EXHIBIT 10.51
LOAN AND SECURITY AGREEMENT
by and between
WESTERNBANK PUERTO RICO
(BUSINESS CREDIT DIVISION)
as Lender
and
PUEBLO INTERNATIONAL, LLC.
XTRA SUPERFOOD CENTERS, INC.
PUEBLO ENTERTAINMENT, INC.
XTRA MERGER CORPORATION
CARIBAD, INC.
ALL TRUCK, INC.
as Borrowers
and
NUTRITIONAL SOURCING CORPORATION
Dated: May 23, 2003
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement, dated as of May 23, 2003 is entered into by
and between Westernbank Puerto Rico, a Puerto Rico Banking corporation
("Lender") and Pueblo International, LLC ("Pueblo"), a Delaware limited
liability company, FLBN Corporation (f/k/a Xtra Super Food Centers, Inc.), a
Delaware corporation, Pueblo Entertainment, Inc., a Delaware corporation,
Xtra Merger Corporation, a Delaware corporation, Caribad, Inc., a Puerto
Rico corporation and All Truck, Inc., a Delaware corporation (hereinafter
referred to individually as a "Borrower" and collectively as "Borrowers")
and Nutritional Sourcing Corporation, a Delaware corporation ("NSC").
WITNESSETH
WHEREAS, pursuant to an Extension And Modification Agreement between Lender,
Borrowers and NSC, dated as of January 30, 2003 (the "Extension Agreement"),
Lender has (a) purchased "Loans" and other "Obligations" pursuant to the
"Credit Agreement" (as such terms are used in the Extension Agreement) and (b)
made Loans and granted other financial accommodations to Borrower as a bridge
facility;
WHEREAS, the Extension Agreement contemplates that under certain circumstances
Lender and Borrowers and NSC will substitute the Extension Agreement with a
"Definitive Loan Agreement" and other "Definitive Financing Agreements" (as
defined in the Extension Agreement) and make additional loans to Borrowers;
WHEREAS, this Agreement is the Definitive Loan Agreement referred to in the
Extension Agreement;
WHEREAS, Borrowers and NSC have requested that Lender enter into certain
financing arrangements with Borrowers pursuant to which Lender may make loans
and provide other financial accommodations to Borrowers and as contemplated by
the Extension Agreement;
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual conditions and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
Section 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also
mean the singular and to the singular shall also mean the plural unless the
context otherwise requires. All references to Borrowers and Lender or
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns. The
words "hereof", "herein", "hereunder", "this Agreement" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not any particular provision of this Agreement and as this Agreement now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced. The word "including" when used in this Agreement shall
mean "including, without limitation". An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in accordance
with Section 11.3 or is cured in a manner satisfactory to Lender, if such
Event of Default is capable of being cured as determined by Lender. Any
accounting term used herein unless otherwise defined in this Agreement
shall have the meanings customarily given to such term in accordance with
GAAP. For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of each
Borrower to payment for goods sold or leased or for services rendered, which
are not evidenced by instruments or chattel paper, and whether or not
earned by performance, including Credit Card Receivables.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one sixteenth (1/16) of one (1%)
percent) determined by dividing (a) the Eurodollar Rate for such Interest
Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve
Percentage. For purposes hereof, "Reserve Percentage" shall mean the
reserve percentage, expressed as a decimal, prescribed by any United
States or foreign banking authority for determining the reserve
requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of the
Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate
Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any
change in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to the sum of: (a) the difference between: (i) the aggregate net book
value of all assets of such Person and its subsidiaries, calculating the book
value of inventory for this purpose on a first - in - first - out basis, after
deducting from such book values all appropriate reserves in accordance with
GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (ii) the aggregate amount of the
indebtedness and other liabilities of such Person and its subsidiaries
(including tax and other proper accruals) plus (b) indebtedness of such
Person and its subsidiaries which is subordinated in right of payment to
the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender and as to NSC the amount of the Senior
Secured Notes from time to time issued and outstanding.
1.4 "Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control
with such Person, and without limiting the generality of the foregoing,
includes (a) any Person which beneficially owns or holds ten percent
(10%) or more of any class of voting stock of such Person or other equity
interests in such Person, (b) any Person of which such Person or a Subsidiary
of such Person beneficially owns or holds ten percent (10%) or more of any
class of voting stock or in which such Person beneficially owns or holds ten
percent (10%) or more of the equity interests and (c) any director or executive
officer of such Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting stock, by agreement or otherwise.
1.5 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good
faith reducing the amount of Revolving Loans and Letter of Credit
Accommodations which would otherwise be available to Borrowers under the
lending formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by Lender in good faith, do
or may affect either (i) the Collateral or any other property which is
security for the Obligations or its value, (ii) the assets, business or
prospects of any Borrower, NSC or any other Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect
Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrowers, NSC or any other
Obligor to Lender is or may have been incomplete, inaccurate or misleading
in any material respect or (c) to reflect outstanding Letter of Credit
Accommodations as provided in Section 2.2 hereof or (d) in respect of any
state of facts which Lender determines in good faith constitutes an Event of
Default or may, with notice or passage of time or both, constitute an Event of
Default.
1.6 "Bankruptcy Code" shall mean the United States Code, being title 11 of
the United States Code as enacted in 1978, as the same may have heretofore
been or may hereafter be amended, recodified, modified or supplemented,
together with all rules, regulations and interpretations thereunder or
related thereto.
1.7 "Bankruptcy Court" shall mean the United States Bankruptcy Court for the
district of Delaware.
1.8 "Blocked Accounts" shall have the meaning set forth in section 6.3 hereof.
1.9 "Borrowers Agent" shall mean Pueblo, in its capacity as agent for
Borrowers hereunder and any successor or replacement agent for Borrowers
appointed and approved by Lender in writing, and its successors and assigns.
1.10 "Business Day" shall mean any day other than a Saturday, Sunday, or other
day on which commercial banks are authorized or required to close under the
laws of the State of New York and a day on which the Reference Bank and Lender
are open for the transaction of business, except that if a determination of a
Business Day shall relate to any Eurodollar Rate Loans, the term Business Day
shall also exclude any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.
1.11 "Capital Lease" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such
Person.
1.12 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated)
of such Person's capital stock, partnership interests or limited liability
company interests at any time outstanding, and any and all rights, warrants
or options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.13 "Cash Equivalents" shall mean, at any time, (a) any evidence of
indebtedness with a maturity date of one hundred eighty (180) days or less
issued or directly and fully guaranteed or insured by the United States of
America of any agency or instrumentality thereof; provided that, the full
faith and credit of the United States of America is pledged in support
thereof; (b) certificates of deposit or bankers' acceptances with a
maturity of one hundred eighty (180) days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $250,000,000;
(c) commercial paper (including variable rate demand notes) with a maturity
of one hundred eighty (180) days or less issued by a corporation (except
an Affiliate of a Borrower) organized under the laws of any State of the
United States of America or the District of Columbia and rated at least
A-1 by Standard & Poor's Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc. or at least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.;
(d) repurchase obligations with a term of not more than thirty (30) days for
underlying security of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and
undivided profits of not less than $250,000,000; (e) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one hundred eighty
(180) days or less from the date of acquisition; provided, that, the terms of
such agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions with Securities Dealers
and Others, as adopted by the Comptroller of the Currency on October 31,
1985; and (f) investments in money market funds and mutual funds which
invest substantially all of their assets in securities of the types
described in clauses (a) through (e) above.
1.14 "Change of Control" shall mean (a) the transfer (in one transaction or
a series of transactions) of all or substantially all of the assets of a
Borrower or NSC to any Person or group (as such term is used in Section
13(d)(3) of the Securities And Exchange Act of 1934[the "Exchange Act"]); (b)
the liquidation or dissolution of a Borrower or NSC or the adoption of a plan
by the stockholders of a Borrower or NSC relating to the dissolution or
liquidation of any Borrower or NSC; (c) the acquisition by any Person or group
(as such term is used in Section 13(d)(3) of the Exchange Act), of beneficial
ownership directly or indirectly, of a majority of the voting power of the
total outstanding voting stock of any Borrower or NSC, or (d) during any
period of two (2) consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of any Borrower or NSC cease
for any reason to constitute a majority of the Board of Directors of such
Borrower or NSC, then still in office; (e) the failure of the present
beneficial holders of voting stock of NSC to own and control, directly
or indirectly, one hundred (100%) percent of the voting power of the total
outstanding voting stock of each Borrower or NSC or (f) the failure of
NSC to be the sole member or sole holder of the membership interests of
Pueblo. As used in this Section 1.14 the term "Board of Directors"
includes the Board of Managers or other governing body of Pueblo and the
term "voting stock" includes the membership interests of Pueblo.
1.15 "Chapter 11 Case" shall mean the Chapter 11 Case of NSC under the
Bankruptcy Code known as In re Nutritional Sourcing Corporation, in the
Bankruptcy Court, designated Case No. 02-12550 (PJW).
1.16 "Closing Date" shall mean the date of making the initial Loans
hereunder, to be fixed by Lender, on or before June 30, 2003, at such place
at such time as shall be specified by Lender.
