EXHIBIT 10.19
SECOND AMENDED AND RESTATED LEASE AND LICENSE FINANCING
AND PURCHASE OPTION AGREEMENT
Between
ARABICA FUNDING, INC.
AND
CARIBOU COFFEE COMPANY, INC.
June 29, 2004
TABLE OF CONTENTS
PAGE
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SECTION 1. Definitions.................................................................................... 2
SECTION 2. Agreement for Lease, License and Purchase Option Financing; Covenant of Quiet Enjoyment........ 22
SECTION 3. Delivery and Acceptance of Assets.............................................................. 23
SECTION 4. Term........................................................................................... 23
SECTION 5. End of Term Delivery of Assets................................................................. 23
SECTION 6. Payments....................................................................................... 24
SECTION 7. Net Lease and License.......................................................................... 24
SECTION 8. Arabica's Title; Grant of Security Interest.................................................... 25
SECTION 9. Use of Assets; Compliance with Laws............................................................ 25
SECTION 10. Maintenance and Repair of the Equipment........................................................ 26
SECTION 11. Replacement of Parts; Alterations; Modifications and Additions................................. 26
SECTION 12. Taxes.......................................................................................... 27
SECTION 13. Assignment, Sublease, Sublicense or other Transfer............................................. 29
SECTION 14. Event of Loss; Obsolete and Worn Out Equipment................................................. 30
SECTION 15. Insurance...................................................................................... 31
SECTION 16. Illegality..................................................................................... 31
SECTION 17. General Indemnity.............................................................................. 32
SECTION 18. Disclaimer..................................................................................... 33
SECTION 19. Representations and Warranties................................................................. 34
SECTION 20. Financial Covenants............................................................................ 41
SECTION 21. Affirmative Covenants.......................................................................... 43
SECTION 22. Negative Covenants............................................................................. 49
SECTION 23. Events of Default.............................................................................. 53
SECTION 24. Remedies Upon Default.......................................................................... 55
SECTION 25. Arabica's Right to Perform for the Company..................................................... 56
SECTION 26. Further Assurances............................................................................. 56
SECTION 27. Transaction Costs, Fees and Expenses........................................................... 56
SECTION 28. Notices........................................................................................ 57
SECTION 29. Call Option.................................................................................... 57
SECTION 30. Put Option..................................................................................... 59
SECTION 31. Arabica Agents, Nominees or Representatives.................................................... 59
SECTION 32. Miscellaneous.................................................................................. 59
SECTION 33. Payments, Set-Off and Subordination............................................................ 60
SECTION 34. Waiver of Jury Trial........................................................................... 60
i
Schedules
1 - Quarterly Dates
1(i) - Financial Statements
2(a) - Equipment and Intangible Assets
3 - Registration or Licensing Exceptions
6(a) - Rent
19(i) - Intellectual Property Exceptions
19(o) - Capital Stock of Restricted Group
19(p) - Environmental Exceptions
19(r)(i) - UCC Filing Jurisdictions
19(r)(ii) - Real Property; Leasehold Interests
19(t) - Stores and Material Agreements
19(u)(i) - Indebtedness to Remain Outstanding
19(u)(ii) - Liens to Remain Outstanding
22(g)(ii) - Existing Investments
22(i) - Affiliate Agreements
Exhibits
A - Form of Compliance Certificate
B - Form of Supplement
C - Form of Store by Store Report
D - Form of Subsidiary Certificate
E - Form of Exemption Certificate
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SECOND AMENDED AND RESTATED LEASE AND LICENSE FINANCING
AND PURCHASE OPTION AGREEMENT
THIS SECOND AMENDED AND RESTATED LEASE AND LICENSE FINANCING AND PURCHASE
OPTION AGREEMENT (as supplemented, amended, modified, restated or replaced from
time to time, this "AGREEMENT"), dated as of June 29, 2004 is made by and
between ARABICA FUNDING, INC., a Delaware corporation ("ARABICA") and CARIBOU
COFFEE COMPANY, INC., a Minnesota corporation (the "COMPANY").
WHEREAS, Arabica and the Company are parties to that certain Amended and
Restated Asset Purchase Agreement, dated as of April 25, 2001 (the "ORIGINAL
ASSET PURCHASE AGREEMENT"), pursuant to which the Company has sold to Arabica
from time to time certain tangible and intangible assets identified therein; and
WHEREAS, Arabica and the Company are parties to that certain Amended and
Restated Lease and License Financing and Purchase Option Agreement, dated as of
April 25, 2001 (the "ORIGINAL AGREEMENT"), relating to tangible and intangible
assets purchased by Arabica pursuant to the Original Asset Purchase Agreement;
WHEREAS, pursuant to the Original Agreement, Arabica has leased and
licensed such tangible and intangible assets to the Company;
WHEREAS, pursuant to the Original Agreement and that certain Amended and
Restated Call Option Letter, dated as of April 25, 2001 (the "ORIGINAL CALL
OPTION LETTER"), Arabica has granted to the Company an option to purchase such
tangible and intangible assets on the terms therein specified;
WHEREAS, pursuant to the Original Agreement and that certain Amended and
Restated Put Option Letter, dated as of April 25, 2001 (the "ORIGINAL PUT OPTION
LETTER"), the Company has granted to Arabica the right to require the Company to
purchase such tangible and intangible assets on the terms therein specified;
WHEREAS, Arabica and the Company propose to amend the Original Asset
Purchase Agreement by entering into the Asset Purchase Agreement (as defined
herein) pursuant to which the Company may propose to sell additional tangible
and intangible assets from time to time to Arabica and may seek to have Arabica
purchase such assets and thereafter lease and license such assets to the Company
hereunder and make such assets subject to the Original Call Option Letter and
the Original Put Option Letter; and
WHEREAS, Arabica and the Company propose to amend and restate the Original
Agreement in the manner herein provided to permit the leasing and licensing of
such additional assets to the Company and to amend the Original Call Option
Letter and the Original Put Option Letter to make such additional assets subject
thereto by entering into the Call Option Letter and the Put Option Letter (each
as defined herein), as applicable.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Arabica and the Company agree, as
of the date hereof, to amend and restate the Original Agreement as herein
provided.
SECTION 1. DEFINITIONS.
(a) Unless the context otherwise requires, the following capitalized terms
shall have the following meanings for all purposes of this Agreement and shall
be equally applicable to both the singular and the plural forms of the terms
herein defined:
"ACQUISITION COST" means the sum of (i) $11,915,837.56 plus (ii) the
acquisition cost amount specified in each Supplement (subject to reduction as a
result of any payment of Acquisition Cost hereunder, under the Call Option
Letter or under the Put Option Letter), which sum shall not exceed at any time
the Reference Amount.
"ACQUISITION TARGET" means any Person or any division of a Person the
outstanding Capital Stock or the assets of which are proposed to be acquired by
the Company or any Wholly-Owned Subsidiary Guarantor in connection with a
Permitted Acquisition.
"ACQUISITION TRANSACTION" means any acquisition of all or substantially
all of the assets or Capital Stock of any Person or any division thereof.
"ADJUSTMENT DATE" shall have the meaning given to such term in the
definition of "Pricing Grid".
"AFFILIATE" as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"APPLICABLE MARGIN" means the rate per annum designated in the Pricing
Grid to be used for purposes of determining the Rental Rate by reference to the
Eurodollar Rate or the COF Rate, as the case may be.
"ASSET PURCHASE AGREEMENT" means that certain Second Amended and Restated
Asset Purchase Agreement, dated as of the date hereof, between the Company and
Arabica.
"ASSETS" means the Equipment and the Intangible Assets.
"AVAILABLE AMOUNT" means on any day the amount by which the Reference
Amount exceeds the unpaid Acquisition Cost on such day.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks in Boston, Massachusetts or New York City are authorized
or required by law to close, provided, that with respect to notices and
determinations in connection with, and payments in respect of,
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Rent when the Rental Rate component thereof is determined based on the
Eurodollar Rate, such day is also a day for trading by and between banks in
Dollar deposits in the interbank eurodollar market.
"CALL OPTION" shall have the meaning given to such term in the Call Option
Letter.
"CALL OPTION LETTER" shall mean that certain Second Amended and Restated
Call Option Letter, dated the date hereof, issued by Arabica to the Company.
"CAPITAL EXPENDITURES" means, for any period, the aggregate of all amounts
expended or financed for the acquisition or leasing (pursuant to a capital
lease) of fixed or capital assets or additions to equipment (including
maintenance expenditures, build-out and new store expenditures, Pre-Opening
Expenses and other replacements, capitalized repairs and improvements during
such period) that should be capitalized under GAAP on a consolidated balance
sheet of such Person and its Subsidiaries.
"CAPITALIZED LEASE OBLIGATIONS" means, as to any Person, the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"CASH EQUIVALENTS" means investments in checking or other similar current
accounts with banks or trust companies organized under the laws of the United
States or any state thereof that have capital and surplus of at least
$500,000,000 and that are insured by the Federal Deposit Insurance Corporation.
"CHANGE IN CONTROL" means for any reason:
(i) Holdings shall own of record less than 67% of the issued and
outstanding Capital Stock or voting power of the Company; or the Persons
who own all of the Capital Stock of Holdings on the date hereof having the
ordinary voting power to elect to the Board of Directors of Holdings shall
cease to own at least 65% of such Capital Stock;
(ii) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT")), excluding the holders of Capital Stock of Holdings and
the Company, respectively, on the Closing Date, shall become, or obtain
rights (whether by means or warrants, options or otherwise) to become, the
"beneficial owner" (as defined in Rules 13(d)-3 and 13(d) 5 under the
Exchange Act), directly or indirectly, of more than 25% of the outstanding
Capital Stock or voting power of Holdings or the Company;
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(iii) during any period of 12 consecutive months, commencing after
the date of this Agreement, Continuing Directors shall cease for any
reason other than death or disability to constitute a majority of the
directors of Holdings then in office;
(iv) the Company shall cease to own of record and beneficially 100%
of the issued and outstanding Capital Stock and voting power in each
Person that is as of the date hereof, or at any time hereafter becomes, a
Wholly-Owned Subsidiary of the Company unless otherwise permitted under
the Lease/Purchase Documents);
(v) GSS Holdings, Inc. or a corporate service company (or an
affiliate thereof) or a charitable trust (any such corporate service
company, affiliate or charitable trust to be reasonably acceptable to
Arabica) shall cease to own of record and beneficially 100% of the issued
and outstanding Capital Stock and voting power of Arabica on a fully
diluted basis, or any member of the Board of Directors of Arabica shall
cease to be an Independent Director; or
(vi) any Specified Change of Control shall occur.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COF RATE" means the cost to Arabica of funding itself in relation to this
Agreement at such times when the Eurodollar Rate is unavailable or Arabica
determines that the Eurodollar Rate does not accurately reflect the cost of its
funding.
"COFFEEHOUSE LEVEL EBITDA MARGIN" means the "Coffeehouse Level EBITDA
Margin" for the Company and its Subsidiaries, calculated in the manner set forth
on the financial statements attached as Schedule 1(i).
"COFFEEHOUSE LEVEL SALES" means the "Coffeehouse Level Sales" for the
Company and its Subsidiaries, calculated in the manner set forth on the
financial statements attached as Schedule 1(i).
"COLLATERAL" means all property now owned or hereafter acquired by any
member of the Restricted Group, upon which a Lien is purported to be created by
any Security Document.
"COMMENCEMENT DATE" means the date of this Agreement.
"COMMONLY CONTROLLED ENTITY" means an entity, whether or not incorporated,
that is under common control with the Company within the meaning of Section 4001
of ERISA or is part of a group that includes the Company, as applicable, and
that is treated as a single employer under Section 414 of the Code.
"COMPANY GUARANTEE AND SECURITY AGREEMENT" means the Company Guarantee and
Security Agreement, dated as of the date hereof, among the Company, Holdings,
each of their respective Subsidiaries and Arabica.
"COMPANY LEASEHOLD MORTGAGE" means the Leasehold Mortgage by the Company
in favor of Arabica covering the Headquarters Building, substantially in the
form of Exhibit A.
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"COMPANY SECURITY DOCUMENTS" means each of the Company Guarantee and
Security Agreement, the Company Leasehold Mortgage, any Mortgage, Leasehold
Security Document, and Intellectual Property Security Agreement and all other
security documents from time to time delivered to Arabica to secure the
obligations of the Company under this Agreement and the other Lease/Purchase
Documents.
"COMPLIANCE CERTIFICATE" means a certificate duly executed by a
Responsible Officer, substantially in the form of Exhibit A.
"CONFIDENTIAL INFORMATION MEMORANDUM" means the Confidential Information
Memorandum, dated April 2004, describing the Company and the Lease/Purchase
Documents.
"CONSOLIDATED CASH FLOW" means, for any period, (a) the Consolidated
EBITDA for such period, minus (b) cash taxes paid or required to be paid during
such period, minus (c) the aggregate amount of Maintenance Capital Expenditures
for such period; in each case determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net Income for
such period plus, without duplication and to the extent reflected as a charge in
the statement of such Consolidated Net Income for such period, the sum of (a)
income tax expense, (b) Consolidated Financing Expense, (c) depreciation and
amortization expense (including amortization of debt acquisition cost), (d)
earnings attributable to minority interests, (e) any extraordinary expenses,
charges or losses, (f) other non-cash charges and (g) Pre-Opening Expenses, and
minus, (a) to the extent included in the statement of such Consolidated Net
Income for such period, the sum of (i) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise includable as
a separate item in the statement of such Consolidated Net Income for such
period, gains on the sales of assets outside of the ordinary course of business)
and (ii) any other non-cash income or credits and (b) any cash payments made
during such period in respect of items described in clause (e) above subsequent
to the fiscal quarter in which the relevant non-cash expenses or losses were
reflected as a charge in the statement of Consolidated Net Income, all as
determined on a consolidated basis for the Company and its Subsidiaries.
"CONSOLIDATED EBITDAR" means, for any period, the sum of (a) Consolidated
EBITDA for such period, plus (b) Consolidated Rental Expense for the Company and
its Subsidiaries for such period, in each case determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED FINANCIAL OBLIGATIONS" means, for any period with respect to
the Company and its Subsidiaries, the sum of all scheduled payments (including
principal, Consolidated Financing Expense and commitment fees) on Indebtedness
(including without limitation with respect to Capitalized Leases) of the Company
and its Subsidiaries; in each case determined on a consolidated basis in
accordance with GAAP. For purposes of this Agreement, as to the Company and its
Subsidiaries, Consolidated Financial Obligations shall, without duplication,
include the Obligations.
"CONSOLIDATED FINANCING EXPENSE" means, for any period, the total
financing expense (including that attributable to Capital Lease Obligations and
excluding amortization of debt acquisition cost) of the Company and its
Subsidiaries for such period with respect to all
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outstanding Indebtedness of the Company and its Subsidiaries (including all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and net costs under Swap Agreements
in respect of financing rates to the extent such net costs are allocable to such
period in accordance with GAAP). For purposes of this Agreement, as to the
Company and its Subsidiaries, Consolidated Financing Expense shall include the
Obligations. For purposes of clarification, it is the intention of the
Restricted Group not to incur any Consolidated Financing Expense or other
financial obligations that are not acceptable under Islamic ▇▇▇▇▇'ah principles.
"CONSOLIDATED FUNDED INDEBTEDNESS" means without duplication with respect
to the Company and its Subsidiaries, all Indebtedness of the Company and its
Subsidiaries with respect to any of the following: (i) the principal amount of
money borrowed (whether recourse or non-recourse), including all amounts payable
in connection therewith, (ii) obligations evidenced by a bond, debenture, note
or other like written obligation to pay money, (iii) Capital Lease Obligations,
(iv) obligations under conditional sales or other title retention agreements or
secured by any Lien, (v) the aggregate face amount of any letters of credit or
similar instruments (including reimbursement obligations with respect thereto),
(vi) the deferred unpaid purchase price of property or services, except trade
payables, accrued expenses and other similar liabilities incurred in the
ordinary course of business, (vii) Indebtedness relating to Swap Agreements,
(viii) Indebtedness relating to sale-leaseback obligations, (ix) all obligations
of such Person under take or pay or similar arrangements or under commodities
agreements, (x) Disqualified Stock, (xi) the principal portion of all
obligations of such Person under synthetic leases, (xii) the Indebtedness of any
partnership or unincorporated joint venture in which such Person is a general
partner or a joint venturer, (xiii) the outstanding attributed principal amount
under any securitization transaction of such Person, (xiv) all obligations that
are immediately due and payable out of proceeds of or production from property
now or hereafter acquired by such Person and (xv) all Guarantee Obligations of
such Person in respect of any or all of the foregoing; in each case determined
on a consolidated basis in accordance with GAAP. The aggregate amount of
Consolidated Funded Indebtedness at any time shall include all accrued amounts
which have become due and payable but has not been paid (whether or not
capitalized) and the accreted amount of any debt issued with original issue
discount. For purposes of this Agreement, as to the Company and its
Subsidiaries, Consolidated Funded Indebtedness shall include the Obligations.
For purposes of clarification, it is the intention of the Restricted Group not
to incur any Consolidated Funded Indebtedness or other financial obligations
that are not acceptable under Islamic ▇▇▇▇▇'ah principles.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated net
income (or loss) of the Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of the Company or is merged into or consolidated with the
Company or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of the Company) in which the Company or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Company or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Company to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any
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Contractual Obligation (other than under any Lease/Purchase Document) or
Requirement of Law applicable to such Subsidiary.
"CONSOLIDATED RENTAL EXPENSE" means, for any period, all obligations in
respect of base and contingent rent expensed during such period under any rental
agreements or leases of real or personal property (other than amounts owed to
Arabica under the Lease/Purchase Documents), excluding tenant allowance
amortization, all determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED SENIOR LEVERAGE RATIO" shall have the meaning given such
term in Section 20(a).
"CONTINUING DIRECTORS" means the directors of Holdings on the Closing
Date, and each other director, if, in each case, such other director's
nomination for election to the board of directors of Holdings is recommended by
at least two thirds of the then Continuing Directors.
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CONTROL INVESTMENT AFFILIATE" means, as to any Person, any other Person
that (a) directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person and (b) is organized by such Person primarily
for the purpose of making equity or debt investments in one or more companies.
