AMENDED AND RESTATED NOTE PURCHASE AGREEMENT

Exhibit 4.1

 

 

UNIFIED WESTERN GROCERS, INC.

 

$40,000,000 IN AGGREGATE PRINCIPAL AMOUNT

 

OF

 

7.157% AMENDED AND RESTATED

SENIOR SECURED NOTES DUE 2016

 

and

 

$46,000,000 IN AGGREGATE PRINCIPAL AMOUNT

 

OF

 

6.421% AMENDED AND RESTATED

SENIOR SECURED NOTES DUE 2016

 

and

 

$6,333,402.39 IN AGGREGATE PRINCIPAL AMOUNT

 

OF

 

SENIOR SECURED NOTES DUE 2008

 

AND

 

$4,500,000 IN AGGREGATE PRINCIPAL AMOUNT

 

OF

 

SENIOR SECURED NOTES DUE 2009

 

AMENDED AND RESTATED

NOTE PURCHASE AGREEMENT

 

 

Dated as of January 3, 2006

 

 

TABLE OF CONTENTS

 

 

UNIFIED WESTERN GROCERS, INC.

5200 Sheila Street

Commerce, CA 90040

Telephone: (323) 264-5200

Telecopy: (323) 266-4051

 

AMENDED AND RESTATED

NOTE PURCHASE AGREEMENT

 

Dated as of January 3, 2006

 

To each of the Purchasers Listed

in Schedule I Hereto (the “ Purchasers ”)

 

Ladies and Gentlemen:

 

The undersigned, Unified Western Grocers, Inc., a California corporation (the “ Company ” or “ Unified ”), hereby agrees with you as follows:

 

SECTION 1. BACKGROUND; ISSUANCE OF NOTES

 

§1.1. Existing Documents . The Company and the Purchasers are parties to the Existing Note Purchase Agreement and the Purchasers are the holders of the Existing Notes. The parties confirm that the aggregate outstanding principal balance of the Existing Notes on the date hereof is $90,667,215.18 and all accrued interest on the Existing Notes through December 31, 2005 has been paid. The parties have agreed to restructure the maturity, interest rates and certain other provisions of the Existing Notes, and amend the Existing Note Purchase Agreement, by amending and restating in their entirety the Existing Notes (except the Continuing Notes, which shall not be amended and restated and the holders of which have consented hereto) (the Existing Notes other than the Continuing Notes being referred to herein as the “ Blended Notes ”) as part of the Tranche A Notes and the Tranche B Notes provided for herein and amending and restating the Existing Note Purchase Agreement with this Agreement.

 

§1.2. Authorization of the Notes . The Company has duly authorized (a) the issuance of $40,000,000 in aggregate principal amount of its 7.157% Amended and Restated Senior Secured Notes due 2016 (the “ Tranche A Notes ”) to be issued under, and substantially in the form set forth in Exhibit A-1 to, this Agreement, and (b) the issuance and sale of $46,000,000 in aggregate principal amount of its 6.421% Amended and Restated Senior Secured Notes due 2016 (the “ Tranche B Notes ”) to be issued under, and substantially in the form set forth in Exhibit A-2 to, this Agreement. The Tranche A Notes, the Tranche B Notes and the Continuing Notes are collectively referred to herein as the “ Notes .”

 

§1.3. Maturity of and Interest on the Notes . Each Tranche A Note and each Tranche B Note shall have a stated maturity date of January 1, 2016 (the “ New Notes Maturity Date ”). The maturity date of the Continuing Notes shall continue to be April 1, 2008 or October 1, 2009, as set forth in the relevant Note, and any reference therein to the Tranche A

 

1

Maturity Date or the Tranche B Maturity Date shall continue to be a reference to those definitions in the Existing Note Purchase Agreement (the “ Continuing Notes Maturity Date ” ). Each Note shall bear interest and otherwise be in the form and payable as set forth in this Agreement.

 

§1.4. Purchase and Sale of the Notes .

 

(a) The Company agrees to issue and sell to you the Tranche A Notes and the Tranche B Notes, and upon and subject to the terms and conditions hereof and in reliance upon the representations and warranties of the Company contained herein, you agree to accept the Tranche A Notes and the Tranche B Notes in consideration of your (i) surrendering and returning to the Company the Blended Notes, which on the date hereof have an aggregate principal balance of $79,833,812.79, and the Tranche A Notes and the Tranche B Notes shall amend and restate the Blended Notes, and (ii) funding to the Company, at par, in immediately available funds, the amount of $6,166,187.21. Accordingly, on the Closing Date, the aggregate outstanding principal balance of the Notes shall be $96,833,402.39. The specific amounts of Tranche A Notes and Tranche B Notes to be purchased by each Purchaser are set forth on Schedule I hereto. The sale and purchase of the Notes shall be held at the offices of Bingham McCutchen LLP (“ Purchasers’ Counsel ”), Three Embarcadero Center, San Francisco, California 94111, at 10:00 a.m., P.S.T., at a closing (the “ Closing ”) on January 6, 2006, or on such other Business Day thereafter on or prior to January 10, 2006, as may be agreed upon by the Company and the Purchasers.

 

(b) On the Closing Date, the Company will issue and deliver to you one or more Tranche A Notes and Tranche B Notes registered in your name or the name of your nominee and in the aggregate principal amount or amounts specified for the applicable Notes opposite your name in Schedule I hereto, duly executed by the manual signature of one of its authorized officers and dated the applicable Closing Date. On the Closing Date, each of the Purchasers shall surrender to the Company the Blended Note(s) registered in its name or the name of its nominee, and the Company acknowledges at such time the indebtedness represented by the Blended Notes shall thereafter be represented in the Tranche A Notes and the Tranche B Notes, and each of the Purchasers shall execute any documents reasonably requested by the Company to evidence the restatement of the Blended Notes, the Existing Note Purchase Agreement and the documents executed in connection therewith. The Company shall cancel each of the Blended Notes surrendered to it in its custody and shall place a legend on the front page of each such Blended Note that the indebtedness and the terms thereof represented by this Note is now set forth in the Tranche A Notes or Tranche B Notes issued on the Closing Date.

 

(c) If on the Closing Date the Company shall fail to tender any of the Notes to you as provided above in this Section 1.4, or any of the conditions specified in Section 2 shall not have been fulfilled to your satisfaction, at your election you shall be relieved of all obligations under this Agreement without thereby waiving any other rights you may have by reason of such failure or such nonfulfillment.

 

§1.5. Use of Proceeds . The proceeds of the sale of the Tranche A Notes and the Tranche B Notes shall be used by the Company for general corporate purchases.

 

2

§1.6. Terms and Conditions of the Notes .

 

(a) Each Tranche A Note issued hereunder shall be substantially in the form annexed hereto as Exhibit A-1 and shall be due on the New Notes Maturity Date. Each Tranche B Note issued hereunder shall be substantially in the form annexed hereto as Exhibit A-2 and shall be due on the New Notes Maturity Date. The form of the Continuing Notes shall not be changed and the terms thereof shall remain unchanged except as set forth herein. Each of the Notes shall bear interest from the Closing Date until such Note shall become due and payable in accordance with the terms thereof or hereof (whether at maturity, by acceleration or otherwise).

 

(b) From the Closing Date to the New Notes Maturity Date, the Tranche A Notes shall bear interest at the fixed rate of 7.157% per annum. From the Closing Date to the New Notes Maturity Date, the Tranche B Notes shall bear interest at the fixed rate of 6.421% per annum. The Continuing Notes with a maturity date of April 1, 2008 shall continue to bear interest at 7.72% per annum, and the Continuing Notes with a maturity date of October 1, 2009 shall continue to bear interest at 8.71% per annum. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. If the Company shall have paid or agreed to pay any interest or premium on any of the Notes in excess of that permitted by law, then it is the express intent of the Company and the holder thereof that all excess amounts previously paid or to be paid by the Company be applied to reduce the principal balance of such Note and that the provisions of such Note immediately be deemed reformed and the amounts thereafter collectable thereunder reduced, without the necessity of the execution of any new document, so as to comply with the then applicable law but also so as to permit the recovery of the fullest amount otherwise called for thereunder.

