessor, shall be paid by Lessee to
Lessor on demand.

                                  ARTICLE XIX

     19.1 Provisions Relating to Lessee's Exercise of its Purchase Option.
          ---------------------------------------------------------------

     Subject to Section 19.2, in connection with any termination of this Lease
                ------------
with respect to any Property pursuant to the terms of Section 16.2, or in
                                                      ------------
connection with Lessee's exercise of its Purchase Option, upon the date on which
this Lease is to terminate with respect to any Property, and upon tender by
Lessee of the amounts set forth in Sections 16.2(b) or 20.2, as applicable,
                                   ----------------    ----
Lessor shall execute and deliver to Lessee (or to Lessee's designee) at Lessee's
cost and expense an assignment (by deed or other appropriate instrument) of
Lessor's entire interest in such Property, in each case in recordable form and
otherwise in conformity with local custom and free and clear of any Lessor Liens
attributable to Lessor but without any other warranties (of title or otherwise)
from Lessor. Such Property shall be conveyed to Lessee "AS-IS, WHERE-IS" and in
then present physical condition.

     19.2 No Purchase or Termination With Respect to Less than All of a
          --------------------------------------------------------------
          Property.
          --------

     Lessee shall not be entitled to exercise its Purchase Option or the Sale
Option separately with respect to a portion of any Property consisting of Land,
Equipment and Improvements but shall be required to exercise its Purchase Option
or the Sale Option with respect to an entire Property.

                                       31
<PAGE>

                                   ARTICLE XX

     20.1 Purchase Option or Sale Option--General Provisions.
          --------------------------------------------------

     Subject to Section 21.1, not less than 120 days and no more than 180 days
                ------------
prior to the Expiration Date or (respecting the Purchase Option only) any
Payment Date occurring after the second anniversary of the Closing Date, Lessee
may give Lessor irrevocable written notice (the "Election Notice") that Lessee
                                                 ---------------
is electing to exercise either (a) the option to purchase all, but not less than
all, the Properties on the Expiration Date or on the Payment Date specified in
the Election Notice (the "Purchase Option") or (b) with respect to an Election
                          ---------------
Notice given in connection with the Expiration Date only, the option to remarket
all, but not less than all, the Properties to a Person other than Lessee or any
Affiliate of Lessee and cause a sale of such Properties to occur on the
Expiration Date pursuant to the terms of Section 22.1 (the "Sale Option"). If
                                         ------------       -----------
Lessee does not give an Election Notice indicating the Purchase Option or the
Sale Option at least 120 days and not more than 180 days prior to the Expiration
Date, then Lessee shall be deemed to have elected the Purchase Option. If Lessee
elects (or is deemed to have elected) to exercise the Purchase Option then
Lessee shall pay to Lessor on the Expiration Date of the Lease the Termination
Value (plus any other amounts, if any, owed under the Operative Agreements) for
all the Properties (which the parties do not intend to be a bargain purchase
option). Upon receipt of such amounts and satisfaction of such obligations,
Lessor shall transfer to Lessee all of Lessor's right, title and interest in and
to all of the Properties in accordance with Section 20.2. If Lessee elects the
                                            ------------
Sale Option, but all the Properties are not sold in accordance with the terms of
Section 22.1 on the Expiration Date, then Lessee shall pay to Lessor on such
------------
date an amount equal to the Maximum Guaranteed Residual Amount, plus all unpaid
Rent and all other amounts due and payable by the Lessee hereunder or under the
other Operative Agreements, as to all the Properties; provided, if the failure
to sell the Properties as required above is due to Lessee's failure to perform
its obligations under Section 22.1, Lessee shall pay to Lessor on such date an
                      ------------
amount equal to the Termination Value (plus any other amounts, if any, owed
under the Operative Agreements) as to all the Properties.

     20.2 Lessee Purchase Option.
          ----------------------
     If no Default or Event of Default shall have occurred and be continuing
(other than those that will be cured by the payment of the Termination Value for
all the Properties) and if the Election Notice has been appropriately given
specifying the Purchase Option, Lessee shall purchase all the Properties on the
Expiration Date or Payment Date at a price equal to the Termination Value and
the Prepayment Fee, if any, for such Properties (which the parties do not intend
to be a "bargain" purchase price).

     Subject to Section 19.2, in connection with any termination of this Lease
                ------------
with respect to any Property pursuant to the terms of Section 16.2, or in
                                                      ------------
connection with Lessee's exercise of its Purchase Option, upon the date on which
this Lease is to terminate with respect to a Property or all of the Properties,
and upon tender by Lessee of the amounts set forth in Section 16.2(b) or this
                                                      ---------------
Section 20.2, as applicable, Lessor shall execute, acknowledge (where required)
------------
and deliver to Lessee, at Lessee's cost and expense, each of the following: (a)
special or limited warranty Deeds conveying each Property to Lessee free and
clear of the Lien of this Lease, the Lien of the Credit Documents and any Lessor
Liens; (b) a Bill of Sale conveying each Property (to the extent

                                       32
<PAGE>

it is personal property) to Lessee free and clear of the Lien of this Lease, the
Lien of the Credit Documents and any Lessor Liens; (c) any real estate tax
affidavit or other document required by law to be executed and filed in order to
record the applicable Deed; and (d) FIRPTA affidavits. All of the foregoing
documentation must be in form and substance reasonably satisfactory to Lessor.
The applicable Property shall be conveyed to Lessee "AS-IS, WHERE-IS" and in
then present physical condition.

     Any Property that is the subject of remediation efforts respecting
Hazardous Substances at the Expiration Date that could materially and adversely
impact its Fair Market Sales Value (with materiality determined in Lessor's
discretion), shall be purchased by Lessee pursuant to this Section 20.2.
                                                           ------------

     On the Expiration Date or any other Payment Date on which Lessee has
elected to exercise its Purchase Option, Lessee shall pay (or cause to be paid)
to Lessor, the Agent and all other parties, as appropriate, the sum of all costs
and expenses incurred by any such party in connection with the election by
Lessee to exercise its Purchase Option and all Rent and all other amounts then
due and payable or accrued under this Lease and/or any other Operative
Agreement.

     20.3 Third Party Sale Option.
          -----------------------

          (a) Provided that (i) no Lease Default or Lease Event of Default shall
              --------
     have occurred and be continuing and (ii) the Election Notice has been
     appropriately given specifying the Sale Option, Lessee shall undertake to
     cause a sale of the Properties on the Expiration Date (all as specified in
     the Election Notice) in accordance with Section 22.1 hereof.
                                             ------------
     Notwithstanding any prior election by the Lessee, if at any time during the
     Marketing Period, any Lease Default or Lease Event of Default occurs,
     Lessee shall be deemed to have irrevocably exercised the Purchase Option.

          (b) In the event Lessee exercises the Sale Option then, as soon as
     practicable and in all events not less than 60 days prior to the Expiration
     Date, Lessee at its expense shall cause to be delivered to Lessor a Phase I
     environmental site assessment for each of the Properties, prepared within
     30 days of its delivery to Lessor by the Environmental Consultant and in
     form, scope and content satisfactory to Lessor and the Majority Holders
     acting in good faith. Lessor (at the direction of the Agent) shall elect
     whether the costs incurred respecting the above-referenced Phase I
     environmental site assessment shall be paid by either (i) sales proceeds
     from the Properties or (ii) Lessee; provided, amounts funded by Lessee with
                                         --------
     respect to the foregoing shall be a part of (and limited by) the Maximum
     Residual Guarantee Amount. If Lessor does not receive an environmental site
     assessment for any Property by the date 60 days prior to the Expiration
     Date or if the environmental assessment for any Property reveals the
     existence of any material Environmental Violation that is not remediated
     (at Lessee's sole expense) by the Expiration Date, or the potential for any
     material Environmental Violation (with materiality in each case as
     determined by Lessor and the Majority Holders in their good faith
     discretion), then Lessee on the Expiration Date shall pay to Lessor an
     amount equal to the Termination Value for that Property and any and all
     other amounts due and owing under the Operative Agreements with respect to
     that Property. Upon receipt of such

                                       33
<PAGE>

     payment, Lessor shall transfer to Lessee all of Lessor's right, title and
     interest in and to that Property in accordance with Section 19.1.
                                                         ------------

                                  ARTICLE XXI

     21.1 Optionee Unaffected.
          -------------------

     Nothing contained in this Lease or in any other Operative Agreement shall
prohibit CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation
("Optionee") from exercising its option to sublease or repurchase the Commerce
  --------
Distribution Center pursuant to Article 1.1.2 and Article 1.1.3 of the Option
and Right of First Refusal Agreement, dated May 19, 1998, by and between
Optionee and Lessee (the "Commerce Option"). In order to facilitate the Commerce
                          ---------------
Option, Lessor hereby agrees that, notwithstanding anything to the contrary set
forth in Article XX, Lessee shall have the right to deliver an Election Notice
         ----------
pursuant to which Lessee exercises its Purchase Option with respect to all of
the Properties but, with respect to the Commerce Distribution Center, Lessee may
direct the Lessor to deliver the transfer documents described in the second
paragraph of Section 20.2 above to the Optionee rather than to Lessee and to
             ------------
accept payment of the Termination Value with respect to the Commerce
Distribution Center from Optionee on behalf of Lessee; provided that Lessee
                                                       --------
shall comply fully with all of the terms and conditions set forth in this Lease
with respect to delivery of an Election Notice and the exercise of its Purchase
Option and provided, further, that Lessee shall remain liable for all of the
           --------  -------
payments required under Section 20.2 including, without limitation, payment of
                        ------------
the Termination Value for the Commerce Distribution Center.

                                  ARTICLE XXII

     22.1 Sale Procedure.
          --------------

          (a) During the Marketing Period, Lessee, on behalf of Lessor, shall
     obtain bids for the cash purchase of all the Properties in connection with
     a sale to one or more third party purchasers to be consummated on the
     Expiration Date or such earlier date as is acceptable to the Agent and the
     Lessee (the "Sale Date") for the highest price available, shall notify
                  ---------
     Lessor promptly of the name and address of each prospective purchaser and
     the cash price which each prospective purchaser shall have offered to pay
     for each such Property and shall provide Lessor with such additional
     information about the bids and the bid solicitation procedure as Lessor may
     reasonably request from time to time. All such prospective purchasers must
     be Persons other than Lessee or any Affiliate of Lessee. On the Sale Date,
     Lessee shall pay (or cause to be paid) to Lessor and all other parties, as
     appropriate, all Rent and all other amounts then due and payable or accrued
     under this Lease and/or any other Operative Agreement and Lessor (at the
     direction of the Agent) shall elect whether the costs and expenses incurred
     by Lessor and/or the Agent respecting the sale of one or more Properties
     shall be paid by either (i) sales proceeds from the Properties or (ii)
     Lessee; provided, amounts funded by Lessee with respect to such costs and
             --------
     expenses shall be a part of (and limited by) the Maximum Residual Guarantee
     Amount.

                                       34
<PAGE>

     Lessor may reject any and all bids and may solicit and obtain bids by
giving Lessee written notice to that effect; provided, however, that
                                             --------  -------
notwithstanding the foregoing, Lessor may not reject the bids submitted by
Lessee if such bids, in the aggregate, are greater than or equal to the sum of
the Limited Recourse Amount for all the Properties, and represent bona fide
offers from one or more third party purchasers. If the highest price which a
prospective purchaser or the prospective purchasers shall have offered to pay
for all the Properties on the Sale Date is less than the sum of the Limited
Recourse Amount for all the Properties or if such bids do not represent bona
fide offers from one or more third parties or if there are no bids, Lessor may
elect to retain one or more of the Properties by giving Lessee prior written
notice of Lessor's election to retain the same, and promptly upon receipt of
such notice, Lessee shall surrender, or cause to be surrendered, each of the
Properties specified in such notice in accordance with Section 10.1. Upon
                                                       ------------
acceptance of any bid, Lessor agrees, at Lessee's request and expense, to
execute a contract of sale with respect to such sale, so long as the same is
consistent with the terms of this Article XXII and provides by its terms that it
                                  ------------
is nonrecourse to Lessor.

     Unless Lessor shall have elected to retain one or more of the Properties
pursuant to the provisions of the preceding paragraph, Lessee shall arrange for
Lessor to sell all the Properties free and clear of the Lien of this Lease and
any Lessor Liens attributable to Lessor, without recourse or warranty (of title
or otherwise), for cash on the Sale Date to the purchaser or purchasers offering
the highest cash sales price, as identified by Lessee or Lessor, as the case may
be; provided, however, solely as to Lessor or the Trust Company, in its
    --------  -------
individual capacity, any Lessor Lien shall not constitute a Lessor Lien so long
as Lessor or the Trust Company, in its individual capacity, is diligently and in
good faith contesting, at the cost and expense of Lessor or the Trust Company,
in its individual capacity, such Lessor Lien by appropriate proceedings in which
event the applicable Sale Date, all without penalty or cost to Lessee, shall be
delayed for the period of such contest. To effect such transfer and assignment,
Lessor shall execute, acknowledge (where required) and deliver to the
appropriate purchaser each of the following: (a) special or limited warranty
Deeds conveying each such Property (to the extent it is real property titled to
Lessor) to the appropriate purchaser free and clear of the Lien of this Lease,
the Lien of the Credit Documents and any Lessor Liens; (b) a Bill of Sale
conveying each such Property (to the extent it is personal property) titled to
Lessor to the appropriate purchaser free and clear of the Lien of this Lease,
the Lien of the Credit Documents and any Lessor Liens; (c) any real estate tax
affidavit or other document required by law to be executed and filed in order to
record each Deed; and (d) FIRPTA affidavits, as appropriate. All of the
foregoing documentation must be in form and substance reasonably satisfactory to
Lessor. Lessee shall surrender the Properties so sold or subject to such
documents to each purchaser in the condition specified in Section 10.1, or in
                                                          ------------
such other condition as may be agreed between Lessee and such purchaser. Lessee
shall not take or fail to take any action which would have the effect of
unreasonably discouraging bona fide third party bids for any Property. If each
of the Properties is not either (i) sold on the Sale Date in accordance with
this Section 22.1, or (ii) retained by Lessor pursuant to an affirmative
     ------------
election made by Lessor pursuant to the second sentence of the second paragraph
of this Section 22.1(a) then (x) Lessee shall be obligated to pay Lessor on the
        ---------------
Sale Date an amount equal to the aggregate Termination Value for all the
Properties less any sales proceeds received by the Lessor, and (y) Lessor shall
transfer each applicable Property to Lessee in accordance with Section 20.2.
                                                               ------------

                                       35
<PAGE>

          (b) If all the Properties are sold on the Sale Date to one or more
     third party purchasers in accordance with Section 22.1(a) and the aggregate
                                               ---------------
     purchase price paid for all the Properties is less than the sum of the
     Termination Value for all the Properties (hereinafter such difference shall
     be referred to as the "Deficiency Balance"), then Lessee hereby
                            ------------------
     unconditionally promises to pay to Lessor on the Sale Date the lesser of
     (i) the Deficiency Balance, or (ii) the Maximum Residual Guarantee Amount
     for all the Properties. On the Sale Date if (x) Lessor receives the
     aggregate Termination Value for all the Properties from one or more third
     party purchasers, (y) Lessor and such other parties receive all other
     amounts specified in the last sentence of the first paragraph of Section
                                                                      -------
     22.1(a) and (z) the aggregate purchase price paid for all the Properties on
     ------
     such date exceeds the sum of the Termination Value for all the Properties,
     then Lessee may retain such excess. If one or more of the Properties is
     retained by Lessor pursuant to an affirmative election made by Lessor
     pursuant to Section 22.1(a), then Lessee hereby unconditionally promises to
                 ---------------
     pay to Lessor on the Sale Date an amount equal to the Maximum Residual
     Guarantee Amount. Any payment of the foregoing amounts described in this
     Section 22.1(b) shall be made together with a payment of all other amounts
     --------------
     referenced in the last sentence of the first paragraph of Section 22.1(a).
                                                               ---------------

          (c) In the event that all the Properties are either sold to one or
     more third party purchasers on the Sale Date or retained by Lessor in
     connection with an affirmative election made by Lessor pursuant to Section
                                                                        -------
     22.1(a), then in either case on the applicable Sale Date Lessee shall
     -------
     provide Lessor or such third party purchaser (unless otherwise agreed by
     such third party purchaser) with (i) all permits, certificates of
     occupancy, governmental licenses and authorizations necessary to use,
     operate, repair, access and maintain each such Property for the purpose it
     is being used by Lessee, and (ii) such manuals, permits, easements,
     licenses, intellectual property, know-how, rights-of-way and other rights
     and privileges in the nature of an easement as are reasonably necessary or
     desirable in connection with the use, operation, repair, access to or
     maintenance of each such Property for its intended purpose or otherwise as
     Lessor or such third party purchaser(s) shall reasonably request (and a
     royalty-free license or similar agreement to effectuate the foregoing on
     terms reasonably agreeable to Lessor or such third party purchaser(s), as
     applicable). All assignments, licenses, easements, agreements and other
     deliveries required by clauses (i) and (ii) of this paragraph (c) shall be
     in form reasonably satisfactory to Lessor or such third party purchaser(s),
     as applicable, and shall be fully assignable (including without limitation
     both primary assignments and assignments given in the nature of security)
     without payment of any fee, cost or other charge. Lessee shall also execute
     any documentation requested by Lessor or such third party purchaser(s), as
     applicable, evidencing the continuation or assignment of each Ground Lease.

     22.2 Application of Proceeds of Sale.
          --------------------------------

     In the event Lessee receives any proceeds of sale of any Property under
this Section 22, the proceeds shall be deemed to have been received in trust on
behalf of Lessor and Lessee shall promptly remit such proceeds to Lessor. Lessor
shall apply the proceeds of sale of any Property in the following order of
priority:

                                       36
<PAGE>

          (a) FIRST, to pay or to reimburse Lessor or the Agent, or both, as the
              -----
     case may be, for the payment of all reasonable costs and expenses incurred
     by Lessor or the Agent, or both, as the case may be, in connection with the
     sale (to the extent Lessee has not satisfied its obligation to pay such
     costs and expenses);

          (b) SECOND, so long as the Credit Agreement is in effect and the Loan
              ------
     or Holder Advance or any amount is owing to the Financing Parties under any
     Operative Agreement, to the Agent to be applied pursuant to intercreditor
     provisions among Lessor, the Lenders and the Holders contained in the
     Operative Agreements; and

          (c) THIRD, to Lessee (or such other Person entitled thereto) unless
              -----
     the proceeds are from the sale of a Property retained by Lessor and
     subsequently sold, in which case Lessee shall not retain any proceeds, and
     all proceeds remaining after the distribution in subsection (a) will be
     distributed under subsection (b).

     22.3 Indemnity for Excessive Wear.
          ----------------------------

     If the proceeds of the sale described in Section 22.1 with respect to the
                                              ------------
Properties shall be less than the Limited Recourse Amount with respect to the
Properties, and at the time of such sale it shall have been reasonably
determined (pursuant to the Appraisal Procedure) that the Fair Market Sales
Value of the Properties shall have been impaired by greater than expected wear
and tear during the term of the Lease, Lessee shall pay to Lessor within 10 days
after receipt of Lessor's written statement (i) the amount of such excess wear
and tear determined by the Appraisal Procedure or (ii) the amount of the Sale
Proceeds Shortfall, whichever amount is less.

     22.4 Appraisal Procedure.
          -------------------

     For determining the Fair Market Sales Value of the Properties or any other
amount which may, pursuant to any provision of any Operative Agreement, be
determined by an appraisal procedure, Lessor and Lessee shall use the following
procedure (the "Appraisal Procedure"). Lessor and Lessee shall endeavor to reach
                -------------------
a mutual agreement as to such amount for a period of 10 days from commencement
of the Appraisal Procedure under the applicable section of the Lease, and if
they cannot agree within 10 days, then two qualified appraisers, one chosen by
Lessee and one chosen by Lessor, shall mutually agree thereupon, but if either
party shall fail to choose an appraiser within 20 days after notice from the
other party of the selection of its appraiser, then the appraisal by such
appointed appraiser shall be binding on Lessee and Lessor. If the two appraisers
cannot agree within 20 days after both shall have been appointed, then a third
appraiser shall be selected by the two appraisers or, failing agreement as to
such third appraiser within 30 days after both shall have been appointed, by the
American Arbitration Association. The decisions of the three appraisers shall be
given within 20 days of the appointment of the third appraiser and the decision
of the appraiser most different from the average of the other two shall be
discarded and such average shall be binding on Lessor and Lessee; provided, that
                                                                  --------
if the highest appraisal and the lowest appraisal are equidistant from the third
appraisal, the third appraisal shall be binding on Lessor and Lessee. The fees
and expenses of the appraiser appointed by Lessee shall be paid by Lessee; the
fees and expenses of the appraiser appointed by Lessor shall be paid by Lessor
(such fees and expenses not being

                                       37
<PAGE>

indemnified pursuant to Section 13 of the Participation Agreement); and the fees
and expenses of the third appraiser shall be divided equally between Lessee and
Lessor.

     22.5 Certain Obligations Continue.
          ----------------------------

     During the Marketing Period, Lessee's obligations with respect to the
Properties (including without limitation the installment of Basic Rent due on
the Expiration Date) shall continue undiminished until payment in full to Lessor
of the sale proceeds, if any, the Maximum Residual Guarantee Amount, the amount
due under Section 22.3, if any, and all other amounts due to Lessor or any other
          ------------
Person with respect to all Properties or any Operative Agreement. Lessor shall
have the right, but shall be under no duty, to solicit bids, to inquire into the
efforts of Lessee to obtain bids or otherwise to take action in connection with
any such sale, other than as expressly provided in this Article XXII.
                                                        ------------

                                 ARTICLE XXIII

     23.1 Holding Over.
          ------------

     If Lessee shall for any reason remain in possession of a Property after the
expiration or earlier termination of this Lease as to such Property (unless such
Property is conveyed to Lessee), such possession shall be as a tenancy at
sufferance during which time Lessee shall continue to pay Supplemental Rent that
would be payable by Lessee hereunder were the Lease then in full force and
effect with respect to such Property and Lessee shall continue to pay Basic Rent
at the lesser of the highest lawful rate and one hundred ten percent (110%) of
the last payment of Basic Rent due with respect to such Property prior to such
expiration or earlier termination of this Lease. Such Basic Rent shall be
payable from time to time upon demand by Lessor and such additional amount of
Basic Rent shall be applied by Lessor ratably to the Lenders and the Holders
based on their relative amounts of the aggregate Property Cost for all
Properties. During any period of tenancy at sufferance, Lessee shall, subject to
the second preceding sentence, be obligated to perform and observe all of the
terms, covenants and conditions of this Lease, but shall have no rights
hereunder other than the right, to the extent given by law to tenants at
sufferance, to continue their occupancy and use of such Property. Nothing
contained in this Article XXIII shall constitute the consent, express or
                  -------------
implied, of Lessor to the holding over of Lessee after the expiration or earlier
termination of this Lease as to any Property (unless such Property is conveyed
to Lessee) and nothing contained herein shall be read or construed as preventing
Lessor from maintaining a suit for possession of such Property or exercising any
other remedy available to Lessor at law or in equity.

                                  ARTICLE XXIV

     24.1 Risk of Loss.
          -------------

     During the Term, unless Lessee shall not be in actual possession of any
Property in question solely by reason of Lessor's exercise of its remedies of
dispossession under Article XVII, the risk of loss or decrease in the enjoyment
                    ------------
and beneficial use of such Property as a result of the damage or destruction
thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is
assumed by Lessee, and Lessor shall in no event be answerable or accountable
therefor.

                                       38
<PAGE>

                                  ARTICLE XXV

     25.1 Assignment.
          ----------

          (a) Lessee may not assign this Lease or any of its rights or
     obligations hereunder or with respect to any Property in whole or in part
     to any Person without the prior written consent of the Agent, the Lenders,
     the Holders and Lessor, which consent may be withheld in the absolute
     discretion of each such party.

          (b) No assignment by Lessee (referenced in this Section 25.1 or
                                                          ------------
     otherwise) or other relinquishment of possession to any Property shall in
     any way discharge or diminish any of the obligations of Lessee to Lessor
     hereunder and Lessee shall remain directly and primarily liable under the
     Operative Agreements as to any rights or obligations assigned by Lessee or
     regarding any Property in which rights or obligations have been assigned or
     otherwise transferred.

     25.2 Subleases.
          ---------

          (a) Promptly, but in any event within five Business Days, following
     the execution and delivery of any sublease permitted by this Article XXV,
                                                                  -----------
     Lessee shall notify Lessor of the execution of such sublease. As of the
     date of each Lease Supplement, Lessee shall lease the respective Properties
     described in such Lease Supplement from Lessor, and any existing tenant
     respecting such Property shall automatically be deemed to be a subtenant of
     Lessee and not a tenant of Lessor.

          (b) Without the prior written consent of the Agent, any Lender, any
     Holder or Lessor and subject to the other provisions of this Section 25.2,
                                                                  ------------
     Lessee may sublet any Property or portion thereof, provided that (i) all
                                                        --------
     subleasing shall be done on market terms, (ii) the sublease does not extend
     beyond the Term, (iii) the sublease is expressly subordinate to this Lease,
     and (iv) the sublease shall in no way diminish the fair market value or
     useful life of any applicable Property.

          (c) No sublease (referenced in this Section 25.2 or otherwise) or
                                              ------------
     other relinquishment of possession to any Property shall in any way
     discharge or diminish any of Lessee's obligations to Lessor hereunder, and
     Lessee shall remain directly and primarily liable under this Lease as to
     such Property.

                                  ARTICLE XXVI

     26.1 No Waiver.
          ----------

     No failure by Lessor or Lessee to insist upon the strict performance of any
term hereof or to exercise any right, power or remedy upon a default hereunder,
and no acceptance of full or partial payment of Rent during the continuance of
any such default, shall constitute a waiver of any such default or of any such
term. To the fullest extent permitted by law, no waiver of any default shall
affect or alter this Lease, and this Lease shall continue in full force and
effect with respect to any other then existing or subsequent default.

                                       39
<PAGE>

                                 ARTICLE XXVII

     27.1 Acceptance of Surrender.
          ------------------------

     No surrender to Lessor of this Lease or of all or any portion of any
Property or of any part of any thereof or of any interest therein shall be valid
or effective unless agreed to and accepted in writing by Lessor and no act by
Lessor or the Agent or any representative or agent of Lessor or the Agent, other
than a written acceptance, shall constitute an acceptance of any such surrender.

     27.2 No Merger of Title.
          -------------------

     There shall be no merger of this Lease or of the leasehold estate created
hereby by reason of the fact that the same Person may acquire, own or hold,
directly or indirectly, in whole or in part, (a) this Lease or the leasehold
estate created hereby or any interest in this Lease or such leasehold estate,
(b) any right, title or interest in any Property, (c) any Notes, or (d) a
beneficial interest in Lessor.

                                 ARTICLE XXVIII

     28.1 Lessee's Representations and Warranties.
          ----------------------------------------

     Lessee represents and warrants as follows:

          (a) Incorporation, Qualification, Corporate Power and Authority. Each
              ------------------------------------------------------------
     Credit Party (i) is a corporation duly organized, validly existing and in
     good standing under the laws of the jurisdiction of its incorporation, (ii)
     is duly qualified and in good standing as a foreign corporation in each
     other jurisdiction in which it owns or leases property or in which the
     conduct of its business requires it to so qualify or be licensed except
     where the failure to so qualify or be licensed would not be likely to have
     a Material Adverse Effect and (iii) has all requisite corporate power and
     authority (including all governmental licenses, permits and other
     approvals) to own or lease and operate its properties and to carry on its
     business as now conducted and as proposed to be conducted. All of the
     outstanding Capital Stock in Lessee have been validly issued and are fully
     paid and non-assessable.

          (b) Capital Stock. Set forth on Schedule 28.1(b) hereto is a complete
              --------------
     and accurate list of all Subsidiaries of Lessee, showing (as to each such
     Subsidiary) as of the date hereof, the jurisdiction of its incorporation,
     the number of shares of each class of its Capital Stock authorized and the
     number outstanding, the percentage of each such class of its Capital Stock
     owned (directly or indirectly) by Lessee or such Credit Party and the
     number of shares covered by all outstanding options, warrants, rights of
     conversion or purchase and similar rights. All of the outstanding Capital
     Stock of all of such Subsidiaries have been validly issued, are fully paid
     and non-assessable and are owned by Lessee or such Credit Party or one or
     more of its Subsidiaries free and clear of all Liens, except those created
     by the Security Documents. Each such Subsidiary (i) is a corporation duly
     organized, validly existing and in good standing under the laws of the
     jurisdiction of its incorporation, (ii) is duly qualified and in good
     standing as a foreign

                                       40
<PAGE>

     corporation in each other jurisdiction in which it owns or leases property
     or in which the conduct of its business requires it to so qualify or be
     licensed except where the failure to so qualify or be licensed would not be
     likely to have a Material Adverse Effect and (iii) has all requisite
     corporate power and authority (including all governmental licenses, permits
     and other approvals) to own or lease and operate its properties and to
     carry on its business as now conducted and as proposed to be conducted.

          (c) Authorization; No Conflict or Violation; Compliance with Laws. The
              -------------------------------------------------------------
     execution, delivery and performance by each Credit Party of this Lease, and
     each other Operative Agreement to which it is or is to be a party, and the
     consummation of the other transactions contemplated hereby and thereby, are
     within such Credit Party's corporate powers, have been duly authorized by
     all necessary corporate action, and do not (i) contravene such Credit
     Party's charter or by-laws, (ii) violate any law, rule, regulation
     (including, without limitation, Regulation X of the Board), order, writ,
     judgment, injunction, decree, determination or award, (iii) conflict with
     or result in the breach of, or constitute a default or require any payment
     to be made under, any contract, loan agreement, indenture, mortgage, deed
     of trust, lease or other instrument binding on or affecting any Credit
     Party, any of its Subsidiaries or any of their properties or (iv) except
     for the Liens created by the Security Documents and the liens in connection
     with the Lessee Credit Agreement, result in or require the creation or
     imposition of any Lien upon or with respect to any of the properties of any
     Credit Party or any of its Subsidiaries. No Credit Party or any of its
     Subsidiaries is in violation of any such law, rule, regulation, order,
     writ, judgment, injunction, decree, determination or award or in breach of
     any such contract, loan agreement, indenture, mortgage, deed of trust,
     lease or other instrument, the violation or breach of which could have a
     Material Adverse Effect.

          (d) Approvals and Consents. No authorization or approval or other
              ----------------------
     action by, and no notice to or filing with, any governmental authority or
     regulatory body or any other third party is required for (i) the due
     execution, delivery, recordation, filing or performance by any Credit Party
     of this Lease or any other Operative Agreement to which it is or is to be a
     party, or for the consummation of the other transactions contemplated
     hereby and thereby, (ii) the grant by any Credit Party of the Liens granted
     by it pursuant to the Security Documents, (iii) the perfection or
     maintenance of the Liens created by the Security Documents (including the
     first priority nature thereof, except to the extent provided in the
     Intercreditor Agreements) or (iv) the exercise by the Agent or any other
     Financing Party of its rights under the Operative Agreements or the
     remedies in respect of the Properties pursuant to the Security Documents,
     except for the authorizations, approvals, actions, notices, consents and
     filings listed on Schedule 28.1(d) hereto, all of which have been duly
     obtained, taken, given or made and are in full force and effect.

          (e) Enforceability. This Lease has been, and each of the other
              --------------
     Operative Agreements when delivered in connection with the Closing will
     have been, duly executed and delivered by each Credit Party thereto. This
     Lease is, and each of the other Operative Agreements when delivered in
     connection with the Closing will be, the legal, valid and binding
     obligation of each Credit Party thereto, enforceable against such Credit
     Party in accordance with its terms.

                                       41
<PAGE>

          (f)  Financial Statements.
               --------------------

               (i) The Consolidated and consolidating balance sheets of Lessee
and its Subsidiaries as at December 31, 2000, and the related Consolidated and
consolidating statements of income and cash flows of Lessee and its Subsidiaries
for the fiscal year then ended, accompanied by an unqualified opinion of Arthur
Andersen LLP, independent public accountants, and the Consolidated and
consolidating balance sheets of Lessee and its Subsidiaries as at October 7,
2001, and the related Consolidated and consolidating statements of income and
cash flows of Lessee and its Subsidiaries for the 40 weeks then ended, duly
certified by the chief financial officer of Lessee, copies of which have been
furnished to each Financing Party, fairly present, subject, in the case of said
balance sheets as at October 7, 2001 and said statements of income and cash
flows for the 40 weeks then ended, to year-end audit adjustments, the
Consolidated and consolidating financial condition of Lessee and its
Subsidiaries as at such dates and the Consolidated and consolidating results of
the operations of Lessee and its Subsidiaries for the periods ended on such
dates, all in accordance with GAAP applied on a consistent basis, and since
December 31, 2000, there has been no change that would have a Material Adverse
Effect.

               (ii) The Consolidated forecasted balance sheets, income
statements and cash flow statements of Lessee and its Subsidiaries delivered to
the Lessor pursuant to the Participation Agreement and Section 28.4(l) of this
Lease were prepared in good faith on the basis of the assumptions stated
therein, which assumptions were fair in the light of conditions existing at the
time of delivery of such forecasts, and represented, at the time of delivery,
Lessee's best estimate of its future financial performance.

               (iii) Except as fully disclosed in the financial statements
delivered pursuant to Section 6.2(a) of the Participation Agreement, there were
as of the date of the delivery of such financial statements and as of the
Closing Date no liabilities or obligations with respect to Lessees or its
Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due) which, either individually or in aggregate,
could reasonably be expected to have a Material Adverse Effect, and no Credit
Party knows of any basis for the assertion against any Credit Party of any
liability or obligation of any nature whatsoever that is not fully disclosed in
such financial statements which, either individually or in the aggregate, could
have a Material Adverse Effect.

          (g) Disclosure. Neither the offering memorandum dated July, 2001, with
              ----------
     the Agent as the "arranger," nor any other information, exhibit or report
     furnished by or on behalf of any Credit Party to any Financing Party in
     connection with the negotiation and syndication of the Operative Agreements
     or pursuant to the terms of the Operative Agreements contained any untrue
     statement of a material fact or omitted to state a material fact necessary
     to make the statements made therein not misleading.

          (h) Litigation. There is no action, suit, investigation, litigation or
              ----------
     proceeding affecting any Credit Party, including any Environmental Claim,
     pending or, to the knowledge of Lessee, threatened before any court,
     governmental agency or arbitrator that (i) could reasonably be expected to
     have a Material Adverse Effect (other than the litigation disclosed on
     Schedule 28.1(h)) or (ii) purports to affect the legality, validity or

                                       42
<PAGE>

     enforceability of this Lease or any other Operative Agreement or the
     consummation of the transactions contemplated hereby or thereby.

          (i)  Use of Proceeds.
               ----------------

               (i) No proceeds of the Advance will be used to acquire any equity
security of a class that is registered pursuant to Section 12 of the Securities
Exchange Act of 1934.

               (ii) Lessee is not engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock (as defined in Regulation
U of the Board).

               (iii) Following application of the proceeds of the Advance, not
more than 25 percent of the value of the assets (either of Lessee only or of
Lessee and its Subsidiaries on a Consolidated basis) subject to the provisions
of Section 28.3(a) or 28.3(e) or subject to any restriction contained in any
agreement or instrument between Lessee and any Financing Party or any Affiliate
of any Financing Party relating to Indebtedness will be Margin Stock.

          (j)  Employee Benefit Plans.
               -----------------------

               (i) Set forth on Schedule 28.1(j) is a complete and accurate list
of all Pension Plans and Multiemployer Plans with respect to any employees of
Lessee, any Subsidiary of Lessee or any of their respective ERISA Affiliates.

               (ii) Except as set forth on Schedule 28.1(j), Lessee, each of its
Subsidiaries and each of their respective ERISA Affiliates are in compliance
with all applicable provisions and requirements of ERISA and the Code and the
regulations and published interpretations thereunder with respect to each
Employee Benefit Plan, and have performed all their obligations under each
Employee Benefit Plan.

               (iii) Lessee has received, with respect to each Employee Benefit
Plan which is intended to qualify under Section 401(a) of the Code, a favorable
determination letter from the Internal Revenue Service indicating that such
Employee Benefit Plan is so qualified and nothing has occurred subsequent to the
issuance of such determination letter which would cause such Employee Benefit
Plan to lose its qualified status.

               (iv) No liability to the PBGC (other than required premium
payments), the Internal Revenue Service, any Employee Benefit Plan or any trust
established under Title IV of ERISA (other than required contributions) has been
or is expected to be incurred by Lessee, any of its Subsidiaries or any of their
ERISA Affiliates.

               (v) No ERISA Event has occurred or is reasonably expected to
occur that (a) would be reasonably expected to have a Material Adverse Effect,
or (b) has resulted in or could reasonably be expected to result in a material
liability of Lessee, any of its Subsidiaries or any of their respective ERISA
Affiliates.

               (vi) Except to the extent set forth on Schedule 28.1(j), no
Employee Benefit Plan provides health or welfare benefits (through the purchase
of insurance or otherwise)

                                       43
<PAGE>

for any retired or former employee of Lessee, any of its Subsidiaries or any of
their respective ERISA Affiliates.

               (vii) The present value of the aggregate accrued benefit
liabilities under each Pension Plan sponsored, maintained or contributed to by
Lessee, any of its Subsidiaries or any of their ERISA Affiliates (determined as
of the end of the most recent plan year on the basis of the actuarial
assumptions specified for funding purposes in the most recent actuarial
valuation for such Pension Plan) did not exceed the aggregate current value of
the assets of such Pension Plan.

               (viii) As of the most recent valuation date for each
Multiemployer Plan for which the actuarial report is available, the potential
liability of Lessee, its Subsidiaries and their respective ERISA Affiliates for
a complete withdrawal from such Multiemployer Plan (within the meaning of
Section 4203 of ERISA), when aggregated with the potential liability of Lessee,
its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal
from all other Multiemployer Plans, based on information available pursuant to
Section 4221(e) of ERISA, is zero.

               (ix) Lessee, each of its Subsidiaries and each of their ERISA
Affiliates have complied with the requirements of Section 515 of ERISA with
respect to each Multiemployer Plan and are not in material "default" (as defined
in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer
Plan.

          (k)  No Adverse Conditions. Neither the business nor the properties of
               ---------------------
     any Credit Party are affected by any fire, explosion, accident, strike,
     lockout, slowdown, stoppage, unfair labor practice or other labor dispute,
     drought, storm, hail, earthquake, embargo, act of God or of the public
     enemy or other casualty or change (whether or not covered by insurance)
     that could have a Material Adverse Effect affecting the value of the
     Properties or the ability of Lessee or any other Credit Party to perform
     its obligations under the Operative Agreements.

          (l)  Compliance with Environmental Laws.
               ----------------------------------

               (i) The operations and properties of each Credit Party and each
of its Subsidiaries comply in all respects with all Environmental Laws, all
necessary Environmental Permits have been obtained and are in effect for the
operations and properties of Lessee and its Subsidiaries, Lessee and its
Subsidiaries are in compliance in all respects with all such Environmental
Permits, and no circumstances exist that could (A) form the basis of an
Environmental Claim against any Credit Party or any of its Subsidiaries or any
of their properties, (B) cause any such property to be subject to any
restrictions on ownership, occupancy, use or transferability under any
Environmental Law or (C) reasonably be expected to prevent or interfere with the
compliance by the Credit Parties and their Subsidiaries with Environmental Laws
in the future, in each case except to the extent that any non-compliance, any
failure to obtain such Environmental Permits or the existence of such
circumstances could not reasonably be expected to have a Material Adverse
Effect.

                                       44
<PAGE>

               (ii) Except as set forth on Schedule 28.1(l)(ii), (A) as of the
Closing Date, none of the properties of any Credit Party or any of its
Subsidiaries is listed or, to the knowledge of Lessee after due inquiry,
proposed for listing on the National Priorities List under CERCLA or on the
Comprehensive Environmental Response, Compensation and Liability Information
System maintained by the Environmental Protection Agency or any analogous state
list of sites requiring investigation or cleanup or, to the best of its
knowledge and except as could not reasonably be expected to have a Material
Adverse Effect, is adjacent to any such property, and except as disclosed in the
environmental reports delivered to the Agent prior to the Closing Date, no
underground storage tanks, as such term is defined in 42 U.S.C. ss. 6991, are
located on any property of any Credit Party or any of its Subsidiaries or, to
the best of its knowledge and except as could not reasonably be expected to have
a Material Adverse Effect, on any adjoining property; and (B) except as could
not reasonably be expected to have a Material Adverse Effect, after the Closing
Date, none of the properties of any Credit Party or any of its Subsidiaries is
listed or, to the knowledge of Lessee after due inquiry, proposed for listing on
the National Priorities List under CERCLA or on the Comprehensive Environmental
Response, Compensation and Liability Information System maintained by the
Environmental Protection Agency or any analogous state list of sites requiring
investigation or cleanup or is adjacent to any such property, and no underground
storage tanks, as such term is defined in 42 U.S.C. ss. 6991, are located on any
property of any Credit Party or any of its Subsidiaries or, to the best of its
knowledge, on any adjoining property.

               (iii) (A) Except as could not reasonably be expected to have a
Material Adverse Effect, neither any Credit Party nor any of its Subsidiaries
has transported or arranged for the transportation of any Hazardous Substances
to any location that is listed or, to the knowledge of Lessee after due inquiry,
proposed for listing on the National Priorities List under CERCLA or on the
Comprehensive Environmental Response, Compensation and Liability Information
System maintained by the Environmental Protection Agency or any analogous state
list, and (B) except as could not reasonably be expected to have a Material
Adverse Effect, Hazardous Substances have not been generated, used, treated,
handled, managed, stored or disposed of on, or released or transported to or
from, any property of any Credit Party or any of its Subsidiaries or any
adjoining property, except in full compliance with all Environmental Laws and
Environmental Permits.

               (iv) As of the Closing Date, none of the Credit Parties has
received any communication (written or oral), whether from a governmental
authority, citizens group, employee or any other Person, that alleges that any
Credit Party or any of its Subsidiaries is not in compliance with any
Environmental Laws.

               (v) There is no Environmental Claim pending or, to the knowledge
of Lessee, threatened against any Credit Party or any of its Subsidiaries, or
against any Person for whom any Credit Party or any of its Subsidiaries has
retained or assumed environmental liability either contractually or by operation
of law that could reasonably be expected to have a Material Adverse Effect.

               (vi) Except as could not reasonably be expected to have a
Material Adverse Effect, without in any way limiting the generality of the
foregoing, (A) there is no asbestos or lead-based materials contained in or
forming part of any building, building

                                       45
<PAGE>

component, structure or office space owned or leased by any Credit Party or any
of its Subsidiaries, and (B) no polychlorinated biphenyls (PCBs) or
PCB-containing items are used or stored at any property owned or leased by any
Credit Party or any of its Subsidiaries in any manner or quantity.

               (vii) Lessee has provided to the Agent all assessments, reports,
data, results of investigations or audits, and other information that is in the
possession of or reasonably available to any Credit Party or any of its
Subsidiaries regarding environmental matters pertaining to or the environmental
condition of any property owned, leased, operated or used by any Credit Party or
any of its Subsidiaries, or the compliance (or noncompliance) by any Credit
Party or any of its Subsidiaries with any Environmental Laws.

               (viii) No Credit Party, and none of their respective
Subsidiaries, is required by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the effectiveness of any transactions
contemplated hereby, (i) to perform a site assessment for Hazardous Substances,
(ii) to remove or remediate Hazardous Substances, (iii) to give notice to or
receive approval from any governmental authority, or (iv) to record or deliver
to any Person any disclosure document or statement pertaining to environmental
matters.

          (m)  No Burdensome Agreements. None of the Credit Parties or any of
               ------------------------
     its Subsidiaries is a party to any indenture, loan or credit agreement or
     any lease, license or other agreement or instrument or subject to any
     charter or corporate restriction that could reasonably be expected to have
     a Material Adverse Effect.

          (n)  Tax Information.
               ---------------

               (i) Each Credit Party has filed, has caused to be filed or has
been included in all material tax returns (Federal, state, local and foreign)
required to be filed and has paid all material taxes due, together with any
applicable interest and penalties.

               (ii) Set forth on Schedule 28.1(n) is a complete and accurate
list, as of the date hereof, of each taxable year of each Credit Party for which
United States federal income tax returns have been filed and for which the
expiration of the applicable statute of limitations for assessment or collection
has not occurred by reason of extension or otherwise (an "Open Year").
                                                          ---------

               (iii) No issues have been raised by the Internal Revenue Service
in respect of Open Years that, in the aggregate, could have a Material Adverse
Effect.

               (iv) No issues have been raised by any state, local or foreign
taxing authority with respect to tax periods for which the expiration of the
applicable statute of limitations for assessment or collection has not occurred
by reason of extension or otherwise that, in the aggregate, could have a
Material Adverse Effect.

               (v) None of the Credit Parties has any liability under a tax
sharing or similar agreement, except pursuant to the Casino Tax Sharing
Documents.

          (o)  No Investment Company. None of the Credit Parties is an
               ---------------------
     "investment company," or an "affiliated person" of, or "promoter" or
     "principal underwriter" for, an

                                       46
<PAGE>

     "investment company," as such terms are defined in the Investment Company
     Act of 1940, as amended, or 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", as such terms are defined in
     the Public Utility Holding Company Act of 1935, as amended. Neither the
     making of the Advance, nor the application of the proceeds or repayment
     thereof by Lessee, nor the consummation of the other transactions
     contemplated hereby, will violate any provision of Investment Company Act
     of 1940, as amended or any rule, regulation or order of the Securities and
     Exchange Commission thereunder or the Public Utility Holding Company Act of
     1935, as amended.

          (p) Solvency. Each Credit Party is, individually and together with its
              --------
     Subsidiaries, Solvent.

          (q) Indebtedness of Lessee and its Subsidiaries.
              -------------------------------------------

              (i) Set forth on Schedule 28.1(q)(i) hereto is a complete and
accurate list of all Indebtedness which shall remain outstanding on the Closing
Date (the "Surviving Indebtedness"), showing as of the date hereof the obligor
           ----------------------
and the principal amount outstanding thereunder and the maturity date thereof.

              (ii) Set forth on Schedule 28.3(a) hereto is a complete and
accurate list of all Liens on the property or assets of any Credit Party or any
of its Subsidiaries as of the date hereof (the "Existing Liens"), showing as of
                                                --------------
the date hereof the lienholder thereof, the principal amount outstanding
thereunder and of the obligations secured thereby and the property or assets of
such Credit Party or such Subsidiary subject thereto.

