EXHIBIT 10.9 MASTER LEASE

 

<PAGE>

                                                                   EXHIBIT 10.9

 

                                  MASTER LEASE

 

      THIS MASTER LEASE (this "Lease") is made as of October 1, 2002 (the

"Effective Date"), by and between SCS FINANCE I, L.P., a Delaware limited

partnership ("Lessor"), and SOUTHWEST CONVENIENCE STORES, LP, a Texas limited

partnership ("Lessee").

 

                                  WITNESSETH:

 

      THAT, in consideration of the mutual covenants and agreements herein

contained, Lessor and Lessee hereby covenant and agree as follows:

 

      1. CERTAIN DEFINED TERMS. The following terms shall have the following

meanings for all purposes of this Lease:

 

      "ADA" means the Americans with Disabilities Act of 1990, as such act may

be amended from time to time.

 

      "Additional Rental" has the meaning set forth in Section 5.B.

 

      "Affiliate" means any Person which directly or indirectly controls, is

under common control with, or is controlled by any other Person. For purposes of

this definition, "controls", "under common control with" and "controlled by"

means the possession, directly or indirectly, of the power to direct or cause

the direction of the management and policies of such Person, whether through the

ownership of voting securities or otherwise.

 

      "Affiliated Borrower" means SCS Finance II, L.P., a Delaware limited

partnership.

 

      "Applicable Regulations" means all applicable statutes, regulations,

rules, ordinances, codes, licenses, permits, orders and approvals of each

Governmental Authority having jurisdiction over any of the Properties or the

Equipment, including, without limitation, all health, building, fire, safety and

other codes, ordinances and requirements, all applicable standards of the

National Board of Fire Underwriters and the ADA and all policies or rules of

common law, in each case, and any judicial or administrative interpretation

thereof, including any judicial order, consent, decree or judgment applicable to

any of the Lessee Parties, each as in effect on the date of determination.

 

      "Applicable Rent Reduction Percentage" means, with respect to any

Property, a fraction, the numerator of which shall be the original principal

balance of the Note relating to such Property and Fee Equipment located thereon,

and the denominator of which shall be the sum of all of the original principal

balances of the Notes relating to all of the Properties and Fee Equipment then

subject to this Lease, including such Property and Fee Equipment.

 

      "Base Annual Rental" means the amount of $2,309,941.08, which Base Annual

Rental may be subject to adjustment from time to time as set forth in Section

21.

 

      "Base Monthly Rental" means an amount equal to 1/12 of the Base Annual

Rental.

 

      "Business Day" means any day on which Lender is open for business other

than a Saturday, Sunday or a legal holiday, ending at 5:00 P.M. Phoenix, Arizona

time.

 

      "Change of Control" means a change in control of any of the Lessee Parties

occurring as a result of: (i) any merger or consolidation by any of the Lessee

Parties, as applicable, with or into any other entity other than another entity

controlled by Alon Israel Oil Company Ltd. or any successor in interest thereto;

or (ii) if any "Person" as defined in Section 3(a)(9) of the Securities and

Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section

13(d) and 14(d) thereof, including a "group" as defined in Section 13(d) of the

Exchange Act, who, subsequent to the Closing, becomes the "beneficial owner" (as

defined in Rule 13d-3 under the Exchange Act), of securities of any of the

Lessee Parties, as applicable, representing 50% or more of the combined voting

power of that Lessee Party's then outstanding securities (other than indirectly

as a result of the redemption by any of the Lessee

 

SCS Finance I, L.P.

 

<PAGE>

 

Parties, as applicable, of its securities) including, without limitation, a

change in control resulting from direct or indirect transfers of voting stock or

partnership, membership or other ownership interests, whether in one or a series

of transactions; provided, however, that if no Event of Default, or events or

circumstances which with the giving of notice or passage of time will result in

an Event of Default, then exists (except for an environmental default being

cured in accordance with Section 24.A.(vii)), then no Change in Control of any

of the Lessee Parties shall be deemed to have occurred if immediately following

the event that would otherwise cause that Change in Control: (i) Lessee has an

aggregate amount of partners' capital equal to or greater than the aggregate

amount of the partners' capital of Lessee, as determined in accordance with GAAP

immediately prior to that event and the Corporate Fixed Charged Coverage Ratio

of Lessee determined for the last twelve full months occurring prior to that

event is at least 1.5:1; or (ii) the rating agency then rating the debt of

Guarantor has confirmed that the credit rating of Guarantor is no lower than its

credit rating immediately prior to that event; and provided, further, no event

that would otherwise be deemed to be a Change in Control hereunder as a result

of any merger or consolidation of, or the transfer of the voting stock or other

voting ownership interests in, Alon Israel Oil Company Ltd. shall be deemed to

be a Change in Control under this Agreement or any other Loan Document. For

purposes of this definition, "control" means the possession, directly or

indirectly, of the power to direct or cause the direction of the management and

policies of any of the Lessee Parties, as applicable.

 

      "Code" means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et

seq., as amended.

 

      "Corporate Fixed Charge Coverage Ratio" means with respect to Guarantor or

Lessee, the "Corporate Fixed Charge Coverage Ratio" as defined in Section

24.A(xii) or Section 59, respectively.

 

      "Default Rate" means the lesser of the highest rate for which the

undersigned may legally contract or the rate of 14% per annum.

 

      "Distributor" means Alon USA, LP, or any other distributor of petroleum

products to the Properties, in accordance with a Permitted Concept.

 

      "Distributor Agreement" means the agreement or agreements with the

Distributor (including any successor Distributor) with respect to the supply of

petroleum products to the Properties, together with all amendments,

modifications, supplements, or replacements thereto.

 

      "Effective Date" has the meaning set forth in the Preamble.

 

      "Environmental Compliance Activities" means any action to comply with any

Environmental Laws or with any permits issued pursuant thereto, any inspection,

investigation, study, monitoring, assessment, audit, sampling and testing,

laboratory or other analysis or any evaluation relating to Hazardous Materials.

 

      "Environmental Condition" means any condition with respect to soil,

surface waters, groundwaters, land, stream sediments, surface or subsurface

strata, ambient air and any environmental medium comprising or surrounding any

of the Properties, which would reasonably be expected to or does result in any

damage, loss, cost, expense, claim, demand, order or liability to or against any

of the Lessee Parties, Lessor or Lender by any third party (including, without

limitation, any Governmental Authority), including, without limitation, any

condition resulting from the operation of business at any of the Properties

and/or the operation of the business of any other property owner or operator in

the vicinity of the Properties and/or any activity or operation formerly

conducted by any person or entity on or off any of the Properties.

 

      "Environmental Insurer" means American International Specialty Lines

Insurance Company, or such other environmental insurance company as Lessor may

select, and its successors and assigns.

 

      "Environmental Laws" means any applicable federal, state and local laws,

statutes, ordinances, rules, regulations, orders, injunctions and decrees of

Governmental Authorities and common law, relating to Hazardous Materials or USTs

and/or the protection of human health or the environment by reason of a Release

or a Threatened Release of Hazardous Materials or USTs or relating to liability

for or costs of Remediation, Environmental Compliance Activities or prevention

of Releases. "Environmental Laws" includes, but is not limited to, the

 

SCS Finance I, L.P.

 

                                       2

 

<PAGE>

 

following statutes, as amended, any successor thereto, and any regulations,

rulings, orders or decrees promulgated pursuant thereto, and any state or local

statutes, ordinances, rules, regulations, orders, injunctions and decrees of

Governmental Authorities: the Comprehensive Environmental Response, Compensation

and Liability Act, 42 U.S.C. Sections 9601 et seq.; the Emergency Planning and

Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; the Hazardous

Materials Transportation Act, 49 U.S.C. Section 5101 et seq.; the Resource

Conservation and Recovery Act (including but not limited to Subtitle I relating

to USTs), 42 U.S.C. Sections 6901 et seq.; the Clean Water Act, 33 U.S.C.