 

(c) Payment of principal and interest on the Notes shall be as follows:

 

(i) Accrued interest on the Tranche A Notes, the Tranche B Notes and the Continuing Notes shall be due and payable on the first Business Day of each month (each, an “ Installment Date ”), commencing on the first Installment Date after the Closing Date. Accrued interest on the Blended Notes shall be paid on the first Installment Date after the Closing Date along with interest accrued on the Tranche A Notes and the Tranche B Notes since the Closing Date.

 

(ii) On each Installment Date commencing on the first Installment Date after the Closing Date, the Company will pay equal monthly installments of principal and accrued interest on the Continuing Notes having a Continuing Notes Maturity Date of April 1, 2008 in the aggregate amount of $106,715.91 (the “ Continuing Notes Amortization Payment ”) without payment of the Make-Whole Amount or any premium.

 

(iii) All principal of the Continuing Notes having a Continuing Notes Maturity Date of October 1, 2009 shall be due on such date.

 

(iv) Commencing on the 61 ^st Installment Date after the Closing Date, the Company will pay equal monthly installments of principal and accrued interest on the

 

3

Tranche A Notes in the aggregate amount of $363,051.42 (the “ Tranche A Amortization Payment ”) without the payment of the Make-Whole Amount or any premium.

 

(v) Commencing on the 61 ^st Installment Date after the Closing Date, the Company will pay equal monthly installments of principal and interest on the Tranche B Notes in the aggregate amount of $398,714.34 (the “ Tranche B Amortization Payment ”) without the payment of the Make-Whole Amount or any premium.

 

(vi) Notwithstanding anything to the contrary contained herein or in the Notes, however, the final payment due under the Notes (whether at maturity, by acceleration or otherwise) shall be in an amount sufficient to pay in full all outstanding principal, together with all accrued interest and Make-Whole Amount due thereon.

 

(d) In the event any payment of principal, Make-Whole Amount, interest or any other sum to be paid by the Company to the Noteholders is not paid when such payment is due, a late charge shall accrue in the amount of two percent (2%) of such overdue sum and shall be due and payable immediately. If the Company shall fail to pay any sum under any of the Notes when such sum is due, whether upon acceleration, maturity or otherwise, such sum shall bear interest at a rate (the “ Overdue Rate ”) equal to the lesser of (i) the maximum interest rate permitted by law and (ii) an interest rate equal to 2% per annum in excess of the interest rate then applicable to such Note.

 

(e) Each of the Continuing Notes shall, without the necessity of any further action, be amended on the Closing Date to reflect that the Continuing Notes are now Notes hereunder. Without limiting the generality of the foregoing, the term “Agreement” therein shall mean this Agreement and the phrase “U[u]ntil the Release Date” in each Note is hereby deleted; provided, however, that the terms “Tranche A Maturity Date” and “Tranche B Maturity Date” in the Continuing Notes shall continue to mean April 1, 2008 and October 1, 2009, respectively.

 

§1.7. Application of Payments . Each payment on a Note shall be applied, first , to sums other than principal, interest and Make-Whole Amount, due from the Company to the holder of the Note under the Debt Documents, second , to the payment of accrued interest on such Note to the date of such payment, and third , to the payment of any principal of and Make-Whole Amount, if any, on such Note then due thereunder.

 

§1.8. Security for the Notes .

 

(a) The Obligations will be unconditionally secured by the following: (i) Liens on the Unified Personal Property pursuant to the Unified Security Agreement, (ii) Liens on the Real Property pursuant to the Deeds of Trust, and (iii) pursuant to the Deeds of Trust, an absolute assignment of the rents and profits from the Real Property. Each Subsidiary Guarantor will unconditionally, absolutely and irrevocably guarantee to the Noteholders the full, prompt and complete payment and performance when due (whether by stated maturity, by acceleration or otherwise) of the Obligations pursuant to its Subsidiary Guaranty. The Subsidiary Guaranties will be secured by Liens on the Subsidiary Personal Property pursuant to the Subsidiary Security Agreement (and, together with the Unified Security Agreement, the “ Security Agreements ”). The

 

4

Personal Property and the Real Property are collectively referred to herein as the “ Property ”. The Deeds of Trust and the Security Agreements run in favor of the Collateral Agent, as collateral agent for the Noteholders pursuant to the Collateral Agency Agreement. The Security Agreements, the Deeds of Trust and the Collateral Agency Agreement, are collectively referred to herein as the “ Security Documents ”. All Notes at any time Outstanding shall be equally and ratably secured by the Security Documents and the Liens created thereunder, without preference, priority or distinction on account of the date or dates or the actual time or times of the issue or maturity of such Notes.

 

(b) Notwithstanding the foregoing, at the time of the Closing, the Collateral Agent agrees to release its Lien on the Bakery.

 

(c) If the Company seeks to sell any of the Real Property, as well as the Improvements and some or all of the Personal Property associated with such Real Property (such Real Property, Improvements and Personal Property being referred to herein as a “ Sale Property ”), to a Person which is not an Affiliate of the Borrower or any Subsidiary, and the Company will receive all of the Net Proceeds Amount of the sale of the Sale Property, the Collateral Agent will (and the Noteholders hereby authorize the Collateral Agent to) release its Lien thereon if all of the following conditions are satisfied:

 

(i) on the date of the sale of the Sale Property, no Default or Event of Default has occurred and is continuing or would result from the consummation of the sale of the Sale Property; and

 

(ii) the amount of the Obligations on such date (after giving effect to any optional prepayment of the Notes from the Net Proceeds Amount pursuant to the provisions of Section 6.2, including the payment of the Make-Whole Amount) is no greater than 58% of the value of the Property remaining as collateral after the sale of the Sale Property (not including, however, any Property consisting of equipment located inside any of the Improvements on any of the other Real Property, whether or not such equipment is a fixture), with such value being determined by a third-party appraiser selected by the Required Noteholders.

 

§1.9. No Set-off or Counterclaim . Each Noteholder shall be entitled to the principal of and Make-Whole Amount, if any, and interest on any of its Notes free from all equities or rights of set-off or counterclaims of the Company or any prior Noteholder and all Persons may act accordingly. The receipt by such Noteholder of any payment of principal, Make-Whole Amount or interest shall be a good discharge to the Company for the same, and the Company shall not be bound to inquire into the title of any such Noteholder.

 

§1.10. Taxes .

 

(a) The Company shall make any and all payments hereunder or under the Notes free and clear of, and without deduction or withholding for or on account of, any present or future taxes, assessments, levies, imposts, duties, fees, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of any Noteholder, business or franchise

 

5

taxes, federal or state income taxes, business and occupation taxes payable in lieu of state income taxes or other taxes that are measured by and imposed upon the Noteholder’s net income or receipts (all such non-excluded taxes, levies, imposts, duties, fees, deductions, charges, withholdings and liabilities on any and all payments hereunder or under the Notes being hereinafter referred to as “ Taxes ”). The Company understands that the transactions contemplated by this Agreement and the Security Documents may not be the Purchasers’ only connections with the states where the Property is located. If the Company shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Noteholder, (i) the sum payable shall be increased to the extent necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1.10) such Noteholder receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions and (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

 

(b) In addition, the Company agrees to pay any present or future stamp or documentary taxes or intangible recording taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution or delivery or otherwise with respect to this Agreement (including, without limitation, in respect of a transfer of the Notes resulting from a change of the Company’s office pursuant to Section 7.9), the Notes or any of the other Debt Documents (hereinafter referred to as “ Other Taxes ”).