1.17 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.18 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.19 "Collateral Access Agreement" shall mean an agreement in writing, in form
and substance satisfactory to Lender, from any lessor of premises to any
Borrower or NSC or any other Person to whom any Collateral(including
Inventory, Equipment, bills of lading or other documents of title)is
consigned or who has custody, control or possession of any such Collateral
or is otherwise the owner or operator of any premises on which any of such
Collateral is located, pursuant to which such lessor, consignee or other
Person, inter alia, acknowledges, in form and substance satisfactory to
Lender, Lender's first priority lien and security interest in such
Collateral, and agrees to waive any and all claims such lessor, consignee
or other Person may at any time have against such Collateral and agrees to
permit Lender access to, and the right to remain on the premises of such
lessor, consignee or other Person, so as to exercise Lender's rights and
remedies and otherwise deal with such Collateral and in the case of any
Person who at any time has custody, control or possession of any bills of
lading or other documents of title, agrees to hold such bills of lading or
other documents as bailee for Lender and to follow all instructions of
Lender with respect thereto.
1.20 "Credit Card Acknowledgments" shall mean the agreements among
Credit Card Issuers or Credit Card Processors who are parties to Credit Card
Agreements, Borrowers and Lender, pursuant to which the Credit Card Issuers or
Credit Card Processors acknowledge Lender's first priority security
interest in the monies due and to become due to Borrowers (including
credits and reserves) under the Credit Card Agreements, and agree to
transfer all such amounts to the Blocked Accounts, or such other account
of Borrowers' Agent set forth in the agreement, or any other account that
Lender may direct, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.21 "Credit Card Agreement" shall mean all agreements now or hereafter
entered into by any Borrower with any Credit Card Issuer or Credit Card
Processor, as same may now exist or may hereafter be amended, modified,
supplemented, extended, renewed or replaced.
1.22 "Credit Card Issuer" shall mean any person who issues credit cards or
debit cards used by customers of a Borrower to purchase goods, including
without limitation, MasterCard or VISA bank credit or debit cards or other
bank credit or debit cards, and American Express, Discover, Diners Club,
▇▇▇▇▇ ▇▇▇▇▇▇▇ and other non-bank credit or debit cards.
1.23 "Credit Card Processor" shall mean any servicing or processing agent
or any factor or financial intermediary who services, processes or manages
the credit, authorization, billing, transfer and/or payment with respect to
any sales transactions of any Borrower involving credit card or debit card
purchases by customers using credit cards or debit cards issued by any
Credit Card Issuer.
1.24 "Credit Card Receivables" shall mean all accounts consisting of the
present and future rights of any Borrower to payment by Credit Card Issuers or
Credit Card Processors for merchandise sold and delivered to customers
of Borrowers who have purchased such goods using a credit card or debit card
issued by a Credit Card Issuer.
1.25 "Debt" shall include, as to any Person, at any time (without
duplication) (a) any liability, whether or not contingent, of such Person in
respect of borrowed money, (b) all obligations of such Person evidenced by
bonds, notes, debentures, or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services,
except (i) trade accounts payable not unpaid more than the greater of (A)
sixty (60) days past the invoice date or (B) the due date thereof and
(ii) other accounts payable and current accrued expenses payable of such
Person arising in the ordinary course of business which are not past due by
more than ninety (90) days, (d)all obligations of such Person under a Capital
Lease, (e) all indebtedness or other obligations of others guaranteed by
such Person, (f) all obligations secured by a lien or security interest
existing on property owned by such Person, whether or not the obligations
secured thereby have been assumed by such Person or are non recourse to the
credit of such Person, (g) all reimbursement obligations of such Person
(whether contingent or otherwise) in respect of letters of credit, bankers
acceptances, surety or other bonds or similar instruments and (h) all
obligations of such Person with respect to redeemable stock or repurchase
or redemption obligations with respect to any Capital Stock or other
equity securities issued by such Person.
1.26 "Dilution" shall mean, for any period, the ratio of (a) the aggregate
amount of reductions in Accounts other than as a result of payments in cash,
for such period to (b) the aggregate amount of total sales, for such period.
1.27 "Due Date" shall mean June 1, 2008.
1.28 "EBITDA" shall mean, as to any Person, with respect to any period, an
amount equal to: (a) the Net Income After Tax of such Person for such period,
plus (b) depreciation and amortization of such Person for such period (to the
extent deducted in the computation of Net Income After Tax of such Person for
such period), plus (c) interest expense of such Person for such period (to the
extent deducted in the computation of Net Income After Tax), plus (d) income
taxes of such Person for such period (to the extent deducted in the
computation of Net Income After Tax) all in accordance with GAAP.
1.29 "Effective Date" shall mean the date of execution of this
Agreement by Lender.
1.30 "Eligible Accounts" shall mean Accounts (other than Credit Card
Receivables) created by a Borrower which are and continue to be acceptable to
Lender based on the criteria set forth below. In general, Accounts shall be
Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and delivery by a
Borrower or rendition of services by a Borrower in the ordinary course of its
business which transactions are completed in accordance with the terms and
provisions contained in any documents related thereto;
(b) such Accounts are not unpaid (i) more than ninety (90) days after the
date of the original invoice for them and (ii) more than sixty (60) days past
the due date thereof.
(c) such Accounts comply with the terms and conditions contained in Section
7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed sale,
sale and return, sale on approval, or other terms under which payment by the
account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to such
Accounts is located in the United States of America or the Commonwealth of
Puerto Rico or at Lender's option: if either (i) the account debtor has
delivered to Borrower an irrevocable letter of credit issued or confirmed by
a bank satisfactory to Lender and payable only in the United States of
America and in U.S. dollars sufficient to cover such Account in form and
substance satisfactory to Lender and if required by Lender the original of
such letter of credit has been delivered to Lender or Lender's agent and
the issuer thereof notified of the assignment of the proceeds of such
letter of credit to Lender, or (ii) such account is subject to credit
insurance payable to Lender issued by an insurer and on terms and in an
amount acceptable to Lender or (iii) such Account is otherwise acceptable in
all respects to Lender (subject to such lending formula with respect
thereto as Lender may determined).
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold
invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices if
Lender shall have received an agreement in writing from the account debtor
in form and substance satisfactory to Lender confirming the unconditional
obligation of the account debtor to take the goods related thereto and
pay such invoice.
(g) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts
(but the portion of the Accounts of such account debtor in excess of the
amount at any time and from time to time owed by Borrower to such account
debtor or claimed owed by such account debtor may be deemed Eligible
Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and perfected
security interest of Lender and any goods giving rise thereto are not, and
were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
accountdebtor with respect to such Accounts is an officer, employee or agent of
or
affiliated with any Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any foreign
government, the United States of America, any State, political subdivision,
department, agency or instrumentality thereof, unless, if the account debtor
is the United States of America, any State, political subdivision,
department, agency or instrumentality thereof, upon Lender's request, the
Federal Assignment of Claims Act of 1940, as amended or any similar State
or local law, if applicable, has been complied with in a manner satisfactory
to Lender;
(l) there are no proceedings or actions which are threatened or pending
against the account debtors with respect to such Accounts which might result
in any material adverse change in any such account debtor's financial
condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than forty percent (40%) of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be
deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than sixty (60) days after the date of the original invoice for
them which constitute more than Fifty Percent (50%) percent of the total
Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total indebtedness to
Borrower does not exceed the credit limit with respect to such account
debtors as determined by Lender from time to time (but the portion of the
Accounts not in excess of such credit limit may be deemed Eligible Accounts);
and
(p) such Accounts are owed by account debtors deemed creditworthy at all
times by Lender, as determined by Lender. General criteria for Eligible
Accounts may be established and revised from time to time by Lender in good
faith. Any Accounts which are not Eligible Accounts shall nevertheless be
part of the Collateral.
1.31 "Eligible Inventory" shall mean Inventory of Borrowers consisting
of finished goods held for resale in the ordinary course of the business of
Borrowers which are acceptable to Lender based on the criteria set forth
below. In general, Eligible Inventory shall not include (a) raw materials or
work-in-process; (b) components which are not part of finished goods; (c) spare
parts for equipment and fixtures; (d) packaging and shipping materials; (e)
supplies used or consumed in Borrowers' business; (f) Inventory at premises
other than those owned and controlled by Borrower, except if Lender shall
have received a Collateral Access Agreement with respect to such premises;
(g) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (h) ▇▇▇▇ and hold
goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory
which is not subject to the first priority, valid and perfected security
interest of Lender; (k) returned, damaged and/or defective Inventory; (l)
Inventory purchased or sold on consignment; (m) Inventory in transit other
than Inventory for which Lender has arranged a Letter of Credit Accommodation
described in Section 2.2(c)(i) hereof; (o) Inventory which consists of
produce, deli and bakery food products, expired foods, and products with
short expiration dates or shelf-life; and (p) Inventory which is subject to
PACA or PASA and for which the supplier has not been paid in full. General
criteria for Eligible Inventory may be established and revised from time to
time by Lender in good faith. Any Inventory which is not Eligible Inventory
shall nevertheless be part of the Collateral.
1.32 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower and
any other Credit Party and any governmental authority,
(a) relating to pollution and the protection, preservation or restoration of
the environment (including air, water vapor, surface water, ground water,
drinking water, drinking water supply, surface land, subsurface land, plant
and animal life or any other natural resource), or to human health or
safety, (b) relating to the exposure to, or the use, storage, recycling,
treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws
with regard to record keeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental
Laws" includes (i) the Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Federal Superfund
Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide,
Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of
1974, (ii) applicable state counterparts to such laws, and (iii) any common
law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of
or exposure to any Hazardous Materials.