For purposes of this definition, "control" of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"DEFAULT" means any of the events specified in Section 23, whether or not
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"DISPOSITION" means, with respect to any property, any sale, lease, sale
and leaseback, assignment, conveyance, transfer or other disposition thereof,
excluding any such dispositions constituting the leasing or licensing of
property pursuant to the Lease/Purchase Documents. The terms "DISPOSE" and
"DISPOSED OF" shall have correlative meanings.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable, in either case at the option of the holder
thereof) or otherwise (a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (b) is or may become redeemable or
repurchaseable at the option of the holder thereof, in whole or in part, or (c)
is convertible or exchangeable at the option of the holder thereof for
Indebtedness or Disqualified Stock, on or prior to, in the case of clause (a),
(b) or (c), the date that is 91 days after the date Final Rent Payment Date,
provided, however, that any Capital Stock that would not constitute Disqualified
Stock but for provisions thereof giving holders thereof the right to require
such Person to purchase or redeem such Capital Stock in cash upon the occurrence
of an "Asset Sale" or "Change of Control" (or similar terms having the same
meaning) occurring prior to the date that is 91 days after the Final Rent
Payment Date shall not constitute Disqualified Stock if:
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(x) the "asset sale" or "change of control" provisions applicable to such
Capital Stock are not more favorable to the holders of such Capital Stock than
the terms of this Agreement; and
(y) any such requirement only becomes operative after compliance with such
terms of this Agreement and the other Lease/Purchase Documents.
"DOLLARS" and "$" means dollars in lawful currency of the United States.
"EFFECTIVE DATE" means, as to the Assets identified on Schedule 2(a)
hereto, the Commencement Date and, as to any Assets identified in a Supplement,
the date of such Supplement.
"ENVIRONMENTAL LAWS" means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"EQUIPMENT" means the equipment and other tangible assets described in
Schedule 2(a) hereto and any other items of Equipment made subject to this
Agreement by the execution and delivery of a Supplement, and all items of
equipment and other assets (including without limitation replacement Parts)
which may from time to time be incorporated in such equipment or other assets
described in Schedule 2(a) or subsequently made subject to this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS" means, for any day, the aggregate
(without duplication) of the maximum rates (expressed as a decimal amount) of
reserve requirements in effect on such day (including basic, supplemental,
marginal and emergency reserves) under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto dealing with reserve requirements prescribed
for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board of Governors of the Federal Reserve System) maintained
by a member bank of the Federal Reserve System.
"EURODOLLAR BASE RATE" means with respect to each day during each Rent
Period in which the Rental Rate is determined with reference to the Eurodollar
Rate, the rate per annum determined on the basis of the rate for deposits in
Dollars for a period equal to (or, if no such period exists, comparable to) such
Rent Period commencing on the first day of such Rent Period appearing on Page
3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days
prior to the beginning of such Rent Period. In the event that such rate does not
appear on Page 3750 of the Telerate screen (or otherwise on such screen), the
"EURODOLLAR BASE RATE" shall be determined by reference to such other comparable
publicly available service for displaying eurodollar rates as may be selected by
Arabica.
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"EURODOLLAR RATE" means with respect to each day during each Rent Period
in which the Rental Rate is determined with reference to the Eurodollar Rate, a
rate per annum determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
-------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EVENT OF DEFAULT" shall have the meaning given such term in Section 23.
"EVENT OF LOSS" means (i) the occurrence of any one or more of the
following events with respect to two-thirds or more of the Equipment: (A) loss
of such Equipment or of the use thereof due to theft or disappearance during the
Term, (B) destruction, damage beyond repair, or rendition of such Equipment
unfit for normal use for any reason whatsoever either permanently or for longer
than a commercially reasonable period of time, (C) any damage to such Equipment
which results in an insurance settlement with respect to such Equipment on the
basis of a total loss, or (D) the permanent condemnation, confiscation, seizure,
or requisition of use or title to any Equipment by any governmental authority
under the power of eminent domain or otherwise; or (ii) the enforcement and
foreclosure by final, unappealable judicial determination, of any Lien created
solely by Arabica through no action, inaction or fault of the Company (other
than Permitted Liens in favor of Arabica) on two-thirds or more of the Assets,
the result of which is to permanently deprive the Company of the use of such
Assets.
"FINAL RENT PAYMENT DATE" means the fifth anniversary of the Commencement
Date.
"GAAP" means generally accepted accounting principles in the United States
as in effect from time to time, except that for purposes of Section 20, GAAP
shall be determined on the basis of such principles in effect on the date hereof
and consistent with those used in the preparation of the most recent audited
financial statements referred to in Section 19(a). In the event that any
"Accounting Change" (as defined below) shall occur and such change results in a
change in the method of calculation of financial covenants, standards or terms
in this Agreement, then the Company and Arabica agree to enter into negotiations
in order to amend such provisions of this Agreement so as to reflect equitably
such Accounting Changes with the desired result that the criteria for evaluating
the Company's financial condition shall be the same after such Accounting
Changes as if such Accounting Changes had not been made. Until such time as such
an amendment shall have been executed and delivered by the Company and Arabica,
all financial covenants, standards and terms in this Agreement shall continue to
be calculated or construed as if such Accounting Changes had not occurred.
"Accounting Changes" refers to changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the SEC.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization (including the National Association of Insurance Commissioners).
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"GROWTH CAPITAL EXPENDITURES" means Capital Expenditures relating solely
to the construction or acquisition of new Stores, including Pre-Opening Expenses
(excluding, to the extent included therein, Capital Expenditures relating to the
remodeling of existing Stores), net of tenant allowances.
"GUARANTEE OBLIGATION" means, as to any Person (the "GUARANTEEING
PERSON"), any obligation of (a) the guaranteeing person or (b) another Person
(including any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "PRIMARY OBLIGATIONS")
of any other third Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined in
good faith by such Person.
"GUARANTORS" means Holdings and the Subsidiary Guarantors.
"HEADQUARTERS BUILDING" means the premises located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
"HEDGING AGREEMENT" means any commodity swap or other agreement designed
to protect against fluctuations in the price of coffee or coffee-related
products. For purposes of clarification, it is the intention of the Restricted
Group not to enter into Hedging Agreements or other financing transactions that
are not acceptable under Islamic ▇▇▇▇▇'ah principles.
"HOLDINGS" means Caribou Holding Company Limited, a Cayman Islands limited
liability company.
"IMPROVEMENT" has the meaning given to such term in Section 11.
"INDEBTEDNESS" means of any Person at any date all obligations, contingent
or otherwise, that should be classified on such Person's balance sheet as
liabilities or to which reference should
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be made by footnote, in each case in accordance with GAAP, including, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services (other than current trade payables, accrued expenses and other similar
liabilities incurred in the ordinary course of such Person's business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations of such Person, (f)
all obligations of such Person, contingent or otherwise, as an account party or
applicant under or in respect of acceptances, letters of credit, surety bonds or
similar arrangements (including reimbursement obligations thereunder), (g) the
maximum redemption price of all Disqualified Stock of such Person, (h) all
Guarantee Obligations of such Person in respect of obligations of the kind
referred to in clauses (a) through (g) above, (i) all obligations of the kind
referred to in clauses (a) through (h) above secured by (or for which the holder
of such obligation has an existing right, contingent or otherwise, to be secured
by) any Lien on property (including accounts and contract rights) owned by such
Person, whether or not such Person has assumed or become liable for the payment
of such obligation, and (j) for the purposes of Section 23(e) only, all
obligations of such Person in respect of Swap Agreements. The Indebtedness of
any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness expressly provide that such Person is not liable therefor. For
purposes of this Agreement, as to the Company and its Subsidiaries, Indebtedness
shall, without duplication, include any and all amounts due (or required to be
due) from time to time by the Company to Arabica hereunder. For purposes of
clarification, it is the intention of the Restricted Group not to incur any
Indebtedness or other financial obligations that are not acceptable under
Islamic ▇▇▇▇▇'ah principles.
"INDEBTEDNESS TO BE PAID" shall have the meaning given to such term in
Section 19(y)(ii).
"INDEMNIFIED PARTY" shall have the meaning given to such term in Section
17.
"INDEPENDENT DIRECTOR" means, with respect to Arabica, an individual who
has not been (or was not) at the time of such individual's appointment, and may
not have been at any time during the preceding five years (a) an equityholder
of, or an officer, director (other than with respect to such Independent
Director's service as a director of Arabica), employee, supplier (other than the
Securities Pledgor and its Affiliates as a supplier of services pursuant to the
Administration Agreement) or customer of Arabica or its Affiliates, (b) a Person
controlling any such equityholder, supplier or customer, or (c) a member of the
immediate family of any such equityholder, officer, director, employee, supplier
or customer or any other equityholder of Arabica. As used in this definition,
the term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of Arabica, whether
through ownership of voting securities, by contract or otherwise.
-11-
"INSOLVENCY" means, with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT" has a corresponding meaning.
"INTANGIBLE ASSETS" means all assets described in Schedule 2(a) hereto and
any other intangible asset made subject to this Agreement by the execution and
delivery of a Supplement, including any accretion of, or attribution of
additional rights to, any such assets.
"INTELLECTUAL PROPERTY" means all rights, priorities and privileges
relating to intellectual property, whether arising under United States,
multinational or foreign laws or otherwise, including copyrights, copyright
licenses, patents, patent licenses, trademarks, trademark licenses, technology,
know-how and processes, and all rights to ▇▇▇ at law or in equity for any
infringement or other impairment thereof, including the right to receive all
proceeds and damages therefrom.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall have the meaning given to
such term in the Company Guarantee and Security Agreement.
"LATE PAYMENT RATE" means a rate equal to the Rental Rate plus 2% (or, if
an Event of Default under Section 23(a) shall have occurred and then be
continuing, 3%).
"LEASE/PURCHASE DOCUMENTS" means the Asset Purchase Agreement, this
Agreement, the Supplemental Agreement, the Put Option Letter, the Call Option
Letter, the Tax Matters Agreement, the Company Guarantee and Security Agreement,
Company Leasehold Mortgage and each other document, instrument or certificate
delivered by Holdings and its Subsidiaries in connection with any of the
foregoing.
"LEASEHOLD SECURITY DOCUMENT" means a landlord consent and waiver (and, if
the applicable member of the Restricted Group holds its leasehold interest in
the relevant real property pursuant to a recorded instrument (in complete or
memorandum form), a leasehold assignment or leasehold mortgage), as may be
required by Arabica, in form and substance reasonably satisfactory to the
Arabica.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having substantially the
same economic effect as any of the foregoing).
"LIENS TO BE TERMINATED" shall have the meaning given such term in Section
19(y)(iii).
"MAJOR MAINTENANCE" has the meaning given to such term in Section 10.
"MARGIN STOCK" has the meaning specified in Section 19(o).
"MAINTENANCE CAPITAL EXPENDITURES" means all Capital Expenditures other
than Growth Capital Expenditures and Capital Expenditures in connection with
Permitted Acquisitions, excluding Pre-Opening Expenses.
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"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, property, operations or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole, (b) the validity or
enforceability of the material terms of this Agreement or any of the other
Lease/Purchase Documents, (c) the material rights or remedies of Arabica
hereunder or thereunder or (d) the ability of Holdings, the Company, any of
their Subsidiaries to fulfill their material obligations hereunder or
thereunder.
"MATERIALS OF ENVIRONMENTAL CONCERN" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.
"MORTGAGE" shall have the meaning given to such term in Section 21(j)(ii).
"MULTIEMPLOYER PLAN" means a Plan that is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NET CASH PROCEEDS" means (i) in connection with any Asset Sale or
Recovery Event, the proceeds thereof in the form of cash and cash equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured by
a Lien expressly permitted hereunder on any asset that is the subject of such
Asset Sale or Recovery Event (other than any Lien pursuant to a Company Security
Document) and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and (ii) in connection with any
issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash
proceeds received from such issuance or incurrence, net of attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.
"NEW STORE COMMITMENT" means an enforceable obligation of the Company or
any of its Subsidiaries to lease, acquire, develop or open a new Store.
"NON-EXCLUDED TAXES" shall have the meaning given such term in Section
12(a).
"OBLIGATIONS" means any and all obligations and liabilities of the Company
to Arabica, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, any other Lease/Purchase Document or any other
document made, delivered or given in connection herewith or therewith, whether
on account of Rent, indemnities, costs, expenses (including all fees, charges
and disbursements of counsel to Arabica that are required to be paid by the
Company pursuant hereto) or otherwise.
"ORDINARY MAINTENANCE" shall have the meaning given to such term in
Section 10.
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"ORGANIZATIONAL DOCUMENTS" means the corporate documents including,
without limitation, the rules and provision of law or the charter documents or
by-laws or shareholder agreements of any member of the Restricted Group.
"ORIGINAL AGREEMENT" has the meaning specified in the recitals to this
Agreement.
"ORIGINAL CALL OPTION LETTER" has the meaning specified in the recitals to
this Agreement.
"ORIGINAL PUT OPTION LETTER" has the meaning specified in the recitals to
this Agreement.
"OTHER TAXES" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Lease/Purchase
Document.
"PARTS" means all appliances, parts, instruments, appurtenances,
accessories and miscellaneous property of whatever nature that may from time to
time be incorporated or installed in or attached to or otherwise made part of
the Equipment.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA (or any successor).
"PERMITTED ACQUISITION" means an Acquisition Transaction by the Company or
a Wholly-Owned Subsidiary Guarantor, subject to the fulfillment of the following
conditions:
(i) the Company shall have obtained the prior written approval of
Arabica and shall have delivered to Arabica such documentation, financial
statements, and other documents or information as Arabica may request;
(ii) Target EBITDA of the Acquisition Target for its most recently
ended four fiscal quarters shall exceed $1.00;
(iii) all assets and properties acquired in connection with any such
Acquisition Transaction shall be free and clear of any Liens other than
Permitted Liens;
(iv) as a result of the Acquisition Transaction, any new Subsidiary
must be a Wholly-Owned Subsidiary Guarantor, and the Restricted Group
shall have complied with all applicable provisions hereof and of the other
Lease/Purchase Documents, including the execution and delivery of such
additional agreements, instruments, certificates, opinions and other
papers as the Arabica may reasonably require;
(v) no Default or Event of Default shall have occurred and be
continuing at the time of, or shall reasonably be expected to result from,
such Acquisition Transaction;
(vi) without limiting the generality of the foregoing, after giving
effect to such Acquisition Transaction, the Company shall be in compliance
with the provisions of
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Section 20, calculated on a pro forma basis after giving effect to the
Acquisition Transaction; and
(vii) such Acquisition Transaction shall have been approved by the
board of directors (or equivalent body) of the Acquisition Target.
"PERMITTED LIENS" means:
(i) Liens in favor of Arabica under the Lease/Purchase Documents;
(ii) Liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is not
required in accordance with the provisions of the Lease/Purchase
Documents;
(iii) landlord's and lessors' Liens in respect of rent not in
default or Liens in respect of pledges or deposits under worker's
compensation, unemployment insurance, social security laws, or similar
legislation (other than ERISA) or in connection with appeal and similar
bonds incidental to litigation; mechanics', laborers' and materialmen's
and similar Liens, if the obligations secured by such Liens are not then
delinquent or are released by appropriate statutory release bonds; Liens
securing the performance of bids, tenders, contracts (other than for the
payment of money); and statutory obligations incidental to the conduct of
its business and that do not in the aggregate materially detract from the
value of its property or materially impair the use thereof in the
operation of its business;
(iv) judgment Liens that shall not have been in existence for a
period of longer than 30 days after the creation thereof or, if a stay of
execution shall have been obtained, for a period longer than 30 days after
the expiration of such stay;
(v) Liens in respect of Capital Lease Obligations and purchase money
obligations incurred within 90 days of purchase which in the aggregate do
not secure Indebtedness in excess of $1,000,000 (of which not more than
$500,000 may consist of existing capital leases) for new tangible personal
property, other than inventory, used in the business of the Company and
its Subsidiaries, provided that any such Liens shall not extend to
property and assets not financed by such capital lease or purchase money
obligation and shall not secure Indebtedness greater than the lesser of
the cost or fair market value of such tangible personal property so
acquired;
(vi) easements, rights of way, restrictions and other similar Liens
relating to real property and not interfering in a material way with the
ordinary conduct of business of the Company and its Subsidiaries or the
value of such real property; and
(vii) Liens of assignments, subleases, licenses, sublicenses or
other transfers of the Company's and its Subsidiaries' rights or assets,
in each case to the extent permitted pursuant to Section 13.
-15-
"PERSON" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"PLAN" means, at a particular time, any employee benefit plan that is
covered by ERISA and in respect of which the Company or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PLEDGED STOCK" means the Capital Stock pledged to Arabica pursuant to the
Company Security Documents.
"PRE-OPENING EXPENSES" means expenses incurred by any member of the
Restricted Group prior to the opening to the general public of a store for
business, determined in accordance with GAAP.
"PRICING GRID" means the table set forth below.
Consolidated Senior Applicable Margin for Applicable Margin for
Leverage Ratio Eurodollar Rate based COF Rate based Third Rent Component
Rental Rate Calculations Rental Rate Calculations Rate
--------------------------------- ------------------------ ------------------------ --------------------
Greater than or equal to 4.00% 5.00% 0.5%
2.0 to 1.0
Greater than or equal to 1.75 3.75% 3.75% 0.5%
to 1.0 but less than 2.0 to 1.0
Greater than 1.25 to 1.0 but 3.25% 3.25% 0.5%
less than 1.75 to 1.0
Less than or equal to 1.25 to 2.50% 3.50% 0.375%
1.0
For the purposes of the Pricing Grid, changes in the Applicable Margin and
the Third Rent Component Rate resulting from changes in the Consolidated Senior
Leverage Ratio shall become effective on the date (the "ADJUSTMENT DATE") of the
commencement of the first Rent Period following the date that is not less than
three Business Days after the date on which financial statements are delivered
to Arabica pursuant to Section 21(a) and shall remain in effect until the next
change to be effected pursuant to this paragraph, provided that, prior to
delivery of financial statements for the fiscal quarter ending January 2, 2005,
the Applicable Margin will not be less than 3.25% for Eurodollar Rate based
Rental Rate calculations or 3.25% for COF Rate based Rental Rate calculations
and the Third Rent Component Rate will be 0.50%. If any financial statements
referred to above are not delivered within the time periods specified in Section
21(a), then, from the end of such time period until the date that is three
Business Days after the date on which such financial statements are delivered,
the highest rate set forth in each column of the Pricing Grid
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shall apply. In addition, at all times while an Event of Default shall have
occurred and be continuing, the highest rate set forth in each column of the
Pricing Grid shall apply. Each determination of the Consolidated Senior Leverage
Ratio pursuant to the Pricing Grid shall be made in a manner consistent with the
determination thereof pursuant to Section 20(a).