          (r) Real Property.
              --------------

              (i) Set forth on Schedule 28.1(r)(i) hereto is a complete and
accurate list, as of the date hereof, of all real property owned by any Credit
Party or leased to any Credit Party under a ground lease (collectively, the
"Owned Real Property"), showing as of the date hereof the street address, county
 -------------------
or other relevant jurisdiction, state, record owner and net book value thereof.
Each Credit Party has good, marketable and insurable fee simple title to the
property identified on Schedule 28.1(r)(i) as owned and a leasehold interest in
the property identified on Schedule 28.1(r)(i) as subject to a ground lease, in
each case free and clear of all Liens, other than Liens created or permitted by
the Operative Agreements. With respect to the Owned Real Property, (i) no Credit
Party has entered into any contract for construction on any such parcel that is
still in effect (other than contracts for (x) minor improvements which would not
give rise to any Lien (other than a Permitted Lien) on any Owned Real Property
or (y) maintenance), (ii) to the knowledge of the Credit Parties, the buildings
and improvements located on each such parcel are located within the boundary
lines of such parcel and are not in violation of applicable setback
requirements, local comprehensive plan provisions, zoning laws and ordinances,
building code requirements, permits, licenses or other forms of approval,
regulation or restrictions by any applicable governmental authority, except to
the extent that any such violation could not reasonably be expected to have a
Material Adverse Effect, and do not encroach on any easement which may burden
the land, (iii) to the knowledge of the Credit Parties, the land does not serve
any adjoining property for any purpose inconsistent with the use

                                       47
<PAGE>

of the land, (iv) except as may be shown on the preliminary title reports issued
by Chicago Title Insurance Company with respect to the Owned Real Property, no
such parcel is located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the use thereof have
not been obtained, (v) except as may be shown on the preliminary title reports
issued by Chicago Title Insurance Company with respect to the Owned Real
Property, there are no outstanding options or rights of first refusal or similar
rights to purchase any such parcel or any portion thereof or interest therein;
and (vi) all facilities located on each such parcel are supplied with utilities
and other services necessary for their ownership, operation or use, all of which
services are adequate and in accordance with all applicable laws, ordinances,
rules and regulations. Chicago Title Insurance Company has provided the Agent
with (x) a preliminary title report with respect to each Owned Real Property,
and (y) a copy of each of the Schedule B exceptions listed therein. Except as
may be shown on the preliminary title reports provided by Chicago Title
Insurance Company, there are no proceedings, claims, disputes or conditions
affecting any of the Owned Real Property that might curtail or interfere with
the use, operation or ownership of such property. Neither the whole nor any
portion of the Owned Real Property nor any other assets of any Credit Party is
subject to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefore, nor has any Credit Party received any notice of any
such proposed condemnation, expropriation or taking. Each Credit Party has
obtained all applicable permits required to use and operate all of the Owned
Real Property in the manner in which the Owned Real Property is currently being
used and operated.

               (ii) Set forth on Schedule 28.1(r)(i) (with respect to ground
leases) and on Schedule 28.1(r)(ii) hereto is a complete and accurate list, as
of the date hereof, of all leases, subleases, assignment of leases and occupancy
agreements (together with all amendments, modifications, renewals or extensions
of any thereof) of real property under which any Credit Party is the lessee,
sublessee or occupant, showing as of the date hereof the street address, county
or other relevant jurisdiction and state. Each agreement referenced in this
Section 28.1(r)(ii) is in full force and effect, and there are no existing
defaults under any such agreement by any Credit Party, or, to the knowledge of
Lessee, by any lessor thereunder, nor, to the knowledge of Lessee, has any event
occurred that (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default under any such
agreement. Each such agreement constitutes the legal, valid and binding
obligation of each applicable Credit Party, enforceable against such Credit
Party in accordance with its terms, and each such agreement is, to the knowledge
of Lessee, the legal, valid and binding obligation of the lessor thereof,
enforceable in accordance with its terms.

          (s) Investments. Set forth on Schedule 28.1(s) hereto is a complete
              -----------
     and accurate list of all Investments held by any Credit Party, showing as
     of the date hereof the amount and the obligor or issuer thereof.

          (t) Intellectual Property. Set forth on Schedule 28.1(t) hereto is a
              ---------------------
     complete and accurate list of all patents, trademarks, trade names, service
     marks and copyrights, and all applications therefor and licenses thereof,
     of each Credit Party, showing as of the date hereof the jurisdiction in
     which registered or applied, the registration or application number, the
     date of registration or filing and the expiration date. All registrations
     listed on Schedule 28.1(t) are in full force and effect and are valid and
     enforceable and all

                                       48
<PAGE>

     applications and registrations listed on Schedule 28.1(t) are standing in
     the name of the current owner, which owner is a Credit Party. The conduct
     of business of the Credit Parties does not infringe upon or violate any
     intellectual property rights of any third party in any manner which could
     reasonably be expected to have a Material Adverse Effect. Each Credit Party
     owns or has the valid right to use all patents, trademarks, trade names,
     service marks, copyrights and trade secrets used in its business as
     currently conducted.

          (u) Other Agreements. Schedule 28.1(u) sets forth a complete and
              ----------------
     accurate list as of the date hereof of (i) all joint venture and
     partnership agreements to which Lessee or any of its Subsidiaries is a
     party, and (ii) all covenants not to compete restricting Lessee or any of
     its Subsidiaries to which Lessee or any of its Subsidiaries is a part or by
     which Lessee or any of its Subsidiaries is bound.

          (v) [not used]

          (w) Mortgages. The execution and delivery of the Mortgage Instruments
              ---------
     by Lessee (together with the assignments thereof by the Owner Trustee to
     the Agent) and by the Owner Trustee, together with the recordation thereof
     in the appropriate recording offices of the applicable jurisdictions, shall
     be effective to create in favor of the Agent for the benefit of the Secured
     Parties a valid first priority Lien on all of the Properties, free and
     clear of all other Liens other than Permitted Liens. The execution and
     delivery of the Subordinate Mortgage Instruments by Lessee (together with
     the assignments thereof by the Owner Trustee to the Agent) and by the other
     Credit Parties, together with the recordation thereof in the appropriate
     recording offices of the applicable jurisdictions, shall be effective to
     create in favor of the Agent for the benefit of the Secured Parties, a
     valid second priority (subordinate only to the extent provided in the
     Intercreditor Agreements) Lien on all of the Lessee Collateral Properties,
     free and clear of all other Liens other than Permitted Liens.

          (x) First Priority Lien. All filings and other actions necessary or
              -------------------
     desirable to perfect and protect the security interest in the Properties
     created under the Security Documents have been duly made or taken, and the
     Security Documents create in favor of the Agent for the benefit of the
     Secured Parties a valid and, together with such filings and other actions,
     perfected first priority security interest in the Properties and a valid
     second priority security interest (only to the extent provided in the
     Intercreditor Agreements) in the Lessee Collateral Properties, securing the
     payment of the Lessee's and the other Credit Parties' obligations under the
     Operative Agreements, and all filings and other actions necessary or
     desirable to perfect and protect such security interest have been duly
     taken. The Lessee or another Credit Party is the legal and beneficial owner
     of each Property or each Lessee Collateral Property, as applicable, free
     and clear of any Lien, except for the liens and security interests created
     or permitted under the Operative Agreements and the Lessee Credit Agreement
     and related documents and the landlords' lien rights in respect of certain
     other property located in the States of Washington, Oregon and Florida and
     identified in the Lessee Credit Agreement.

          (y) Insurance. Schedule 28.1(y) sets forth a true and complete listing
              ---------
     of all insurance maintained by the Credit Parties as of the date hereof,
     and with the amounts

                                       49
<PAGE>

     insured (and any deductibles) set forth therein. The amounts of such
     insurance cover all risks as is commercially reasonable and prudent with
     respect to the business and properties of Lessee and its Subsidiaries and
     which is usually carried by companies engaged in similar businesses and
     owning similar properties in the same general areas in which Lessee or such
     Subsidiary operates.

          (z) Broker's, Finder's or Similar Fees. Except for the Commitment Fees
              ----------------------------------
     and the Administrative Fees payable by Lessee from the Advance, there are
     no brokerage commissions, finder's fees or similar fees or commissions
     payable by any Credit Party pursuant to any agreement entered into by any
     Credit Party or of which any Credit Party is aware in connection with the
     transactions contemplated hereby or any Operative Agreement.

     28.2 Affirmative Covenants.
          ---------------------

     So long as the Advance or any other Obligation of any Credit Party under
any Operative Agreement shall remain unpaid, Lessee will:

          (a) Compliance with Laws, etc. Comply, and cause each of its
              -------------------------
     Subsidiaries to comply, in all material respects, with all applicable laws,
     rules, regulations and orders, including, without limitation, compliance
     with ERISA and workers' compensation laws.

          (b) Payment of Taxes, etc. Pay and discharge, and cause each of its
              ---------------------
     Subsidiaries to pay and discharge, before the same shall become delinquent,
     (i) all material taxes, assessments and governmental charges or levies
     imposed upon any of them or upon their respective property and (ii) all
     material lawful claims that, if unpaid, might by law become a Lien upon
     their respective property; provided, however, that neither Lessee nor any
     of its Subsidiaries shall be required to pay or discharge any such tax,
     assessment, charge or claim that is being contested in good faith and by
     proper proceedings and as to which appropriate reserves are being
     maintained, unless and until any Lien (other than a Permitted Lien)
     resulting therefrom attaches to its property.

          (c) Compliance with Environmental Laws. Comply, and cause each of its
              ----------------------------------
     Subsidiaries and all lessees and other Persons occupying its properties to
     comply, in all material respects, with all Environmental Laws and
     Environmental Permits applicable to their respective operations and
     properties; obtain and renew, and cause each of its Subsidiaries to obtain
     and renew, all Environmental Permits necessary for their respective
     operations and properties; and to the extent required by applicable
     Environmental Laws and in accordance with the requirements thereof,
     conduct, and cause each of its Subsidiaries to conduct, any investigation,
     study, sampling and testing, and undertake any cleanup, removal, remedial
     or other action necessary to remove and clean up all Hazardous Substances
     from any of their respective properties; provided, however, that neither
     Lessee nor any of its Subsidiaries shall be required to undertake any such
     cleanup, removal, remedial or other action to the extent that its
     obligation to do so is being contested in good faith and by proper
     proceedings diligently pursued, appropriate reserves are being maintained
     with respect to such circumstances and the failure to take any such action
     could not reasonably be expected to have a Material Adverse Effect.

                                       50
<PAGE>

          (d) Change in Control. If Lessee agrees with any creditor other than
              -----------------
     the Financing Parties to a more restrictive "change in control" provision
     than it gave to the Financing Parties in Section 17.1(o), Lessee will give
     written notice to the Agent of such provision and will, if requested by the
     Agent, amend Section 17.1(o) so that it is as restrictive as the "change in
     control" restriction given to the other creditor.

          (e) Preservation of Corporate Existence, Etc. Preserve and maintain,
              ----------------------------------------
     and cause each of its Subsidiaries to preserve and maintain, their
     respective corporate existence, rights (charter and statutory), permits,
     licenses, approvals, privileges and franchises; provided, however, that
     Lessee and its Subsidiaries may consummate any merger or consolidation
     permitted under Section 28.3(c) and provided, further, neither Lessee nor
     any of its Subsidiaries shall be required to preserve any right, permit,
     license, approval, privilege or franchise if the board of directors of
     Lessee or such Subsidiary shall determine that the preservation thereof is
     no longer desirable in the conduct of the business of Lessee or such
     Subsidiary, as the case may be, and that the loss thereof is not
     disadvantageous in any material respect to Lessee, such Subsidiary or the
     Financing Parties.

          (f) Inspection Rights. At any reasonable time and from time to time
              -----------------
     and upon reasonable notice, permit the Agent or any of the Financing
     Parties or any agents or representatives thereof, to examine and make
     copies of and abstracts from the records and books of account of, and visit
     and inspect the Properties and the Lessee Collateral Properties, and to
     discuss the affairs, finances and accounts of Lessee and any of its
     Subsidiaries with any of their officers or directors and with their
     independent certified public accountants (who are hereby directed by Lessee
     to discuss the affairs, finances and accounts of Lessee and any of its
     Subsidiaries with the Agent or any agent or representative thereof in
     accordance with this Lease).

          (g) Preparation of Environmental Reports. At the written request of
              ------------------------------------
     the Agent from time to time, provide to the Agent within 60 days after such
     request, at the expense of Lessee, an environmental site assessment report
     for all of its and its Subsidiaries' properties described in such request,
     prepared by an environmental consulting firm reasonably acceptable to the
     Agent, indicating the presence or absence of Hazardous Substances and the
     estimated cost of any compliance, removal or remedial action in connection
     with any Hazardous Substances on such properties; without limiting the
     generality of the foregoing, if the Agent reasonably determines at any time
     that a material risk exists that any such report will not be provided
     within the time referred to above, the Agent may retain an environmental
     consulting firm to prepare such report at the expense of Lessee, and Lessee
     hereby grants and agrees to cause any Subsidiary which owns any property
     described in such request to grant at the time of such request, to the
     Agent, the Financing Parties, such firm and any agents or representatives
     thereof the rights, upon reasonable notice and during normal business
     hours, to enter onto their respective properties in order to perform such
     assessment; provided that any action taken by the Agent pursuant to this
     provision or otherwise under this Lease pertaining to the environmental
     activities of Lessee or any of its Subsidiaries shall not be construed to
     render the Agent liable for the conditions of any such property or
     responsible for any obligations of Lessee or any other Person as against
     any governmental agency or any

                                       51
<PAGE>

     other Person. For the avoidance of doubt, Lessee disclaims any obligation
     to indemnify any Indemnified Party for claims of third parties arising out
     of the gross negligence or willful misconduct of any of the Financing
     Parties, any environmental consulting firm retained by any of them or their
     respective agents or representatives in connection with any entry by any of
     them onto the property of Lessee or any Subsidiary pursuant to this Section
     28.2(g).

          (h) Keeping of Books. Keep, and cause each of its Subsidiaries to
              ----------------
     keep, proper books of record and account, in which full and correct entries
     shall be made of all financial transactions and the assets and business of
     Lessee and each such Subsidiary in accordance with generally accepted
     accounting principles in effect from time to time.

          (i) Maintenance of Properties, Etc. Maintain and preserve, and cause
              ------------------------------
     each of its Subsidiaries to maintain and preserve, all of their respective
     properties that are used or useful in the conduct of their respective
     businesses in good working order and condition, ordinary wear and tear
     excepted.

          (j) Compliance with Terms of Other Leaseholds; New Leases. Make all
              -----------------------------------------------------
     payments and otherwise perform and observe all obligations in respect of
     all other leases of real property to which Lessee or any of its
     Subsidiaries is a party, keep such other leases in full force and effect
     and not allow such other leases to lapse or be terminated or any rights to
     renew such leases to be forfeited or canceled, enforce each agreement
     relating to the other leases in accordance with its terms, and take all
     such action requested by the Agent or the Majority Lenders to such end, and
     notify the Agent of any default by any party with respect to such other
     leases and cooperate with the Agent in all respects to cure any such
     default, and cause each of its Subsidiaries to do each of the foregoing. If
     at any time the Lessee Credit Agreement is not in effect, Lessee agrees,
     and agrees to cause each other Credit Party, to exercise commercially
     reasonable efforts, in connection with any lease, sublease, assignment of
     lease or other occupancy agreement entered into after the date hereof in
     which Lessee or such Credit Party is the lessee, sublessee, assignee or
     occupant, to obtain from the applicable lessor a landlord's waiver and
     consent relating thereto, without requiring the payment of any amounts to
     the applicable lessor as an inducement for the execution of such waiver and
     consent.

          (k) Additional Credit Parties; Additional Properties. Upon (x) the
              ------------------------------------------------
     request of the Agent, (y) the formation or acquisition of any new direct or
     indirect Subsidiaries by any Credit Party (provided that compliance
     herewith shall not constitute a waiver of Section 28.3(h)), or (z) the
     acquisition of any property by any Credit Party, Lessee shall, in each case
     at Lessee's expense:

              (i) within 30 days after such request, formation or acquisition,
cause such Subsidiary (other than a Foreign Subsidiary) to duly execute and
deliver to the Agent a Joinder Agreement, whereby such Subsidiary shall
guarantee all obligations of the Credit Parties under the Operative Agreements,

                                       52
<PAGE>

               (ii) within 30 days after such request, formation or acquisition,
furnish to the Agent a description of the real and personal properties of the
Credit Parties and their respective Subsidiaries in detail satisfactory to the
Agent,

               (iii) within 30 days after such request, formation or
acquisition,

                     (A) cause such Subsidiary (other than a Foreign Subsidiary)
to duly execute and deliver to the Agent an amendment to the Subordinate
Security Agreement, and any documents in connection therewith, whereby such
Subsidiary shall grant a Lien on those of its assets described in the
Subordinate Security Agreement to secure the obligations under the Operative
Agreements, and

                     (B) with respect to any real property with a fair market
value of $750,000 or more in which such Subsidiary (other than a Foreign
Subsidiary) has an interest, cause such Subsidiary to duly execute and deliver
such deeds of trust, trust deeds and mortgages ("Additional Mortgages") in
                                                 --------------------
appropriate form for filing in all filing or recording offices that the Agent
may deem necessary or desirable to create a valid second priority (to the
secured parties under the Lessee Credit Agreement) and subsisting Lien on the
property described therein in favor of the Agent for the benefit of the Secured
Parties,

               (iv) within 30 days after such request, formation or acquisition,
take (and cause such Subsidiary, each direct and indirect parent of such
Subsidiary or any Credit Party to take) whatever action may be necessary or
desirable in the opinion of the Agent to vest in the Agent, for the benefit of
the Secured Parties, valid and subsisting Liens on the properties purported to
be subject to the Security Documents, pursuant to subclause (iii) above,
enforceable against all third parties in accordance with their terms (including
the filing of UCC financing statements, the giving of notices and the
endorsement of notices on title documents and the recording of any Additional
Mortgage),

               (v) promptly take (and cause such Subsidiary or any Credit Party
to take) all action requested by the Agent or the Majority Lenders to provide
mortgage policies, American Land Title Association form surveys, appraisals,
assignments of leases and rents, consents and agreements of lessors and other
third parties, estoppel letters and other confirmations and evidence of
insurance with respect to any real property that becomes the subject of an
Additional Mortgage, in each case in form and substance satisfactory to the
Agent,

               (vi) upon request of the Agent, deliver to the Agent, a signed
copy of a favorable opinion, addressed to the Agent and the Secured Parties, of
counsel for the Credit Parties acceptable to the Agent with respect to any of
the foregoing (including any of the foregoing guaranties, security agreements,
pledges, mortgages and assignments being legal, valid and binding obligations of
each Credit Party thereto enforceable in accordance with their terms, and any of
the recordings, filings, notices, endorsements and other actions requested by
the Agent being sufficient to create valid perfected Liens on such properties)
and as to such other matters as the Agent may reasonably request,

               (vii) as promptly as practicable after such request, formation or
acquisition, deliver to the Agent upon request of the Agent or the Majority
Lenders with respect

                                       53
<PAGE>

to each parcel of real property owned or held by the entity that is the subject
of such request, formation or acquisition, title reports, surveys and
engineering, soils and other reports, and environmental assessment reports, each
in scope, form and substance satisfactory to the Agent; provided that to the
extent that any Credit Party or any of its Subsidiaries shall have otherwise
received any of the foregoing items with respect to such real property, such
items shall, promptly after the receipt thereof, be delivered to the Agent, and

               (viii) at any time and from time to time, promptly execute and
deliver any and all further instruments and documents and take all such other
action as the Agent may reasonably deem necessary in obtaining the full benefits
of, or in perfecting and preserving the Liens of, such guaranties, mortgages,
pledges, assignments, security agreement supplements and security agreements.

          (l)  Further Assurances. (i) Promptly upon request by the Agent,
               ------------------
     correct, and cause each of its Subsidiaries promptly to correct, any
     material defect or error that may be discovered in any Operative Agreement
     or in the execution, acknowledgment, filing or recordation thereof, and
     (ii) promptly upon request by the Agent, do, execute, acknowledge, deliver,
     record, re-record, file, re-file, register and re-register any and all such
     further acts, deeds, conveyances, pledge agreements, mortgages, deeds of
     trust, trust deeds, assignments, financing statements and continuations
     thereof, termination statements, notices of assignment, transfers,
     certificates, assurances and other instruments as the Agent may reasonably
     require from time to time in order to (A) carry out more effectively the
     purposes of the Operative Agreements, (B) to the fullest extent permitted
     by applicable law, subject any Credit Party's or any of its Subsidiaries'
     properties, assets, rights or interests to the Liens now or hereafter
     intended to be covered by any of the Security Documents, (C) perfect and
     maintain the validity, effectiveness and priority of any of the Security
     Documents and any of the Liens intended to be created thereunder and (D)
     assure, convey, grant, assign, transfer, preserve, protect and confirm more
     effectively unto the Financing Parties the rights granted or now or
     hereafter intended to be granted to the Financing Parties under any
     Operative Agreement or under any other instrument executed in connection
     with any Operative Agreement to which any Credit Party or any of its
     Subsidiaries is or is to be a party, and cause each of its Subsidiaries to
     do so. If a Default has occurred and is continuing, each Credit Party
     agrees that upon the Agent's request, such Credit Party (x) shall grant,
     and shall cause its Subsidiaries to grant, to the Agent for the benefit of
     the Secured Parties a security interest in all properties, assets, rights
     or interests of such Credit Party or such Subsidiary in which a Lien has
     not previously been granted to the Agent pursuant to the Security Documents
     and (y) shall take all steps necessary to perfect the security interest
     granted to the Agent on or after the Closing Date to the extent not
     previously perfected, regardless of whether the Agent agreed either not to
     take a security interest or not perfect any security interest in any such
     property, asset, right or interest on the Closing Date and regardless of
     whether any such property, asset, right or interest satisfies a threshold
     or other requirement for granting such a lien otherwise set forth herein.

          (m)  Appraisals. At the request of the Agent from time to time after
               ----------
     the Closing Date, provide to the Agent within 60 days after such request,
     at the expense of Lessee, appraisals of the properties of Lessee and its
     Subsidiaries described in such

                                       54
<PAGE>

     request as the Agent may reasonably determine are necessary to ensure
     compliance with, and which appraisals comply with all applicable
     requirements of, the Federal Financial Institutions Reform, Recovery and
     Enforcement Act of 1989, as amended.

          (n) [not used]

          (o) Flood Hazard Certification. Within 90 days after the Closing Date,
              --------------------------
     and from time to time thereafter as reasonably requested by the Agent or
     the Majority Lenders, at Lessee's expense, deliver such flood hazard
     certification as the Agent or the Majority Lenders may require with respect
     to the Properties or the Lessee Collateral Properties.

          (p) Additional Mortgages. If Lessee or any Credit Party grants
              --------------------
     additional mortgages or deeds of trust for any real property pursuant to
     the terms of the Lessee Credit Agreement, it will promptly execute all
     necessary Subordinate Mortgage Instruments related to such real property.

          (q) [not used]

     28.3 Negative Covenants.
          ------------------

     So long as the Advance or any other Obligation of any Credit Party under
any Operative Agreement shall remain unpaid, Lessee will not, at any time:

          (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
              ----------
     any of its Subsidiaries to create, incur, assume or suffer to exist, any
     Lien on or with respect to any of its or their assets of any character
     (tangible or intangible) whether now owned or hereafter acquired other than
     the Liens specified below in this Section 28.3(a), or sign or file, or
     permit any of its Subsidiaries to sign or file, under the Uniform
     Commercial Code, a financing statement that names Lessee or any of its
     Subsidiaries as debtor, or sign, or permit any of its Subsidiaries to sign,
     any security agreement authorizing any secured party thereunder to file
     such financing statement, or assign, or permit any of its Subsidiaries to
     assign, any accounts or other right to receive income other than in respect
     of any of the following:

               (i)   Liens created by the Operative Agreements;

               (ii)  Liens created by the Lessee Credit Agreement and related
documents for the purpose of securing Lessee's obligations thereunder;

               (iii) Permitted Liens;

               (iv)  Existing Liens securing Surviving Indebtedness and any
replacement, extension or renewal of any such Lien; provided that (x) no such
replacement, extension or renewal shall encumber any additional assets of Lessee
or any of its Subsidiaries and (y) the amount of Indebtedness secured by such
Lien shall not be increased from that existing on the Closing Date;

                                       55
<PAGE>

               (v)    purchase money Liens upon or in real property or equipment
acquired or held by Lessee or any of its Subsidiaries in the ordinary course of
business to secure the purchase price of such real property or equipment or to
secure Indebtedness incurred solely for the purpose of financing the
acquisition, construction or improvement of any such real property or equipment
to be subject to such Liens, or Liens existing on any such real property or
equipment at the time of acquisition (other than any such Liens created in
contemplation of such acquisition that do not secure the purchase price), or
extensions, renewals or replacements of any of the foregoing for the same or a
lesser amount; provided, however, that no such Lien shall extend to or cover any
               --------  -------
property other than the real property or equipment being acquired, constructed
or improved, and no such extension, renewal or replacement shall extend to or
cover any property not theretofore subject to the Lien being extended, renewed
or replaced; and provided further that the aggregate principal amount of the
                 -------- -------
Indebtedness secured by Liens permitted by this clause (v) shall not exceed
$7,500,000 at any time outstanding;

               (vi)   Liens arising in connection with Capital Leases in an
aggregate principal amount not to exceed $20,000,000 at any time outstanding,
provided that no such Lien shall extend to or cover any Properties or other
assets (other than the assets subject to such Capital Leases);

               (vii)  other Liens securing Indebtedness outstanding in an
aggregate principal amount not to exceed $5,000,000 provided that no such Lien
shall extend to or cover any Properties; and

               (viii) Liens securing hedge agreements permitted under Section
28.3(b).

     If Lessee or any of its Subsidiaries shall create or assume any Lien upon
any of its properties or assets, whether now owned or hereafter acquired, other
than Liens permitted by the provisions of this Section 28.3(a), it shall make or
cause to be made effective a provision whereby the obligations will be secured
by such Lien equally and ratably with any and all other Indebtedness secured
thereby as long as any such Indebtedness shall be so secured; provided that,
notwithstanding the foregoing, this covenant shall not be construed as a consent
by the Majority Lenders to the creation or assumption of any such Lien not
permitted by the provisions of this Section 28.3(a).

          (b) Indebtedness. Create, incur, assume or suffer to exist, or permit
              ------------
     any of its Subsidiaries to create, incur, assume or suffer to exist, any
     Indebtedness other than:

               (i)  in the case of Lessee,

                    (A) Indebtedness under the Operative Agreements,

                    (B) Indebtedness under the Lessee Credit Agreement,

                    (C) secured hedge agreements between Lessee and BNP Paribas
and between Lessee and Union Bank of California, N.A., and other hedge
agreements, the purpose of which is to hedge against fluctuations in interest
rates and are entered into by Lessee in the ordinary course of business,
consistent with prudent business practice and not entered into for speculative
purposes, provided that the aggregate notional amount of such

                                       56
<PAGE>

secured hedge agreements and other hedge agreements shall not exceed
$100,000,000 at any time outstanding, and

                    (D) Indebtedness owed to a wholly-owned Domestic Subsidiary
of Lessee that is a Credit Party; provided that such Indebtedness is evidenced
                                  --------
by a promissory note that has been pledged to the Agent pursuant to the
Subordinate Security Agreement;

               (ii)  in the case of any wholly-owned Domestic Subsidiary of
Lessee that is a Credit Party, Indebtedness owed to Lessee or to another
wholly-owned Domestic Subsidiary of Lessee that is a Credit Party so long as
such Indebtedness is evidenced by a promissory note that has been pledged to the
Agent pursuant to the Subordinate Security Agreement; and

               (iii) in the case of Lessee and any of its Subsidiaries,

                     (A) Indebtedness secured by Liens permitted by Section
28.3(a)(ii), (v), (vi) and (viii),

                     (B) the Surviving Indebtedness, and any Indebtedness issued
in exchange for, or the net proceeds of which are used to refinance, all or a
part of the Surviving Indebtedness; provided, however, that the principal amount
                                    --------  -------
of such refinancing Indebtedness does not exceed the principal amount, plus
accrued interest (if any), of the Surviving Indebtedness so refinanced,

                     (C) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business,

                     (D) unsecured Indebtedness of Lessee in respect of its
daily overdraft facility but only to the extent such Indebtedness (1) is
incurred in the ordinary course of Lessee's business consistent with past
practices (2) does not exceed $7,500,000 in principal amount at any time
outstanding, and (3) is repaid in full within 3 Business Days of the incurrence
of such Indebtedness, and

                     (E) other unsecured Indebtedness (other than Indebtedness
owed to Casino) of Lessee and its Subsidiaries in an aggregate principal amount
at any time outstanding not to exceed $10,000,000.

          (c) Mergers, Corporate Changes, Etc. Merge into or consolidate with
              -------------------------------
     any Person or permit any Person to merge into it or liquidate or dissolve
     itself (or suffer any liquidation or dissolution), or permit any of its
     Subsidiaries to do (or suffer) any of the foregoing, except that (i) any
     Subsidiary of Lessee may merge into or consolidate with, any other
     Subsidiary of Lessee that is, or as a result of such merger or
     consolidation shall become, a Credit Party, or that, in the case of any
     such consolidation, the Person formed by such consolidation shall be a
     wholly-owned Solvent Domestic Subsidiary of Lessee; (ii) any of Lessee's
     Subsidiaries may merge into or consolidate with Lessee so long as the
     surviving entity is Lessee; (iii) any of Lessee's Subsidiaries may
     liquidate or dissolve if all of the assets of such Subsidiary are acquired
     by Lessee or any other Credit Party; and (iv) each of Lessee's Domestic
     Subsidiaries may change its jurisdiction of formation by

                                       57
<PAGE>

     merger or otherwise so long as such jurisdiction remains within the United
     States of America and Lessee or such Domestic Subsidiary provides notice of
     such change and otherwise complies with the provisions of the Security
     Agreement and the Pledge Agreement; provided, however, that in each case,
                                         --------  -------
     immediately after giving effect thereto, no Default shall have occurred and
     be continuing or would result therefrom.

          (d) Sales of Assets. Sell, lease, license, transfer or otherwise
              ---------------
     dispose of, or permit any of its Subsidiaries to sell, lease, license,
     transfer or otherwise dispose of, any assets, or grant any option or other
     right to purchase, lease or otherwise acquire any assets other than:

               (i)   sales of Inventory in the ordinary course of its business,

               (ii)  in a transaction authorized by subsection (c) of this
Section 28.3,

               (iii) the sale of any asset by any Credit Party (other than a
bulk sale of Inventory and a sale of Accounts Receivable (as defined in the UCC)
other than delinquent accounts for collection purposes only) so long as (A) the
purchase price paid to the Credit Party for such asset shall be no less than the
fair market value of such asset at the time of such sale, (B) the purchase price
for such asset shall be paid to the Credit Party solely in cash and (C) the
aggregate purchase price paid to all of the Credit Parties for such asset and
all other assets sold by the Credit Parties during the same fiscal year pursuant
to this clause (iii) shall not exceed $7,500,000 in any fiscal year and
$15,000,000 during the term of this Lease; provided that the proceeds of such
                                           --------
asset sales are applied in accordance with Section 2.05(b)(iii) of the Lessee
Credit Agreement, and

               (iv)  the grant of any option or other right to purchase any
asset in a transaction which would be permitted under the provisions of the
immediately preceding clause (iii);

provided that in each case, immediately after giving effect thereto, no Default
--------
shall have occurred and be continuing or would result therefrom.

          (e) Investments in Other Persons. Make or hold, or permit any of its
              ----------------------------
     Subsidiaries to make or hold, any Investment in any Person other than:

               (i)   Investments by Lessee and its Subsidiaries in Lessee or in
Subsidiaries that are or become Credit Parties,

               (ii)  Investments by Lessee and its Subsidiaries after the
Closing Date in Smart & Final de Mexico, S.A. de C.V. and in Smart & Final del
Noroeste, S.A. de C.V. in an aggregate amount not to exceed $2,500,000,

               (iii) loans and advances to officers and employees in the
ordinary course of the business of Lessee and its Subsidiaries as presently
conducted in an aggregate principal amount not to exceed $2,000,000 at any time
outstanding,

               (iv)  Investments by Lessee and its Subsidiaries in Cash
Equivalents,

                                       58
<PAGE>

               (v)   Investments existing on the Closing Date and set forth on
Schedule 28.1(s); and

               (vi)  other Investments in an aggregate amount invested not to
exceed $2,000,000; provided that with respect to Investments made under this
clause (v), immediately before and after giving effect thereto, no Default shall
have occurred and be continuing or would result therefrom.

          (f) Dividends, Etc. Declare or pay any dividends, purchase, redeem,
              --------------
     retire, defease or otherwise acquire for value any of its capital stock or
     any warrants, rights or options to acquire such capital stock, now or
     hereafter outstanding, return any capital to its stockholders, partners or
     members (or the equivalent Persons thereof) as such, make any distribution
     of assets, capital stock, warrants, rights, options, obligations or
     securities to its stockholders, partners or members (or the equivalent
     Persons thereof) as such or issue or sell any capital stock or any
     warrants, rights or options to acquire such capital stock, or permit any of
     its Subsidiaries to do any of the foregoing, or permit any of its
     Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for
     value any capital stock of Lessee or any warrants, rights or options to
     acquire such capital stock or to issue or sell any capital stock or any
     warrants, rights or options to acquire such capital stock, except that, so
     long as no Default shall have occurred and be continuing or would result
     therefrom:

               (i)   Lessee may declare and deliver dividends and distributions
payable only in (and to the holders of) common stock of Lessee,

               (ii)  Lessee may declare and pay cash dividends to its
stockholders pursuant to any dividend plan approved in writing by the Majority
Lenders;

               (iii) except to the extent the Net Cash Proceeds thereof are
required to be applied to the prepayment of the Advance pursuant to Section
2.05(b) of the Lessee Credit Agreement, Lessee and any of its Subsidiaries may
purchase, redeem, retire, defease or otherwise acquire shares of such Person's
capital stock with the proceeds received from the issuance of its capital stock
with equal or inferior voting powers, designations, preferences and rights;

               (iv)  Lessee and any of its Subsidiaries may issue equity
securities upon the exercise of rights to acquire such equity securities but
only if the Net Cash Proceeds, if any, from the exercise of such rights are
applied to the repayment of the Advance to the extent required pursuant to
Section 2.05(b) of the Lessee Credit Agreement; and

               (v)   any Subsidiary may declare and pay dividends to Lessee or
to a Subsidiary of Lessee that is a Credit Party.

          (g) Change in Nature of Business. Make, or permit any of the other
              ----------------------------
     Credit Parties to make, any material change in the nature of its business
     as carried on at the date hereof.

                                       59
<PAGE>

          (h) Charter Amendments; New Subsidiaries. Amend, or permit any of the
              ------------------------------------
     other Credit Parties to amend, its or their certificate or articles of
     incorporation, bylaws or other organizational or charter documents
     (including, without limitation, by filing any certificate of designation
     with respect to any preferred stock or otherwise creating any new preferred
     stock) or, create or acquire, or permit any of the other Credit Parties to
     directly or indirectly create or acquire, a Subsidiary not in existence on
     the date hereof.

          (i) Accounting Changes. Make or permit, or permit any of its
              ------------------
     Subsidiaries to make or permit, any change in accounting policies or
     reporting practices, except as required by generally accepted accounting
     principles.

          (j) Prepayments, Etc. of Indebtedness; Amendments to Agreements. (i)
              -----------------------------------------------------------
     Prepay, redeem, purchase, defease or otherwise satisfy prior to the
     scheduled payment or maturity thereof in any manner any Indebtedness other
     than the prepayment of (A) the Advance in accordance with the terms of this
     Lease and (B) Capital Leases in the ordinary course of business and (C) the
     Lessee Credit Agreement; (ii) make any payment in violation of any
     subordination terms of any Indebtedness; (iii) amend, modify or change in
     any manner any term or condition of any Surviving Indebtedness or any
     Casino Tax Sharing Document; or (iv) permit any of the Credit Parties to do
     any of the foregoing other than to prepay any Indebtedness payable to
     Lessee.

          (k) Negative Pledge. Enter into or suffer to exist, or permit any of
              ---------------
     its Subsidiaries to enter into or suffer to exist, any agreement
     prohibiting or conditioning the creation or assumption of any Lien upon any
     of their respective property or assets other than (i) in favor of the Agent
     and the Secured Parties, (ii) under the Lessee Credit Agreement or (iii)
     any Indebtedness permitted by Section 28.3(b)(iii)(A) hereof, in each case
     so long as such prohibition or condition extends only to the property
     subject to the Lien securing such Indebtedness.

          (l) Partnerships. Become a general partner in any general or limited
              ------------
     partnership or joint venture, or permit any of its Subsidiaries to do so,
     other than any Subsidiary the sole assets of which consist of its interest
     in such partnership or joint venture.

          (m) Affiliate Transactions. Enter into, or permit any of its
              ----------------------
     Subsidiaries to enter into, directly or indirectly, any transaction with
     (including, without limitation, the purchase, sale or exchange of property
     or the rendering of any service to) any Affiliate of Lessee, except
     pursuant to (x) the reasonable requirements of Lessee's or such
     Subsidiary's business, as the case may be, and upon fair and reasonable
     terms no less favorable to such Lessee or such Subsidiary than could be
     obtained in a comparable arm's-length transaction with an unaffiliated
     Person and (y) the Casino Tax Sharing Documents and (z) Capital Leases
     between any Credit Party and Casino in existence on the Closing Date.

          (n) [not used]

                                       60
<PAGE>

          (o) Payment Restrictions Affecting Subsidiaries; Document Amendment.
              ---------------------------------------------------------------
     Directly or indirectly, enter into or suffer to exist, or permit any of its
     Subsidiaries to enter into or suffer to exist, any agreement or arrangement
     (other than the Operative Agreements and the Lessee Credit Agreement) (i)
     limiting the ability of any such Subsidiary to declare or pay dividends or
     other distributions in respect of its Capital Stock or repay or prepay any
     Indebtedness owed to, make loans or advances to, or otherwise transfer
     assets to or invest in, Lessee or any Subsidiary of Lessee (whether through
     a covenant restricting dividends, loans, asset transfers or investments, a
     financial covenant or otherwise), or (ii) limiting the ability of any
     Credit Party to enter into amendments, modifications or waivers of the
     Operative Agreements.

          (p) Speculative Transactions. Engage, or permit any of its
              ------------------------
     Subsidiaries to engage, in any transaction involving commodity options or
     futures contracts or any similar speculative transactions other than hedge
     agreements permitted pursuant to Section 28.3(b)(i)(B).

     28.4 Reporting Requirements.
          ----------------------

     So long as the Advance or any other Obligation of any Credit Party under
any Operative Agreement shall remain unpaid, any Letter of Credit shall be
outstanding or any Financing Party shall have any Commitment hereunder, Lessee
shall deliver to the Agent (with a courtesy copy to each Secured Party; provided
that the failure to provide any such courtesy copy to any Secured Party shall
not constitute a breach or violation of this Section 28.4 and shall not give
rise to any Default):

          (a) [not used]

          (b) Default Notice. As soon as possible and in any event within two
              --------------
     Business Days after the occurrence of any Default and within two Business
     Days after any Material Adverse Effect occurs or arises, a statement of the
     chief executive officer, chief financial officer, treasurer or controller
     of Lessee setting forth details thereof and the action that Lessee has
     taken and proposes to take with respect thereto.

          (c) Quarterly Financials. As soon as available and in any event within
              --------------------
     45 days after the end of each of the first three quarters of each fiscal
     year, Consolidated and consolidating balance sheets of Lessee and its
     Subsidiaries as of the end of such quarter and Consolidated and
     consolidating statements of income and cash flows of Lessee and its
     Subsidiaries for the period commencing at the end of the previous fiscal
     year and ending with the end of such quarter, setting forth in each case in
     comparative form the corresponding figures for such period (on a quarterly
     and year-to-date basis from the forecast delivered pursuant to Section
     28.4(l)) and the corresponding figures for the corresponding period of the
     preceding fiscal year, all in reasonable detail and duly certified (subject
     to year-end audit adjustments) by the chief executive officer or chief
     financial officer of Lessee as having been prepared in accordance with
     GAAP, together with (i) a certificate of such officer stating that the
     representations, warranties and covenants in Section 28.1 are true and
     correct in all material respects as of the date of such certificate and
     that no Default has occurred and is continuing or, if a Default has

                                       61
<PAGE>

     occurred and is continuing, a statement as to the nature thereof and the
     action that Lessee has taken and proposes to take with respect thereto, and
     (ii) a schedule in form satisfactory to the Agent of the computations used
     by Lessee in determining compliance with the covenants contained in
     Sections 28.3(a), (b), (d), (e), (f) and 28.5; provided that in the event
                                                    --------
     of any change in generally accepted accounting principles used in the
     preparation of such financial statements, Lessee shall also provide, if
     necessary for the determination of compliance with Section 28.5, a
     statement of reconciliation conforming such financial statements to GAAP.
     Notwithstanding the foregoing, however, Lessee shall not be required to
     report consolidating numbers with respect to Smart & Final de Mexico, S.A.
     de C.V.

          (d) Annual Financials. As soon as available and in any event within 90
              -----------------
     days after the end of each fiscal year, a copy of the annual audit report
     for such year for Lessee and its Subsidiaries, including therein audited
     Consolidated and unaudited consolidating balance sheets of Lessee and its
     Subsidiaries as of the end of such fiscal year and audited Consolidated and
     unaudited consolidating statements of income and cash flows of Lessee and
     its Subsidiaries for such fiscal year, in each case with respect to such
     audited balance sheets and statements of income and cash flow accompanied
     by an opinion acceptable to the Agent of Arthur Andersen LLP or other
     independent public accountants of recognized standing acceptable to the
     Agent, together with (i) a certificate of such accounting firm to the
     Secured Parties stating that in the course of the regular audit of the
     business of Lessee and its Subsidiaries, which audit was conducted by such
     accounting firm in accordance with generally accepted auditing standards,
     such accounting firm has obtained no knowledge that a Default has occurred
     and is continuing, or if, in the opinion of such accounting firm, a Default
     has occurred and is continuing, a statement as to the nature thereof, (ii)
     a schedule in form satisfactory to the Agent of the computations used by
     such accountants in determining, as of the end of such fiscal year,
     compliance with the covenants contained in Sections 28.3(a), (b), (d), (e),
     (f) and 28.5 and including a comparison of the results for such fiscal year
     to the results for such fiscal year set forth in the forecast delivered
     pursuant to Section 28.4(l), and (iii) a certificate of the chief executive
     officer, chief financial officer, treasurer or controller of Lessee (A)
     stating that the representations, warranties and covenants in Section 28.1
     are true and correct in all material respects as of the date of such
     certificate and that no Default has occurred and is continuing or, if a
     default has occurred and is continuing, a statement as to the nature
     thereof and the action that Lessee has taken and proposes to take with
     respect thereto, and (B) verifying, as of the end of such fiscal year,
     compliance with the covenants contained in Sections 28.3(a), (b), (d), (e),
     (f) and 28.5, and the computations (which shall be set forth therein) used
     in determining such compliance. Notwithstanding the foregoing, Lessee shall
     not be required to report consolidating numbers with respect to Smart &
     Final de Mexico, S.A. de C.V.

          (e) ERISA Events. Promptly and in any event within ten Business Days
              ------------
     after Lessee, any Subsidiary or any ERISA Affiliate knows or has reason to
     know that any material ERISA Event with respect to any such Person has
     occurred, a statement of the chief executive officer, chief financial
     officer, treasurer or controller of Lessee describing such ERISA Event and
     the action, if any, that the applicable Person has taken and/or proposes to
     take with respect thereto and, when known, any action taken or threatened
     by

                                       62
<PAGE>

     the Internal Revenue Service, the United States Department of Labor or the
     PBGC with respect thereto.

          (f) Plan Terminations. Promptly and in any event within 10 Business
              -----------------
     Days after receipt thereof by Lessee, any Subsidiary or any ERISA
     Affiliate, copies of any notice from the PBGC stating its intention to
     terminate any Employee Benefit Plan or to have a trustee appointed to
     administer any such Employee Benefit Plan.

          (g) Plan Annual Reports. Promptly and in any event within 30 days
              -------------------
     after the receipt of a request therefor by the Agent or the Majority
     Lenders, copies of each Schedule B (Actuarial Information) to the annual
     report (Form 5500 Series) with respect to each Plan of Lessee, each
     Subsidiary or each ERISA Affiliate.

          (h) Multiemployer Plan Notices. Promptly and in any event within 10
              --------------------------
     Business Days after receipt thereof by Lessee, any Subsidiary or any ERISA
     Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
     concerning (i) the imposition of Withdrawal Liability by any such
     Multiemployer Plan on Lessee, any Subsidiary or any ERISA Affiliate, (ii)
     the reorganization or termination, within the meaning of Title IV of ERISA,
     of any such Multiemployer Plan or (iii) the amount of liability incurred,
     or that may be incurred, by Lessee, any Subsidiary or any ERISA Affiliate
     in connection with any event described in clause (i) or (ii) above.

          (i) Litigation. As promptly as practicable, notice of the commencement
              ----------
     of, or any material adverse change in the status of or in the financial
     effect on any Credit Party or any Subsidiary thereof, any material actions,
     suits, investigations, litigation and proceedings before any court or
     governmental department, commission, board, bureau, agency or
     instrumentality, domestic or foreign, affecting any Credit Party or any of
     its Subsidiaries of the type described in Section 4.01(d) of the Lessee
     Credit Agreement that is not disclosed in any report filed by Lessee with
     the Securities Exchange Commission or any governmental authority that may
     be substituted therefor.

          (j) Press Releases; Securities Reports. Promptly after the sending or
              ----------------------------------
     filing thereof, copies of all (i) press releases, (ii) proxy statements,
     financial statements and reports that any Credit Party or any of its
     Subsidiaries sends to its stockholders, and (iii) regular, periodic and
     special reports, and all registration statements, that any Credit Party or
     any of its Subsidiaries files with the Securities and Exchange Commission
     or any governmental authority that may be substituted therefor, or with any
     national securities exchange.

          (k) Environmental Conditions. Promptly after the assertion or
              ------------------------
     occurrence thereof, notice of any material Environmental Claim against or
     of any material noncompliance by any Credit Party or any of their
     respective Subsidiaries with any Environmental Law or Environmental Permit,
     or any condition or occurrence on any property of any Credit Party or any
     of their respective Subsidiaries that results in or could (i) form the
     basis for such material Environmental Claim or material noncompliance, or
     (ii) cause any property of any Credit Party or any of their respective
     Subsidiaries to be

                                       63
<PAGE>

     subject to any material restrictions on ownership, occupancy, use or
     transferability under any Environmental Law.

          (l) Annual Forecasts. Together with the annual financial statements
              ----------------
     required pursuant to Section 28.4(d), forecasts prepared by management of
     Lessee, in form satisfactory to the Agent, of balance sheets, income
     statements and cash flow statements on a monthly basis for the fiscal year
     following such fiscal year and on an annual basis for each fiscal year
     thereafter until the Expiration Date, together with an explanation of the
     assumptions on which such forecasts are based.

          (m) Creditor Reports. If requested by the Agent, copies of any
              ----------------
     statement or report furnished to any holder of debt securities of any
     Credit Party or of any of its Subsidiaries pursuant to the terms of any
     indenture, loan or credit or similar agreement as to the occurrence of any
     "default" thereunder.

          (n) Lessee Credit Agreement Notices. Promptly upon receipt thereof,
              -------------------------------
     copies of (i) all notices, requests and other documents received by any
     Credit Party or any of its Subsidiaries under or pursuant to the
     transactions described in the Lessee Credit Agreement regarding any event
     that could materially impair the value of the interests or the rights of
     any Credit Party or otherwise have a Material Adverse Effect, (ii) any
     amendment, modification or waiver of any provision of the Lessee Credit
     Agreement or any related document (provided that compliance herewith shall
     not constitute a waiver of Section 28.3(j)), and (iii) from time to time
     upon request by the Agent, such information and reports regarding the
     Lessee Credit Agreement or any related document as the Agent may reasonably
     request; in each case, to the extent not otherwise required to be delivered
     to the Agent pursuant to any other clause of this Section 28.4.

          (o) Real Property. Within 30 days following any request by the Agent
              -------------
     (which request shall not be made more than once in any fiscal year unless a
     Default shall have occurred and be continuing), a report supplementing
     Schedules 28.1(r)(i) and 28.1(r)(ii), including an identification of all
     Owned Real Property and leased real property, as applicable, disposed of by
     any Credit Party or any of its Subsidiaries during the period from the
     Closing Date until delivery of such report or, if any such report has
     previously been provided, since the date of the most recent report, a list
     and description (including, if the Agent so requests, the street address,
     county or other relevant jurisdiction, state, record owner, book value
     thereof and, in the case of leases of property, the lessor, lessee,
     expiration date and annual rental cost thereof) of all real property
     acquired or leased during the period from the Closing Date until delivery
     of such report or, if any such report has previously been provided, since
     the date of the most recent report, and a description of such other changes
     in the information included in such Schedules as may be necessary for such
     Schedules to be accurate and complete.