1.33 "Equipment" shall mean all of each Borrowers' now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, racks,
shelves, freezers, coolers, material handling equipment, all attachments,
accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements wherever located.
1.34 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
1.35 "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary,
to the next one - sixteenth (1/16) of one (1%) percent) at which the
Reference Bank is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected by Borrowers'
Agent and approved by Lender) on or about (9:00a.m. (New York time) two
(2) Business Days prior to the commencement of such Interest Period in
amounts substantially equal to the principal amount of the Eurodollar
Rate Loans requested by and available to Borrowers in accordance with this
Agreement, with a maturity of comparable duration to the Interest Period
selected by Borrowers' Agent.
1.36 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
1.37 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the amount
of the Revolving Loans available to Borrowers as of such time based on (A)
the applicable lending formulas multiplied by (B) the Net Amount of Eligible
Accounts and the lesser of (1) the Value of Eligible Inventory and(2) the Net
Recovery Percentage of Eligible Inventory, as determined by Lender, and the
amount of the Pledged Cash and subject to the sublimits and Availability
Reserves from time to time established by Lender hereunder, and (ii) the
Maximum Credit minus (b) the sum of: (i) the amount of all then outstanding
and unpaid Obligations plus (ii) the aggregate amount of all then
outstanding and unpaid trade payables of Borrowers which remain unpaid
more than the greater of (A) sixty (60) days past the invoice date or
(B) the due date thereof, as of such time, plus (iii) the amount of checks
issued by Borrowers to pay trade payables, but not yet sent and the book
overdraft of Borrowers.
1.38 "Extension Agreement Financing Agreements" shall mean, collectively,
the Extension Agreement and all notes, guarantees, security agreement
documents and instruments executed and/or delivered by Borrowers, NSC or
any other Obligor in connection with the Extension Agreement, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.39 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreement documents and instruments now or at
any time hereafter executed and/or delivered by Borrowers, NSC or any other
Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.40 "Fixed Charge Coverage Ratio" shall mean as to any Person with respect
to any period, the ratio of (a) such Person's EBITDA for such period divided
by (b) the sum of (i) the interest expense plus (ii) the current maturities
of all Debt, except the Revolving Loans, plus (iii) all taxes (not including
taxes deducted from or charged to earnings in computing EBITDA), of such
Person for such period.
1.41 "Franchise Agreements" shall mean all agreements between any
Borrower and any other person, pursuant to which a Borrower is granted the
right to sell, rent or lease any property or provide any service by another
Person with or without the use of any of such Person's Intellectual Property.
1.42 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other
kind and/or type of pollutants or contaminants (including materials which
include hazardous constituents), sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including any
other substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as
hazardous or toxic under any Environmental Law).
1.43 "Information Certificate" shall mean the Information Certificates
of Borrowers and NSC constituting Exhibit A to the Extension
Agreement and as revised by Borrowers and delivered to Lender in connection
with this Agreement, containing material information with respect to
Borrowers and NSC and their respective business and assets, provided
by or on behalf of Borrowers to Lender in connection with the preparation
of the Agreement and the other Financing Agreements and the financing
arrangements provided for therein.
1.44 "Intellectual Property" shall mean as to NSC and its Subsidiaries such
now owned and hereafter arising or acquired patents, patent rights, patent
applications, copyrights, works which are the subject matter of copyrights,
copyright registrations, trademarks, trade names, trade styles, trademark
and service ▇▇▇▇ applications, and licenses and rights to use any of the
foregoing; all extensions, renewals, reissues, divisions, continuations,
and continuations in part of any of the foregoing; all rights to ▇▇▇
for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings,
designs, blueprints, surveys, reports, manuals, and operating standards;
goodwill (including any goodwill associated with any trademark or the license
of any trademark); customer and other lists in whatever form maintained;
trade secret rights, copyright rights, rights in works of authorship, domain
names and domain name registration; software and contract rights relating to
computer software programs, in whatever form created or maintained.
1.45 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrowers'
Agent may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided that,
Borrowers' Agent may not elect an Interest Period which will end after the
last day of the then - current term of this Agreement.
1.46 "Interest Rate" shall mean as to(a) Prime Rate Loans,(i)which are
Revolving Loans, a rate of one and one half percent (1.5%) per annum in
excess of the Prime Rate and (ii) which are Term Loans, a rate of two
percent (2%) per annum in excess of the Prime Rate and (b) as to Eurodollar
Rate Loans, (i) which are Revolving Loans, a rate of three and one half
percent (3.5%) per annum in excess of the Adjusted Eurodollar Rate and (ii)
which are Term Loans, a rate of four percent (4%) per annum in excess of the
Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by Borrowers' Agent as in effect three (3) Business
Days after the date of receipt by Lender of the request of Borrower for such
Eurodollar Rate Loans in accordance with the term thereof, whether such rate
is higher or lower than any rate previously quoted to Borrowers); provided
that, the Interest Rate shall mean(x) the rate of three and one half percent
(3.5%) per annum in excess of the Prime Rate as to Prime Rate Loans which are
Revolving Loans and the rate of four percent (4%) per annum in excess
of the Prime Rate as to Prime Rate Loans which are Term Loans and (y) the
rate of five and one half percent (5.5%) per annum in excess of the Adjusted
Eurodollar Rate as to Eurodollar Rate Loans which are Revolving Loans and the
rate of six percent (6%) per annum in excess of the Adjusted Eurodollar Rate
as to Eurodollar Rate Loans which are Term Loans, at Lender's option,
without notice, (a) for the period (i) from and after the date of
termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against
Borrowers) and (ii) from and after the date of the occurrence of an Event
of Default for so long as such Event of Default is continuing as determined
by Lender, and (b) on the Revolving Loans at any time outstanding in
excess of the amounts available to Borrower under Section 2 (whether or not
such excess(es), arise or are made with or without Lender's knowledge or
consent and whether made before or after an Event of Default); provided that,
at no time shall the Interest Rate be lower than a rate of six percent (6%) per
annum as to Prime Rate Loans and seven percent (7%) per annum as to Eurodollar
Rate Loans.
1.47 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.48 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of any Borrower, NSC or any other
Obligor or (b) with respect to which Lender has agreed to indemnify the issuer
or guaranteed to the issuer the performance by any Borrower of its obligations
to such issuer.
1.49 "Loans" shall mean the Revolving Loans and the Term Loans.
1.50 "Material Adverse Effect" shall mean a material adverse effect on (a)
the financial condition, business, performance or operation of Borrowers, (b)
the legality, validity or enforceability of this Agreement or any of the other
Financing Agreements; (c) the legality, validity, enforceability, perfection or
priority of the security interests and liens of Lender upon the Collateral or
any other property which is security for the Obligations; (d) the Collateral
of Borrowers (taken as a whole) or the value of the Collateral;
(e) the ability of Borrowers to repay the Obligations or of Borrowers to
perform their obligations under this Agreement or any of the other Financing
Agreements; or (f) the ability of Lender to enforce the Obligations or
realize upon the Collateral or otherwise with respect to the rights and
remedies of Lender under this Agreement or any of the other Financing
Agreements.
1.51 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of a Borrower
involving monetary liability of or to any Person in an amount in excess of
$1,000,000 in any fiscal year, (c) any Franchise Agreement and
(c) any other contract or other agreement (other than the Financing
Agreements), whether written or oral, to which a Borrower is a party as to
which the breach, nonperformance, cancellation or failure to renew by any
party thereto would have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations or prospects of
Borrowers or the validity or enforceability of this Agreement, any of the
other Financing Agreements, or any of the rights and remedies of Lender
hereunder or thereunder.
1.52 "Maximum Credit" shall mean the amount of $80,000,000.
1.53 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or
claimed with respect thereto.
1.54 "Net Income After Tax" shall mean, with respect to any Person for any
period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the
extent included therein any extraordinary or non - recurring gains and
extraordinary non-cash charges to property, plant and equipment or goodwill)
after deducting all charges (including income taxes) which should be deducted
before arriving at the net income (loss) for such period, all as determined
in accordance with GAAP; provided that, (a) the net income of any Person that
is not a Subsidiary of NSC or a Borrower or that is accounted for by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions actually received by NSC or a Borrower or a wholly -
owned Subsidiary of NSC or a Borrower; (b) the net income of any Person that
is not a wholly owned Subsidiary shall be included only after deducting
portions of income properly attributable to minority interests and (c) the
effect of any change in accounting principles adopted by such Person or its
Subsidiaries after the date hereof shall be excluded. For the purposes of
this definition, net income excludes any gain and non - cash loss (but not any
cash loss) realized upon the sale or other disposition of any assets that are
not sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or of any capital
stock of such Person or a Subsidiary of such Person and any net income
realized as a result of changes in accounting principles or the application
thereof to such Person.
1.55 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage (a) the numerator of which is the amount equal to the recovery on
the aggregate amount of the Inventory at such time on an orderly liquidation
basis as set forth in appraisals of Inventory received by Lender in accordance
with Section 7.3, net of estimated operating expenses, liquidation expenses
and commissions and (b) the denominator of which is the original cost of the
aggregate amount of the Inventory subject to appraisal.