"PROJECTIONS" shall have the meaning given such term in Section
20(b)(iii).
"PROPERTIES" shall have the meaning given such term in Section 19(q)(i).
"PUT OPTION" shall have the meaning given such term in the Put Option
Letter.
"PUT OPTION LETTER" means that certain Second Amended and Restated Put
Option Letter, dated the date hereof, issued by the Company to Arabica.
"QUALIFIED INVESTMENTS" means (i) existing investments and, with Arabica's
prior written consent (such consent not to be unreasonably withheld), additional
investments in Caribou MSP Airport, a Minnesota joint venture, and Caribou
Venture, L.L.C., a Minnesota limited liability company, (ii) existing and
additional investments in Caribou Acquisition Company, Inc. and Caribou on
Piedmont, Inc., (iii) investments in Wholly-Owned Subsidiaries formed, with the
consent of Arabica, after the date hereof, and (iv) Cash Equivalents.
"QUARTERLY DATES" means the dates set forth on Schedule 1 and the last day
of each fiscal quarter of the Company thereafter.
"RECOVERY EVENT" means any settlement of or payment in respect of any
property or casualty insurance claim or any condemnation proceeding relating to
any asset of any member of the Restricted Group, or any receipt by any member of
the Restricted Group of any amount as a refund of any Tax or Other Tax.
"REFERENCE AMOUNT" means on any day an amount equal to $55,000,000 (or
$60,000,000, if so increased by Arabica and the Company) as such amount may be
reduced from time to time as follows: (i) The Company shall have the right, upon
not less than three Business Days' notice to Arabica, to reduce the Reference
Amount by any amount at least equal to $1,000,000, or a whole multiple thereof
(or any amount which would have the effect of reducing the Reference Amount to
zero); provided that no such reduction of the Reference Amount shall be
permitted if, after giving effect thereto and to any payments under the Call
Option Letter made on the effective date thereof, the unpaid Acquisition Cost
would exceed the Reference Amount as so reduced; provided further that any such
reduction shall be in an amount equal to, and shall reduce permanently the
Reference Amount then in effect; and (ii) the Reference Amount shall,
automatically and without further action by any Person, be permanently reduced,
unless such reduction is waived by Arabica, by (x) an amount equal to 100% of
the Net Cash Proceeds from, and on the date of, the issuance of any Capital
Stock or incurrence of any Indebtedness by any member of the Restricted Group or
of any Subordinated Debt; and (y) 80% of the Net Cash Proceeds from any Asset
Sale received by any member of the Restricted Group.
"REFERENCE PERIOD" means each period of four consecutive fiscal quarters
of the Company ending on each Quarterly Date on or after the Commencement Date.
"REGISTERED HOLDER" shall have the meaning given such term in Section
13(b).
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"REGULATION U" means Regulation U (12 CFR Part 221) of the Board as in
effect from time to time.
"REINVESTMENT DEFERRED AMOUNT" means with respect to any Reinvestment
Event, the aggregate Net Cash Proceeds received by any member of the Restricted
Group in connection therewith that, as a result of the delivery of a
Reinvestment Notice, are not used for purposes of funding the Recovery Event
Purchase Price (as defined in the Put Option Letter) upon exercise by Arabica of
its Recovery Event Option (as defined in the Put Option Letter).
"REINVESTMENT EVENT" means any Recovery Event in respect of which the
Company has delivered a Reinvestment Notice.
"REINVESTMENT NOTICE" means a written notice executed by a Responsible
Officer stating that no Event of Default has occurred and is continuing and that
the Company (directly or indirectly through a Subsidiary) intends and expects to
use all or a specified portion of the Net Cash Proceeds of a Recovery Event to
acquire or repair assets useful in its business.
"RENT" means the amounts payable during the Term pursuant to Section 6 of
this Agreement and Schedule 6(a).
"RENT PAYMENT DATE" means each Quarterly Date occurring on or prior to the
Final Rent Payment Date, and the Final Rent Payment Date.
"RENT PERIOD" means the period commencing on the Commencement Date and
ending on the first Rent Payment Date occurring after the date hereof, and
thereafter the consecutive periods commencing on each Rent Payment Date and
ending on the next occurring Rent Payment Date, provided that:
(i) the first Rent Period for any Assets that are added to this
Agreement pursuant to a Supplement will commence on the effective date of
such Supplement and end on the next occurring Rent Payment Date;
(ii) any Rent Period that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in the next calendar month, in which case such
Rent Period shall end on the immediately preceding Business Day;
(iii) any Rent Period that begins on the last Business Day of a
calendar month (or on a day for which there is not a numerically
corresponding day in the calendar month at the end of such Rent Period)
shall, subject to clause (iv) below, end on the last Business Day of a
calendar month; and
(iv) any Rent Period that would otherwise end after the Final Rent
Payment Date shall end on the Final Rent Payment Date.
"RENTAL RATE" shall have the meaning given to such term in Section 1(b) of
Schedule 6(a).
-18-
"REORGANIZATION" means with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"REPORTABLE EVENT" means any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.
Section 4043.
"REPLACEMENT" shall have the meaning given to such term in Section 11.
"REQUIRED ALTERATION" shall have the meaning given to such term in Section
11.
"REQUIREMENT OF LAW" means, as to any Person, the Certificate of
Incorporation and By Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"RESPONSIBLE OFFICER" means the chief executive officer, president, chief
financial officer or treasurer of the Company, but in any event, with respect to
financial matters, the chief financial officer of the Company.
"RESTRICTED GROUP" means the Company, each of its Subsidiaries and
Holdings, each of which is referred to as a "member" of the Restricted Group.
"RESTRICTED PAYMENTS" means any distribution or payment of cash or
property, or both, directly or indirectly (i) in respect of any Subordinated
Debt, or (ii) to the holder of any Capital Stock or to any Affiliates of any
such holder for any reason whatsoever, including without limitation, salaries,
loans, debt repayment, consulting fees, management fees, expense reimbursements
and dividends, distributions, put, call or redemption payments and any other
payments in respect of such Capital Stock; provided, however, that Restricted
Payments shall not include reasonable and customary salaries paid to employees
of the Company or any of its Subsidiaries for actual services rendered and
reimbursements of bona fide out of pocket business expenses made to such
employees and to other holders of any equity interest of the Company.
"SEC" means the Securities and Exchange Commission, any successor thereto
and any analogous Governmental Authority.
"SINGLE EMPLOYER PLAN" means any Plan that is covered by Title IV of
ERISA, but that is not a Multiemployer Plan.
"SOLVENT" means, when used with respect to any Person, means that, as of
any date of determination, (i) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (ii) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (iii) such Person will not
have, as of such date, an unreasonably small amount of capital
-19-
with which to conduct its business, and (iv) such Person will be able to pay its
debts as they mature. For purposes of this definition, (x) "debt" means
liability on a "claim", and (y) "claim" means any (I) right to payment, whether
or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured or (II) right to an equitable remedy for breach of performance if
such breach gives rise to a right to payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured or
unmatured, disputed, undisputed, secured or unsecured.
"SPECIFIED CHANGE OF CONTROL" means a "Change of Control" (or any other
defined term having a similar purpose) as defined in any Subordinated Debt
Documentation, any organizational document of Holdings or any agreement relating
to the Capital Stock of Holdings or the Company.
"SPECIFIED FOREIGN JURISDICTION" means any country other than the United
States in which the Company's annual revenues or profits (excluding revenues and
profits derived from franchising and similar licensing agreements or mail-order
business) exceed $500,000.
"STORE" means any store owned or controlled directly or indirectly by the
Company or any of its Subsidiaries.
"SUBORDINATED DEBT" means any unsecured subordinated Indebtedness of the
Company; provided, that the terms and conditions thereof (including terms
regarding subordination) are reasonably satisfactory to Arabica.
"SUBORDINATED DEBT DOCUMENTATION" means any agreement or instrument
entered into by any member of the Restricted Group in connection with any
Subordinated Debt.
"SUBSIDIARY" means, as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company. For purposes of clarification,
as of the date hereof, Caribou MSP Airport, a Minnesota joint venture, and
Caribou Venture, LLC, a Minnesota limited liability company shall not be
considered to be Subsidiaries of the Company or Holdings.
"SUBSIDIARY GUARANTOR" means each Subsidiary of the Company other than
Caribou Coffee Charitable Foundation, a Minnesota non-profit corporation.
"SUPPLEMENT" has the meaning specified in Section 2(b).
"SUPPLEMENTAL AGREEMENT" means that certain Second Amended and Restated
Supplemental Agreement, dated as of the date hereof, between Arabica and the
Company.
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"SUPPLEMENTAL PAYMENTS" means all amounts, liabilities and obligations
which the Company assumes or agrees to pay hereunder to Arabica, including
without limitation indemnity payments, but excluding payments of Rent and
payments made under the Call Option Letter or the Put Option Letter.
"SWAP AGREEMENT" means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies, commodities, equity or
debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions. For purposes of
clarification, it is the intention of the Restricted Group not to enter into
Swap Agreements or other financing transactions that are not acceptable under
Islamic ▇▇▇▇▇'ah principles.
"TARGET EBITDA" means, for any period, as to an Acquisition Target (or
consolidated, combined or related group of Acquisition Targets), net income for
such period plus, without duplication and to the extent reflected as a charge in
the statement of such net income for such period, the sum of (a) income tax
expense, (b) interest expense, and (c) depreciation and amortization expense,
all calculated in accordance with generally accepted accounting principles
consistently applied.
"TAX" shall have the meaning given such term in Section 12.
"TAX MATTERS AGREEMENT" means that certain Second Amended and Restated Tax
Matters Agreement, dated as of the date hereof, between Arabica and the Company.
"TERM" shall have the meaning given to such term in Section 4.
"TRANSACTION COSTS" means all the costs, fees and expenses referenced in
Section 23.
"THIRD RENT COMPONENT" shall have the meaning given such term in Section
1(d) of Schedule 6(a).
"THIRD RENT COMPONENT RATE" means the applicable rate per annum designated
as such in the Pricing Grid for purposes of calculating the Third Rent
Component.
"TOTAL PURCHASE PRICE" means the "purchase price" for any Acquisition
Transaction, irrespective of the form in which the same is paid, as reasonably
determined by Arabica, to the seller or any affiliate of the seller at the
closing of the Acquisition Transaction.
"UNITED STATES" means the United States of America.
(b) As used herein and in the other Lease/Purchase Documents, and any
certificate or other document made or delivered pursuant hereto or thereto, (i)
accounting terms relating to any member of the Restricted Group not defined in
Section 1(a) and accounting terms partly defined in Section 1(a), to the extent
not defined, shall have the respective meanings given to them under GAAP, (ii)
the words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation", (iii) the word "incur" shall be construed to
mean incur, create, issue, assume, become liable in respect of or suffer to
exist (and the words "incurred" and
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"incurrence" shall have correlative meanings), (iv) the words "asset" and
"property" shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
Capital Stock, securities, revenues, accounts, leasehold interests and contract
rights, (v) references to agreements or other Contractual Obligations shall,
unless otherwise specified, be deemed to refer to such agreements or Contractual
Obligations as amended, supplemented, restated or otherwise modified from time
to time and (vi) references to the "knowledge" of any member of the Restricted
Group shall refer to the actual knowledge of the senior management personnel of
such member of the Restricted Group.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import, when used in this Agreement, shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
"WHOLLY-OWNED SUBSIDIARY" means as to any Person, any other Person all of
the Capital Stock of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
"WHOLLY-OWNED SUBSIDIARY GUARANTOR" means any Subsidiary Guarantor that is
a Wholly Owned Subsidiary of the Company.
SECTION 2. AGREEMENT FOR LEASE, LICENSE AND PURCHASE OPTION FINANCING;
COVENANT OF QUIET ENJOYMENT.
(a) Subject to, and upon all of the terms and conditions of this
Agreement, Arabica hereby provides a lease, license and purchase option finance
facility to the Company for the Assets by leasing to the Company each item of
Equipment identified on Schedule 2(a) hereto or subsequently made subject to
this Agreement pursuant to a Supplement, licensing to the Company each
Intangible Asset identified on Schedule 2(a) hereto or subsequently made subject
to this Agreement pursuant to a Supplement, and granting to the Company options
to purchase the Assets, and the Company hereby accepts such facility by leasing
from Arabica each item of the Equipment and by licensing from Arabica each item
of the Intangible Assets from and including the applicable Effective Date for
the duration of the Term and by granting to Arabica the right to require the
Company to purchase the Assets.
(b) Arabica and the Company may from time to time agree to add to this
Agreement additional items of Equipment and Intangible Assets to be leased and
licensed hereunder, and to be subject to the Company's purchase option and
Arabica's right to require the Company to purchase, by the execution and
delivery of a supplement in substantially the form of Exhibit B hereto (each, a
"SUPPLEMENT"). From and after the Effective Date of a Supplement, the items of
Equipment identified therein will constitute items of Equipment hereunder and
the Intangible Assets identified therein will constitute Intangible Assets
thereunder, subject as to each to all of the terms and conditions of this
Agreement, the Call Option Letter, the Put Option Letter, the Supplemental
Agreement and the Tax Matters Agreement.
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(c) Provided that no Event of Default has occurred and is continuing,
Arabica agrees that it shall not interfere with the Company's quiet enjoyment
and use of the Assets during the Term.
SECTION 3. DELIVERY AND ACCEPTANCE OF ASSETS. The Company has inspected
the Equipment and all documentation and indicia representing the Intangible
Assets and, as of the applicable Effective Date, shall be deemed (i) to have
unconditionally and irrevocably accepted the Assets for all purposes of this
Agreement, (ii) to have acknowledged and agreed that, as between Arabica and the
Company, (A) each item of Equipment has been inspected to the Company's
satisfaction, is in good operating order, repair and condition, and is of a
size, design, capacity and manufacture acceptable to the Company, (B) all
documentation and indicia representing the Assets have been inspected to the
Company's satisfaction and are of the form and type acceptable to the Company,
(C) except as noted on Schedule 3, each Asset is duly registered with and/or
certified or licensed by any governmental entity which is charged with such
registration or with issuing such certificates or licenses, (D) the Company is
satisfied that each Asset is suitable for its intended purpose, (E) Arabica,
with respect to each Asset, has made no warranty, expressed or implied, other
than as expressly set forth herein and (F) the Company has unconditionally
accepted each Asset under this Agreement, and (iii) to have waived any defect or
other proper objection to any Asset.
SECTION 4. TERM. The term for the lease and license of the Assets
hereunder (the "TERM") shall commence, and the Rent shall commence to accrue, as
to any Assets, on the Effective Date applicable to such Assets and, unless
sooner terminated by Arabica pursuant to Section 24 or upon an Event of Loss, or
pursuant to the Put Option Letter or the Call Option Letter, shall end on the
Final Rent Payment Date; provided, however, that notwithstanding the
termination, as to any Assets, of the term of the lease and license provided
hereunder, all other obligations of the Company hereunder and under the other
Lease/Purchase Documents and all other rights of Arabica hereunder and under the
other Lease/Purchase Documents shall continue in full force and effect until all
Rent accruing prior to such termination, Supplemental Payments and other amounts
due and payable by the Company have been indefeasibly paid in full in cash. The
Company shall not have the right to terminate this Agreement prior to the Final
Rent Payment Date without the prior written consent of Arabica.
SECTION 5. END OF TERM DELIVERY OF ASSETS. If the Company shall not have
elected to purchase the Assets pursuant to the Call Option, or title shall not
have automatically reverted to the Company pursuant to the last sentence of this
Section 5, or Arabica shall not have required the Company to purchase the Assets
pursuant to the Put Option, then at the end of the term of this Agreement the
Company shall deliver, at the Company's expense, all Assets to Arabica (or to a
third party designated by Arabica) at a location or locations within the
continental United States as specified in writing by Arabica or such third
party. At the time of such return to Arabica or delivery to the third party,
each item of Equipment (and each Part or component thereof) shall be in good
operating order, and in the repair and condition as when originally delivered to
the Company, ordinary wear and tear from proper use thereof excepted, and
refurbished where necessary. In addition, each Asset shall (i) be in accordance
and compliance with any and all statutes, laws, ordinances, rules and
regulations of any federal, state or local governmental body, agency or
authority applicable to the use and operation of such item of Asset and (ii) be
free and clear of all Liens, other than those granted or placed thereon by
Arabica. Notwithstanding the foregoing, upon the indefeasible payment at the end
of the Term, in full and in cash, of all Rent,
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including any unpaid Acquisition Cost, Supplemental Payments and other amounts
due and payable by the Company under the Lease/Purchase Documents, title to the
Assets shall automatically revert to the Company.
SECTION 6. PAYMENTS.
(a) The Company shall pay Rent to Arabica in accordance with this Section
6 and Schedule 6(a). Rent shall be paid with respect to each Rent Period in the
amounts and on the Rent Payment Dates specified in Schedule 6(a). Unless
otherwise specified in Schedule 6(a), Rent for each Rent Period is due and
payable in arrears and in full on each Rent Payment Date. Unless otherwise
agreed, the Company shall pay Rent without deduction or set-off and without
prior notice or demand from Arabica. All payments to be made by the Company
hereunder or under any of the other Lease/Purchase Documents shall be made in
Dollars by wire transfer and in immediately available funds directly to the
account of Arabica specified on the signature page hereof.
(b) The Company hereby undertakes that it shall pay to Arabica, upon
demand, to the extent permitted by applicable law, a late fee on any Rent,
Supplemental Payment or other amount payable under this Agreement or any of the
other Lease/Purchase Documents to which the Company is a party that is not paid
when due, for any period for which any of the same is overdue (without regard to
any grace period) at a rate per annum equal to the Late Payment Rate. Payment or
acceptance of the late fee provided for in this Section 6(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Arabica.