          (p) Insurance. Within 30 days following any request by the Agent
              ---------
     (which request shall not be made more than once in any fiscal year unless a
     Default shall have occurred and be continuing), a report summarizing the
     insurance coverage (specifying type, amount and carrier) in effect for
     Lessee and its Subsidiaries and containing such

                                       64
<PAGE>

     additional information as the Agent, or any Secured Party through the
     Agent, may reasonably specify.

          (q) Other Information. Such other information respecting the business,
              -----------------
     condition (financial or otherwise), operations, performance, properties or
     prospects of any Credit Party as any Financing Party may from time to time
     reasonably request.

     28.5 Financial Covenants.
          -------------------

     So long as the Advance or any other Obligation of any Credit Party under
any Operative Agreement shall remain unpaid, Lessee will:

          (a) Net Worth. Maintain at all times a Consolidated Net Worth of not
              ---------
     less than the sum of (i) $270,000,000, plus (ii) 50% of positive cumulative
     Consolidated Net Income for any fiscal quarter of Lessee ending after the
     fiscal quarter ending October 8, 2001 (but without any deduction for any
     period in which Consolidated Net Income is a negative number) plus (iii)
     100% of the amount of all cash proceeds of any equity issuances by Lessee
     or any of its Subsidiaries after the date hereof.

          (b) Senior Leverage Ratio. Not permit the Senior Leverage Ratio at the
              ----------------------
     end of the fiscal quarters of Lessee set forth below to exceed the
     correlative ratio indicated:

  ---------------------------------------
  Fiscal Quarter           Leverage Ratio
  --------------           --------------
  ---------------------------------------
  Fourth Quarter 2001      3.25 to 1.0
  ---------------------------------------
  First Quarter 2002       3.25 to 1.0
  ---------------------------------------
  Second Quarter 2002      3.00 to 1.0
  ---------------------------------------
  Third Quarter 2002       3.00 to 1.0
  ---------------------------------------
  Fourth Quarter 2002      2.75 to 1.0
  ---------------------------------------
  First Quarter 2003       2.75 to 1.0
  ---------------------------------------
  Second Quarter 2003      2.75 to 1.0
  ---------------------------------------
  Third Quarter 2003       2.75 to 1.0
  ---------------------------------------
  Fourth Quarter 2003      2.50 to 1.0
  ---------------------------------------
  First Quarter 2004       2.50 to 1.0
  ---------------------------------------
  Second Quarter 2004      2.50 to 1.0
  ---------------------------------------
  Third Quarter 2004       2.25 to 1.0
  ---------------------------------------

          (c) Adjusted Leverage Ratio. Not permit the Adjusted Leverage Ratio at
              -----------------------
     the end of the fiscal quarters of Lessee set forth below to exceed the
     correlative ratio indicated:

  ----------------------------------------
  Fiscal Quarter            Leverage Ratio
  --------------            --------------
  ----------------------------------------
  Fourth Quarter 2001       4.5 to 1.0
  ----------------------------------------
  First Quarter 2002        4.5 to 1.0
  ----------------------------------------
  Second Quarter 2002       4.5 to 1.0
  ----------------------------------------
  Third Quarter 2002        4.5 to 1.0
  ----------------------------------------
  Fourth Quarter 2002       4.5 to 1.0
  ----------------------------------------
  First Quarter 2003        4.5 to 1.0
  ----------------------------------------

                                      65

<PAGE>

  ----------------------------------------
  Second Quarter 2003       4.5 to 1.0
  ----------------------------------------
  Third Quarter 2003        4.5 to 1.0
  ----------------------------------------
  Fourth Quarter 2003       4.25 to 1.0
  ----------------------------------------
  First Quarter 2004        4.25 to 1.0
  ----------------------------------------
  Second Quarter 2004       4.25 to 1.0
  ----------------------------------------
  Third Quarter 2004        4.25 to 1.0
  ----------------------------------------

          (d) Fixed Charge Coverage Ratio. Maintain at all times a Fixed Charge
              ---------------------------
     Coverage Ratio of not less than 2.0 to 1.0.

          (e) Capital Expenditures. Not make, or permit any of its Subsidiaries
              --------------------
     to make, any Capital Expenditures that would cause the aggregate of all
     such Capital Expenditures made by Lessee and its Subsidiaries to exceed
     $50,000,000 during each of the fiscal years ending December 29, 2002 and
     December 28, 2003, respectively, and $55,000,000 during the fiscal year
     ending January 1, 2005 (such amount, for each such fiscal year, the
     "Maximum Expenditure Amount"), provided that the Maximum Expenditure Amount
      --------------------------
     for any fiscal year, beginning with the fiscal year ending December 28,
     2003, shall be increased by an amount equal to the excess, if any, of the
     Maximum Expenditure Amount for the previous year (without giving effect to
     any previous adjustment made in accordance with this proviso) over the
     actual amount of Capital Expenditures made during such previous fiscal
     year, but in no event shall such increase exceed $10,0000,000

                                  ARTICLE XXIX

     29.1 Notices.
          -------

     All notices required or permitted to be given under this Lease shall be in
writing and delivered as provided in the Participation Agreement.

                                  ARTICLE XXX

     30.1 Miscellaneous.
          -------------

     Anything contained in this Lease to the contrary notwithstanding, all
claims against and liabilities of Lessee or Lessor arising from events
commencing prior to the expiration or earlier termination of this Lease shall
survive such expiration or earlier termination. If any provision of this Lease
shall be held to be unenforceable in any jurisdiction, such unenforceability
shall not affect the enforceability of any other provision of this Lease and
such jurisdiction or of such provision or of any other provision hereof in any
other jurisdiction.

     30.2 Amendments and Modifications.
          ----------------------------

     Neither this Lease nor any Lease Supplement may be amended, waived,
discharged or terminated except in accordance with the provisions of Section
12.4 of the Participation Agreement.

                                       66
<PAGE>

     30.3 Successors and Assigns.
          ----------------------

     All the terms and provisions of this Lease shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns.

     30.4 Headings and Table of Contents.
          ------------------------------

     The headings and table of contents in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

     30.5 Counterparts.
          ------------

     This Lease may be executed in any number of counterparts, each of which
shall be an original, but all of which shall together constitute one and the
same instrument.

     30.6 GOVERNING LAW
          -------------

     THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, EXCEPT TO THE EXTENT THE
LAWS OF THE STATE WHERE A PARTICULAR PROPERTY IS LOCATED ARE REQUIRED TO APPLY.

     30.7 [Not Used]
          ----------

     30.8 Memoranda of Lease and Lease Supplements.
          ----------------------------------------

     This Lease shall not be recorded; provided, Lessor and Lessee shall
                                       --------
promptly record (a) a memorandum of this Lease and the applicable Lease
Supplement (in substantially the form of Exhibit B attached hereto) or a short
                                         ---------
form lease (in form and substance reasonably satisfactory to Lessor) regarding
each Property promptly after the acquisition thereof in the local filing office
with respect thereto, in all cases at Lessee's cost and expense, and as required
under applicable law to sufficiently evidence this Lease and any such Lease
Supplement in the applicable real estate filing records. Lessor (at the
direction of the Agent) shall elect whether the costs and expenses incurred by
Lessor and/or the Agent respecting the recordation of the above-referenced items
shall be paid by either (i) Lessor (but only the extent amounts are available
therefor with respect to the Advance) or (ii) Lessee; provided, amounts funded
by Lessee with respect to such costs and expenses shall be a part of (and
limited by) the Maximum Residual Guarantee Amount.

     30.9 Allocations between the Lenders and the Holders.
          -----------------------------------------------

     Notwithstanding any other term or provision of this Lease to the contrary,
the allocations of the proceeds of the Properties and any and all other Rent and
other amounts received hereunder shall be subject to the inter-creditor
provisions between the Lenders and the Holders contained in the Operative
Agreements (or as otherwise agreed among the Lenders and the Holders from time
to time).

                                       67
<PAGE>

     30.10 Limitations on Recourse.
           -----------------------

     Notwithstanding anything contained in this Lease to the contrary, Lessee
agrees to look solely to Lessor's estate and interest in the Properties (and in
no circumstance to the Agent, the Lenders, the Holders or otherwise to Lessor)
for the collection of any judgment requiring the payment of money by Lessor in
the event of liability by Lessor, and no other property or assets of Lessor or
any shareholder, owner or partner (direct or indirect) in or of Lessor, or any
director, officer, employee, beneficiary, Affiliate of any of the foregoing
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Lessee under or with respect to this Lease, the
relationship of Lessor and Lessee hereunder or Lessee's use of the Properties or
any other liability of Lessor to Lessee. Nothing in this Section 30.10 shall be
                                                         -------------
interpreted so as to limit the terms of Sections 6.1 or 6.2 or the provisions of
                                        ------------    ---
Section 12.9 of the Participation Agreement.

     30.11 WAIVERS OF JURY TRIAL.
           ---------------------

     EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO THE FULLEST
EXTENT ALLOWED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LEASE AND FOR ANY COUNTERCLAIM THEREIN.

     30.12 Exercise of Lessor Rights.
           -------------------------

     Lessee hereby acknowledges and agrees that the rights and powers of Lessor
under this Lease have been assigned to the Agent pursuant to the terms of the
Security Agreement and the other Operative Agreements. Lessor and Lessee hereby
acknowledge and agree that (a) the Agent shall, in its discretion, direct and/or
act on behalf of Lessor pursuant to the provisions of Sections 8.2(h) and 8.6 of
the Participation Agreement, (b) all notices to be given to Lessor shall be
given to the Agent and (c) all notices to be given by Lessor may be given by the
Agent, at its election.

     30.13 SUBMISSION TO JURISDICTION AND VENUE.
           ------------------------------------

     THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO
JURISDICTION AND VENUE ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS
                                                                    -------
MUTANDIS.
--------

     30.14 USURY SAVINGS PROVISION.
           -----------------------

     IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN STRICT
COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. TO THE EXTENT
ANY RENT OR PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED BY ANY COURT OF
COMPETENT JURISDICTION AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THIS
SECTION 30.14 SHALL APPLY. ANY SUCH RENT OR PAYMENTS SO CHARACTERIZED AS
INTEREST MAY BE REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE
PARTIES HERETO ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH
SHALL OVERRIDE AND CONTROL ALL SUCH

                                       68
<PAGE>

AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR
ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION
PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL ANY
INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS LEASE
OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE
LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR
ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS
OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE
PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS
SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER
APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW
DOCUMENT OR AGREEMENT. IF LESSOR SHALL EVER RECEIVE ANYTHING OF VALUE WHICH IS
CHARACTERIZED AS INTEREST WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR
UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF
THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN
EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE
COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST,
OR REFUNDED TO LESSEE OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH
AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED
TO BE PRINCIPAL. ALL INTEREST PAID OR AGREED TO BE PAID TO LESSOR SHALL, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND
SPREAD THROUGHOUT THE FULL STATED TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL
OR EXTENSION) OF THIS LEASE SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH
PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE
LAW.

     30.15 Release of Collateral.
           ---------------------

     Upon Lessee's written request to Lessor and notice to the Agent, Lessor
shall release any item of Collateral described in a Subordinate Mortgage
Instrument or the Subordinate Security Agreement if the disposition of such
Collateral is permitted by and complies with Section 28.3(d) and if Lessor
receives a certificate from a Responsible Officer of Lessee as to such
compliance.

                            [signature page follows]

                                       69
<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed
and delivered as of the date first above written.

                                     LESSOR:

                                     WELLS FARGO BANK NORTHWEST,
                                     NATIONAL ASSOCIATION, not
                                     individually, but solely as
                                     the Owner Trustee under S&F
                                     Trust
                                     1998-1

                                     By: /s/ C. Scott Nielsen
                                        ---------------------------------
                                     Name: C. Scott Nielsen
                                     Title:Vice President

                                [Lease Agreement]
<PAGE>

                                     LESSEE:

                                     SMART & FINAL INC.

                                     By: /s/ Richard N. Phegley
                                        ----------------------------------
                                     Name: Richard N. Phegley
                                     Title: Senior Vice President and
                                            Chief Financial Officer

                                     By: /s/ Donald G. Alvarado
                                        ----------------------------------
                                     Name: Donald G. Alvarado
                                     Title:Senior Vice President and Secretary

                                        i
<PAGE>

                                    CERTAIN OF THE RIGHT, TITLE AND INTEREST OF
                                    THE OWNER LESSOR IN AND TO THIS FACILITY
                                    LEASE AND THE RENT DUE AND TO BECOME DUE
                                    HEREUNDER HAVE BEEN ASSIGNED AS COLLATERAL
                                    SECURITY TO, AND ARE SUBJECT TO A FIRST
                                    PRIORITY SECURITY INTEREST IN FAVOR OF FLEET
                                    CAPITAL CORPORATION, AS SECURED PARTY, AND
                                    THE OWNER LESSOR, AS DEBTOR.

                                    *Receipt of the original counterpart of the
                                    foregoing Lease Agreement is hereby
                                    acknowledged on this     day of November,
                                                         ---
                                    2001.

                                    FLEET CAPITAL CORPORATION

                                    By:___________________________________
                                    Name:_________________________________
                                    Title:________________________________

                                    __________________________________________
                                    * This acknowledgement executed in the
                                    original counterpart only.

                                       ii<PAGE>

                                                                   Exhibit 10.21

                                  $175,000,000

                                CREDIT AGREEMENT

                          Dated as of November 30, 2001

                                      Among

                               SMART & FINAL INC.,

                                   as Borrower
                                   -----------

                    THE FINANCIAL INSTITUTIONS NAMED HEREIN,

                               as Initial Lenders
                               ------------------

                                  BNP PARIBAS,

                   as Administrative Agent and Lead Arranger,
                   -----------------------------------------

                          HARRIS TRUST & SAVINGS BANK,

                              as Syndication Agent
                              --------------------

                                       and

              COOPERATIVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
                     "RABOBANK NEDERLAND", NEW YORK BRANCH,

                             as Documentation Agent
                             ----------------------
<PAGE>

                                TABLE OF CONTENTS
                                -----------------
<TABLE>
<S>                                                                                               <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.....................................................    1
------------------------------------------
   Section 1.01   Certain Defined Terms........................................................    1
   ------------   ---------------------
   Section 1.02   Computation of Time Periods..................................................   24
   ------------   ---------------------------
   Section 1.03   Accounting Terms.............................................................   24
   ------------   ----------------
   Section 1.04   Other Definitional Provisions................................................   24
   ------------   -----------------------------
   Section 1.05   Exhibits and Schedules.......................................................   24
   ------------   ----------------------
   Section 1.06   Ownership of Synthetic Lease Properties......................................   24
   ------------   ---------------------------------------
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES...................................................   24
--------------------------------------------
   Section 2.01   The Advances.................................................................   24
   ------------   ------------
   Section 2.02   Making the Advances..........................................................   26
   ------------   -------------------
   Section 2.03   Repayment....................................................................   29
   ------------   ---------
   Section 2.04   Reduction of the Revolving Commitments and Swing Line Commitments............   30
   ------------   -----------------------------------------------------------------
   Section 2.05   Prepayments..................................................................   31
   ------------   -----------
   Section 2.06   Interest.....................................................................   33
   ------------   --------
   Section 2.07   Fees.........................................................................   36
   ------------   ----
   Section 2.08   Increased Costs, Etc.........................................................   37
   ------------   ---------------------
   Section 2.09   Payments and Computations....................................................   38
   ------------   -------------------------
   Section 2.10   Taxes........................................................................   41
   ------------   -----
   Section 2.11   Sharing of Payments, Etc.....................................................   45
   ------------   -------------------------
   Section 2.12   Use of Proceeds..............................................................   45
   ------------   ---------------
   Section 2.13   Evidence of Debt.............................................................   46
   ------------   ----------------
   Section 2.14   Conversion of Advances.......................................................   46
   ------------   ----------------------
ARTICLE III AMOUNTS AND TERMS OF LETTERS OF CREDIT.............................................   47
--------------------------------------------------
   Section 3.01   The Letter of Credit Subfacility.............................................   47
   ------------   --------------------------------
   Section 3.02   Issuance of Letters of Credit................................................   47
   ------------   -----------------------------
   Section 3.03   Drawing and Reimbursement....................................................   48
   ------------   -------------------------
   Section 3.04   Obligations Absolute.........................................................   48
   ------------   --------------------
   Section 3.05   Letter of Credit Compensation................................................   49
   ------------   -----------------------------
   Section 3.06   Use of Letters of Credit.....................................................   50
   ------------   ------------------------
ARTICLE IV CONDITIONS OF LENDING...............................................................   50
--------------------------------
   Section 4.01   Conditions Precedent to Initial Borrowing....................................   50
   ------------   -----------------------------------------
   Section 4.02   Conditions Precedent to Each Borrowing and Issuance..........................   56
   ------------   ---------------------------------------------------
   Section 4.03   Determinations Under Section 4.01............................................   57
   ------------   ---------------------------------
ARTICLE V REPRESENTATIONS AND WARRANTIES.......................................................   57
----------------------------------------
   Section 5.01   Representations and Warranties of the Borrower...............................   57
   ------------   ----------------------------------------------
ARTICLE VI COVENANTS OF THE BORROWER...........................................................   68
------------------------------------
   Section 6.01   Affirmative Covenants........................................................   68
   ------------   ---------------------
   Section 6.02   Negative Covenants...........................................................   75
   ------------   ------------------
   Section 6.03   Reporting Requirements.......................................................   82
   ------------   ----------------------
   Section 6.04   Financial Covenants..........................................................   86
   ------------   -------------------
ARTICLE VII EVENTS OF DEFAULT..................................................................   88
-----------------------------
   Section 7.01   Events of Default............................................................   88
   ------------   -----------------
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                            <C>
   Section 7.02   Actions in Respect of the Letters of Credit Upon Default.....................   90
   ------------   --------------------------------------------------------
ARTICLE VIII THE CREDIT AGENTS.................................................................   91
------------------------------
   Section 8.01   Authorization and Action.....................................................   91
   ------------   ------------------------
   Section 8.02   Credit Agents' Reliance, Etc.................................................   92
   ------------   -----------------------------
   Section 8.03   Credit Agents and Affiliates.................................................   92
   ------------   ----------------------------
   Section 8.04   Lender Party Credit Decision.................................................   93
   ------------   ----------------------------
   Section 8.05   Indemnification..............................................................   93
   ------------   ---------------
   Section 8.06   Successor Agents.............................................................   94
   ------------   ----------------
   Section 8.07   Syndication Agent and Documentation Agent....................................   94
   ------------   -----------------------------------------
   Section 8.08   Secured Hedge Agreements.....................................................   94
   ------------   -------------------------
ARTICLE IX MISCELLANEOUS.......................................................................   95
------------------------
   Section 9.01   Amendments, Etc.; Release of Collateral; Termination.........................   95
   ------------   ----------------------------------------------------
   Section 9.02   Notices, Etc.................................................................   96
   ------------   -------------
   Section 9.03   No Waiver; Remedies..........................................................   96
   ------------   -------------------
   Section 9.04   Costs and Expenses...........................................................   97
   ------------   ------------------
   Section 9.05   Right of Set-off.............................................................   99
   ------------   ----------------
   Section 9.06   Binding Effect...............................................................   99
   ------------   --------------
   Section 9.07   Assignments and Participations...............................................   99
   ------------   ------------------------------
   Section 9.08   Governing Law................................................................  102
   ------------   -------------
   Section 9.09   Execution in Counterparts....................................................  102
   ------------   -------------------------
   Section 9.10   No Liability of the L/C Bank.................................................  103
   ------------   ----------------------------
   Section 9.11   Confidentiality..............................................................  103
   ------------   ---------------
   Section 9.12   Waiver of Jury Trial.........................................................  103
   ------------   --------------------
   Section 9.13   Marshalling; Payments Set Aside..............................................  104
   ------------   -------------------------------
   Section 9.14   Agreement to Enter Into New Intercreditor Agreement..........................  104
   ------------   ---------------------------------------------------
</TABLE>

                                       ii
<PAGE>

                             SCHEDULES AND EXHIBITS
                             ----------------------

Schedules
---------
Schedule I                 Commitments, Etc.
Schedule 4.01(h)(v)        Jurisdictions
Schedule 5.01(b)           Capital Stock of Loan Parties
Schedule 5.01(d)           Approvals and Consents
Schedule 5.01(h)           Litigation
Schedule 5.01(j)           Pension Plans
Schedule 5.01(l)(ii)       Superfund Site
Schedule 5.01(n)           Open Years
Schedule 5.01(q)(i)        Surviving Debt
Schedule 5.01(r)(i)        Owned Real Property
Schedule 5.01(r)(ii)       Leased Real Property
Schedule 5.01(s)           Existing Investments
Schedule 5.01(t)           Intellectual Property
Schedule 5.01(u)           Certain Agreements, Etc.
Schedule 5.01(y)           Insurance
Schedule 6.02(a)           Existing Liens

Exhibits
--------
Exhibit A     Form of Assignment and Acceptance
Exhibit B-1   Form of Notice of Borrowing
Exhibit B-2   Form of Notice of Swing Line Borrowing
Exhibit C     Form of Notice of Issuance
Exhibit D-1   Form of Revolving Note
Exhibit D-2   Form of Swing Line Note
Exhibit E-1   Form of Security Agreement
Exhibit E-2   Form of Pledge Agreement
Exhibit E-3   Form of Subordinate Security Agreement
Exhibit F-1   Form of Deed of Trust
Exhibit F-2   Form of Leasehold Deed of Trust
Exhibit G     Form of Guaranty
Exhibit H     Form of Intercompany Note
Exhibit I     Form of Solvency Certificate
Exhibit J-1   Form of Opinion of Borrower's Special California Counsel
Exhibit J-2   Form of Opinion of Borrower's In-House Counsel
Exhibit K     Form of Borrowing Base Certificate
Exhibit L     Form of Amendment to Guaranty
Exhibit M-1   Form of Amendment to Security Agreement
Exhibit M-2   Form of Amendment to Pledge Agreement
Exhibit N-1   Form of Second Deed of Trust on Fee Interest in Synthetic Lease
              Properties
Exhibit N-2   Form of Second Deed of Trust on Leasehold Interest in Synthetic
              Lease Properties
Exhibit O     Form of Landlord's Waiver and Consent Agreement

                                       iii
<PAGE>

Exhibit P     Form of Environmental Indemnity Agreement
Exhibit Q-1   Form of Intercreditor Agreement (Owned Property)
Exhibit Q-2   Form of Intercreditor Agreement (Leased Property)

                                       iv
<PAGE>

                                                           SASM&F 11/29/01 DRAFT

          CREDIT AGREEMENT, dated as of November 30, 2001 among SMART & FINAL
INC., a Delaware corporation (the "Borrower"), the financial institutions and
                                   --------
other entities listed on the signature pages hereof as Lenders (the "Initial
                                                                     -------
Lenders"), BNP PARIBAS, as Administrative Agent (in such capacity, together with
-------
any successor in such capacity appointed pursuant to Article VIII, the
"Administrative Agent"), and as Lead Arranger (in such capacity, the "Lead
 --------------------           -------------                         ----
Arranger"), and BNP PARIBAS, as L/C Bank (as hereinafter defined).
--------

                             PRELIMINARY STATEMENTS

          (1) The Borrower has requested, on the terms and conditions set forth
herein, (a) that the Lenders make Revolving Advances (as hereinafter defined) to
the Borrower from time to time in an aggregate principal amount not to exceed at
any time outstanding the aggregate Revolving Commitments (as hereinafter
defined) of the Lenders less the sum of (i) the aggregate amount of Letter of
Credit Obligations (as hereinafter defined) outstanding at such time, and (ii)
Swing Line Advances (as hereinafter defined) outstanding from time to time, (b)
that the Swing Line Lender (as hereinafter defined) make Swing Line Advances to
the Borrower from time to time in an aggregate principal amount not to exceed at
any time outstanding Ten Million Dollars ($10,000,000) and (c) that the L/C Bank
issue Letters of Credit (as hereinafter defined) for the account of the Borrower
from time to time in an aggregate Available Amount (as hereinafter defined) not
to exceed at any time outstanding the L/C Sublimit (as hereinafter defined).

          (2) Subject to the terms and conditions set forth in this Agreement,
(a) the Lenders have agreed severally to make such Revolving Advances to the
Borrower, (b) the Swing Line Lender has agreed to make such Swing Line Advances
to the Borrower, and (c) the L/C Bank has agreed to issue such Letters of Credit
for the account of the Borrower.

                                    AGREEMENT

          NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

     Section 1.01  Certain Defined Terms. As used in this Agreement, the
                   ---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
<PAGE>

          "Accounts Receivable" means all "accounts" as defined in the Uniform
           -------------------
Commercial Code in effect from time to time in the State of California.

          "Additional Costs" means any amount payable by Borrower to any Lender
           ----------------
Party pursuant to Section 2.08 hereof.

          "Additional Mortgages" has the meaning set forth in Section 6.01(1).
           --------------------

          "Adjusted EBITDA" means, for any period, determined for the Borrower
           ---------------
and its Subsidiaries on a Consolidated basis, EBITDA plus the interest component
of all amounts paid as rent under the Synthetic Lease.

          "Adjusted Leverage Ratio" means, as of any date of determination, the
           -----------------------
ratio of (i) the sum of (A) Consolidated Total Debt as of the end of the most
recently ended fiscal quarter of the Borrower plus (B) the product of (1) rent
                                              ----
expense (including amounts paid as rent under the Synthetic Lease) for the
Borrower and its Subsidiaries on a Consolidated basis for the period of four
fiscal quarters ending as of the end of the most recently ended fiscal quarter
of the Borrower multiplied by (2) 8 to (ii) the sum of (A) EBITDA for the
                ----------
Borrower and its Subsidiaries on a Consolidated basis for the period of four
fiscal quarters ending as of the end of the most recently ended fiscal quarter
of the Borrower plus, (B) rent expense (including amounts paid as rent under the
                ----
Synthetic Lease) for the Borrower and its Subsidiaries on a Consolidated basis
for the period of four fiscal quarters ending as of the end of the most recently
ended fiscal quarter of the Borrower.

          "Administrative Agent's Account" means the account of the
           ------------------------------
Administrative Agent as the Administrative Agent shall specify in writing to the
Lender Parties.

          "Advance" means a Revolving Advance, a Swing Line Advance or an L/C
           -------
Advance.

          "Affiliate" means, as to any Person, any other Person that, directly
           ---------
or indirectly, controls, is controlled by or is under common control with such
Person. For purposes of this definition, the term "control" (including the terms
"controlling", "controlled by" and "under common control with") of a Person
means the possession, direct or indirect, of the power to vote 10% or more of
the Voting Interests of such Person or direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Interests, by contract or otherwise.

          "Agreement" means this Credit Agreement, including the Schedules and
           ---------
Exhibits hereto, as it may be amended, restated, extended, supplemented or
otherwise modified from time to time.

          "Applicable Lending Office" means, with respect to each Lender, such
           -------------------------
Lender's Domestic Lending Office in the case of a Base Rate Advance and such
Lender's Eurodollar Lending Office in the case of a Eurodollar Rate Advance.

                                       2
<PAGE>

          "Applicable Margin" means, for any fiscal quarter for each Interest
           -----------------
Type of Advance set forth below, the applicable rate per annum set forth in the
table below opposite the Adjusted Leverage Ratio determined as of the last day
of the immediately preceding fiscal quarter and beneath such Interest Type of
Advance:

--------------------------------------------------------------------------
                                 Applicable Margin for   Applicable Margin
       Adjusted Leverage Ratio         Eurodollar Rate      for Base Rate
Tier                                  Advances                Advances
--------------------------------------------------------------------------
 I             *4.25                    2.50%                 1.50%
--------------------------------------------------------------------------
 II        *3.75 but **4.25             2.25%                 1.25%
--------------------------------------------------------------------------
III       *3.25 but **3.75              2.00%                 1.00%
--------------------------------------------------------------------------
 IV         **3.25                      1.75%                 0.75%
--------------------------------------------------------------------------

provided, however, that, notwithstanding the foregoing, (i) on the Closing Date
--------  -------
and until the six month anniversary thereof, the Applicable Margin shall be 2.5%
for Eurodollar Rate Advances and 1.5% for Base Rate Advances, and (ii) for
purposes of determining the Applicable Margin at any time following the six
month anniversary of the Closing Date, the Adjusted Leverage Ratio shall be
deemed to be greater than or equal to 4.25 to 1.0 at all times when a Default
has occurred and is continuing based on the Borrower's failure to deliver any
financial statement, compliance certificate or Borrowing Base Certificate as and
when required pursuant to Sections 6.03(a), 6.03(c) or 6.03(d), as applicable.
For purposes of this Agreement, any change in the Applicable Margin based on a
change in the Adjusted Leverage Ratio shall be effective three Business Days
after the date of receipt by the Administrative Agent of the financial
statements, compliance certificate and Borrowing Base Certificate required by
Sections 6.03(a), 6.03(c) and 6.03(d), as applicable, reflecting such change.

          "Assignment and Acceptance" means an assignment and acceptance entered
           -------------------------
into by a Lender Party and an Eligible Assignee, and accepted by the Borrower
(if required hereunder) and the Administrative Agent, in accordance with Section
9.07 and in substantially the form of Exhibit A hereto.

          "Available Amount" of any Letter of Credit means, at any time, the
           ----------------
maximum amount available to be drawn under such Letter of Credit at such time
(assuming compliance at such time with all conditions to drawing).

          "Bank Hedge Agreement" means a Hedge Agreement between the Borrower
           --------------------
and a Hedge Bank (or Hedge Banks) or a Secured Hedge Bank (or Secured Hedge
Banks).

          "Base Rate" means a fluctuating interest rate per annum in effect from
           ---------
time to time, which rate per annum shall at all times be equal to the higher of:
(a) the rate of interest established by BNP Paribas as its "base rate," with
each change in such rate to be effective for purposes of this Agreement and the
transactions contemplated hereby without necessity of any action on the part of
any Person, on the day on which such change is effective, it being understood
that such rate does not and shall not necessarily reflect the best or lowest
rate of interest available to BNP Paribas' best or preferred

*  = more than equals to
** = less than

                                       3
<PAGE>

commercial customers and (b) 1/2 of one percent per annum above the Federal
Funds Rate.

          "Base Rate Advance" means an Advance that bears interest as provided
           -----------------
in Section 2.06(a).

          "Borrower" has the meaning set forth in the recital of parties to this
           --------
Agreement.

          "Borrower's Account" means the account of the Borrower which the
           ------------------
Borrower designates to the Administrative Agent in writing from time to time.

          "Borrowing" means a Revolving Borrowing or a Swing Line Borrowing.
           ---------

          "Borrowing Base Amount" means, at any time of determination, the
           ---------------------
lesser of (i) the aggregate Revolving Commitments in effect at such time, and
(ii) the sum of the following amounts for each category of Eligible Collateral
(as reflected in the then most recently delivered Borrowing Base Certificate):

          (a)  with respect to Eligible Inventory, 60% of the value thereof, and

          (b) with respect to Eligible Accounts Receivable, 80% of the value
thereof;

provided, however, that in the event a Default has occurred and is continuing
--------  -------
based on the Borrower's failure to deliver any financial statement, compliance
certificate or Borrowing Base Certificate as and when required pursuant to
Sections 6.03(a), 6.03(c), or 6.03(d), as applicable, the Borrowing Base Amount
shall be such amount as may be determined from time to time by the
Administrative Agent and the Required Lenders in their sole discretion.

          "Borrowing Base Availability" means, at any time, an amount equal to
           ---------------------------
the Borrowing Base Amount minus the sum of (i) the then outstanding aggregate
principal amount of the Revolving Advances and the Swing Line Advances and (ii)
the aggregate Letters of Credit Obligations then outstanding.

          "Borrowing Base Certificate" means a certificate of the Borrower
           --------------------------
concerning the Borrowing Base Amount of the Borrower substantially in the form
of Exhibit K.

          "Borrowing Base Deficiency" means, at any time, the amount by which
           -------------------------
the then outstanding aggregate principal amount of the Revolving Advances and
the Swing Line Advances plus (ii) the aggregate Letters of Credit Obligations
then outstanding exceeds the Borrowing Base Amount.

          "Business Day" means a day of the year on which banks are not required
           -------------
or authorized by law to close in Los Angeles, California or New York, New York
and, if

                                       4
<PAGE>

the applicable Business Day relates to any Eurodollar Rate Advances, on which
dealings are carried on in the London interbank market.

          "Capital Expenditures" means, for any period, the sum of (a) all
           --------------------
expenditures during such period for equipment, fixed assets, real property or
improvements, or for replacements or substitutions therefor or additions
thereto, that have a useful life of more than one year plus (b) the aggregate
principal amount of all Debt (including obligations under Capitalized Leases)
assumed or incurred in connection with any such expenditures.

          "Capitalized Leases" means leases that have been or should be, in
           ------------------
accordance with GAAP, recorded as capital leases.

          "Cash Equivalents" means any of the following, to the extent owned by
           ----------------
the Borrower free and clear of all Liens and having a maturity of not greater
than 180 days from the date of acquisition thereof: (a) readily marketable
direct obligations of the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally guaranteed by the full
faith and credit of the Government of the United States, (b) insured
certificates of deposit of or time deposits with any commercial bank that (i) is
a Lender or a member of the Federal Reserve System, (ii) issues (or the parent
of which issues) commercial paper rated as described in clause (c), (iii) is
organized under the laws of the United States or any State thereof and (iv) has
combined capital and surplus of at least $1 billion or (c) commercial paper
(other than commercial paper issued by or on behalf of the Borrower or any of
its Affiliates) in an aggregate amount of no more than $500,000 per issuer
outstanding at any time, issued by any corporation organized under the laws of
any State of the United States and rated at least "Prime-1" (or the then
equivalent grade) by Moody's Investors Services or "A-1" (or the then equivalent
grade) by Standard & Poor's Ratings Group.

          "Casino" means Casino USA, Inc. and its Affiliates.
           ------

          "Casino Note" means the promissory note dated as of June 11, 1999
           -----------
issued by the Borrower in favor of Casino in the principal amount of
$15,964,606.25.

          "Casino Tax Sharing Documents" means the Tax Allocation Agreement by
           ----------------------------
and between Smart & Final Iris Corporation and Casino, dated November 5, 1984,
and the Tax Termination Agreement by and between the Borrower and Casino, dated
August 6, 1991, both as amended January 3, 1993.

          "CERCLA" means the Comprehensive Environmental Response, Compensation
           ------
and Liability Act of 1980, as amended or supplemented from time to time, and the
regulations promulgated pursuant thereto.

          "Closing Date" means the date on which each of the conditions in
           ------------
Section 4.01 is satisfied or waived.

                                       5
<PAGE>

          "Collateral" means all "Collateral" referred to in the Collateral
           ----------
Documents and all other property that is subject to any Lien in favor of the
Administrative Agent, the Lenders or any L/C Bank.

          "Collateral Documents" means the Security Agreement, the Pledge
           --------------------
Agreement, the Mortgages and any Additional Mortgages, and all exhibits and
schedules to (and any documents executed in connection with) the foregoing, and
any other agreement that creates or purports to create a Lien in favor of the
Administrative Agent for the benefit of the Secured Parties.

          "Commitment" means a Revolving Commitment or a Swing Line Commitment.
           ----------

          "Commitment Fee Percentage" means a fee per annum on the undrawn
           -------------------------
amount of the Facility as set forth below payable quarterly in arrears (and on
the Commitment Termination Date) following the Closing:

----------------------------------------------------------
Tier   Adjusted Leverage Ratio   Commitment Fee Percentage
----------------------------------------------------------
 I            *4.25                     0.50%
----------------------------------------------------------
 II     *3.75 but **4.25                0.40%
----------------------------------------------------------
III     *3.25 but **3.75                0.35%
----------------------------------------------------------
 IV         **3.25                      0.30%
----------------------------------------------------------

provided, however, that, notwithstanding the foregoing, (i) on the Closing Date
--------  -------
and until the six month anniversary thereof, the Commitment Fee Percentage shall
be 0.50%, and (ii) for purposes of determining the Commitment Fee Percentage
thereafter, the Adjusted Leverage Ratio shall be deemed to be greater than or
equal to 4.25 to 1.0 at all times when a Default has occurred and is continuing
based on the Borrower's failure to deliver any financial statement, compliance
certificate or Borrowing Base Certificate as and when required pursuant to
Sections 6.03(a), 6.03(c) or 6.03(d), as applicable. For purposes of this
Agreement, any change in the Commitment Fee Percentage based on a change in the
Adjusted Leverage Ratio shall be effective three Business Days after the date of
receipt by the Administrative Agent of the financial statements, compliance
certificate and Borrowing Base Certificate required by Sections 6.03(a), 6.03(c)
and 6.03(d), as applicable, reflecting such change.

          "Commitment Termination Date" means November 30, 2004, on which date
           ---------------------------
the Facilities shall terminate and all amounts outstanding thereunder shall be
due and payable, subject to early termination and acceleration upon the
occurrence of an Event of Default.

          "Confidential Information" means information that the Borrower
           ------------------------
furnishes to the Administrative Agent or any Lender in a writing designated as
confidential but does not include any such information that is or becomes
generally available to the public or that is or becomes available to the
Administrative Agent or such Lender from a source other than the Borrower that
is not, to the best of the

*  = more than equals to
** = less than

                                       6
<PAGE>

Administrative Agent's or such Lender's knowledge, acting in violation of a
confidentiality agreement with the Borrower.

          "Consolidated" refers to the consolidation of accounts in accordance
           ------------
with GAAP.

          "Consolidated Interest Expense" means, for any period, total interest
           -----------------------------
expense (including the interest component of Capitalized Leases) of the Borrower
and its Subsidiaries on a Consolidated basis for such period in conformity with
GAAP, including, without limitation, all commissions, discounts and other fees
and charges owed with respect to any financings or letters of credit, but
excluding charges in such period for the amortization or write-off of
capitalized (i) amounts payable pursuant to Section 2.07, (ii) other non-cash
charges for amortization or write-off of debt issuance expenses incurred prior
to the date hereof, and (iii) other expenses relating to the negotiation and
preparation of this Agreement.

          "Consolidated Net Income" means, for any period, the net earnings (or
           -----------------------
loss) after taxes of the Borrower and its Subsidiaries on a Consolidated basis
determined for such period in conformity with GAAP.

          "Consolidated Net Worth" means the excess of (i) the total assets of
          -----------------------
the Borrower and its Subsidiaries determined on a Consolidated basis in
accordance with GAAP, over (ii) all liabilities of the Borrower and its
Subsidiaries determined on a Consolidated basis in accordance with GAAP.

          "Consolidated Total Debt" means, as of any time of determination,
           -----------------------
determined for the Borrower and its Subsidiaries on a consolidated basis, (i)
indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) non-contingent obligations
to pay the deferred purchase price of property or services other than trade
payables incurred in the ordinary course of business, (iv) Capitalized Leases,
(v) all Obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities and (vi) all indebtedness of others
referred to in clauses (i) through (v) above guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (w) to pay or purchase such indebtedness or to
advance or supply funds for the payment or purchase of such indebtedness, (x) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such indebtedness or to assure the holder of such indebtedness against loss, (y)
to supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such property
is received or such services are rendered) or (z) otherwise to assure a creditor
against loss; provided, that Consolidated Total Debt shall not include any
indebtedness in respect of the Synthetic Lease.

          "Conversion," "Convert" and "Converted" each refer to a conversion of
           ----------    -------       ---------
Advances of one Interest Type into Advances of the other Interest Type pursuant
to Section 2.06.

                                       7
<PAGE>

          "Credit Agents" means, collectively, the Administrative Agent, the
           -------------
Syndication Agent, the Documentation Agent, and BNP Paribas in its capacity as
Collateral Agent (as defined in each of the Collateral Documents) for each of
the Secured Parties under the Collateral Documents.

          "Debt" of any Person means, without duplication, (a) all indebtedness
           ----
of such Person for borrowed money, (b) all Obligations of such Person for the
deferred purchase price of property or services (other than trade payables not
overdue by more than 60 days incurred in the ordinary course of such Person's
business), (c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all Obligations of such Person
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (e) all Capitalized
Leases, (f) all Obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities, (g) all Obligations of such
Person to purchase, redeem, retire, defease or otherwise make any payment in
respect of any capital stock of or other ownership or profit interest in such
Person or any other Person or any warrants, rights or options to acquire such
capital stock, valued, in the case of Redeemable Preferred Stock, at the greater
of its voluntary or involuntary liquidation preference plus accrued and unpaid
dividends, (h) all Obligations of such Person in respect of Hedge Agreements,
(i) all Debt of others referred to in clauses (a) through (h) above guaranteed
directly or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (i) to pay or
purchase such Debt or to advance or supply funds for the payment or purchase of
such Debt, (ii) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor to
make payment of such Debt or to assure the holder of such Debt against loss,
(iii) to supply funds to or in any other manner invest in the debtor (including
any agreement to pay for property or services irrespective of whether such
property is received or such services are rendered) or (iv) otherwise to assure
a creditor against loss, and (j) all Debt referred to in clauses (a) through (h)
above secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Debt.

          "Default" means any Event of Default or any event that would
           -------
constitute an Event of Default but for the requirement that notice be given or
time elapse or both.

          "Default Rate" has the meaning specified in Section 2.06(d).
           ------------

          "Disclosed Litigation" has the meaning specified in Section 5.01(h).
           --------------------

          "Domestic Lending Office" means, with respect to any Lender, the
           -----------------------
office of such Lender specified as its "Domestic Lending Office" opposite its
name on Schedule I hereto or in the Assignment and Acceptance pursuant to which
it became a Lender, or

                                       8
<PAGE>

such other office of such Lender as such Lender may from time to time specify to
the Borrower and the Administrative Agent.

          "Domestic Subsidiary" means a direct or indirect Subsidiary of the
           -------------------
Borrower that is not a Foreign Subsidiary.

          "EBITDA" means, for any period, net income (or net loss) excluding all
           ------
non-cash extraordinary items of gain or loss, plus, to the extent deducted in
determining such net income (or net loss), the sum of (a) interest expense, (b)
income tax expense, (c) depreciation expense and (d) amortization expense, in
each case determined in accordance with GAAP for such period.

          "Eligible Accounts Receivable" means Accounts Receivable of the
           ----------------------------
Borrower and its Domestic Subsidiaries. The value of such Accounts Receivable
shall be their book value determined in accordance with GAAP (after taking into
account the amount of any allowance for doubtful accounts), as reflected on the
most recent Borrowing Base Certificate received by the Administrative Agent
pursuant to Section 4.02(a)(iii) or Section 6.03(a); provided, however, that the
following shall not constitute Eligible Accounts Receivable:

          (i) Accounts Receivable in respect of which the Security Agreement,
after giving effect to the related filings of financing statements that have
then been made, if any, does not create or has ceased to create a valid and
perfected first priority Lien in favor of the Administrative Agent and the
Lender Parties securing the Secured Obligations; and

          (ii) Accounts Receivable owing from any Person that is an Affiliate of
the Borrower.

          "Eligible Assignee" means (a) any commercial bank, savings and loan
           -----------------
association, savings bank, finance company, insurance company, mutual fund or
other financial institution, fund or investor which has been approved in writing
(or, in the case of the Borrower, deemed approved as provided below) by the
Borrower and the Administrative Agent as an Eligible Assignee for purposes of
this Agreement, provided that in each such case such approval shall not be
                --------
unreasonably withheld, provided, further, that if the Borrower is requested at
                       --------  -------
any time to approve any Person as an Eligible Assignee hereunder and the
Administrative Agent has not received written notice from the Borrower, within
ten Business Days of such request, that the Borrower does not approve such
Person as an Eligible Assignee, the Borrower shall be deemed to have approved
such Person as an Eligible Assignee, and provided, further, that approval of the
                                         --------  -------
Borrower shall not be required if an Event of Default has occurred and is
continuing, and (b) any Lender Party and any Affiliate of any Lender Party,
provided that, in the case of Affiliates of such Lender Party, written notice to
--------
the Administrative Agent shall have been provided.

          "Eligible Collateral" means, collectively, Eligible Inventory and
           -------------------
Eligible Accounts Receivable.

                                       9
<PAGE>

          "Eligible Inventory" means Inventory of the Borrower and its Domestic
           ------------------
Subsidiaries. The value of such Inventory shall be the book value of such
Inventory determined in accordance with GAAP as reflected on the most recent
Borrowing Base Certificate received by the Administrative Agent pursuant to
Section 4.02(a)(iii) or Section 6.03(a); provided, however, that Eligible
                                         --------  -------
Inventory shall not include any Inventory in respect of which the Security
Agreement, after giving effect to the related filings of financing statements
that have then been made, if any, does not create or has ceased to create a
valid and perfected first priority Lien in favor of the Administrative Agent and
the Lender Parties securing the Secured Obligations.

          "Employee Benefit Plan" means any "employee benefit plan" as defined
           ---------------------
in Section 3(3) of ERISA which is or was sponsored, maintained or contributed to
by, or required to be contributed to by, the Borrower or any of its
Subsidiaries.

          "Environmental Action" means any administrative, regulatory or
           --------------------
judicial action, suit, demand, demand letter, directive, claim, lien, notice,
investigation, proceeding, order or consent agreement relating in any way to any
Environmental Law or any Environmental Permit including (a) any claim by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any Environmental Law
and (b) any claim by any Person seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials, claiming non-compliance or violation of any Environmental Law, or
arising from alleged injury or threat of injury to health, safety or the
environment.

          "Environmental Indemnity Agreement" has the meaning specified in
           ---------------------------------
Section 4.01(h)(xvi).

          "Environmental Law" means any federal, state or local law, rule,
           -----------------
regulation, order, writ, judgment, injunction, decree, determination, ordinance,
code, guideline, policy and any and all common law requirements, rules and bases
of liability relating to the environment, health, safety or Hazardous Materials,
now or hereafter in effect and any judicial or administrative interpretation
thereof, including, without limitation, CERCLA, the Resource Conservation and
Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act,
the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide
Act and the Occupational Safety and Health Act, the Oil Pollution Act, the
Emergency Planning and the Community Right-to-Know Act, and any state and local
or foreign counterparts or equivalents, in each case as amended from time to
time.

          "Environmental Permit" means any permit, approval, identification
           --------------------
number, license or other authorization required under any Environmental Law.

          "Equity Interests" means, with respect to any Person, shares of
           ----------------
capital stock of (or other ownership or profit interests in) such Person,
warrants, options or other rights for the purchase or other acquisition from
such Person of shares of capital stock of

                                       10
<PAGE>

(or other ownership or profit interests in) such Person, securities convertible
into or exchangeable for shares of capital stock of (or other ownership or
profit interests in) such Person or warrants, rights or options for the purchase
or other acquisition from such Person of such shares (or such other interests),
and other ownership or profit interests in such Person (including, without
limitation, partnership, member or trust interests therein), whether voting or
nonvoting, and whether or not such shares, warrants, options, rights or other
interests are authorized or otherwise existing on any date of determination.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
           -----
amended from time to time, and the regulations promulgated and rulings issued
thereunder.

          "ERISA Affiliate" means, as applied to any Person, (i) any corporation
           ---------------
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that Person is a member; and (iii)
any member of an affiliated service group within the meaning of Sections 414(m)
or 414(o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is a member. Any former ERISA Affiliate of the Borrower or any of its
Subsidiaries shall continue to be considered an ERISA Affiliate of the Borrower
or any such Subsidiary within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of the Borrower or such Subsidiary and
with respect to liabilities arising after such period for which the Borrower or
such Subsidiary could be liable under the Internal Revenue Code or ERISA.