 

(c) The Company will indemnify each Noteholder for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 1.10) paid by any Noteholder, as the case may be, or any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. The Company shall pay the amount of any such Taxes or Other Taxes to such Noteholder within thirty (30) days from the date such Noteholder makes written demand therefor.

 

(d) If a written claim for payment is made by any taxing authority against a Noteholder for any Taxes or Other Taxes with respect to which the Company may be liable for indemnity under this Section 1.10 (a “ Tax Claim ”), such Noteholder shall give the Company written notice of such Tax Claim as soon as practicable and furnish the Company with copies of such Tax Claim and all other writings received from the taxing authority relating to such Tax Claim, provided , however , that failure so to notify the Company shall not relieve the Company of any obligation to indemnify such Noteholder under this Section 1.10 except for Taxes or Other Taxes that would not otherwise have been imposed and the contest of which was effectively precluded as a result of such failure to notify.

 

(e) Within thirty (30) days after the date of any payment of Taxes by the Company, the Company will furnish to the Noteholders the original or a certified copy of a receipt evidencing payment thereof. The Company shall compensate each Noteholder for all reasonable losses and expenses sustained by such Noteholder as a result of any failure by the Company so to furnish such copy of such receipt.

 

6

(f) The agreements and obligations of the Company contained in this Section 1.10 shall survive the termination of this Agreement and/or the Security Documents and the payment in full of the Notes and all other amounts payable hereunder.

 

§1.11. Definitions, etc . Certain terms used in this Agreement are defined in the Glossary attached hereto. References to a “Schedule” or “Exhibit” are, unless otherwise specified, to the Schedules and Exhibits attached to this Agreement, as the same may be supplemented from time to time. All of the Glossary, the Schedules and Exhibits attached to this Agreement are hereby incorporated by reference herein in their entirety. References herein to “you” and “your” in any context applicable after the Closing Date shall be deemed to be references to the “Noteholders” and the “Noteholders’,” respectively.

 

SECTION 2. CONDITIONS TO CLOSING

 

Your obligation to purchase and pay for, and otherwise accept, the Notes to be sold to you, amended and restated or continued in effect, as applicable, at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions:

 

§2.1. Representations and Warranties . The representations and warranties of the Company in this Agreement and each of the other Debt Documents shall be correct when made and at the time of the Closing.

 

§2.2. Performance; No Default . (a) The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and, after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 1.5), no Default or Event of Default shall have occurred and be continuing, and (b) no Default or Event of Default (as those terms are defined in the Existing Note Purchase Agreement) shall have occurred and be continuing under the Existing Note Purchase Agreement. Except as disclosed in Item 2.2 of Schedule II , since the Report Date, neither the Company nor any Subsidiary shall have entered into any transaction that would have been prohibited by Sections 8.1 through 8.5, 8.6(a), 8.6(f), 8.6(g), 8.6(h), 8.6(i), 8.7 and 8.8 had such Sections applied since such date.

 

§2.3. Certificates .

 

(a) Officer’s Certificate . The Company shall have delivered to you an Officer’s Certificate, dated the Closing Date, certifying that the conditions specified in Sections 2.1, 2.2 and 2.14 have been fulfilled.

 

(b) Secretary’s Certificate . The Company and each Subsidiary Guarantor shall have delivered to you a certificate certifying (i) the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Debt Documents to which it is a party, (ii) its Articles of Incorporation and Bylaws attached thereto as then in effect, and (iii) the incumbency and specimen signatures of the persons authorized to execute the Debt Documents to which it is a party.

 

7

(c) Corporate Documents of the Company and the Subsidiary Guarantors . You shall have received (a) a copy of the articles of incorporation and any amendments thereto of the Company, certified by the Secretary of State of the State of California, dated as of a date not more than sixty (60) days prior to the Closing Date, (b) a certificate issued by the California Secretary of State or other appropriate Governmental Authority as to the good standing and qualification to do business of the Company and each Subsidiary Guarantor, (c) a certificate of the California Franchise Tax Board or other appropriate Governmental Authority as to the tax status of the Company and each Subsidiary Guarantor, and (d) a certificate of good standing from the Oregon Secretary of State showing the Company as a foreign corporation in good standing in such jurisdiction.

 

§2.4. Opinions of Counsel . You shall have received opinions in form and substance satisfactory to you, dated the Closing Date (a) from Sheppard, Mullin, Richter & Hampton, LLP, special counsel for the Company, covering the matters set forth in Exhibit B and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you), and (b) Purchasers’ Counsel, substantially in the form required by the Collateral Agent and covering such other matters incident to such transactions as you may reasonably request.

 

§2.5. Purchase Permitted By Applicable Law, etc . On the Closing Date your purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without resort to any so-called “basket clause” of any such law, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof.

 

§2.6. Delivery of Notes . Contemporaneously with the Closing, the Company shall deliver the Tranche A Notes and the Tranche B Notes to be sold by it at the Closing, in each case as specified in Schedule I .

 

§2.7. Debt Documents; Other Agreements . You shall have received (a) from the Company, fully executed originals of the Unified Security Agreement, the Deeds of Trust, the Environmental Indemnity Agreement, the Collateral Agency Agreement and any other Debt Documents to which the Company is a party, and (b) from each Subsidiary Guarantor, fully executed originals of the Subsidiary Guaranty and the Subsidiary Security Agreement.

 

§2.8. Security Filings . You shall have received evidence, in form and substance satisfactory to you and Purchaser’s Counsel, that the Financing Statements (or amendments to any Financing Statements previous filed) shall have been duly filed in respect of the security interests intended to be created by the Security Documents with such Governmental Authority as the Collateral Agent may reasonably require, and all filing fees in respect thereof shall have been paid. As of the Closing Date, the Collateral Agent for the benefit of the Purchasers shall hold a valid perfected first priority security interest in the Personal Property, and valid first priority Liens on the Real Property, subject in each case only to Permitted Liens.

 

8

§2.9. Tax Lien and Judgment Lien Searches . You shall have received the results of searches regarding the Company conducted in the tax lien and judgment lien filing records in each appropriate jurisdiction (including without limitation, the California Secretary of State, the Secretary of State of Oregon and the various county recorders of the counties where the Real Property is located), in each case reasonably satisfactory to you.

 

§2.10. Title Insurance . You shall have received such increases in coverage amounts and endorsements to the lender’s policies of title insurance previously issued by Chicago Title Company with respect to the Security Documents as you may reasonably require.

 

§2.11. Payment of Special Counsel Fees . Without limiting the provisions of Section 13.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of Purchasers’ Counsel to the extent reflected in a statement from such counsel rendered to the Company at least three (3) Business Days prior to the Closing (with the understanding that supplemental statements for reasonable fees and disbursements subsequently posted is to be rendered at a later date).

 

§2.12. Private Placement Number . A Private Placement number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the NAIC) shall have been obtained for the Notes.

 

§2.13. Changes in Corporate Structure . The Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the Report Date.

 

§2.14. Changes in Indebtedness . Since the Report Date, there has been no Material change in the principal amounts (other than as a result of scheduled amortization payments), interest rates (other than as a result of “grid pricing” provisions), sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries.

 

§2.15. Insurance . The Company shall have furnished to you (a) a certificate of an insurance broker, dated the Closing Date, which certificate shall be reasonably satisfactory in substance to you, and shall certify that the Company is in compliance with the requirements of Section 7.2, and (b) originals, manually signed by an authorized agent for the issuer, of all certificates of insurance required under Section 7.2(b)(iv).