1.56 "Net Revenues" shall mean, gross revenues less returns, credits,
discounts and allowances.
1.57 "Noteholders Liens" shall mean the security interests in favor of
the holders of NSC's 10.125% Senior Secured Notes due August 1, 2009, in the
collateral described in the Security Pledge, as in effect on the Closing Date,
which shall be junior and subordinate to the liens and security interests of
Lender therein to the extent provided in the Security Pledge as in effect on
the date hereof.
1.58 "NSC Notes" shall mean the 10.125% Restated Subordinated
Intercompany Note issued by Pueblo and 10.125% Subordinated Intercompany Note
issued by Pueblo Entertainment, Inc. to NSC, to be dated on or about June 2,
2003 in the principal amounts of $70,000,000 and $20,000,000, respectively.
1.59 "Obligations" shall mean any and all Revolving Loans, Term Loans, Letter
of Credit Accommodations, and all other obligations, liabilities
and indebtedness of every kind, nature and description owing by Borrowers or
NSC to Lender and/or its affiliates, including principal, interest, charges,
fees, costs and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether arising under this Agreement or
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after
the commencement of any case with respect to any Borrower under the
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of
such case, whether or not such amounts are allowed or allowable in whole or
in part in such case), whether direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by Lender.
1.60 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrowers.
1.61 "Payment Account" shall have the meaning set forth in Section
6.3 hereof. 1.62 "PACA" shall mean the "Packers and Stockyards Act", 7 USC
Section 181, et.seq.
1.63 "PASA" shall mean the "Perishable Agricultural Commodities
Act", 7 USC Section 499a, et. seq.
1.64 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects Subchapter S
status under the Internal Revenue Code of 1986, as amended or N corporation
status under the Puerto Rico Internal Revenue Code of 1994, as amended),
limited liability company, limited liability partnership, business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.
1.65 "Pledged Cash" shall mean the cash collateral delivered by Borrowers
to Lender pursuant to a "Cash Collateral Pledge And Security Agreement" dated
as of January 30, 2003 and which will continue to be held by Lender subject to
the provisions thereof, as amended (the "Cash Collateral Agreement") and
this Agreement.
1.66 "Prime Rate" shall mean the rate from time to time advised by
Westernbank Puerto Rico, or its successors, to its clients as its "prime
rate", whether or not such advised rate is the best rate available at such
bank.
1.67 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.68 "Real Estate Security" shall include (a) those leasehold mortgages
requested by Lender to be granted by Borrowers; (b) the mortgage liens on
the Real Property and interests of Borrowers described in Schedule 5.1(e)
hereto (the "Mortgages"), (c) the mortgage notes described on Schedule 5.1(e)
hereto to be pledged to Lender and (d) liens and security interests in
favor of Lender on all other Real Property of Borrowers or NSC, all on the
terms and subject to the provisions contained herein and in the other
applicable Financing Agreements.
1.69 "Real Property" shall mean all now owned and hereafter acquired
real property of any Borrower or NSC, including leasehold interests and those
real properties described on Schedule 5.1(e) hereto, together with all
buildings, structures and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, whenever located.
1.70 "Receivables" shall mean all of the following now owned or
hereafter arising or acquired property of Borrowers: (a) all Accounts;
(b) all interest, fees, late charges, penalties, collection fees and other
amounts due or to become due or otherwise payable in connection with any
Account; (c) all payment intangibles of each Borrower; (d) all letters of
credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to a Borrower or otherwise in favor of or delivered
to any Borrower in connection with any Account; or (e) all other accounts,
contract rights, chattel paper, instrument, notes, general intangibles and
other forms of obligations owing to any Borrower, whether from the sale and
lease of goods or other property, licensing of any property (including
Intellectual Property or other general intangibles), rendition of services
or from loans or advances by any Borrower or to or for the benefit of any
third person, including loans or advances to any Affiliates or Subsidiaries
of NSC or otherwise associated with any Accounts, Inventory or general
intangibles of any Borrower (including without limitation, choses in action,
causes of action, tax refunds, tax refund claims, any funds which may become
payable to a Borrower in connection with the termination of any employee
benefit plan and any other amounts payable to a Borrower from any employee
benefit plan) and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof,
casualty or any similar types of insurance and any process thereof and
proceeds of insurance covering the lives of employees on which a Borrower
is a beneficiary.
1.71 "Records" shall mean all of Borrowers' present and future books of
account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of
a Borrower with respect to the foregoing maintained with or by any other
person).
1.72 "Reference Bank" shall mean Westernbank Puerto Rico or such other
bank as Lender may from time to time designate.
1.73 "Reorganization Plan" shall mean NSC Plan of Reorganization in the
Chapter 11 Case as approved by Lender; but shall exclude the "Alternative
Plan" described therein.
1.74 "Restricted Junior Payment" shall mean (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of any Borrower now or hereafter outstanding or any payment on
account of a return of capital (or the setting aside or otherwise depositing
or investing of any sums for such purpose) or (b) any redemption, retirement,
purchase, defeasance or other acquisition, direct of indirect, of any shares
of any class of Capital Stock of any Borrower or any Affiliate of a Borrower
now or hereafter outstanding (or the setting aside or otherwise depositing or
investing of any sums for such purpose) or (c) any payment, direct or
indirect, of any interest, principal of or premium, if any, on any
redemption, retirement, purchase or other acquisition, direct or indirect,
of any Subordinated Debt (or the setting aside or otherwise depositing or
investing of any sums for such purpose) or (d) any payment of money or
transfer of any interest in any asset to any Affiliate of a Borrower.
1.75 "Retail Store" shall mean the retail stores which are now existing
or hereafter operated by any Borrower and which sell Inventory.
1.76 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.77 "Security Pledge" shall mean the "Security Pledge And
Intercreditor Agreement between NSC and Wilmington Trust Company, to be dated
on or about June 2, 2003.
1.78 "Senior Secured Notes" shall mean NSC's 10.125% Senior Secured
Notes due August 1, 2009, to be issued by NSC pursuant to and as part of the
Reorganization Plan.
1.79 "Solvent" shall mean, at any time with respect to any Person, that
at such time such Person (a) is able to pay its debts as they mature and has
(and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business
consistent with its practices as of the date thereof, and (b) the assets and
properties of such Person at a fair valuation (and including as assets for
this purpose at a fair valuation all rights of subrogation, contribution or
indemnification arising pursuant to any guarantees given by such Person) are
greater than the indebtedness of such Person, and including subordinated and
contingent liabilities computed at the amount which, such person has a
reasonable basis to believe, represents an amount which can reasonably be
expected to become an actual or matured liability (and including as to
contingent liabilities arising pursuant to any guarantee the face amount of
such liability as reduced to reflect the probability of it becoming a
matured liability).
1.80 "Subordinated Debt" shall mean all liabilities, indebtedness and
obligations of any Borrower, NSC or any other Obligor to any person the
payment of which is restricted by this Agreement, any of the other Financing
Agreements or the Security Pledge.
1.81 "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any corporation, association, limited liability company, limited
liability partnership, or other limited or general partnership, trust,
association or other business entity, of which an aggregate of at least a
majority of the outstanding Capital Stock or other interests entitled to vote
in the election of the Board of Directors of such corporation, managers,
trustees or other controlling persons (whether or not the right so to vote
exists or has been suspended by reason of the happening of a contingency), or
an equivalent controlling interest therein, of such Person is, at the time
directly or indirectly, owned by such Person and/or one or more subsidiaries
of such Person.
1.82 "Suppressed Availability" shall mean the amount, as determined by
Lender, calculated at any time, which Borrowers shall otherwise be entitled to
borrow under applicable lending formulas but which shall not be available to,
and which shall be withheld from, Borrowers.
1.83 "Term Loans" shall mean the term loans made by Lender to
Borrowers as provided for in Section 2.3 hereof.
1.84 "Uniform Commercial Code" or "UCC" shall include the Puerto
Rico "Commercial Transactions Act" and "UCC" shall mean the Uniform
Commercial Code.
1.85 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first - in - first -
out basis in accordance with GAAP or (b) market value.
1.86 "Voting Stock" or "voting stock" shall mean with respect to any
Person, (a) one(1) or more classes of Capital Stock of such Person having
general voting powers to elect at least a majority of the Board of Directors,
managers, trustees or other persons performing similar functions, even if at
the time any other class or classes of Capital Stock have, or might have,
voting power by reason of the happening of any contingency or (b) any Capital
Stock of such Person convertible or exchangeable without restriction at the
option of the holder thereof into Capital Stock of such Person described in
clause (a) of this definition.
1.87 "Working Capital" shall mean as to any Person, at any time, in
accordance with GAAP, on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to the difference between: (a) the
aggregate net book value of all current assets of such Person and its
subsidiaries (as determined in accordance with GAAP), calculating the book
value of inventory for this purpose on a first - in - first - out basis,
and (b) all current liabilities of such Person and its subsidiaries (as
determined in accordance with GAAP), provided, that, as to Borrowers, for
purposes of Section 9.14, (i) the liabilities of Borrowers to Lender under
this Agreement and (ii) the current amount of Borrowers' reserves for self
insurance liabilities, shall not be considered current liabilities (whether
or not classified as current liabilities in accordance with GAAP).