(c) The parties hereto acknowledge and agree that each Supplemental
Payment and each payment under the other documents entered into in connection
with this Agreement shall be integral to this Agreement.
SECTION 7. NET LEASE AND LICENSE. Except as otherwise specifically
provided herein, this Agreement is a net lease and license, and the Company
acknowledges and agrees that the Company's obligations hereunder, including
without limitation its obligation to pay all Rent, Supplemental Payments and
other amounts payable hereunder or under any of the other Lease/Purchase
Documents, shall be absolute and unconditional under any and all circumstances
and shall be paid without notice or demand and without any abatement, reduction,
diminution, setoff, defense, counterclaim or recoupment whatsoever, including
without limitation any abatement, reduction, diminution, setoff, defense,
counterclaim or recoupment due or alleged to be due to, or by reason of, any
past, present or future claims which the Company may have against Arabica, any
Registered Holder, or the manufacturer or producer of any item
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of the Assets, any Part or unit or component of the Equipment, or any other
Person for any reason whatsoever. Except to the extent expressly provided
herein, and without in any manner limiting the generality of the foregoing
sentence, the obligations and liabilities of the Company hereunder shall in no
way be released, discharged or otherwise affected for any reason, including
without limitation (i) any defect in any item of the Equipment, any Part or unit
or component of the Equipment, or the condition, design, operation or fitness
for use thereof; (ii) any defect in any Asset; (iii) abandonment, salvage,
scrapping or destruction of, any item of the Assets, or any Part or unit or
component of the Equipment; (iv) any Liens or rights of others with respect to
any item of the Assets, or any Part or unit or component of the Equipment
(unless the enforcement of such Lien results in an Event of Loss as described in
clause (ii) of the definition of Event of Loss); (v) any prohibition or
interruption of or other restriction against the Company's use, operation or
possession of any item of the Assets, or any Part or unit or component of the
Equipment for any reason whatsoever, or any interference with such use,
operation or possession by any Person; (vi) any other indebtedness or liability,
howsoever and whenever arising, of Arabica or of any Registered Holder or of the
Company to any other Person; (vii) any insolvency, bankruptcy or similar
proceedings by or against Arabica, any Registered Holder, any Subsidiary of the
Company or any guarantor of the Company's obligations; or (viii) any other
reason whatsoever, whether similar or dissimilar to any of the foregoing, any
present or future law to the contrary notwithstanding; it being the intention of
the parties hereto that the Rent and other amounts payable by Company hereunder
shall continue to be payable in all events and in the manner and at the times
herein provided, without notice or demand, unless the obligation to pay the same
shall be terminated pursuant to the express provisions of this Agreement.
SECTION 8. ARABICA'S TITLE; GRANT OF SECURITY INTEREST.
(a) With the exception of those Assets purchased by the Company upon its
exercise of the Call Option or upon Arabica's exercise of the Put Option or upon
payment by the Company of all Rent and other amounts due on the Final Rent
Payment Date, (i) title to each item of the Assets shall at all times remain in
Arabica and (ii) at no time during the Term shall title to any Asset become
vested in the Company.
(b) Without prejudice, and in addition to Section 8(a), and
notwithstanding anything to the contrary, this Agreement is to be treated as a
security agreement under the Uniform Commercial Code as in effect in the states
in which the Assets are located or deemed to be located, and the Company hereby
grants to Arabica a security interest in the Assets and all proceeds thereof as
collateral security for the payment and performance of the Obligations.
SECTION 9. USE OF ASSETS; COMPLIANCE WITH LAWS. The Company agrees that
(i) each item of the Assets will be used only for purposes or operations in the
ordinary course of its business and (ii) each item of the Equipment will be used
and operated only in the manner set forth in, and in accordance with, the terms,
conditions and provisions of the insurance policy or policies providing the
coverages specified in Section 15. In no event shall the Company use or operate
any Asset, or knowingly permit any Asset to be used or operated, for any purpose
for which such Asset is not designed or reasonably suitable, or in any fashion
that may reasonably subject such Asset to any Liens, other than Permitted Liens,
or (as to Equipment) in any area excluded from coverage by any such insurance
policy or policies. The Company further agrees that each Asset will be used and
operated in the conduct of the Company's business and in compliance with all
statutes, laws, ordinances, rules and regulations of any federal, state, local
or foreign government or governmental authority having jurisdiction with respect
to the use, operation, maintenance and condition of such Asset (including
without limitation all zoning, environmental protection, pollution, sanitary and
safety laws). The Company will not load, use, operate, or store any Asset, or
knowingly permit the loading, using, operating or storing of any Asset, in a
negligent manner or otherwise in violation of this Agreement or (as to
Equipment) so as to void any of the insurance coverages specified in Section 15
respecting any Equipment. The Company shall procure and maintain in effect all
licenses, certificates, permits, approvals and
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consents required by federal, state, local or foreign laws or by any
governmental body, agency or authority, in connection with the delivery, use,
operation, maintenance and condition of each Asset. The Assets will at all times
be and remain in the control of the Company except as the Company's
relinquishment of control of an Asset is specifically permitted by this
Agreement and except while an Asset is undergoing maintenance. To the extent
that any applicable law requires the licensing or certification of an operator
of any item of the Equipment, each such operator shall be duly licensed and
currently certificated and qualified to operate such item of Equipment and
authorized by the terms of (and in accordance with the provisions and
requirements of) the insurance policy or policies providing the coverages
specified in Section 15 hereof.
SECTION 10. MAINTENANCE AND REPAIR OF THE EQUIPMENT.
(a) The Company agrees, at its own cost and expense, to be responsible for
the performance of all Ordinary Maintenance required by the Equipment. The term
"ORDINARY MAINTENANCE" shall mean all repair, replacement and maintenance
required in the ordinary and regular course of the Company's business and
operations to keep, repair, maintain and preserve the Equipment in good order
and operating condition, and in compliance with such maintenance and repair
standards and procedures as are set forth in the manufacturer's manuals
pertaining to the Equipment, and as otherwise may be required to enforce
warranty claims against each vendor and manufacturer of each item of Equipment,
and in compliance with the maintenance and repair standards of the Company for
similar equipment and with prudent industry standards and with all requirements
of law applicable to the maintenance and condition of the Equipment.
(b) Arabica shall be obligated to perform or cause to be performed all
Major Maintenance required by the Equipment. Arabica has entered into the
Supplemental Agreement with the Company, under which the Company has agreed to
perform or cause to be performed all Major Maintenance required by the
Equipment, and Arabica and the Company have agreed on the amount to be paid by
Arabica to the Company in reimbursement of the costs incurred by the Company in
performing or causing to be performed such Major Maintenance. The term "MAJOR
MAINTENANCE" shall mean all repair, replacement and maintenance required by the
Equipment and not constituting Ordinary Maintenance.
SECTION 11. REPLACEMENT OF PARTS; ALTERATIONS; MODIFICATIONS AND
ADDITIONS. In case any Part, component or unit of the Equipment is required to
be altered or modified, or any equipment or appliance on any item of Equipment
is required to be altered, added, replaced or modified, in either case in order
to comply with applicable laws, regulations, requirements or rules ("REQUIRED
ALTERATION"), Arabica shall be obligated to make or cause to be made such
Required Alteration. Arabica has entered into the Supplemental Agreement with
the Company, under which the Company has agreed to make or cause to be made such
Required Alterations, and Arabica and the Company have agreed on the amount to
be paid by Arabica to the Company in reimbursement of the costs incurred by the
Company in making or causing to be made such Required Alterations. Such Required
Alterations shall immediately be and become part of the Equipment and subject to
the terms of this Agreement, and title thereto shall vest in Arabica. All Parts,
equipment and appliances incorporated or installed in or attached to any item of
Equipment in connection with servicing, repairing, maintaining and overhauling
any item of Equipment pursuant to the requirements of Sections 10 or 11 hereof
("REPLACEMENT") shall be considered accessions to such item of Equipment and
shall immediately, without further act, be
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and become part of the Equipment, and title thereto shall vest in Arabica. The
Company may, without the prior written consent of Arabica, affix or install any
accessory, equipment or device on the Equipment or make any improvement or
addition thereto other than a Required Alteration or Replacement
("IMPROVEMENT"); provided, that, (i) a nonremovable Improvement may be made to
the Equipment only if such Improvement does not reduce the value of the
Equipment and (ii) any other Improvement may be made to the Equipment only if
such Improvement is readily removable without causing damage to the Equipment or
impairing the value, utility or condition the Equipment would have had if such
Improvement had not been so affixed or installed. Nonremovable Improvements
shall be considered accessions to the Equipment and shall immediately without
further act, be and become part of the Equipment, and title thereto shall vest
in Arabica. At the time title to any replacement Part, equipment or appliance
has become vested in Arabica pursuant to the provisions of this Section 11,
title to the part, equipment or appliance replaced thereby shall thereupon vest
in the Company and Arabica shall be deemed to have released any Lien thereon and
any interest therein.
SECTION 12. TAXES.
(a) All payments made by the Company under this Agreement shall be made
free and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority (any of the
foregoing, a "TAX"), excluding net income taxes and franchise taxes (imposed in
lieu of net income taxes) imposed on Arabica or any Registered Holder as a
result of a present or former connection between Arabica or any Registered
Holder and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from Arabica or any Registered Holder having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any other Lease/Purchase Document). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("NON-EXCLUDED TAXES") or Other Taxes are required to be withheld
from any amounts payable to Arabica or any Registered Holder hereunder, the
amounts so payable to Arabica or any Registered Holder shall be increased to the
extent necessary to yield to Arabica or any Registered Holder (after payment of
all Non-Excluded Taxes and Other Taxes) Rent or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement, provided,
however, that the Company shall not be required to increase any such amounts
payable to Arabica or any Registered Holder with respect to any Non-Excluded
Taxes (i) that are attributable to Arabica's or such Registered Holder's failure
to comply with the requirements of subsection (d) or (e) of this Section or (ii)
that are United States withholding taxes imposed on amounts payable to a
Registered Holder at the time such Registered Holder becomes a party to this
Agreement, except to the extent that such Registered Holder's assignor (if any)
was entitled, at the time of assignment, to receive additional amounts from the
Company with respect to such Non-Excluded Taxes pursuant to this paragraph.
(b) In addition, the Company shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
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(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Company, as promptly as possible thereafter the Company shall send to Arabica or
the relevant Registered Holder, as applicable, a certified copy of an original
official receipt received by the Company showing payment thereof. If the Company
fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate
taxing authority or fails to remit to Arabica or such Registered Holder the
required receipts or other required documentary evidence, the Company shall
indemnify Arabica or such Registered Holder for any incremental taxes, interest
or penalties that may become payable by Arabica or such Registered Holder as a
result of any such failure.
(d) Any Registered Holder that is not a "U.S. Person" as defined in
Section 7701(a)(30) of the Code (a "NON U.S. PERSON") shall deliver to the
Company two copies of either U.S. Internal Revenue Service Form W-8BEN or Form
W-8ECI, or, in the case of a Non U.S. Person claiming exemption from U.S.
federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest", a statement substantially in the form of
Exhibit E and a Form W-8BEN, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non U.S. Person claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Company under this Agreement and the other Lease/Purchase
Documents. Such forms shall be delivered to the Company by such Non U.S. Person
on or before the date it becomes a party to this Agreement or becomes a
Registered Holder. In addition, such Non U.S. Person shall deliver to the
Company such forms promptly upon the obsolescence or invalidity of any form
previously delivered by such Non U.S. Person. Such Non-U.S. Person shall
promptly notify the Company at any time it determines that it is no longer in a
position to provide any previously delivered certificate to the Company (or any
other form of certification adopted by the U.S. taxing authorities for such
purpose). Notwithstanding any other provision of this paragraph, such Non U.S.
Person shall not be required to deliver any form pursuant to this subsection
that such Non U.S. Person is not legally able to deliver.
(e) A Registered Holder that is entitled to an exemption from or reduction
of non-U.S. withholding tax under United States law or any treaty to which the
United States is a party, with respect to payments under this Agreement shall
deliver to the Company (with a copy to Arabica), at the time or times prescribed
by applicable law or reasonably requested by the Company, such properly
completed and executed documentation prescribed by applicable law as will permit
such payments to be made without withholding or at a reduced rate, provided that
such Registered Holder is legally entitled to complete, execute and deliver such
documentation and in such Registered Holder's judgment such completion,
execution or submission would not materially prejudice the legal position of
such Registered Holder.
(f) If Arabica or any Registered Holder determines, in its sole
discretion, that it has received a refund of any Non-Excluded Taxes or Other
Taxes as to which it has been indemnified by the Company or with respect to
which the Company has paid additional amounts pursuant to this Section 12, it
shall pay over such refund to the Company (but only to the extent of indemnity
payments made, or additional amounts paid, by the Company under this Section 12
with respect to the Non-Excluded Taxes or Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of Arabica or such Registered Holder
and without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund); provided, that the Company, upon the
request of Arabica or such Registered Holder, agrees to repay the
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amount paid over to the Company (plus any amounts imposed by the relevant
Governmental Authority) to Arabica or such Registered Holder in the event
Arabica or such Registered Holder is required to repay such refund to such
Governmental Authority. This paragraph shall not be construed to require Arabica
or such Registered Holder to make available its tax returns (or any other
information relating to its taxes which it deems confidential) to the Company or
any other Person. Any interest received by the Company as a result of any such
refund will be donated by the Company to charity.
(g) The agreements in this Section shall survive the termination of this
Agreement and the payment of Rent and all other amounts payable hereunder.
SECTION 13. ASSIGNMENT, SUBLEASE, SUBLICENSE OR OTHER TRANSFER.
(a) Assignment, Sublease, Sublicense or Other Transfer by the Company.
Arabica hereby gives its written consent to the Company to sublicense on a
non-exclusive basis (provided that the rights retained by the Company in respect
thereof may be subject to territorial exclusivity rights of the franchisee or
licensee), either indirectly through one or more Subsidiaries of the Company or
directly, to franchisees or similar licensees, the Company's owned or
licensed-in Intellectual Property to (i) promote and operate retail locations
selling the same or similar products, including beverages, food, whole beans and
ground coffee, and merchandise, as those sold at the Company's own retail
locations and (ii) promote and sell whole beans and ground coffee and other
products through institutional trade channels that the Company sells through
institutional trade channels. Except as provided in the previous sentence, the
Company will not, without the prior written consent of Arabica, assign,
sublease, sublicense or otherwise transfer its rights or obligations with
respect to any of the Assets or hereunder, and any attempted assignment,
sublease, sublicense or other transfer by the Company without such Arabica
consent shall be null and void. With respect to any sublease or sublicense for
which Arabica provides its written consent, no such sublease or sublicense by
the Company will reduce any of the obligations of the Company hereunder or the
rights of Arabica hereunder, and all of the obligations of the Company hereunder
shall be and remain primary and shall continue in full force and effect as the
obligations of a principal and not of a guarantor or surety. The Company shall
furnish to Arabica not later than the effective date of such sublease or
sublicense (i) in respect of Assets other than Intellectual Property, new
insurance certificates from the Company's insurance broker, in form and
substance satisfactory to Arabica, indicating compliance with the insurance
provisions of this Agreement and (ii) an officer's certificate from the Company
naming the sublessee or sublicensee and specifying the address for the sublessee
or sublicensee's principal place of business. The Company shall, and shall cause
such sublessee or sublicensee to, execute and deliver such instruments to the
appropriate Person for filing and to deliver copies of the same to Arabica
(including sublease or sublicense agreements and Uniform Commercial Code
financing statements) as may be requested by Arabica in connection with any such
sublease or sublicense. Without limiting the foregoing, the Company shall be
entitled (without the consent of Arabica) to sublease any of the Assets to any
Subsidiary or Affiliate and, in connection therewith, to transfer the location
of any such Asset to the premises of such Subsidiary or Affiliate. The Company
shall provide Arabica with advance written notice of any such sublease. Any
sublease of any of the Assets to any Subsidiary or Affiliate of the Company
shall be subject to the agreement of such Affiliate or Subsidiary to acknowledge
that Arabica holds title to such Assets. Any permitted assignment by the Company
pursuant to this Section
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13(a) shall (A) be subject to the rights of Arabica under the Put Option Letter
and (B) include an assignment by the Company of the Supplemental Agreement, the
Put Option Letter, the Call Option Letter and any other agreement between
Arabica and the Company relating to the Assets, this Agreement or the foregoing
letters and agreements, to the same assignee, and an assumption by such assignee
of the obligations of the Company thereunder, and Arabica consents to such
assignment and assumption of the Supplemental Agreement, the Put Option Letter,
the Call Option Letter and such other agreements.
(b) Assignments By Arabica. Subject to the prior written consent of the
Company, which consent may not be unreasonably withheld (unless a Default has
occurred and is continuing, in which case no such consent shall be required),
Arabica may at any time sell or transfer all, but not less than all, of
Arabica's right, title and interest in and to the Assets and, in connection
therewith, sell, assign and transfer all, but not less than all, of Arabica's
right, title and interest in, to and under this Agreement each assignee in such
circumstances and each Person for whom any such Person may act, either directly
or indirectly, being a "REGISTERED HOLDER"), and may, without the consent of the
Company, and at its sole discretion, collaterally assign to any Person all or
any of its rights hereunder or under any Lease/Purchase Document. Any permitted
assignment by Arabica pursuant to this Section 13(b) shall (i) be subject to the
rights of the Company under the Call Option Letter and (ii) include an
assignment by Arabica of the Supplemental Agreement, the Put Option Letter and
the Call Option Letter to the same Registered Holder, and an assumption by such
Registered Holder of the obligations of Arabica thereunder, and the Company
consents to such assignment and assumption of the Supplemental Agreement, the
Put Option Letter and the Call Option Letter.
SECTION 14. EVENT OF LOSS; OBSOLETE AND WORN OUT EQUIPMENT.
(a) Termination Upon Event of Loss. Upon the occurrence of an Event of
Loss, the Company shall give prompt notice thereof to Arabica and the lease and
license of the Assets hereunder shall terminate immediately, and all Rent shall
cease to accrue with respect to all of the Assets, provided that Arabica shall
be entitled to the payment specified in Section 14(b) with respect to the
Assets; and provided, further, however, that notwithstanding such termination of
the lease, license and purchase option financing provided hereunder, the
obligations of the Company hereunder and under the other Lease/Purchase
Documents and the rights of Arabica hereunder and under the other Lease/Purchase
Documents shall continue in full force and effect until all Rent, Supplemental
Payments and other amounts payable by the Company hereunder or under any of the
other Lease/Purchase Documents have been indefeasibly paid in full in cash. Not
later than five Business Days after the occurrence of an Event of Loss, the
Company shall pay the Rent applicable to such Assets to the date of such Event
of Loss.