Sections 1251 et seq.; the Clean Air Act, 42 U.S.C. Sections 7401 et seq.; the

Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Safe Drinking

Water Act, 42 U.S.C. Sections 7401 et seq.; the Occupational Safety and Health

Act, 29 U.S.C. Section 651 et seq.; the Federal Insecticide, Fungicide and

Rodenticide Act, 7 U.S.C. Sections 136 et seq.; the Endangered Species Act, 16

U.S.C. Sections 1531 et seq. and the National Environmental Policy Act, 42

U.S.C. Section 4321 et seq. "Environmental Laws" also includes, but is not

limited to, any applicable federal, state and local laws, statutes, ordinances,

rules, regulations, orders, injunctions and decrees of Governmental Authorities

and common law: conditioning transfer of property upon a negative declaration or

other approval of a Governmental Authority of the environmental condition of the

property; requiring notification or disclosure of Releases or other

environmental condition of any of the Properties to any Governmental Authority

or other person or entity, whether or not in connection with transfer of title

to or interest in property; imposing conditions or requirements relating to

Hazardous Materials or USTs in connection with permits or other authorizations

required by Governmental Authorities; relating to the handling and disposal of

Hazardous Materials; relating to nuisance, trespass or other causes of action

related to Hazardous Materials; and relating to wrongful death, personal injury,

or property or other damage in connection with the physical condition or use of

any of the Properties by reason of the presence of Hazardous Materials or USTs

in, on, under or above any of the Properties.

 

      "Environmental Liens" has the meaning set forth in Section 6.L(9).

 

      "Environmental Policies" means the environmental insurance policies issued

by Environmental Insurer to Lender with respect to the Properties, which

Environmental Policies shall be in form and substance satisfactory to Lender in

its sole discretion.

 

      "Equipment" means the Fee Equipment and the Leasehold Equipment.

 

      "Equipment Loan Agreement" means the Equipment Loan and Security

Agreement, dated as of the Effective Date, in effect between Lessor and Lender,

as such agreement may be amended, modified or supplemented from time to time and

any replacements or substitutions thereof.

 

      "Equipment Loan Documents" means, collectively, the Equipment Loan

Agreement, the Equipment Notes, and all other documents, instruments and

agreements executed in connection therewith or contemplated thereby, all as

amended, modified or supplemented from time to time, and any and all

replacements or substitutions thereof.

 

      "Equipment Notes" means, collectively, the equipment promissory notes

dated as of the Effective Date executed by Lessor and payable to Lender and

secured by the Leasehold Equipment, as such notes may be amended, modified,

restated and/or substituted from time to time.

 

      "Equipment Premises" means collectively or individually, as the context

may require a parcel or all of the parcels of real property described by address

and unit number in Exhibit B attached hereto, and legally described on Exhibit

B-2 attached hereto, which are leased to Lessee pursuant to the Premises Leases

and all rights, privileges and appurtenances associated therewith, including all

buildings, fixtures and other improvements.

 

      "Equipment Premises Landlord" means the owner of the fee-simple interest

in one or more Equipment Premises, which party leases such Equipment Premises to

Lessee pursuant to a Premises Lease.

 

      "Event of Default" has the meaning set forth in Section 24.

 

      "Fee Equipment" means the furniture, machinery, equipment, trade fixtures,

appliances, gas pumps and canopies, and all other tangible personal property now

or hereafter located at the Properties owned by Lessor and leased to Lessee

pursuant to this Lease.

 

SCS Finance I, L.P.

 

                                       3

 

<PAGE>

 

      "GAAP" means generally accepted accounting principles consistently applied

and in effect in the United States of America from time to time.

 

      "Governmental Authority" means any governmental authority, agency,

department, commission, bureau, board, instrumentality, court or

quasi-governmental authority having jurisdiction or supervisory or regulatory

authority over any of the Properties, Equipment or any of the Lessee Parties.

 

      "Guaranty" means the unconditional guaranty of payment and performance

dated as of the date of this Agreement executed by Guarantor, for the benefit of

Lessor with respect to this Lease.

 

      "Guarantor" means Alon USA, Inc., a Delaware corporation, and its

successors.

 

      "Hazardous Materials" means (a) any toxic substance or hazardous waste,

substance, solid waste or related material, or any pollutant or contaminant; (b)

radon gas, asbestos in any form which is or could become friable, urea

formaldehyde foam insulation, transformers or other equipment containing

dielectric fluid having levels of polychlorinated biphenyls in excess of

applicable standards established by any Governmental Authority, or any petroleum

product or additive; (c) any substance, gas, material or chemical which is now

or hereafter defined as or included in the definition of "hazardous substances,"

"toxic substances," "hazardous materials," "hazardous wastes," "regulated

substances" or words of similar import under any Environmental Laws, including,

without limitation, "petroleum" and "petroleum-based substances" or any similar

terms described or defined in any Environmental Laws and any applicable federal,

state, county or local laws applicable to or regulating USTs; and (d) any other

chemical, material, gas or substance the exposure to or release of which is

prohibited, limited or regulated by any Governmental Authority that asserts or

may assert jurisdiction over any of the Properties or the operations or activity

at any of the Properties, or any chemical, material, gas or substance that does

or is reasonably likely to pose a hazard to the health and/or safety of the

occupants of any of the Properties or the owners and/or occupants of property

adjacent to or surrounding the any of Properties.

 

      "Indemnified Parties" means Lessor, Environmental Insurer, Lender, their

respective directors, officers, shareholders, trustees, beneficial owners,

partners and members, any directors, officers, shareholders, trustees,

beneficial owners, partners, members of any shareholders, beneficial owners,

partners or members of Lessor, Environmental Insurer or Lender, and all

employees, agents, servants, representatives, contractors, subcontractors,

affiliates, subsidiaries, participants, successors and assigns of any of the

foregoing, including, but not limited to, any successors by merger,

consolidation or acquisition of all or a substantial portion of the assets and

business of Lessor, Environmental Insurer or Lender, as applicable.

 

      "Lease Term" shall have the meaning described in Section 4.

 

      "Leasehold Equipment" means the furniture, machinery, equipment, trade

fixtures, appliances, gas pumps and canopies, and all other tangible personal

property now or hereafter located at the Equipment Premises owned by Lessor and

leased to Lessee pursuant to this Lease.

 

      "Lender" means GE Capital Franchise Finance Corporation, a Delaware

corporation, its successors and assigns, any successor lender in connection with

any loan secured by Lessor's interest in any of the Properties and/or Equipment,

and any servicer of any loan secured by Lessor's interest in any of the

Properties and/or the Equipment.

 

      "Lessee Parties" means, collectively, Lessee and any guarantors of this

Lease (including, in each case, any predecessors-in-interest).

 

      "Lessor Entities" means, collectively, Lessor (including any

predecessor-in-interest to Lessor) and any Affiliate of Lessor (including any

Affiliate of any predecessor-in-interest to Lessor).

 

      "Loan Agreement" means the Loan Agreement dated as of the Effective Date

in effect between Lessor and Lender, as such agreement may be amended, modified

or supplemented from time to time and any and all replacements or substitutions

thereof.

 

SCS Finance I, L.P.

 

                                       4

 

<PAGE>

 

      "Loan Documents" means, collectively, the Loan Agreement, the Notes, the

Mortgages and all other documents, instruments and agreements executed in

connection therewith or contemplated thereby, all as amended, modified and

supplemented and any and all replacements or substitutions thereof.

 

      "Loan Pool" means:

 

            (i) in the context of a Securitization, any pool or group of loans

      that are a part of such Securitization;

 

            (ii) in the context of a Transfer, all loans which are sold,

      transferred or assigned to the same transferee; and

 

            (iii) in the context of a Participation, all loans as to which

      participating interests are granted to the same participant.

 

      "Losses" means any and all claims, suits, liabilities (including, without

limitation, strict liabilities), actions, proceedings, obligations, debts,

damages, losses, costs, expenses, diminutions in value, fines, penalties,

charges, fees, expenses, judgments, awards, amounts paid in settlement and

damages of whatever kind or nature (including, without limitation, attorneys'

fees, court costs and other costs of defense).