Section 2. Credit Facilities.
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein, Lender
agrees to make Revolving Loans to Borrowers from time to time in amounts
requested by Borrowers' Agent up to the amount equal to:
(i) Up to ninety percent (90%) of the Net Amount of Eligible
Accounts, plus
(ii) Up to the lesser of: (A) sixty five percent (65%) of the Value of
Eligible Inventory or (B) eighty percent (80%) of the "Net Recovery
Percentage" for Eligible Inventory, plus
(iii) Up to One Hundred Percent (100%)of the Pledged Cash, less
(iv) any Availability Reserves; provided that, except in Lender's
discretion, the aggregate amount of Revolving Loans at any time outstanding
pursuant to Section 2.1(a)(i)(ii)and (iii) hereof shall in no event exceed
Thirty Five Million Dollars ($ 35,000,000). (b) Lender may, in its
discretion, from time to time, upon not less than five (5) days prior notice
to Borrowers' Agent, (i) reduce the lending formula with respect to Eligible
Accounts and Eligible Inventory to the extent that Lender determines in good
faith that: (A) the Dilution with respect to the Accounts for any period has
increased in any material respect or may be reasonably anticipated to increase
in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined or (C) the Dilution as of the
close of any month is greater than five percent (5%) for such month or (ii)
reduce the lending formula(s) with respect to Eligible Inventory to the
extent that Lender determines that: (A) the number of days of the turnover of
the Inventory for any period has changed in any material respect or (B) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory has
deteriorated. In determining whether to reduce the lending formula(s), Lender
may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves. Lender anticipates that any reduction on
account of a determination by Lender under Section 2.1(b)(i) (C) hereof will be
at a rate which is not less than twice the percentage determined thereunder.
(C) Except in Lender's discretion, the aggregate amount of the Loans and the
Letter of Credit Accommodations outstanding at any time shall not exceed the
Maximum Credit. In the event that the outstanding amount of any component of
the Loans, or the aggregate amount of the outstanding Loans and Letter of
Credit Accommodations exceed the amounts available under the lending formulas,
the sublimits for Letter of Credit Accommodations set forth in Section 2.2(d)
or the Maximum Credit, as applicable, such event shall not limit, waive or
otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrowers shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of
any such excess(es) for which payment is demanded.
(d) Lender may treat the then undrawn amounts of outstanding Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory as Revolving
Loans to the extent Lender is in effect basing the issuance of the Letter of
Credit Accommodations on the Value of the Eligible Inventory being purchased
with such Letter of Credit Accommodations. In determining the actual amounts
of such Letter of Credit Accommodations to be so treated for purposes of the
sublimit, the outstanding Revolving Loans and Availability Reserves shall be
attributed first to any components of the lending formulas in Section 2.1(a)
that are not subject to such sublimit, before being attributed to the
components of the lending formulas subject to such sublimit.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein, at the
request of Borrowers' Agent, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrowers containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.2.
(b) In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations Borrowers shall
pay to Lender a letter of credit fee at a rate equal to two and one - half
percent (2.5%) per annum on the daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month, except that
Borrowers shall pay to Lender such letter of credit fee, at Lender's option,
without notice, at a rate equal to four and one - half percent (4.5%) per
annum on such daily outstanding balance for: (i) the period from and after
the date of termination or non - renewal hereof until Lender has received
full and final payment of all Obligations (notwithstanding entry of a
judgment against any Borrower) and (ii) the period from and after the date
of the occurrence of an Event of Default for so long as such Event of Default
is continuing as determined by Lender. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed and the obligation of Borrowers to pay such fee shall survive
the termination or non - renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on the date of
the proposed issuance of any Letter of Credit Accommodations the Revolving
Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed
Letter of Credit Accommodation is for the purpose of purchasing Eligible
Inventory, the sum of (A) thirty five percent (35%) of the Value of such
Eligible Inventory, plus (B) freight, taxes, duty and other amounts which
Lender estimates must be paid in connection with such Inventory upon arrival
and for delivery to one of Borrower's locations for Eligible Inventory within
the United States of America, Puerto Rico or the Virgin Islands and (ii) if
the proposed Letter of Credit Accommodation is for any other purpose an
amount equal to one hundred percent(100%) of the face amount thereof and all
other commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation an
Availability Reserve shall be established in the applicable amount set forth
in Section 2.2"(i) or Section 2.2"(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations
made or incurred by Lender in connection therewith shall not at any time
exceed Ten Million Dollars ($10,000,000) in the aggregate, included within
the overall Revolving Loans. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, Borrowers will either
furnish cash collateral to secure the reimbursement obligations to the issuer
in connection with any Letter of Credit Accommodations or furnish cash
collateral to Lender for the Letter of Credit Accommodations and in either
case, the Revolving Loans otherwise available to Borrower shall not be
reduced as provided in Section 2.2(c) to the extent of such cash collateral.
(e) Borrowers shall jointly and severally indemnify and hold Lender harmless
from and against any and all losses, claims, damages, liabilities, costs and
expenses which Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating
thereto, including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by any issuer or correspondent or any other
person with respect to any Letter of Credit Accommodation. Borrowers assume
all risks with respect to the acts or omissions of the drawer under or
beneficiary of, or any other person with respect to, any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrowers' agent. Borrowers assume all risks for, and agree to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any
goods subject to any Letter of Credit Accommodations and any documents,
drafts or acceptances thereunder. Borrowers hereby release and hold Lender
harmless from and against any acts, waivers, errors, delays or omissions,
whether caused by Borrowers, by any issuer or correspondent or otherwise with
respect to or relating to any Letter of Credit Accommodation. The provisions
of this Section 2.2(e) shall survive the payment of Obligations and the
termination or non - renewal of this Extension Agreement.
(f) Nothing contained herein shall be deemed or construed to grant Borrowers
any right or authority to pledge the credit of Lender in any manner. Lender
shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit
Accommodation. Borrowers shall be bound by any interpretation made in good
faith by Lender, or any other issuer or correspondent under or in connection
with any Letter of Credit Accommodation or any documents, drafts or
acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of Borrowers. Lender shall have the sole
and exclusive right and authority to, and Borrowers shall not: (i) at any
time an Event of Default exists or has occurred and is continuing,
(A) approve or resolve any questions of non - compliance of documents,
(B) give any instructions as to acceptance or rejection of any documents or
goods or (C) execute any and all applications for steamship or airway
guaranties, indemnities or delivery orders, and (ii) at all times, (A) grant
any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances, or documents, and (B) agree
to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances
thereunder or any letters of credit included in the Collateral. Lender may
take such actions either in its own name or in Borrowers' names.
(g) Any rights, remedies, duties or obligations granted or undertaken by
Borrowers to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed
to have been granted or undertaken by Borrowers to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of
Credit Accommodation, shall be deemed to have been undertaken by Borrowers to
Lender and to apply in all respects to Borrowers.
2.3 Term Loans. Lender is or will be making three (3) Term Loans to
Borrowers as follows:
(a)(i) Lender intends to make a capital expenditures Term Loan to
Borrowers for the purpose of remodeling retail stores, relocating retail
stores, opening new retail stores and purchasing new Equipment for
remodeled, relocated or new retail stores, all as approved by Lender, in the
original principal amount of up to the lesser of (A) $4,000,000 or (B) the
sum of (1) 70% of the "Eligible Construction Project Costs" (as hereafter
defined) of remodeling, relocating or opening new retail stores plus (2) 70%
of the lower of (x) the "Original Supplier Landed Cost"(as hereafter
defined) of "Eligible New Equipment" (as hereafter defined) and (y) the "Net
Fair Market Value" (as hereafter defined), of Eligible New Equipment. This
Term Loan ("Term Loan A") will be (A) evidenced by Term Loan A Promissory
Notes each in the original principal amount of each partial disbursement of
Term Loan A, duly executed and delivered by Borrowers to Lender concurrently
with each disbursement, (B) repaid, together with interest and other amounts,
in accordance with this Agreement, the Term Loan A Promissory Notes and the
other Financing Agreements and (C) secured by all of the Collateral. Term
Loan A shall in no event exceed $4,000,000, in the aggregate, during the term
of this Agreement. Borrowers may not request disbursements of Term Loan A in
amounts of less than $250,000. All amounts drawn under Term Loan A and all
Term Loan A Promissory Notes shall be payable calculated on the basis of 60
equal monthly payments of principal with a final payment of the then
remaining principal balance, interest and other amounts, as provided herein
and in the Term Loan A Promissory Notes, on the Due Date. Borrowers shall
execute and deliver to Lender a Term Loan A Promissory Note at the time of
each partial disbursement of this Term Loan A in the principal amount of such
disbursement. Borrowers may request partial disbursements, from time to time,
at any time prior to January 30, 2006 of amounts available under Term Loan A,
in minimum amounts of $250,000. Any amounts under Term Loan A not disbursed at
or prior to January 30, 2006 will no longer be available after such date.