(b) Event of Loss Payments. Pursuant to the Supplemental Agreement, all
insurance and other payments resulting from an Event of Loss in relation to the
Assets to which the Company is entitled shall be paid or remitted by the Company
to Arabica. Upon such payment, the unpaid Acquisition Cost previously
attributable to the Assets shall be deemed to have been paid in full.
(c) Application of Payments Not Relating to an Event of Loss. Any payments
(including without limitation insurance proceeds) received at any time by
Arabica or the Company from any insurer, governmental authority or other party
with respect to any condemnation, confiscation,
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theft or seizure of, or requisition of title to or use of, or loss or damage to,
any item of the Equipment not constituting an Event of Loss, will be applied
directly in payment of repairs or for replacement of property in accordance with
the provisions of Sections 10 and 11 hereof, if not already paid by the Company,
or if already paid by the Company and if no Default or Event of Default shall
have occurred and be continuing, shall be applied to reimburse the Company for
such payment. If an Event of Default shall have occurred and is continuing, any
such payment shall be applied to the unpaid Acquisition Cost of the Assets.
SECTION 15. INSURANCE.
(a) Coverage - Property Damage. Arabica shall be responsible for
maintaining or causing to be maintained property damage insurance coverage
(including, without limitation, so-called "all perils" coverage at the greater
of replacement value or Acquisition Cost) for the Equipment. Arabica shall
satisfy this obligation by entering into the Supplemental Agreement.
(b) Coverage - Liability and Other. The Company shall maintain (i)
comprehensive general public liability insurance, including "broad form"
liability coverage blanket contractual, personal injury, property damage and
loss of use of property of others, (ii) fidelity insurance and (iii) such other
insurance with respect to the Equipment in such amounts and against such
insurable hazards as is usually carried by the Company.
(c) Insurance Policies. All insurance required to be maintained by or on
behalf of the Company or any other member of the Restricted Group pursuant to
this Agreement and the other Lease/Purchase Documents shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days (10 days for non payment of
premiums) after receipt by Arabica of written notice thereof, (ii) provide that
Arabica's interest will be insured regardless of any breach or violation of the
underlying policies by the Company or such other member of the Restricted Group
or any other Person, (iii) name Arabica and its successors and assigns as loss
payee pursuant to a loss payable endorsement issued in favor of and delivered to
Arabica and (iv) be reasonably satisfactory in all other respects to Arabica. If
the Company or any member of the Restricted Group fails to provide or cause to
be provided such insurance, Arabica, in its sole discretion, may provide such
insurance and charge the cost to the Company and any member of the Restricted
Group.
SECTION 16. ILLEGALITY. Where the introduction of any law, order,
regulation or official directive or any change in the interpretation or
application thereof makes it unlawful for Arabica or the Company to give effect
to its respective obligations under this Agreement or the Supplemental
Agreement, then each party shall notify the other of such change in
circumstances and, in consultation with the other party, use all reasonable
efforts to avoid the effects of such introduction, variation or change. If the
affected party determines in good faith that it is unable, within any period
which the relevant introduction, variation or change may allow, to avoid the
effects of the same, then the Put Option may be exercised by Arabica in
accordance with Section 2 of the Put Option Letter.
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SECTION 17. GENERAL INDEMNITY.
(a) The Company hereby assumes liability for, and does hereby agree,
whether or not any of the transactions contemplated hereby are consummated, to
indemnify, protect, save, defend, exonerate, pay and hold harmless Arabica, each
Registered Holder, each Person claiming by or through any Registered Holder, and
each of their respective officers, directors, stockholders, successors, assigns,
agents and servants, and any beneficiaries of any of the foregoing (each such
party may be referred to herein as an "INDEMNIFIED PARTY") on a net after-tax
basis (at the then highest marginal federal and applicable state, local and
foreign income tax rates) from and against any and all obligations, fees,
liabilities, losses, interest, damages, punitive damages, penalties, fines,
claims, demands, actions, suits, judgments, costs and expenses, including
without limitation reasonable legal fees and expenses (including without
limitation such legal fees and expenses or disbursements of any kind or nature
whatsoever incurred in connection with the execution, delivery, performance and
enforcement of this Agreement and the other Lease/Purchase Documents, or any
amendment, supplement or modification of, or any waiver or consent in connection
thereof and any agreement related to the foregoing), of every kind and nature
whatsoever imposed on, incurred by, or asserted against any Indemnified Party,
in any way relating to or arising out of the Assets or the performance by
Arabica or any Indemnified Party of its obligations hereunder, under any
agreement related hereto or under any guaranty or the Company Security Documents
relating to the obligations of the Company hereunder, except as otherwise
provided herein, or (i) the manufacture, construction, ordering, purchase,
acceptance or rejection, ownership, delivery, leasing, re-leasing, subleasing,
licensing, re-licensing, sublicensing, possession, use, operation, maintenance,
storage, registration or re-registration, titling or re-titling, licensing or
re-licensing, documentation, removal, return, sale (including without limitation
sale by an Indemnified Party to the Company pursuant to the terms hereof) or
other applications or dispositions thereof, including without limitation any of
such as may arise from (A) loss or damage to any property or death or injury to
any Person, (B) patent or latent defects in the Assets (whether or not
discoverable by the Company or any Indemnified Party), (C) any claims based on
strict liability in tort or otherwise, (D) any claims based on patent, trademark
or copyright infringement attributable to the use, possession or operation of
the Assets by the Company, and (E) any claims based on liability arising under
any applicable environmental or noise or pollution control law or regulation,
(ii) any failure on the part of the Company to perform or comply with any of the
terms of this Agreement or any document, instrument, agreement or contract
entered into in relation hereto or otherwise in relation to the Assets but
excluding any claim based upon any failure on the part of an Indemnified Party
to comply with its obligations under this Agreement or any document, instrument,
agreement or contract entered into by such Indemnified Party in relation hereto
or otherwise in relation to the Assets or (iii) any claims, encumbrances,
security interests, liens or legal processes regarding such Indemnified Party's
title to or interest in the Assets attributable to the Company's use of the
Assets. The Company shall not be required to indemnify any Indemnified Party for
any claims resulting from acts which would constitute the willful misconduct or
gross negligence of such Indemnified Party. The Company shall give each
Indemnified Party prompt notice of any occurrence, event or condition known to
the Company as a consequence of which any Indemnified Party is or is reasonably
likely to be entitled to indemnification hereunder.
(b) The indemnification provided in this Section 17 shall specifically
apply to and include claims or actions brought by or on behalf of employees of
the Company and the
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Company hereby expressly waives, as against any Indemnified Party, any immunity
to which the Company may otherwise be entitled under any industrial or worker's
compensation laws. The Company shall promptly upon request of any such
Indemnified Party (but in any event within 30 days of such request) reimburse
such Indemnified Party for amounts expended by it in connection with any of the
foregoing or pay such amounts directly. The Company shall be subrogated to an
Indemnified Party's rights in any matter with respect to which the Company has
actually reimbursed such Indemnified Party for amounts expended by it or has
actually paid such amounts directly pursuant to this Section 17. If any action,
suit or proceeding is brought against any Indemnified Party in connection with
any claim indemnified against hereunder, such Indemnified Party will, after
receipt of notice of the commencement of such action, suit or proceeding, notify
the Company thereof, enclosing a copy of all papers served upon such Indemnified
Party. The Company may, and upon such Indemnified Party's request will, at the
Company's expense, resist and defend such action, suit or proceeding, or cause
the same to be resisted or defended by counsel selected by the Company and
reasonably satisfactory to such Indemnified Party and in the event of any
failure by the Company to do so, the Company shall pay all costs and expenses
(including without limitation reasonable attorney's fees and expenses) incurred
by such Indemnified Party in connection with such action, suit or proceeding.
The provisions of this Section 17, and all of the indemnities and the
obligations of the Company under this Section 17, shall apply to the Assets and
each component thereof and shall apply from the date of the execution of this
Agreement and shall survive the expiration or earlier termination of this
Agreement and all documents, instruments, agreements and contracts entered into
in relation hereto or otherwise in relation to the Assets or any component of
the Assets and are expressly made for the benefit of, and shall be enforceable
by, each Indemnified Party.
(c) All amounts due under this Section 17 shall be payable not later than
10 days after written demand therefor. Demands for payments pursuant to this
Section 17 shall be submitted to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇)
(Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇) or to such other Person or address as may be
hereafter designated by the Company in a written notice to Company. The
agreements in this Section 17 shall survive payment of all Obligations
hereunder.
SECTION 18. DISCLAIMER. ARABICA, NOT BEING A SELLER (AS SUCH TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE IN EFFECT IN ANY APPLICABLE JURISDICTION
AND FOR THE PURPOSES OF SUCH CODE), OR A SELLER'S AGENT, AND INASMUCH AS THE
COMPANY HAS ACCEPTED DELIVERY OF THE ASSETS AFTER SATISFYING ITSELF AS TO THE
CONDITION, QUALITY, FITNESS FOR ANY PARTICULAR PURPOSE OR OTHERWISE OF SUCH
ASSETS, HEREBY EXPRESSLY DISCLAIMS AND MAKES TO THE COMPANY OR ANY SUBSIDIARY OR
AFFILIATE OF THE COMPANY NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR OTHERWISE, INCLUDING,
BUT NOT LIMITED TO: THE FITNESS FOR USE, DESIGN OR CONDITION OF THE ASSETS; THE
QUALITY OR CAPACITY OF THE ASSETS; THE WORKMANSHIP OF THE ASSETS; THAT THE
ASSETS WILL SATISFY THE REQUIREMENTS OF ANY LAW, RULE, SPECIFICATION OR CONTRACT
PERTAINING THERETO, AND ANY GUARANTY OR WARRANTY AGAINST PATENT INFRINGEMENT OR
LATENT DEFECTS, IT BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN ARABICA AND THE
COMPANY OR ANY SUBSIDIARY OR AFFILIATE OF THE COMPANY, ARE TO BE BORNE BY THE
COMPANY. ARABICA IS NOT RESPONSIBLE FOR ANY DIRECT,
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INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGE TO OR LOSSES RESULTING FROM THE
INSTALLATION, OPERATION OR USE OF THE ASSETS OR ANY PRODUCTS MANUFACTURED
THEREBY. ARABICA HEREBY ASSIGNS TO THE COMPANY ALL ASSIGNABLE WARRANTIES MADE BY
THE SUPPLIER TO ARABICA FOR AND DURING THE TERM OF THIS AGREEMENT AND THE
COMPANY AGREES TO RESOLVE ALL SUCH CLAIMS DIRECTLY WITH THE SUPPLIER. ARABICA
SHALL COOPERATE FULLY WITH THE COMPANY WITH RESPECT TO THE RESOLUTION OF SUCH
CLAIMS, IN GOOD FAITH AND BY APPROPRIATE PROCEEDINGS AT THE COMPANY'S EXPENSE.
ANY SUCH CLAIM SHALL NOT AFFECT IN ANY MANNER THE UNCONDITIONAL OBLIGATION OF
THE COMPANY TO MAKE RENT AND OTHER PAYMENTS HEREUNDER. So long and only so long
as an Event of Default shall not have occurred and be continuing, and so long
and only so long as any of the Assets shall be subject to this Agreement and the
Company shall be entitled to possession of the Assets hereunder, Arabica
authorizes the Company, at the Company's sole expense, to assert for Arabica's
account, all rights and powers of Arabica under any manufacturer's, vendor's or
dealer's warranty on any item of Assets; provided, however, that the Company
shall indemnify, protect, save, defend and hold harmless Arabica from and
against any and all claims, and all costs, expenses, damages, losses and
liabilities incurred or suffered by Arabica in connection therewith, as a result
of, or incident to, any action by the Company pursuant to the foregoing
authorization.
SECTION 19. REPRESENTATIONS AND WARRANTIES. In order to induce Arabica to
enter into this Agreement and to lease and license the Assets to the Company
hereunder, the Company hereby confirms (i) the representations and warranties of
each member of the Restricted Group set forth in the other Lease/Purchase
Documents (which are incorporated by reference herein) and (ii) the following
representations and warranties (which representations and warranties assume the
leasing and licensing to the Company of Assets existing on the Commencement Date
and shall survive the execution and delivery of this Agreement and the leasing
and licensing of such Assets):
(a) Financial Condition. The audited consolidated balance sheets of the
Company and its Subsidiaries as at December 28, 2003, and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
Ernst & Young LLP, present fairly the consolidated financial condition of the
Company and its Subsidiaries as at such date, and the consolidated results of
its operations and its consolidated cash flows for the respective fiscal years
then ended. The unaudited consolidated balance sheet of the Company and its
Subsidiaries as at March 28, 2004, and the related unaudited consolidated
statements of income and cash flows for the three-month period ended on such
date, present fairly the consolidated financial condition of the Company as at
such date, and the consolidated results of its operations and its consolidated
cash flows for the three-month period then ended (subject to normal year-end
audit adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants and disclosed therein). No member of the
Restricted Group has any material Guarantee Obligations, contingent liabilities,
liabilities for taxes, or any long-term leases (other than pursuant to the
Lease/Purchase Documents) or unusual forward or long-term commitments, including
any rate or foreign currency swap or exchange transaction or other
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obligation in respect of derivatives, that are not reflected in the most recent
financial statements referred to in this paragraph. During the period from
December 28, 2003 to and including the date hereof there has been no Disposition
by any member of the Restricted Group of any material part of its business or
property. No Subordinated Indebtedness of any member of the Restricted Group is
outstanding as of the date hereof.
(b) No Change. Since December 28, 2003, there has been no development or
event that has had or could reasonably be expected to have a Material Adverse
Effect.
(c) Existence; Compliance with Law. Each member of the Restricted Group
(a) is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) has the power and authority, and the
legal right, to own and operate its property, to lease the property it operates
as lessee and to conduct the business in which it is currently engaged, (c) is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification and (d) is in compliance
with all Requirements of Law except to the extent that the failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(d) Power; Authorization; Enforceable Obligations. Each member of the
Restricted Group has the power and authority, and the legal right, to execute,
deliver and perform the Lease/Purchase Documents to which it is a party. Each
member of the Restricted Group has taken all necessary organizational action to
authorize the execution, delivery and performance of the Lease/Purchase
Documents to which it is a party. No consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the execution, delivery,
performance, validity or enforceability of any of the Lease/Purchase Documents.
Each Lease/Purchase Document has been duly executed and delivered on behalf of
each member of the Restricted Group party thereto and constitutes the legal,
valid and binding obligation of such member of the Restricted Group, enforceable
against each such member in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(e) No Legal Bar. The execution, delivery and performance of the
Lease/Purchase Documents will not violate in any material respect any
Requirement of Law or any Contractual Obligation of any member of the Restricted
Group and will not result in, or require, the creation or imposition of any Lien
on any of their respective properties or revenues pursuant to any Requirement of
Law or any such Contractual Obligation (other than the Liens created by the
Lease/Purchase Documents). There are no Requirements of Law or Contractual
Obligations applicable to any member of the Restricted Group that, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(f) Litigation. No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge of any
member of the Restricted Group, threatened by or against any member of the
Restricted Group or against any of their respective properties or revenues (a)
with respect to any of the Lease/Purchase Documents or any of the
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transactions contemplated hereby or thereby, or (b) that could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
(g) No Default. No member of the Restricted Group is in default under or
with respect to any of its Contractual Obligations in any respect that could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
(h) Ownership of Property; Liens. Each member of the Restricted Group has
title in fee simple to, or a valid leasehold interest in, all its real property,
and good title to, or a valid leasehold interest in, all its other property, and
none of such property is subject to any Lien except for Permitted Liens.
(i) Intellectual Property. Except as otherwise described on Schedule
19(i), (a) Arabica owns all service marks used by the Company and its
Subsidiaries in their business and (b) each member of the Restricted Group owns,
or is licensed to use, all other Intellectual Property necessary for the conduct
of its business as currently conducted. Except as otherwise described on
Schedule 19(i), no material claim has been asserted and is pending by any Person
challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any Intellectual Property, nor does any member of the
Restricted Group have knowledge of any valid basis for any such claim. The use
of Intellectual Property by each member of the Restricted Group does not
infringe on the rights of any Person except for instances which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except as provided in Schedule 19(i), no interest in any of the
Intellectual Property has been licensed by any member of the Restricted Group to
any other Person (except for licenses permitted pursuant to Section 13).
(j) Taxes. Each member of the Restricted Group has filed or caused to be
filed all federal, state and other material tax returns that are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the relevant
member of the Restricted Group; no tax Lien has been filed, and, to the
knowledge of the members of the Restricted Group, no claim is being asserted,
with respect to any such tax, fee or other charge. No member of the Restricted
Group has executed any waiver having the effect of extending any applicable
statute of limitations in respect of tax liabilities.
(k) Federal Regulations. No portion of any amount paid to any member of
the Restricted Group under the Lease/Purchase Documents will be used for
"buying" or "carrying" any "margin stock" within the respective meanings of each
of the quoted terms under Regulation U as now and from time to time hereafter in
effect or for any purpose that violates the provisions of Regulations T, U or X
of the Board. If requested by Arabica, the Company will furnish to Arabica a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U-1, as applicable, referred to in Regulation U.
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(l) Labor Matters. (a) There are no collective bargaining agreements or
other labor contracts covering any member of the Restricted Group; (b) to the
knowledge of the members of the Restricted Group, no union or other labor
organization is seeking to organize, or to be recognized as bargaining
representative for, a bargaining unit of employees of any member of the
Restricted Group; (c) there is no material labor dispute pending or threatened
against or affecting any member of the Restricted Group; (d) there has not been,
during the five year period prior to the date hereof, any material labor dispute
against or affecting any member of the Restricted Group, other than employee
grievances arising in the ordinary course of business which are not, in the
aggregate, material; and (e) each member of the Restricted Group has complied in
all material respects with (or corrected in full any prior noncompliance) and is
in material compliance with the provisions of the Fair Labor Standards Act of
1938, as amended, and regulations thereunder.