 

§2.16. Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated by this Agreement, each of the other Debt Documents and all documents and instruments incident to the transactions contemplated hereby and thereby shall be reasonably satisfactory to you, and you shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request.

 

§2.17. No Material Adverse Change . There shall have occurred no Material Adverse Change, as reasonably determined by the Noteholders, since October 1, 2005.

 

9

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to you as of the date hereof and as of the Closing Date:

 

§3.1. Organization; Power and Authority . The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing or validly existing, as applicable, in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement, the Notes and the other Debt Documents and to perform the provisions hereof and thereof.

 

§3.2. Authorization, etc . This Agreement, the Notes and the other Debt Documents have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. Upon receipt by the Company of payment for the Notes, the Notes will have been duly issued by the Company, will be entitled to the benefits and security of the Security Agreements, the Deeds of Trust and the other Security Documents, and will each constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The other Debt Documents, when executed and delivered by the Company, will each constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. Representations as to enforcement in this Section 3.2 are subject in each case to (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

§3.3. Disclosure . Except as disclosed in Item 3.3 of Schedule II , the Debt Documents, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated thereby, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as expressly described in Item 3.3 of Schedule II , or in any of the documents, certificates or other writings identified therein, since the date of the most recent Financial Statements (the “ Report Date ”), there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect (a “ Material Adverse Change ”). There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth in this Agreement or the other Debt Documents or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby or thereby.

 

10

§3.4. Organization and Ownership of Shares of Subsidiaries; Affiliates .

 

(a) Item 3.4 of Schedule II contains complete and correct lists of (i) the Company’s Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, and (ii) the Company’s Affiliates, other than Subsidiaries.

 

(b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary Guarantor have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Item 3.4 of Schedule II ).

 

(c) Each Subsidiary Guarantor is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing or validly existing, as applicable, in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

 

(d) No Subsidiary Guarantor is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Item 3.4 of Schedule II and customary limitations imposed by corporate law statutes and, in the case of the Insurance Subsidiaries, restrictions imposed by insurance law statutes and regulations) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.

 

(e) Each Subsidiary which is not (i) a Financial Subsidiary, (ii) an Insurance Subsidiary, or (iii) a Subsidiary Guarantor does not (A) have total assets worth more than $250,000, and all such Subsidiaries do not have assets which exceed $1,000,000 in the aggregate, (B) have any material liabilities other than those which have been disclosed on Item 3.4 of Schedule II , and (C) does not engage in any business activity whatsoever.

 

§3.5. Financial Statements . The Company has heretofore furnished to you copies of audited consolidated financial statements of the Company and its Subsidiaries for the Fiscal Years ended October 1, 2005 and October 2, 2004, including audited consolidated balance sheets of the Company and its Subsidiaries as of the end of each such Fiscal Year and consolidated statements of income, retained earnings, changes in shareholders’ equity and cash flows of the Company and its Subsidiaries for each such Fiscal Year, together with the opinion thereon of Deloitte & Touche LLP, independent certified public accountants (such financial statements referred to in this Section 3.5 being collectively referred to as the “ Financial Statements ”). All of the Financial Statements (including in each case the related schedules and

 

11

notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates of such Financial Statements and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto.

 

§3.6. Compliance with Laws, Other Instruments, etc . The execution, delivery and performance by the Company of this Agreement, the Notes and the other Debt Documents will not (a) except as set forth in Item 3.6 of Schedule II , contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under (i) any indenture, mortgage, deed of trust, loan, purchase or credit agreement, Capital Lease or any provision of the corporate charter or by-laws of the Company or any Subsidiary Guarantor, or (ii) any Material agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (c) violate in any material respect any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary.

 

§3.7. Governmental Authorizations, etc . No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company or any Subsidiary Guarantor of this Agreement, the Notes or the other Debt Documents.

 

§3.8. Litigation; Observance of Agreements, Statutes and Orders .

 

(a) Except as disclosed in the Financial Statements or as disclosed in Item 3.8 of Schedule II , there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

(b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

§3.9. Taxes . The Company and its Subsidiaries have filed all material tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments

 

12

(a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect.

 

§3.10. Title to Property; Leases .

 

(a) The Company has good and valid fee title to the Real Property and, the Company has good and valid title to the Unified Personal Property. Each Subsidiary Guarantor has good and valid title to its Subsidiary Personal Property. Except for Permitted Liens, there are no Liens on any of the Property.

 

(b) Item 3.10(b) of Schedule II accurately lists (i) each financing statement, deed of trust or other security agreement or instrument which is currently filed, recorded or registered pursuant to any United States or federal, state or local law or regulation that names the Company or any Subsidiary Guarantor as debtor or lessee or as the grantor or the transferor of the interest created thereby, and (ii) as to each such financing statement, deed, agreement or other instrument, the names of the debtor, lessee, grantor or transferor and the secured party, lessor, grantee or transferee and the name of the jurisdiction in which such financing statement, deed, agreement or other instrument has been filed, recorded or registered. Except as disclosed in Item 3.10(b) of Schedule II , no Liens exist against the Property and no person has any right, interest or claim against the Property or any revenues or proceeds generated by the Property other than Permitted Liens.

 

(c) The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the Company’s most recent audited balance sheet or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects.

 

§3.11. Licenses, Permits, etc . Except as disclosed in Item 3.11 of Schedule II .

 

(a) the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others;

 

(b) to the best knowledge of the Company, neither the Company nor any of its Subsidiaries is in Material violation of any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and

 

(c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent,

 

13

copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries.

 

§3.12. Compliance with ERISA; Multiemployer Plans .

 

(a) Neither (i) the execution and delivery of this Agreement by the Company, (ii) the offer, issuance, sale and delivery of the Notes by the Company, (iii) the acquisition of the Notes by you, (iv) the execution and delivery of the other Debt Documents by the Company, (v) the application by the Company of the proceeds of the sale of the Notes nor (vi) the consummation of any of the other transactions contemplated by the Debt Documents constitutes or will result in a non-exempt “prohibited transaction” under Section 4975 of the Code or Section 406 of ERISA. The representation by the Company in the preceding sentence is made in reliance upon and subject to the accuracy of the representations made by you in Section 4.1. Item 3.12 of Schedule II is a complete and correct list of all Plans with respect to which the Company or any ERISA Affiliate is a “party in interest” (within the meaning of Section 3(14) of ERISA) or with respect to which its securities are “employer securities” (within the meaning of Section 407(d)(1) of ERISA).

 

(b) Each Plan is in Material compliance in all respects with applicable provisions of ERISA and the Code. Each of the Company and any ERISA Affiliate has made all contributions to each Plan required to be made by it.

 

(c) Except for liabilities to make contributions and to pay PBGC premiums and administrative costs, neither the Company nor any ERISA Affiliate has incurred any Material liability to or on account of any Pension Plan under applicable provisions of ERISA or the Code, and no condition exists which presents a Material risk to the Company or any ERISA Affiliate of incurring any such liability. No Pension Plan has an “accumulated funding deficiency” (within the meaning of Section 412 of the Code), whether or not waived. None of the Company or any ERISA Affiliate, the PBGC or any other Person has instituted any proceedings or taken any other action to terminate any Pension Plan.

 

(d) [Except as disclosed in Note 14 to the Company’s Financial Statements for the Fiscal Year ended October 1, 2005, is this clause needed? ] the actuarial present value of all accumulated benefit obligations under each Pension Plan (based on the assumptions used in the funding of such Pension Plan, which assumptions are reasonable, and determined as of the last day of the most recent plan year of such Pension Plan for which an annual report has been filed with the Internal Revenue Service) did not exceed the current value of the assets of such Pension Plan as of such last day.