(ii) In order to draw amounts under Term Loan A for Eligible New Equipment, in
addition to having met and continuing to meet the conditions elsewhere
specified herein:
(A) The Eligible New Equipment for which disbursement is being requested
shall have been delivered to Borrowers in Puerto Rico or the United States
Virgin Islands;
(B) The Eligible New Equipment for which disbursement is requested shall be
free and clear of all liens, charges, claims of third parties and security
interests whatsoever;
(C) Borrowers' Agent shall deliver to Lender such documents with respect to
such Eligible New Equipment as Lender may request, including supplier
invoices, evidence of payment of excise tax thereon, a payback analysis, a
letter requesting Lender to make payment directly to the vendor and a
Certificate of Borrowers' Agent's President and Chief Financial Officer as to
such matters as Lender may request;
(D) Borrowers shall have executed and delivered to Lender a Term Loan A
Promissory Note in form and substance satisfactory to Lender;
(E) Lender shall be satisfied that neither the disbursement nor repayment of
such portion of Term Loan A will have a Material Adverse Effect on Borrowers
described in Section 1.50(a) or (e) hereof; and
(F) The conditions precedent specified Section 4.3 hereof shall be satisfied
at and as of the time of each disbursement of Term Loan A;
provided that, with respect to Pueblo's store in Isla Verde, in order
to draw amounts for Eligible New Equipment under Term Loan A only on the
Closing Date, (x) Borrowers' Agent may furnish an appraisal acceptable to
Lender in lieu of the items to be delivered pursuant to Section 2.3(a)(ii)
(C) hereof,(y) disbursement will be made to Borrowers and (z) the provisions
of Section 2.3(a)(ii)(E) shall not be applicable. (iii) In order to draw
amounts under Term Loan A for Eligible Construction Project Costs, in
addition to having met and continuing to meet the conditions elsewhere
specified herein: (A) Borrowers shall have incurred the Eligible Construction
Project Costs for which disbursement is being requested and shall certify to
Lender, in form and substance satisfactory to Lender that the proceeds of
Term Loan A to be disbursed by Lender hereunder shall be used by Borrowers to
cover amounts which shall at the time have been expended and/or be justly due
and owing by Borrowers on account of the Eligible Construction Project Costs
of remodeling, relocating or opening retail stores of any Borrower; (B)
Borrowers' Agent shall deliver to Lender such documents with respect to
such Eligible Construction Project Costs as Lender may request, including but
not limited to supplier invoices, evidence of payment of excise tax thereon,
a payback analysis, a letter requesting Lender to make payment directly to
the vendor and a Certificate of Borrowers' Agent's President and Chief
financial Officer as to such matters as Lender may request; (C) Borrowers
shall have executed and delivered to Lender a Term Loan A Promissory Note
in form and substance satisfactory to Lender; (D) Lender shall be satisfied
that neither the disbursement nor repayment of such portion of Term Loan A
will have a Material Adverse Effect on Borrowers described in
Section 1.50(a) or (e) hereof . (E) The conditions precedent specified
Section 4.3 hereof shall be satisfied at and as of the time of each
disbursement of Term Loan A; (H) Each request for a disbursement hereunder of
Term Loan A for remodeling, relocating or opening a retail store shall be
accompanied by a certification of the work in place, satisfactorily
completed, of Eligible Construction Project Costs, submitted by Borrowers'
Agent and an independent engineer satisfactory to Lender; (I) Lender shall
have previously approved, in writing (1) such remodeling relocation or
opening of such retail store and (2) a detailed budget submitted
by Borrowers' Agent for such remodeling, relocation or opening; and
(J) The disbursement requested shall be in accordance with such budget;
provided that, with respect to Pueblo's store in Isla Verde, in order
to draw amounts for Eligible Construction Project Costs under Term Loan A
only on the Closing Date the provisions of Section 2.3(a)(iii) shall not be
applicable. (iv) As used in this Section 2.3(a):
(A) "Eligible Construction Project Costs" means the costs of materials used
in the remodeling, relocating or opening of a new retail store; but does not
include labor;
(B) "Net Fair Market Value", with respect to Eligible New Equipment, means
the market value of such Equipment, as determined by Lender and excludes
installation costs;
(C) "Eligible New Equipment" means (1) new Equipment purchased from the
manufacturer or its duly authorized dealer, (2) which has not been used and
which is not more than one (1) year old, (3) which is not fixtures, (4) which
is not subject to a lien or security interest of any other person, (5) which
is not leased and (6), which is not worn - out or obsolete; and
(D) "Original Supplier Landed Cost" means supplier invoice price less all
excise or other taxes, less freight to San ▇▇▇▇, Puerto Rico, or the United
States Virgin Islands, as applicable, less all duty.
(b) (i) Lender intends to make a Term Loan to Borrowers for the purpose of
partially refinancing existing indebtedness of Pueblo to NSC and to be used
for working capital, in the principal amount of the lesser of
(A) $36,000,000 or (B) seventy five percent (75%) of the "Net Fair Market
Value" (as hereafter defined) of the "Eligible Real Property"(as hereafter
defined) owned by Borrowers. In order to draw amounts under this Term Loan
not disbursed at closing, in addition to having met and continuing to meet the
conditions elsewhere specified herein Borrowers must, within 30 days after the
Closing Date, satisfy all those conditions specified in Section 4.3 hereof.
This Term Loan ("Term Loan B") is and will be (A) evidenced by one or more
Term Loan B Promissory Notes in the original principal amounts disbursed duly
executed and delivered by Borrowers to Lender concurrently herewith and at the
time of any additional disbursement thereof, (B) repaid together with interest
and other amounts, in accordance with this Agreement, the Term Loan B
Promissory Notes, and the other Financing Agreements, calculated on the basis
of 180 consecutive monthly installments payable on the 1st day of each month,
commencing the 1st day of the month after disbursement thereof, of which all
installments except the last installment, shall each be in the principal
amount of (1) the amount disbursed divided by (2) 180 and the last installment
and final payment shall be the amount of the entire unpaid balance of such
Term Loan and Term Loan B Promissory Notes and due on the Due Date, together
with interest and other amounts as provided herein and in the Term Loan B
Promissory Notes and (C) secured by all of the Collateral.
(ii) As used in this Section 2.3(b):
(A) "Eligible Real Property" means those real properties owned by Borrowers,
described in Schedule 2.3(b) hereto, not subject to any lien or encumbrance
other than those which are acceptable to Lender, and which real properties are
acceptable to Lender; and
(B)" Net Fair Market Value" with respect to Eligible Real Property, means
the fair market value of such Eligible Real Property, net of all liens,
claims, charges and encumbrances, as determined by appraisals acceptable to
Lender.
(C) (i) Lender intends to make a Term Loan to Borrowers to be used for working
capital, in the principal amount of the lesser of (A) $ 5,000,000 and (B)
fifty percent (50%) of the "Net Value" of "Eligible Leaseholds" (as hereafter
defined). In order to draw amounts under this Term Loan not disbursed at
closing, in addition to having met and continuing to meet the conditions
elsewhere specified herein Borrowers must, within 30 days after the Closing
Date satisfy all those conditions specified in Section 4.3 hereof. This Term
Loan ("Term Loan C") is and will be (A) evidenced by one or more Term Loan C
Promissory Notes in the original principal amounts disbursed duly executed and
delivered by Borrowers to Lender concurrently therewith and at the time of any
additional disbursement thereof, (B) repaid together with interest and other
amounts, in accordance with this Agreement, the Term Loan C Promissory Notes,
and the other Financing Agreements, calculated on the basis of 60 consecutive
monthly installments payable on the 1st day of each month, commencing the 1st
day of the month after each disbursement thereof, of which all installments,
except the last installment, shall each be in the principal amount of (1) the
amount disbursed divided by (2) 60, and the last installment and final payment
shall be the amount of the entire unpaid balance of such Term Loan and Term
Loan C Promissory Note and due on the Due Date, together with interest and
other amounts provided herein and in the Term Loan C Promissory Note and (C)
secured by all of the Collateral.
(ii) As used in this Section 2.3(c)
(A) "Eligible Leaseholds" means those leasehold interests of Borrowers
described on Schedule 2.3(c) hereto, not subject to any lien or encumbrance and
which leasehold interests are acceptable to Lender; and
(B) "Net Value", with respect to an Eligible Leasehold, means the fair market
value of such leaseholds as determined by appraisals acceptable to Lender.
(d) Notwithstanding any other provision of this Agreement or the Term
Notes all Term Loans shall become immediately due and payable upon the
termination or non - renewal of this Agreement, or in Lender's discretion upon
the occurrence of an Event of Default under this Agreement or any of the
other Financing Agreements.
2.4 Availability Reserves. All Revolving Loans otherwise available to
Borrowers pursuant to the lending formulas and subject to the Maximum Credit
and other applicable limits hereunder shall be subject to Lender's continuing
right to establish and revise Availability Reserves.
2.5 Maximum Credit. Except in Lender's discretion, the aggregate amount
of all of the Loans at any time shall not exceed the Maximum Credit. In the
event that the outstanding amount of any component of the Loans, or the
aggregate amount of the outstanding Loans, exceed the amounts available under
the lending formulas, or the Maximum Credit, as applicable, such event shall
not limit, waive or otherwise affect any rights of Lender in that circumstance
or on any future occasions and Borrowers shall, upon demand by Lender, which
may be made at any time or from time to time, immediately repay to Lender the
entire amount of any such excess(es) for which payment is demanded. The
Maximum Credit shall have the following sublimits:
(a) Revolving Loans - $35,000,000;
(b) Term Loan A - $ 4,000,000;
(c) Term Loan B - $36,000,000; and
(d) Term Loan C - $ 5,000,000.