(m) ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Company nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan that
has resulted or could reasonably be expected to result in a material liability
under ERISA, and neither the Company nor any Commonly Controlled Entity would
become subject to any material liability under ERISA if the Company or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent.
(n) Investment Company Act; Other Regulations. No member of the Restricted
Group is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
No member of the Restricted Group is subject to regulation under any Requirement
of Law (other than Regulation X of the Board) that limits its ability to incur
Indebtedness.
(o) Subsidiaries; Capital Stock . Except as disclosed to Arabica in
writing from time to time after the Closing Date:
(i) Holdings has only the Subsidiaries set forth on, and the
authorized, issued and outstanding Capital Stock of each member of the
Restricted Group is as set forth on, Schedule 19(o) and (ii) the Capital
Stock of each member of the Restricted Group are duly authorized, validly
issued, fully paid and nonassessable and are owned beneficially and of
record by the Persons set forth on Schedule 19(o), free and clear of all
Liens.
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(ii) Except as set forth on Schedule 19(o), no member of the
Restricted Group has issued any securities convertible into, or options or
warrants for, any common or preferred equity securities thereof and there
are no agreements, voting trusts or understandings binding upon any member
of the Restricted Group with respect to the voting securities of any
member of the Restricted Group or affecting in any manner the sale,
pledge, assignment or other disposition thereof, including any right of
first refusal, option, redemption, call or other right with respect
thereto, whether similar or dissimilar to any of the foregoing.
(p) Environmental Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect:
(i) the facilities and properties owned, leased or operated by any
member of the Restricted Group (the "PROPERTIES") do not contain, and have
not previously contained, any Materials of Environmental Concern in
amounts or concentrations or under circumstances that constitute or
constituted a violation of, or could give rise to liability under, any
Environmental Law;
(ii) no member of the Restricted Group has received or is aware of
any notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the business
operated by any member of the Restricted Group (the "BUSINESS"), nor does
any member of the Restricted Group have knowledge or reason to believe
that any such notice will be received or is being threatened;
(iii) Materials of Environmental Concern have not been transported
or disposed of from the Properties in violation of, or in a manner or to a
location that could give rise to liability under, any Environmental Law,
nor have any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of the Properties in violation
of, or in a manner that could give rise to liability under, any applicable
Environmental Law;
(iv) no judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the members of the Restricted Group,
threatened, under any Environmental Law to which any member of the
Restricted Group is or will be named as a party with respect to the
Properties or the Business, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business;
(v) there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or
related to the operations of any member of the Restricted Group in
connection with the Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that could give
rise to liability under Environmental Laws;
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(vi) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with all
applicable Environmental Laws, and there is no contamination at, under or
about the Properties or violation of any Environmental Law with respect to
the Properties or the Business; and
(vii) no member of the Restricted Group has assumed any liability of
any other Person under Environmental Laws.
(q) Accuracy of Information, etc. No statement or information contained in
this Agreement, the Confidential Information Memorandum, any other
Lease/Purchase Document, or any other document, certificate or statement
furnished by or on behalf of the Company or any of its Subsidiaries to Arabica
or any Registered Holder, for use in connection with the transactions
contemplated by this Agreement or the other Lease/Purchase Documents, contains
any untrue statement of a material fact or omits any material fact necessary to
make the statements contained herein or therein not misleading. The projections
and pro forma financial information contained in the materials referenced above
are based upon good faith estimates and assumptions believed by management of
the Company to be reasonable at the time made, it being recognized that such
financial information as it relates to future events is not to be viewed as fact
and that actual results during the period or periods covered by such financial
information may differ from the projected results set forth therein by a
material amount. No member of the Restricted Group has knowledge of any fact
that could reasonably be expected to have a Material Adverse Effect that has not
been expressly disclosed herein, in the other Lease/Purchase Documents, in the
Confidential Information Memorandum or in any other documents, certificates and
statements furnished to Arabica or any Registered Holder for use in connection
with the transaction contemplated hereby and by the other Lease/Purchase
Documents.
(r) Company Security Documents, Real Property.
(i) Each Company Security Document is effective to create in favor
of the Arabica a legal, valid and enforceable security interest in the
Collateral described therein and proceeds thereof. In the case of the
Pledged Stock described in the Company Security Documents, when stock
certificates representing such Pledged Stock are delivered to Arabica, and
in the case of the other Collateral described in the Company Security
Documents, when financing statements and other filings specified on
Schedule 19(r)(ii) in appropriate form are filed in the offices specified
on Schedule 19(r)(i), each Company Security Document shall constitute a
fully perfected Lien on, and security interest in, all right, title and
interest of the members of the Restricted Group in such Collateral and the
proceeds thereof, as security for the Obligations (as defined in the
applicable Security Document), in each case prior and superior in right to
any other Person (except, in the case of Collateral other than Pledged
Stock, Permitted Liens).
(ii) Schedule 19(r)(ii), as of the Closing Date, each parcel of
owned real property and each leasehold interest in real property held by
the members of the Restricted Group.
(s) Solvency. Each member of the Restricted Group is, and after giving
effect to this Agreement and the other Lease/Purchase Documents, and the
incurrence of all Indebtedness and
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obligations being incurred in connection herewith and therewith will be and will
continue to be, Solvent.
(t) Stores; Material Agreements. Schedule 19(t) accurately and completely
lists all Stores owned or operated by the Company or any of its Subsidiaries
(with the owner and operator and address of each Store listed thereon) and all
material agreements (including all real estate leases) to which any member of
the Restricted Group is a party. Each of the material agreements listed on
Schedule 19(t) is in full force and effect and constitutes the legally valid and
binding obligation of the Company or its Subsidiary, as the case may be,
identified thereon as being a party to such agreement and, to the knowledge of
the Restricted Group, the other parties thereto, enforceable against each of
them in accordance with its respective terms. No member of the Restricted Group
is in violation under any material agreements, where such violations in the
aggregate could reasonably be expected to have a Material Adverse Effect. To the
knowledge of the members of the Restricted Group, except as disclosed in
Schedule 19(t), third parties to any material agreements are not in material
violation thereof to the extent that such violations in the aggregate could
reasonably be expected to have a Material Adverse Effect.
(u) Indebtedness Outstanding.
(i) Set forth on Schedule 19(u)(i) hereto is a list and description
of all Indebtedness of any member of the Restricted Group that will be
outstanding immediately after the initial closing under this Agreement.
(ii) Set forth on Schedule 19(u)(ii) hereto is a list and
description of all Liens of any member of the Restricted Group that will
be outstanding immediately after the initial closing under this Agreement.
(v) Anti-Terrorism Laws.
(i) No member of the Restricted Group and, to the knowledge of the
Restricted Group, no Affiliate of any member of the Restricted Group, is
in violation of any United States laws applicable to such member of the
Restricted Group or such Affiliate relating to terrorism or money
laundering ("ANTI-TERRORISM LAWS"), including Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001 (the "EXECUTIVE ORDER"),
and the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Public Law
107-56.
(ii) No member of the Restricted Group and, to the knowledge of any
member of the Restricted Group, no Affiliate of any member of the
Restricted Group is any of the following:
(A) a Person or entity that is listed in the annex to, or is
otherwise subject to the provisions of, the Executive Order;
(B) a Person or entity owned or controlled by, or acting for
or on behalf of, any Person or entity that is listed in the annex
to, or is otherwise subject to the provisions of, the Executive
Order;
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(C) a Person or entity with which any party is prohibited from
dealing or otherwise engaging in any transaction by any
Anti-Terrorism Law;
(D) a Person or entity that commits, threatens or conspires to
commit or supports "terrorism" as defined in the Executive Order; or
(E) a Person or entity that is named as a "specially
designated national and blocked person" on the most current list
published by the U.S. Treasury Department Office of Foreign Assets
Control at its official website or any replacement website or other
replacement official publication of such list.
(iii) No member of the Restricted Group and, to the knowledge of any
member of the Restricted Group, no Affiliate of any member of the
Restricted Group (A) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the
benefit of any Person described in clause (ii) above, (B) deals in, or
otherwise engages in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order, or (C)
engages in or conspires to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate,
any of the prohibitions set forth in any Anti-Terrorism Law.
(iv) No Person is acting for any member of the Restricted Group or
any Affiliate of any thereof as a broker or other agent acting or
benefiting in any capacity in connection with this Agreement.
(w) Use of Proceeds. The Company shall use the sale proceeds received
under the Asset Purchase Agreement for the acquisition and/or construction of
new facilities, operating facility upgrades, working capital and other general
corporate purposes.
(x) Regulation H. No Mortgage encumbers improved real property that is
located in an area that has been identified by the Secretary of Housing and
Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
SECTION 20. FINANCIAL COVENANTS. The Company covenants and agrees that
until all Rent and other amounts payable hereunder and under the Lease/Purchase
Documents have been indefeasibly paid in full in cash:
(a) Maximum Consolidated Senior Leverage Ratio. The Company will not cause
or permit the ratio (the "CONSOLIDATED SENIOR LEVERAGE RATIO") of the
Consolidated Funded Indebtedness of the Company and its Subsidiaries (excluding
any Subordinated Debt included therein) at any Quarterly Date during any period
set forth below to the Consolidated EBITDA of the Company for the Reference
Period ending on such Quarterly Date to be greater than the ratio set forth in
the table below for the period during which such date falls:
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Closing Date through January 2, 2005 2.00:1.00
January 3, 2005 through April 3, 2005 2.25:1.00
April 4, 2005 through July 3, 2005 2.50:1.00
July 4, 2005 through July 2, 2006 2.75:1.00
July 3, 2006 through October 1, 2006 2.50:1.00
October 2, 2006 through December 31, 2006 2.25:1.00
January 1, 2007 through April 1, 2007 2.00:1.00
April 2, 2007 through July 1, 2007 1.75:1.00
July 2, 2007 through December 30, 2007 1.50:1.00
December 31, 2007 and thereafter 1.00:1.00
(b) Minimum Consolidated Financial Obligations Coverage Ratio. The Company
will not cause or permit the ratio of the Consolidated Cash Flow of the Company
and its Subsidiaries for any Reference Period ending on any Quarterly Date
falling in any period referred to below to the Consolidated Financial
Obligations of the Company and its Subsidiaries for such Reference Period to be
less than the ratio specified below for the period during which such date falls:
Minimum Cash Flow
Quarterly Dates Coverage Ratio
----------------------------------------- -----------------
Closing Date through January 2, 2005 5.00:1.00
January 3, 2005 through January 1, 2006 5.00:1.00
January 2, 2006 through December 31, 2006 4.50:1.00
January 1, 2007 and thereafter 5.00:1.00
(c) Minimum Interest Coverage Ratio. The Company will not cause or permit
the ratio of (i) the Consolidated EBITDAR of the Company and its Subsidiaries
for each Reference Period ending on any Quarterly Date to (ii) the sum of
Consolidated Financing Expense plus Consolidated Rental Expense of the Company
and its Subsidiaries for such Reference Period to be less than 1.50:1.00.
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(d) Maximum Growth Capital Expenditures.
The Company will not cause or permit the Growth Capital Expenditures made by the
Company and its Subsidiaries in any fiscal year to exceed the maximum amounts
set forth below for the fiscal years listed:
Maximum Amount of
Fiscal Year Ending Growth Capital Expenditures
--------------------------- ---------------------------
January 2, 2005 $26,000,000
January 1, 2006 $34,500,000
December 31, 2006 $35,000,000
December 30, 2007 $19,000,000
Each fiscal year thereafter $21,000,000
provided that so long as no Default shall then exist, up to 25% of Growth
Capital Expenditures permitted, but not made, in any such fiscal year, as
provided above, may be deferred and made in the subsequent fiscal year in
addition to permitted Growth Capital Expenditures for such subsequent fiscal
year specified above, provided that no such deferred Growth Capital Expenditures
may be further deferred.
(e) New Store Commitments. The Company shall not enter into any New Store
Commitment if at such time (i) the Coffeehouse Level EBITDA Margin for the
Reference Period most recently ended is less than 16% of Coffeehouse Level Sales
for such Reference Period or (ii) the aggregate Available Amount is less than
(A) the budgeted amount of Capital Expenditures for outstanding New Store
Commitments (including the New Store Commitment in question, and assuming that
the budgeted amount of Capital Expenditures for any New Store Commitment for
which a Capital Expenditure budget has not been determined is $300,000), less
(B) the aggregate amount of Capital Expenditures made toward New Store
Commitments prior to the opening of each such Store.
SECTION 21. AFFIRMATIVE COVENANTS. The Company covenants and agrees that
until all Rent and other amounts payable hereunder and under the Lease/Purchase
Documents have been indefeasibly paid in full in cash:
(a) Financial Reporting. The Company will furnish to Arabica the following
financial statements, each of which shall be complete and correct in all
material respects and shall be prepared in reasonable detail and in accordance
with GAAP:
(i) as soon as available, but in any event within 90 days after the
end of each fiscal year a copy of the audited consolidated balance sheet
of the Company and its consolidated Subsidiaries as at the end of such
year and the related audited consolidated statements of income and of cash
flows for such year, setting forth in each case in comparative form the
figures for the previous year, reported on without a "going concern" or
like qualification or exception, or qualification arising out of the scope
of the audit, by Ernst & Young or other independent certified public
accountants of nationally recognized standing;
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(ii) as soon as available, but in any event not later than 45 days
after the end of each quarterly period of each fiscal year, the unaudited
consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of such quarter and, in each case, the related
unaudited consolidated statements of income and of cash flows for such
quarter and the portion of the fiscal year through the end of such
quarter, setting forth in each case in comparative form the figures for
the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments); and
(iii) as soon as available, but in any event not later than 30 days
after the end of each month occurring during each fiscal year, the
unaudited consolidated balance sheets of the Company and its consolidated
Subsidiaries as at the end of such month and the related unaudited
consolidated statements of income and of cash flows for such month and the
portion of the fiscal year through the end of such month, setting forth in
each case in comparative form the figures for the previous year, certified
by a Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments).
(b) Certificates; Other Information. The Company will furnish to Arabica:
(i) concurrently with the delivery of the financial statements
referred to in Section 21(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(ii) concurrently with the delivery of any financial statements
pursuant to Section 21, (i) a certificate of a Responsible Officer stating
that, to the best of such Responsible Officer's knowledge, the Company and
each of its Subsidiaries, during such period, have observed or performed
all of its covenants and other agreements, and satisfied every condition
contained in this Agreement and the other Lease/Purchase Documents to
which it is a party to be observed, performed or satisfied by it, and that
such Responsible Officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate, (ii) a Store by Store
report substantially in the form of Exhibit C, and (iii) in the case of
quarterly or annual financial statements, (A) a Compliance Certificate
containing all information and calculations necessary for determining
compliance by the Company and each of its Subsidiaries, with the
provisions of this Agreement referred to therein as of the last day of the
fiscal quarter or fiscal year of the Company and (B) to the extent not
previously disclosed to Arabica, a description of any change in the
jurisdiction of organization of any member of the Restricted Group, and a
list of any Intellectual Property or other property as to which action is
required under Section 21(i), in each case acquired by any member of the
Restricted Group since the date of the most recent report delivered
pursuant to this clause (C) (or, in the case of the first such report so
delivered, since the date hereof);
(iii) as soon as available, and in any event no later than 30 days
prior to the beginning of each fiscal year of the Company, a detailed
consolidated budget for the
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following fiscal year (including a projected consolidated balance sheet of
the Company and its Subsidiaries as of the end of the following fiscal
year, the related consolidated statements of projected cash flow,
projected changes in financial position and projected income and a
description of the underlying assumptions applicable thereto), and, as
soon as available, significant revisions, if any, of such budget and
projections with respect to such fiscal year (collectively, the
"PROJECTIONS"), which Projections shall in each case be accompanied by a
certificate of a Responsible Officer stating that such Projections are
based on reasonable estimates, information and assumptions and that such
Responsible Officer has no reason to believe that such Projections are
incorrect or misleading in any material respect;
(iv) within 45 days after the end of each fiscal quarter, a
narrative discussion and analysis of the financial condition and results
of operations of the Company and its Subsidiaries for such fiscal quarter
and for the period from the beginning of the then current fiscal year to
the end of such fiscal quarter, as compared to the portion of the
Projections covering such periods and to the comparable periods of the
previous year;
(v) no later than 10 Business Days (or, in the case of amendments or
supplements to this Agreement and the other Lease/Purchase Documents
effected solely to facilitate the sale and leaseback of additional Assets
hereunder and thereunder, three Business Days) prior to the effectiveness
thereof, copies of substantially final drafts of any proposed amendment,
supplement, waiver or other modification with respect to the
Lease/Purchase Documents;
(vi) within five days after the same are sent, copies of all
financial statements and reports that any member of the Restricted Group
send to the holders of any class of its debt securities or public equity
securities and, within five days after the same are filed, copies of all
financial statements and reports that any member of the Restricted Group,
may make to, or file with, the SEC; and
(vii) promptly, such additional financial and other information as
Arabica may from time to time reasonably request.
(c) Payment of Obligations. Each member of the Restricted Group will pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its material obligations of whatever nature,
except where the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Company or any of its
Subsidiaries, when relevant.
(d) Maintenance of Existence; Compliance; Conduct of Business. Each member
of the Restricted Group will (i) preserve, renew and keep in full force and
effect its organizational existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business; (ii) comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect;
(iii) maintain and keep in full force and effect all material licenses and
permits necessary to the proper conduct of its
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business; and (iv) remain or engage in the business of (A) owning, operating and
promoting, directly or indirectly (including through licensees and franchisees),
the Stores and other retail locations wherever located selling the same or
similar products, including beverages, food, whole beans and ground coffee, and
merchandise, as those currently sold by the Company and its Subsidiaries through
the Stores or otherwise and (B) selling and promoting, directly or indirectly
(including through licensees or franchisees), whole beans and ground coffee and
other products through institutional trade channels, and in no other business.
(e) Maintenance of Property; Insurance. Subject to Sections 10, 11 and 15,
each member of the Restricted Group will (a) keep all property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted and (b) maintain with financially sound and reputable insurance
companies insurance on all its property as required under the Company Security
Documents and, without limiting the provisions thereof, in at least such amounts
and against at least such risks (but including in any event public liability,
product liability and business interruption) as are usually insured against in
the same general area by companies engaged in the same or a similar business.