 

(e) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. The expected post-retirement benefit obligation (determined as of the last day of the Company’s most recently ended Fiscal Year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to continuation coverage mandated by Section 4980B of the Code) of the

 

14

Company and its Subsidiaries has been accurately reflected in Note 15 to the Company’s Financial Statements for the Fiscal Year ended October 1, 2005.

 

§3.13. Private Offering by the Company . Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than the Purchasers, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act.

 

§3.14. Use of Proceeds; Margin Regulations . The Company will apply the proceeds of the sale of the Notes for general corporate purposes. None of the transactions contemplated by this Agreement (including, without limitation, the direct or indirect use of the proceeds from the sale of the Notes) will violate or result in a violation of Section 7 of the Exchange Act or any regulations issued pursuant thereto, including, without limitation, Regulation T (12 C.F.R., Part 220), as amended, Regulation U (12 C.F.R., Part 221), as amended and Regulation X (12 C.F.R., Part 224), as amended, of the Board of Governors of the Federal Reserve System. The proceeds from the sale of the Notes by the Company will not be used to purchase or carry any “margin securities” within the meaning of such Regulation U, and the Company has no present intention of acquiring any such margin securities.

 

§3.15. Existing Indebtedness . Except as described therein, Item 3.15 of Schedule II sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of the date set forth therein, including the amounts, interest rates, sinking funds, installment payments and maturities of the Indebtedness of the Company and its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

 

§3.16. Foreign Assets Control Regulations, etc . Neither the issuance of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or the Anti-Terrorism Order. Without limiting the foregoing, neither the Company nor any of its Subsidiaries (a) is a blocked person described in Section 1 of the Anti-Terrorism Order, or (b) engages in any dealing or transactions, or be otherwise associated, with any such blocked person.

 

§3.17. Status under Certain Statutes . Neither the Company nor any Subsidiary is, and the ownership of the Property by the Company does not cause the Company to be, subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding

 

15

Company Act of 1935, as amended, the Public Utility Holding Company Act of 2005, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended.

 

§3.18. Environmental Matters . Except as disclosed in Item 3.18 of Schedule II :

 

(a) neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect;

 

(b) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect;

 

(c) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and

 

(d) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.

 

§3.19. Event of Default . No event has occurred and is continuing, and no condition exists, that, if all of the Notes had been issued and were Outstanding on the date hereof, would constitute a Default or an Event of Default.

 

§3.20. Solvency . The Company is not, and immediately after giving effect to the issue and sale of the Notes and the consummation of the other transactions contemplated by the Debt Documents will not be, insolvent as defined under any applicable federal or state law. For purposes of this Section 3.20, “ insolvent ” means:

 

(a) having, at a fair valuation, total liabilities (including unliquidated, contingent, subordinated, unmatured, disputed, legal, equitable, secured or unsecured liabilities) that exceed total assets;

 

(b) generally not paying debts as they become due;

 

(c) based on current projections that are themselves based on underlying assumptions providing a reasonable basis for the projections and reflecting present circumstances

 

16

and the most likely course of action for the period projected, having insufficient cash flow to pay debts as they mature;

 

(d) having unreasonably small capital with which to engage in anticipated business; or

 

(e) being “insolvent” as defined under any applicable federal or state law.

 

For purposes of this Section 3.20, the “ fair valuation ” of the assets of any Person shall be determined on the basis of the amount which may be realized within a reasonable time, either through collection or sale of such assets at the regular market value, conceiving the latter as the amount which could be obtained for the property in question within such period by a capable and diligent seller from an interested buyer who is willing to purchase under ordinary selling conditions.

 

§3.21. Address . The address of the principal place of business and chief executive office of the Company is the same as the address for notices to the Company provided in Section 16.

 

§3.22. Insurance . The Company and its Subsidiaries have obtained insurance, with respect to their respective properties and businesses, with financially sound and responsible insurers, of such a nature, with such terms and in such amounts as a prudent person would maintain with respect to similar properties and a similar business and which otherwise satisfies the requirements of Section 7.2.

 

§3.23. Other Names . The businesses conducted by the Company and each Subsidiary Guarantor prior to the date hereof have not for the past five years been conducted under any corporate, trade or fictitious name except as set forth in Item 3.23 of Schedule II .

 

§3.24. Flood Hazard Area . No portion of the Real Property lies within a designated flood plain or flood hazard area unless such portion is covered by adequate flood insurance in accordance with Section 7.2.

 

§3.25. No Condemnations . There is no proceeding pending or, to the best knowledge of the Company, threatened which would involve the taking of any portion of the Real Property by exercise of the power of eminent domain.

 

§3.26. Patronage Dividend Certificates . All Patronage Dividend Certificates issued as of the Closing Date are and shall remain, and all subsequently issued Patronage Dividend Certificates shall be and remain, subordinate in right of payment to the Indebtedness of the Company evidenced by this Agreement and the other Debt Documents on the terms set forth in the Company’s most recent SEC filings made prior to the date hereof, or in a manner more favorable to the Noteholders than such terms.

 

§3.27. Sophistication of Obligors . The Company and each other Subsidiary Guarantor, by reason of its business and financial experience, has the capacity to protect its own

 

17

interests in connection with the transactions contemplated hereby and by the other Debt Documents.

 

SECTION 4. REPRESENTATIONS OF THE PURCHASERS

 

§4.1. Purchase for Investment . You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You further represent that you are an “accredited investor” within the meaning of Regulation D of the SEC. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.

 

§4.2. Source of Funds . You represent and warrant that, with respect to each source of funds to be used by you to purchase the Notes (respectively, the “ Source ”), at least one of the following statements is accurate as of the Closing Date:

 

(a) The Source consists of assets of an “insurance company general account” as such term is defined in Section V(e) of Prohibited Transaction Class Exemption (“ PTCE ”) 95-60 (issued July 12, 1995), and such general account satisfies the conditions set forth in Section I(a) of PTCE 95-60;

 

(b) The Source is a “governmental plan” (within the meaning of Section 3(32) of ERISA);

 

(c) The Source is either (i) an “insurance company pooled separate account” (within the meaning of PTCE 90-1 (issued January 20, 1990)) or (ii) a “bank collective investment fund” (within the meaning of PTCE 91-38 (issued July 12, 1991)); and you have identified in writing to the Company each “employee benefit plan” (within the meaning of Section 3(3) of ERISA) or group of such employee benefit plans that comprises 10% of the assets of such account or fund;

 

(d) The Source is an “investment fund” managed by a “qualified professional asset manager” or “QPAM” (as defined in Part V of PTCE 84-14 (issued March 13, 1984)) which QPAM has been identified in writing; and no other party to the transactions described in this Agreement and no “affiliate” of such other party (as defined in Section V(c) of PTCE 84-14) has at this time, or has exercised at any time during the immediately preceding year, the authority to appoint or terminate said QPAM as manager of the assets of any Plan identified in writing pursuant to this paragraph (d) or to negotiate the terms of said QPAM’s management agreement on behalf of any such identified Plans;

 

18

(e) The Source is one or more Plans, or a separate account or trust fund comprised of one or more Plans, each of which has been identified in writing pursuant to this paragraph (e); or

 

(f) The Source includes no assets which are subject to ERISA or Section 4975 of the Code.

 

§4.3. Sophistication of Purchasers . Each Purchaser, by reason of its business and financial experience, has the capacity to protect its own interests in connection with the transactions contemplated hereby and by the other Debt Documents.

 

§4.4. Several Representations . The representations and warranties of the Purchasers set forth in this Article are several and not joint.