2.6 Release of Pledged Cash. Lender shall, on the Closing Date release from
the lien of its pledge and deliver to Borrowers any Pledged Cash in excess of
that required (a) for the amount of the Revolving Loans and Letter of Credit
Accommodations to be within the "formulas" herein provided and (b) so that no
Event of Default or event or condition which with the giving of notice or
passage of time or both would become an Event of Default shall exist.
2.7 Repayment of Existing Loans. Borrowers shall, on the Closing Date,
repay to Lender all indebtedness and other amounts owing to Lender by
Borrowers under the Extension Agreement.
Section 3. Interest And Fees.
3.1 Interest.
(a) Borrowers shall pay to Lender interest on the outstanding principal
amount of the non - contingent Obligations at the Interest Rate.
Notwithstanding any other provision hereof(except Section 3.1(d)(i)), in no
event shall the interest payable hereunder be less than six percent (6%) per
annum on the Revolving Loans and seven percent(7%) per annum on the Term
Loans. All interest accruing hereunder on and after the date of any Event of
Default or termination or non - renewal hereof shall be payable on demand.
(b) Borrowers' Agent may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrowers'
Agent shall specify the amount of the Prime Rate Loans which will constitute
Eurodollar Rate Loans (subject to the limits set forth below) and the Interest
Period to be applicable to such Eurodollar Rate Loans. Subject to the terms
and conditions contained herein, three (3) Business Days after receipt by
Lender of such request from Borrowers' Agent, such Prime Rate Loans shall be
converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall
continue, as the case may be, provided that, (i) no Event of Default, or
event which with notice or passage of time or both would constitute an Event
of Default exists or has occurred and is continuing, (ii) no party hereto
shall have sent any notice of termination or non - renewal of this Agreement,
(iii) Borrowers shall have complied with such customary procedures as are
established by Lender and specified by Lender to Borrowers' Agent from time
to time for requests by Borrowers' Agent for Eurodollar Rate Loans,
(iv) no more than four (4) Interest Periods may be in effect at any one
time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an
amount not less than $5,000,000 or an integral multiple of $1,000,000 in
excess thereof, (vi) the maximum amount of the Eurodollar Rate Loans for
Revolving Loans and Term Loans at any time requested by Borrowers' Agent shall
not exceed the amount equal to eighty (80%) percent of the lowest principal
amount of the Revolving Loans and Term Loans which it is anticipated will be
outstanding during the applicable Interest Period, in each case as determined
by Lender (but with no obligation of Lender to make such Loans) and (vii)
Lender shall have determined that the Interest Period or Adjusted Eurodollar
Rate is available to Lender through the Reference Bank and can be readily
determined as of the date of the request for such Eurodollar Rate Loan by
Borrowers' Agent. Any request by Borrowers' Agent to convert Prime Rate
Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate
Loans shall be irrevocable. Notwithstanding anything to the contrary
contained herein, Lender and Reference Bank shall not be required to purchase
United States Dollar deposits in the London interbank market or other
applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the
provisions hereof shall be deemed to apply as if Lender and Reference Bank
had purchased such deposits to fund the Eurodollar Rate Loans. Interest
periods for different Loans (i.e. Revolving Credit, Term A, Term B or Term C
Loans) that commence on the same date and have the same duration shall be
treated as a single Interest Period for purposes of the minimum dollar amount
of Eurodollar Loans, and maximum number of Interest Periods, hereunder.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans
upon the last day of the applicable Interest Period, unless Lender has
received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon
notice by Lender to Borrowers' Agent, convert to Prime Rate Loans in the
event that (i) an Event of Default or event which, with the notice or passage
of time, or both, would constitute an Event of Default, shall exist, (ii)
this Agreement shall terminate or not be renewed, or (iii) the aggregate
principal amount of the Prime Rate Loans which have previously been converted
to Eurodollar Rate Loans or existing Eurodollar Rate Loans continued, as the
case may be, at the beginning of an Interest Period shall at any time during
such Interest Period Exceed either (A) the aggregate principal amount of the
Loans then outstanding, or (B) the Revolving Loans then available to Borrower
under Section 2.1 hereof. Borrowers shall pay to Lender, upon demand by
Lender (or Lender may, at its option, charge any loan account of
Borrowers) any amounts required to compensate Lender, the Reference Bank or
any participant with Lender for any loss (including loss of anticipated
profits), cost or expense incurred by such person, as a result of the
conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of
the foregoing.
(d) Interest shall be payable by Borrowers to Lender monthly
in arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed. The interest rate on non - contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the
month after any change in such Prime Rate is advised based on the Prime Rate
in effect on the last day of the month in which any such change occurs. In no
event shall (i) charges constituting interest payable by Borrower to Lender
exceed the maximum amount or the rate permitted under any applicable law or
regulation and if any part of this Agreement is in contravention of any such
law or regulation, such part or provision shall be deemed amended to conform
thereto and (ii) except as may be required by the preceding subclause (i) the
Interest Rate ever be less than(A) six percent (6%) per annum on the
Revolving Loans and (B) seven percent(7%) per annum on the Term Loans.
3.2 Servicing Fee. Borrowers shall pay to Lender monthly a servicing fee
in an amount equal to $5,000 in respect of Lender's services for each month
(or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on the first day of
each month hereafter.
3.3 Unused Line Fee. Borrowers shall pay to Lender monthly, an unused
line fee at a rate equal to one half of one percent (0.5%) percent per annum
calculated upon the amount by which $30,000,000 exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof),
while this Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first day of
each month in arrears.
3.4 Letter of Credit Fees. Borrower shall pay Lender fees for Letter of
Credit Accommodations as stated in Section 2.2(b) hereof.
3.5 Early Termination Fee. If for any reason (a) this Agreement is
terminated prior to the end of then current term or any renewal term of this
Agreement or (b)this Agreement fails to close (i) prior to the end of the
current term of the Extension Agreement or any renewal or extension thereof,
or (ii) on or prior to September 30, 2003, in view of the impracticality and
extreme difficulty of ascertaining actual damages and by mutual agreement of
the parties as to a reasonable calculation of Lender's lost profits as a
result thereof, Borrowers agree to pay to Lender, on demand an early
termination fee in the amount set forth below if such termination or failure
is effective in the period indicated:
Amount Period
(a) $4,000,000 From the date hereof to and
including August 31, 2003;
(b) $1,050,000 plus 3% of the then From September 1, 2003 to and
outstanding balance of the Term Loans including June 22, 2005;
at and as of the date of such
failure or termination
(c) $700,000 plus 2% of the then From June 23, 2005 to and
including outstanding balance of the June 22, 2006; and
Term Loans as of the date of such
termination.
(d) $ 350,000 plus 1% of the then From June 23, 2006 to and
outstanding balance of the Term including June 21, 2008 or if
Loans as of the date of such this Agreement is extended for
Termination an additional period as provided
herein, to and including the end
of the then current term
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. In
addition, Lender shall be entitled to such early termination fee upon the
occurrence of any Event of Default described in Sections 10.1(g) or 10.1(h)
hereof except if (a) Lender does not exercise its right to terminate this
Agreement, (b) Lender elects, at its option, to provide financing to
Borrowers or permit the use of cash collateral under the Bankruptcy Code
and (c) such financing or use is approved on terms acceptable to Lender;
provided that, such termination fee shall remain payable as otherwise
provided herein. The early termination fee provided for in this Section
3.5 shall be deemed included in the Obligations. Borrowers waive any claim
for reduction of fees whether or not such fees are treated as a penalty.
3.6 Changes in Laws and Increased Costs of Loans. (a)
Notwithstanding anything to the contrary contained herein, all Eurodollar
Rate Loans shall, upon notice by Lender to Borrowers' Agent, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either
(A) make it unlawful for Lender, the Reference Bank or any participant to
make or maintain Eurodollar Rate Loans or to comply with the terms hereof
in connection with the Eurodollar Rate Loans, or (B) shall result in the
increase in the costs to Lender, the Reference Bank or any participant of
making or maintaining any Eurodollar Rate Loans by an amount deemed by
Lender to be material or (C) reduce the amounts received or receivable by
Lender in respect thereof, by an amount deemed by Lender to be material
or (ii) the cost to Lender, the Reference Bank or any participant of
making or maintaining any Eurodollar Rate Loans shall otherwise increase
by an amount deemed by Lender to be material. Borrowers shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of the foregoing, including, without limitation, any such loss, cost or
expense incurred by reason of the liquidation or re - employment of deposits or
other funds acquired by such person to make or maintain the Eurodollar Rate
Loans or any portion thereof. A certificate of Lender setting forth the basis
for the determination of such amount necessary to compensate Lender as
aforesaid shall be delivered to Borrowers and shall be conclusive, absent
manifest error. (b) If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the last day of
the applicable Interest Period (whether pursuant to acceleration, upon
maturity or otherwise), including any payments pursuant to the application
of collections or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrower) any amounts required to
compensate Lender, the Reference Bank or any participant with Lender for any
additional loss (including loss of anticipated profits), cost or expense
incurred by such person as a result of such prepayment or payment, including
without limitation, any loss, cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds acquired
by such person to make or maintain such Eurodollar Rate Loans or any portion
thereof.