          "ERISA Event" means (i) a "reportable event" within the meaning of
           -----------
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by the Borrower, any of its Subsidiaries or any of their respective
ERISA Affiliates from any Pension Plan or the termination of any such Pension
Plan resulting in liability to Borrower, any of its Subsidiaries or any of their
respective Affiliates pursuant to Section 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which constitutes grounds under Section
4042(a) of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (vi) the imposition of liability on the Borrower,
any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to
Section 4062(e) or 4069 of ERISA or by reason of the application of Section
4212(c) of ERISA; (vii) the

                                       11
<PAGE>

withdrawal of the Borrower, any of its Subsidiaries or any of their respective
ERISA Affiliates in a complete or partial withdrawal (within the meaning of
Sections 4203 and 4205 of ERISA) from any Multiemployer Plan resulting in
liability therefor to Borrower, any of its Subsidiaries or any of their
respective ERISA Affiliates (regardless of when notice of such liability is
received), or the receipt by the Borrower, any of its Subsidiaries or any of
their respective ERISA Affiliates of notice from any Multiemployer Plan that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or
that it intends to terminate or has terminated under Section 4041A or 4042 of
ERISA; (viii) the occurrence of an act or omission which is reasonably likely to
give rise to the imposition on the Borrower, any of its Subsidiaries or any of
their respective ERISA Affiliates of fines, penalties, taxes or related charges
under Chapter 43 of the Internal Revenue Code or under Section 409, Section
502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit
Plan; (ix) the receipt by the Borrower, any of its Subsidiaries or any of their
respective ERISA Affiliates of notice of the assertion of a material claim
(other than routine claims for benefits) against any Employee Benefit Plan other
than a Multiemployer Plan or the assets thereof, or against the Borrower, any of
its Subsidiaries or any of their respective ERISA Affiliates with respect to any
Employee Benefit Plan; or (x) the receipt by the Borrower, any of its
Subsidiaries or any of their respective ERISA Affiliates of notice of the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or pursuant to ERISA with respect to any Pension Plan.

          "Escondido Property" means the property located in the City of
           ------------------
Escondido, California and subject to a ground lease as identified on Schedule
5.01(r)(i).

          "Eurocurrency Liabilities" has the meaning specified in Regulation D
           ------------------------
of the Board of Governors of the Federal Reserve System, as in effect from time
to time.

          "Eurodollar Lending Office" means, with respect to any Lender, the
           -------------------------
office of such Lender specified as its "Eurodollar Lending Office" opposite its
name on Schedule I hereto or in the Assignment and Acceptance pursuant to which
it became a Lender (or, if no such office is specified, its Domestic Lending
Office), or such other office of such Lender as such Lender may from time to
time specify to the Borrower and the Administrative Agent.

          "Eurodollar Rate" means, for any such Eurodollar Rate Advances for any
           ---------------
such Interest Period therefor, an interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) equal to the rate per annum obtained by
dividing (i) the rate per annum appearing on Reuters Screen LIBO Page as the
London interbank offered rate for deposits in U.S. dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period (provided,
                                                               --------
however, if more than one rate is specified on Reuters Screen LIBO Page, the
-------
applicable rate shall be the arithmetic mean of all such rates) by (ii) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such
Interest Period. If for any reason the rate described in the foregoing clause
(a) is not available at the time of determination of the Eurodollar Rate for any
Eurodollar Rate Advances for any Interest Period, the term "Eurodollar Rate"
shall mean, for any Eurodollar Rate Advance for any Interest Period therefor, an
interest rate per annum (rounded upwards, if

                                       12
<PAGE>

necessary, to the nearest 1/100 of 1%) equal to the rate per annum obtained by
dividing (a) the rate per annum appearing on Telerate Page 3750 (or any
successor page) as the London interbank offered rate for deposits in U.S.
dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period
by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage
for such Interest Period.

          "Eurodollar Rate Advance" means an Advance that bears interest as
           -----------------------
provided in Section 2.06(c).

          "Eurodollar Rate Reserve Percentage" means, for any Interest Period
           ----------------------------------
for any Eurodollar Rate Advance, the reserve percentage applicable two Business
Days before the first day of such Interest Period under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for a member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities (or
with respect to any other category of liabilities that includes deposits by
reference to which the interest rate on Eurodollar Rate Advances is determined)
having a term equal to such Interest Period.

          "Events of Default" has the meaning specified in Section 7.01.
           ----------------

          "Excluded Taxes" has the meaning specified in Section 2.10(c).
           --------------

          "Existing Credit Agreement" means that certain Credit Agreement dated
           -------------------------
as of November 13, 1998 by and among the Borrower, Credit Lyonnais Los Angeles
Branch, as Administrative Agent and Co-Lead Arranger, Nationsbanc Montgomery
Securities LLC as Syndication Agent and Co-Lead Arranger, and the financial
institutions listed therein as "Initial Lenders," as amended, supplemented or
modified to the date hereof.

          "Existing Hedge Agreements" has the meaning specified in Section
           -------------------------
4.01(b).

          "Existing Liens" has the meaning specified in Section 5.01(q)(iii).
           --------------

          "Extraordinary Receipt" means any cash received by or paid to or for
           ---------------------
the account of any Person not in the ordinary course of business, including tax
refunds, pension plan reversions, proceeds of insurance (including any key man
life insurance but excluding proceeds of business interruption insurance to the
extent such proceeds constitute compensation for lost earnings), condemnation
awards (and payments in lieu thereof), indemnity payments and any purchase price
adjustment received in connection with any purchase agreement; provided that an
                                                               --------
Extraordinary Receipt shall not include cash receipts received from proceeds of
insurance, condemnation awards (or payments in lieu thereof) or indemnity
payments to the extent that such proceeds, awards or payments (A) in respect of
loss or damage to equipment, fixed assets or real property are applied (or in
respect of which expenditures were previously incurred) to replace or repair the

                                       13
<PAGE>

equipment, fixed assets or real property in respect of which such proceeds were
received in accordance with the terms of the Loan Documents, so long as such
application is made within six months after the occurrence of such damage or
loss or (B) are received by any Person in respect of any third party claim
against such Person and applied to pay (or to reimburse such Person for its
prior payment of) such claim and the costs and expenses of such Person with
respect thereto.

          "Facility" means the Revolving Facility or the Swing Line Facility.
           --------

          "Federal Funds Rate" means, for any period, a fluctuating interest
           ------------------
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

          "Fiscal Year" means the fiscal year of the Borrower and its
           -----------
Subsidiaries, which ends on the Sunday closest to December 31. In 52-week years,
the first, second and fourth quarters are 12-week periods and the third quarter
is a 16-week period. In 53-week years, the first and second quarters are 12-week
periods, the third quarter is a 16-week period and the fourth quarter is a
13-week period.

          "Fixed Charge Coverage Ratio" means, as of any date of determination,
           ---------------------------
determined for the period of four consecutive fiscal quarters ending as of the
last day of each fiscal quarter of the Borrower, the ratio of (a) the sum of (i)
Consolidated EBITDA of the Borrower and its Subsidiaries and (ii) rent expense
(including amounts paid as rent under the Synthetic Lease) for the Borrower and
its Subsidiaries on a Consolidated basis for the period of four fiscal quarters
ending as of the end of the most recently ended fiscal quarter of the Borrower
to (b) the sum of (i) Consolidated Interest Expense of the Borrower and its
Subsidiaries and (ii) rent expense (including amounts paid as rent under the
Synthetic Lease) for the Borrower and its Subsidiaries on a Consolidated basis
for the period of four fiscal quarters ending as of the end of the most recently
ended fiscal quarter of the Borrower.

          "Foreign Subsidiary" means any "controlled foreign corporation" within
           ------------------
the meaning of Section 957(a) of the Internal Revenue Code as to which the
Borrower or any of its Subsidiaries is a "United States shareholder" as defined
in Section 951(b) of the Internal Revenue Code.

          "GAAP" has the meaning specified in Section 1.03.
           ----

         "Guarantors" means each present and future direct or indirect
          ----------
Subsidiary of the Borrower that is a party to the Guaranty.

          "Guaranty" has the meaning specified in Section 4.01(h)(x), and
           --------
includes any amendment to Guaranty delivered hereunder.

                                       14
<PAGE>

          "Hazardous Materials" means (a) petroleum or petroleum products,
           -------------------
natural or synthetic gas, radioactive materials, asbestos in any form, urea
formaldehyde foam insulation, polychlorinated biphenyls, lead or lead-based
paint, and radon gas, (b) any substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "medical waste," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words
of similar import, under any Environmental Law and (c) any other substance the
release of or exposure to which is injurious to human health or the environment
or governed or regulated under any Environmental Law.

          "Hedge Agreements" means interest rate swap, cap or collar agreements,
           ----------------
interest rate future or option contracts and other similar agreements.

          "Hedge Bank" means any Lender Party or an Affiliate of a Lender Party
           ----------
in its capacity as a party to a Bank Hedge Agreement.

          "Indemnified Party" has the meaning specified in Section 9.04(b).
           -----------------

          "Indemnified Taxes" has the meaning specified in Section 2.10(a).
           -----------------

          "Initial Lenders" has the meaning specified in the recital of parties
           ---------------
to this Agreement.

          "Insufficiency" means, with respect to any Plan, the amount, if any,
           -------------
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.

          "Intercompany Notes" has the meaning specified in Section
           ------------------
4.01(h)(xiv).

          "Intercreditor Agreements" has the meaning specified in Section
           ------------------------
4.01(h)(xvii).

          "Interest Period" has the meaning specified in Section 2.06(b).
           ---------------

          "Interest Type" refers to the distinction between Advances bearing
           -------------
interest at the Base Rate and Advances bearing interest at the Eurodollar Rate.

          "Internal Revenue Code" means the Internal Revenue Code of 1986, as
           ---------------------
amended from time to time, and the regulations promulgated and rulings issued
thereunder.

          "Inventory" means all Inventory referred to in Section 2(a)(i) of the
           ---------
Security Agreement.

          "Investment" in any Person means any loan or advance to such Person,
           ----------
any purchase or other acquisition of any capital stock, warrants, rights,
options, obligations or other securities of such Person, any capital
contribution to such Person or any other investment in such Person, including,
without limitation, any arrangement

                                       15
<PAGE>

pursuant to which the investor incurs Debt of the types referred to in clauses
(i) and (j) of the definition of "Debt" in respect of such Person. For the
                                  ----
avoidance of doubt, Investments shall not include Capital Expenditures.

          "Issue" means, with respect to any Letter of Credit, either issue such
           -----
Letter of Credit, extend the expiry of such Letter of Credit (other than any
such extension occurring pursuant to the terms of such Letter of Credit), renew
such Letter of Credit (other than any such renewal occurring pursuant to the
terms of such Letter of Credit), or increase the amount of such Letter of
Credit, and the terms "Issued", "Issuing", and "Issuance" shall have
                       ------    -------        --------
corresponding meanings.

          "Landlord's Lien Rights" means any "landlord's lien" rights or other
           ----------------------
rights, claims or demands of any of the lessors of the real property described
in Section 5.01(r)(ii) with respect to the Collateral whether created by
statute, contract or otherwise.

          "L/C Advance" means a payment made by an L/C Bank under a Letter of
           -----------
Credit.

          "L/C Bank" means BNP Paribas in its capacity as an issuer of a Letter
           --------
of Credit or any assignee acting in such capacity.

          "L/C Cash Collateral Account" has the meaning specified in Section
           ---------------------------
7.02.

          "L/C Related Documents" has the meaning specified in Section 3.04(a).
           ---------------------

          "L/C Sublimit" means Fifteen Million Dollars ($15,000,000) as such
           ------------
amount may be reduced pursuant to Section 2.04.

          "Lender Party" means any Lender or any L/C Bank.
           ------------

          "Lenders" means the Initial Lenders and each Eligible Assignee that
           -------
shall become a party hereto pursuant to Section 9.07.

          "Letter of Credit" means any letter of credit issued hereunder.
           ----------------

          "Letter of Credit Agreement" has the meaning specified in Section
           --------------------------
3.02(a).

          "Letter of Credit Obligations" means, as of any date of determination
           ----------------------------
with respect to any Letter of Credit, the sum of (a) the then outstanding
Available Amount of such Letter of Credit, and (b) the aggregate amount of the
Unreimbursed Letter of Credit Liability thereunder.

          "Letter of Credit Subfacility" has the meaning specified in Section
           ----------------------------
3.01.

          "Lien" means any lien, security interest or other charge or
           ----
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation,

                                       16
<PAGE>

the lien or retained security title of a conditional vendor and any easement,
right of way or other encumbrance on title to real property.

          "Loan Documents" means this Agreement, the Notes, the Guaranty, the
           --------------
Collateral Documents, each Letter of Credit Agreement, each Secured Hedge
Agreement, the Intercompany Notes and any other instrument or agreement executed
by the Borrower and the Administrative Agent that states that it is a Loan
Document.

          "Loan Parties" means the Borrower and the Guarantors.
           ------------

          "Margin Stock" has the meaning specified in Regulation U.
           ------------

          "Material Adverse Change" means any material adverse change in the
performance, prospects, business, assets, nature of assets, condition (financial
or otherwise) or properties of the Borrower, or of the Borrower and its
Subsidiaries taken as a whole.

          "Material Adverse Effect" means a material adverse effect on (a) the
           -----------------------
performance, prospects, business, assets, nature of assets, condition (financial
or otherwise) or properties of the Borrower, or the Borrower and its
Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative
Agent or any Lender Party under any Loan Document or (c) the ability of any Loan
Party to perform its Obligations under any Loan Document to which it is or is to
be a party.

          "Maximum Expenditure Amount" has the meaning specified in Section
           --------------------------
6.04(e).

          "Mortgage" has the meaning specified in Section 4.01(h)(ix).
           --------

          "Mortgage Policy" has the meaning specified in Section 4.01(h)(ix)(A).
           ---------------

          "Multiemployer Plan" means any Employee Benefit Plan which is a
           ------------------
"multiemployer plan" as defined in Section 3(37) of ERISA.

          "Net Cash Proceeds" means, with respect to any sale, lease, transfer
           -----------------
or other disposition of any asset or the sale or issuance of any Debt or capital
stock, any securities convertible into or exchangeable for capital stock or any
warrants, rights or options to acquire capital stock by any Person, the
aggregate amount of cash received from time to time by or on behalf of such
Person in connection with such transaction after deducting therefrom only (a)
reasonable and customary brokerage commissions, underwriting fees and discounts,
legal fees, finder's fees and other similar fees and commissions and (b) the
amount of taxes payable in connection with or as a direct result of such
transaction in the taxable year of such transaction or in the immediately
succeeding taxable year, the computation of which shall take into account the
reduction in tax liability resulting from any available operating losses and net
operating loss carryovers, tax credits and tax credit carryforwards, and similar
tax attributes, and (c) the amount of any Debt secured by a Lien on such asset
that, by the terms of such transaction, is required to be repaid upon such
disposition, in each case with respect to

                                       17
<PAGE>

the foregoing clauses (a) and (c) to the extent, but only to the extent, that
the amounts so deducted are, at the time of receipt of such cash, actually paid
to a Person that is not an Affiliate and are properly attributable to such
transaction or to the asset that is the subject thereof.

          "Note" means a Revolving Note or a Swing Line Note.
           ----

          "Notice of Borrowing" means either (a) a notice in substantially the
           -------------------
form of Exhibit B-1, or (b) telephonic notice (confirmed immediately in writing)
of the information required by Exhibit B-1.

          "Notice of Issuance" means a notice in substantially the form of
           ------------------
Exhibit C.

          "Notice of Swing Line Borrowing" means either (a) a notice
           ------------------------------
substantially in the form of Exhibit B-2, or (b) telephonic notice (confirmed
immediately in writing) of the information required by Exhibit B-2.

          "Obligation" means, with respect to any Person, any payment,
           ----------
performance or other obligation of such Person of any kind, including, without
limitation, post-petition interest in any proceeding under the United States
Bankruptcy Code or other applicable bankruptcy laws and including any liability
of such Person on any claim, whether or not the right of any creditor to payment
in respect of such claim is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured, and whether or not such claim is discharged, stayed or otherwise
affected by any proceeding referred to in Section 7.01(f). Without limiting the
generality of the foregoing, the Obligations of the Loan Parties under the Loan
Documents include (a) the obligation to pay principal, interest, Letter of
Credit commissions, charges, expenses, fees, attorneys' fees and disbursements,
indemnities and other amounts payable by any Loan Party under any Loan Document
and (b) the obligation to reimburse any amount in respect of any of the
foregoing that any Lender Party, in its sole discretion, may elect to pay or
advance on behalf of such Loan Party.

          "Offering Memorandum" means the offering memorandum dated October,
           -------------------
2001 used by the Syndication Agent in connection with the syndication of the
Commitments.

          "Open Year" has the meaning specified in Section 4.01(n)(ii).
           ---------

          "Other Indemnified Taxes" has the meaning specified in Section
           -----------------------
2.10(b).

          "Owned Real Property" has the meaning specified in Section 5.01(r)(i).
           -------------------

          "Owner Trustee" means Wells Fargo Bank Northwest, National Association
           -------------
(formerly known as First Security Bank, National Association) not individually,
except as expressly stated in any applicable document to which it may be a
party, but solely as the Owner Trustee under the S&F Trust 1998-1.

                                       18
<PAGE>

          "Participation Agreement" means that certain Participation Agreement
           -----------------------
dated as of November 30, 2001 among Smart & Final Inc., as the Lessee, the
various parties hereto from time to time, as the Guarantors, the Owner Trustee,
the various banks and other lending institutions identified therein, as the
Holders and Lenders, and Fleet Capital Corporation, as the Administrative Agent
for the Lenders and respecting the Security Documents (as defined therein), as
the Administrative Agent for the Lenders and the Holders, to the extent of their
interests.

          "PBGC" means the Pension Benefit Guaranty Corporation.
           ----

          "Pension Plan" means any Employee Benefit Plan, other than a
           ------------
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.

          "Permitted Encumbrances" means, with respect to any property subject
           ----------------------
to a Mortgage or an Additional Mortgage, the matters listed on Schedule B to the
policy of title insurance in favor of the Administrative Agent with respect to
such property.

          "Permitted Liens" means such of the following as to which no
           ---------------
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) Liens for taxes, assessments and governmental charges or
levies not yet due and payable or being contested in good faith by Borrower by
appropriate proceedings and for which adequate reserves have been established by
Borrower as reflected in Borrower's financial statements; (b) Liens imposed by
law, such as materialmen's, mechanics', carriers', workmen's and repairmen's
Liens and other similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of more than 30 days or
being contested in good faith by Borrower by appropriate proceedings and for
which adequate reserves have been established by Borrower as reflected in
Borrower's financial statements; (c) Liens (other than Liens imposed on any
property of Borrower pursuant to ERISA or Section 412 of the Code) incurred or
deposits or pledges made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
and other statutory obligations; (d) Liens incurred or deposits and pledges made
in the ordinary course to secure performance of tenders, surety and appeal
bonds, bids, leases (other than Capitalized Leases), performance bonds, sales
contracts and other similar obligations, in each case, not incurred in
connection with the obtaining of credit or the payment of a deferred purchase
price and which do not, in the aggregate, exceed $5,000,000; and (e) Permitted
Encumbrances.

          "Person" means an individual, partnership, limited liability company,
           ------
corporation (including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.

          "Pledge Agreement" has the meaning specified in Section 4.01(h)(viii).
           ----------------

                                       19
<PAGE>

          "Preferred Stock" means, with respect to any corporation, capital
           ---------------
stock issued by such corporation that is entitled to a preference or priority
over any other capital stock issued by such corporation upon any distribution of
such corporation's assets, whether by dividend or upon liquidation.

          "Pro Rata Share" of any amount means, with respect to any Lender at
           --------------
any time, the product of (a) a fraction the numerator of which is such Lender's
Revolving Commitment at such time and the denominator of which is the sum of the
Revolving Facility (in each case without giving effect to any termination of
Commitments pursuant to Section 2.04 or Section 7.01) at such time times (b)
                                                                   -----
such amount.

          "Redeemable" means, with respect to any capital stock, Debt or other
           ----------
right or Obligation, any such right or Obligation that (a) the issuer has
undertaken to redeem at a fixed or determinable date or dates, whether by
operation of a sinking fund or otherwise, or upon the occurrence of a condition
not solely within the control of the issuer or (b) is redeemable at the option
of the holder.

          "Register" has the meaning specified in Section 9.07(c).
           --------

          "Regulation U" means Regulation U of the Board of Governors of the
           ------------
Federal Reserve System, as in effect from time to time.

          "Required Lenders" means at any time Lender Parties owed or holding
           ----------------
more than 50% of the sum of (a) the aggregate principal amount of the Advances
outstanding at such time, (b) the aggregate Available Amount of all Letters of
Credit outstanding at such time, and (c) the aggregate Unused Revolving
Commitments at such time. For purposes of this definition, the Available Amount
of each Letter of Credit and the aggregate principal amount of all outstanding
Swing Line Advances shall be considered to be owed to the Lenders ratably in
accordance with their respective Revolving Commitments.

          "Responsible Officer" means the President, Chief Executive Officer,
           -------------------
any Vice President, the Chief Financial Officer, the Controller, or the
Treasurer of the Borrower.

          "Revolving Advance" has the meaning specified in Section 2.01(a).
           -----------------

          "Revolving Borrowing" means a borrowing consisting of simultaneous
           -------------------
Revolving Advances of the same Interest Type made by the Lenders.

          "Revolving Commitment" means, (i) with respect to any Lender listed on
           --------------------
Schedule I, the amount set forth opposite such Lender's name on Schedule I under
the caption "Revolving Commitment," (ii) with respect to any Lender not listed
on Schedule I hereto, the amount set forth in the Assignment and Acceptance
pursuant to which such Person became a Lender hereunder, or (iii) if any of such
Lenders has entered into one or more Assignments and Acceptances, the amount set
forth for such Lender in the Register maintained by the Administrative Agent
pursuant to Section 9.07(c) as such Lender's

                                       20
<PAGE>

"Revolving Commitment", in the case of each of the foregoing clauses (i), (ii)
and (iii), as such amount may be reduced at or prior to such time pursuant to
Section 2.04.

          "Revolving Facility" means, at any time, the aggregate amount of the
           ------------------
Lenders' Revolving Commitments at such time.

          "Revolving Note" means a promissory note of the Borrower payable to
           --------------
the order of any Lender, in substantially the form of Exhibit D-1 hereto,
evidencing the aggregate indebtedness of the Borrower to such Lender resulting
from the Revolving Advances made by such Lender.

          "Second Mortgages" has the meaning specified in Section 4.01(h)(xv).
           ----------------

          "Secured Hedge Agreement" means a Hedge Agreement between the Borrower
           -----------------------
and a Secured Hedge Bank or Secured Hedge Banks.

          "Secured Hedge Bank" means any Lender Party or an Affiliate of a
           ------------------
Lender Party in its capacity as a party to a Secured Hedge Agreement.

          "Secured Obligations" has the meaning specified in the Security
           -------------------
Agreement.

          "Secured Parties" means the Administrative Agent, the Lender Parties
           ---------------
and the Secured Hedge Banks.

          "Security Agreement" has the meaning specified in Section
           ------------------
4.01(h)(viii).

          "Senior Leverage Ratio" means, as of any date of determination, the
           ---------------------
ratio of (i) all Debt of the Borrower and its Subsidiaries under the Loan
Documents, the Synthetic Lease Documents, Capitalized Leases and any other Debt
secured by Liens permitted under Section 6.02(a) as of the end of the most
recently ended fiscal quarter of the Borrower to (ii) Adjusted EBITDA for the
period of four fiscal quarters ending as of the end of the most recently ended
fiscal quarter of the Borrower.

          "Solvent" and "Solvency" mean, with respect to any Person on a
           -------       --------
particular date, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute an unreasonably
small capital. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.

                                       21
<PAGE>

          "Store #405" means that certain Smart & Final store located at 2431
           ----------
28th St., Sacramento, California and subject to a ground lease as identified on
Schedule 5.01(r)(i).

          "Subsidiary" of any Person means any corporation, partnership, limited
           ----------
liability company, joint venture, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such partnership,
limited liability company or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person's other Subsidiaries; provided, however, that Smart &
Final Scholarship Foundation, a California corporation, shall not be considered
a "Subsidiary" of the Borrower or any other Loan Party for purposes of this
Agreement and the other Loan Documents.

          "Supermajority Lenders" means at any time Lender Parties owed or
           ---------------------
holding more than 66 2/3% of the sum of (a) the aggregate principal amount of
the Advances outstanding at such time, (b) the aggregate Available Amount of all
Letters of Credit outstanding at such time, and (c) the aggregate Unused
Revolving Commitments at such time. For purposes of this definition, the
Available Amount of each Letter of Credit and the aggregate principal amount of
all outstanding Swing Line Advances shall be considered to be owed to the
Lenders ratably in accordance with their respective Revolving Commitments.

          "Surviving Debt" has the meaning specified in Section 5.01(q)(i).
           --------------

          "Surviving Debt Agreement" means any agreement or instrument setting
           ------------------------
forth the terms and conditions of any Surviving Debt.

          "Swing Line Advance" means an advance by the Swing Line Lender to the
           ------------------
Borrower pursuant to Section 2.01(b).

          "Swing Line Borrowing" means a borrowing consisting of a Swing Line
           --------------------
Advance made by the Swing Line Lender.

          "Swing Line Commitment" means, with respect to the Swing Line Lender,
           ---------------------
$10,000,000, or, if such Lender has entered into one or more Assignments and
Acceptances with respect to the Swing Line Commitment, the amount set forth for
the Swing Line Lender in the Register maintained by the Administrative Agent
pursuant to Section 9.07(c) as such Lender's "Swing Line Commitment", in each
case as such amount may be reduced at or prior to such time pursuant to Section
2.04.

          "Swing Line Commitment Commencement Date" means the Closing Date.
           ---------------------------------------

                                       22
<PAGE>

          "Swing Line Facility" means, at any time, the aggregate amount of the
           -------------------
Swing Line Lender's Swing Line Commitment at such time.

          "Swing Line Lender" means BNP Paribas and any assignee of the Swing
           -----------------
Line Commitment which assumes such Swing Line Commitment in accordance with the
terms of Section 9.07.

          "Swing Line Note" means a promissory note of the Borrower payable to
           ---------------
the order of the Swing Line Lender, in substantially the form of Exhibit D-2
hereto, evidencing the aggregate indebtedness of the Borrower to such Lender
resulting from the Swing Line Advances made by such Lender.

          "Swing Line Reserve Amount" means, (i) at all times prior to the Swing
           -------------------------
Line Commitment Commencement Date, zero, and (ii) at any time of determination
thereafter, the greater of (A) the aggregate Swing Line Commitment in effect at
such time, and (B) the aggregate principal amount of all outstanding Swing Line
Advances at such time.

          "Synthetic Lease Documents" means the Operative Agreements as defined
           -------------------------
in the Participation Agreement.

          "Synthetic Lease" means the Lease as defined in the Participation
           ---------------
Agreement.

          "Synthetic Lease Properties" means the real properties that are
           --------------------------
subject to the Synthetic Lease.

          "Tax Indemnitee" has the meaning specified in Section 2.10(c).
           --------------

          "Taxes" has the meaning specified in Section 2.10(a).
           -----

          "Transfer Date" has the meaning specified in Section 2.08(e).
           -------------

          "Transferee" has the meaning specified in Section 2.08(e).
           ----------

          "Unreimbursed Letter of Credit Liability" means, as of any date of
           ---------------------------------------
determination with respect to any Letter of Credit, the aggregate amount of all
L/C Advances which have been made by, and not reimbursed to, the L/C Bank under
such Letter of Credit.

          "Unused Revolving Commitment" means, with respect to any Lender at any
           ---------------------------
time, (a) such Lender's Revolving Commitment at such time, minus (b) the sum of
                                                           -----
(i) the aggregate principal amount of all Revolving Advances of such Lender
outstanding at such time, plus (ii) such Lender's Pro Rata Share of the
aggregate Letter of Credit Obligations outstanding at such time, plus (iii) such
Lender's Pro Rata Share of the Swing Line Advances then outstanding.

                                       23
<PAGE>

          "Unused Swing Line Commitment" means, with respect to the Swing Line
           ----------------------------
Lender at any time, the remainder of (a) such Lender's Swing Line Commitment at
such time, minus (b) the aggregate principal amount of all Swing Line Advances
           -----
made by such Lender and outstanding at such time.

          "Voting Interests" means, with respect to any Person, shares of
           ----------------
capital stock issued by a corporation, or equivalent Equity Interests in any
other Person, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even if the right so to vote has
been suspended by the happening of such a contingency.

          "Withdrawal Liability" has the meaning specified in Part I of Subtitle
           --------------------
E of Title IV of ERISA.

     Section 1.02 Computation of Time Periods. In this Agreement in the
                  ---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".

     Section 1.03 Accounting Terms. All accounting terms not specifically
                  ----------------
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(g) ("GAAP").

     Section 1.04 Other Definitional Provisions. References to Sections and
                  -----------------------------
subsections shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specified. The term "including" means including
without limitation. Any of the terms defined herein may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference.

     Section 1.05 Exhibits and Schedules. Each of the exhibits and schedules
                  ----------------------
attached hereto is hereby incorporated into and shall constitute part of these
Articles.

     Section 1.06 Ownership of Synthetic Lease Properties. For all purposes
                  ---------------------------------------
under the Loan Documents other than the calculation of the financial covenants
set forth in Section 6.04 and the grant of the Liens by the Owner Trustee in the
Collateral Documents, the Borrower shall be deemed to be the owner of the
Synthetic Lease Properties.

                                   ARTICLE II

                        AMOUNTS AND TERMS OF THE ADVANCES

     Section 2.01 The Advances.
                  ------------

               (a) Revolving Advances. Each Lender severally agrees, on the
                   ------------------
terms and conditions hereinafter set forth, to make advances (each a "Revolving
                                                                      ---------
Advance") to the Borrower from time to time on any Business Day during the
-------
period

                                       24
<PAGE>

from the Closing Date until the Commitment Termination Date in an amount for
each such Advance not to exceed the lesser of (i) such Lender's Unused Revolving
Commitment on such Business Day (after giving effect to any repayment of Swing
Line Advances made or to be made with the proceeds thereof pursuant to a
designation therefor set forth by the Borrower in a Notice of Borrowing for such
Borrowing or pursuant to a Notice of Borrowing given by the Administrative Agent
in accordance with Section 2.02(f)) and (ii) such Lender's Pro Rata Share of the
Borrowing Base Availability; provided, however, that (1) the foregoing clause
                             --------  -------
(ii) shall not limit any Lender's obligations under Section 2.02(f), and (2)
except with respect to a Borrowing the proceeds of which will be applied to
repay outstanding Swing Line Advances pursuant to a designation therefor set
forth by the Borrower in a Notice of Borrowing for such Borrowing or pursuant to
a Notice of Borrowing given by the Administrative Agent pursuant to Section
2.02(f), the Borrower shall not request, and no Lender shall be required to make
Revolving Advances in respect of any Borrowing if a Borrowing Base Deficiency
would result after giving effect thereto. Each Revolving Borrowing shall be in
an aggregate amount of Five Million Dollars ($5,000,000) or (except in the case
of the initial Advance) an integral multiple of One Million Dollars ($1,000,000)
in excess thereof and shall consist of Revolving Advances made by the Lenders
ratably according to their respective Revolving Commitments. Within the
foregoing limits, the Borrower may borrow under this Section 2.01(a), prepay
pursuant to Section 2.05 and reborrow under this Section 2.01(a).

               (b) Swing Line Advances. The Swing Line Lender agrees, on the
                   -------------------
terms and conditions hereinafter set forth, to make advances (each a "Swing Line
                                                                      ----------
Advance") to the Borrower from time to time on any Business Day during the
-------
period from the Swing Line Commitment Commencement Date until the Commitment
Termination Date in an amount not to exceed the Swing Line Lender's Unused Swing
Line Commitment on such Business Day; provided, however, that the Swing Line
                                      --------  -------
Lender shall not make any Swing Line Advance if, after giving effect to such
Swing Line Advance, a Borrowing Base Deficiency would result. Each Swing Line
Borrowing shall consist of Swing Line Advances made by the Swing Line Lender and
shall be in an amount equal to $1,000,000 or an integral multiple of $100,000 in
excess thereof. Immediately upon the making of each Swing Line Advance by the
Swing Line Lender, the Swing Line Lender shall be deemed to have sold and
transferred to each Lender, and each Lender shall be deemed to have purchased
and received from the Swing Line Lender, in each case irrevocably and without
any further action by any party, an undivided interest and participation in such
Swing Line Advance and the Obligations of the Borrower under this Agreement in
respect thereof in an amount equal to such Lender's Pro Rata Share of such Swing
Line Advance, provided, however, that (i) no Lender shall be required to fund
              --------  -------
its participation in any such Swing Line Advance until demand therefor is made
by the Administrative Agent pursuant to Section 2.02(f)(ii) hereof, and (ii) no
Lender shall be entitled to share in any payments of principal or interest in
respect of its participation in any such Swing Line Advance except to the extent
set forth in Section 2.02(f)(ii) hereof with respect to any such participation
which has been funded by such Lender as provided therein. Within the limits of
the Swing Line Lender's Unused Swing Line Commitment in effect from time to
time, the Borrower may

                                       25
<PAGE>

borrow under this Section 2.01(b), prepay pursuant to Section 2.05 and reborrow
under this Section 2.01(b).

     Section 2.02 Making the Advances.
                  -------------------

               (a) Initial Borrowings. The initial Borrowings hereunder shall be
                   ------------------
made on the Closing Date and shall be made on notice received by the
Administrative Agent from the Borrower (pursuant to a Notice of Borrowing) not
later than 9:00 a.m. (Los Angeles, California time) (or such later time as the
Administrative Agent may agree) on the Business Day immediately preceding the
Closing Date. Such Notice of Borrowing shall be irrevocable upon receipt by the
Administrative Agent. Upon receipt of such notice, the Administrative Agent
shall promptly give notice to each Lender (but in no event later than 10:30 a.m.
Los Angeles, California time on the Closing Date). Each Lender shall, before
11:30 a.m. (Los Angeles, California time) on the Closing Date, make available
for the account of its Applicable Lending Office to the Administrative Agent
such Lender's ratable share of such Borrowings by depositing same day funds in
the Administrative Agent's Account. Notwithstanding any contrary provision
hereof, the initial Borrowings may consist only of Base Rate Advances.

               (b) Subsequent Revolving Borrowings. Each Revolving Borrowing
                   -------------------------------
occurring after the Closing Date shall be made on notice received by the
Administrative Agent from the Borrower (pursuant to a Notice of Borrowing) not
later than 9:00 a.m. (Los Angeles, California time) (a) on the Business Day
prior to the date of such Borrowing if such Borrowing consists of Base Rate
Advances, and (b) on the third Business Day prior to the date of such Borrowing
if such Borrowing consists of Eurodollar Rate Advances. Each such Notice of
Borrowing shall be irrevocable upon receipt by the Administrative Agent and, in
the case of any Notice of Borrowing for Eurodollar Rate Advances, the Borrower
shall indemnify each Lender against any loss, cost or expense incurred by such
Lender as a result of any failure to fulfill on or before the date specified by
such Notice of Borrowing the applicable conditions set forth in this Section
2.02 or Article IV, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as a part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.

               (c) Revolving Advances by Lenders. If the Administrative Agent
                   -----------------------------
receives a Notice of Borrowing (or if the Administrative Agent gives a Notice of
Borrowing pursuant to Section 2.02(f)), the Administrative Agent shall promptly
(and in any event not later than 3:00 p.m. (Los Angeles, California time) on the
Business Day prior to the date of such Borrowing or, if such Borrowing consists
of Eurodollar Rate Advances, the third Business Day prior to the date of such
Borrowing) give each Lender notice of such Notice of Borrowing. Each Lender
shall, before 11:30 a.m. (Los Angeles, California time) on the date of such
Borrowing in the case of any Revolving Borrowing to be made on such date, make
available for the account of its Applicable Lending Office to the Administrative
Agent such Lender's ratable portion of such Borrowing by depositing same day
funds in the Administrative Agent's Account.

                                       26
<PAGE>

Unless the Administrative Agent shall have received written notice from a Lender
prior to the date of any Revolving Borrowing hereunder that such Lender will not
make available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
ratable portion available to the Administrative Agent on the date of such
Borrowing in accordance with the terms hereof and the Administrative Agent may,
in reliance upon such assumption, but shall not be required to, make available
to or for the account of the Borrower on such date a corresponding amount. If
and to the extent that such Lender shall not have so made such ratable portion
available to the Administrative Agent and the Administrative Agent makes such
ratable portion available to the Borrower, such Lender and the Borrower, without
prejudice to any rights or remedies that the Borrower may have against such
Lender, severally agree to repay to the Administrative Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to or for the account of the Borrower until
the date such amount is repaid to the Administrative Agent, at (A) in the case
of the Borrower, the interest rate applicable at the time to the Advances
comprising such Borrowing, and (B) in the case of such Lender, the Federal Funds
Rate with respect to the three-day period commencing from the date such amount
is made available to or for the account of the Borrower and the interest rate
applicable at the time to the Advances comprising such Borrowing thereafter. If
such Lender shall pay to the Administrative Agent such amount, such amount so
paid shall constitute such Lender's Advance as part of the relevant Borrowing
for purposes of this Agreement and, to the extent that the Borrower previously
paid such amount to the Administrative Agent, the Administrative Agent will
refund to the Borrower such amount so paid, but without interest.

               (d) Disbursement of Revolving Advances. Upon fulfillment of the
                   ----------------------------------
applicable conditions set forth in Article IV (which fulfillment the
Administrative Agent may assume in the absence of actual knowledge, or notice
received from the Borrower or the Required Lenders, to the contrary), the
Administrative Agent will make funds for any Borrowing available to the Borrower
by crediting the Borrower's Account, subject to the Administrative Agent's
receipt of funds from the Lenders, and provided that the Administrative Agent
shall first make a portion of such funds equal to any outstanding L/C Advance
under any Letter of Credit, and any interest accrued and unpaid thereon to and
as of such date, available to the applicable L/C Bank for reimbursement of such
L/C Advance and payment of such interest.

               (e) Swing Line Borrowings. Each Swing Line Borrowing shall be
                   ---------------------
made on notice received by the Administrative Agent and the Swing Line Lender
from the Borrower (pursuant to a Notice of Swing Line Borrowing) not later than
9:00 A.M. (Los Angeles, California time) on the date of such Borrowing. Each
such Notice of Swing Line Borrowing shall be irrevocable upon receipt by the
Administrative Agent and the Swing Line Lender. If (i) the Administrative Agent
and the Swing Line Lender receive a Notice of Swing Line Borrowing and (ii) the
applicable conditions set forth in Article IV have been fulfilled (which
fulfillment the Administrative Agent and the Swing Line Lender may assume in the
absence of actual knowledge, or notice received from the Borrower, the
Administrative Agent or the Required Lenders, to the contrary), then the Swing
Line Lender will make funds for any Swing Line Borrowing available to the

                                       27
<PAGE>

Borrower by wire transfer to the Borrower on or before 3:00 p.m. (Los Angeles,
California time) on the date of such Swing Line Borrowing.

               (f) Settlement of Swing Line Advances. (i) The Administrative
                   ---------------------------------
Agent may, and upon request by the Swing Line Lender in the Swing Line Lender's
sole and absolute discretion, the Administrative Agent shall, at any time and
from time to time, give to the Lenders and the Borrower a Notice of Borrowing
for a Borrowing of Revolving Advances which are Base Rate Advances on behalf of
the Borrower, in each case in an amount equal to the aggregate amount of Swing
Line Advances then owing by the Borrower (or such lesser amount as the
Administrative Agent or the Swing Line Lender shall specify), and the proceeds
of which are to be used to prepay such Swing Line Advances on the date of such
Borrowing. Upon receipt of any such Notice of Borrowing, each Lender (other than
the Swing Line Lender) shall, before 11:30 a.m. (Los Angeles, California time)
on the Business Day following the date on which such Notice of Borrowing is
given), make available for the account of its Applicable Lending Office to the
Administrative Agent such Lender's Pro Rata Share of such Borrowing by
depositing same day funds in the Administrative Agent's Account. Notwithstanding
any contrary provision of this Agreement, (A) the proceeds of any such Borrowing
shall be distributed by the Administrative Agent to the Swing Line Lender) as a
prepayment of all or a portion of the then outstanding Swing Line Advances, and
(B) the outstanding Swing Line Advances of the Swing Line Lender, in an amount
equal to the aggregate amount of the Swing Line Advances to be prepaid on such
date, shall be deemed to be prepaid with the proceeds of a Revolving Advance
made by the Swing Line Lender and such portion of the Swing Line Advances deemed
to be so prepaid shall no longer be outstanding as Swing Line Advances but shall
be outstanding as Revolving Advances made by the Swing Line Lender.

          (ii) In addition to the right of the Swing Line Lender to require a
Borrowing under Section 2.02(f)(i), the Swing Line Lender may at any time and
from time to time and in its sole and absolute discretion request (by notice to
the Administrative Agent and the Borrower) the Administrative Agent to, and upon
receipt of such request the Administrative Agent shall, make demand on each
Lender for payment of its participation in each Swing Line Advance then
outstanding, and upon receipt of any such demand each Lender shall promptly fund
such participation by paying to the Administrative Agent, for the account of the
Swing Line Lender, the amount of such participation in same day funds on the
date such request is given by the Administrative Agent to the Lenders. With
respect to each such participation in any Swing Line Advance which is funded by
any Lender, the Swing Line Lender shall promptly pay to the Administrative
Agent, and the Administrative Agent shall promptly pay to such Lender, in lawful
money of the United States and in the kind of funds so received, an amount equal
to such Lender's ratable share of all payments received by the Swing Line Lender
in respect of (A) the principal of such Swing Line Advance, and (B) interest on
such Swing Line Advance for the period from and after the date on which such
participation was funded. If any payment received by the Swing Line Lender on
account of any Swing Line Advance and distributed to any Lender as a participant
under the preceding sentence is thereafter recovered from the Swing Line Lender
in connection with any bankruptcy or insolvency proceeding relating to the
Borrower or otherwise,

                                       28
<PAGE>

each Lender which received such distribution shall, upon demand by the Swing
Line Lender through the Administrative Agent, repay to the Swing Line Lender
such Lender's ratable share of the amount so recovered together with such
Lender's ratable share (according to the proportion of (1) the amount of such
Lender's required prepayment to (2) the total amount so recovered) of any
interest or other amount paid or payable by the Swing Line Lender in respect of
the total amount so recovered. The Borrower agrees that any Lender purchasing a
participation in any Swing Line Advance from the Swing Line Lender hereunder
may, to the fullest extent permitted by law, exercise all its rights of payment
with respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.

          (iii) Anything contained herein to the contrary notwithstanding, the
obligation of each Lender to make any Revolving Advance pursuant to Section
2.02(f)(i) or to fund its participation in any Swing Line Advances pursuant to
Section 2.02(f)(ii) shall be absolute and unconditional and shall not be subject
to any conditions set forth in Article IV hereof or otherwise affected by any
circumstance including, without limitation, (A) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the Swing
Line Lender or any Loan Party; (B) the occurrence or continuance of a Default;
(C) any adverse change in the business, condition (financial or otherwise),
operations, performance, properties or prospects of any Loan Party; (D) any
breach of any Loan Document by the Borrower, any other Loan Party or any other
Lender Party; or (E) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.

          (iv) The Borrower irrevocably authorizes (A) the Administrative Agent
to give any Notice of Borrowing pursuant to Section 2.02(f)(i) (with a copy to
the Borrower), (B) the Lenders to make the Revolving Advances pursuant to such
Notice of Borrowing, and (C) the Administrative Agent to distribute the proceeds
thereof as provided herein.

               (g) Nature of Lenders' Obligations. The failure of any Lender to
                   ------------------------------
make the Advance to be made by it as part of any Borrowing shall not relieve any
other Lender of its obligation, if any, hereunder to make its Advance on the
date of such Borrowing, but no Lender shall be responsible for the failure of
any other Lender to make the Advance to be made by such other Lender on the date
of any Borrowing.

               (h) Reports by Swing Line Lender. If requested by the
                   ----------------------------
Administrative Agent, the Swing Line Lender shall furnish to the Administrative
Agent prior to the fifth Business Day of each month (and at such other times as
the Administrative Agent may request) a written report summarizing all Swing
Line Borrowings and payments in respect thereof during the preceding month and
the aggregate outstanding principal amount of all Swing Line Advances as of the
last day of such month (or as of such other date as the Administrative Agent may
request).

     Section 2.03 Repayment.
                  ---------

                                       29
<PAGE>

               (a) Revolving Advances. The Borrower shall repay to each Lender
                   ------------------
(in accordance with the provisions of Section 2.09(a)) on the Commitment
Termination Date the aggregate principal amount of all Revolving Advances owing
to such Lender outstanding on the Commitment Termination Date.

               (b) L/C Advances. The Borrower shall repay each L/C Advance as
                   ------------
provided in Section 3.03.

               (c) Swing Line Advances. The Borrower shall repay to the Swing
                   -------------------
Line Lender the aggregate principal amount of all Swing Line Advances then
outstanding on the Commitment Termination Date.

     Section 2.04 Reduction of the Revolving Commitments and Swing Line
                  -----------------------------------------------------
Commitments.
-----------

               (a) Optional Reductions. The Borrower shall have the right, upon
                   -------------------
at least three Business Days' notice to the Administrative Agent, to terminate
in whole or reduce ratably in part the Unused Revolving Commitments of the
Lenders; provided, however, that (i) each partial reduction shall be in an
         --------  -------
amount of Three Million Dollars ($3,000,000) or any multiple of One Million
Dollars ($1,000,000) in excess thereof, and (ii) the aggregate amount of the
Revolving Commitments shall not be reduced pursuant to this Section 2.04 to an
amount less than the sum of (A) the aggregate principal amount of all Revolving
Advances then outstanding, (B) the aggregate amount of all Letter of Credit
Obligations then outstanding, and (C) the aggregate principal amount of all
Swing Line Advances then outstanding.

               (b) Mandatory Reductions. The Revolving Facility shall be
                   --------------------
automatically and permanently reduced, on a pro rata basis, on each date on
which prepayment thereof is required to be made pursuant to Section 2.05(b)(iii)
in an amount equal to the Net Cash Proceeds received by the Borrower or any of
its Subsidiaries in the transaction giving rise to such required prepayment.
Each such reduction of the Revolving Facility shall be made ratably among the
Lenders in accordance with their Revolving Commitments.

               (c) Reduction of Swing Line Commitment. The Swing Line Commitment
                   ----------------------------------
of the Swing Line Lender shall be (i) terminated automatically and
simultaneously upon any termination in whole of the Revolving Commitments, and
(ii) reduced ratably in an aggregate amount equal to the product of (i) the
amount by which, as a result of any partial reduction of the Revolving
Commitments of the Lenders, the aggregate Revolving Commitments of the Lenders
are reduced below $20,000,000 multiplied by (ii) 0.50 (any such reduction of the
                              ----------
Swing Line Commitment to be effective automatically and simultaneously with any
such reduction of the Revolving Commitments).

               (d) Reduction of the Letter of Credit Subfacility. The Letter of
                   ---------------------------------------------
Credit Subfacility shall be (i) terminated automatically and simultaneously upon
any termination in whole of the Revolving Commitments, and (ii) reduced by an
amount

                                       30
<PAGE>

equal to product of (i) the amount by which, as a result of any partial
reduction of the Revolving Commitments of the Lenders, the aggregate Revolving
Commitments of the Lenders are reduced below $30,000,000 multiplied by (ii) 0.50
                                                         ----------
(any such reduction of the Letter of Credit Subfacility to be effective
automatically and simultaneously with any such reduction of the Revolving
Commitments).