 

SECTION 5. INFORMATION AS TO THE COMPANY

 

§5.1. Financial and Business Information . The Company shall deliver to the Collateral Agent:

 

(a) Quarterly Statements — within forty five (45) days after the end of each Fiscal Quarter (other than the last quarterly fiscal period of each such Fiscal Year):

 

(i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and

 

(ii) consolidated statements of income and cash flows of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the Fiscal Year ending with such quarter,

 

setting forth, in the case of the balance sheet, in comparative form the figures as of the end of the preceding Fiscal Year and, in the case of the statements of income and cash flows, in comparative form the figures for the corresponding periods in the previous Fiscal Year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the consolidated financial position of the Company and its Subsidiaries and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided, however, that delivery within the time period specified above of copies of the Company’s Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the SEC shall be deemed to satisfy the requirements of this Section 5.1(a);

 

(b) Annual Statements — within ninety (90) days after the end of each Fiscal Year of the Company:

 

(i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such year, and

 

19

(ii) consolidated statements of income, changes in shareholders’ equity and cash flows of the Company and its Subsidiaries for such year,

 

setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail, prepared in accordance with GAAP, and accompanied:

 

(A) by an opinion thereon of independent certified public accountants of recognized national standing, stating that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, such opinion shall not contain a disclaimer of opinion, shall not express doubts about the ability of the Company or its Subsidiaries to continue as a going concern, shall not be limited because of a restricted or limited examination by such accountant of any material portion of the Company’s and its consolidated Subsidiaries’ records, or otherwise be subject to a qualification which the Required Noteholders reasonably determine is material and adverse, and

 

(B) to the extent not reflected or disclosed in such financial statements or the notes thereto, a detailed report of all Guaranties of the Company and the Subsidiary Guarantors, including, without limitation, the aggregate annual payments due under such Guaranties, excluding, in the case of Guaranties of lease obligations, “percentage” rent or other contingent rent and payments made by the lessee for property taxes, insurance, utilities, common area maintenance charges and the like;

 

provided , however , that the delivery within the time period specified above of the Company’s Annual Report on Form 10-K for such Fiscal Year (together with the Company’s annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the SEC, together with the detailed report described in clause (B) above, shall be deemed to satisfy the requirements of this Section 5.1(b);

 

(c) Reports to Management — at any time after the occurrence and during the continuation of an Event of Default, promptly after the submission thereof to the Company, one copy of each detailed report submitted to the Audit Committee of the Board of Directors of the Company by its independent auditors in connection with each annual or interim audit of the accounts of the Company made by such accountants (including the auditors’ comment letter to management, if any such letter is prepared);

 

(d) SEC and Other Reports — promptly upon their becoming available (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the SEC and of all

 

20

press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material;

 

(e) Notice of Default or Event of Default — immediately, and in any event within 5 days after a Responsible Officer’s becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 9.1(g), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;

 

(f) ERISA Matters — promptly, and in any event within five (5) days after a Responsible Officer’s becoming aware of any of the following that could result in the imposition of a tax or other penalty on the Company or any ERISA Affiliate in connection with any Plan, a written notice specifying the nature thereof, what action the Company is taking or proposes to take with respect thereto, and, when known, any action taken by the Internal Revenue Service, the U.S. Department of Labor, the PBGC or any foreign governmental entity with respect thereto: (i) an ERISA Termination Event, (ii) a “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA), other than one to which an exemption applies, (iii) a failure to make a timely contribution to any Pension Plan, if such failure has given rise to a lien under Section 412(n) of the Code or any comparable provision of applicable foreign law, or (iv) an actual, asserted or alleged violation of ERISA, the Code or applicable foreign law;

 

(g) Notices from Governmental Authority — promptly, and in any event within thirty (30) days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect;

 

(h) Reports to Other Lenders — without duplication, concurrently with the delivery therewith, promptly upon their becoming available, one copy of each income statement (including consolidating income statements) and each material report, notice or other information (other than routine notices of borrowings and repayments) sent by the Company or any Subsidiary to any Person that holds Indebtedness of the Company or any Subsidiary;

 

(i) Payments under Guarantees — promptly, and in any event within five (5) days after the Company has, paid $250,000 or more under any Guaranty, notice of such payment and the circumstances giving rise to such payment;

 

(j) Financial Reports of Financial Subsidiaries and Insurance Subsidiaries — promptly, and in any event within thirty (30) days of receipt thereof, copies of the financial statements (balance sheet, statement of income and statement of cash flows) of the Financial Subsidiaries and the financial statements (balance sheet and statement of income) of the Insurance Subsidiaries for each Fiscal Year of such Subsidiary prepared in such Subsidiary’s ordinary course of business;

 

21

(k) Material Litigation — promptly upon and, in any event, within thirty (30) days after, any Responsible Officer of the Company having knowledge thereof, notice of the institution of any suit, action or proceeding against the Company, any of its Subsidiaries or any shareholder thereof which has a reasonable possibility of being determined adversely to the Company and, if so determined, could have a Material Adverse Effect;

 

(l) Events Relating to the Property — promptly upon and, in any event, within five (5) days after, any Responsible Officer of the Company having knowledge thereof, notice of (i) any default or event of default under any Material agreement relating to all or a Material portion of the Property to which the Company or any of its Subsidiaries is a party, (ii) any claim exceeding $5,000,000 made by the Company under any insurance policy with respect to all or a portion of the Property, or (iii) the institution of any suit, action or proceeding affecting all or a Material portion of the Property, in which the amount involved exceeds $5,000,000 or in which injunctive or similar relief is sought;

 

(m) Amendment of Charter Documents — any proposed amendment, modification or supplement to the articles of incorporation or bylaws of the Company that Materially affects the interests of the Noteholders at least five (5) business days prior to the proposed effective date thereof;

 

(n) Information Required by Rule 144A — with reasonable promptness, upon the request of the holder of any Note, provide such holder, and any “qualified institutional buyer” (as such term is defined in Rule 144A) designated by such holder, such financial and other information as such holder may reasonably determine to be necessary in order to permit compliance with the information requirements of such Rule 144A in connection with the resale of Notes;

 

(o) Material Adverse Change — promptly upon and, in any event, within five (5) days after, any Responsible Officer of the Company having knowledge thereof, notice of any material adverse change in the business, operations or financial or other condition of the Company since the date hereof;

 

(p) Requested Information — with reasonable promptness, such other data and information relating to the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes;

 

(q) Financial Forecasts — No later than ninety (90) days following the close of each Fiscal Year, a consolidated projected income statement and any other projections prepared in the ordinary course of the Company’s business, in each case for the upcoming Fiscal Year and including a substantive description of each of the material underlying assumptions used in preparing such consolidated projected income statement or other projections in form and detail reasonably satisfactory to the Noteholders; and

 

22

(r) Auditors’ Letters — Promptly after receipt thereof, any writing delivered to the Company or any of its Subsidiaries from accountants which reports on any material weakness.

 

§5.2. Officer’s Certificate . Each set of financial statements delivered to a holder of Notes pursuant to Sections 5.1(a) and 5.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth:

 

(a) Covenant Compliance — the information (including detailed calculations) required in order to establish whether the Company and its Subsidiaries were in compliance with the requirements of Section 8.4 through 8.6, inclusive, during the quarterly or annual period covered by the statements then being furnished including, with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence; and

 

(b) Event of Default — a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto.

 

§5.3. Inspection . The Company shall permit the representatives of each holder of Notes that is an Institutional Investor:

 

(a) No Default — if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to examine its books of account, records, reports and other papers, to make copies and extracts therefrom, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company’s officers, employees and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing but which will not interfere in any Material respect with the Company’s or its Subsidiary’s operations; and

 

(b) Default — if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested.