(f) Inspection of Property; Books and Records; Discussions. Each member of
the Restricted Group will (a) keep proper books of records and account in which
full, true and correct entries in conformity with GAAP (in respect of the
Company and its Subsidiaries only) and all Requirements of Law shall be made of
all dealings and transactions in relation to its business and activities and (b)
permit representatives of Arabica or its designees to visit and inspect any of
its properties and examine and make abstracts from any of its books and records
at any reasonable time and as often as may reasonably be desired and to discuss
the business, operations, properties and financial and other condition of
members of the Company and its Subsidiaries with officers and employees of
members of the Restricted Group and with their independent certified public
accountants. Upon receipt of Arabica's notice requesting to inspect certain
Equipment or other Assets or books and records, such member of the Restricted
Group shall promptly notify Arabica of the location thereof and shall make all
necessary arrangements to facilitate the inspection. Without limiting the
foregoing, Arabica may conduct as many commercial credit examinations of the
Company and its Subsidiaries as it reasonably deems necessary, whether or not an
Event of Default exists. One such examination per year while no Event of Default
has occurred and is continuing, and all such examinations during the continuance
of any Event of Default, shall be all at the expense of the Company.
(g) Notices. Promptly give notice to Arabica of:
(i) the occurrence of any Default or Event of Default;
(ii) any (A) default or event of default under any Contractual
Obligation of any member of the Restricted Group, or (B) litigation,
investigation or proceeding that may exist at any time between any member
of the Restricted Group and any Governmental Authority, that in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(iii) any litigation or proceeding affecting any member of the
Restricted Group, (A) in which the amount involved that is not covered by
insurance is $250,000 or
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more, (B) in which injunctive or similar relief is sought or (C) which
relates to any Lease/Purchase Document or any agreement relating thereto;
(iv) the following events, as soon as possible and in any event
within 30 days after any member of the Restricted Group, knows or has
reason to know thereof: (A) the occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan, the creation of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (B) the institution of proceedings or the taking of
any other action by the PBGC, the Company or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or
the termination, Reorganization or Insolvency of, any Plan;
(v) no more than five Business Days after becoming aware of any
investigative proceedings by a Governmental Authority commenced or
threatened against any member of the Restricted Group regarding any
potential violation of Environmental Laws, any spill, release, discharge
or disposal of any Materials of Environmental Concern or any event
required to be reported to any such Governmental Authority, written notice
thereof and of the action being proposed to be taken with respect thereto;
and
(vi) any development or event that has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section 21(g) shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Company or any of its Subsidiaries, as
relevant, proposes to take with respect thereto.
(h) Environmental Laws.
(i) Each member of the Restricted Group will comply in all material
respects with, and ensure compliance in all material respects by all
tenants and subtenants, if any, with, all applicable Environmental Laws,
and obtain and comply in all material respects with and maintain, and
ensure that all tenants and subtenants obtain and comply in all material
respects with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable
Environmental Laws.
(ii) Each member of the Restricted Group conduct and complete all
investigations, studies, sampling and testing, and all remedial, removal
and other actions required under Environmental Laws and promptly comply in
all material respects with all lawful orders and directives of all
Governmental Authorities regarding Environmental Laws.
(i) Additional Collateral, Etc.
(i) With respect to any property acquired after the Closing Date by
any member of the Restricted Group (other than (x) any property described
in paragraph (ii) or (iii) below, (y) any property listed in clause (v) of
the definition of "Permitted Liens"
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and (z) any Intellectual Property, to the extent of any filings required
outside of the United States (unless such filings are in a Specified
Foreign Jurisdiction)) as to which Arabica does not have a perfected Lien,
promptly (and not less frequently than quarterly, in the case of any
Collateral constituting Intellectual Property) (A) execute and deliver to
Arabica such amendments to the Security Documents or such other documents
(including any Leasehold Security Document) as Arabica deems necessary or
advisable to grant to Arabica a security interest in such property and (B)
take all actions necessary or advisable to grant to Arabica a perfected
first priority security interest in such property, including the filing of
Uniform Commercial Code financing statements in such jurisdictions as may
be required by the Company Security Documents or by law or as may
reasonably be requested by Arabica in respect of such property.
(ii) With respect to any fee interest in any real property having a
value (together with improvements thereon) of at least $250,000 acquired
after the Closing Date by any member of the Restricted Group, promptly (A)
execute and deliver a first priority mortgage reasonably satisfactory to
Arabica (each, a "MORTGAGE"), in favor of Arabica covering such real
property, (B) if requested by Arabica, provide Arabica and any Registered
Holders with (1) title and extended coverage insurance covering such real
property in an amount at least equal to the purchase price of such real
property (or such other amount as shall be reasonably specified by
Arabica) as well as a current ALTA survey thereof, together with a
surveyor's certificate and (2) any consents or estoppels reasonably deemed
necessary or advisable by Arabica in connection with such Mortgage, each
of the foregoing in form and substance reasonably satisfactory to Arabica
and (C) if requested by Arabica, deliver to Arabica legal opinions
relating to the matters described above, which opinions shall be in form
and substance, and from counsel, reasonably satisfactory to Arabica.
(iii) With respect to any new Subsidiary (other than Caribou Coffee
Charitable Foundation) created or acquired after the Commencement Date by
any member of the Restricted Group, promptly (A) execute and deliver to
Arabica such amendments to the Company Security Documents as the Arabica
deems necessary or advisable to grant to Arabica a perfected first
priority security interest in the Capital Stock of such new Subsidiary
that is owned by any member of the Restricted Group, (B) deliver to
Arabica the certificates representing such Capital Stock, together with
undated stock powers, in blank, executed and delivered by a duly
authorized officer of the relevant member or members of the Restricted
Group, (C) cause such new Subsidiary (1) to become a party to the Company
Guarantee and Security Agreement, (2) to take such actions necessary or
advisable to grant to Arabica a perfected first priority security interest
in the Collateral described in the Company Security Documents with respect
to such new Subsidiary, including the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required by the
Company Security Documents or by law or as may reasonably be requested by
Arabica (other than in respect of property listed in clause (v) of the
definition of "Permitted Liens" and Intellectual Property, to the extent
of any filings required outside of the United States and the European
Union) and (3) to deliver to Arabica a certificate of such Subsidiary,
substantially in the form of Exhibit D, with appropriate insertions and
attachments, and (D) if requested by Arabica, deliver to the
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Arabica legal opinions relating to the matters described above, which
opinions shall be in form and substance, and from counsel, reasonably
satisfactory to Arabica.
(iv) Promptly upon any member of the Restricted Group undertaking
any business or operations in any Specified Foreign Jurisdiction (other
than entering into agreements with franchisees and similar licensees in
any such jurisdiction and other than in respect of property subject to a
Lien expressly permitted by clause (e) of the definition of "Permitted
Liens") notify Arabica thereof and, if reasonably requested by Arabica,
promptly furnish to Arabica an opinion of counsel, such opinion and such
counsel to be reasonably satisfactory to Arabica, as to the satisfaction
of the requirements of subsections (i) through (iii) above.
(j) Leasehold Security Documents. To the extent that the same have not
been obtained on or prior to the Commencement Date, (i) the Company shall, and
shall use its reasonable efforts to cause the owner of the Headquarters Building
to execute and deliver to Arabica the Company Leasehold Mortgage and (ii) the
Company shall, and shall cause the landlord under each other lease of real
property to which any member of the Restricted Group is a party as lessee, and
such lessee, to execute and deliver a landlord consent in form and substance
reasonably satisfactory to Arabica.
(k) Accounting System. The Company and its Subsidiaries will maintain an
accurate system of accounting in accordance with GAAP. Neither the Company nor
its Subsidiaries will change its fiscal year from the fiscal year accounting
used in the preparation of the financial statements referred to in Section
19(a).
(l) Further Assurance. From time to time hereafter, the Company will
execute and deliver, or cause to be executed and delivered, such additional
instruments, certificates and documents, and take all such actions, as Arabica
shall reasonably request for the purpose of implementing or effectuating the
provisions of the Lease/Purchase Documents and upon the exercise by Arabica of
any power, right, privilege or remedy pursuant to the Lease/Purchase Documents
which requires any consent, approval, registration, qualification or
authorization of any Governmental Authority or instrumentality, exercise and
deliver, or cause to be executed and delivered, all applications,
certifications, instruments and other documents and papers that Arabica may be
so required to obtain.
(m) The Company shall use the sale proceeds received under the Asset
Purchase Agreement for the acquisition and/or construction of new facilities,
operating facility upgrades, working capital and other general corporate
purposes.
SECTION 22. NEGATIVE COVENANTS. The Company covenants and agrees that
until all Rent and other amounts payable hereunder and under the Lease/Purchase
Documents have been indefeasibly paid in full in cash:
(a) Indebtedness; Contingent Liabilities. The Company will not, and will
not permit any of its Wholly-Owned Subsidiaries to, create, issue, incur,
assume, suffer, or become liable with respect to any Consolidated Funded
Indebtedness except:
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(i) Consolidated Funded Indebtedness of the Company and its
Subsidiaries hereunder and under the other Lease/Purchase Documents;
(ii) without limiting clause (iv) of this Section 22(a),
Indebtedness of the Company and its Subsidiaries in the amounts existing
on the date hereof and described in Schedule 19(u)(i) (but no
re-financings, renewals or extensions thereof without Arabica's prior
written consent);
(iii) Guarantee Obligations of the Company and its Subsidiaries in
respect of endorsements of negotiable instruments for collections in the
ordinary course of business;
(iv) without limiting clause (ii) if this Section 22(a), Capital
Lease Obligations and purchase money Indebtedness of the Company and its
Subsidiaries not exceeding $1,000,000 (of which not more than $500,000 may
consist of existing Capital Lease Obligations) in the aggregate, in each
case secured by Permitted Liens described in clause (e) of the definition
of "Permitted Liens"; and
(v) unsecured Consolidated Funded Indebtedness of the Subsidiaries
of the Company to the Company, evidenced by intercompany notes pledged and
delivered to Arabica pursuant to the Security Agreement.
(b) Liens. The Company will not, and will not permit any of its
Wholly-Owned Subsidiaries to, create, incur, assume or suffer to exist any Liens
upon any of its property, whether now owned or hereafter acquired, except for
Permitted Liens.
(c) Disposition of Assets, Etc. The Company will not, and will not permit
any of its Wholly-Owned Subsidiaries to, sell, lease, transfer or otherwise
dispose of any of its properties, assets, rights, licenses or franchises to any
Person, except for (i) the sale by the Company of assets from time to time to
Arabica, and lesaeback thereof from Arabica, pursuant to this Agreement and the
other Lease/Purchase Documents; (ii) the disposition of inventory in the
ordinary course of business (which dispositions may be made free from the Liens
of the Lease/Purchase Documents), (iii) the disposition in the ordinary course
of business, without replacement, of equipment which is obsolete or no longer
needed in the conduct of its business and the disposition and replacement in the
ordinary course of business of equipment or other tangible personal property
with other equipment of at least equal utility and value, and (iv) the
disposition in the ordinary course of business in any year of equipment or other
tangible personal property having an aggregate value of not more than
$1,000,000.
(d) Amendment to Organizational Documents. The Company will not, and will
not permit any of its Wholly-Owned Subsidiaries to, permit or suffer any
amendment of its Organizational Documents which could materially and adversely
affect its financial condition or adversely affect the rights of Arabica
hereunder or under the Lease/Purchase Documents or of any party providing
financing to Arabica (it being expressly agreed that the inclusion in such
charter documents of any provision similar to those set forth in Section
102(b)(2) of Title 8 of the Delaware General Corporation Law is prohibited under
this Section).
(e) Mergers; Consolidations; Issuance of Securities; Etc. The Company will
not, and will not permit any of its Wholly-Owned Subsidiaries to, dissolve,
liquidate, merge or
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consolidate into or with any other Person; provided that any Wholly-Owned
Subsidiary of the Company may merge into the Company or any Wholly-Owned
Subsidiary Guarantor so long as the Company or such Wholly-Owned Subsidiary
Guarantor, as the case may be, is the surviving entity of such merger. The
Company will not, and will not permit any of its Wholly-Owned Subsidiaries to,
issue or sell or permit to be issued any additional Capital Stock, except
pursuant to its stock option plan as in effect as of the date hereof.
(f) Restricted Payments. The Company will not, and will not permit any of
its Wholly-Owned Subsidiaries to, directly or indirectly declare, order, pay or
make any Restricted Payment or set aside any sum or property therefore except as
follows:
(i) the Subsidiaries of the Company may (A) pay dividends and make
distributions to the Company and (B) repay indebtedness owed to the
Company; and
(ii) the Subsidiaries of the Company may make distributions to the
Company to enable the Company to pay as and when due amounts owed from
time to time hereunder and under the other Lease/Purchase Documents.
(g) Investments, Loans and Acquisitions. The Company will not, and will
not permit any of its Wholly-Owned Subsidiaries to, (i) purchase or acquire any
Indebtedness or Capital Stock of any other Person, (ii) acquire all or
substantially all of the assets, or any division, of any Person, (iii) make any
loan, advance or extension of credit to, or contribution to the capital of, or
other investment in, any other Person, (iv) purchase any real estate for sale or
investment, (v) purchase any commodities futures contracts, (vi) form any
Subsidiary, or (vii) make any commitment or acquisition of any option or enter
into any other arrangement for the purpose of making any of the foregoing
investments, loans or acquisitions (the foregoing, "INVESTMENTS"), except the
following:
(i) Qualified Investments;
(ii) the existing investments referred to in Schedule 22(g)(ii);
(iii) Hedging Agreements in connection with bona fide hedging
transactions in the ordinary course of business;
(iv) loans from the Company to its Wholly-Owned Subsidiaries that
are evidenced by intercompany notes that are pledged and delivered to
Arabica pursuant to the Security Agreement; and
(v) other Investments, including Permitted Acquisitions, not
exceeding $2,500,000 in the aggregate, provided that at the time of any
Investment no Default or Event of Default shall have occurred and be
continuing; and
(h) Sale and Leaseback. Except as contemplated by this Agreement and the
other Lease/Purchase Documents, the Company will not, and will not permit any of
its Wholly-Owned Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby it shall sell or transfer any of its property acquired prior
to the date of this Agreement in order to lease such property or
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lease other property that it intends to use for substantially the same purpose
as such property being sold or transferred.
(i) Transaction with Affiliates. The Company will not, and will not permit
any of its Wholly-Owned Subsidiaries to, enter, directly or indirectly, into any
purchase, sale, lease or other transaction with any Affiliate, except in the
ordinary course of business and on terms that are no less favorable to the
Company or its Wholly-Owned Subsidiary, as applicable, than those which could be
obtained at the time in a comparable arm's length transaction with any Person
who is not an Affiliate. The Company will not, and will not permit any of its
Wholly Owned Subsidiaries to, incur Indebtedness to any Affiliate except as
permitted under Section 22(a) of this Agreement. All transactions of the Company
and its Wholly-Owned Subsidiaries with Affiliates existing on the date of this
Agreement are described on Schedule 22(i) hereto.
(j) ERISA. The Company will not permit any Plan maintained by the Company
and its Subsidiaries to (i) engage in any "prohibited transaction" (as defined
in Section 4975 of the Code), (ii) incur an "accumulated funding deficiency" (as
defined in Section 302 of ERISA), or (iii) terminate (or suffer to be
terminated) any Plan in a manner that could result in the imposition of a Lien
on the assets of any member of the Restricted Group pursuant to Section 4068 of
ERISA.
(k) Amendment of Certain Agreements. The Company will not, and will not
permit any member of the Restricted Group to, amend or modify any of its
organizational documents or any of the Lease/Purchase Documents without the
prior written consent of Arabica, which will not be unreasonably withheld or
delayed. The Company will not, and will not permit any of its Wholly Owned
Subsidiaries to, amend any material agreement if the same would be reasonably
likely to result in a Material Adverse Effect.
(l) Margin Stock. The Company will not, and will not permit its
Wholly-Owned Subsidiaries to, use or permit the use of any of the proceeds of
any amounts received by it under the Lease/Purchase Documents, directly or
indirectly, for the purpose of purchasing or carrying, or for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry, any Margin Stock or for any other purpose which might constitute a
"purpose credit" within the meaning of Regulation U, or cause this Agreement to
violate Regulation T, U or X of the Board or the Securities Exchange Act of
1934, as amended, or any rules or regulations promulgated under such statutes.
(m) Negative Pledges, Etc. The Company will not, and will not permit its
Wholly-Owned Subsidiaries to, enter into any agreement, amendment or arrangement
(excluding this Agreement or any other Lease/Purchase Document) prohibiting or
restricting (i) it from amending or otherwise modifying this Agreement or any
other Lease/Purchase Document, (ii) the creation or assumption of any Liens upon
its properties, revenues or assets, whether now owned or hereafter acquired, or
(iii) the ability of any Subsidiary to make any payment or distribution,
directly or indirectly, to the Company. The Company will not, and will not
permit its Wholly-Owned Subsidiaries to, renew or enter into any material
agreement without using commercially reasonable efforts to obtain the written
consents of such third parties necessary to effect the collateral assignments
thereof and grants of security interests therein in accordance with the Lease
Purchase Documents.