     Section 2.05 Prepayments.
                  -----------

               (a) Optional Prepayments. The Borrower may, upon (i) prior notice
                   --------------------
to the Administrative Agent (which shall be given not later than 11:00 a.m. on
the day of prepayment in the case of prepayment of Revolving Advances which
consist of Base Rate Advances and three Business Days in advance in the case of
prepayment of Revolving Advances which are Eurodollar Rate Advances) or (ii)
prior notice to the Swing Line Lender (which may be given on the date of
prepayment in the case of prepayment of Swing Line Advances), in either case
stating the proposed date and aggregate principal amount of the prepayment and,
in the case of Revolving Advances, the Interest Type of Advances to be prepaid
(and if such notice is given the Borrower shall), prepay in whole or in part the
outstanding principal of Advances of such Interest Type, together with, in the
case of any prepayment of Eurodollar Rate Advances, interest thereon to the date
of such prepayment on the principal amounts prepaid (plus, in the case of
prepayment of Eurodollar Rate Advances prior to the end of the applicable
Interest Period, any additional amount for which the Borrower shall be obligated
pursuant to Section 9.04(c)); provided, however, that each partial prepayment of
Revolving Advances shall be in an aggregate principal amount of not less than
Three Million Dollars ($3,000,000) or an integral multiple of $1,000,000 in
excess thereof, and each partial prepayment of Swing Line Advances shall be in
an aggregate principal amount of not less than One Million Dollars ($1,000,000).

               (b) Mandatory Prepayments.
                   ---------------------

                    (i) Excess Advances. If, at any time, the then outstanding
                        ---------------
          aggregate principal amount of all Revolving Advances shall exceed
          either the aggregate amount of the Revolving Commitments of the
          Lenders at such time or the Borrowing Base Amount at such time, in
          each case minus the sum of (i) the aggregate amount of the Letter of
          Credit Obligations then outstanding and (ii) the aggregate principal
          amount of the Swing Line Advances then outstanding, the Borrower shall
          immediately prepay, for the ratable account of the Lenders, the
          outstanding principal amount of Revolving Advances in an aggregate
          amount equal to such excess. If, at any time, the then outstanding
          aggregate amount of all Swing Line Advances shall exceed either (i)
          the Swing Line Commitment of the Swing Line Lender, or (ii) the
          Borrowing Base Amount then in effect minus the sum of (A) the
          aggregate amount of the Letter of Credit Obligations then outstanding,
          and (B) the aggregate principal amount of the Revolving Advances then
          outstanding, the Borrower shall thereupon prepay, for the account of
          the Swing Line Lender, the outstanding principal amount of Swing Line
          Advances in an aggregate amount equal to such excess.

                                       31
<PAGE>

                    (ii)  Incomplete Settlement. If any Lender shall for any
                          ---------------------
          reason fail to pay any amount payable by it (including the funding of
          any participation in any Swing Line Advances), or fail to make any
          Revolving Advance to be made by it, pursuant to Section 2.02(f), the
          Borrower shall, on demand by the Administrative Agent, prepay the
          Swing Line Advances then outstanding in an amount equal to such
          amount.

                    (iii) Net Cash Proceeds. The Borrower shall, on the date of
                          -----------------
          receipt by the Borrower or any other Loan Party of the Net Cash
          Proceeds from (A) the sale, lease, transfer or other disposition of
          any assets of the Borrower or any other Loan Party (including the sale
          by the Borrower or any other Loan Party of the capital stock of any of
          their respective Subsidiaries but excluding (1) sales of inventory in
          the ordinary course of business, (2) sales of damaged, worn or
          obsolete equipment to the extent the proceeds thereof are intended to
          be (and are) used to purchase replacements for such equipment within
          180 days or sales of damaged, worn or obsolete equipment made after
          the purchase of replacements for such equipment, (3) sales of the
          Synthetic Lease Properties permitted under Section 6.02(d)(v)
          (provided, that any proceeds from such sales which are not used to
          purchase replacement properties or applied to repay Obligations under
          the Synthetic Lease shall not be excluded from the prepayment
          requirements of this section), and (4) sales, leases, transfers and
          other dispositions of assets other than those contemplated by clauses
          (1), (2) and (3) above, which are sold, leased, transferred or
          otherwise disposed of for amounts that do not exceed $2,500,000 in any
          Fiscal Year), (B) the incurrence or issuance by the Borrower or any of
          its Subsidiaries of any Debt not permitted under Section 6.02(b) (it
          being understood that the provisions of this Section 2.05(b)(iii)
          shall not be construed to permit the incurrence of Debt otherwise
          prohibited by Section 6.02(b)), including any refinancing of any Debt
          (other than the Existing Credit Agreement which is being refinanced
          with proceeds of the initial Borrowing), (C) the sale or issuance by
          the Borrower or any of its Subsidiaries of any Equity Interests
          (including receipt of any capital contribution), and (D) any
          Extraordinary Receipt received by or paid to or for the account of the
          Borrower or any of its Subsidiaries and not otherwise included in
          clause (A), (B) or (C) above, prepay outstanding Advances as provided
          in Section 2.05(c), except that, in the case of sales of assets
          contemplated by clause (4) above, the amount of such Net Cash Proceeds
          in excess of $2,500,000 in any Fiscal Year shall be so applied.

                    (iv)  L/C Cash Collateral. If, at any time, the aggregate
                          -------------------
          Available Amount of all Letters of Credit then outstanding exceeds the
          L/C Sublimit in effect at such time, the Borrower shall immediately
          pay to the Administrative Agent for deposit in the L/C Cash Collateral
          Account an amount sufficient to cause the aggregate amount on deposit
          in such account to equal the amount of such excess.

                    (v)   Interest Payable on Amounts Prepaid. All prepayments
                          -----------------------------------
          under this Section 2.05 shall be made together with accrued interest
          to the date of such prepayment on the principal amount prepaid.

                                       32
<PAGE>

               (c) Application of Prepayments. Prepayments of the Revolving
                   --------------------------
Facility made pursuant to this Section 2.05 shall be first applied to prepay L/C
                                                     -----
Advances then outstanding until such Advances are paid in full, second applied
                                                                ------
to prepay Swing Line Advances then outstanding until such Advances are paid in
full, third applied to prepay Revolving Advances then outstanding comprising
      -----
part of the same Borrowings until such Advances are paid in full and fourth
                                                                     ------
deposited in the L/C Cash Collateral Account to cash collateralize 100% of the
Available Amount of the Letters of Credit then outstanding. The amount remaining
(if any) after the prepayment in full of the Advances then outstanding and the
100% cash collateralization of the aggregate Available Amount of Letters of
Credit then outstanding may, provided no Default shall have occurred and be
continuing, be returned to the Borrower and the Revolving Facility shall be
permanently reduced as set forth in Section 2.04(b).

     Section 2.06 Interest. The Borrower shall pay interest on the unpaid
                  --------
principal amount of each Advance from the date of such Advance until such
principal is paid in full at the applicable rate set forth below.

               (a) Interest on Base Rate and Swing Line Advances. Except to the
                   ---------------------------------------------
extent that the Borrower shall elect to pay interest on all or any part of any
Revolving Advance made or to be made to the Borrower under Section 2.01 for any
Interest Period pursuant to subsections (b) and (c) of this Section 2.06 and
except as otherwise provided in this Agreement, the Borrower shall pay interest
on the unpaid principal amount of each Advance, from the date of such Advance
until such principal amount is paid in full, payable quarterly in arrears on the
last Business Day of each March, June, September and December commencing
December 31, 2001 and on the date such Advance shall be paid in full, at a
fluctuating interest rate per annum equal, subject to Section 2.06(d), to the
sum of the Base Rate in effect from time to time and the Applicable Margin for
Base Rate Advances in effect from time to time.

               (b) Interest Periods for Eurodollar Rate Advances. The Borrower
                   ---------------------------------------------
may, pursuant to Section 2.06(c), elect to have the interest on the principal
amount of all or any portion of any Revolving Advances made or to be made to the
Borrower under Section 2.01, in each case ratably according to the respective
outstanding principal amounts of Revolving Advances owing to each Lender (each
such principal amount owing to a Lender as to which such election has been made
being a "Eurodollar Rate Advance" owing to such Lender) determined and payable
         -----------------------
for a specified period (an "Interest Period" for such Eurodollar Rate Advance)
                            ---------------
in accordance with subsection (c) below, provided, however, that the Borrower
                                         --------  -------
may not (i) make any such election with respect to any Swing Line Advances or
L/C Advances, or (ii) have more than five (5) Eurodollar Rate Advances owing to
any Lender outstanding at any one time. Each Interest Period shall be one, two,
three, or six months, at the Borrower's election pursuant to subsection (c)
below, provided, however, that:
       --------  -------

                    (i) the first day of an Interest Period for any Eurodollar
          Rate Advance shall be either the last day of any then current Interest
          Period for such Advance or, if there shall be no then current Interest
          Period for such Advance, any Business Day;

                                       33
<PAGE>

                    (ii)  whenever the last day of any Interest Period would
          otherwise occur on a day other than a Business Day, the last day of
          such Interest Period shall be extended to occur on the next succeeding
          Business Day; provided, however, that if such extension would cause
                        --------  -------
          the last day of such Interest Period to occur in the next following
          month, the last day of such Interest Period shall occur on the next
          preceding Business Day;

                    (iii) whenever the first day of any Interest Period occurs
          on a day of the month for which there is no numerically corresponding
          day in the calendar month that succeeds such initial calendar month by
          the number of months equal to the number of months of such Interest
          Period, such Interest Period shall end on the last Business Day of
          such succeeding calendar month; and

                    (iv)  Interest Periods of longer than one week shall not be
          available until the earlier of (a) the Administrative Agent's
          determination that syndication is completed or (b) three months
          following the Closing Date, in each case unless the Administrative
          Agent in its sole discretion determines otherwise.

               (c) Interest on Eurodollar Rate Advances. The Borrower may from
                   ------------------------------------
time to time, on the condition that no Event of Default has occurred and is
continuing, and subject to the provisions of Sections 2.06(b) and 2.06(e), elect
to pay interest on all or any portion of any Revolving Advances during any
Interest Period therefor at a rate per annum equal to the sum of the Eurodollar
Rate for such Interest Period for such Advances plus the Applicable Margin for
Eurodollar Rate Advances in effect from time to time, by notice, specifying the
amount of the Advances as to which such election is made (which amount shall
aggregate at least Five Million Dollars ($5,000,000) or any multiple of One
Million Dollars ($1,000,000) in excess thereof) and the first day and duration
of such Interest Period, received by the Administrative Agent before 9:00 a.m.
(Los Angeles, California time) three Business Days prior to the first day of
such Interest Period. If the Borrower has made such election for Eurodollar Rate
Advances for any Interest Period, the Borrower shall pay interest on the unpaid
principal amount of such Eurodollar Rate Advances during such Interest Period,
payable in arrears on the last day of such Interest Period and, in the case of
any Interest Period which is longer than three months, on each three month
anniversary of the first day of such Interest Period, in each case at a rate
equal, subject to Section 2.06(d), to the sum of the Eurodollar Rate for such
Interest Period for such Eurodollar Rate Advances plus the Applicable Margin for
Eurodollar Rate Advances in effect from time to time during such Interest
Period. On the last day of each Interest Period for any Eurodollar Rate Advance,
the unpaid principal balance thereof shall automatically become and bear
interest as a Base Rate Advance, except to the extent that the Borrower has
elected to pay interest on all or any portion of such amount for a new Interest
Period commencing on such day in accordance with this Section 2.06(c). Each
notice by the Borrower under this Section 2.06(c) shall be irrevocable upon
receipt by the Administrative Agent, and the Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified by such notice the
applicable conditions set forth in this Section 2.06(c) or Article IV,
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by

                                       34
<PAGE>

reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund any such Eurodollar Rate Advance when such Eurodollar Rate
Advance, as a result of such failure, is not made or does not become effective.

               (d) Default Interest. Upon the occurrence and during the
                   ----------------
continuance of an Event of Default, interest shall accrue (i) on any Advance
then outstanding at a rate that is 2% per annum in excess of the interest rate
otherwise payable under this Agreement with respect to such Advance (which, for
the avoidance of doubt, shall include the Applicable Margin) (the "Default
                                                                   -------
Rate"); provided that, in the case of any Eurodollar Rate Advance, upon the
----
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective such Eurodollar Rate Advance shall thereupon become a
Base Rate Advance and shall thereafter bear interest at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Base Rate Advances (which, for the avoidance of doubt, shall include the
Applicable Margin), and (ii) to the fullest extent permitted by law, on any
overdue principal, interest or other amounts payable hereunder at a rate that is
2% per annum in excess of the interest rate otherwise payable under this
Agreement with respect to Base Rate Advances (which, for the avoidance of doubt,
shall include the Applicable Margin). Such interest shall be payable upon
demand. Payment or acceptance of the increased rates of interest provided for in
this Section 2.06(d) is not a permitted alternative to timely payment and shall
not constitute a waiver of any Event of Default or otherwise prejudice or limit
any rights or remedies of the Administrative Agent or any Lender.

               (e) Suspension of Eurodollar Rate Advances.
                   --------------------------------------

                    (i) Illegality. Notwithstanding any other provision of this
                        ----------
          Agreement, if the introduction of or any change in or in the
          interpretation of any law or regulation shall make it unlawful, or any
          central bank or other governmental authority shall assert that it is
          unlawful, for any Lender or its Eurodollar Lending Office to perform
          its obligations hereunder to make Eurodollar Rate Advances or to
          continue to fund or maintain Eurodollar Rate Advances hereunder, then,
          on notice thereof and demand therefor by such Lender to the Borrower
          through the Administrative Agent, (i) each Eurodollar Rate Advance
          will automatically, upon such demand, Convert into a Base Rate Advance
          and (ii) the obligation of the Lenders to make, or to Convert Advances
          into, Eurodollar Rate Advances shall be suspended until the
          Administrative Agent shall notify the Borrower that such Lender has
          determined that the circumstances causing such suspension no longer
          exist; provided, however, that, before making any such demand, such
                 --------  -------
          Lender agrees to use reasonable efforts (consistent with its internal
          policy and legal and regulatory restrictions) to designate a different
          Eurodollar Lending Office if the making of such a designation would
          allow such Lender or its Eurodollar Lending Office to continue to
          perform its obligations to make Eurodollar Rate Advances or to
          continue to fund or maintain Eurodollar Rate Advances and would not,
          in the judgment of such Lender, be otherwise disadvantageous to such
          Lender.

                                       35
<PAGE>

                    (ii)  Other Circumstances. If, with respect to any
                          -------------------
          Eurodollar Rate Advances, (A) the Administrative Agent shall determine
          in good faith (which determination shall be conclusive) that the
          Eurodollar Rate cannot be determined in accordance with the definition
          thereof, or (B) Lenders owed at least 50% of the then aggregate unpaid
          principal amount thereof notify the Administrative Agent that the
          Eurodollar Rate for any Interest Period for such Advances will not
          adequately reflect the cost to such Lenders of making, funding or
          maintaining their Eurodollar Rate Advances for such Interest Period,
          the Administrative Agent shall forthwith so notify the Borrower and
          the Lenders, whereupon (i) each such Eurodollar Rate Advance will
          automatically, on the last day of the then existing Interest Period
          therefor, Convert into a Base Rate Advance and (ii) the obligation of
          the Lenders to make, or to Convert Advances into, Eurodollar Rate
          Advances shall be suspended until the Administrative Agent shall
          notify the Borrower that such Lenders have determined that the
          circumstances causing such suspension no longer exist.

                    (iii) Suspension on Event of Default. Upon the occurrence
                          ------------------------------
          and during the continuance of any Event of Default, (i) each
          Eurodollar Rate Advance will automatically, on the last day of the
          then existing Interest Period therefor, convert into a Base Rate
          Advance and (ii) the obligation of the Lenders to make, or to convert
          Advances into, Eurodollar Rate Advances shall be suspended.

     Section 2.07 Fees.
                  ----

               (a) Commitment Fees. The Borrower agrees to pay to the
                   ---------------
Administrative Agent a commitment fee on the average daily amount of each
Lender's Revolving Commitment less the sum of (i) Revolving Advances made by
such Lender and outstanding from time to time, (ii) such Lender's Pro Rata Share
of the aggregate Letter of Credit Obligations outstanding from time to time, and
(iii) in the case of the Swing Line Lender only, the outstanding amount of any
Swing Line Advances, for the account of such Lender, from the Closing Date in
the case of each Initial Lender and from the effective date specified in the
Assignment and Acceptance pursuant to which it became a Lender in the case of
each other Lender until the Commitment Termination Date, at the rate per annum
equal to the Commitment Fee Percentage in effect from time to time, payable in
arrears on the last Business Day of each March, June, September and December,
commencing December 31, 2001 and, and on the Commitment Termination Date.

               (b) Agent's Fees. The Borrower agrees to pay to the Agent (i) the
                   ------------
fees in the amounts and at the times set forth in the letter dated October 16,
2001 from the Agent to the Borrower, and agreed to and accepted by the Borrower
on October 19, 2001, and (ii) such other fees as may from time to time be agreed
between the Borrower and the Agent.

               (c) Absolute Obligation. The Borrower's obligation hereunder to
                   -------------------
pay the fees referred to in this Section 2.07 shall be absolute and

                                       36
<PAGE>

unconditional and shall survive the making and repayment of Advances, the
termination of all Letter of Credit Obligations and the termination of this
Agreement. All fees which are due or become due pursuant to this Section 2.07
are nonrefundable.

     Section 2.08 Increased Costs, Etc.
                  --------------------

               (a) Increased Costs. If, due to either (i) the introduction of or
                   ---------------
any change in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the cost (including Taxes, other than Excluded Taxes) to any
Lender Party of agreeing to make or of making, funding or maintaining Eurodollar
Rate Advances or of agreeing to issue or of issuing or maintaining Letters of
Credit (or of agreeing to purchase or purchasing participations therein) or of
agreeing to make or of making or maintaining L/C Advances (or of agreeing to
purchase or purchasing participations therein), then the Borrower shall from
time to time, upon demand by such Lender Party (with a copy of such demand to
the Administrative Agent), pay to the Administrative Agent for the account of
such Lender Party additional amounts sufficient to compensate such Lender Party
for such increased cost.

               (b) Capital Requirements. If, due to either (i) the introduction
                   --------------------
of or any change in or in the interpretation of any law or regulation or (ii)
the compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the amount of capital required or expected to be maintained by
any Lender Party or any corporation controlling such Lender Party as a result of
or based upon the existence of such Lender Party's commitment to lend or to
issue or purchase participations in Letters of Credit hereunder and other
commitments of such type or the issuance or maintenance of or participation in
the Letters of Credit (or similar contingent obligations), then, upon demand by
such Lender Party (with a copy of such demand to the Administrative Agent), the
Borrower shall pay to the Administrative Agent for the account of such Lender
Party, from time to time as specified by such Lender Party, additional amounts
sufficient to compensate such Lender Party for the increase in costs incurred by
such Lender Party as a result of maintaining such increased capital to the
extent that such Lender Party reasonably determines such increase in capital to
be attributable in whole or in part to the existence of such Lender Party's
commitment to lend or to issue or participate in Letters of Credit hereunder or
to the issuance or maintenance of or participation in any Letters of Credit (or
similar contingent obligations).

               (c) Mitigation. If any Lender Party desires to make a claim
                   ----------
against Borrower under this Section 2.08, such Lender Party shall notify
Borrower of any event occurring after the date of this Agreement entitling such
Lender Party to compensation under paragraph (a) or (b) of this Section 2.08 as
promptly as practicable, but in any event within 90 days after such Lender Party
obtains actual knowledge thereof; provided that (i) such Lender Party shall only
                                  --------
be entitled to payment from Borrower for any Additional Costs under this Section
2.08 incurred from and after the date that is 90 days prior to the date on which
such Lender Party gives such notice, and (ii) each Lender

                                       37
<PAGE>

Party will use commercially reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to mitigate the amount of the
Additional Costs associated with such event, including designating a different
Applicable Lending Office if the making of such designation would avoid the need
for, or reduce the amount of, such increased cost and would not, in the
reasonable judgment of such Lender Party, result in any economic, legal or
regulatory disadvantage to such Lender Party (other than economic disadvantages
for which the Borrower agrees to indemnify such Lender Party). Any Lender Party
making a claim under this Section 2.08 shall provide to Borrower an officer's
certificate setting forth in reasonable detail (i) the events giving rise to
such Additional Costs and (ii) the amount of such Lender Party's request for
compensation under paragraph (a) or (b) of this Section 2.08, together with a
statement that the determinations and allocations made in respect of the
Additional Costs comply with the provisions of this Section 2.08. Determinations
and allocations by any Lender Party for purposes of this Section 2.08 of any
change in law or regulation under paragraph (a) or any change in capital
requirements under paragraph (b) on it costs or rate of return of maintaining
its Commitment or its funding or on amounts receivable by it in respect of
Advances made by it, and of the amounts required to compensate such Lender Party
under this Section 2.08 shall be conclusive absent manifest error.

               (d) Exceptions to Compensation Requirement. Borrower shall not be
                   --------------------------------------
required to make any payments under this Section 2.08 to any Lender Party if (i)
a claim hereunder arises through circumstances specific to such Lender Party and
which do not affect commercial lenders in the same jurisdiction as such Lender
Party generally, or (ii) such Lender Party is required by Section 2.08(e) to
assign its Commitment to a designated assignee but fails to do so (other than as
a result of such designated institution failing to execute an Assignment and
Acceptance and consummating the transaction contemplated thereby), or (iii) the
claim arises out of, and immediately upon, a voluntary relocation by such Lender
Party of its Applicable Lending Office.

               (e) Replacement of Lender Party. If any Lender Party gives notice
                   ---------------------------
of a claim against Borrower under this Section 2.08, Borrower shall have the
right by notice to such Lender Party to request such Lender Party to transfer
its Commitment and its interests under the Loan Documents, without
representation or warranty (except for the absence of such Liens on such
interests arising by, through or under such Lender Party) and in accordance with
Section 9.07, on a Business Day not fewer than ten Business Days after the
giving of such notice (the "Transfer Date") to an Eligible Assignee designated
                            -------------
by Borrower (the "Transferee") for consideration equal to the sum of (i) such
                  ----------
Lender Party's share of the principal of the Advances outstanding, plus (ii)
accrued interest to the Transfer Date on such share of the Advances, plus (iii)
all other amounts, if any, owing to such Lender Party under the Loan Documents.

     Section 2.09 Payments and Computations.
                  -------------------------

               (a) Payments by Borrower. The Borrower shall make each payment
                   --------------------
hereunder and under any other Loan Document to which it is a party, irrespective
of and without condition or deduction for any counterclaim, defense,

                                       38
<PAGE>

recoupment or setoff, in lawful money of the United States and in same day funds
delivered to the Administrative Agent not later than 10:00 a.m. (Los Angeles,
California time) on the day when due by deposit of such funds to the
Administrative Agent's Account. Any payment so delivered to the Administrative
Agent after 10:00 a.m. (Los Angeles, California time) on any Business Day, or on
any day which is not a Business Day, shall be deemed received by the
Administrative Agent on the next succeeding Business Day. The Administrative
Agent will promptly after receipt of each payment cause to be distributed like
funds relating to the payment of principal, interest, commitment fees or letter
of credit fees ratably to each Lender for the account of its Applicable Lending
Office, and like funds relating to the payment of any other amount payable to
any Lender or any L/C Bank (including payments with respect to Letters of Credit
and payments for the account of any Lender under Sections 2.08, 2.10 or 9.04(c))
to such Lender for the account of its Applicable Lending Office or to such L/C
Bank, in each case to be applied in accordance with, and subject to, the terms
of this Agreement, including Section 2.09(e) below. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to Section 9.07(c), from and after the effective date
specified in such Assignment and Acceptance, the Administrative Agent shall make
all payments hereunder and under any other Loan Document in respect of the
interest assigned thereby to the Lender assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.

               (b) Computations. All computations of interest in respect of Base
                   ------------
Rate Advances based on BNP Paribas' "base rate" shall be made by the
Administrative Agent on the basis of a year of 365/366 days and all other
computations of interest in respect of any other amounts payable hereunder,
including fees, shall be made by the Administrative Agent on the basis of a year
of 360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
being computed; provided that if any Advance is repaid on the same day on which
it is made, one day's interest shall be paid on such Advance. Each determination
by the Administrative Agent of an interest rate, fee, commission or discount
rate hereunder shall be conclusive and binding for all purposes, absent manifest
error.

               (c) Payments Assumed. Unless the Administrative Agent shall have
                   ----------------
received notice from the Borrower prior to the date on which any payment is due
to the Lenders or any L/C Bank hereunder that the Borrower will not make such
payment in full, the Administrative Agent may assume that the Borrower has made
such payment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, but shall not be
required to, cause to be distributed to each Lender or such L/C Bank on such due
date an amount equal to the amount then due to such Lender or such L/C Bank. If
and to the extent that the Borrower shall not have so made such payment in full
to the Administrative Agent, each Lender and L/C Bank shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
or L/C Bank together with interest thereon, for each day from the date such
amount is distributed to such Lender or L/C Bank until the date such Lender

                                       39
<PAGE>

or L/C Bank repays such amount to the Administrative Agent, at the Federal Funds
Rate with respect to the three-day period commencing from the date such amount
is distributed to such Lender Party and at the interest rate applicable to Base
Rate Advances at such time thereafter.

               (d) Application of Payments Specified by the Borrower. Except as
                   -------------------------------------------------
otherwise specified herein, so long as no Event of Default has occurred and is
continuing, all payments shall be applied as instructed by the Borrower if such
instructions are received by the Administrative Agent prior to or
contemporaneously with receipt of funds therefor.

               (e) Application of Payments Not Otherwise Specified. If the
                   -----------------------------------------------
Administrative Agent receives funds for application to the Advances or any
Letter of Credit Obligations or other Obligations of the Borrower under the Loan
Documents under circumstances for which the Loan Documents do not specify the
Advances or the Facility or the Obligations to which, or the manner in which,
such funds are to be applied, the Administrative Agent may elect to distribute
such funds first, to the L/C Banks ratably in payment of the principal of and
           -----
interest on any outstanding L/C Advances, second, to the payment of the
                                          ------
outstanding Swing Line Advances and interest thereon, third, to each Lender
                                                      -----
ratably in accordance with such Lender's proportionate share of all Advances
(other than Swing Line Advances) then outstanding, in repayment or prepayment of
such of the outstanding Advances (other than Swing Line Advances), and for
application to such principal installments, as the Administrative Agent may
direct, and thereafter ratably to the Lenders in repayment or prepayment of any
other Obligations of the Borrower then outstanding under the Loan Documents as
the Administrative Agent shall direct, provided that if an Event of Default has
                                       --------
occurred and is continuing and the Revolving Commitments of the Lenders and the
Swing Line Commitments of the Swing Line Lender have been terminated in full,
the Administrative Agent shall distribute any payments and any proceeds of any
collection, sale or other realization or liquidation of any Collateral first, to
                                                                       -----
the payment of all costs and expenses of the Administrative Agent under the Loan
Documents, second, to the L/C Banks ratably in payment of the principal of and
           ------
interest on any outstanding L/C Advances, third, to the payment of the
                                          -----
outstanding Swing Line Advances and interest thereon, and fourth, to each Lender
                                                          ------
ratably in accordance with such Lender's proportionate share of the principal
amount of all Advances (other than Swing Line Advances) and Letter of Credit
Obligations then outstanding, in payment or prepayment of such Obligations owed
to such Lender under the Loan Documents, and for application to such principal
installments (if applicable) as the Administrative Agent shall direct.

               (f) Payments on Business Days. Whenever any payment hereunder or
                   -------------------------
under any other Loan Document shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest and commitment and other fees; provided, however, if such
                                                   --------  -------
extension would cause payment of interest on or principal of any Eurodollar Rate
Advance to be made in the next following month, such payment shall be made on
the immediately preceding Business Day.

                                       40
<PAGE>

               (g) Payments From Borrower's Accounts. The Borrower hereby
                   ---------------------------------
authorizes each Lender Party and each of its Affiliates, if and to the extent
payment owed to such Lender Party is not made when due hereunder or, in the case
of a Lender Party, under the Notes held by such Lender Party, to charge from
time to time, to the fullest extent permitted by law but subject to Sections
2.11 and 9.05, against any or all of the Borrower's accounts with such Lender
Party or such Affiliate any amount so due.

     Section 2.10 Taxes.
                  -----

               (a) Withholding Taxes. Any and all payments by the Borrower
                   -----------------
hereunder or under the Notes or any other Loan Document shall be made, in
accordance with Section 2.09, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto ("Taxes"), except to the
                                                         -----
extent required by applicable law. If the Borrower shall be required by
applicable law to deduct or withhold any Tax (other than an Excluded Tax) from
or in respect of any sum payable by the Borrower or under this Agreement, the
Notes or any other Loan Documents to any Lender Party or the Administrative
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions or withholdings (including deductions or
withholdings applicable to the additional sum payable pursuant to this clause
(i)) such Lender Party or the Administrative Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions or
withholdings been made, (ii) the Borrower shall make such deductions or
withholdings, and (iii) the Borrower shall pay the full amount deducted or
withheld to the relevant taxation authority or other authority in accordance
with applicable law. The Taxes for which the Borrower is required to make
additional payments pursuant to this Section 2.10(a) are called herein
"Indemnified Taxes".
 -----------------

               (b) Other Taxes. In addition, the Borrower shall pay any present
                   -----------
or future stamp, documentary, excise, property or similar taxes, charges or
levies (other than Excluded Taxes) that arise from any payment made hereunder or
under the Notes or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement or the Notes (hereinafter referred to as "Other
                                                                          -----
Indemnified Taxes").
-----------------

               (c) Excluded Taxes. For the purposes of this Section 2.10,
                   --------------
"Excluded Taxes" means, with respect to any Lender Party, the Administrative
 --------------
Agent and any other Person entitled to receive a payment to be made by or on
account of any obligation of the Borrower hereunder or under the Notes (each of
which is called herein a "Tax Indemnitee"), (i) any Taxes which are imposed on
                          --------------
or with respect to, or measured by, the net income of such Tax Indemnitee and
which are imposed by the United States of America, or by any government or other
taxation authority in the jurisdiction under the laws of which such Tax
Indemnitee is organized or in which its principal office is located or, in the
case of any Lender Party, in which any of its Applicable Lending Offices is
located or, in the case of the Administrative Agent, in which it has an office
location at which it performs its duties as Administrative Agent, (ii) in the
case of any Lender Party or Administrative Agent that is organized under the
laws of a jurisdiction outside the

                                       41
<PAGE>

United States of America, any withholding tax that (A) is in effect and applies
to amounts payable by the Borrower under this Agreement, the Notes or any other
Loan Document to or for the benefit of such Lender Party at the time such Lender
Party becomes a party to this Agreement (or designates a new Applicable Lending
Office) except, in the case of any Lender Party that becomes a party to this
Agreement or designates a new Applicable Lending Office after the Closing Date,
to the extent that such Lender Party is entitled at the time it designates a new
Applicable Lending Office, or to the extent that such Lender Party's assignor
was entitled at the time such Lender Party becomes a party to this Agreement, as
the case may be, to receive additional amounts from the Borrower with respect to
any withholding tax pursuant to Section 2.10(a), or (B) is attributable to such
Lender Party's failure to comply with Section 2.10(f) or such Administrative
Agent's failure to comply with Section 2.10(f) or 9.07(d), other than by reason
of not being eligible for any exception from, or reduced rate of, withholding
upon completion of the Internal Revenue Service Form at the time required, (iii)
any Tax that is imposed in connection with any sale, assignment, transfer or
other disposition by any Tax Indemnitee of all or any part of its interest in
this Agreement, the Notes or any other Loan Documents other than during the
continuance of an Event of Default, and (iv) any Tax imposed by any government
or other taxation authority in any jurisdiction to the extent such Tax is
attributable to a connection between such jurisdiction and such Tax Indemnitee
other than a connection arising from the transactions contemplated by this
Agreement and the other Loan Documents.

               (d) Indemnification. The Borrower shall indemnify each Lender
                   ---------------
Party and the Administrative Agent for the full amount of Indemnified Taxes and
Other Indemnified Taxes, and for the full amount of taxes imposed by any
jurisdiction on amounts payable under this Section 2.10, paid by such Lender
Party or the Administrative Agent (as the case may be) and any liability
(including penalties, additions to tax, interest and expenses) arising therefrom
or with respect thereto. This indemnification shall be made within 30 days from
the date such Lender Party or the Administrative Agent (as the case may be)
makes written demand therefor, provided that such written demand includes a
description in reasonable detail of the Indemnified Tax or Other Indemnified Tax
for which indemnification is being demanded and the calculation in reasonable
detail of the amount of such indemnity. So long as no Default shall have
occurred and be continuing, and the Administrative Agent or Lender Party shall
have determined that no adverse tax consequences could reasonably be expected to
result therefrom, at the request and expense of the Borrower and after receipt
of an opinion from recognized counsel (reasonably satisfactory to the
Administrative Agent or the applicable Lender Party, as the case may be) stating
that there is a substantial basis to contest the imposition or assertion of an
Indemnified Tax or Other Indemnified Tax or Tax for which the Borrower is or
would be required to indemnify the Administrative Agent or applicable Lender
Party pursuant to Section 2.08 (a "Tax Opinion"), the Administrative Agent or
                                   -----------
such Lender Party, as applicable, shall contest the imposition or assertion of
such Indemnified Tax or Other Indemnified Tax or Tax in good faith in accordance
with applicable law; provided, that such imposition or assertion of an
Indemnified Tax or Other Indemnified Tax or Tax exceeds $100,000. The Borrower
hereby agrees to reimburse the Administrative Agent or such Lender Party for all
costs of such contest upon demand. The Administrative Agent or such Lender
Party, as

                                       42
<PAGE>

applicable, shall have responsibility for the conduct of any contest conducted
pursuant to this Section 2.10(d).

               (e) Evidence of Payment. Within 30 days after the date of any
                   -------------------
payment by the Borrower of an Indemnified Tax pursuant to Section 2.10 (a) or
any Other Indemnified Tax pursuant to Section 2.10(b), the Borrower shall
furnish to the Administrative Agent, at its address referred to in Section 9.02,
the original receipt of payment thereof or a certified copy of such receipt or,
if the relevant taxation authority does not provide a receipt for such payment,
such evidence of such payment as may be reasonably obtainable by the Borrower
and reasonably satisfactory to the Administrative Agent. In the case of any
payment hereunder or under the Notes by the Borrower through an account or
branch outside the United States or on behalf of the Borrower by a payor that is
not a United States person, if the Borrower determines that no Taxes are payable
in respect thereof, the Borrower shall furnish, or shall cause such payor to
furnish, to the Administrative Agent, at such address, an opinion of counsel
acceptable to the Administrative Agent stating that such payment is exempt from
Indemnified Taxes. Notwithstanding such opinion, if any Lender Party or the
Administrative Agent receives notice from the relevant taxing authority that any
Indemnified Tax is due with respect to such payment, the Borrower shall
indemnify such Lender Party or the Administrative Agent, as the case may be, to
the extent required by Section 2.10(d). For purposes of this subsection (e) and
subsection (f), the terms "United States" and "United States person" shall have
the meanings specified in Section 7701 of the Internal Revenue Code.

               (f) Foreign Lenders and L/C Banks. Each Lender Party organized
                   -----------------------------
under the laws of a jurisdiction outside the United States shall, on or prior to
the date of its execution and delivery of this Agreement in the case of each
Initial Lender, and on the date of the Assignment and Acceptance pursuant to
which it became a Lender Party in the case of each other Lender Party, and from
time to time thereafter upon the reasonable request in writing by the Borrower
or the Administrative Agent (but only so long thereafter as such Lender Party
remains lawfully able to do so), provide the Administrative Agent and the
Borrower with a properly completed and signed Internal Revenue Service Form
W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Lender Party is exempt from or is
entitled to a reduced rate of United States withholding tax on payments under
this Agreement or the Notes. If the form provided by a Lender Party at the time
such Lender Party first becomes a party to this Agreement indicates a United
States interest withholding tax rate in excess of zero, withholding tax at such
rate shall be considered an Excluded Tax unless and until such Lender Party
provides the appropriate form certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered an Excluded Tax for
periods governed by such form; provided, however, that if, at the date of the
                               --------  -------
Assignment and Acceptance pursuant to which a Lender Party assignee becomes a
party to this Agreement, the Lender Party assignor was entitled to indemnity
payments under Section 2.10(a) in respect of United States withholding tax with
respect to interest paid at such date, then, to such extent, the term
Indemnified Taxes shall include (in addition to withholding taxes, other than
Excluded Taxes, that may be imposed in the future or other amounts otherwise
included in Indemnified Taxes) United States withholding tax, if any, applicable
with respect to the Lender Party assignee on

                                       43
<PAGE>

such date. If any form or document referred to in this Section 2.10(f) requires
the disclosure of information, other than information necessary to compute the
tax payable and information required on the date hereof by Internal Revenue
Service Form W-8BEN or W-8ECI, that the Lender Party reasonably considers to be
confidential, the Lender Party shall give notice thereof to the Borrower and
shall not be obligated to include in such form or document such confidential
information.

          The Administrative Agent, and any successor Administrative Agent, that
is organized under the laws of a jurisdiction outside the United States shall,
on or prior to the date it becomes a party to this Agreement, and from time to
time thereafter upon the reasonable request in writing by the Borrower, provide
the Borrower with a properly completed and signed Internal Revenue Service Form
W-8IMY (including all required attachments and supplements).

               (g) Mitigation of Withholding Taxes. Any Lender Party claiming
                   -------------------------------
any additional amounts payable pursuant to this Section 2.10 shall use
commercially reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its Eurodollar
Lending Office if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts that may thereafter accrue and
would not, in the reasonable judgment of such Lender Party, be otherwise
disadvantageous to such Lender Party.

          If the Borrower is required by applicable law to withhold any
Indemnified Tax with respect to any amount payable to or for the benefit of any
Lender Party pursuant to this Agreement or the Notes, the Borrower may, at any
time upon at least ten (10) Business Days prior written notice to the
Administrative Agent, arrange to have any other Lender or any Eligible Assignee
purchase from the affected Lender in accordance with Section 9.07 all of its
Notes and/or Revolving Commitments for an amount equal to the aggregate
outstanding principal amount thereof plus interest thereon accrued to (but not
including) the date of purchase.

               (h) Refunds. If, in the case of any Indemnified Tax, Other
                   -------
Indemnified Tax, or Tax in respect of which the Borrower has paid an indemnity
to or for the account of any Tax Indemnitee pursuant to this Section 2.10 or
Section 2.08, as the case may be, the Tax Indemnitee has received a refund of
such Indemnified Tax, Other Indemnified Tax or Tax pursuant to Section 2.08,
then the Tax Indemnitee shall remit to the Borrower the portion of such refund
(net of any expenses incurred in connection therewith) that is attributable to
the payment of such Indemnified Tax, Other Indemnified Tax, or Tax as determined
in the sole discretion of the Tax Indemnitee which determination shall be final,
provided that if an Event of Default shall have occurred the Tax Indemnitee
shall cease to have any obligation under this Section 2.10(h).

               (i) Survival. Without prejudice to the survival of any other
                   --------
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower, each Lender Party and the Administrative Agent contained in this
Section 2.10 shall survive the payment in full of principal and interest
hereunder and under the Notes.

                                       44
<PAGE>

     Section 2.11 Sharing of Payments, Etc. If any Lender Party shall obtain at
                  ------------------------
any time any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise, other than as a result of an assignment
pursuant to Section 9.07) (a) on account of Obligations due and payable to such
Lender Party hereunder and under the Notes at such time in excess of its ratable
share (according to the proportion of (i) the amount of such Obligations due and
payable to such Lender Party at such time to (ii) the aggregate amount of the
Obligations due and payable to all Lender Parties hereunder and under the Notes
at such time) of payments on account of the Obligations due and payable to all
Lender Parties hereunder and under the Notes at such time obtained by all the
Lender Parties at such time or (b) on account of Obligations owing (but not due
and payable) to such Lender Party hereunder and under the Notes at such time in
excess of its ratable share (according to the proportion of (i) the amount of
such Obligations owing to such Lender Party at such time to (ii) the aggregate
amount of the Obligations owing (but not due and payable) to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations owing (but not due and payable) to all Lender Parties hereunder and
under the Notes at such time obtained by all the Lender Parties at such time,
such Lender Party shall forthwith purchase from the other Lender Parties such
interests or participating interests in the Obligations due and payable or owing
to them, as the case may be, as shall be necessary to cause such purchasing
Lender Party to share the excess payment ratably with each of them; provided,
                                                                    --------
however that if all or any portion of such excess payment is thereafter
-------
recovered from such purchasing Lender Party, such purchase from each other
Lender Party shall be rescinded and such other Lender Party shall repay to the
purchasing Lender Party the purchase price to the extent of such other Lender
Party's ratable share (according to the proportion of (i) the purchase price
paid to such Lender Party to (ii) the aggregate purchase price paid to all
Lender Parties) of such recovery together with an amount equal to such Lender
Party's ratable share (according to the proportion of (i) the amount of such
other Lender Party's required repayment to (ii) the total amount so recovered
from the purchasing Lender Party) of any interest or other amount paid or
payable by the purchasing Lender Party in respect of the total amount so
recovered. The Borrower agrees that any Lender Party so purchasing an interest
or participating interest from another Lender Party pursuant to this Section
2.11 may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such interest or
participating interest as fully as if such Lender Party were the direct creditor
of the Borrower in the amount of such interest or participating interest.

     Section 2.12 Use of Proceeds. The proceeds of the Advances and drawings
                  ---------------
under the Letters of Credit shall be available (and the Borrower agrees that it
shall use such proceeds): (a) to repay in full all amounts outstanding under the
Existing Credit Agreement, (b) to repay in full all amounts outstanding under
the Casino Note, (c) to pay transaction fees and expenses, and (d) to provide
working capital for the Borrower and its Subsidiaries and, subject to the
provisions of this Agreement and the other Loan Documents, for other general
corporate purposes of the Borrower and its Subsidiaries. No portion of the
proceeds of any borrowing under this Agreement shall be used by the Borrower or
any of its Subsidiaries in any manner that might cause the borrowing or the
application of such proceeds to violate Regulation U, Regulation T or Regulation
X of the Board of Governors of the Federal Reserve System or any other
regulation of such

                                       45
<PAGE>

Board or to violate the Securities Exchange Act of 1934, as amended from time to
time, and any successor statute, in each case as in effect on the date or dates
of such borrowing and such use of proceeds.

     Section 2.13 Evidence of Debt.
                  ----------------

               (a) Maintenance of Accounts by Lenders. Each Lender shall
                   ----------------------------------
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Advance
owing to such Lender from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.

               (b) Maintenance of Accounts by Agent. The Register maintained by
                   --------------------------------
the Administrative Agent pursuant to Section 9.07(c) shall include a control
account, and a subsidiary account for each Lender Party, in which accounts
(taken together) shall be recorded (i) the date and amount of each Borrowing
made hereunder, the Interest Type of the Advances comprising such Borrowing and
any Interest Period applicable thereto, (ii) the terms of each Assignment and
Acceptance delivered to and accepted by it, (iii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender Party hereunder, and (iv) the amount of any sum received by the
Administrative Agent from the Borrower hereunder and each Lender Party's share
thereof. The entries made in the Register shall be conclusive and binding for
all purposes, absent manifest error.

     Section 2.14 Conversion of Advances.
                  ----------------------

               (a) Optional. The Borrower may on any Business Day, upon notice
                   --------

given to the Administrative Agent not later than 9:00 a.m. (Los Angeles,
California time) on the third Business Day prior to the date of the proposed
Conversion, Convert all or any portion of the Advances of one Interest Type
comprising the same Borrowing into Advances of the other Interest Type;
provided, however, that (i) any Conversion of Eurodollar Rate Advances into Base
--------  -------
Rate Advances shall be made only on the last day of an Interest Period for such
Eurodollar Rate Advances, (ii) any Conversion of Base Rate Advances into
Eurodollar Rate Advances shall be in an amount not less than $3,000,000 and
integral multiples of $1,000,000 thereafter, (iii) no Conversion of any Advances
shall result in more separate Borrowings than permitted under Section 2.06(b)
and (iv) each Conversion of Advances comprising part of the same Borrowing under
the Revolving Facility shall be made ratably among the Lenders in accordance
with their Commitments under the Revolving Facility. Each such notice of
Conversion shall, within the restrictions specified above, specify (i) the date
of such Conversion, (ii) the Advances to be Converted and (iii) if such
Conversion is into Eurodollar Rate Advances, the duration of the initial
Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Borrower and shall be subject to Section 9.04(c).

               (b) Mandatory. On the date on which the aggregate unpaid
                   ---------
principal amount of Eurodollar Rate Advances comprising any Borrowing shall

                                       46
<PAGE>

be reduced, by payment or prepayment or otherwise, to less than $3,000,000, such
Advances shall automatically Convert into Base Rate Advances.

                                  ARTICLE III

                     AMOUNTS AND TERMS OF LETTERS OF CREDIT

     Section 3.01 The Letter of Credit Subfacility. The Borrower may request
                  --------------------------------
that the L/C Bank Issue Letters of Credit for the account of the Borrower from
time to time on any Business Day during the period after the Closing Date until
the Commitment Termination Date (a) in an aggregate Available Amount for all
Letters of Credit not to exceed at any time Fifteen Million Dollars
($15,000,000) (the "Letter of Credit Subfacility"), and (b) in an Available
                    ----------------------------
Amount for each such Letter of Credit not to exceed the Unused Revolving
Commitments of the Lenders on such Business Day. The L/C Bank shall not be
obligated to issue a Letter of Credit if such Issuance would cause the sum of
the Revolving Advances, the Swing Line Reserve Amount and the Letter of Credit
Obligations then outstanding to exceed the Borrowing Base Amount. No Letter of
Credit shall (i) have a face amount of less than $500,000, or (ii) have an
expiration date (including all rights of the Borrower or the beneficiary to
require renewal) later than the earlier of five (5) Business Days before the
Commitment Termination Date and one year after the date of issuance thereof;
provided, however, any Letter of Credit may by its terms be renewable on terms
satisfactory to the L/C Bank, but shall not have an expiration date later than
five Business Days before the Commitment Termination Date unless the Borrower
and the applicable L/C Bank enter into an agreement satisfactory to such L/C
Bank in its sole discretion with respect to the acceleration and replacement of
such Letter of Credit, which agreement may require the Borrower to cash
collateralize such Letter of Credit or enter into such other collateral
arrangements as determined by the L/C Bank in its sole discretion. Within the
limits of the Letter of Credit Subfacility, and subject to the limits referred
to above, the Borrower may request the Issuance of one or more Letters of Credit
under this Section 3.01, repay amounts due resulting from L/C Advances
thereunder pursuant to Section 3.03, and request the Issuance of one or more
additional Letters of Credit under this Section 3.01.

     Section 3.02 Issuance of Letters of Credit.
                  -----------------------------

               (a) Notice of Issuance. Each Letter of Credit shall be Issued
                   ------------------
pursuant to a Notice of Issuance, which must be received by the Administrative
Agent and the L/C Bank not later than 9:00 a.m. (Los Angeles, California time)
on the third Business Day prior to the date of the proposed Issuance of such
Letter of Credit (or such shorter period as may be acceptable to the applicable
L/C Bank). Each such Notice of Issuance shall specify the requested (i) date of
such Issuance (which shall be a Business Day), (ii) Available Amount of such
Letter of Credit, (iii) expiration date of such Letter of Credit, (iv) name and
address of the beneficiary of such Letter of Credit, and (v) form of such Letter
of Credit, and shall be accompanied by such customary application and agreement
for letter of credit of the L/C Bank (a "Letter of Credit Agreement") as the L/C
                                         --------------------------
Bank may specify to the Borrower for use in connection with such requested
Letter of Credit.