 

23

SECTION 6. PREPAYMENT OF THE NOTES

 

§6.1. Required Prepayments .

 

(a) Scheduled Prepayments . The Company shall make the prepayments of principal on the Notes required by Section 1.6, without payment of the Make-Whole Amount or any premium. Notwithstanding anything to the contrary contained herein or in any Note, however, the final payment due under each Note (whether at maturity, by acceleration or otherwise) shall be in an amount sufficient to pay in full all outstanding principal thereon together with all accrued interest and premium (if any) due hereon.

 

(b) Reduction of Prepayment Amount . Upon any partial prepayment of the Notes pursuant to Section 6.2 or purchase of the Notes permitted by Section 6.5, the principal amount of each required payment of principal of and accrued interest on the Notes becoming due under this Section 6.1 on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase.

 

§6.2. Optional Prepayments with Make-Whole Amount . On and after the first Installment Date following the Closing Date, the Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time, all or any part of the Notes, in an amount not less than $5,000,000 in aggregate principal amount of the Notes then Outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, plus interest accrued to the date of prepayment, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. If no Default or Event of Default has occurred and is continuing on both the date of notice and the date of payment, the Company may specify the series (or more than one series) that it will prepay; if a Default or Event of Default has occurred and is continuing on either (or both) of such dates, then the prepayment shall be applied pro rata to all Notes or otherwise applied as the Noteholders agree. The Company will give each holder of Notes written notice of each optional prepayment under this Section 6.2 not less than thirty (30) days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 6.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation, which calculation shall be subject to the approval of the Noteholders. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.

 

§6.3. Allocation of Partial Prepayments . In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time Outstanding in proportion, as nearly as practicable, to the

 

24

respective unpaid principal amounts thereof on the Business Day immediately preceding Settlement Date.

 

§6.4. Maturity; Surrender, etc . In the case of each prepayment of Notes pursuant to this Section 6, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

 

§6.5. Purchase of Notes . The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the Outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.

 

§6.6. Make-Whole Amount . The term “ Make-Whole Amount ” means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:

 

“Called Principal” means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 6.2 or has become or is declared to be immediately due and payable pursuant to Section 10.1, as the context requires.

 

“Discounted Value” means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.

 

“Reinvestment Yield” means 0.50% over the yield to maturity implied by (x) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as the applicable PX page of the Bloomberg Financing Markets Service (or such other display as may replace such display) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (y) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the

 

25

Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the constant maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the constant maturity closest to and less than the Remaining Average Life.

 

“Remaining Average Life” means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

 

“Remaining Scheduled Payments” means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date; provided, however, that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to this Section 6 or Section 10.1.

 

“Settlement Date” means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 6.2 or has become or is declared to be immediately due and payable pursuant to Section 10.1, as the context requires.

 

§6.7. Restrictions on Prepayment . Except as otherwise provided in this Section 6, there shall be no prepayment, in whole or in part, of the principal of all or any of the Notes. The Company waives any right to prepay the Notes except under the terms and conditions as set forth in this Section 6 and agrees that if the Notes are prepaid pursuant to Section 6.2, the Company will pay the Make-Whole Amount. The Company hereby acknowledges that the inclusion of this waiver of prepayment rights and agreement to pay the Make-Whole Amount upon prepayment of the Notes pursuant to Section 6.2 was separately negotiated with the Purchasers, that the economic value of the various elements of this waiver and agreement was discussed, that the consideration given by the Company for the Notes was adjusted to reflect the specific waiver and agreement negotiated between the Company and the Purchasers and contained herein, and that this waiver is intended to comply with California Civil Code Section 2954.10.

 

26

SECTION 7. AFFIRMATIVE COVENANTS

 

The Company covenants that so long as any of the Notes are outstanding:

 

§7.1. Compliance with Law . The Company will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises, patents, trademarks, service marks, trade names, copyrights, design patents and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that noncompliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

§7.2. Insurance .

 

(a) The Company will, and, at all times during the term hereof, will cause each of its Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, coinsurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

 

(b) The Company will maintain, or cause to be maintained, in full force and effect, with such insurers, amounts, coverages and forms reasonably satisfactory to and approved by the Noteholders, insurance as follows:

 

(i) Required Insurance Coverages and Limits . The Company agrees that it will at its own cost and expense and at all times during the term carry and maintain or cause to be carried and maintained:

 

(A) Casualty Insurance — “all risk” property insurance on the Property in an amount not less than the full replacement cost of the Property (without regard to depreciation), which coverage shall include, without limitation, flood insurance (for any Real Property located in a 100-year flood plain) and earthquake insurance, but (in either case) only to the extent that such coverage is generally available at commercially practicable rates;

 

(B) Liability Insurance — comprehensive general liability insurance (including, without limitation, blanket contractual, personal injury, XCU hazards, products/completed operations, independent contractors, and broad form property damage) applicable to the Property in such amounts as from time to time are usually carried by organizations similar to the Company owning or leasing and operating similar properties in similar locations; provided, however, that the Company shall be required to carry and maintain

 

27

liability insurance applicable to the Real Property in a minimum amount equal to $50,000,000 aggregate/$1,000,000 per occurrence;

 

(C) Worker’s Compensation — worker’s compensation insurance with respect to employees of the Company sufficient to meet the statutory requirements of all states where the Real Property is located; and

 

(D) Other Insurance — such other insurance with respect to the Company’s property and business of such a nature, with such terms and in such amounts, as a prudent person with the Company’s financial resources would maintain with respect to similar properties and a similar business, and, in any event, insurance on all its property of a character usually insured by corporations engaged in the same or a similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against and for by such corporations.

 

(ii) Insurance Terms . All the insurance policies required pursuant to Section 7.2(b) above shall be subject to such deductible amounts and retentions as are usual and customary for entities similar to the Company owning or leasing and operating similar properties, but in no event greater than reasonably acceptable to the Noteholders.

 

(iii) Additional Insureds; Loss Payees . All insurance hereunder shall name the Noteholders and such other parties (with an insurable interest) as the Noteholders may designate as additional insureds as their respective interests may appear. All insurance referred to in clause (b)(i)(A) above shall name the Collateral Agent as loss payee. The Company agrees to effect all insurance provided for in this Section 7.2 with financially sound and responsible insurance companies legally qualified to issue insurance in all states where the Property is located and reasonably acceptable to the Noteholders. All such policies referred to in clauses (a), (b)(i)(A) and (b)(i)(B), as the case may be, shall (i) provide that the same shall not be cancelled, materially modified or terminated without at least thirty (30) days’ (or ten (10) days’ in the case of nonpayment of premium) prior written notice to each insured and each loss payee named therein, (ii) provide for at least thirty (30) days’ prior written notice to each insured and each loss payee named therein of the date on which such policies shall terminate by lapse of time if not renewed, (iii) contain a breach-of-warranty clause providing that the respective interests of the Noteholders or any other additional insured or loss payee shall not be invalidated by any action or inaction of the Company or any other Person, (iv) insure the Noteholders and any other additional insured or loss payee regardless of any breach or violation by the Company or any other Person of any warranties, declarations, or conditions contained in the policies related to such insurance, (v) except for the insurance referred to in clause (b)(i)(D) above, provide that the insurer thereunder waives all right of subrogation against the Noteholders and waives any right of set-off or counterclaim and any other right of deduction whether by attachment or otherwise, and (vi) be primary without right of contribution from any other insurance carried by or on behalf of any Noteholder with respect to any interest in the Property. No Noteholder shall, by reason of accepting, rejecting, approving or obtaining insurance incur any liability for the existence, nonexistence, form or legal sufficiency thereof, the solvency of any insurer, or the payment of any losses.