 

      "Material Adverse Effect" means a material adverse effect on (i) any of

the Properties and/or Equipment, including, without limitation, the operation of

any of the Properties and/or Equipment as a Permitted Concept, or (ii) Lessee's

ability to perform its obligations under this Lease or any Premises Lease.

 

      "Memorandum" means the memorandum of master lease dated as of the

Effective Date between Lessor and Lessee with respect to the Properties. A

duplicate original Memorandum will be executed and recorded in the applicable

real property records for each Property. Each Memorandum will contain exhibits

with the addresses and store identification numbers for all of the Properties

and the legal description for the applicable Property.

 

      "Mortgage" or "Mortgages" means, as the context may require, the mortgage

or deed of trust dated as of the date of this Agreement executed by Lessor for

the benefit of Lender with respect to a Property or the mortgages, deeds of

trust or deeds to secure debt, assignments of rents and leases, security

agreements and fixture filings dated as of the Effective Date executed by Lessor

for the benefit of Lender with respect to all of the Properties, as the same may

be amended, modified, restated and/or supplemented from time to time and any and

all replacements or substitutions thereof. A Mortgage has been executed for each

Property.

 

      "Notes" means, collectively, the promissory notes dated as of the

Effective Date executed by Lessor and payable to Lender with respect to the

Properties, as such notes may be amended, modified, restated and/or substituted

from time to time.

 

      "Other Agreements" means, collectively, all agreements and instruments now

or hereafter entered into between, among or by (1) any of the Lessee Parties

and/or any Affiliate of any of the Lessee Parties (including any Affiliate of

any predecessor-in-interest to any of the Lessee Parties), and, or for the

benefit of, (2) any of the Lessor Entities; provided, however, the term Other

Agreements shall not include this Lease or any Related Lease.

 

      "Participation" means one or more grants by Lender or any Affiliate of

Lender to a third party of a participating interest in notes evidencing

obligations to repay secured or unsecured loans owned by Lender or any Affiliate

of Lender or any or all servicing rights with respect thereto.

 

      "Permitted Amounts" means, with respect to any given level of Hazardous

Materials, that level or quantity of Hazardous Materials in any form or

combination of forms the presence, use, storage, release or handling of which

does not constitute a violation of any Environmental Laws and is customarily

employed in the ordinary course of, or associated with, similar businesses

located in the states in which the Properties are located.

 

SCS Finance I, L.P.

 

                                       5

 

<PAGE>

 

      "Permitted Concept" means the operation of each Property or Equipment

Premises as a recognized, regionally or nationally branded convenience store or

convenience store brand used by Lessee for substantially all of its stores, with

facilities for the sale of gasoline, which sells gasoline under the brand name

"Fina" (or any variant thereof or successor brand thereto) or under any other

national or brand name for gasoline having a similar or greater name recognition

in the market area in which the Property or Equipment Premises are located or

any other brand to which Lessor consents, in Lessor's reasonable discretion.

 

      "Permitted Liens" means (i) those recorded easements, restrictions, liens

and encumbrances set forth as exceptions in the title insurance policies issued

by Title Company to Lender with respect to the Properties, (ii) liens or

encumbrances created by, through or under the Lender or any Person claiming by

or through Lender, (iii) liens or encumbrances for taxes, assessments or other

governmental charges either not yet due or being contested by Lessee in

accordance with this Lease or the Loan Documents, (iv) inchoate materialman's,

mechanic's, workmen's, repairmen's or other like liens arising in the ordinary

course of business and for amounts the payment of which either is not yet due or

is being contested by Lessee as may be permitted by this Lease, provided the

nonpayment of such amount does not involve any material danger of sale, for

forfeiture or loss of any part of the Properties or Equipment, title thereto or

any interest therein.

 

      "Person" means any individual, corporation, partnership, limited liability

company, trust, unincorporated organization, Governmental Authority or any other

form of entity.

 

      "Personal Property" means all machinery, appliances, furniture, equipment,

trade fixtures, gas pumps and canopies and other tangible personal property (but

excluding inventory, general intangibles, payment intangibles, cash, instruments

(including promissory notes), documents, accounts, chattel paper (whether

tangible or electronic), deposit accounts, letter of credit rights, securities

and all other investment property, any other contract rights or rights to the

payment of money, and all other intangible property), owned by Lessee now or

hereafter located on or at any of the Properties or used solely in connection

with any of the Properties.

 

      "Premises Lease" or "Premises Leases" means, as the context may require,

one or all of the leases for an Equipment Premises, each between Lessee, as

lessee, and an Equipment Premises Landlord, as lessor, as the same may be

amended or supplemented from time to time.

 

      "Properties" means, collectively, the parcels of real estate owned by

Lessor, which are described by address, Lessor Number and Unit Number in Exhibit

A attached hereto and legally described in Exhibit A-1 attached hereto, all

rights, privileges and appurtenances associated therewith, and all buildings,

fixtures and other improvements now or hereafter located on such real estate

(whether or not affixed to such real estate).

 

      "Property" means any one of the Properties.

 

      "Questionnaires" means the environmental questionnaires completed on

behalf of Lessor with respect to the Properties and submitted to Environmental

Insurer in connection with the issuance of the Environmental Policies.

 

      "Related Lease" means the master lease, dated as of the date of this

Lease, between Lessee, as lessee, and the Affiliated Borrower, as lessor, as

amended or supplemented from time to time.

 

      "Release" means any presence, release, deposit, discharge, emission,

leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,

escaping, dumping, disposing or other movement of Hazardous Materials in

violation of Environmental Laws or which may result in a Material Adverse

Effect.

 

      "Remediation" means any response, remedial, removal, or corrective action,

any activity to clean up, detoxify, decontaminate, contain or otherwise

remediate any Hazardous Materials or USTs required by any Environmental Law or

any Governmental Authority, any actions to cure or mitigate any Release, any

action to comply with any Environmental Laws or with any permits issued pursuant

thereto, and any inspection, investigation, study, monitoring, assessment,

audit, sampling and testing, laboratory or other analysis, or any evaluation

relating to any Release of Hazardous Materials or Release from any USTs.

 

SCS Finance I, L.P.

 

                                       6

 

<PAGE>

 

      "Securitization" means one or more sales, dispositions, transfers or

assignments by Lender or any Affiliate of Lender to a special purpose

corporation, trust or other entity identified by Lender or any Affiliate of

Lender of notes evidencing obligations to repay secured or unsecured loans owned

by Lender or any Affiliate of Lender (and, to the extent applicable, the

subsequent sale, transfer or assignment of such notes to another special purpose

corporation, trust or other entity identified by Lender or any Affiliate of

Lender), and the issuance of bonds, certificates, notes or other instruments

evidencing interests in pools of such loans, whether in connection with a

permanent asset securitization or a sale of loans in anticipation of a permanent

asset securitization. Each Securitization shall be undertaken in accordance with

all requirements which may be imposed by the investors or the rating agencies

involved in each such sale, disposition, transfer or assignment or which may be

imposed by applicable securities, tax or other laws or regulations.

 

      "Terrorism Laws" means Executive Order 13224 issued by the President of

the United States of America, the Terrorism Sanctions Regulations (Title 31 Part

595 of the U.S. Code of Federal Regulations), the Terrorism List Governments

Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal

Regulations), and the Foreign Terrorist Organizations Sanctions Regulations

(Title 31 Part 597 of the U.S. Code of Federal Regulations), and all other

present and future federal, state and local laws, ordinances, regulations,

policies and any other requirements of any Governmental Authority (including,

without limitation, the United States Department of the Treasury Office of

Foreign Assets Control) addressing, relating to, or attempting to eliminate,

terrorist acts and acts of war, each as hereafter supplemented, amended or

modified from time to time, and the present and future rules, regulations and

guidance documents promulgated under any of the foregoing, or under similar

laws, ordinances, regulations, policies or requirements of other states or

localities.

 

      "Threatened Release" means a substantial likelihood of a Release which

requires action to prevent or mitigate damage to the soil, surface waters,

groundwaters, land, stream sediments, surface or subsurface strata, ambient air

or any other environmental medium comprising or surrounding any of the

Properties which may result from such Release.