                                       47
<PAGE>

               (b) Conditions to Issuance. If (i) the requested form of such
                   ----------------------
Letter of Credit is acceptable to the Administrative Agent and the L/C Bank in
the reasonable discretion of each, and (ii) such L/C Bank has not received
notice from the Administrative Agent or the Required Lenders that the Issuance
of such Letter of Credit is not authorized because such Issuance would not
comply with the requirements of clause (a) or (b) of Section 3.01 or one or more
of the conditions set forth in Section 4.02 has not been satisfied, then such
L/C Bank will, upon fulfillment of the applicable conditions set forth in
Section 4.02 (which fulfillment such L/C Bank may assume in the absence of
actual knowledge, or notice received from the Borrower, the Administrative Agent
or the Required Lenders, to the contrary) and subject to the provisions of this
Article III, make such Letter of Credit available to the Borrower at the
Administrative Agent's office referred to in Section 9.02 or as otherwise agreed
upon with the Borrower in connection with such Issuance. In the event and to the
extent that the provisions of any Letter of Credit Agreement shall conflict with
this Agreement, the provisions of this Agreement shall govern.

     Section 3.03 Drawing and Reimbursement. The Borrower agrees to reimburse
                  -------------------------
the L/C Bank under each Letter of Credit, within one Business Day after it has
notice of any L/C Advance by such L/C Bank thereunder, for the principal amount
of such L/C Advance, and shall pay to such L/C Bank, on demand, interest on the
unreimbursed principal of such L/C Advance at a rate per annum equal to (a) from
the date of such L/C Advance to the first Business Day after notice thereof has
been given to the Borrower, the rate applicable to Base Rate Advances in effect
from time to time, and (b) from and after such first Business Day, the Default
Rate. If the Borrower shall fail to so reimburse the L/C Bank within one
Business Day after the Borrower receives notice that any such L/C Advance has
been made, then upon demand by the L/C Bank, and whether or not a Default has
occurred and is continuing or any conditions set forth in Section 4.02 are
satisfied, each Lender shall purchase from such L/C Bank, and such L/C Bank
shall sell and assign to each Lender, such Lender's Pro Rata Share of such
outstanding L/C Advance as of the date of such purchase, by making available for
the account of such L/C Bank, by deposit to the Administrative Agent's Account,
in same day funds, an amount equal to the portion of the outstanding principal
amount of such L/C Advance to be purchased by such Lender. Each Lender agrees to
purchase its Pro Rata Share of an outstanding L/C Advance on (A) the Business
Day on which demand therefor is made by the L/C Bank which made such L/C
Advance, provided notice of such demand is given not later than 12:00 noon (Los
Angeles, California time) on such Business Day, or (B) the first Business Day
next succeeding such demand if notice of such demand is given after such time.
Upon any such assignment by an L/C Bank to any Lender of a portion of an L/C
Advance, such L/C Bank represents and warrants to such Lender that such L/C Bank
is the legal and beneficial owner of such interest being assigned by it, but
makes no other representation or warranty and assumes no responsibility with
respect to such L/C Advance, the Loan Documents or any Loan Party.

     Section 3.04 Obligations Absolute. The Obligations of the Borrower under
                  --------------------
this Agreement, any Letter of Credit Agreement and any other agreement or
instrument relating to any Letter of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, such Letter of Credit Agreement

                                       48
<PAGE>

and such other agreement or instrument under all circumstances, including,
without limitation, the following circumstances (it being understood that any
such payment by the Borrower is without prejudice to, and does not constitute a
waiver of, any rights the Borrower might have or might acquire as a result of
the payment by any L/C Bank of any draft or the reimbursement by the Borrower
thereof):

               (a) any lack of validity or enforceability of this Agreement, any
Letter of Credit Agreement, any Letter of Credit or any other agreement or
instrument relating thereto (this Agreement and all of the other foregoing being
collectively referred to herein as the "L/C Related Documents");
                                        ---------------------

               (b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of the Borrower in respect of
any L/C Related Document or any other amendment or waiver of or any consent to
departure from all or any of the L/C Related Documents;

               (c) the existence of any claim, set-off, defense or other right
that the Borrower or any of its Subsidiaries may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any Persons for whom any
such beneficiary or any such transferee may be acting), any L/C Bank or any
other Person, whether in connection with the transactions contemplated by the
L/C Related Documents or any unrelated transaction;

               (d) any statement or any other document presented under a Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

               (e) payment by any L/C Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of such Letter of Credit, or payment by the L/C Bank under a Letter of
Credit in any other circumstances in which conditions to payment are not met;

               (f) any exchange, release or non-perfection of any Collateral or
other collateral, or any release or amendment or waiver of or consent to
departure from the Guaranty or any other guarantee, for all or any of the
Obligations of the Borrower in respect of the L/C Related Documents; or

               (g) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a Guarantor or any other guarantor.

     Section 3.05 Letter of Credit Compensation.
                  -----------------------------

               (a) The Borrower shall pay to the Administrative Agent for the
account of each Lender, a letter of credit fee with respect to each Letter of
Credit, in an amount equal to a rate per annum equal to the Applicable Margin
for Eurodollar Rate

                                       49
<PAGE>

Advances in effect from time to time on such Lender's Pro Rata Share of the
average daily Available Amount of such Letter of Credit outstanding from time to
time;

The letter of credit fees payable under this Section 3.05(a) shall be payable
quarterly in arrears on the last Business Day of each March, June, September and
December, commencing December 31, 2001, and on the Commitment Termination Date.
For purposes of computing any fees under this Section 3.05(a), the determination
of the maximum amount available to be drawn under a Letter of Credit at any time
shall assume strict compliance with all conditions for drawing. Any fees paid
pursuant to this Section 3.05(a) are nonrefundable.

               (b) The Borrower shall pay to each L/C Bank, for its own account
and on demand, such other commissions, issuance fees, fronting fees, transfer
fees and other fees, charges and expenses in connection with the Issuance,
amendment, transfer, cancellation or administration of each Letter of Credit as
the Borrower and such L/C Bank shall agree.

     Section 3.06 Use of Letters of Credit. Any Letters of Credit Issued
                  ------------------------
hereunder shall be used solely to support Obligations of the Borrower and its
Subsidiaries not prohibited hereunder.

                                   ARTICLE IV

                              CONDITIONS OF LENDING

     Section 4.01 Conditions Precedent to Initial Borrowing. The obligation of
                  -----------------------------------------
each Lender Party to make an Advance and the obligation of an L/C Bank to Issue
a Letter of Credit on the occasion of the initial Borrowing is subject to the
following conditions precedent:

               (a) The Lender Parties shall be satisfied with the corporate and
legal structure and capitalization of each Loan Party, including the terms and
conditions of the charter, bylaws and each class of Equity Interests of each
Loan Party and of each agreement or instrument relating to such structure or
capitalization.

               (b) The Lender Parties (i) shall be satisfied, and shall have
received satisfactory evidence, that the Existing Credit Agreement, the Casino
Note and the hedge agreements (x) between the Borrower and Bank of America, N.A.
and (y) between the Borrower and Credit Lyonnais Los Angeles Branch
(collectively, the "Existing Hedge Agreements") shall be prepaid, redeemed or
                    -------------------------
defeased in full or otherwise satisfied and extinguished contemporaneously with
the initial Borrowing and any agreement, instrument or document relating to the
Existing Credit Agreement, the Casino Note and the Existing Hedge Agreements
shall be cancelled on the Closing Date, (ii) shall be satisfied with, and shall
have received, all instruments or other documents required to terminate any and
all liens and security interests granted pursuant to, or in connection with, the
Existing Credit Agreement, the

                                       50
<PAGE>

Casino Note and the Existing Hedge Agreements or to release any collateral
relating to the Existing Credit Agreement, the Casino Note and the Existing
Hedge Agreements (including, without limitation, a payoff letter, UCC
termination statements, real property releases and reconveyances, and releases
of liens recorded in the U.S. Patent and Trademark Office), all of which shall
have been duly executed by the appropriate party thereto and, where so required,
shall have been positioned for filing with the appropriate authorities promptly
following the initial Borrowing, (iii) shall be satisfied, and shall have
received satisfactory evidence, that the Lien securing the hedge agreement
between the Borrower and Union Bank of California, N.A. is pari passu with the
Liens granted to the Administrative Agent pursuant to the Collateral Documents,
and (iv) shall be satisfied in all respects with the Surviving Debt and all
terms and conditions of any Surviving Debt Agreement;

               (c) Since December 31, 2000 nothing shall have occurred (and the
Lenders shall have become aware of no facts or conditions not previously known)
which the Lenders shall determine could reasonably be expected to have a
Material Adverse Effect.

               (d) There shall exist no action, suit, investigation, litigation
or proceeding pending or threatened before any court, governmental agency or
arbitrator affecting any Loan Party or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect or which purports to
affect the legality, validity or enforceability of this Agreement, any Note, any
other Loan Document or the consummation of the transactions contemplated hereby.

               (e) The Borrower shall have paid all accrued costs, fees and
expenses of, or other compensation payable to, the Administrative Agent, the
Syndication Agent, the Lead Arranger and the Lender Parties (including the
accrued fees and expenses of counsel to the Administrative Agent, the
Syndication Agent and the Lead Arranger).

               (f) The Borrower shall have entered into the Synthetic Lease with
respect to the Properties (as defined in the Participation Agreement), and shall
have terminated and satisfied all obligations with respect to any synthetic
leases of the Borrower existing before the Closing Date, in each case on terms
and conditions satisfactory to the Administrative Agent, and the Administrative
Agent (and any Lender Party so requesting copies) shall have received copies of
all of the Synthetic Lease Documents and shall be satisfied in all respects with
the terms and conditions therein.

               (g) The Administrative Agent shall have received, and shall be
satisfied in all respects with, (i) the Consolidated financial statements of the
Borrower and its Subsidiaries for the Fiscal Years ended January 2, 2000 and
December 31, 2000, including balance sheets and income and cash flow statements
audited by independent public accountants of recognized national standing and
prepared in conformity with GAAP, (ii) the most recent interim quarterly
financial statements of the Borrower and its Subsidiaries, and (iii) unaudited
year-to-date financial statements of the Borrower and its Subsidiaries for the
period ending October 7, 2001.

                                       51
<PAGE>

               (h) The Administrative Agent shall have received on or before the
day of the initial Borrowing the following, each dated such day (unless
otherwise specified), in form and substance satisfactory to the Administrative
Agent (unless otherwise specified) and (except for the Notes) in sufficient
copies for each Lender Party:

                    (i)   Fully executed counterparts of this Agreement.

                    (ii)  The Notes to the order of each Lender, as appropriate.

                    (iii) Certified copies of the resolutions of the Board of
          Directors of the Borrower and each other Loan Party approving this
          Agreement, the Notes, and each other Loan Document to which it is or
          is to be a party, and of all documents evidencing other necessary
          corporate action and governmental approvals, if any, with respect to
          this Agreement, the Notes, and each other Loan Document.

                    (iv)  With respect to each Loan Party, a copy of a
          certificate of the Secretary of State of the State of such Loan
          Party's organization, dated reasonably near the date of the initial
          Borrowing, listing the charter of such Loan Party and each amendment
          thereto on file in such office and certifying (A) as to a true and
          correct copy of the charter of such Loan Party and each amendment
          thereto on file in such Secretary's office, and (B) that (1) such
          amendments are the only amendments to such Loan Party's charter on
          file in such office, (2) such Loan Party has paid all franchise taxes
          to the date of such certificate, and (3) such Loan Party is duly
          incorporated and in good standing or presently subsisting under the
          laws of the State of such Loan Party's organization.

                    (v)   With respect to each Loan Party, a copy of a
          certificate of the Secretary of State of each jurisdiction in which
          such Loan Party is qualified to do business, as listed on Schedule
          4.01(h)(v), dated reasonably near the date of the initial Borrowing,
          stating that such Loan Party is duly qualified and in good standing as
          a foreign corporation in such State and has filed all annual reports
          required to be filed to the date of such certificate.

                    (vi)  A certificate of each Loan Party, signed on behalf of
          such Loan Party by its President or a Vice President and its Secretary
          or any Assistant Secretary, dated the date of the initial Borrowing
          (the statements made in which certificate shall be true on and as of
          the date of the initial Borrowing), certifying as to (A) the absence
          of any amendments to the charter of such Loan Party since the date of
          the Secretary of State's certificate referred to in Section
          4.01(h)(iv), (B) a true and correct copy of the bylaws of such Loan
          Party as in effect on the date of the initial Borrowing, (C) the due
          incorporation and good standing of such Loan Party as a corporation
          organized under the laws of the State of its jurisdiction of
          incorporation, and the absence of any proceeding for the

                                       52
<PAGE>

          dissolution or liquidation of such Loan Party, (D) the truth of the
          representations and warranties contained in the Loan Documents as
          though made on and as of the date of the initial Borrowing and (E) the
          absence of any event occurring and continuing, or resulting from the
          initial Borrowing, that constitutes a Default.

                    (vii)  A certificate of the Secretary or an Assistant
          Secretary of each Loan Party certifying the names and true signatures
          of the officers of such Loan Party authorized to sign this Agreement,
          the Notes, and each other Loan Document to which they are or are to be
          parties and the other documents to be delivered hereunder and
          thereunder.

                    (viii) A security agreement in substantially the form of
          Exhibit E-1 (as amended from time to time in accordance with its
          terms, the "Security Agreement"), duly executed by each Loan Party,
                      ------------------
          and a pledge agreement in substantially the form of Exhibit E-2 (as
          amended from time to time in accordance with its terms, the "Pledge
                                                                       ------
          Agreement"), duly executed by each Subsidiary of the Borrower (other
          ---------
          than any Foreign Subsidiary), together with:

                         (A) certificates representing the Pledged Shares (as
     defined in the Pledge Agreement) accompanied by undated stock powers
     executed in blank and instruments evidencing the Pledged Debt (as defined
     in the Security Agreement) endorsed in blank,

                         (B) duly executed financing statements in appropriate
     form for filing under the Uniform Commercial Code in all jurisdictions that
     the Administrative Agent may deem necessary or desirable in order to
     perfect and protect the Liens created by the Security Agreement and the
     Pledge Agreement covering the Collateral described in the Security
     Agreement and the Pledge Agreement and completed requests for information
     dated on or before the date of the initial Borrowing listing all effective
     financing statements filed in such jurisdictions that name any Subsidiary
     of the Borrower (other than any Foreign Subsidiary) as debtor, together
     with copies of such other financing statements,

                         (C) evidence of the insurance required by the terms of
     the Security Agreement (subject to such exceptions as may be acceptable to
     the Administrative Agent), and

                         (D) evidence that all other action that the
     Administrative Agent may deem necessary or desirable in order to perfect
     and protect the Liens created under the Security Agreement, the Pledge
     Agreement or covering any Collateral, or the priority thereof, has been
     taken (including receipt of duly executed payoff letters and UCC
     termination statements).

                    (ix) Deeds of trust, trust deeds and mortgages in
substantially the form of Exhibit F and covering the properties listed on

                                       53
<PAGE>

          Schedule 5.01(r)(i) other than the Escondido Property, Store #405 and
          the properties located in Mexico (as amended from time to time in
          accordance with their terms, the "Mortgages"), duly executed by the
                                            ---------
          Borrower in appropriate form for filing in all filing or recording
          offices that the Administrative Agent may deem necessary or desirable
          in order to create a valid and subsisting Lien subject only to
          Permitted Liens on the property described therein in favor of the
          Administrative Agent for the benefit of the Secured Parties, together
          with:

                         (A) American Land Title Association Lender's Extended
                    Coverage title insurance policies (the " Mortgage Policies")
                                                             -----------------
                    issued by Chicago Title Insurance Company in form and
                    substance, with endorsements and in amounts acceptable to
                    the Administrative Agent, insuring the Mortgages to be valid
                    first and subsisting Liens on the property described
                    therein, free and clear of all defects (including, but not
                    limited to, mechanics' and materialmen's Liens) and
                    encumbrances, excepting only Permitted Encumbrances, and
                    providing for such other affirmative insurance (including
                    endorsements for future advances under the Loan Documents
                    and for mechanics' and materialmen's Liens) as the
                    Administrative Agent may deem necessary or desirable,

                         (B) an appraisal of each of the properties described in
                    the Mortgages to the extent required by, and complying with,
                    the requirements of the Federal Financial Institutions
                    Reform, Recovery and Enforcement Act of 1989,

                         (C) such consents and agreements of lessors and other
                    third parties, and such estoppel letters and other
                    confirmations, as the Administrative Agent may deem
                    necessary or desirable and the Borrower is able to obtain
                    using commercially reasonable efforts (which shall not
                    include the payment of any amounts to such lessors or third
                    parties as an inducement to such lessors and third parties
                    to execute such consents, agreements, estoppel letters or
                    confirmations),

                         (D) evidence of the insurance required by the terms of
                    each Mortgage (subject to such exceptions as may be
                    acceptable to the Administrative Agent),

                         (E) favorable opinions of local counsel with respect to
                    the Mortgages in form and substance satisfactory to the
                    Administrative Agent, and

                         (F) evidence that all other action that the
                    Administrative Agent may deem necessary or desirable in
                    order to create valid first and subsisting Liens on the
                    property described in the Mortgages has been taken.

                                       54
<PAGE>

                    (x)    A guaranty in substantially the form of Exhibit G (as
          amended from time to time in accordance with its terms, the
          "Guaranty"), duly executed by each of the Borrower's
          --------
          direct and indirect Subsidiaries (other than any Foreign Subsidiary).

                    (xi)   Such financial, business and other information
          regarding the Borrower and its Subsidiaries as the Lender Parties
          shall have requested, including, without limitation, information as to
          possible contingent liabilities, tax matters, environmental matters,
          obligations under ERISA and Employee Benefit Plans, collective
          bargaining agreements and other arrangements with employees, interim
          financial statements dated the end of the most recent fiscal quarter
          for which financial statements are available (or, in the event the
          Lender Parties' due diligence review reveals material changes since
          such financial statements, as of a later date within 45 days of the
          day of the initial Borrowing), pro forma financial statements as to
          the Borrower and forecasts prepared by management of the Borrower, in
          form and substance satisfactory to the Lender Parties, of balance
          sheets, income statements and cash flow statements on a monthly basis
          for the first year following the day of the initial Borrowing and on
          an annual basis for each year thereafter until the Commitment
          Termination Date.

                    (xii)  A certificate, in the form of Exhibit I hereto,
          attesting to the Solvency of each Loan Party before and after giving
          effect to the transactions contemplated hereby, from the Borrower's
          chief financial officer.

                    (xiii) Favorable opinions of (i) Holland & Knight LLP,
          special California counsel for the Borrower and the other Loan
          Parties, in substantially the form of Exhibit J-1 hereto and (ii)
          Donald G. Alvarado, general counsel of the Borrower, in substantially
          the form of Exhibit J-2 hereto and, in each case, as to such other
          matters as any Lender Party through the Agent may reasonably request.

                    (xiv)  an Intercompany Note in substantially the form of
          Exhibit H (as amended from time to time, each an "Intercompany Note")
                                                            -----------------
          from each Guarantor in favor of the Borrower, accompanied by an
          endorsement by the Borrower in favor of the Administrative Agent.

                    (xv)   (A) Deeds of trust, trust deeds and mortgages in
          substantially the form of Exhibit N-1 and covering the Synthetic Lease
          Properties duly executed by the Owner Trustee and (B) deeds of trust,
          trust deeds and mortgages in substantially the form of Exhibit N-2 and
          covering the Borrower's leasehold interest in the Synthetic Lease
          Properties duly executed by the Borrower (collectively, the "Second
                                                                       ------
          Mortgages"), in each case in appropriate form for filing in all filing
          ---------
          or recording offices that the Administrative Agent may deem necessary
          or desirable in order to create a valid and subsisting Lien in favor
          of the Administrative Agent for the benefit of the Secured Parties,
          subordinate

                                       55
<PAGE>

          only to the Lien created by the Synthetic Lease Documents to the
          extent provided in the Intercreditor Agreement (Leased Property).

                    (xvi)   A security agreement in substantially the form of
          Exhibit E-3 (as amended from time to time in accordance with its
          terms, the "Subordinate Security Agreement"), duly executed by the
                      ------------------------------
          Owner Trustee and the Borrower, in order to create a valid and
          subsisting Lien in favor of the Administrative Agent for the benefit
          of the Secured Parties in all of the personal property financed under
          the Synthetic Lease Documents, subordinate only to the Lien created by
          the Synthetic Lease Documents to the extent provided in the
          Intercreditor Agreement (Leased Property), together with duly executed
          financing statements in appropriate form for filing under the Uniform
          Commercial Code in all jurisdictions that the Administrative Agent may
          deem necessary or desirable in order to perfect and protect the Liens
          created by the Subordinate Security Agreement covering the Collateral
          described in the Subordinate Security Agreement .

                    (xvii)  An environmental indemnity agreement in the form of
          Exhibit P duly executed by Borrower (the "Environmental Indemnity
                                                    -----------------------
          Agreement").
          ---------

                    (xviii) Intercreditor agreements in the form of Exhibit Q-1
          and Q-2 (as amended from time to time in accordance with their
          respective terms, the "Intercreditor Agreements") duly executed by
                                 ------------------------
          each party thereto.

                    (xix)   Evidence of insurance naming the Administrative
          Agent as additional insured and/or loss payee with such responsible
          and reputable insurance companies or associations, and in such amounts
          and covering such risks, as is reasonably satisfactory to the Initial
          Lenders.

                    (xx)    A Notice of Borrowing, Notice of Swing Line
          Borrowing or Notice of Issuance, as applicable, relating to the
          initial Borrowing.

                    (xxi)   A report from Arthur Andersen satisfactory in form
          and substance to the Administrative Agent with respect to the Loan
          Parties' Eligible Collateral.

          Section 4.02 Conditions Precedent to Each Borrowing and Issuance. The
                       ---------------------------------------------------
obligation of each Lender to make an Advance and the obligation of an L/C Bank
to Issue a Letter of Credit (including the initial issuance), and the right of
the Borrower to request a Swing Line Borrowing, shall be subject to the further
conditions precedent that on the date of such Borrowing or Issuance:

               (a) the following statements shall be true (and each of the
giving of the applicable Notice of Borrowing, Notice of Swing Line Borrowing or
Notice

                                       56
<PAGE>

of Issuance and the acceptance by the Borrower of the proceeds of such Borrowing
or of such Letter of Credit shall constitute a representation and warranty by
the Borrower that both on the date of such notice and on the date of such
Borrowing or Issuance such statements are true):

                    (i)  the representations and warranties contained in each
          Loan Document are correct on and as of the date of such Borrowing or
          issuance, before and after giving effect to such Borrowing or Issuance
          and to the application of the proceeds therefrom, as though made on
          and as of such date (other than any such representations or warranties
          that, by their terms, are specifically made as of a date other than
          the date of such Borrowing or Issuance, in which case such
          representations and warranties shall have been true and correct as of
          such other date), and

                    (ii) no Default, has occurred and is continuing, or would
          result from such Borrowing or Issuance or from the application of the
          proceeds therefrom;

               (b) no Borrowing Base Deficiency shall result after giving effect
to such Borrowing or Issuance and the Borrower shall have delivered a Borrowing
Base Certificate as required by Section 6.03(a)evidencing the same; and

               (c) the Administrative Agent shall have received a Notice of
Borrowing, Notice of Swing Line Borrowing or Notice of Issuance, and such other
approvals, opinions or documents as any Lender or such L/C Bank through the
Administrative Agent may reasonably request.

     Section 4.03 Determinations Under Section 4.01. For purposes of determining
                  ---------------------------------
compliance with the conditions specified in Section 4.01, each Lender Party has
reviewed all documents which it has deemed reasonable to review and shall be
deemed to have consented to, approved or accepted or to be satisfied with each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to the Lender Parties unless an officer of the
Administrative Agent responsible for the transactions contemplated by the Loan
Documents shall have received notice from such Lender Party prior to the initial
Borrowing specifying its objection thereto and such Lender Party shall not have
made available to the Administrative Agent such Lender Party's ratable portion
of such Borrowing.

                                   ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

     Section 5.01 Representations and Warranties of the Borrower. The Borrower
                  ----------------------------------------------
represents and warrants as follows:

               (a) Incorporation, Qualification, Corporate Power and Authority.
                   -----------------------------------------------------------
Each Loan Party (i) is a corporation duly organized, validly existing and in

                                       57
<PAGE>

good standing under the laws of the jurisdiction of its incorporation, (ii) is
duly qualified and in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the failure to so
qualify or be licensed would not be likely to have a Material Adverse Effect and
(iii) has all requisite corporate power and authority (including all
governmental licenses, permits and other approvals) to own or lease and operate
its properties and to carry on its business as now conducted and as proposed to
be conducted. All of the outstanding Equity Interests in the Borrower have been
validly issued and are fully paid and non-assessable.

               (b) Capital Stock. Set forth on Schedule 5.01(b) hereto is a
                   -------------
complete and accurate list of all Subsidiaries of the Borrower and each Loan
Party, showing (as to each such Subsidiary) as of the date hereof, the
jurisdiction of its incorporation, the number of shares of each class of its
Equity Interests authorized and the number outstanding, the percentage of each
such class of its Equity Interests owned (directly or indirectly) by the
Borrower or such Loan Party and the number of shares covered by all outstanding
options, warrants, rights of conversion or purchase and similar rights. All of
the outstanding Equity Interests of all of such Subsidiaries have been validly
issued, are fully paid and non-assessable and are owned by the Borrower or such
Loan Party or one or more of its Subsidiaries free and clear of all Liens,
except those created by the Collateral Documents. Each such Subsidiary (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which it owns or
leases property or in which the conduct of its business requires it to so
qualify or be licensed except where the failure to so qualify or be licensed
would not be likely to have a Material Adverse Effect and (iii) has all
requisite corporate power and authority (including all governmental licenses,
permits and other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.

               (c) Authorization; No Conflict or Violation; Compliance with
                   --------------------------------------------------------
Laws. The execution, delivery and performance by each Loan Party of this
----
Agreement, the Notes, and each other Loan Document to which it is or is to be a
party, and the consummation of the other transactions contemplated hereby and
thereby, are within such Loan Party's corporate powers, have been duly
authorized by all necessary corporate action, and do not (i) contravene such
Loan Party's charter or by-laws, (ii) violate any law, rule, regulation
(including, without limitation, Regulation X of the Board of Governors of the
Federal Reserve System), order, writ, judgment, injunction, decree,
determination or award, (iii) conflict with or result in the breach of, or
constitute a default or require any payment to be made under, any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument binding
on or affecting any Loan Party, any of its Subsidiaries or any of their
properties or (iv) except for the Liens created by the Collateral Documents,
result in or require the creation or imposition of any Lien upon or with respect
to any of the properties of any Loan Party or any of its Subsidiaries. No Loan
Party or any of its Subsidiaries is in violation of any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award or
in breach of any such contract, loan agreement, indenture, mortgage, deed of

                                       58
<PAGE>

trust, lease or other instrument, the violation or breach of which could
have a Material Adverse Effect.

               (d) Approvals and Consents. No authorization or approval or other
                   ----------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body or any other third party is required for (i) the due execution,
delivery, recordation, filing or performance by any Loan Party of this
Agreement, the Notes, or any other Loan Document to which it is or is to be a
party, or for the consummation of the other transactions contemplated hereby and
thereby, (ii) the grant by any Loan Party of the Liens granted by it pursuant to
the Collateral Documents, (iii) the perfection or maintenance of the Liens
created by the Collateral Documents (including the first priority nature
thereof, except to the extent provided in the Intercreditor Agreement (Leased
Property)) or (iv) the exercise by the Administrative Agent or any Lender Party
of its rights under the Loan Documents or the remedies in respect of the
Collateral pursuant to the Collateral Documents, except for the authorizations,
approvals, actions, notices, consents and filings listed on Schedule 5.01(d)
hereto, all of which have been duly obtained, taken, given or made and are in
full force and effect.

               (e) Enforceability. This Agreement has been, and each of the
                   --------------
Notes, and each other Loan Document when delivered hereunder will have been,
duly executed and delivered by each Loan Party thereto. This Agreement is, and
each of the Notes, and each other Loan Document when delivered hereunder will
be, the legal, valid and binding obligation of each Loan Party thereto,
enforceable against such Loan Party in accordance with its terms.

               (f) Financial Statements.
                   --------------------

                    (i)  The Consolidated and consolidating balance sheets of
          the Borrower and its Subsidiaries as at December 31, 2000, and the
          related Consolidated and consolidating statements of income and cash
          flows of the Borrower and its Subsidiaries for the Fiscal Year then
          ended, accompanied by an unqualified opinion of Arthur Andersen LLP,
          independent public accountants, and the Consolidated and consolidating
          balance sheets of the Borrower and its Subsidiaries as at October 7,
          2001, and the related Consolidated and consolidating statements of
          income and cash flows of the Borrower and its Subsidiaries for the 40
          weeks then ended, duly certified by the chief financial officer of the
          Borrower, copies of which have been furnished to each Lender, fairly
          present, subject, in the case of said balance sheets as at October 7,
          2001 and said statements of income and cash flows for the 40 weeks
          then ended, to year-end audit adjustments, the Consolidated and
          consolidating financial condition of the Borrower and its Subsidiaries
          as at such dates and the Consolidated and consolidating results of the
          operations of the Borrower and its Subsidiaries for the periods ended
          on such dates, all in accordance with GAAP applied on a consistent
          basis, and since December 31, 2000, there has been no Material Adverse
          Change.

                    (ii) The Consolidated forecasted balance sheets, income
          statements and cash flow statements of the Borrower and its
          Subsidiaries

                                       59
<PAGE>

          delivered to the Lenders pursuant to Section 4.01(h)(xi) and 6.03(l)
          were prepared in good faith on the basis of the assumptions stated
          therein, which assumptions were fair in the light of conditions
          existing at the time of delivery of such forecasts, and represented,
          at the time of delivery, the Borrower's best estimate of its future
          financial performance.

                    (iii) Except as fully disclosed in the financial statements
          delivered pursuant to Section 4.01(f), there were as of the date of
          the delivery of such financial statements and as of the Closing Date
          no liabilities or obligations with respect to the Borrowers or its
          Subsidiaries of any nature whatsoever (whether absolute, accrued,
          contingent or otherwise and whether or not due) which, either
          individually or in aggregate, could reasonably be expected to have a
          Material Adverse Effect, and no Loan Party knows of any basis for the
          assertion against any Loan Party of any liability or obligation of any
          nature whatsoever that is not fully disclosed in such financial
          statements which, either individually or in the aggregate, could have
          a Material Adverse Effect.

               (g) Disclosure. Neither the Offering Memorandum nor any other
                   ----------
information, exhibit or report furnished by or on behalf of any Loan Party to
the Administrative Agent or any Lender Party in connection with the negotiation
and syndication of the Loan Documents or pursuant to the terms of the Loan
Documents contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements made therein not misleading.

               (h) Litigation. There is no action, suit, investigation,
                   ----------
litigation or proceeding affecting any Loan Party, including any Environmental
Action, pending or, to the knowledge of Borrower, threatened before any court,
governmental agency or arbitrator that (i) could reasonably be expected to have
a Material Adverse Effect or (ii) purports to affect the legality, validity or
enforceability of this Agreement, any Note, or any other Loan Document or the
consummation of the transactions contemplated hereby or thereby. For purposes of
disclosure, the Loan Parties have disclosed the litigation set forth on Schedule
5.01(h).

               (i) Use of Proceeds.
                   ---------------

                    (i)   No proceeds of any Advance will be used to acquire any
          equity security of a class that is registered pursuant to Section 12
          of the Securities Exchange Act of 1934.

                    (ii)  The Borrower is not engaged in the business of
          extending credit for the purpose of purchasing or carrying Margin
          Stock, and no proceeds of any Advance or drawings under any Letter of
          Credit will be used to purchase or carry any Margin Stock or to extend
          credit to others for the purpose of purchasing or carrying any Margin
          Stock.

                    (iii) Following application of the proceeds of each Advance,
          not more than 25 percent of the value of the assets (either of the

                                       60
<PAGE>

          Borrower only or of the Borrower and its Subsidiaries on a
          Consolidated basis) subject to the provisions of Section 6.02(a) or
          6.02(e) or subject to any restriction contained in any agreement or
          instrument between the Borrower and any Lender Party or any Affiliate
          of any Lender Party relating to Debt will be Margin Stock.

               (j) Employee Benefit Plans.
                   ----------------------

                    (i)   Set forth on Schedule 5.01(j) is a complete and
          accurate list of all Pension Plans and Multiemployer Plans with
          respect to any employees of Borrower, any Subsidiary of Borrower or
          any of their respective ERISA Affiliates.

                    (ii)  Except as set forth on Schedule 5.01(j), the Borrower,
          each of its Subsidiaries and each of their respective ERISA Affiliates
          are in compliance with all applicable provisions and requirements of
          ERISA and the Internal Revenue Code and the regulations and published
          interpretations thereunder with respect to each Employee Benefit Plan,
          and have performed all their obligations under each Employee Benefit
          Plan.

                    (iii) The Borrower has received, with respect to each
          Employee Benefit Plan which is intended to qualify under Section
          401(a) of the Internal Revenue Code, a favorable determination letter
          from the Internal Revenue Service indicating that such Employee
          Benefit Plan is so qualified and nothing has occurred subsequent to
          the issuance of such determination letter which would cause such
          Employee Benefit Plan to lose its qualified status.

                    (iv)  No liability to the PBGC (other than required premium
          payments), the Internal Revenue Service, any Employee Benefit Plan or
          any trust established under Title IV of ERISA (other than required
          contributions) has been or is expected to be incurred by Borrower, any
          of its Subsidiaries or any of their ERISA Affiliates.

                    (v)   No ERISA Event has occurred or is reasonably expected
          to occur that (a) would be reasonably expected to have a Material
          Adverse Effect, or (b) has resulted in or could reasonably be expected
          to result in a material liability of the Borrower, any of its
          Subsidiaries or any of their respective ERISA Affiliates.

                    (vi)  Except to the extent set forth on Schedule 5.01(j), no
          Employee Benefit Plan provides health or welfare benefits (through the
          purchase of insurance or otherwise) for any retired or former employee
          of the Borrower, any of its Subsidiaries or any of their respective
          ERISA Affiliates.

                    (vii) The present value of the aggregate accrued benefit
          liabilities under each Pension Plan sponsored, maintained or
          contributed to by the Borrower, any of its Subsidiaries or any of
          their ERISA Affiliates (determined as of the end of the most recent
          plan year on the basis of the actuarial

                                       61
<PAGE>

          assumptions specified for funding purposes in the most recent
          actuarial valuation for such Pension Plan) did not exceed the
          aggregate current value of the assets of such Pension Plan.

                    (viii) As of the most recent valuation date for each
          Multiemployer Plan for which the actuarial report is available, the
          potential liability of the Borrower, its Subsidiaries and their
          respective ERISA Affiliates for a complete withdrawal from such
          Multiemployer Plan (within the meaning of Section 4203 of ERISA), when
          aggregated with the potential liability of the Borrower, its
          Subsidiaries and their respective ERISA Affiliates for a complete
          withdrawal from all other Multiemployer Plans, based on information
          available pursuant to Section 4221(e) of ERISA, is zero.

                    (ix)   The Borrower, each of its Subsidiaries and each of
          their ERISA Affiliates have complied with the requirements of Section
          515 of ERISA with respect to each Multiemployer Plan and are not in
          material "default" (as defined in Section 4219(c)(5) of ERISA) with
          respect to payments to a Multiemployer Plan.

               (k) No Adverse Conditions. Neither the business nor the
                   ---------------------
properties of any Loan Party are affected by any fire, explosion, accident,
strike, lockout, slowdown, stoppage, unfair labor practice or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance) that could have a
Material Adverse Effect and there has been no Material Adverse Change affecting
the value of the Collateral or the ability of the Borrower or any other Loan
Party to perform its obligations under the Loan Documents.

               (l) Compliance with Environmental Laws.
                   ----------------------------------

                    (i) The operations and properties of each Loan Party and
          each of its Subsidiaries comply in all respects with all Environmental
          Laws, all necessary Environmental Permits have been obtained and are
          in effect for the operations and properties of the Borrower and its
          Subsidiaries, the Borrower and its Subsidiaries are in compliance in
          all respects with all such Environmental Permits, and no circumstances
          exist that could (A) form the basis of an Environmental Action against
          any Loan Party or any of its Subsidiaries or any of their properties,
          (B) cause any such property to be subject to any restrictions on
          ownership, occupancy, use or transferability under any Environmental
          Law or (C) reasonably be expected to prevent or interfere with the
          compliance by the Loan Parties and their Subsidiaries with
          Environmental Laws in the future, in each case except to the extent
          that any non-compliance, any failure to obtain such Environmental
          Permits or the existence of such circumstances could not reasonably be
          expected to have a Material Adverse Effect.

                    (ii) Except as set forth on Schedule 5.01(l)(ii), (A) as of
          the Closing Date, none of the properties of any Loan Party or any of
          its Subsidiaries is listed or, to the knowledge of the Borrower after
          due inquiry,

                                       62
<PAGE>

          proposed for listing on the National Priorities List under CERCLA or
          on the Comprehensive Environmental Response, Compensation and
          Liability Information System maintained by the Environmental
          Protection Agency or any analogous state list of sites requiring
          investigation or cleanup or, to the best of its knowledge and except
          as could not reasonably be expected to have a Material Adverse Effect,
          is adjacent to any such property, and except as disclosed in the
          environmental reports delivered to the Administrative Agent prior to
          the Closing Date, no underground storage tanks, as such term is
          defined in 42 U.S.C. (S)6991, are located on any property of any Loan
          Party or any of its Subsidiaries or, to the best of its knowledge and
          except as could not reasonably be expected to have a Material Adverse
          Effect, on any adjoining property; and (B) after the Closing Date,
          except as could not reasonably be expected to have a Material Adverse
          Effect, none of the properties of any Loan Party or any of its
          Subsidiaries is listed or, to the knowledge of the Borrower after due
          inquiry, proposed for listing on the National Priorities List under
          CERCLA or on the Comprehensive Environmental Response, Compensation
          and Liability Information System maintained by the Environmental
          Protection Agency or any analogous state list of sites requiring
          investigation or cleanup or is adjacent to any such property, and no
          underground storage tanks, as such term is defined in 42 U.S.C. (S)
          6991, are located on any property of any Loan Party or any of its
          Subsidiaries or, to the best of its knowledge, on any adjoining
          property.

                    (iii) (A) Except as could not reasonably be expected to have
          a Material Adverse Effect, neither any Loan Party nor any of its
          Subsidiaries has transported or arranged for the transportation of any
          Hazardous Materials to any location that is listed or, to the
          knowledge of the Borrower after due inquiry, proposed for listing on
          the National Priorities List under CERCLA or on the Comprehensive
          Environmental Response, Compensation and Liability Information System
          maintained by the Environmental Protection Agency or any analogous
          state list, and (B) except as could not reasonably be expected to have
          a Material Adverse Effect, Hazardous Materials have not been
          generated, used, treated, handled, managed, stored or disposed of on,
          or released or transported to or from, any property of any Loan Party
          or any of its Subsidiaries or any adjoining property, except in full
          compliance with all Environmental Laws and Environmental Permits.

                    (iv) As of the Closing Date, none of the Loan Parties has
          received any communication (written or oral), whether from a
          governmental authority, citizens group, employee or any other Person,
          that alleges that any Loan Party or any of its Subsidiaries is not in
          compliance with any Environmental Laws in any manner which could
          reasonably be expected to have a Material Adverse Effect.

                    (v) There is no Environmental Action pending or, to the
          knowledge of the Borrower, threatened against any Loan Party or any of
          its Subsidiaries, or against any Person for whom any Loan Party or any
          of its Subsidiaries has retained or assumed environmental liability
          either contractually

                                       63
<PAGE>

          or by operation of law that could reasonably be expected to have a
          Material Adverse Effect.

                    (vi)   Except as could not reasonably be expected to have a
          Material Adverse Effect, without in any way limiting the generality of
          the foregoing, (A) there is no asbestos or lead-based materials
          contained in or forming part of any building, building component,
          structure or office space owned or leased by any Loan Party or any of
          its Subsidiaries, and (B) no polychlorinated biphenyls (PCBs) or
          PCB-containing items are used or stored at any property owned or
          leased by any Loan Party or any of its Subsidiaries in any manner or
          quantity.

                    (vii)  The Borrower has conducted a diligent search of its
          records and has provided to the Administrative Agent all assessments,
          reports, data, results of investigations or audits, and other
          information that it discovered as a result of such search regarding
          environmental matters pertaining to or the environmental condition of
          any property owned, leased, operated or used by any Loan Party or any
          of its Subsidiaries, or the compliance (or noncompliance) by any Loan
          Party or any of its Subsidiaries with any Environmental Laws.

                    (viii) No Loan Party, and none of their respective
          Subsidiaries, is required by virtue of the transactions set forth
          herein and contemplated hereby, or as a condition to the effectiveness
          of any transactions contemplated hereby, (i) to perform a site
          assessment for Hazardous Materials, (ii) to remove or remediate
          Hazardous Materials, (iii) to give notice to or receive approval from
          any governmental authority, or (iv) to record or deliver to any Person
          any disclosure document or statement pertaining to environmental
          matters.

               (m) No Burdensome Agreements. None of the Loan Parties or any of
                   ------------------------
its Subsidiaries is a party to any indenture, loan or credit agreement or any
lease, license or other agreement or instrument or subject to any charter or
corporate restriction that could reasonably be expected to have a Material
Adverse Effect.

               (n) Tax Information.
                   ---------------

                    (i)  Each Loan Party has filed, has caused to be filed or
          has been included in all material tax returns (Federal, state, local
          and foreign) required to be filed and has paid all material taxes due,
          together with any applicable interest and penalties.

                    (ii) Set forth on Schedule 5.01(n) is a complete and
          accurate list, as of the date hereof, of each taxable year of each
          Loan Party for which United States Federal income tax returns have
          been filed and for which the expiration of the applicable statute of
          limitations for assessment or collection has not occurred by reason of
          extension or otherwise (an "Open Year").
                                      ---------

                                       64
<PAGE>

                    (iii) No issues have been raised by the Internal Revenue
          Service in respect of Open Years that, in the aggregate, could have a
          Material Adverse Effect.

                    (iv)  No issues have been raised by any state, local or
          foreign taxing authority with respect to tax periods for which the
          expiration of the applicable statute of limitations for assessment or
          collection has not occurred by reason of extension or otherwise that,
          in the aggregate, could have a Material Adverse Effect.

                    (v)   None of the Loan Parties has any liability under a tax
          sharing or similar agreement, except pursuant to the Casino Tax
          Sharing Documents.

               (o) No Investment Company. None of the Loan Parties is an
                   ---------------------
"investment company," or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended, or 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", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended. Neither
the making of any Advances, nor the Issuance of any Letters of Credit, nor the
application of the proceeds or repayment thereof by the Borrower, nor the
consummation of the other transactions contemplated hereby, will violate any
provision of Investment Company Act of 1940, as amended or any rule, regulation
or order of the Securities and Exchange Commission thereunder or the Public
Utility Holding Company Act of 1935, as amended.

               (p) Solvency. Each Loan Party is, individually and together with
                   --------
its Subsidiaries, Solvent.

               (q) Debt of the Borrower and its Subsidiaries.
                   -----------------------------------------

                    (i)   Set forth on Schedule 5.01(q)(i) hereto is a complete
          and accurate list of all Debt which shall remain outstanding on the
          Closing Date (the "Surviving Debt"), showing as of the date hereof the
          obligor and the principal amount outstanding thereunder and the
          maturity date thereof.

                    (ii)  Set forth on Schedule 6.02(a) hereto is a complete and
          accurate list of all Liens on the property or assets of any Loan Party
          or any of its Subsidiaries as of the date hereof (the "Existing
                                                                 --------
          Liens"), showing as of the date hereof the lienholder thereof, the
          -----
          principal amount outstanding thereunder and of the obligations secured
          thereby and the property or assets of such Loan Party or such
          Subsidiary subject thereto.

               (r) Real Property.
                   -------------

                    (i)   Set forth on Schedule 5.01(r)(i) hereto is a complete
          and accurate list, as of the date hereof, of all real property owned
          by any

                                       65
<PAGE>

          Loan Party or leased to any Loan Party under a ground lease
          (collectively, the "Owned Real Property"), showing as of the date
                              -------------------
          hereof the street address, county or other relevant jurisdiction,
          state, record owner and net book value thereof. Each Loan Party has
          good, marketable and insurable fee simple title to the property
          identified on Schedule 5.01(r)(i) as owned and a leasehold interest in
          the property identified on Schedule 5.10(r)(i) as subject to a ground
          lease, in each case free and clear of all Liens, other than Liens
          created or permitted by the Loan Documents. With respect to the Owned
          Real Property, (i) no Loan Party has entered into any contract for
          construction on any such parcel that is still in effect (other than
          contracts for (x) minor improvements which would not give rise to any
          Lien (other than a Permitted Lien) on any Owned Real Property or (y)
          maintenance), (ii) to the knowledge of the Loan Parties, the buildings
          and improvements located on each such parcel are located within the
          boundary lines of such parcel and are not in violation of applicable
          setback requirements, local comprehensive plan provisions, zoning laws
          and ordinances, building code requirements, permits, licenses or other
          forms of approval, regulation or restrictions by any applicable
          governmental authority, except to the extent that any such violation
          could not reasonably be expected to have a Material Adverse Effect,
          and do not encroach on any easement which may burden the land, (iii)
          to the knowledge of the Loan Parties, the land does not serve any
          adjoining property for any purpose inconsistent with the use of the
          land, (iv) except as may be shown on the preliminary title reports
          issued by Chicago Title Insurance Company with respect to the Owned
          Real Property, no such parcel is located within any flood plain or
          subject to any similar type restriction for which any permits or
          licenses necessary to the use thereof have not been obtained, (v)
          except as may be shown on the preliminary title reports issued by
          Chicago Title Insurance Company with respect to the Owned Real
          Property, there are no outstanding options or rights of first refusal
          or similar rights to purchase any such parcel or any portion thereof
          or interest therein; and (vi) all facilities located on each such
          parcel are supplied with utilities and other services necessary for
          their ownership, operation or use, all of which services are adequate
          and in accordance with all applicable laws, ordinances, rules and
          regulations. Chicago Title Insurance Company has provided the
          Administrative Agent with (x) a preliminary title report with respect
          to each Owned Real Property, and (y) a copy of each of the Schedule B
          exceptions listed therein. Except as may be shown on the preliminary
          title reports provided by Chicago Title Insurance Company, there are
          no proceedings, claims, disputes or conditions affecting any of the
          Owned Real Property that might curtail or interfere with the use,
          operation or ownership of such property. Neither the whole nor any
          portion of the Owned Real Property nor any other assets of any Loan
          Party is subject to any governmental decree or order to be sold or is
          being condemned, expropriated or otherwise taken by any public
          authority with or without payment of compensation therefore, nor has
          any Loan Party received any notice of any such proposed condemnation,
          expropriation or taking. Each Loan Party has obtained all applicable
          permits required to use and operate all of the Owned Real Property in
          the manner in which the Owned Real Property is currently being used
          and operated.