 

28

(iv) Certificate . On or prior to the Closing Date, and not less than five (5) days prior to the expiration dates of the expiring policies required pursuant to this Section 7.2, the Company shall deliver to you certificates of insurance issued by the insurers thereunder or by an insurance broker authorized to bind such insurers evidencing the insurance maintained pursuant to this Section 7.2.

 

(v) Performance by Noteholders . In the event that the Company fails to maintain insurance as herein provided, the Noteholders may at their option, but without obligation, and upon not less than five (5) Business Days’ notice to the Company, provide such insurance and, in such event, the Company shall, upon demand from time to time, reimburse the Noteholders for the cost thereof, together with interest at the Overdue Rate on such cost from the date of payment of such cost to the date of reimbursement.

 

(vi) Proceeds . The amount collected under any such insurance policies maintained pursuant to this Section 7.2 shall be distributed or applied in accordance with the terms and provisions of this Agreement, the Security Agreements or the Deeds of Trust, as applicable.

 

(vii) Separate Insurance . Nothing in this Section 7.2 shall be construed to prohibit any Noteholder from insuring at its own expense its interest therein, and any insurance so maintained shall not provide for or result in a reduction of the coverage or the amounts payable under any of the insurance required to be maintained by the Company under this Section 7.2.

 

§7.3. Maintenance of Properties .

 

(a) Generally . The Company will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section 7.3 shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b) Maintenance of the Property . With respect to the Property specifically, the Company shall:

 

(i) to keep the Property in good condition and repair (reasonable wear and tear excepted);

 

(ii) subject to Section 8.4, not to remove or demolish material structures on the Property;

 

(iii) to complete or restore promptly and in good and workmanlike manner the Property or any part thereof which may be damaged or destroyed (provided, that, in the case of an insured loss, any insurance proceeds are made available by the Collateral Agent in

 

29

accordance with the terms and conditions of the applicable Deed of Trust) unless the part thereof so damaged or destroyed is obsolete or no longer used by the Company in the operation of its business and the failure to complete or restore such part of the Property will not result in a Material reduction in the value of the Property;

 

(iv) except as are being contested under Section 8.5, to pay when due all material claims for work performed and for materials furnished on or to the Real Property, and to promptly pay any and all Liens arising out of or resulting from work performed or materials supplied on or to the Real Property;

 

(v) to comply in all Material respects with and not suffer any Material violations of (A) any and all laws, ordinances, regulations and standards, including, but not limited to, all Environmental Laws, (B) any and all covenants, conditions, restrictions and equitable servitudes, whether public or private, of every kind and character, and (C) all requirements of insurance companies and any bureau or agency which establishes standards of insurability, which laws, covenants or requirements affect the Property and pertain to acts committed or conditions existing thereon, including, without limitation, such work of alteration, improvement or demolition as such laws, covenants or requirements mandate;

 

(vi) not to commit or permit waste of the Property or any material part thereof;

 

(vii) to perform in all Material respects all obligations required to be performed in any leases, conditional sales contracts or like agreements affecting all or any portion of the Property or the operation, occupation or use thereof; and

 

(viii) to make no further assignment of rents of the Property.

 

(c) The Company shall execute and, where appropriate, acknowledge and deliver such further instruments as the Noteholders reasonably deem necessary or appropriate to continue or perfect the security provided by the Security Documents.

 

(d) The Company shall not seek, make or consent to any agreements, restrictions or change in the zoning or conditions of use of the Property that would be binding on the successors or assigns of the Company or that would affect the ability of the Company to continue to use the Property for substantially the same purposes as presently used without the prior written consent of the Noteholders, which consent shall not be unreasonably withheld or delayed if such agreements, restrictions and changes do not affect the priority or materially impair the value of the Noteholders’ security under the Security Documents. The Company shall comply, in all Material respects, with and make all payments required under the provisions of any covenants, conditions or restrictions affecting the Property. The Company shall comply with all existing and future requirements of all Governmental Authorities having jurisdiction over all or any portion of the Property unless the requirement is being properly contested or failure to comply will not have a Material Adverse Effect.

 

30

§7.4. Payment of Taxes and Claims .

 

(a) The Company will and will cause each of its Subsidiaries to file all material tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect.

 

(b) The Company will pay and discharge promptly after notice and prior to delinquency, all taxes, assessments, levies, imposts, duties, fees and charges imposed by any federal, state or Local Government authority upon any Noteholder by reason of its interest in the Property created hereby, under any of the Security Documents or by reason of any payment, or portion thereof, made to any Noteholder hereunder; provided, however, that the Company shall not have any obligation to pay or discharge any Noteholder’s business or franchise taxes, federal or state income taxes, business and occupation taxes payable in lieu of state income taxes or other taxes that are measured by and imposed upon the Noteholder’s net income or receipts.

 

(c) The Company will pay and discharge promptly all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other similar Persons for labor, materials, supplies and rentals that, if unpaid, might by law become a Lien upon all or a portion of the Property or any of its other property; provided, however, that none of the foregoing need be paid while the same is being contested in good faith by appropriate proceedings diligently conducted in accordance with the conditions of Section 8.5.

 

§7.5. Corporate Existence, Designation of Subsidiaries, etc . Subject to Section 8.2, (a) the Company will, and shall cause each of the Subsidiary Guarantors to, take and fulfill, or cause to be taken and fulfilled, all actions and conditions necessary to preserve and keep in full force and effect its existence, rights and privileges as a corporation and will not liquidate or dissolve, and it will take and fulfill, or cause to be taken and fulfilled, all actions and conditions necessary to qualify, and to preserve and keep in full force and effect its qualification, to do business as a foreign corporation in the jurisdictions in which the conduct of its business or the ownership or leasing of its properties requires such qualification and the failure so to qualify would have a Material Adverse Effect; provided, however, that the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiary Guarantors and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect.

 

31

§7.6. Keeping of Records and Books of Account . The Company shall keep, and cause each of its Subsidiaries to keep, adequate records and books of accounts, in which complete entries will be made and which in the case of financial statements referred to in Section 5.1 will be prepared (except as otherwise expressly provided in this Agreement) in accordance with GAAP, consistently applied.

 

§7.7. ERISA .

 

(a) The Company and the ERISA Affiliates each will take all actions and fulfill all conditions necessary to maintain any and all Plans in substantial compliance with applicable requirements of ERISA and the Code until such Plans are terminated, and the liabilities thereof discharged, in accordance with applicable law.

 

(b) No Pension Plan will have any “accumulated funding deficiency” (within the meaning of Section 412 of the Code), which deficiency could reasonably be expected to have a Material Adverse Effect.

 

§7.8. Additional Subsidiary Guarantors . In the event that (a) the Company creates, acquires or capitalizes (directly or indirectly) any Subsidiary after the Closing Date with assets in excess of $250,000 (excluding the Financial Subsidiaries and the Insurance Subsidiaries), (b) any existing Subsidiary which is not a Subsidiary Guarantor acquires total assets in excess of $250,000 (excluding the Financial Subsidiaries and the Insurance Subsidiaries), or (c) any other Subsidiary is required to guarantee the Operating Line of Credit, the Company shall cause such Subsidiary to execute a Subsidiary Guaranty and a Subsidiary Security Agreement. Thereafter, said Subsidiary shall be a Subsidiary Guarantor for all purposes of the Debt Documents.

 

§7.9. Maintenance of Office . The Company will maintain at the office located at the address for notices to the Company provided in Section 16 an office where notices, presentations and demands in respect of this Agreement, the Notes and the other Debt Documents may be given to and made upon them; provided, however, that the Company may, upon fifteen (15) Business Days’ prior written notice to the Noteholders, move such office to any other location within the United States of America.

 

§7.10. Change in Name or Jurisdict