 

      "Title Company" means Lawyers Title Insurance Corporation.

 

      "Transfer" means one or more sales, transfers or assignments by Lender or

any Affiliate of Lender to a third party of notes evidencing obligations to

repay secured or unsecured loans owned by Lender or any Affiliate of Lender or

any or all servicing rights with respect thereto.

 

      "UCC" shall have the meaning described in Section 31.

 

      "USTs" means any one or combination of below or above ground tanks and

associated piping systems used in connection with the storage, dispensing and

general use of petroleum and petroleum-based substances.

 

      2. DEMISE OF PROPERTIES. In consideration of the rentals and other sums to

be paid by Lessee and of the other terms, covenants and conditions on Lessee's

part to be kept and performed, Lessor hereby leases to Lessee, and Lessee hereby

takes and hires, all of the Properties and Equipment. The Properties and

Equipment are leased to Lessee "AS IS" and "WHERE IS" without representation or

warranty by Lessor and subject to the rights of parties in possession, to the

existing state of title, any state of facts which an accurate survey or physical

inspection might reveal, and all Applicable Regulations now or hereafter in

effect. Lessee has examined each of the Properties and the Equipment and title

to each of the Properties and the Equipment and has found all of the same

satisfactory for all of Lessee's purposes.

 

      3. MASTER LEASE CHARACTERIZATION. A. Lessor and Lessee intend that:

 

            (i) this Lease constitutes a single master lease of all, but not

      less than all, of the Properties and Equipment and that Lessor and Lessee

      have executed and delivered this Lease with the understanding that this

      Lease constitutes a unitary, unseverable instrument pertaining to all, but

      not less than all, of the Properties, and that neither this Lease nor the

      duties, obligations or rights of Lessee may be allocated or otherwise

      divided among the Properties and Equipment by Lessee;

 

SCS Finance I, L.P.

 

                                       7

 

<PAGE>

 

            (ii) this Lease is a "true lease" and not a financing lease,

      mortgage, equitable mortgage, deed of trust, trust agreement, security

      agreement or other financing or trust arrangement, and the economic

      realities of this Lease are those of a true lease; and

 

            (iii) the business relationship created by this Lease and any

      related documents is solely that of a long-term commercial lease between

      landlord and tenant and has been entered into by both parties in reliance

      upon the economic and legal bargains contained herein.

 

      B. Lessor and Lessee acknowledge and agree that the Lease Term, including

any term extensions provided for in this Lease, is less than the remaining

economic life of each of the Properties and of the Equipment.

 

      C. Lessee waives any claim or defense based upon the characterization of

this Lease as anything other than a true lease and irrevocably waives any claim

or defense which asserts that this Lease is anything other than a true lease.

Lessee covenants and agrees that it will not assert that this Lease is anything

but a true lease. Lessee stipulates and agrees not to challenge the validity,

enforceability or characterization of the lease of the Properties and Equipment

as a true lease and further stipulates and agrees that nothing contained in this

Lease creates or is intended to create a joint venture, partnership (either de

jure or de facto), equitable mortgage, trust, financing device or arrangement,

security interest or the like. Lessee shall support the intent of the parties

that the lease of the Properties and Equipment pursuant to this Lease is a true

lease and does not create a joint venture, partnership (either de jure or de

facto), equitable mortgage, trust, financing device or arrangement, security

interest or the like, if, and to the extent that, any challenge occurs.

 

      D. Lessee waives any claim or defense based upon the characterization of

this Lease as anything other than a master lease of all of the Properties and

Equipment and irrevocably waives any claim or defense which asserts that this

Lease is anything other than a master lease. Lessee covenants and agrees that it

will not assert that this Lease is anything but a unitary, unseverable

instrument pertaining to the lease of all, but not less than all, of the

Properties and Equipment. Lessee stipulates and agrees not to challenge the

validity, enforceability or characterization of the lease of the Properties and

Equipment as a unitary, unseverable instrument pertaining to the lease of all,

but not less than all, of the Properties and Equipment. Lessee shall support the

intent of the parties that this Lease is a unitary, unseverable instrument

pertaining to the lease of all, but not less than all, of the Properties and

Equipment, if, and to the extent that, any challenge occurs.

 

      E. Lessee represents and warrants to Lessor that (i) the Base Annual

Rental is the fair market value for the use of the Properties and Equipment and

was agreed to by Lessor and Lessee on that basis, and (ii) the execution,

delivery and performance by Lessee of this Lease does not constitute a transfer

of all or any part of the Properties and Equipment.

 

      F. The expressions of intent, the waivers, the representations and

warranties, the covenants, the agreements and the stipulations set forth in this

Section are a material inducement to Lessor entering into this Lease.

 

      4. LEASE TERM. The Lease Term for all of the Properties and Equipment

shall commence as of the Effective Date and shall expire on March 31, 2023,

unless terminated sooner as provided in this Lease. The time period during which

this Lease shall actually be in effect is referred to herein as the "Lease

Term."

 

      5. RENTAL AND OTHER PAYMENTS. A. If the Effective Date is a date other

than the first day of the month, Lessee shall pay Lessor on the Effective Date

the Base Monthly Rental prorated on the basis of the ratio that the number of

days from the Effective Date through the last day in the month containing the

Effective Date bears to the number of days in such month. Thereafter, on or

before the first day of each succeeding calendar month, Lessee shall pay Lessor

in advance the Base Monthly Rental. The payments of the Base Monthly Rental

shall be made to such account or accounts as Lessor shall designate to Lessee

from time to time.

 

      B. All sums of money required to be paid by Lessee under this Lease which

are not specifically referred to as rent ("Additional Rental") shall be

considered rent although not specifically designated as such. Lessor shall have

the same remedies for nonpayment of Additional Rental as those provided herein

for the nonpayment of Base Annual Rental.

 

SCS Finance I, L.P.

 

                                       8

 

<PAGE>

 

      6. REPRESENTATIONS AND WARRANTIES OF LESSEE. The representations and

warranties of Lessee contained in this Section are being made to induce Lessor

to enter into this Lease and Lessor has relied, and will continue to rely, upon

such representations and warranties. Lessee represents and warrants to Lessor as

of the Effective Date as follows:

 

      A. Organization, Authority and Status. (i) Each of the Lessee Parties

(other than individuals), as applicable, is duly organized or formed, validly

existing and in good standing under the laws of its state of incorporation or

formation. Lessee is qualified as a foreign corporation, partnership or limited

liability company, as applicable, to do business in each state where the

Properties are located, and each of the Lessee Parties is qualified as a foreign

corporation, partnership or limited liability company, as applicable, to do

business in any other jurisdiction where the failure to be qualified would

reasonably be expected to result in a Material Adverse Effect. All necessary

action has been taken to authorize the execution, delivery and performance by

Lessee of this Lease and of the other documents, instruments and agreements

provided for herein. Lessee is not a "foreign corporation", "foreign

partnership", "foreign trust", "foreign limited liability company" or "foreign

estate", as those terms are defined in the Internal Revenue Code and the

regulations promulgated thereunder. Lessee's U.S. Federal Tax Identification

number, Organization Identification number and principal place of business are

correctly set forth on the signature page of this Lease. The person(s) who have

executed this Lease on behalf of Lessee are duly authorized to do so. None of

the Lessee Parties, and no individual or entity owing directly or indirectly any

interest in any of the Lessee Parties, is an individual or entity whose property

or interests are subject to being "blocked" under any of the Terrorism Laws or

who is otherwise in violation of any of the Terrorism Laws.

 

      B. Enforceability. Upon execution by Lessee, this Lease shall constitute

the legal, valid and binding obligation of Lessee, enforceable against Lessee in

accordance with its terms, except as such enforceability may be limited by

applicable bankruptcy, insolvency, liquidation, fraudulent conveyance,

fraudulent transfer, reorganization and other laws affecting the rights of

creditors generally and general principles of equity.