                                       66
<PAGE>

                    (ii) Set forth on Schedule 5.01(r)(i) (with respect to
          ground leases) and on Schedule 5.01(r)(ii) hereto is a complete and
          accurate list, as of the date hereof, of all leases, subleases,
          assignment of leases and occupancy agreements (together with all
          amendments, modifications, renewals or extensions of any thereof) of
          real property under which any Loan Party is the lessee, sublessee or
          occupant, showing as of the date hereof the street address, county or
          other relevant jurisdiction and state. Each agreement referenced in
          this Section 5.01(r)(ii) is in full force and effect, and there are no
          existing defaults under any such agreement by any Loan Party, or, to
          the knowledge of Borrower, by any lessor thereunder, nor, to the
          knowledge of Borrower, has any event occurred that (whether with or
          without notice, lapse of time or the happening or occurrence of any
          other event) would constitute a default under any such agreement. Each
          such agreement constitutes the legal, valid and binding obligation of
          each applicable Loan Party, enforceable against such Loan Party in
          accordance with its terms, and each such agreement is, to the
          knowledge of Borrower, the legal, valid and binding obligation of the
          lessor thereof, enforceable in accordance with its terms.

               (s) Investments. Set forth on Schedule 5.01(s) hereto is a
                   -----------
complete and accurate list of all Investments held by any Loan Party, showing as
of the date hereof the amount and the obligor or issuer thereof.

               (t) Intellectual Property. Set forth on Schedule 5.01(t) hereto
                   ---------------------
is a complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights, and all applications therefor and licenses thereof, of
each Loan Party, showing as of the date hereof the jurisdiction in which
registered or applied, the registration or application number, the date of
registration or filing and the expiration date. All registrations listed on
Schedule 5.01(t) are in full force and effect and are valid and enforceable and
all applications and registrations listed on Schedule 5.01(t) are standing in
the name of the current owner, which owner is a Loan Party. The conduct of
business of the Loan Parties does not infringe upon or violate any intellectual
property rights of any third party in any manner which could reasonably be
expected to have a Material Adverse Effect. Each Loan Party owns or has the
valid right to use all patents, trademarks, trade names, service marks,
copyrights and trade secrets used in its business as currently conducted.

               (u) Other Agreements. Schedule 5.01(u) sets forth a complete and
                   ----------------
accurate list as of the date hereof of (i) all joint venture and partnership
agreements to which the Borrower or any of its Subsidiaries is a party, and (ii)
all covenants not to compete restricting the Borrower or any of its Subsidiaries
to which the Borrower or any of its Subsidiaries is a part or by which the
Borrower or any of its Subsidiaries is bound.

               (v) Intentionally Omitted.
                   ---------------------

               (w) Mortgages. The execution and delivery of the Mortgages by the
                   ---------
Loan Parties, together with the recordation thereof in the appropriate recording
offices of the applicable jurisdictions, shall be effective to create in favor
of the

                                       67
<PAGE>

Administrative Agent for the benefit of the Secured Parties a valid first
priority Lien on all of the Owned Real Property, free and clear of all other
Liens other than Permitted Liens. Regardless of whether the Synthetic Lease is
re-characterized as a financing mechanism, the execution and delivery of the
Second Mortgages by the Borrower and the Owner Trustee, respectively, together
with the recordation thereof in the appropriate recording offices of the
applicable jurisdictions, shall be effective to create in favor of the
Administrative Agent for the benefit of the Secured Parties, a valid second
priority (but only to the extent provided in the Intercreditor Agreement (Leased
Property)) Lien on all of the Synthetic Lease Properties, free and clear of all
other Liens other than Permitted Liens.

               (x) First Priority Lien. All filings and other actions necessary
                   -------------------
or desirable to perfect and protect the security interest in the Collateral
created under the Collateral Documents have been duly made or taken, and the
Collateral Documents create in favor of the Administrative Agent for the benefit
of the Secured Parties a valid and, together with such filings and other
actions, perfected first priority security interest in the Collateral (other
than the Synthetic Lease Properties, in which the Administrative Agent, for the
benefit of the Secured Parties, shall have a second priority security interest,
but only to the extent provided in the Intercreditor Agreement (Leased
Property)), securing the payment of the Obligations under the Loan Documents,
and all filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken. The Loan Parties are the legal and
beneficial owners of the Collateral free and clear of any Lien, except for the
liens and security interests created or permitted under the Loan Documents and
the Synthetic Lease Documents and the Landlord's Lien Rights in respect of the
property listed on Schedule 5.01(r)(ii) located in the States of Washington,
Oregon and Florida.

               (y) Insurance. Schedule 5.01(y) sets forth a true and complete
                   ---------
listing of all insurance maintained by the Loan Parties as of the date hereof,
and with the amounts insured (and any deductibles) set forth therein. The
amounts of such insurance cover all risks as is commercially reasonable and
prudent with respect to the business and properties of the Borrower and its
Subsidiaries and which is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower or such Subsidiary operates.

               (z) Broker's, Finder's or Similar Fees. Except for fees payable
                   ----------------------------------
by the Borrower to the Administrative Agent, there are no brokerage commissions,
finder's fees or similar fees or commissions payable by any Loan Party pursuant
to any agreement entered into by any Loan Party or of which any Loan Party is
aware in connection with the transactions contemplated hereby or any Loan
Document.

                                   ARTICLE VI

                            COVENANTS OF THE BORROWER

     Section 6.01 Affirmative Covenants. So long as any Advance or any other
                  ---------------------
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter

                                       68
<PAGE>

of Credit shall be outstanding or any Lender Party shall have any Commitment
hereunder, the Borrower will:

               (a) Compliance with Laws, Etc. Comply, and cause each of its
                   -------------------------
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, including, without limitation, compliance with
ERISA and workers' compensation laws.

               (b) Payment of Taxes, Etc. Pay and discharge, and cause each of
                   ---------------------
its Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all material taxes, assessments and governmental charges or levies imposed
upon any of them or upon their respective property and (ii) all material lawful
claims that, if unpaid, might by law become a Lien upon their respective
property; provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to pay or discharge any such tax, assessment,
charge or claim that is being contested in good faith and by proper proceedings
and as to which appropriate reserves are being maintained, unless and until any
Lien (other than a Permitted Lien) resulting therefrom attaches to its property.

               (c) Compliance with Environmental Laws. Comply, and cause each of
                   ----------------------------------
its Subsidiaries and all lessees and other Persons occupying its properties to
comply, in all material respects, with all Environmental Laws and Environmental
Permits applicable to their respective operations and properties; obtain and
renew, and cause each of its Subsidiaries to obtain and renew, all Environmental
Permits necessary for their respective operations and properties; and to the
extent required by applicable Environmental Laws and in accordance with the
requirements thereof, conduct, and cause each of its Subsidiaries to conduct,
any investigation, study, sampling and testing, and undertake any cleanup,
removal, remedial or other action necessary to remove and clean up all Hazardous
Materials from any of their respective properties; provided, however, that
neither the Borrower nor any of its Subsidiaries shall be required to undertake
any such cleanup, removal, remedial or other action to the extent that its
obligation to do so is being contested in good faith and by proper proceedings
diligently pursued, appropriate reserves are being maintained with respect to
such circumstances and the failure to take any such action could not reasonably
be expected to have a Material Adverse Effect.

               (d) Maintenance of Insurance. Maintain, and cause each of its
                   ------------------------
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is
commercially reasonable and prudent with respect to the business and properties
of the Borrower and its Subsidiaries and which is usually carried by companies
engaged in similar businesses and owning similar properties in the same general
areas in which the Borrower or such Subsidiary operates. Each such policy of
insurance shall (a) name Administrative Agent for the benefit of Lenders as an
additional insured thereunder as its interests may appear and (b) in the case of
each insurance policy pursuant to which proceeds are paid to the Borrower or any
other Loan Party, contain a loss payable clause or endorsement, reasonably
satisfactory in form and substance to Administrative Agent, that names
Administrative Agent for the benefit of Lenders as a loss payee thereunder and
provides for at least 30 days prior written notice to Administrative Agent of
any cancellation of

                                       69
<PAGE>

such policy. The insurance maintained by the Borrower and its Subsidiaries as of
the date hereof shall be deemed to satisfy the requirements of this Section
6.01(d) as of the date hereof.

               (e) Preservation of Corporate Existence, Etc. Preserve and
                   ----------------------------------------
maintain, and cause each of its Subsidiaries to preserve and maintain, their
respective corporate existence, rights (charter and statutory), permits,
licenses, approvals, privileges and franchises; provided, however, that the
                                                --------  -------
Borrower and its Subsidiaries may consummate any merger or consolidation
permitted under Section 6.02(c) and provided, further, neither the Borrower nor
                                    --------  -------
any of its Subsidiaries shall be required to preserve any right, permit,
license, approval, privilege or franchise if the Board of Directors of the
Borrower or such Subsidiary shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Borrower or such
Subsidiary, as the case may be, and that the loss thereof is not disadvantageous
in any material respect to the Borrower, such Subsidiary or the Lender Parties.

               (f) Inspection Rights. At any reasonable time and from time to
                   -----------------
time and upon reasonable notice, permit the Administrative Agent or any of the
Lender Parties or any agents or representatives thereof, to examine and make
copies of and abstracts from the records and books of account of, and visit and
inspect the properties of, the Borrower and any of its Subsidiaries, and to
discuss the affairs, finances and accounts of the Borrower and any of its
Subsidiaries with any of their officers or directors and with their independent
certified public accountants (who are hereby directed by the Borrower to discuss
the affairs, finances and accounts of the Borrower and any of its Subsidiaries
with the Administrative Agent or any agent or representative thereof in
accordance with this Agreement).

               (g) Preparation of Environmental Reports. At the written request
                   ------------------------------------
of the Administrative Agent from time to time, provide to the Administrative
Agent within 60 days after such request, at the expense of the Borrower, an
environmental site assessment report for all of its and its Subsidiaries'
properties described in such request, prepared by an environmental consulting
firm reasonably acceptable to the Administrative Agent, indicating the presence
or absence of Hazardous Materials and the estimated cost of any compliance,
removal or remedial action in connection with any Hazardous Materials on such
properties; without limiting the generality of the foregoing, if the
Administrative Agent reasonably determines at any time that a material risk
exists that any such report will not be provided within the time referred to
above, the Administrative Agent may retain an environmental consulting firm to
prepare such report at the expense of the Borrower, and the Borrower hereby
grants and agrees to cause any Subsidiary which owns any property described in
such request to grant at the time of such request, to the Administrative Agent,
the Lender Parties, such firm and any agents or representatives thereof the
rights, upon reasonable notice and during normal business hours, to enter onto
their respective properties in order to perform such assessment; provided that
                                                                 --------
any action taken by the Administrative Agent pursuant to this provision or
otherwise under this Agreement pertaining to the environmental activities of the
Borrower or any of its Subsidiaries shall not be construed to render the
Administrative Agent liable for the conditions of any such property or
responsible for any

                                       70
<PAGE>

obligations of the Borrower or any other Person as against any governmental
agency or any other Person. For the avoidance of doubt, the Borrower disclaims
any obligation to indemnify any Indemnified Party for claims of third parties
arising out of the gross negligence or willful misconduct of any of the Lender
Parties, any environmental consulting firm retained by any of them or their
respective agents or representatives in connection with any entry by any of them
onto the property of the Borrower or any Subsidiary pursuant to this Section
6.01(g).

               (h) Keeping of Books. Keep, and cause each of its Subsidiaries to
                   ----------------
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Borrower and each such Subsidiary in accordance with generally accepted
accounting principles in effect from time to time.

               (i) Maintenance of Properties, Etc. Maintain and preserve, and
                   ------------------------------
cause each of its Subsidiaries to maintain and preserve, all of their respective
properties that are used or useful in the conduct of their respective businesses
in good working order and condition, ordinary wear and tear excepted.

               (j) Compliance with Terms of Leaseholds; New Leases. Make all
                   -----------------------------------------------
payments and otherwise perform and observe all obligations in respect of the
Synthetic Lease and all other leases of real property to which the Borrower or
any of its Subsidiaries is a party, keep such Synthetic Lease and all other
leases in full force and effect and not allow such Synthetic Lease or other
leases to lapse or be terminated or any rights to renew such leases to be
forfeited or canceled except, with respect to the Synthetic Lease, pursuant to
the terms thereof, enforce each Synthetic Lease Document and each other
agreement relating to the other leases in accordance with its terms, and take
all such action requested by the Administrative Agent or the Required Lenders to
such end, and notify the Administrative Agent of any default by any party with
respect to such Synthetic Lease and other leases and cooperate with the
Administrative Agent in all respects to cure any such default, and cause each of
its Subsidiaries to do each of the foregoing. The Borrower agrees, and agrees to
cause each other Loan Party, to exercise commercially reasonable efforts, in
connection with any lease, sublease, assignment of lease or other occupancy
agreement entered into after the date hereof in which the Borrower or such Loan
Party is the lessee, sublessee, assignee or occupant, (x) to obtain from the
applicable lessor a complete, fully executed Landlord's Waiver and Consent
Agreement in the form of Exhibit O or (y) to include the provisions of such
Landlord's Waiver and Consent Agreement in the applicable lease, sublease,
assignment of lease or other occupancy agreement, but in each case without
requiring the payment of any amounts to the applicable lessor as an inducement
for the execution of such Landlord Waiver and Consent Agreement or the inclusion
in the applicable lease, sublease, assignment of lease or other occupancy
agreement of such provision.

               (k) Additional Loan Parties; Additional Collateral. Upon (x) the
                   ----------------------------------------------
request of the Administrative Agent, (y) the formation or acquisition of any new
direct or indirect Subsidiaries by any Loan Party (provided that compliance
herewith

                                       71
<PAGE>

shall not constitute a waiver of Section 6.02(h)), or (z) the acquisition of any
property by any Loan Party, the Borrower shall, in each case at the Borrower's
expense:

                    (i)   within 30 days after such request, formation or
          acquisition, cause such Subsidiary (other than a Foreign Subsidiary)
          to duly execute and deliver to the Administrative Agent an amendment
          to the Guaranty in substantially the form of Exhibit L, whereby such
          Subsidiary shall guarantee all Obligations of the Loan Parties under
          the Loan Documents,

                    (ii)  within 30 days after such request, formation or
          acquisition, furnish to the Administrative Agent a description of the
          real and personal properties of the Loan Parties and their respective
          Subsidiaries in detail satisfactory to the Administrative Agent,

                    (iii) within 30 days after such request, formation or
          acquisition,

                         (A) cause such Subsidiary (other than a Foreign
                    Subsidiary) to duly execute and deliver to the
                    Administrative Agent an amendment to the Security Agreement
                    in substantially the form of Exhibit M-1 hereto, and any
                    documents in connection therewith, whereby such Subsidiary
                    shall grant a Lien on those of its assets described in the
                    Security Agreement to secure the Obligations under the Loan
                    Documents,

                         (B) cause such Subsidiary and each direct and indirect
                    parent of such Subsidiary to duly execute and deliver to the
                    Administrative Agent an amendment to the Pledge Agreement in
                    substantially the form of Exhibit M-2 hereto, and any
                    documents in connection therewith, whereby such Subsidiary
                    shall pledge or cause to be pledged to the Administrative
                    Agent all of the outstanding capital stock of such
                    Subsidiary (or, if such Subsidiary is a Foreign Subsidiary,
                    65% of such capital stock) owned by any Loan Party to secure
                    such Loan Party's Obligations under the Loan Documents, and

                         (C) with respect to any real property with a fair
                    market value of $750,000 or more in which such Subsidiary
                    (other than a Foreign Subsidiary) has an interest, cause
                    such Subsidiary to duly execute and deliver such deeds of
                    trust, trust deeds and mortgages ("Additional Mortgages") in
                                                       --------------------
                    appropriate form for filing in all filing or recording
                    offices that the Administrative Agent may deem necessary or
                    desirable to create a valid first and subsisting Lien on the
                    property described therein in favor of the Administrative
                    Agent for the benefit of the Secured Parties,

                    (iv) within 30 days after such request, formation or
          acquisition, take (and cause such Subsidiary, each direct and indirect
          parent of

                                       72
<PAGE>

          such Subsidiary or any Loan Party to take) whatever action may be
          necessary or desirable in the opinion of the Administrative Agent to
          vest in the Administrative Agent, for the benefit of the Secured
          Parties, valid and subsisting Liens on the properties purported to be
          subject to the Collateral Documents, pursuant to subclause (iii)
          above, enforceable against all third parties in accordance with their
          terms (including the filing of Uniform Commercial Code financing
          statements, the giving of notices and the endorsement of notices on
          title documents and the recording of any Additional Mortgage),

                    (v) promptly take (and cause such Subsidiary or any Loan
          Party to take) all action requested by the Administrative Agent or the
          Required Lenders to provide Mortgage Policies, American Land Title
          Association form surveys, appraisals, assignments of leases and rents,
          consents and agreements of lessors and other third parties, estoppel
          letters and other confirmations and evidence of insurance with respect
          to any real property that becomes the subject of an Additional
          Mortgage, in each case in form and substance satisfactory to the
          Administrative Agent,

                    (vi) upon request of the Administrative Agent, deliver to
          the Administrative Agent, a signed copy of a favorable opinion,
          addressed to the Administrative Agent and the Lender Parties, of
          counsel for the Loan Parties acceptable to the Administrative Agent
          with respect to any of the foregoing (including any of the foregoing
          guaranties, security agreements, pledges, mortgages and assignments
          being legal, valid and binding obligations of each Loan Party party
          thereto enforceable in accordance with their terms, and any of the
          recordings, filings, notices, endorsements and other actions requested
          by the Administrative Agent being sufficient to create valid perfected
          Liens on such properties) and as to such other matters as the
          Administrative Agent may reasonably request,

                    (vii) as promptly as practicable after such request,
          formation or acquisition, deliver to the Administrative Agent upon
          request of the Administrative Agent or the Required Lenders with
          respect to each parcel of real property owned or held by the entity
          that is the subject of such request, formation or acquisition, title
          reports, surveys and engineering, soils and other reports, and
          environmental assessment reports, each in scope, form and substance
          satisfactory to the Administrative Agent; provided that to the extent
          that any Loan Party or any of its Subsidiaries shall have otherwise
          received any of the foregoing items with respect to such real
          property, such items shall, promptly after the receipt thereof, be
          delivered to the Administrative Agent, and

                    (viii) at any time and from time to time, promptly execute
          and deliver any and all further instruments and documents and take all
          such other action as the Administrative Agent may reasonably deem
          necessary in obtaining the full benefits of, or in perfecting and
          preserving the Liens of, such guaranties, mortgages, pledges,
          assignments, security agreement supplements and security agreements.

                                       73
<PAGE>

               (l) Further Assurances. (i) Promptly upon request by the
                   ------------------
Administrative Agent, or any Lender Party through the Administrative Agent,
correct, and cause each of its Subsidiaries promptly to correct, any material
defect or error that may be discovered in any Loan Document or in the execution,
acknowledgment, filing or recordation thereof, and (ii) promptly upon request by
the Administrative Agent, or any Lender Party through the Administrative Agent,
do, execute, acknowledge, deliver, record, re-record, file, re-file, register
and re-register any and all such further acts, deeds, conveyances, pledge
agreements, mortgages, deeds of trust, trust deeds, assignments, financing
statements and continuations thereof, termination statements, notices of
assignment, transfers, certificates, assurances and other instruments as the
Administrative Agent, or any Lender Party through the Administrative Agent, may
reasonably require from time to time in order to (A) carry out more effectively
the purposes of the Loan Documents, (B) to the fullest extent permitted by
applicable law, subject any Loan Party's or any of its Subsidiaries' properties,
assets, rights or interests to the Liens now or hereafter intended to be covered
by any of the Collateral Documents, (C) perfect and maintain the validity,
effectiveness and priority of any of the Collateral Documents and any of the
Liens intended to be created thereunder and (D) assure, convey, grant, assign,
transfer, preserve, protect and confirm more effectively unto the Lender Parties
the rights granted or now or hereafter intended to be granted to the Lender
Parties under any Loan Document or under any other instrument executed in
connection with any Loan Document to which any Loan Party or any of its
Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do
so. If a Default has occurred and is continuing, each Loan Party agrees that
upon the Administrative Agent's request, such Loan Party (x) shall grant, and
shall cause its Subsidiaries to grant, to the Collateral Agent (as defined in
the Collateral Documents) for the benefit of the Lender Parties a security
interest in all properties, assets, rights or interests of such Loan Party or
such Subsidiary in which a Lien has not previously been granted to the
Collateral Agent pursuant to the Collateral Documents and (y) shall take all
steps necessary to perfect the security interest granted to the Collateral Agent
on or after the Closing Date to the extent not previously perfected, regardless
of whether the Administrative Agent agreed either not to take a security
interest or not perfect any security interest in any such property, asset, right
or interest on the Closing Date and regardless of whether any such property,
asset, right or interest satisfies a threshold or other requirement for granting
such a lien otherwise set forth herein.

               (m) Appraisals. At the request of the Administrative Agent from
                   ----------
time to time after the Closing Date, provide to the Administrative Agent within
60 days after such request, at the expense of the Borrower, appraisals of the
properties of the Borrower and its Subsidiaries described in such request as the
Administrative Agent may reasonably determine are necessary to ensure compliance
with, and which appraisals comply with all applicable requirements of, the
Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989, as
amended.

               (n) Consents and Agreements of Lessor. Use commercially
                   ---------------------------------
reasonable efforts to provide to the Administrative Agent, at the expense of the
Borrower, such consents and agreements of lessors and other third parties and
such estoppel letters and other confirmations as the Administrative Agent
requested pursuant

                                       74
<PAGE>

to Section 4.01(h)(ix)(C) and which the Borrower was not able to provide prior
to the Closing Date, but without requiring the payment of any amounts to lessors
or other third parties as an inducement for the execution of such consents,
agreements, estoppel letters and confirmations.

               (o) Flood Hazard Certification. Within 90 days after the Closing
                   --------------------------
Date, and from time to time thereafter as reasonably requested by the
Administrative Agent or the Required Lenders, at the Borrower's expense, deliver
such flood hazard certification as the Administrative Agent or the Required
Lenders may require with respect to the properties subject to the Mortgages.

               (p) Escondido Property. Use commercially reasonable efforts to
                   ------------------
obtain from the ground lessor on the Escondido Property such ground lessor's
consent for the Borrower to encumber the Borrower's leasehold interest in the
Escondido Property in favor the Administrative Agent. As promptly as practicable
upon obtaining such consent, the Borrower shall execute a Mortgage in respect of
its leasehold interest in the Escondido Property and cause Chicago Title
Insurance Company to issue a Mortgage Policy in respect of such Mortgage.

               (q) Store #405. Use commercially reasonable efforts to obtain
                   ----------
from the ground lessor of Store #405 all documents required by Chicago Title
Insurance Company (including, without limitation, a memorandum of lease and any
necessary consents) in order for Chicago Title Insurance Company to issue a
Mortgage Policy for Store #405, in form and substance consistent with the
Mortgage Policies to be issued on the Closing Date. Upon obtaining such
documents, the Borrower shall execute a Mortgage in favor of Administrative
Agent in respect of its leasehold interest in Store #405 and cause Chicago Title
Insurance Company to issue a Mortgage Policy in respect of such Mortgage.

     Section 6.02 Negative Covenants. So long as any Advance or any other
                  ------------------
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Borrower will not, at any time:

               (a) Liens, Etc. Create, incur, assume or suffer to exist, or
                   ----------
permit any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien on or with respect to any of its or their assets of any character (tangible
or intangible) whether now owned or hereafter acquired other than the Liens
specified below in this Section 6.02(a), or sign or file, or permit any of its
Subsidiaries to sign or file, under the Uniform Commercial Code of any
jurisdiction, a financing statement that names the Borrower or any of its
Subsidiaries as debtor, or sign, or permit any of its Subsidiaries to sign, any
security agreement authorizing any secured party thereunder to file such
financing statement, or assign, or permit any of its Subsidiaries to assign, any
accounts or other right to receive income other than in respect of any of the
following:

                    (i) Liens created by the Loan Documents;

                                       75
<PAGE>

                    (ii)  Liens created by the Synthetic Lease Documents for the
          purpose of securing the Borrower's obligations thereunder as in effect
          on the date hereof to the extent that such Liens are subject to the
          Intercreditor Agreements;

                    (iii) Permitted Liens;

                    (iv)  Existing Liens securing Surviving Debt and any
          replacement, extension or renewal of any such Lien; provided that (x)
          no such replacement, extension or renewal shall encumber any
          additional assets of the Borrower or any of its Subsidiaries and (y)
          the amount of Debt secured by such Lien shall not be increased from
          that existing on the Closing Date;

                    (v)   purchase money Liens upon or in real property or
          equipment acquired or held by the Borrower or any of its Subsidiaries
          in the ordinary course of business to secure the purchase price of
          such real property or equipment or to secure Debt incurred solely for
          the purpose of financing the acquisition, construction or improvement
          of any such real property or equipment to be subject to such Liens, or
          Liens existing on any such real property or equipment at the time of
          acquisition (other than any such Liens created in contemplation of
          such acquisition that do not secure the purchase price), or
          extensions, renewals or replacements of any of the foregoing for the
          same or a lesser amount; provided, however, that no such Lien shall
                                   --------  -------
          extend to or cover any property other than the real property or
          equipment being acquired, constructed or improved, and no such
          extension, renewal or replacement shall extend to or cover any
          property not theretofore subject to the Lien being extended, renewed
          or replaced; and provided further that the aggregate principal amount
                           -------- -------
          of the Debt secured by Liens permitted by this clause (v) shall not
          exceed $7,500,000 at any time outstanding;

                    (vi)   Liens arising in connection with Capitalized Leases
          in an aggregate principal amount not to exceed $20,000,000 at any time
          outstanding, provided that no such Lien shall extend to or cover any
          Collateral or other assets (other than the assets subject to such
          Capitalized Leases);

                    (vii)  other Liens securing Debt outstanding in an aggregate
          principal amount not to exceed $5,000,000 provided that no such Lien
          shall extend to or cover any Collateral; and

                    (viii) Liens securing Secured Hedge Agreements permitted
          under Section 6.02(b)(i)(B).

If the Borrower or any of its Subsidiaries shall create or assume any Lien upon
any of its properties or assets, whether now owned or hereafter acquired, other
than Liens permitted by the provisions of this Section 6.02(a), it shall make or
cause to be made effective provision whereby the Obligations will be secured by
such Lien equally and ratably with any and all other Debt secured thereby as
long as any such Debt shall be so secured;

                                       76
<PAGE>

provided that, notwithstanding the foregoing, this covenant shall not be
--------
construed as a consent by the Required Lenders to the creation or assumption of
any such Lien not permitted by the provisions of this Section 6.02(a).

               (b) Debt. Create, incur, assume or suffer to exist, or permit any
                   ----
of its Subsidiaries to create, incur, assume or suffer to exist, any Debt other
than:

                    (i) in the case of the Borrower,

                         (A) Debt under the Synthetic Lease Documents in a
                    principal amount outstanding not to exceed the principal
                    amount outstanding on the Closing Date,

                         (B) (x) the Secured Hedge Agreements between the
                    Borrower and BNP Paribas and between the Borrower and Union
                    Bank of California, N.A. and (y) other Hedge Agreements
                    whose purpose is to hedge against fluctuations in interest
                    rates and are entered into by the Borrower in the ordinary
                    course of business, consistent with prudent business
                    practice and not entered into for speculative purposes;
                    provided that the aggregate notional amount of such Secured
                    Hedge Agreements and other Hedge Agreements shall not exceed
                    $100,000,000 at any time outstanding, and

                         (C) Debt owed to a wholly-owned Domestic Subsidiary of
                    the Borrower that is a Loan Party; provided that such Debt
                                                       --------
                    is evidenced by a promissory note that has been pledged to
                    the Administrative Agent pursuant to the Security Agreement.

                    (ii)  in the case of any wholly-owned Domestic Subsidiary of
          the Borrower that is a Loan Party, Debt owed to the Borrower or to
          another wholly-owned Domestic Subsidiary of the Borrower that is a
          Loan Party so long as such Debt is evidenced by a promissory note that
          has been pledged to the Administrative Agent pursuant to the Security
          Agreement; and

                    (iii) in the case of the Borrower and any of its
          Subsidiaries,

                         (A) Debt under the Loan Documents;

                         (B) Debt secured by Liens permitted by Section
                    6.02(a)(v) and (vi) not to exceed in the aggregate the
                    amounts set forth in such Sections,

                         (C) the Surviving Debt, and any Debt issued in exchange
                    for, or the net proceeds of which are used to refinance, all
                    or a part of the Surviving Debt; provided, however, that the
                                                     --------  -------
                    principal amount of such refinancing Debt does not exceed
                    the principal amount, plus accrued interest (if any), of the
                    Surviving Debt so refinanced,

                                       77
<PAGE>

                         (D) endorsement of negotiable instruments for deposit
                    or collection or similar transactions in the ordinary course
                    of business,

                         (E) unsecured Debt of the Borrower in respect of its
                    daily overdraft facility but only to the extent such Debt
                    (1) is incurred in the ordinary course of the Borrower's
                    business consistent with past practices (2) does not exceed
                    $7,500,000 in principal amount at any time outstanding, and
                    (3) is repaid in full within 3 Business Days of the
                    incurrence of such Debt, and

                         (F) other unsecured Debt (other than Debt owed to
                    Casino) of the Borrower and its Subsidiaries in an aggregate
                    principal amount at any time outstanding not to exceed
                    $10,000,000.

               (c) Mergers, Corporate Changes, Etc. Merge into or consolidate
                   -------------------------------
with any Person or permit any Person to merge into it or liquidate or dissolve
itself (or suffer any liquidation or dissolution), or permit any of its
Subsidiaries to do (or suffer) any of the foregoing, except that (i) any
Subsidiary of the Borrower may merge into or consolidate with, any other
Subsidiary of the Borrower that is, or as a result of such merger or
consolidation shall become, a Loan Party, or that, in the case of any such
consolidation, the Person formed by such consolidation shall be a wholly-owned
Solvent Domestic Subsidiary of the Borrower; (ii) any of the Borrower's
Subsidiaries may merge into or consolidate with Borrower so long as the
surviving entity is Borrower; (iii) any of the Borrower's Subsidiaries may
liquidate or dissolve if all of the assets of such Subsidiary are acquired by
the Borrower or any other Loan Party; and (iv) each of the Borrower's Domestic
Subsidiaries may change its jurisdiction of formation by merger or otherwise so
long as such jurisdiction remains within the United States of America and the
Borrower or such Domestic Subsidiary provides notice of such change and
otherwise complies with the provisions of the Security Agreement and the Pledge
Agreement; provided, however, that in each case, immediately after giving effect
           --------  -------
thereto, no Default shall have occurred and be continuing or would result
therefrom.

               (d) Sales of Assets. Sell, lease, license, transfer or otherwise
                   ---------------
dispose of, or permit any of its Subsidiaries to sell, lease, license, transfer
or otherwise dispose of, any assets, or grant any option or other right to
purchase, lease or otherwise acquire any assets other than:

                    (i)   sales of Inventory in the ordinary course of its
          business,

                    (ii)  in a transaction authorized by subsection (c) of this
          Section 6.02,

                    (iii) the sale of any asset by any Loan Party (other than
          (x) a bulk sale of Inventory, (y) a sale of Accounts Receivable other
          than delinquent accounts for collection purposes only and (z) sales of
          assets permitted

                                       78
<PAGE>

          under clause (v) below) so long as (A) the purchase price paid to the
          Loan Party for such asset shall be no less than the fair market value
          of such asset at the time of such sale, (B) the purchase price for
          such asset shall be paid to the Loan Party solely in cash and (C) the
          aggregate purchase price paid to all of the Loan Parties for such
          asset and all other assets sold by the Loan Parties during the same
          Fiscal Year pursuant to this clause (iii) shall not exceed $7,500,000
          in any Fiscal Year and $15,000,000 during the term of this Agreement;
          provided that the proceeds of such asset sales are applied in
          accordance with Section 2.05(b)(iii),

                    (iv) the grant of any option or other right to purchase any
          asset in a transaction which would be permitted under the provisions
          of the immediately preceding clause (iii), and

                    (v)  the sale of any of the Synthetic Lease Properties in
          accordance with Section 11.2 of the Synthetic Lease as in effect on
          the date hereof and subject to the $5,000,000 limitation set forth
          therein, provided that the net proceeds of such sale are applied in
          accordance with Section 2.05(b)(iii);

provided that in each case, immediately after giving effect thereto, no Default
--------
shall have occurred and be continuing or would result therefrom.

               (e) Investments in Other Persons. Make or hold, or permit any of
                   ----------------------------
its Subsidiaries to make or hold, any Investment in any Person other than:

                    (i)   Investments by the Borrower and its Subsidiaries in
          the Borrower or in Subsidiaries that are or become Loan Parties,

                    (ii)  Investments by the Borrower and its Subsidiaries after
          the Closing Date in Smart & Final de Mexico, S.A. de C.V. and in Smart
          & Final del Noroeste, S.A. de C.V. in an aggregate amount not to
          exceed $2,500,000,

                    (iii) loans and advances to officers and employees in the
          ordinary course of the business of the Borrower and its Subsidiaries
          as presently conducted in an aggregate principal amount not to exceed
          $2,000,000 at any time outstanding,

                    (iv)  Investments by the Borrower and its Subsidiaries in
          Cash Equivalents,

                    (v)   Investments existing on the Closing Date and set forth
          on Schedule 5.01(s); and

                    (vi)  other Investments in an aggregate amount invested not
          to exceed $2,000,000; provided that with respect to Investments made
          under this clause (v), immediately before and after giving effect
          thereto, no Default shall have occurred and be continuing or would
          result therefrom.

                                       79
<PAGE>

               (f) Dividends, Etc. Declare or pay any dividends, purchase,
                   --------------
redeem, retire, defease or otherwise acquire for value any of its capital stock
or any warrants, rights or options to acquire such capital stock, now or
hereafter outstanding, return any capital to its stockholders, partners or
members (or the equivalent Persons thereof) as such, make any distribution of
assets, capital stock, warrants, rights, options, obligations or securities to
its stockholders, partners or members (or the equivalent Persons thereof) as
such or issue or sell any capital stock or any warrants, rights or options to
acquire such capital stock, or permit any of its Subsidiaries to do any of the
foregoing, or permit any of its Subsidiaries to purchase, redeem, retire,
defease or otherwise acquire for value any capital stock of the Borrower or any
warrants, rights or options to acquire such capital stock or to issue or sell
any capital stock or any warrants, rights or options to acquire such capital
stock, except that, so long as no Default shall have occurred and be continuing
or would result therefrom:

                    (i)   the Borrower may declare and deliver dividends and
          distributions payable only in (and to the holders of) common stock of
          the Borrower,

                    (ii)  the Borrower may declare and pay cash dividends to its
          stockholders pursuant to any dividend plan approved in writing by the
          Required Lenders;

                    (iii) except to the extent the Net Cash Proceeds thereof are
          required to be applied to the prepayment of the Advances pursuant to
          Section 2.05(b), the Borrower and any of its Subsidiaries may
          purchase, redeem, retire, defease or otherwise acquire shares of such
          Person's capital stock with the proceeds received from the issuance of
          its capital stock with equal or inferior voting powers, designations,
          preferences and rights;

                    (iv)  the Borrower and any of its Subsidiaries may issue
          equity securities upon the exercise of rights to acquire such equity
          securities but only if the Net Cash Proceeds, if any, from the
          exercise of such rights are applied to the repayment of Advances to
          the extent required pursuant to Section 2.05(b); and

                    (v)   any Subsidiary may declare and pay dividends to the
          Borrower or to a Subsidiary of the Borrower that is a Loan Party.

               (g) Change in Nature of Business. Make, or permit any of the
                   ----------------------------
other Loan Parties to make, any material change in the nature of its business as
carried on at the date hereof.

               (h) Charter Amendments; New Subsidiaries. Amend, or permit any of
                   ------------------------------------
the other Loan Parties to amend, its or their certificate or articles of
incorporation, bylaws or other organizational or charter documents (including,
without limitation, by filing any certificate of designation with respect to any
preferred stock or otherwise creating any new preferred stock) or, create or
acquire, or permit any of the

                                       80
<PAGE>

other Loan Parties to directly or indirectly create or acquire, a Subsidiary not
in existence on the date hereof.

               (i) Accounting Changes. Make or permit, or permit any of its
                   ------------------
Subsidiaries to make or permit, any change in accounting policies or reporting
practices, except as required by generally accepted accounting principles.

               (j) Prepayments, Etc. of Debt; Amendments to Agreements. (i)
                   ---------------------------------------------------
Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled
payment or maturity thereof in any manner any Debt other than the prepayment of
(A) the Advances in accordance with the terms of this Agreement and (B)
Capitalized Leases in the ordinary course of business; (ii) make any payment in
violation of any subordination terms of any Debt; (iii) amend, modify or change
in any manner any term or condition of any Intercompany Note, any other
Surviving Debt or any Casino Tax Sharing Document; (iv) amend, modify or change
in any manner which is materially adverse to the Lender Parties any term or
condition of the Synthetic Lease Documents; or (v) permit any of the Loan
Parties to do any of the foregoing other than to prepay any Debt payable to the
Borrower.

               (k) Negative Pledge. Enter into or suffer to exist, or permit any
                   ---------------
of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting
or conditioning the creation or assumption of any Lien upon any of their
respective property or assets other than (i) in favor of the Administrative
Agent and the Lender Parties or (ii) any Debt permitted by Section
6.02(b)(iii)(A) hereof, in each case so long as such prohibition or condition
extends only to the property subject to the Lien securing such Debt.

               (l) Partnerships. Become a general partner in any general or
                   ------------
limited partnership or joint venture, or permit any of its Subsidiaries to do
so, other than any Subsidiary the sole assets of which consist of its interest
in such partnership or joint venture.

               (m) Affiliate Transactions. Enter into, or permit any of its
                   ----------------------
Subsidiaries to enter into, directly or indirectly, any transaction with
(including, without limitation, the purchase, sale or exchange of property or
the rendering of any service to) any Affiliate of the Borrower, except pursuant
to (x) the reasonable requirements of the Borrower's or such Subsidiary's
business, as the case may be, and upon fair and reasonable terms no less
favorable to such Borrower or such Subsidiary than could be obtained in a
comparable arm's-length transaction with an unaffiliated Person, (y) the Casino
Tax Sharing Documents and (z) Capitalized Leases between any Loan Party and
Casino in existence on the Closing Date and set forth on Schedule 5.01(q)(i).

               (n) Intentionally Omitted.
                   ---------------------

               (o) Payment Restrictions Affecting Subsidiaries; Document
                   -----------------------------------------------------
Amendment. Directly or indirectly, enter into or suffer to exist, or permit any
---------
of its Subsidiaries to enter into or suffer to exist, any agreement or
arrangement

                                       81
<PAGE>

(other than the Loan Documents) (i) limiting the ability of any such Subsidiary
to declare or pay dividends or other distributions in respect of its Equity
Interests or repay or prepay any Debt owed to, make loans or advances to, or
otherwise transfer assets to or invest in, the Borrower or any Subsidiary of the
Borrower (whether through a covenant restricting dividends, loans, asset
transfers or investments, a financial covenant or otherwise), or (2) limiting
the ability of any Loan Party to enter into amendments, modifications or waivers
of the Loan Documents.

               (p) Speculative Transactions. Engage, or permit any of its
                   ------------------------
Subsidiaries to engage, in any transaction involving commodity options or
futures contracts or any similar speculative transactions other than Hedge
Agreements permitted pursuant to Section 6.02(b)(i)(B).

     Section 6.03 Reporting Requirements. So long as any Advance or any other
                  ----------------------
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Borrower shall deliver to the Administrative Agent
(with a courtesy copy to each Lender; provided that the failure to provide any
such courtesy copy to any Lender shall not constitute a breach or violation of
this Section 6.03 and shall not give rise to any Default):

               (a) Borrowing Base Certificate. Quarterly, within 10 Business
                   --------------------------
Days after the last Business day of each fiscal quarter of the Borrower and at
any other time requested by the Administrative Agent, a Borrowing Base
Certificate, which shall: (i) be completed substantially in the form of Exhibit
K, (A) detailing the Borrower's Eligible Accounts Receivable and Eligible
Inventory as of the last day of such quarter or as of such other date as the
Administrative Agent may request, and (B) verifying, as of the end of such
fiscal quarter of the Borrower, compliance with the covenants contained in
Sections 6.02(a), (b), (d), (e), (f), (g) and 6.04, and the computations (which
shall be set forth therein) used in determining such compliance; (ii) be
prepared by or under the supervision of the Borrower's chief executive officer,
chief financial officer, treasurer or controller and certified by such officer
subject only to adjustment upon completion of the normal year-end audit of
physical inventory; and (iii) include such additional schedules and other
information as the Administrative Agent may reasonably request.

               (b) Default Notice. As soon as possible and in any event within
                   --------------
two Business Days after the occurrence of any Default and within two Business
Days after any Material Adverse Effect occurs or arises, a statement of the
chief executive officer, chief financial officer, treasurer or controller of the
Borrower setting forth details thereof and the action that the Borrower has
taken and proposes to take with respect thereto.

               (c) Quarterly Financials. As soon as available and in any event
                   --------------------
within 45 days after the end of each of the first three quarters of each Fiscal
Year, Consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of the end of such quarter and Consolidated and consolidating
statements of income and

                                       82
<PAGE>

cash flows of the Borrower and its Subsidiaries for the period commencing at the
end of the previous Fiscal Year and ending with the end of such quarter, setting
forth in each case in comparative form the corresponding figures for such period
(on a quarterly and year-to-date basis from the forecast delivered pursuant to
Section 6.03(l)) and the corresponding figures for the corresponding period of
the preceding Fiscal Year, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief executive officer, chief financial
officer, treasurer or controller of the Borrower as having been prepared in
accordance with GAAP, together with (i) a certificate of said officer stating
that the representations and warranties in Section 5.01 are true and correct in
all material respects as of the date of such certificate and that no Default has
occurred and is continuing or, if a Default has occurred and is continuing, a
statement as to the nature thereof and the action that the Borrower has taken
and proposes to take with respect thereto, and (ii) a schedule in form
satisfactory to the Administrative Agent of the computations used by the
Borrower in determining compliance with the covenants contained in Sections
6.02(a), (b), (d), (e), (f) and 6.04; provided that in the event of any change
                                      --------
in generally accepted accounting principles used in the preparation of such
financial statements, the Borrower shall also provide, if necessary for the
determination of compliance with Section 5.04, a statement of reconciliation
conforming such financial statements to GAAP. Notwithstanding the foregoing,
however, Borrower shall not be required to report consolidating numbers with
respect to Smart & Final de Mexico, S.A. de C.V.

               (d) Annual Financials. As soon as available and in any event
                   -----------------
within 90 days after the end of each Fiscal Year, a copy of the annual audit
report for such year for the Borrower and its Subsidiaries, including therein
audited Consolidated and unaudited consolidating balance sheets of the Borrower
and its Subsidiaries as of the end of such Fiscal Year and audited Consolidated
and unaudited consolidating statements of income and cash flows of the Borrower
and its Subsidiaries for such Fiscal Year, in each case with respect to such
audited balance sheets and statements of income and cash flow accompanied by an
opinion acceptable to the Administrative Agent of Arthur Andersen LLP or other
independent public accountants of recognized standing acceptable to the
Administrative Agent, together with (i) a certificate of such accounting firm to
the Lenders stating that in the course of the regular audit of the business of
the Borrower and its Subsidiaries, which audit was conducted by such accounting
firm in accordance with generally accepted auditing standards, such accounting
firm has obtained no knowledge that a Default has occurred and is continuing, or
if, in the opinion of such accounting firm, a Default has occurred and is
continuing, a statement as to the nature thereof, (ii) a schedule in form
satisfactory to the Administrative Agent of the computations used by such
accountants in determining, as of the end of such Fiscal Year, compliance with
the covenants contained in Sections 6.02(a), (b), (d), (e), (f) and 6.04 and
including a comparison of the results for such Fiscal Year to the results for
such Fiscal Year set forth in the forecast delivered pursuant to Section
6.03(l), and (iii) a certificate of the chief executive officer, chief financial
officer, treasurer or controller of the Borrower (A) stating that the
representations and warranties in Section 5.01 are true and correct in all
material respects as of the date of such certificate and that no Default has
occurred and is continuing or, if a default has occurred and is continuing, a
statement as to the nature thereof and the action that the Borrower

                                       83
<PAGE>

has taken and proposes to take with respect thereto, and (B) verifying, as of
the end of such Fiscal Year, compliance with the covenants contained in Sections
6.02(a), (b), (d), (e), (f) and 6.04, and the computations (which shall be set
forth therein) used in determining such compliance. Notwithstanding the
foregoing, Borrower shall not be required to report consolidating numbers with
respect to Smart & Final de Mexico, S.A. de C.V.

               (e) ERISA Events. Promptly and in any event within ten Business
                   ------------
Days after the Borrower, any Subsidiary or any ERISA Affiliate knows or has
reason to know that any material ERISA Event with respect to any such Person has
occurred, a statement of the chief executive officer, chief financial officer,
treasurer or controller of the Borrower describing such ERISA Event and the
action, if any, that the applicable Person has taken and/or proposes to take
with respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto.

               (f) Plan Terminations. Promptly and in any event within 10
                   -----------------
Business Days after receipt thereof by the Borrower, any Subsidiary or any ERISA
Affiliate, copies of any notice from the PBGC stating its intention to terminate
any Employee Benefit Plan or to have a trustee appointed to administer any such
Employee Benefit Plan.

               (g) Plan Annual Reports. Promptly and in any event within 30 days
                   -------------------
after the receipt of a request therefor by the Administrative Agent or the
Required Lenders, copies of each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) with respect to each Plan of the Borrower, each
Subsidiary or each ERISA Affiliate.

               (h) Multiemployer Plan Notices. Promptly and in any event within
                   --------------------------
10 Business Days after receipt thereof by the Borrower, any Subsidiary or any
ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
concerning (i) the imposition of Withdrawal Liability by any such Multiemployer
Plan on the Borrower, any Subsidiary or any ERISA Affiliate, (ii) the
reorganization or termination, within the meaning of Title IV of ERISA, of any
such Multiemployer Plan or (iii) the amount of liability incurred, or that may
be incurred, by the Borrower, any Subsidiary or any ERISA Affiliate in
connection with any event described in clause (i) or (ii) above.

               (i) Litigation. As promptly as practicable, notice of the
                   ----------
commencement of, or any material adverse change in the status of or in the
financial effect on any Loan Party or any Subsidiary thereof, any material
actions, suits, investigations, litigation and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting any Loan Party or any of its Subsidiaries of the
type described in Section 4.01(d) that is not disclosed in any report filed by
the Borrower with the Securities Exchange Commission or any governmental
authority that may be substituted therefor.

                                       84
<PAGE>

               (j) Press Releases; Securities Reports. Promptly after the
                   ----------------------------------
sending or filing thereof, copies of all (i) press releases, (ii) proxy
statements, financial statements and reports that any Loan Party or any of its
Subsidiaries sends to its stockholders, and (iii) regular, periodic and special
reports, and all registration statements, that any Loan Party or any of its
Subsidiaries files with the Securities and Exchange Commission or any
governmental authority that may be substituted therefor, or with any national
securities exchange.

               (k) Environmental Conditions. Promptly after the assertion or
                   ------------------------
occurrence thereof, notice of any material Environmental Action against or of
any material noncompliance by any Loan Party or any of their respective
Subsidiaries with any Environmental Law or Environmental Permit, or any
condition or occurrence on any property of any Loan Party or any of their
respective Subsidiaries that results in or could (i) form the basis for such
material Environmental Action or material noncompliance, or (ii) cause any
property of any Loan Party or any of their respective Subsidiaries to be subject
to any material restrictions on ownership, occupancy, use or transferability
under any Environmental Law.