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SECTION 23. EVENTS OF DEFAULT. Any of the following events shall
constitute an "EVENT OF DEFAULT" (whether any such event shall be voluntary or
involuntary, or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body):
(a) The Company shall fail to pay any Rent or amount payable under
Sections 29 or 30 when due in accordance with the terms hereof; or any expense
or other Supplemental Payment within three days of the date when due in
accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by any member of
the Restricted Group herein or in any other Lease/Purchase Document or that is
contained in any certificate, document or financial or other statement furnished
by it at any time under or in connection with this Agreement or any such other
Lease/Purchase Document shall prove to have been inaccurate in any material
respect on or as of the date made or deemed made; or
(c) The Company (i) shall default in the observance or performance of any
agreement contained in Sections 21(b)(v) or (vi), 21(d), 21(e), 21(f) or (g) or
Section 22 hereof, or in Section 4 of the Supplemental Agreement, or any member
of the Restricted Group shall default in the observance or performance of any
agreement contained in Section 5.2 or 5.5 of the Company Guarantee and Security
Agreement, or (ii) shall default in the observance or performance of any
agreement contained in Section 21(a) or Section 21(b)(i) through (iv) or (vii)
hereof and such default shall continue unremedied for a period of 5 days;
(d) Any member of the Restricted Group shall default in the observance or
performance of any other agreement contained in this Agreement or any other
Lease/Purchase Document to which it is a party (other than as provided in
paragraphs (a) through (c) of this Section), and such default shall continue
unremedied for a period of 30 days after notice to the Company from Arabica; or
(e) (i) any member of the Restricted Group shall (i) default in making any
payment of any principal of any Indebtedness (including any Guarantee
Obligation, but excluding any payment under the Lease/Purchase Document) on the
scheduled or original due date with respect thereto; or (ii) default in making
any payment of any interest on any such Indebtedness beyond the period of grace,
if any, provided in the instrument or agreement under which such Indebtedness
was created; or (iii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to
cause, with the giving of notice if required, such Indebtedness to become due
prior to its stated maturity or (in the case of any such Indebtedness
constituting a Guarantee Obligation) to become payable; provided, that a
default, event or condition described in clause (i), (ii) or (iii) of this
paragraph (e) shall not at any time constitute an Event of Default unless, at
such time, one or more defaults, events or conditions of the type described in
clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be
continuing with respect to Indebtedness the outstanding principal amount of
which exceeds in the aggregate $500,000; or
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(f) (i) any member of the Restricted Group shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or any
member of the Restricted Group shall make a general assignment for the benefit
of its creditors; or (ii) there shall be commenced against any member of the
Restricted Group any case, proceeding or other action of a nature referred to in
clause (i) above that (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against any
member of the Restricted Group any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets that results in the entry of
an order for any such relief that shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv)
any member of the Restricted Group shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) any member of the Restricted
Group shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) Any member of the Restricted Group or any Commonly Controlled Entity
shall fail to pay when due an amount or amount that it shall have become liable
to pay to the PBGC or to a Plan under Title IV of ERISA and which, together with
all such amounts, exceeds $500,000 in the aggregate; or notice of intent to
terminate a Plan or Plans shall be filed under Title IV of ERISA by any member
of the Restricted Group, any Commonly Controlled Entity, any plan administrator
or any combination of the foregoing; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any such
Plan or Plans must be terminated; or
(h) one or more judgments or decrees shall be entered against any member
of the Restricted Group involving in the aggregate a liability (not paid or
fully covered by insurance as to which the relevant insurance company has
acknowledged coverage) of $500,000 or more, and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
30 days from the entry thereof; or
(i) any of the Company Security Documents or any of the Lease/Purchase
Documents shall cease, for any reason, to be in full force and effect, or any
member or Affiliate of any member of the Restricted Group shall so assert, or
any Lien created by any of the Company Security Documents shall cease to be
enforceable and of the same effect and priority purported to be created thereby,
or any member or Affiliate of any member of the Restricted Group shall so
assert; or
(j) the guarantee contained in Section 2 of the Company Guarantee and
Security Agreement shall cease, for any reason, to be in full force and effect
or any member or Affiliate of any member of the Restricted Group shall so
assert; or
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(k) a Change of Control shall occur; or
(l) Holdings shall (i) conduct, transact or otherwise engage in, or commit
to conduct, transact or otherwise engage in, any business or operations other
than those incidental to its ownership of the Capital Stock of the Company, (ii)
incur, create, assume or suffer to exist any Indebtedness or other liabilities
or financial obligations, except (x) nonconsensual obligations imposed by
operation of law, (y) obligations pursuant to the Lease/Purchase Documents to
which it is a party and (z) obligations with respect to its Capital Stock, or
(iii) own, lease, manage or otherwise operate any properties or assets other
than the ownership of shares of Capital Stock of the Company; or
(m) any Subordinated Debt shall cease, for any reason, to be validly
subordinated to the Obligations, as provided in the Subordinated Debt
Documentation, or any member or Affiliate of any member of the Restricted Group
shall so assert.
SECTION 24. REMEDIES UPON DEFAULT.
(a) Upon the occurrence of any Event of Default, Arabica may undertake one
or more of the following actions: (i) exercise the Put Option and require the
Company to purchase, and upon such exercise the Company shall be obligated to
purchase and pay for the Assets in accordance with the terms of the Put Option
Letter, (ii) terminate as to some or all of the Assets the lease, license and
purchase option financing provided hereunder, (iii) exercise all or any of its
rights under any of the Lease/Purchase Documents and the Collateral provided to
it thereunder, (iv) exercise any and all rights available to Arabica at law or
in equity, and proceed to protect and enforce Arabica's rights by any action at
law, in equity or other appropriate proceeding. In the event that Arabica shall
apply for the appointment of, or the taking of possession by, a trustee,
receiver or liquidator of the Company or any Store or of any other similar
official to hold or liquidate all or any substantial part of the properties or
assets of the Company or any Store following the occurrence of a default in
payment of any amount owed hereunder and following any applicable notice or cure
period, the Company hereby consents, and will cause each of its Wholly-Owned
Subsidiaries to consent, to such appointment and taking of possession and agrees
to execute and deliver any and all documents requested by Arabica relating
thereto (whether by joining in a petition for the voluntary appointment of, or
entering no contest to a petition for the appointment of, such an official or
otherwise, as appropriate under applicable law).
(b) Without limiting the foregoing, upon the occurrence and during the
continuance of an Event of Default hereunder, whether or not Arabica has taken
any of the actions set forth in (a) above, Arabica may require, at its option:
(i) the Company to use its reasonable commercial efforts to obtain an absolute
assignment in form and substance reasonably satisfactory to Arabica of all of
the right, title and interest of the Company and its Wholly-Owned Subsidiaries
in their respective real estate leases (provided any such assignment shall be
subject to the condition that Arabica shall sublease the covered premises back
to the Company or its Subsidiary, as applicable, on the same terms as the
assigned lease), (ii) the Company and Caribou to cause its Wholly-Owned
Subsidiaries to use reasonable commercial efforts to obtain real estate
leasehold mortgages in form and substance reasonably satisfactory to Arabica
with respect to each of the real estate leaseholds of the Company and its
Wholly-Owned Subsidiaries (in the event absolute
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assignments are not required pursuant to clause (i) immediately above) and/or
(iii) the Company and its Wholly-Owned Subsidiaries to enter into agency account
agreements with respect to each of their respective deposit and other accounts
in form and substance similar to the form attached to the Company Guarantee and
Security Agreement and otherwise reasonably satisfactory to Arabica, requiring
all of such depository banks to sweep such accounts daily and wire such funds
into a concentration account pledged to Arabica.
(c) In addition, the Company shall be liable for all Rent accrued through
the date of termination hereof or, if Arabica exercises the Put Option, through
the Exercise Price Payment Date (as defined in the Put Option Letter), and any
and all Supplemental Payments and other amounts due hereunder and under any of
the other Lease/Purchase Documents before or after any termination hereof,
including all costs and expenses (including without limitation reasonable
attorney's fees and disbursements) incurred by reason of the occurrence of any
Event of Default or the exercise of Arabica's remedies with respect thereto.
(d) No failure to exercise and no delay in exercising, on the part of
Arabica or any Registered Holder, any right, remedy, power or privilege
hereunder or under the other Lease/Purchase Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law. To the extent permitted
by applicable law, the Company, for itself and on behalf of its Wholly Owned
Subsidiaries, hereby waives any rights now or hereafter conferred by statute or
otherwise which may require Arabica to sell the Assets in mitigation of
Arabica's damages or otherwise to limit or modify any of Arabica's rights or
remedies under this Section 24.
SECTION 25. ARABICA'S RIGHT TO PERFORM FOR THE COMPANY. If the Company
fails to make any Supplemental Payment required to be made by it hereunder or
fails to perform or comply with any of its agreements contained herein, Arabica
may itself make such payment or perform or comply with such agreement, and the
amount of such payment and the amount of the expenses of Arabica incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, together with an amount thereon computed at the
Late Payment Rate in accordance with Section 6(b), shall, if not paid by the
Company to Arabica on demand, be deemed a Supplemental Payment hereunder;
provided, however, that no such payment, performance or compliance by Arabica
shall be deemed to cure any Event of Default hereunder.
SECTION 26. FURTHER ASSURANCES. Arabica and the Company agree to cooperate
in good faith and to execute and deliver such documents and further assurances
consistent with and in clarification of the characterization and intent of the
parties with respect to this Agreement, the Supplemental Agreement, the Put
Option Letter and the Call Option Letter.
SECTION 27. TRANSACTION COSTS, FEES AND EXPENSES. The Company shall pay
promptly all out-of-pocket costs, fees and expenses of Arabica and its agents
and representatives in connection with the negotiation, preparation, execution,
delivery, administration and enforcement of this Agreement and any of the
Lease/Purchase Documents (and all amendments,
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modifications and supplements hereto and thereto) and any agreements or
instruments entered into or executed in connection herewith, including without
limitation all costs, fees and expenses of outside legal counsel or the
allocated costs of in-house legal counsel, accounting, consulting, brokerage or
other similar professional fees or expenses, and any fees or expenses associated
with any travel or other costs relating to any appraisals or credit or other
examinations conducted in connection with the Obligations or any collateral
therefor, and if all such expenses are not paid within five Business Days after
demand therefor, in addition to the amount of such expenses, a late fee computed
pursuant to Section 6(b) shall be payable.
SECTION 28. NOTICES. All notices provided for or required under the terms
and provisions hereof shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it in
the United States mail with postage prepaid and properly addressed (i) if to
Arabica or the Company, at their respective addresses as set forth on the
signature page hereof or at such other address as either of them shall, from
time to time, designate in writing to the other, and (ii) if to any Registered
Holder, to the address of such Registered Holder as such Registered Holder shall
designate, from time to time, in writing to Arabica and the Company.
SECTION 29. CALL OPTION.
(a) Company Call Option. Provided the Company has paid all Rent, all
Supplemental Payments and all other amounts then due hereunder or under any of
the other Lease/Purchase Documents, the Company shall have the right and option
to purchase, pursuant to the Call Option Letter, all, or a pro rata portion of
all, of the Assets from Arabica on any Rent Payment Date occurring after the
first anniversary of the date hereof for an aggregate price of $10.00, payable
in connection with each such purchase, plus the other amounts specified in the
Call Option Letter. The Company shall notify Arabica of its exercise of the Call
Option not less than thirty (30) days prior to the Rent Payment Date on which
the purchase is to be effected, any such notice to be irrevocable and to be
provided in accordance with the terms of the Call Option Letter. If the Company
exercises the Call Option under this Section 29(a), Arabica undertakes to sell
the Assets to the Company at such price and on the terms and conditions provided
herein and in the Call Option Letter. The Call Option may be utilized on more
than one Rent Payment Date.
(b) Settlement Terms. In the event that the Company purchases the Assets
from Arabica pursuant to Section 29(a) above and the Call Option Letter, Arabica
and the Company hereby agree that the following provisions shall apply:
(i) Representations and Warranties of the Company. The Company shall
represent, warrant, covenant and agree with Arabica as of the date of any
sale of the Assets by Arabica to the Company, except where specific
reference is made to another date or dates, that:
(A) The Company has the full right, power and authority to
purchase such Assets from Arabica as provided in this Agreement and
to carry out the Company's obligations under this Agreement (as such
pertain to the sale of such
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Assets), and all requisite action necessary to authorize the Company
to enter into the purchase of the Assets and to carry out the
Company's obligations with respect thereto has been, or on or before
the date of any sale of the Assets to the Company, will have been,
taken;
(B) The Company acknowledges that:
(1) The Company is purchasing the Assets, and the Assets
shall be conveyed and transferred to the Company, "HAVING BEEN
INSPECTED TO THE SATISFACTION OF CARIBOU, AS-IS, WHERE-IS, AND
WITH ALL FAULTS AND SPECIFICALLY AND EXPRESSLY WITHOUT ANY
RECOURSE OR WARRANTIES, REPRESENTATIONS, COVENANTS OR
GUARANTEES, EXPRESSED OR IMPLIED, OF ANY KIND, NATURE, OR TYPE
WHATSOEVER FROM OR ON BEHALF OF ARABICA"; provided, that
Arabica shall represent that there are no Liens on the Assets
which have arisen because of Arabica's action or inaction. The
Company acknowledges that it has not relied, and is not
relying, on any information, document, sales brochure, or
other literature, sketch, projection, pro forma, statement,
representation, guarantee, or warranty (whether express or
implied, or oral or written, or material or immaterial) that
may have been given by, or made by, or on behalf of, Arabica;
(2) The Company shall not be entitled to, and shall not
rely on, Arabica or Arabica's agents as to (a) the quality,
nature, adequacy, or physical condition of the Assets; or (b)
the quality of any labor or materials relating in any way to
the Assets;
(3) EXCEPT AS EXPRESSLY SET FORTH IN THE PROVISO IN
SUBPARAGRAPH (1) ABOVE (WITH RESPECT TO VOLUNTARILY INCURRED
LIENS), ARABICA HAS NOT, DOES NOT, AND WILL NOT, WITH RESPECT
TO THE ASSETS, MAKE ANY WARRANTIES OR REPRESENTATIONS, EXPRESS
OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING BUT NOT
IN ANY WAY LIMITED TO, ANY WARRANTY OF CONDITION,
MERCHANTABILITY, HABITABILITY, OR FITNESS FOR A PARTICULAR
USE, OR WITH RESPECT TO THE VALUE, PROFITABILITY, OR
MARKETABILITY OF THE ASSETS; and
(4) Without in any way limiting the generality of the
preceding subparagraphs (1) through (3), the Company
specifically acknowledges and agrees that the Company hereby
waives, releases, and discharges any claim the Company has,
might have had, or may have against Arabica with respect to
the condition of the Assets, patent or latent, the actual or
potential income or profits to be derived from the Assets, and
any other state of facts which exists with respect to such
Assets.
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(ii) Survival Beyond Closing. The representations and warranties of
the Company contained in this Agreement as set forth in Section 29(b)(i)
shall survive the closing of the sale of the Assets to the Company.
(iii) Seller. At the sale of any Assets to the Company, Arabica
shall deliver or cause to be delivered to the Company, at the Company's
sole cost and expense, a ▇▇▇▇ of sale of such Assets, duly executed by
Arabica.
(iv) Payment. On the closing date of the sale, the Company shall pay
$10 to Arabica plus the other amounts required to be paid pursuant to the
Call Option Letter.
SECTION 30. PUT OPTION. Upon the occurrence of any event specified in
Sections 1, 2, 3, 4, 5, 6 or 7 of the Put Option Letter, Arabica may exercise
the Put Option and require the Company to purchase, and upon such exercise the
Company shall be obligated to purchase and pay for, Assets in accordance with
the terms of the Put Option Letter.
SECTION 31. ARABICA AGENTS, NOMINEES OR REPRESENTATIVES. In fulfilling any
of its obligations or exercising any of its rights under this Agreement, the
Supplemental Agreement, the Put Option Letter, the Call Option Letter or any
agreement entered into in connection herewith, Arabica may designate and utilize
an agent, nominee or representative, which shall, unless otherwise indicated by
Arabica, have right and authority to act on behalf of Arabica.
SECTION 32. MISCELLANEOUS. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating or diminishing Arabica's rights under the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
No term or provision of this Agreement may be amended, altered, waived,
discharged or terminated orally, but only by an instrument in writing signed by
a duly authorized officer of the party against which the enforcement of the
amendment, alteration, waiver, discharge or termination is sought. A waiver on
any one occasion shall not be construed as a waiver on a future occasion. All of
the covenants, conditions and obligations contained in this Agreement shall be
binding upon and shall inure to the benefit of the respective successors and
assigns of Arabica and (subject to the restrictions of Section 13(a) hereof) the
Company. This Agreement may be executed in as many counterparts as shall be
determined by the parties hereto when so executed, each such counterpart shall
be binding on both parties hereto, notwithstanding that both parties are not
signatories to the same counterpart. This Agreement and each related instrument,
document, agreement and certificate collectively constitute the entire agreement
of Arabica and the Company with respect to the financing of the Assets, and
cancel and supersede any and all prior oral or written understandings with
respect thereto. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING
WITHOUT LIMITATION ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THE
COMPANY HEREBY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS AND THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURTS
FOR THE DISTRICT OF MASSACHUSETTS AND THE SOUTHERN DISTRICT OF NEW YORK, AS WELL
AS TO THE JURISDICTION OF
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ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN OR OTHER REVIEW SOUGHT FROM THE
AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF THE COMPANY'S OR ANY OF ITS WHOLLY-OWNED SUBSIDIARIES'
OBLIGATIONS UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY LEASE/PURCHASE
DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, AND
EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE IN ANY OF SUCH
COURTS.
SECTION 33. PAYMENTS, SET-OFF AND SUBORDINATION.
(a) If any payment hereunder is due and payable on a day that is not a
Business Day, such payment shall be due and payable in the next preceding
Business Day.
(b) Upon the occurrence and during the continuance of any Event of
Default, Arabica is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
any other indebtedness at any time owing by Arabica to or for the credit or the
account of the Company against any and all of the Obligations now or hereafter
existing hereunder or under any Lease/Purchase Document.
(c) The Company acknowledges that Arabica is financed with financing
provided by a credit provider and that the Assets and the Company's rights under
this Agreement and the other Lease/Purchase Documents and the lease, license and
purchase option financing and other transactions contemplated hereunder are
subject and subordinate to the Lien on the Assets granted by Arabica to such
credit provider. The Company further acknowledges that the Obligations are
secured by a Lien granted by the Company to Arabica, pursuant to this Agreement
and the Lease/Purchase Documents, on the Assets and the other assets of the
Company not leased and licensed hereunder.
SECTION 34. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER
DOCUMENTS ENTERED INTO IN CONNECTION HEREWITH OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR THE RELATIONSHIP THAT IS
BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business relationship, that each has already relied on this waiver in entering
into this Agreement, and that each will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants and represents that
it has reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION 34 AND EXECUTED BY EACH
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OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF
THE OTHER DOCUMENT ENTERED INTO IN CONNECTION WITH THIS AGREEMENT. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
ARABICA FUNDING, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
Address
c/o Global Securitization Services, LLC
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CARIBOU COFFEE COMPANY, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
Address
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