 

      C. Litigation. Except as set forth in Schedule I hereof, there are no

suits, actions, proceedings or investigations pending, or, to its actual

knowledge, threatened against or involving the Lessee Parties or any of the

Properties or Equipment before any arbitrator or Governmental Authority, except

for such suits, actions, proceedings or investigations which, individually or in

the aggregate, have not had, and would not reasonably be expected to result in,

a Material Adverse Effect.

 

      D. Absence of Breaches or Defaults. The Lessee Parties are not, and the

authorization, execution, delivery and performance of this Lease and the

documents, instruments and agreements provided for herein will not result in,

any breach or default under any Premises Lease or any other document, instrument

or agreement to which any of the Lessee Parties is a party or by which any of

the Lessee Parties, any of the Properties or any of the property of any of the

Lessee Parties is subject or bound, except for such breaches or defaults which,

individually or in the aggregate, have not had, and could not reasonably be

expected to result in, a Material Adverse Effect. The authorization, execution,

delivery and performance of this Lease and the documents, instruments and

agreements provided for herein will not violate any applicable law, statute,

regulation, rule, ordinance, code or order. None of the Properties are subject

to any right of first refusal, right of first offer or option to purchase or

lease granted to a third party. Lessee has not assigned, transferred, mortgaged,

hypothecated or otherwise encumbered this Lease or any rights hereunder or

interest herein.

 

      E. Liabilities of Lessor. Lessee is not liable for any indebtedness for

money borrowed by Lessor and has not guaranteed any of the debts or obligations

of Lessor.

 

      F. Licenses and Permits; Access. All required licenses and permits, both

governmental and private, to use and operate each of the Properties and the

Equipment Premises as a Permitted Concept are in full force and effect, except

for such licenses and permits the failure of which to obtain has not had, and

could not reasonably be expected to result in, a Material Adverse Effect.

Adequate rights of access to public roads and ways are available to each of the

Properties for unrestricted ingress and egress and otherwise to permit

utilization of each of the Properties for their intended purposes, and all such

public roads and ways have been completed and dedicated to public use.

 

SCS Finance I, L.P.

 

                                       9

 

<PAGE>

 

      G. Condition of Properties. Each of the Properties and Equipment, is in

good condition and repair and well maintained, ordinary wear and tear excepted.

The Properties are fully equipped and operational, free from known structural

defects, safe and properly lighted.

 

      H. Utilities. Adequate public utilities are available at each of the

Properties to permit utilization of each of the Properties as a Permitted

Concept and all utility connection fees and use charges will have been paid in

full, prior to delinquency.

 

      I. Area Development; Wetlands. No condemnation or eminent domain

proceedings affecting any of the Properties have been commenced or, to Lessee's

actual knowledge, are contemplated. None of the Properties and, to Lessee's

actual knowledge, none of the real property bordering any of the Properties are

designated by any Governmental Authority as a wetlands.

 

      J. Financial Information. Lessee has delivered to Lessor and Lender

certain financial statements and other information concerning the Lessee Parties

in connection with this Lease (collectively, the "Financial Information"). The

Financial Information is true, correct and complete in all material respects;

there have been no amendments to the Financial Information since the date such

Financial Information was prepared or delivered to Lessor. Lessee understands

that Lessor is relying upon the Financial Information and Lessee represents that

such reliance is reasonable. All financial statements included in the Financial

Information were prepared in accordance with GAAP and fairly present as of the

date of such financial statements the financial condition of each individual or

entity to which they pertain. No change has occurred with respect to the

financial condition of any of the Lessee Parties and/or the Properties as

reflected in the Financial Information which has not been disclosed in writing

to Lessor that has had, or could reasonably be expected to result in, a Material

Adverse Effect.

 

      K. Zoning; Compliance With Laws. Each of the Properties is in compliance

with all applicable zoning requirements, and the use of each of the Properties

as a Permitted Concept does not constitute a nonconforming use under applicable

zoning requirements, except where such noncompliance would not have a Material

Adverse Effect. The Lessee Parties, the Properties, the Equipment Premises and

Equipment are in compliance with all Applicable Regulations except for such

noncompliance which has not had, and would not reasonably be expected to result

in, a Material Adverse Effect.

 

      L. Environmental. Except as disclosed in the Questionnaires as amended and

supplemented through the date of Closing:

 

      (1) None of the Properties nor any of the Lessee Parties are in violation

of, or subject to, any pending or, to Lessee's actual knowledge, threatened

investigation or inquiry by any Governmental Authority or to any remedial

obligations under any Environmental Laws which violation, investigation or

inquiry would have a Material Adverse Effect, and this representation and

warranty would continue to be true and correct following disclosure to the

applicable Governmental Authorities of all relevant facts, conditions and

circumstances, if any, pertaining to any of the Properties;

 

      (2) All permits, licenses or similar authorizations required to construct,

occupy, operate or use any buildings, improvements, fixtures and Equipment

forming a part of or located at any of the Properties by reason of any

Environmental Laws have been obtained, or are pending, and Borrower has no

reason to believe that such permits, licenses or similar authorizations that are

pending will not be issued in due course, except where such failure to obtain

any permit, license or authorization would not have a Material Adverse Effect;

 

      (3) Since the initial acquisition by and during the ownership and/or

occupancy of the Properties by Lessee, and to Lessee's knowledge prior to such

acquisition and ownership, no Hazardous Materials have been used, handled,

manufactured, generated, produced, stored, treated, processed, transferred,

disposed of or otherwise Released in, on, under, from or about any of the

Properties, except in Permitted Amounts;

 

      (4) None of the Properties contain Hazardous Materials, except in

Permitted Amounts, and all USTs located on or about the Properties or which

constitute any portion of the Equipment, if any, are in full compliance with all

Environmental Laws, except where such noncompliance would not have a Material

Adverse Effect;

 

SCS Finance I, L.P.

 

                                       10

 

<PAGE>

 

      (5) To Borrower's knowledge, there is no threat of any Release migrating

to any of the Properties in excess of Permitted Amounts;

 

      (6) Since the initial acquisition by and during the ownership and/or

occupancy of the Properties by Lessor, Lessee, and to Lessee's knowledge prior

to such acquisition and ownership there is no past or present non-compliance

with Environmental Laws, or with permits issued pursuant thereto, in connection

with any of the Properties, except where such noncompliance would not have a

Material Adverse Effect;

 

      (7) None of the Lessee Parties has received any written notice or other

communication from any person or entity (including but not limited to a

Governmental Authority) relating to any Release of Hazardous Materials in excess

of Permitted Amounts, or USTs or Remediation thereof, possible liability of any

person or entity pursuant to any Environmental Law, other Environmental

Conditions in connection with any of the Properties or Equipment, or any actual

or potential administrative or judicial proceedings in connection with any of

the foregoing;

 

      (8) All information known to any of the Lessee Parties or contained in the

files of any of the Lessee Parties relating to any existing Environmental

Condition or Releases of Hazardous Materials in, on, under or from any of the

Properties, other than in Permitted Amounts, has been provided to Lessor,

including, without limitation, information relating to all prior Remediation;

 

      (9) All of the Properties are free and clear of all liens and other

encumbrances imposed pursuant to any Environmental Law (the "Environmental

Liens"); and none of the Lessee Parties has allowed any tenant or other user of

any of the Properties or Equipment to do any act on the Properties or Equipment

Premises that materially increased the dangers to human health or the

environment, posed an unreasonable risk of harm to any person or entity (whether

that person or entity on or off any of the Properties), impaired the value of

any of the Properties or Equipment in any material respect, is contrary to any

requirement of any insurer, constituted a public or private nuisance, or

violated any covenant, condition, agreement or easement applicable to any of the

Properties, except where such violation did not have a Material Adverse Effect

on the Premises; and

 

      (10) The information and disclosures in the Questionnaires, as amended or

supplemented through the date of Closing, are true, correct and complete in all

material respects, and the person or persons executing the Questionnaires and

any amendments or supplements thereto were duly authorized to do so; and

 

      (11) Each of the Lessee Parties is in compliance with the requirements of

40 C.F.R. Section 280 Subpart H - Financial Responsibility (or equivalent state

law or regulation) with respect to all petroleum underground storage tanks or

storage tank systems (as those terms are defined under 40 C.F.R. Section 280.12

or equivalent state law or regulation) owned or operated by any of the Lessee

Parties or located on any of the Properties, except where such noncompliance

would not have a Material Adverse Effect.