               (l) Annual Forecasts. Together with the annual financial
                   ----------------
statements required pursuant to Section 6.03(d), forecasts prepared by
management of the Borrower, in form satisfactory to the Administrative Agent, of
balance sheets, income statements and cash flow statements on a monthly basis
for the Fiscal Year following such Fiscal Year and on an annual basis for each
Fiscal Year thereafter until the Commitment Termination Date, together with an
explanation of the assumptions on which such forecasts are based.

               (m) Creditor Reports. If requested by the Administrative Agent,
                   ----------------
copies of any statement or report furnished to any holder of debt securities of
any Loan Party or of any of its Subsidiaries pursuant to the terms of any
indenture, loan or credit or similar agreement as to the occurrence of any
"default" thereunder.

               (n) Synthetic Lease Notices. Promptly upon receipt thereof,
                   -----------------------
copies of (i) all notices, requests and other documents received by any Loan
Party or any of its Subsidiaries under or pursuant to any Synthetic Lease
Document regarding any event that could materially impair the value of the
interests or the rights of any Loan Party or otherwise have a Material Adverse
Effect, (ii) any amendment, modification or waiver of any provision of any
Synthetic Lease Document (provided that compliance herewith shall not constitute
a waiver of Section 6.02(j)), and (iii) from time to time upon request by the
Administrative Agent, such information and reports regarding the Synthetic Lease
Documents as the Administrative Agent may reasonably request; in each case, to
the extent not otherwise required to be delivered to the Administrative Agent
pursuant to any other clause of this Section 6.03.

               (o) Real Property. Within 30 days following any request by the
                   -------------
Administrative Agent (which request shall not be made more than once in any
Fiscal Year unless a Default shall have occurred and be continuing), a report
supplementing Schedules 5.01(r)(i) and 5.01(r)(ii), including an identification
of all

                                       85
<PAGE>

Owned Real Property and leased real property, as applicable, disposed of by any
Loan Party or any of its Subsidiaries during the period from the Closing Date
until delivery of such report or, if any such report has previously been
provided, since the date of the most recent report, a list and description
(including, if the Administrative Agent so requests, the street address, county
or other relevant jurisdiction, state, record owner, book value thereof and, in
the case of leases of property, the lessor, lessee, expiration date and annual
rental cost thereof) of all real property acquired or leased during the period
from the Closing Date until delivery of such report or, if any such report has
previously been provided, since the date of the most recent report, and a
description of such other changes in the information included in such Schedules
as may be necessary for such Schedules to be accurate and complete.

               (p) Insurance. Within 30 days following any request by the
                   ---------
Administrative Agent (which request shall not be made more than once in any
Fiscal Year unless a Default shall have occurred and be continuing), a report
summarizing the insurance coverage (specifying type, amount and carrier) in
effect for the Borrower and its Subsidiaries and containing such additional
information as the Administrative Agent, or any Lender through the
Administrative Agent, may reasonably specify.

               (q) Other Information. Such other information respecting the
                   -----------------
business, condition (financial or otherwise), operations, performance,
properties or prospects of any Loan Party as Administrative Agent, or any Lender
Party through the Administrative Agent, may from time to time reasonably
request.

     Section 6.04 Financial Covenants. So long as any Advance or any other
                  -------------------
Obligation of any Loan Party under any Loan Document shall remain unpaid, any
Letter of Credit shall be outstanding or any Lender Party shall have any
Commitment hereunder, the Borrower will:

               (a) Net Worth. Maintain at all times a Consolidated Net Worth of
                   ---------
not less than the sum of (i) $270,000,000, plus (ii) 50% of positive cumulative
Consolidated Net Income for any fiscal quarter of the Borrower ending after the
fiscal quarter ending October 8, 2001 (but without any deduction for any period
in which Consolidated Net Income is a negative number) plus (iii) 100% of the
amount of all cash proceeds of any equity issuances by the Borrower or any of
its Subsidiaries after the date hereof.

               (b) Senior Leverage Ratio. Not permit the Senior Leverage Ratio
                   ---------------------
at the end of the fiscal quarters of the Borrower set forth below to exceed the
correlative ratio indicated:

                                       86
<PAGE>

        --------------------------------------------------------
        Fiscal Quarter                Leverage Ratio
        --------------                --------------
        --------------------------------------------------------
        Fourth Quarter 2001           3.25 to 1.0
        --------------------------------------------------------
        First Quarter 2002            3.25 to 1.0
        --------------------------------------------------------
        Second Quarter 2002           3.00 to 1.0
        --------------------------------------------------------
        Third Quarter 2002            3.00 to 1.0
        --------------------------------------------------------
        Fourth Quarter 2002           2.75 to 1.0
        --------------------------------------------------------
        First Quarter 2003            2.75 to 1.0
        --------------------------------------------------------
        Second Quarter 2003           2.75 to 1.0
        --------------------------------------------------------
        Third Quarter 2003            2.75 to 1.0
        --------------------------------------------------------
        Fourth Quarter 2003           2.50 to 1.0
        --------------------------------------------------------
        First Quarter 2004            2.50 to 1.0
        --------------------------------------------------------
        Second Quarter 2004           2.50 to 1.0
        --------------------------------------------------------
        Third Quarter 2004            2.25 to 1.0
        --------------------------------------------------------

               (c) Adjusted Leverage Ratio. Not permit the Adjusted Leverage
                   -----------------------
Ratio at the end of the fiscal quarters of the Borrower set forth below to
exceed the correlative ratio indicated:

        --------------------------------------------------------
        Fiscal Quarter                Leverage Ratio
        --------------                --------------
        --------------------------------------------------------
        Fourth Quarter 2001           4.5 to 1.0
        --------------------------------------------------------
        First Quarter 2002            4.5 to 1.0
        --------------------------------------------------------
        Second Quarter 2002           4.5 to 1.0
        --------------------------------------------------------
        Third Quarter 2002            4.5 to 1.0
        --------------------------------------------------------
        Fourth Quarter 2002           4.5 to 1.0
        --------------------------------------------------------
        First Quarter 2003            4.5 to 1.0
        --------------------------------------------------------
        Second Quarter 2003           4.5 to 1.0
        --------------------------------------------------------
        Third Quarter 2003            4.5 to 1.0
        --------------------------------------------------------
        Fourth Quarter 2003           4.25 to 1.0
        --------------------------------------------------------
        First Quarter 2004            4.25 to 1.0
        --------------------------------------------------------
        Second Quarter 2004           4.25 to 1.0
        --------------------------------------------------------
        Third Quarter 2004            4.25 to 1.0
        --------------------------------------------------------

               (d) Fixed Charge Coverage Ratio. Maintain at all times a Fixed
                   ---------------------------
Charge Coverage Ratio of not less than 2.0 to 1.0.

               (e) Capital Expenditures. Not make, or permit any of its
                   --------------------
Subsidiaries to make, any Capital Expenditures that would cause the aggregate of
all such Capital Expenditures made by the Borrower and its Subsidiaries to
exceed $50,000,000 during each of the Fiscal Years ending December 29, 2002 and
December 28, 2003, respectively, and $55,000,000 during the Fiscal Year ending
January 1, 2005 (such amount, for each such Fiscal Year, the "Maximum
                                                              -------
Expenditure Amount"), provided that the Maximum Expenditure Amount for any
------------------
Fiscal Year, beginning with the Fiscal Year ending December 28, 2003, shall be
increased by an amount equal to the excess, if any, of the Maximum Expenditure
Amount for the previous year (without giving effect to any previous adjustment
made in accordance with this proviso) over the actual amount of

                                       87
<PAGE>

Capital Expenditures made during such previous Fiscal Year, but in no event
shall such increase exceed $10,0000,000.

                                  ARTICLE VII

                                EVENTS OF DEFAULT

     Section 7.01 Events of Default. If any of the following events ("Events of
                  -----------------                                   ---------
Default") shall occur and be continuing:
-------

               (a) the Borrower shall fail to pay any principal of any Advance
when the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise); or any Loan Party shall fail to
make any interest or any other payment under any Loan Document within three
Business Days after such interest or other amount becomes due and payable; or

               (b) any representation or warranty made by any Loan Party (or any
of its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made or deemed made; or

               (c) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in Sections 2.12, 6.01(e), (f), (k), (1) or (m),
6.02 or 6.04; or

               (d) (i) any Loan Party shall fail to perform or observe any term,
covenant or agreement contained in Section 6.03 if such failure shall remain
unremedied for 10 days after the earlier of the date on which (x) such Loan
Party (including any officer of such Loan Party) becomes aware of such failure,
or (y) written notice thereof shall have been given to the Borrower by the
Administrative Agent or (ii) any Loan Party shall fail to perform or observe any
other term, covenant or agreement contained in any Loan Document on its part to
be performed or observed if such failure shall remain unremedied for 30 days
after the earlier of the date on which (x) such Loan Party (including any
officer of such Loan Party) becomes aware of such failure, or (y) written notice
thereof shall have been given to the Borrower by the Administrative Agent; or

               (e) any "Event of Default" (under and as defined in the
Participation Agreement) shall have occurred and be continuing; or any Loan
Party or any of its Subsidiaries shall fail to pay any principal of, premium or
interest on or any other amount payable in respect of any Debt of such Loan
Party or Subsidiary that is outstanding in a principal amount of at least
$5,000,000 in the aggregate (but excluding Debt outstanding hereunder) when the
same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise); or any other event shall occur
or condition shall exist under any agreement or instrument relating to any such
Debt, if the effect of such event or condition is to accelerate, or to permit
the acceleration of, the maturity of such Debt or otherwise to cause, or to
permit the holder thereof to cause, such Debt to mature; or any such Debt shall
be declared to be

                                       88
<PAGE>

due and payable or required to be prepaid or redeemed (other than by a regularly
scheduled required prepayment or redemption), purchased or defeased, or an offer
to prepay, redeem, purchase or defease such Debt shall be required to be made,
in each case prior to the stated maturity thereof; or

               (f) any Loan Party or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by any Loan Party or any of
its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property, or any such
proceeding shall have been commenced against any Loan Party or any of its
Subsidiaries and shall not have been withdrawn, dismissed, bonded or discharged
within 60 days thereafter or at any time an order for relief is granted in such
proceeding; or any Loan Party or any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
subsection (f); or

               (g) any judgments or orders in excess of $5,000,000 individually
or $10,000,000 in the aggregate for the payment of money shall be rendered
against any Loan Party or any of its Subsidiaries and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 60 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or

               (h) any non-monetary judgment or order shall be rendered against
any Loan Party or any of its Subsidiaries that could have a Material Adverse
Effect, and there shall be any period of 10 consecutive days during which a stay
of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or

               (i) any provision of any Loan Document after delivery thereof
pursuant to Section 4.01 shall for any reason cease to be valid and binding on
or enforceable against any Loan Party party to it, or any such Loan Party shall
so state in writing; or

               (j) any Collateral Document or financing statement after delivery
thereof pursuant to Sections 4.01 or 6.01 shall for any reason (other than
pursuant to the terms thereof or pursuant to the Intercreditor Agreement (Leased
Property)) cease to create a valid and perfected first priority Lien on the
Collateral purported to be covered thereby; or

               (k) (i) if at any time when Casino is not the single largest
shareholder of the Borrower, any Person or two or more Persons acting in concert
(other than Casino) shall have acquired beneficial ownership (within the meaning
of Rule 13d-3

                                       89
<PAGE>

of the Securities and Exchange Commission under the Securities Exchange Act of
1934), directly or indirectly, of Voting Interests of the Borrower representing
33-1/3% or more of the combined voting power of all Voting Interests of the
Borrower; or (ii) the majority of the seats (other than vacant seats) on the
board of directors of the Borrower cease to be occupied by Persons who either
(a) were members of the board of directors of the Borrower on the Closing Date
or (b) were nominated for election by the board of directors (or any committee
thereof) of the Borrower, a majority of whom were directors on the Closing Date
or whose election or nomination for election was previously approved by a
majority of such directors; or (iii) any Person or two or more Persons acting in
concert (other than Casino) shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon consummation, will
result in its or their acquisition of, the power to exercise, directly or
indirectly, a controlling influence over the management or policies of the
Borrower, other than any contract or arrangement with respect to acquisition of
Voting Interests of the Borrower (it being understood that such acquisition of
Voting Interests is governed by clause (i) of this paragraph); or

               (l) there shall occur one or more ERISA Events which individually
or in the aggregate results in or reasonably could be expected to result in a
Material Adverse Effect; or there exists any fact or circumstance that
reasonably could be expected to result in the imposition of a Lien or security
interest under Section 412(n) of the Internal Revenue Code or under ERISA on the
assets of the Borrower and its Subsidiaries;

then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the Commitments of each Lender Party and the obligation of each Lender
Party to make Advances and of any L/C Bank to issue Letters of Credit to be
terminated, whereupon the same shall forthwith terminate, and (ii) shall at the
request, or may with the consent, of the Required Lenders, by notice to the
Borrower, declare the Notes, all interest thereon and all other amounts payable
under this Agreement and the other Loan Documents to be forthwith due and
payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of an Event of Default described
          --------  -------
in Section 7.01(f), (x) the Commitments of each Lender Party and the obligation
of each Lender Party to make Advances and of each L/C Bank to issue Letters of
Credit shall automatically be terminated and (y) the Notes, all such interest
and all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower. Nothing contained in this Section 7.01 is
intended to preclude or limit the Administrative Agent from exercising any of
the rights or remedies available to it under any of the Loan Documents or at
law.

     Section 7.02 Actions in Respect of the Letters of Credit Upon Default. If
                  --------------------------------------------------------
any Event of Default shall have occurred and be continuing, the Administrative
Agent may from time to time, or shall at the request of the Required Lenders,
irrespective of

                                       90
<PAGE>

whether it is taking any of the actions described in Section 7.01 or otherwise,
make demand upon the Borrower to, and forthwith upon such demand the Borrower
will, pay to the Administrative Agent on behalf of the Lender Parties in same
day funds at the Administrative Agent's office designated in such demand, for
deposit to a non-interest bearing account established by the Administrative
Agent for such purposes or for purposes of Sections 2.05(b)(iv), 2.05(c) or 3.01
or (the "L/C Cash Collateral Account"), an amount equal to the aggregate
         ---------------------------
Available Amount of all Letters of Credit then outstanding (and the Borrower
hereby grants to the Administrative Agent, for the ratable benefit of the
Administrative Agent and each Lender Party, a continuing security interest in
all amounts at any time on deposit in the L/C Cash Collateral Account to secure
all Letter of Credit Obligations from time to time outstanding and all other
Obligations hereunder). If at any time the Administrative Agent determines that
any funds held in the L/C Cash Collateral Account are subject to any right or
claim of any Person other than the Administrative Agent and the Lender Parties
or that the total amount of such funds is less than the aggregate Available
Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the
Administrative Agent, pay to the Administrative Agent, as additional funds to be
deposited and held in the L/C Cash Collateral Account, an amount equal to the
excess of (a) such aggregate Available Amount over (b) the total amount of
funds, if any, then held in the L/C Cash Collateral Account that the
Administrative Agent determines to be free and clear of any such right and
claim.

                                  ARTICLE VIII

                                THE CREDIT AGENTS

     Section 8.01 Authorization and Action. Each Lender Party (in its capacity
                  ------------------------
as a Lender, the Swing Line Lender (if applicable), the L/C Bank (if applicable)
and on behalf of itself and its Affiliates) hereby appoints (a) BNP Paribas as
its Administrative Agent, Harris Trust & Savings Bank as its Syndication Agent
and Cooperative Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland",
New York Branch as its Documentation Agent under and for purposes of this
Agreement, the Notes and each other Loan Document, and (b) BNP Paribas as its
Administrative Agent under and for purposes of the Collateral Documents. Each
Lender Party (i) authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers and discretion under this
Agreement and the other Loan Documents as are delegated to the Administrative
Agent by the terms hereof and thereof, together with such powers and discretion
as are reasonably incidental thereto and (ii) authorizes and instructs the
Administrative Agent to enter into each of the Loan Documents, including the
Intercreditor Agreements and any new intercreditor agreements required pursuant
to Section 9.14. As to any matters not expressly provided for by the Loan
Documents (including, without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding upon all Lender Parties and all holders of Notes; provided, however,
                                                          --------  -------
that the Administrative Agent shall not be required to take any action that

                                       91
<PAGE>

exposes the Administrative Agent to personal liability or that is contrary to
this Agreement or applicable law. With respect to any action to be taken by the
Administrative Agent in its sole discretion pursuant to this Agreement, the
Administrative Agent may obtain the instructions of the Required Lenders and may
act or refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon such instructions, and such instructions shall be
binding upon all Lender Parties and all holders of Notes; provided that the
                                                          --------
Administrative Agent shall not be required to take any action that exposes the
Administrative Agent to personal liability or that is contrary to this Agreement
or applicable law. The Administrative Agent agrees to give to each Lender Party
prompt notice of each notice given to any of them by the Borrower pursuant to
the terms of this Agreement.

     Section 8.02 Administrative Agent's Reliance, Etc. Neither the
                  -------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by any of them under
or in connection with the Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;
(ii) may consult with legal counsel (including counsel for any Loan Party),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender Party and shall not be responsible
to any Lender Party for any statements, warranties or representations made in or
in connection with the Loan Documents; (iv) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of any Loan Document on the part of any Loan Party or to inspect
the property (including the books and records) of any Loan Party; (v) shall not
be responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (vi) shall
incur no liability under or in respect of any Loan Document by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telegram, telecopy or cable) believed by it to be genuine and signed or sent by
the proper party or parties; and (vii) shall incur no liability as a result of
any determination whether the transactions contemplated by the Loan Documents
constitute a "highly leveraged transaction" within the meaning of the
interpretations issued by the Comptroller of the Currency, the Federal Deposit
Insurance Corporation and the Board of Governors of the Federal Reserve System.

     Section 8.03 Credit Agents and Affiliates. With respect to its Commitments
                  ----------------------------
and the Advances made by it and the Notes issued to it, each Credit Agent shall
have the same rights and powers under the Loan Documents as any other Lender
Party and may exercise the same as though it were not a Credit Agent; and the
terms "Lender", "Lenders", "Lender Party" or "Lender Parties" shall, unless
otherwise expressly indicated, include each Credit Agent in its individual
capacity. Each Credit Agent and its

                                       92
<PAGE>

respective Affiliates may accept deposits from, lend money to, act as trustee
under indentures of, accept investment banking engagements from and generally
engage in any kind of business with, any Loan Party, any of their Subsidiaries
and any Person who may do business with or own securities of any Loan Party or
any such Subsidiary, all as if such Credit Agent were not a Credit Agent and
without any duty to account therefor to the Lender Parties.

     Section 8.04 Lender Party Credit Decision. Each Lender Party acknowledges
                  ----------------------------
that it has, independently and without reliance upon the Credit Agents or any
other Lender Party and based on the financial statements referred to in Section
5.01 and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Lender
Party also acknowledges that it will, independently and without reliance upon
the Credit Agents or any other Lender Party and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.

     Section 8.05 Indemnification. Each Lender Party severally agrees to
                  ---------------
indemnify each Credit Agent and the Lead Arranger and their respective
affiliates, officers, directors, employees, attorneys, agents and advisors (to
the extent not promptly reimbursed by the Borrower) from and against such Lender
Party's ratable share of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against any Credit Agent or the Lead Arranger in any way relating to or arising
out of the Loan Documents or any action taken or omitted by any Credit Agent or
the Lead Arranger under the Loan Documents; provided, however, that no Lender
                                            --------  -------
Party shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of any Credit Agent or
the Lead Arranger. Without limitation of the foregoing, each Lender Party agrees
to reimburse the Credit Agents and the Lead Arranger promptly upon demand for
its ratable share of any costs and expenses payable by the Borrower under
Section 9.04, to the extent that the Credit Agents or the Lead Arranger are not
promptly reimbursed for such costs and expenses by the Borrower. For purposes of
this Section 8.05, the Lender Parties' respective ratable shares of any amount
shall be determined, at any time, according to the sum of (a) the aggregate
principal amount of the Advances (other than L/C Advances) outstanding at such
time and owing to the respective Lender Parties, plus (b) their respective Pro
Rata Shares of the aggregate Letter of Credit Obligations outstanding at such
time, plus (c) their respective Unused Revolving Commitments at such time. The
failure of any Lender Party to reimburse the Credit Agents and the Lead Arranger
promptly upon demand for its ratable share of any amount required to be paid by
the Lender Parties to the Credit Agents and the Lead Arranger as provided herein
shall not relieve any other Lender Party of its obligation hereunder to
reimburse the Credit Agents and the Lead Arranger for its ratable share of such
amount, but no Lender Party shall be responsible for the failure of any other
Lender Party to reimburse the Credit Agents and the Lead Arranger for such other
Lender Party's ratable share of such amount.

                                       93
<PAGE>

     Section 8.06 Successor Administrative Agent. The Administrative Agent may
                  ------------------------------
resign at any time by giving written notice thereof to the Lender Parties and
the Borrower and may be removed at any time with or without cause by the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint a successor Administrative Agent, which shall
thereupon become the Administrative Agent hereunder. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lender Parties, appoint a successor Administrative
Agent, which shall be a commercial bank organized under the laws of the United
States or of any State thereof and having a combined capital and surplus of at
least $250,000,000. If within 45 days after written notice is given of the
retiring Administrative Agent's resignation or removal under this Section 8.06
no successor Administrative Agent shall have been appointed and shall have
accepted such appointment, then on or after such 45th day, the retiring
Administrative Agent shall have the right to petition a court of competent
jurisdiction to appoint a successor Administrative Agent. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor Administrative
Agent and upon the execution and filing or recording of such financing
statements, or amendments thereto, and such amendments or supplements to the
Mortgages, and such other instruments or notices, as may be necessary or
desirable, or as the Required Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Collateral
Documents, such successor Administrative Agent shall succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations under the Loan Documents. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article VIII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.

     Section 8.07 Syndication Agent and Documentation Agent. The Syndication
                  -----------------------------------------
Agent and the Documentation Agent shall not have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Lenders as such. Without limiting the foregoing, neither the
Syndication Agent nor the Documentation Agent shall have or be deemed to have
any fiduciary relationship with any Lender Party.

     Section 8.08 Secured Hedge Agreements.
                  ------------------------

               (a) Each Lender proposing to enter into a Secured Hedge Agreement
hereby agrees to provide the Administrative Agent with notice of intent to enter
into such agreement; further, each Lender party to a Secured Hedge Agreement,
hereby agrees to promptly provide the Administrative Agent with an executed copy
of same.

                                       94
<PAGE>

               (b) Each Secured Hedge Bank hereby agrees to promptly provide
Administrative Agent notice of default under any Secured Hedge Agreement.

                                   ARTICLE IX

                                  MISCELLANEOUS

     Section 9.01 Amendments, Etc.; Release of Collateral; Termination.
                  ----------------------------------------------------

               (a) Amendments, Etc. No amendment or waiver of any provision of
                   ----------------
this Agreement or the Notes or any other Loan Document, nor consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed (or, in the case of the Collateral
Documents, consented to) by the Required Lenders (and, in the case of any such
amendment, the Borrower), and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided that (a) no amendment, waiver or consent shall, unless in writing and
--------
signed by all of the Lender Parties, do any of the following at any time: (i)
waive any of the conditions specified in Sections 4.01 or 4.02, (ii) change the
percentage of the Commitments, the aggregate unpaid principal amount of the
Advances or the aggregate Available Amount of outstanding Letters of Credit that
shall be required for the Lender Parties or any of them to take any action
hereunder, (iii) release all of the Collateral or substantially all of the
Collateral in any transaction or series of related transactions (it being
understood that the Administrative Agent may release Collateral constituting
less than substantially all of the Collateral in accordance with Section
9.01(b)), (iv) release all or substantially all of the Guarantors from their
obligations under the Guaranty, (v) reduce or postpone the payment of principal
(but not any mandatory prepayment pursuant to Section 2.05(b)(iii)), interest,
fees or other amounts due hereunder, or (vi) amend this Section 9.01; (b) no
amendment, waiver or consent shall, unless in writing and signed by the Required
Lenders and each Lender that is directly affected by such amendment, waiver or
consent, (i) increase or extend the Commitments of such Lender, or (ii) change
the order of application of any prepayment set forth in Section 2.05 in any
manner that materially affects such Lender; and (c) no amendment, waiver or
consent shall, unless in writing and signed by the Supermajority Lenders, amend
the definition of "Borrowing Base Amount;" provided, further that no amendment,
                                           --------  -------
waiver or consent shall, unless in writing and signed by the Swing Line Lender
or the applicable L/C Bank, as the case may be, in addition to the Lenders
required above to take such action, affect the rights or obligations of the
Swing Line Lender or of any L/C Bank, as the case may be, under this Agreement;
and provided further that no amendment, waiver or consent shall, unless in
    -------- -------
writing and signed by the Administrative Agent in addition to the Lender Parties
required above to take such action, affect the rights or duties of the
Administrative Agent under this Agreement or the other Loan Documents.

               (b) Release of Collateral. Upon the written request of the
                   ---------------------
Borrower, and without the consent of the Required Lenders or any other Lender
Party, the Administrative Agent is authorized to and, subject to the provisions
of this Section 9.01(b), shall release any item or items of Collateral
comprising less than substantially all

                                       95
<PAGE>

of the Collateral at the time of such release (and is authorized to, and subject
to the provisions of this Section 9.01(b), shall, at the Borrower's expense,
execute any documents or instruments reasonably requested by the Borrower in
connection therewith) if (A) such release is requested in conjunction with the
consummation of any sale or other disposition of such Collateral that is not
prohibited by this Agreement, (B) arrangements satisfactory to the
Administrative Agent for the receipt by the Administrative Agent of any
prepayment required under Section 2.05(b) have been made, and (C) the Borrower
has delivered to the Administrative Agent a certificate signed by the Borrower's
chief executive officer, chief financial officer, treasurer or controller
certifying that such sale or other disposition is not prohibited by this
Agreement.

               (c) Termination. Upon the payment in full of all Obligations
                   -----------
(other than Obligations which by their terms survive termination of this
Agreement) of the Loan Parties under the Loan Documents, the expiration or
termination of all Letters of Credit and the expiration or termination of all
Commitments hereunder, the Administrative Agent shall upon request provide a
payoff letter or similar document indicating that all Obligations of the Loan
Parties under the Loan Documents (other than any Obligations which survive
termination of the Loan Documents) have been discharged. On or after delivery of
such payoff letter or similar document, upon the written request of the
Borrower, the Administrative Agent is authorized by the Lender Parties to and
shall (i) release all of the Collateral (and is authorized by the Lender Parties
to and shall, at the Borrower's expense, execute any documents or instruments
reasonably requested by the Borrower in connection therewith) and (ii) deliver
any Collateral in the Administrative Agent's possession to the Agent (as defined
in the Participation Agreement) if the Synthetic Lease is outstanding at such
time.

     Section 9.02 Notices, Etc. All notices and other communications provided
                  -------------
for hereunder shall be in writing (including telegraphic, telecopy or cable
communication) and mailed, telegraphed, telecopied, cabled or delivered, if to
the Borrower, at its address at Smart & Final Inc., 600 Citadel Drive, Commerce,
California 90040, Telecopier No. (323) 869-7862, Attn: Donald G. Alvarado; if to
any Initial Lender, at its Domestic Lending Office specified opposite its name
on Schedule I hereto; if to any other Lender, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it became a Lender;
and if to the Administrative Agent, at its address at BNP Paribas, 725 South
Figueroa Street, Suite 2090, Los Angeles, California 90017, Telecopier No. (213)
488-9602, Attn: Sean Conlon or, as to each party, at such other address as shall
be designated by such party in a written notice to the other parties. All such
notices and communications shall, when mailed, telegraphed, telecopied or
cabled, be effective when deposited in the mails, delivered to the telegraph
company, transmitted by telecopier or delivered to the cable company,
respectively, except that notices and communications to the Administrative Agent
pursuant to Article II, III, IV or VIII shall not be effective until received by
the Administrative Agent.

     Section 9.03 No Waiver; Remedies. No failure on the part of any Lender
                  -------------------
Party or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder, under any Note or under any other Loan Document shall operate
as a waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or

                                       96
<PAGE>

further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

     Section 9.04 Costs and Expenses. (a) The Borrower agrees to pay on demand
                  ------------------
(i) all costs and expenses of the Lead Arranger and the Administrative Agent in
connection with the negotiation, preparation, execution, delivery, syndication,
administration, modification and amendment of the Loan Documents, whether or not
the Loan Documents are executed or the Facility is closed, (including, without
limitation, (A) all due diligence, credit review, transportation, computer,
duplication, appraisal, audit, insurance, consultant, search, filing and
recording fees and expenses and (B) the reasonable fees and expenses of counsel
(whether employed by such Person or separately engaged) for the Lead Arranger
and the Administrative Agent with respect thereto) and (ii) all costs and
expenses of the Lead Arranger, the Administrative Agent, each Lender and each
L/C Bank in connection with the enforcement of the Loan Documents, whether in
any action, suit or litigation, any bankruptcy, insolvency or other similar
proceeding affecting creditors' rights generally or otherwise, including with
respect to advising such Person as to their rights and responsibilities, or the
perfection, protection or preservation of rights or interests, under the Loan
Documents, with respect to negotiations with any Loan Party or with other
creditors of any Loan Party arising out of any Default or any events or
circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights generally and any
proceeding ancillary thereto and in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" (including, without limitation, the reasonable fees and
expenses of counsel (whether employed by such Person or separately engaged) for
the Lead Arranger, the Administrative Agent and each Lender Party with respect
thereto).

               (b) The Borrower agrees to indemnify, defend and save and hold
harmless each Credit Agent, the Lead Arranger, each Lender, each L/C Bank and
each of their Affiliates and their officers, directors, employees, agents and
advisors (each, an "Indemnified Party") from and against, and shall pay on
                    -----------------
demand, any and all claims, liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
(including, without limitation, reasonable fees and expenses of counsel but
excluding Taxes, it being understood and agreed that the obligations of the
Borrower to indemnify the Lender Parties and the Administrative Agent for Taxes
are set forth in Section 2.10) that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection with
or by reason of, or in connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of, related to or in
connection with (i) this Agreement or any other Loan Document, the actual or
proposed use of the proceeds of any Advance or of any Letter of Credit issued
hereunder or any of the transactions contemplated hereby or by the other Loan
Documents, (ii) the actual or alleged presence of Hazardous Materials on any
property of any Loan Party or any Environmental Action relating in any way to
any Loan Party, (iii) any pollution or threat to human health or the environment
that is related in any way to any Loan Party or any of its Subsidiaries or any
other owner's or operator's management, use, control, ownership or operation of
the properties owned, leased,

                                       97
<PAGE>

operated or used by any Loan Party or any of its Subsidiaries, including all
on-site and off-site activities involving Hazardous Materials, (iv) any
Environmental Action against any Person whose liability for such Environmental
Action any Loan Party or any of its Subsidiaries has assumed or retained either
contractually or by operation of law, or (v) the breach of any environmental
representation or warranty set forth in Sections 5.01(h) and 5.01(l), in each
case whether or not such investigation, litigation or proceeding is brought by
any Loan Party, its directors, shareholders or creditors or an Indemnified Party
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. The Borrower also
agrees not to assert any claim against any Credit Agent, the Lead Arranger, any
Lender Party, any of their Affiliates, or any of their respective directors,
officers, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise
relating to any of the transactions contemplated herein or in any other Loan
Document or the actual or proposed use of the proceeds of the Advances.

               (c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the account of a
Lender Party other than on the last day of the Interest Period for such Advance,
as a result of a payment or Conversion pursuant to Section 2.05 or 2.06,
acceleration of the maturity of the Notes pursuant to Section 7.01 or for any
other reason, the Borrower shall, upon demand by such Lender Party (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender Party any amounts required to compensate such Lender
Party for any additional losses, costs or expenses that it may reasonably incur
as a result of such payment or Conversion or such failure to pay or prepay, as
the case may be, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender Party to fund or
maintain such Advance. In addition to the foregoing, if any losses, costs or
expenses are incurred by the Administrative Agent or any Lender with respect to
Eurodollar Rate Advances during the 180 day period following the Closing Date as
a result of or in connection with the syndication of the Facilities, the
Borrower shall, upon demand by the Administrative Agent or any Lender, pay to
the Administrative Agent or such Lender any amounts required to compensate the
Administrative Agent or such Lender for any such losses, costs or expenses.

               (d) If any Loan Party fails to pay when due any costs, expenses
or other amounts payable by it under any Loan Document, including, without
limitation, fees and expenses of counsel and indemnities, such amount may be
paid on behalf of such Loan Party by the Administrative Agent or any Lender
Party, in its sole discretion, and the Borrower shall reimburse the
Administrative Agent or such Lender Party on demand for any amounts so paid with
interest thereon at the Default Rate from the date of such payment until so
reimbursed.

                                       98
<PAGE>

     Section 9.05 Right of Set-off. Upon the occurrence and during the
                  ----------------
continuance of any Event of Default, the Administrative Agent, each Lender Party
and each of their respective Affiliates is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and
otherwise apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Administrative Agent, such Lender Party or such Affiliate to or for the
credit or the account of the Borrower against any and all of the Obligations of
the Borrower now or hereafter existing under this Agreement and the Note or
Notes held by such Lender Party, irrespective of whether the Administrative
Agent, such Lender Party or such Affiliate shall have made any demand under this
Agreement or such Note or Notes and although such Obligations may be unmatured;
provided, however, that (a) any such set-off and application shall be subject to
--------  -------
the provisions of Section 2.11 and (b) each Lender Party shall give the
Administrative Agent at least two (2) Business Days' prior written notice of its
intent to set off, and each Lender Party shall cooperate with the Administrative
Agent in taking any such reasonable actions as may be necessary to minimize any
adverse effect of Sections 580 and 726 of the California Code of Civil
Procedure. The Administrative Agent and each Lender Party agrees promptly to
notify the Borrower after any such set-off and application; provided that the
                                                            --------
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Administrative Agent, each Lender Party and their
respective Affiliates under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) that the
Administrative Agent, such Lender Party and their respective Affiliates may
have.

     Section 9.06 Binding Effect. This Agreement shall become effective when it
                  --------------
shall have been executed by the Borrower and the Administrative Agent and when
the Administrative Agent shall have been notified by each Initial Lender that
such Initial Lender has executed it and thereafter shall be binding upon and
inure to the benefit of the Borrower, the Administrative Agent and each Lender
Party and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lender Parties.

     Section 9.07 Assignments and Participations. (a) Each Lender Party may
                  ------------------------------
assign to one or more banks or other entities all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment or Commitments, and the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) each such assignment
                           --------  -------
shall be of a uniform, and not a varying, percentage of all rights and
obligations under and in respect of all of the Facilities, (ii) except in the
case of an assignment to a Person that, immediately prior to such assignment,
was a Lender Party or an assignment of all of a Lender Party's rights and
obligations under this Agreement, the amount of the Commitments and Advances of
the assigning Lender Party being assigned pursuant to each such assignment shall
(unless otherwise consented to by the Borrower and the Administrative Agent
(except that no consent of the Borrower shall be required if a Default has
occurred and is continuing)) be equal to $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, (iii) each such assignment shall be to an Eligible
Assignee, (iv) such Lender Party shall have

                                       99
<PAGE>

obtained the Administrative Agent's prior written consent to such assignment,
and (v) the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note or Notes subject to such
assignment and a processing and recordation fee of $3,500. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in such Assignment and Acceptance, (x) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender Party hereunder and (y) the Lender Party assignor
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender Party's rights and obligations under this Agreement, such
Lender Party shall cease to be a party hereto).

               (b) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with, this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender Party makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
other Loan Party or the performance or observance by any Loan Party of any of
its obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 5.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, such assigning Lender Party or
any other Lender Party and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Loan Documents as are delegated to the
Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such assignee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender or
L/C Bank, as the case may be.

               (c) The Administrative Agent shall maintain at its address
referred to in Section 9.02 a copy of each Assignment and Acceptance delivered
to and

                                      100
<PAGE>

accepted by it and a register for the recordation of the names and addresses of
the Lender Parties and the Commitment of, and principal amount of the Advances
owing to, each Lender Party from time to time (the "Register"). The entries in
                                                    --------
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Administrative Agent and the Lender Parties shall
treat each Person whose name is recorded in the Register as a Lender Party
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Lender Party at any reasonable time and
from time to time upon reasonable prior notice.

               (d) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender Party and an assignee, together with any Note or Notes
subject to such assignment, the Administrative Agent shall, if such Assignment
and Acceptance has been completed and is in substantially the form of Exhibit A
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register, (iii) give prompt notice thereof to the
Borrower, and (iv) deliver to the Borrower promptly a properly completed and
signed Internal Revenue Service Form W-8IMY reflecting such assignment. Within
five Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Administrative Agent in exchange for
the surrendered Note or Notes a new Note to the order of such Eligible Assignee
in an amount equal to the Commitment assumed by it pursuant to such Assignment
and Acceptance and, if the assigning Lender Party has retained a Commitment
hereunder, a new Note to the order of the assigning Lender Party in an amount
equal to the Commitment retained by it hereunder. Such new Note or Notes shall
be in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Note or Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of
Exhibit D-1 or D-2 hereto, as applicable.

               (e) Each Lender Party may sell participations in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments, the Advances owing to it and
the Note or Notes held by it); provided, however, that (i) such Lender Party's
obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the
other Lender Parties shall continue to deal solely and directly with such Lender
Party in connection with such Lender Party's rights and obligations under this
Agreement, (v) no participant under any such participation shall have any right
to approve any amendment or waiver of any provision of any Loan Document, or any
consent to any departure by any Loan Party therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation, postpone any date fixed for any payment of
the principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, or release
all or substantially all of the Collateral, and (vi) such Lender Party shall be
solely responsible for any and all Taxes on or with respect to

                                      101
<PAGE>

any participation or any amount payable by or for the account of such Lender
Party to or for the account of any participant of such Lender Party. The
Borrower agrees that any Person so purchasing a participation from a Lender
Party pursuant to this Section 9.07(e) shall be entitled to (i) exercise all its
rights of payment (including the right of set-off) with respect to such
participation to the fullest extent permitted by law and as fully as if such
Person were the direct creditor of the Borrower in the amount of such
participation, and (ii) the benefits of Sections 2.08 and 2.10.

               (f) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
                                       --------  -------
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.

               (g) Notwithstanding any other provision set forth in this
Agreement or any other Loan Document to the contrary, any Lender Party may
assign all or any portion of the Advances or Notes held by it to any Federal
Reserve Bank or the United States Treasury as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and any
Operating Circular issued by such Federal Reserve Bank, provided that any
                                                        --------
payment in respect of such assigned Notes or Advances made by the Borrower to or
for the account of the assigning and/or pledging Lender in accordance with the
terms of this Agreement shall satisfy the Borrower's obligations hereunder in
respect of such assigned Advances or Notes to the extent of such payment. No
such assignment shall release the assigning Lender Party from its obligations
hereunder.

     Section 9.08 Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
                  -------------
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES (I) AGREE THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR ANY FEDERAL COURT SITTING IN
LOS ANGELES, CALIFORNIA AND (II) CONSENT TO THE NON-EXCLUSIVE JURISDICTION OF
SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE PARTIES
BY MAIL AT THE ADDRESSES SPECIFIED IN SECTION 9.02. THE PARTIES HEREBY WAIVE ANY
OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR
ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

     Section 9.09 Execution in Counterparts. This Agreement may be executed in
                  -------------------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed counterpart of
this Agreement.

                                      102
<PAGE>

     Section 9.10 No Liability of the L/C Bank. The Borrower assumes all risks
                  ----------------------------
of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither any L/C Bank
nor any of its officers or directors shall be liable or responsible for: (a) the
use that may be made of any Letter of Credit or any acts or omissions of any
beneficiary or transferee in connection therewith; (b) the validity, sufficiency
or genuineness of documents, or of any endorsement thereon, even if such
documents should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (c) payment by such L/C Bank against presentation of
documents that do not comply with the terms of a Letter of Credit, including
failure of any documents to bear any reference or adequate reference to the
Letter of Credit; or (d) any other circumstances whatsoever in making or failing
to make payment under any Letter of Credit, except that the Borrower shall have
                                            ------
a claim against such L/C Bank, and such L/C Bank shall be liable to the
Borrower, to the extent of any direct, but not consequential, damages suffered
by the Borrower that the Borrower proves were caused by (i) such L/C Bank's
willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit comply with the terms of the Letter of
Credit or (ii) such L/C Bank's willful failure to make lawful payment under a
Letter of Credit after the presentation to it of a draft and certificates
strictly complying with the terms and conditions of the Letter of Credit. In
furtherance and not in limitation of the foregoing, such L/C Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.

     Section 9.11 Confidentiality. The Administrative Agent and each Lender
                  ---------------
Party agrees to keep confidential any Confidential Information furnished or made
available to it by the Borrower pursuant to this Agreement; provided that
                                                            --------
nothing herein shall prevent any Lender Party from disclosing such information
(i) to any other Lender Party or any Affiliate of any Lender Party or any
officer, director, employee, agent, or advisor of any Lender Party or Affiliate
of any Lender Party, (ii) to any other Person if incidental to the
administration of the credit facility provided herein, (iii) as required by any
law, rule, or regulation, (iv) upon the order of any court or administrative
agency, (v) upon the request or demand of any regulatory agency or authority,
(vi) that is or becomes available to the public or that is or becomes available
to any Lender Party other than as a result of a disclosure by any Lender Party
prohibited by this Agreement, (vii) in connection with any litigation to which
such Lender Party or any of its Affiliates may be a party, (viii) to the extent
necessary in connection with the exercise of any remedy under this Agreement or
any other Loan Document or (ix) to any Eligible Assignee or participant or
proposed Eligible Assignee or participant in accordance with Section 9.07(f).

     Section 9.12 Waiver of Jury Trial. EACH OF THE BORROWER, THE ADMINISTRATIVE
                  --------------------
AGENT, THE L/C BANK AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE
ADVANCES, ANY LETTER OF CREDIT OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY
LENDER PARTY IN

                                      103
<PAGE>

THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

     Section 9.13 Marshalling; Payments Set Aside. Neither the Administrative
                  -------------------------------
Agent nor any Lender Party shall be under any obligation to marshal any assets
in favor of the Borrower or any other party or against or in payment of any or
all of the Obligations under the Loan Documents. To the extent that the Borrower
makes a payment or payments to the Administrative Agent or the Lender Parties
(or to the Administrative Agent for the benefit of the Lender Parties), or the
Administrative Agent or any Lender Party enforces any security interests or
exercise its rights of setoff, and such payment or payments or the proceeds of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, any
other state or federal law, common law or any equitable cause, then, to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor or related thereto,
shall be revived and continued in full force and effect as if such payment or
payments had not been made or such enforcement or setoff had not occurred.

     Section 9.14 Agreement to Enter Into New Intercreditor Agreement. If at any
                  ---------------------------------------------------
time the Obligations under the Synthetic Lease are paid off and refinanced in
accordance with the terms of the Loan Documents, upon the Borrower's request,
the Administrative Agent shall enter into an intercreditor agreement with the
new agent or agents with respect to the Leased Collateral (as defined in the
Intercreditor Agreement attached as Exhibit Q-2 hereto), which intercreditor
agreement shall contain provisions substantially similar to the provisions of
the Intercreditor Agreement attached as Exhibit Q-2 hereto, including the
subordination provisions of Paragraph 2 thereof.

                                      104
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.

                                   SMART & FINAL INC.,
                                   as Borrower

                                   By:   /s/ Richard N. Phegley
                                        ----------------------------------------
                                        Name: Richard N. Phegley
                                        Title: Senior Vice President & Chief
                                        Financial Officer

                                   By:   /s/ Donald G. Alvarado
                                        ----------------------------------------
                                        Name: Donald G. Alvarado
                                        Title: Senior Vice President &
                                        Secretary

                                      105
<PAGE>

                                   BNP PARIBAS,
                                   as Administrative Agent, L/C Bank,
                                   Swingline Lender and a Lender

                                   By:  /s/ Sean T. Conlon
                                        ----------------------------------------
                                        Name: Sean T. Conlon
                                        Title: Managing Director

                                   By:  /s/ Mitchell M. Ozawa
                                        ----------------------------------------
                                        Name: Mitchell M. Ozawa
                                        Title: Director

                                      106
<PAGE>

                                   Initial Lenders:

                                   HARRIS TRUST & SAVINGS BANK

                                   By:  /s/ C. Scott Place
                                        ----------------------------------------
                                        Name: C. Scott Place
                                        Title: Vice President

                                      107
<PAGE>

                                   COOPERATIVE CENTRALE
                                   RAIFFEISEN-BOERENLEENBANK B.A.,
                                   "RABOBANK NEDERLAND", NEW YORK BRANCH

                                   By:  /s/ Hans F. Breukhoven
                                        ----------------------------------------
                                        Name: Hans F. Breukhoven
                                        Title: Vice President

                                   By:  /s/ Ian Reece
                                        ----------------------------------------
                                        Name: Ian Reece
                                        Title: Managing Director

                                      108
<PAGE>

                                   CREDIT INDUSTRIEL ET COMMERCIAL

                                   By:  /s/ Eric Dulot
                                        ----------------------------------------
                                        Name: Eric Dulot
                                        Title: Vice President

                                   By:  /s/ Albert M. Calo
                                        ----------------------------------------
                                        Name: Albert M. Calo
                                        Title: Vice President

                                      109
<PAGE>

                                   COBANK, ACB

                                   By:  /s/ S. Richard Dill
                                        ----------------------------------------
                                        Name: S. Richard Dill
                                        Title: Vice President

                                      110
<PAGE>

                                   UNION BANK OF CALIFORNIA, N.A.

                                   By:  /s/ Peter Thompson
                                        ----------------------------------------
                                        Name: Peter Thompson
                                        Title: Vice President

                                      111
<PAGE>

                                   U.S. BANK NATIONAL ASSOCIATION

                                   By:  /s/ Janet E. Jordan
                                        ----------------------------------------
                                        Name: Janet E. Jordan
                                        Title: Vice President

                                      112
<PAGE>

                                   NATEXIS BANQUE-BFCE

                                   By:  /s/ Pieter J. van Tulder
                                        ----------------------------------------
                                        Name: Pieter J. van Tulder
                                        Title: Vice President and Manager -
                                        Multinational Group

                                   By:  /s/ Christine Dirringer
                                        ----------------------------------------
                                        Name: Christine Dirringer
                                        Title: Vice President

                                      113
<PAGE>

                                   TRANSAMERICA BUSINESS CAPITAL CORPORATION

                                   By:  /s/ Stephen K. Goetschius
                                        ----------------------------------------
                                        Name: Stephen K. Goetschius
                                        Title: Senior Vice President

                                      114
<PAGE>

                                   CITY NATIONAL BANK

                                   By:  /s/ Catherine Abe
                                        ----------------------------------------
                                        Name: Catherine Abe
                                        Title: Vice President

                                      115
<PAGE>

                                   RZB FINANCE LLC

                                   By:  /s/ John A. Valiska
                                        ----------------------------------------
                                        Name: John A. Valiska
                                        Title: Vice President

                                   By:  /s/ Pearl Geffers
                                        ----------------------------------------
                                        Name: Pearl Geffers
                                        Title: First Vice President

                                      116
<PAGE>

                                   UNITED CALIFORNIA BANK

                                   By:  /s/ Chuck Weerasooriya, CFA
                                        ----------------------------------------
                                        Name: Chuck Weerasooriya, CFA
                                        Title: Vice President

                                      117
<PAGE>

                                   PREFERRED BANK

                                   By:  /s/ Walt Duchanin
                                        ----------------------------------------
                                        Name: Walt Duchanin
                                        Title: Executive Vice President &
                                        Chief Credit Officer

                                      118
<PAGE>

                                   BANK LEUMI USA

                                   By:  /s/ Jacques V. Delvoye
                                        ----------------------------------------
                                        Name: Jacques V. Delvoye
                                        Title: Vice President

                                      119

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