 

      M. No Mechanics' Liens. There are no delinquent accounts payable or

mechanics' liens in favor of any materialman, laborer, or any other person or

entity in connection with labor or materials furnished to or performed on any

portion of the Properties; and no work has been performed or is in progress nor

have materials been supplied to the Properties or agreements entered into for

work to be performed or materials to be supplied to the Properties prior to the

Effective Date, which will be delinquent on the Effective Date.

 

      N. Title to Personal Property. Lessee is the owner of all Personal

Property, free and clear of all liens, encumbrances, charges and security

interests of any nature whatsoever, except the liens created by the Lease, and

no Affiliate of Lessee owns any of the Personal Property. Upon the execution and

delivery of this Lease, Lessor shall have a first priority lien upon and

security interest in all Personal Property, which lien and security interest

shall secure the payment by Lessee of the Rents that become due and payable to

Lessor pursuant to this Lease and the performance by Lessee of its other

agreements, covenants and obligations arising under this Lease.

 

      O. Distributor Provisions. Lessee has delivered to Lessor a true, correct

and complete copy of the Distributor Agreement. The Distributor Agreement is the

only agreement in effect with Distributor with respect to the Properties. The

Distributor Agreement is in full force and effect and constitutes the legal,

valid and binding obligations of the parties to the Distributor Agreement,

enforceable in accordance with its terms, except as such

 

SCS Finance I, L.P.

 

                                        11

 

<PAGE>

 

enforceability may be limited by applicable bankruptcy, insolvency, liquidation,

reorganization and other laws affecting the rights of creditors generally and

general principles of equity. None of the Lessee Parties has assigned,

transferred, mortgaged, hypothecated or otherwise encumbered the Distributor

Agreement or any rights thereunder or any interest therein, and none of the

Lessee Parties has received any notice that the Distributor has made any

assignment, pledge or hypothecation of all or any part of its rights or interest

in the Distributor Agreement. No notice of default from Distributor has been

received under the Distributor Agreement which has not been cured and no notice

of default to Distributor has been given under the Distributor Agreement which

has not been cured. No event has occurred and no condition exists which, with

the giving of notice or the lapse of time or both, would constitute a default

under the Distributor Agreement. At the request of Lessor, Lessee shall deliver

to Lessor a certificate from Distributor in a form and substance acceptable to

Lessor, which provided that the Distributor Agreement is valid, binding and in

full force and effect and no events have occurred which could constitute a

default thereunder.

 

      P. Premises Leases. The Premises Leases are in full force and effect and

represent the legal, valid and binding obligations of the parties thereto, in

accordance with the respective terms of each Premises Lease. No default exists

under any of the Premises Leases. Lessee's use of the Equipment Premises and

Leasehold Equipment thereon is in compliance with the Premises Leases.

 

      Q. Guaranty. Lessee has delivered to Lessor the executed Guaranty. The

Guaranty is in full force and effect and constitutes the legal, valid and

binding obligation of Guarantor with respect to this Lease, except as such may

be limited by applicable bankruptcy, insolvency, liquidation, fraudulent

conveyance, fraudulent transfer, reorganization and other laws affecting the

right of creditors generally or general principles of equity.

 

      7. NONCONSOLIDATION; TRANSFER, PARTICIPATION AND SECURITIZATION; PREMISES

LEASES; COMPLIANCE CERTIFICATES. Lessee covenants to Lessor for so long as this

Lease is in effect as follows:

 

      A. Nonconsolidation Covenants. (i) The annual financial statements of

Lessee, including consolidated financial statements, if any, shall contain notes

stating that (a) all of Lessor's assets are owned by Lessor and (b) Lessor is a

separate entity with its own separate creditors which will be entitled to be

satisfied out of Lessor's assets.

 

      (ii) Lessee will not assume liability for any indebtedness for money

borrowed by Lessor and does not, and will not, guarantee any of the debts or

obligations of Lessor. Lessee will not hold itself out as being liable for any

obligations or indebtedness of Lessor.

 

      (iii) Lessee shall not and shall use its best efforts to cause its

Affiliates not to hold Lessor out to the public or to any individual creditors

as being a unified entity with assets and liabilities in common with Lessee

except that Lessor may be included in Lessee's or its Affiliates' reports under

the Securities Exchange Act of 1934, as amended, and its and their consolidated

financial statements, as appropriate, provided such statements adequately

disclose the separate legal existence of Lessor, the separate ownership by

Lessor of the Properties and Equipment and the separate liabilities of Lessor.

 

      (iv) Lessee shall conduct its business so as not to mislead others as to

the separate identity of Lessor, and particularly will avoid the appearance of

conducting business on behalf of Lessor. Without limiting the generality of the

foregoing, no oral and written communications of Lessee, including, without

limitation, letters, invoices, purchase orders, contracts, statements and loan

applications, will be made in the name of Lessor which to the extent that to do

otherwise would materially bear upon the maintenance of Lessor's separate

identity.

 

      (v) Lessee will not act in Lessor's name.

 

      (vi) Where necessary and appropriate, Lessee shall disclose the

independent business status of Lessor to creditors of Lessee, if any.

 

      (vii) The resolutions, agreements and other instruments of Lessee, if any,

underlying the transactions described in this Lease will be maintained by

Lessee.

 

SCS Finance I, L.P.

 

                                       12

 

<PAGE>

 

      (viii) All transactions between Lessee and Lessor will be no less fair to

each party than they could obtain on an arm's-length basis.

 

      (ix) The books, records and accounts of Lessee shall at all times be

maintained in a manner permitting the assets and liabilities of Lessor to be

easily separated and readily ascertained from those of Lessee.

 

      (x) Lessee will not direct, or otherwise control, the ongoing business

decisions of Lessor.

 

      (xi) Lessee will not file or cause to be filed a voluntary or involuntary

petition in bankruptcy on behalf of or against Lessor, nor seek substantive

consolidation of the assets and liabilities of Lessor and Lessee in any

bankruptcy or insolvency proceeding during the Lease Term and for a period of 91

days after the Lease Term.

 

      B. Transfer, Participation and/or Securitization Covenants. (i) Lessee

agrees to cooperate in good faith with Lessor and Lender in connection with any

Transfer, Participation and/or Securitization of any of the Notes, Equipment

Notes, Mortgages, Equipment Loan Documents and/or any of the Loan Documents, or

any or all servicing rights with respect thereto, including, without limitation,

(X) providing such documents, financial and other data, and other information

and materials (the "Disclosures") which would typically be required with respect

to the Lessee Parties by a purchaser, transferee, assignee, servicer,

participant, investor or rating agency involved with respect to such Transfer,

Participation and/or Securitization, as applicable; provided, however, the

Lessee Parties shall not be required to make Disclosures of any confidential

information or any information which has not previously been made public unless

required by applicable federal or state securities laws; and (Y) amending the

terms of this Lease to the extent necessary so as to satisfy the requirements of

purchasers, transferees, assignees, servicers, participants, investors or

selected rating agencies involved in any such Transfer, Participation or

Securitization, so long as such amendments would not have a material adverse

effect upon either of the Lessee Parties or the transactions contemplated by

this Lease and no amendment would result in any additional obligation of Lessee

or increase in the amount of any payment that Lessee is required to make

pursuant to this Lease. Lessor shall be responsible for causing Lender to

prepare at Lender's expense any documents evidencing the amendments referred to

in the preceding subitem (Y).

 

      (ii) Lessee consents to Lessor and Lender providing the Disclosures, as

well as any other information which Lessor and Lender may now have or hereafter

acquire with respect to the Properties or Equipment or the financial condition

of the Lessee Parties to each purchaser, transferee, assignee, servicer,

participant, investor or rating agency involved with respect to such Transfer,

Participation and/or Securitization, as applicable. Lessee shall pay its own

attorney fees and other out-of-pocket expenses incurred in connection with the

performance of its obligations under this Section 7.B but shall not be required

to incur in any event any such fees and expenses that with related fees and

expenses of Lessor would in the aggregate exceed $10,000 in connection with any

and all such Transfers, Participations and/or Securitizations unless Lender

shall agree to reimburse Lessee and Lessor for any amounts expended by them in

excess of $10,000 in the aggregate.

 

      C. Covenants Regarding Premises Leases. Lessee covenants and agrees to

perform each and every covenant, obligation and duty of Lessee arising under and

in connection with the Premises Leases during the term of this Master Lease. No

Premises Lease shall be amended, modified, terminated or otherwise altered

during the term of this Master Lease.

 

      D. Compliance Certificate. Within 60 days after the end of each fiscal

year of Lessee, Lessee shall deliver a compliance certificate to Lessor, in a

form to be provided by Lessor, in order to establish that Lessee is in

compliance in all material respects with all of its obligations, duties and

covenants under this Lease.

 

      8. RENTALS TO BE NET TO LESSOR. The Base Annual Rental payable hereunder

shall be net to Lessor, so that this Lease shall yield to Lessor the rentals

specified during the Lease Term, and that, except as may be otherwise expressly

provided herein, all costs, expenses and obligations of every kind and nature

whatsoever relating to the Properties and/or Equipment shall be performed and

paid by Lessee.

 

      9. TAXES AND ASSESSMENTS. Lessee shall pay, prior to the earlier of

delinquency or the accrual of interest on the unpaid balance, all taxes and

assessments of every type or nature assessed against, imposed upon or

 

SCS Finance I, L.P.

 

                                       13

 

<PAGE>

 

arising with respect to any of the Properties and Equipment, this Lease, the

rental or other payments due under this Lease or Lessee during the Lease Term

which affect in any manner the net return realized by Lessor under this Lease,

including, without limitation, the following:

 

      A. All taxes and assessments upon any of the Properties and Equipment or

any part thereof and upon any Personal Property, whether belonging to Lessor or

Lessee, or any tax or charge levied in lieu of such taxes and assessments;

 

      B. All taxes, charges, license fees and or similar fees imposed by reason

of the use of any of the Properties or Equipment by Lessee; and

 

      C. All excise, transaction, privilege, license, sales, use and other taxes

upon the rental or other payments due under this Lease, the leasehold estate of

either party or the activities of either party pursuant to this Lease.

 

      Notwithstanding the foregoing, but without limiting the preceding

obligation of Lessee to pay all taxes which are imposed on the rental or other

payments due under this Lease, in no event will Lessee be required to pay any

income taxes (i.e., taxes which are based on the income of Lessor or determined

taking into account deductions for depreciation, interest, taxes and ordinary

and necessary business expenses) or franchise taxes (unless imposed in lieu of

other taxes that would otherwise be the obligation of Lessee under this Lease)

including, without limitation, any "gross receipts tax" or any similar tax based

upon gross income or receipts of Lessor which does not take into account

deductions from depreciation, interest, taxes and/or ordinary or necessary

business expenses, any transfer taxes of Lessor, or any tax imposed with respect

to the sale, exchange or other disposition by Lessor, in whole or in part, of

any of the Properties or Equipment or Lessor's interest in this Lease (other

than transfer or recordation taxes imposed in connection with the transfer of

any of the Properties or Equipment to Lessee or the termination of this Lease

pursuant to the provisions of this Lease).

 

      All taxing authorities shall be instructed to send all tax and assessment

invoices relating to the Properties, the Personal Property and the Equipment to

Lessee and, upon Lessor's or Lender's request, Lessee shall promptly provide

Lessor and Lender with copies of all tax and assessment invoices received by

Lessee. Upon request, Lessee shall also provide Lessor and Lender with evidence

that such invoices were paid in a timely fashion. Lessee may, at its own

expense, contest or cause to be contested, by appropriate legal proceedings

conducted in good faith and with due diligence, the amount or validity or

application, in whole or in part, of any item specified in this Section or lien

therefor, provided that (i) Lessee shall provide written notice to Lessor of any

contest involving more than $10,000.00, (ii) such proceeding shall suspend the

collection thereof from the applicable Properties or Equipment or any interest

therein, (iii) neither such Properties or Equipment nor any interest therein

would be in any danger of being sold, forfeited or lost by reason of such

proceedings, (iv) no Event of Default has occurred and is continuing, and (v)

Lessee shall have deposited with Lessor adequate reserves for the payment of the

taxes, together with all interest and penalties thereon, unless paid in full

under protest, or Lessee shall have furnished the security as may be required in

the proceeding or as may be required by Lessor to insure payment of any

contested taxes.

 

      10. UTILITIES. Lessee shall contract, in its own name, for and pay when

due all charges for the connection and use of water, gas, electricity,

telephone, garbage collection, sewer use and other utility services supplied to

the Properties during the Lease Term. Under no circumstances shall Lessor be

responsible for any interruption of any utility service.

 

      11. INSURANCE. Throughout the Lease Term, Lessee shall maintain with

respect to each of the Properties and Equipment related thereto, at its sole

expense, the following types and amounts of insurance (which may be included

under a blanket insurance policy if all the other terms hereof are satisfied):

 

      A. Insurance against loss, damage or destruction by fire and other

casualty, including theft, vandalism and malicious mischief, flood (for each of

the Properties which is in a location designated by the Federal Emergency

Management Administration as a Special Flood Hazard Area), earthquake (for each

of the Properties which is in an area that has been subject to destructive

earthquakes during the period in which records relating to the occurrence of

earthquakes have been kept for the areas in which the Properties are located),

boiler explosion (for each of the

 

SCS Finance I, L.P.

 

                                       14

 

<PAGE>

 

Properties with a boiler), plate glass breakage, sprinkler damage (for each of

the Properties which has a sprinkler system), all matters covered by a standard

extended coverage endorsement, special coverage endorsement commonly known as an

"all-risk" endorsement and such other risks as Lessor may reasonably require,

insuring each of the Properties and Equipment for not less than 100% of their

full insurable replacement cost.

 

      B. Commercial general liability and property damage insurance, including a

products liability clause, covering Lessor and Lessee against bodily injury

liability, property damage liability and automobile bodily injury and property

damage liability, including without limitation any liability arising out of the

ownership, maintenance, repair, condition or operation of the Properties or

Equipment or adjoining ways, streets or sidewalks and, if applicable, insurance

covering Lessor and Lessee against liability arising from the sale of liquor,

beer or wine on the Properties. Such insurance policy or policies shall contain

a broad form contractual liability endorsement under which the insurer agrees to

insure Lessee's obligations under Section 19 hereof to the extent insurable, and

a "severability of interest" clause or endorsement which precludes the insurer

from denying the claim of Lessee or Lessor because of the negligence or other

acts of the other, shall be in amounts of not less than $1,000,000.00 per injury

and occurrence with respect to any insured liability, whether for personal

injury or property damage, or such higher limits as Lessor may reasonably

require from time to time consistent with insurance limits required by Lender

for properties and borrowers similar to the Premises and Lessor, at the time the

requirement is imposed, and shall be of form and substance satisfactory to

Lessor.

 

      C. Reserved.

 

      D. State Worker's Compensation insurance in the statutorily mandated

limits, employer's liability insurance with limits not less than those limits as

may be necessary to comply with applicable laws.

 

      E. Such other insurance as may from time to time be reasonably required by

Lessor or Lender in order to protect their respective interests with respect to

the Properties and Equipment consistent with insurance coverages required by

Lender for properties and borrowers similar to the Premises and Lessor at the

time the insurance is required.

 

      All insurance policies shall:

 

      (i) Provide for a waiver of subrogation by the insurer as to claims

against Lessor, Lender and their respective employees and agents and provide

that such insurance cannot be unreasonably cancelled, invalidated or suspended

on account of the conduct of Lessee, its officers, directors, employees or

agents;

 

      (ii) Provide that any "no other insurance" clause in the insurance policy

shall exclude any policies of insurance separately maintained by Lessor or

Lender and that the insurance policy obtained by Lessee pursuant to this Section

11 shall not be brought into contribution with insurance maintained by Lessor or

Lender;

 

      (iii) Contain a standard without contribution mortgagee clause endorsement

in favor of Lender and its successors and assigns as their interests may appear

and any other party designated by Lessor;

 

      (iv) Provide that the policy of insurance shall not be terminated,

cancelled or substantially modified without at least thirty (30) days' prior

written notice to Lessor, Lender and to any other party covered by any standard

mortgage clause endorsement;

 

      (v) Provide that the insurer shall not have the option to restore the

applicable Properties and Equipment if Lessor or Lessee elects to terminate this

Lease in accordance with the terms hereof;

 

      (vi) Be issued by the Kemper Group of insurance companies or insurance

companies licensed to do business in the states in which the Properties are

located and which are rated A:VI or better by Best's Insurance Guide or are

otherwise approved by Lessor; and

 

      (vii) Provide that the insurer shall not deny a claim because of the

negligence of Lessee, anyone acting for Lessee or any tenant or other occupant

of any of the Properties.

 

SCS Finance I, L.P.

 

                                       15

 

<PAGE>

 

      It is expressly understood and agreed that the foregoing minimum limits of

insurance coverage shall not limit the liability of Lessee for its acts or

omissions as provided in this Lease. All liability insurance policies (with the

exception of worker's compensation insurance to the extent not available under

statutory law), shall designate Lessor and Lender and their respective

successors and assigns as additional insureds as their interests may appear and

shall be payable as set forth in Section 21 hereof. All such policies shall be

written as primary policies, with deductibles not to exceed 10% of the amount of

coverage. Any other policies, including any policy now or hereafter carried by

Lessor or Lender, shall serve as excess coverage. Lessee shall procure policies

for all insurance for periods of not less than one year and shall provide to

Lessor and Lender certificates of insurance or, upon the request of Lessor or

Lender, duplicate originals of insurance policies evidencing that insurance

satisfying the requirements of this Lease is in effect at all times. In the

event of any transfer by Lessor of Lessor's interest in any of the Properties or

Equipment or any financing or refinancing of Lessor's interest in any of the

Properties or Equipment, Lessee shall, upon not less than ten (10) days' prior

written notice, deliver to Lessor or any Lender providing such financing or

refinancing, as the case may be, certificates of all insurance required to be

maintained by Lessee hereunder naming such transferee or such Lender, as the

case may be, as an additional named insured to the extent required herein

effective as of the date of such transfer, financing or refinancing.

 

      As an alternative to maintaining all of the insurance required under this

Section 11 with third party insurers, Lessee may elect to self-insure for a

portion of the required coverages pursuant to a self-insurance program, provided

that (i) the total amount of self-insurance provided by Lessee with respect to

each policy of insurance required to be maintained by Lessee hereunder shall not

exceed the lesser of (A) 10% of Lessee's Net Worth (as defined hereafter) or (B)

$1,000,000.00, and (ii) Lessee maintains a Net Worth (as defined hereafter)

equal to at least $10,000,000.00; provided, that Lessee shall at all times

provide the remaining portion of the coverages set forth in this Section 11 with

third party insurers complying with the provisions of this Section 11. The

amount of all deductibles with respect to such third party policies shall not,

however, exceed in the aggregate, when added to the amount of self-insurance,

the per policy limitation on self-insurance provided in the preceding sentence.

For purposes hereof, the term "Net Worth" means the total equity in Lessee,

determined in accordance with GAAP as of the month end occurring immediately

prior to the date of determination.

 

      12. TAX AND INSURANCE IMPOUND. Upon the occurrence of an Event of Default,

Lessor may require Lessee to pay to Lessor sums which will provide an impound

account (which shall not be deemed a trust fund) for paying up to the next one

year of taxes, assessments and/or insurance premiums for each of the Properties

and Equipment. Upon such requirement, Lessor will estimate the amounts needed

for such purposes and will notify Lessee to pay the same to Lessor in equal

monthly installments, as nearly as practicable, in addition to all other sums

due under this Lease. Should additional funds be required at any time, Lessee

shall pay the same to Lessor on demand. Lessee shall advise Lessor of all taxes

and insurance bills which are due and shall cooperate fully with Lessor in

assuring that the same are paid. Lessor may deposit all impounded funds in

accounts insured by any federal or state agency and may commingle such funds

with other funds and accounts of Lessor. Interest or other gains from such

funds, if any, shall be the sole property of Lessee. Upon receipt from Lessee of

evidence of the amount of taxes, assessments and/or insurance premiums owing

from time to time, Lessor shall apply the amounts so held to the payment of such

taxes, assessments and/or insurance premiums for which such amounts are held in

such impound account. If an Event of Default shall occur subsequent to Lessor

requiring the establishment of an impound account pursuant to this Section,

Lessor may apply all impounded funds against any sums due from Lessee to Lessor.

Lessor shall give to Lessee an annual accounting showing all credits and debits

to and from such impounded funds received from Lessee.

 

      13. PAYMENT OF RENTAL AND OTHER SUMS. All rental and other sums which

Lessee is required to pay hereunder shall be the unconditional obligation of

Lessee and shall be payable in full when due without any setoff, abatement,

deferment, deduction or counterclaim whatsoever. Upon execution of this Lease,

Lessee shall authorize Lessor to establish arrangements whereby payments of the

Base Monthly Rental and impound payments, if any, are transferred by Automated

Clearing House Debit initiated by Lessor or its designee directly from Lessee's

bank account to such account as Lessor may designate or as Lessor may otherwise

designate; provided, however, upon notice from Lender to Lessee and Lessor

delivered in the manner set forth in Section 29, Lessee shall deliver all

payments of Base Monthly Rental as specified in such notice from Lender. Any

delinquent payment (that is, any payment not made within five calendar days

after the date when due) shall, in addition to any other remedy of Lessor, incur

a late charge of 5% (which late charge is intended to compensate Lessor for the

cost of handling and

 

SCS Finance I, L.P.

 

                                       16

 

<PAGE>

 

processing such delinquent payment and should not be considered interest) and

bear interest at the Default Rate, such interest to be computed from and

including the date such payment was due through and including the date of the

payment; provided, however, in no event shall Lessee be obligated to pay a sum

of late charge and interest higher than the maximum legal rate then in effect.

 

      14. USE. A. Except as set forth below, each of the Properties, the

Equipment Premises and Equipment shall be used solely for the operation of a

Permitted Concept, and for no other purpose. Lessor and Lessee agree that the

operation of the Properties and the Equipment Premises as Permitted Concepts

shall permit Lessee to operate or cease to operate, or shall permit Lessee to

grant to third parties the right to operate or cease to operate, in the

convenience stores located on one or more of the Properties and the Equipment

Premises, kiosks, stands, counters, or other facilities relating to the sale of

food, drinks, confections and other goods and services, not including the sale

of gasoline ("Additional Concepts") so long as the Additional Concepts are

operated in a manner consistent with the requirements of this Lease and the

rights of third parties to operate within the Properties or Equipment Premises

are subordinate to this Lease. Lessee may locate, use and operate and allow

third parties to locate, use and operate equipment, machinery, furniture and

signage on one or more of the Properties and Equipment Premises in connection

with the operation of the Additional Concepts, in a manner consistent with the

requirements of this Lease.

 

      B. Lessee shall occupy the Properties and Equipment Premises and use the

Equipment related thereto commencing on the Effective Date and, except as set

forth below and except during periods when any of the Properties or Equipment

Premises is untenantable by reason of fire or other casualty or condemnation

(provided, however, during all such periods while any of the Properties is

untenantable, Lessee shall strictly comply with the terms and conditions of

Section 21 of this Lease), Lessee shall at all times during the Lease Term

occupy each of the Properties and Equipment Premises and diligent