3.7 Extension Fee. Borrowers ratify and confirm that the extension fee
payable pursuant to Section 4.2 of the Extension Agreement has been fully
earned.
Section 4. Conditions Precedent.
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender
making the initial Loans, and providing the initial Letter of Credit
Accommodations hereunder:
(a) All of the representations and warranties of Borrowers and NSC contained
in the Extension Agreement Financing Agreements shall be true and correct on
and as of the Closing Date, except when made as of a specified date and as to
such representations and warranties same shall have been true and correct as
of the date specified and Lender shall have received a certificate of the
Chief Executive Officer and Chief Financial Officer of Borrowers and NSC to
such effect.
(b) Borrowers and NSC shall have complied with all conditions and performed
all covenants to be performed by any of them at a prior to the Closing Date
and Lender shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of Borrower and NSC to such effect.
(c) No court of competent jurisdiction shall have issued any injunction or
restraining order or other order with respect to the Reorganization Plan
which prohibits the consummation of the transactions contemplated therein or
modifies such transactions and no action or other proceeding shall have been
commenced which seeks any of the foregoing or to restrain or modify any of
the transactions described in the Financing Agreements.
(d) Lender shall have received, in form and substance satisfactory to Lender,
(i) evidence that Lender has valid, perfected and first priority security
interests in and liens upon the Collateral and any other property which is
intended to be security for the Obligations, including the Real Estate
Security, subject only to the security interests and liens permitted by
Section 9.8 hereof or in the other Financing Agreements; and (ii) all releases,
terminations and such other documents as Lender may request to evidence and
effectuate the termination by others (except with respect Capital Lease
obligations of Borrowers not in excess of $12,300,000, in the aggregate) who
have provided financial accommodations to Borrowers of their respective
financing arrangements with Borrowers and the termination and release by it or
them, as the case may be, of any interest in and to any assets and properties
of any Borrower and NSC, duly authorized, executed and delivered by it or
each of them, including, but not limited to, (A) UCC termination statements
for all UCC financing statements previously filed by it or any of them or
their predecessors, as secured party and any Borrower or NSC, as debtor
and (B) satisfactions and discharges of any mortgages, deeds of trust or
deeds to secure debt by any Borrower in favor of others or NSC in form
acceptable for recording in the appropriate government office.
(e) All requisite corporate and other actions and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory
in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of requisite
corporate and other actions and proceedings which Lender may have requested
in connection therewith, such documents where requested by Lender or its
counsel to be certified by appropriate corporate officers or governmental
authorities.
(f) No material adverse change shall have occurred in the assets, business or
prospects of Borrowers or NSC since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of any Borrower or NSC to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Lender to
enforce the Obligations or realize upon the Collateral.
(g) Lender shall have completed a field review of the Records and such other
information with respect to the Collateral as Lender may require to determine
the amount of Revolving Loans and Term Loans available to Borrowers, the
results of which shall be satisfactory to Lender, not more than three (3)
business days prior to the Closing Date.
(h) Lender shall have received, in form and substance satisfactory to Lender,
all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including acknowledgments by lessors, mortgagees and
warehousemen of Lender's liens and security interests in the Collateral,
waivers by such persons of any security interests, liens or other claims by
such persons to the Collateral and agreements permitting Lender access to, and
the right to remain on, the premises to exercise its rights and remedies and
otherwise deal with the Collateral.
(i) Lender shall have received, in form and substance satisfactory to Lender,
such opinion letters of counsel to Borrowers and NSC with respect to the
Financing Agreements, and the security interests and liens of Lender in the
Collateral and such other matters as Lender may request.
(j) The other Financing Agreements requested or submitted by Lender from or
to Borrowers and all instruments and documents hereunder and thereunder shall
have been duly executed and delivered to Lender, in form and substance
satisfactory to Lender.
(k) Lender shall have received, in form and substance satisfactory to
Lender all agreements with respect to (i) the Blocked Accounts and (ii)all
investment property and all other deposit accounts of Borrowers or NSC as
Lender may require, duly authorized, executed and delivered by Borrowers, NSC
and the appropriate depository, financial or other applicable institution.
(l) Lender shall have received the Credit Card Acknowledgments, in each case
duly authorized, executed and delivered by the Credit Card Issuers and Credit
Card Processors.
(m) Lender shall have received in form and substance satisfactory to Lender
copies of all of Borrowers' agreements with financial institutions regarding
the collection of receipts from purchases made by customers on credit and
debit cards.
(n) Each of the depository banks used by a Borrower for the deposit of
receipts from the sale of merchandise and each other depository bank used by
Borrower for the deposit of other proceeds of Collateral and other property,
which is collateral security for the Obligations shall have been notified of
Lender's security interest therein and shall have been irrevocably authorized
and directed to send all funds on deposit with such banks only to the Blocked
Account designated by Lender or as Lender otherwise directs.
(o) Lender shall have received, and NSC shall have obtained, in form and
substance satisfactory to Lender, a final and unappealable order of the
Bankruptcy Court in the Chapter 11 Case to which no objection or opposition
shall have been filed or made:
(i) Approving the execution, delivery and performance of this Agreement and
the other Financing Agreements to which it is a party, by NSC and the
consummation of the transactions contemplated hereby and thereby;
(ii) Confirming the Reorganization Plan; and
(iii) As to such other matters as Lender may request.
(p) The Reorganization Plan shall concurrently with the making of the
Initial Loans, have been consummated and Lender shall have received evidence
satisfactory to it that all payments required to be made in connection
therewith have been, or concurrently with the making of the Initial Loans will
be, made.
(q) The amount payable by Borrowers to NSC and by NSC in connection with the
consummation of the Reorganization Plan shall not exceed $51,000,000.
(r) Excess Availability, as of the Closing Date, shall not be less than
$5,000,000, after giving effect to the Loans to be made and the Letter of
Credit Accommodations to be provided in connection with the initial
transactions hereunder.
(s) All indebtedness owing (i) by any Borrower to NSC and (ii) by the
Borrowers among themselves shall have been fully subordinated to the
Obligations, to Lenders satisfaction.
(t) Lender shall have received, in form and substance satisfactory to Lender,
(i) a pro forma and market value consolidated and consolidating and combined
and combining, as applicable, balance sheet of Borrowers, reflecting the
initial transactions contemplated hereunder, including, but not limited to,
(A) the Loans to be provided by Lender to Borrowers (B) the use of the
proceeds of the initial Loans as provided herein and (C) the consummation of
the Reorganization Plan and (ii) a projection and forecast of Borrowers' cash
flow for their current and five(5) succeeding fiscal years all accompanied by
a certificate, dated as of the Closing Date, of the chief executive officer
and chief financial officer of Borrowers, stating that such pro - forma balance
sheet, market value balance sheet and projection of cash flow, represents the
reasonable, good faith opinion of such officers as to the subject matter
thereof as of the date of such certificate and as to such other matters as
Lender may request.
(u) The market value balance sheet of Borrower, the certificate and the
projection referred to in Section 4.1 (t) hereof shall reflect to Lender's
satisfaction that Borrowers, taken as a whole, are Solvent.
(v) The Reorganization Plan, as consummated, shall be acceptable to Lender.
(w) Borrowers shall not have granted any liens or security interests in any
of their assets to any Person except (i) the security interest and liens
permitted by Section 9.8 hereof, (ii) the liens and security interests
granted to Lender and (iii) the Noteholders Liens, which shall in all
respects be junior and subordinate to the liens and security interests of
Lender, to Lender's satisfaction.
(x) Lender shall have received, in form and substance satisfactory to
Lender, (i) a guarantee of payment by each Borrower of the Obligations owed
by each of the other Borrowers and (ii) a guarantee of payment of the
Obligations by NSC secured by a first and only security interest (except for
the Noteholders Liens) in NSC's assets in favor of Lender granted by NSC.
(y) All Collateral owned by any Borrower to be furnished to Lender pursuant
hereto or pursuant to any of the other Financing Agreements shall be
furnished by the owner thereof directly to Lender and none of such Collateral
shall be furnished through NSC and Borrowers and NSC shall have terminated
any liens and security interests of NSC therein.
(z) The "Alternative Plan" (as defined in the Reorganization Plan) shall not
have become effective and no event or circumstances shall exist which with or
without the issuance of the "Direction Letter" (as defined in the
Reorganization Plan) would allow the Alternative Plan to become effective.
(aa) Lender shall have received all such subordination agreements, non-
disturbance agreements, assignments of leases, landlord's consents and other
agreements and consents from landlords, subtenants, mortgagees and others
with respect to the Real Estate Security as Lender shall request.
(bb) Lender shall have received evidence, satisfactory to it, that
$15,000,000 has been contributed to the capital of NSC by PX & M Holdings,
Inc., in cash.
(cc) Lender shall have received estoppel certificates from substantially all
of Borrowers' landlords showing that no defaults thereunder by any Borrower
exists or that any alleged default does not have a Material Adverse Effect.
(dd) Borrowers shall have furnished evidence to Lender that all property
taxes on the Real Estate then due have been paid.
(ee) Borrowers shall have executed and delivered to Lender all Real Estate
Security to Lender and Lender shall have received mortgagee title policies
with respect thereto in such amounts and from such insurers and with such
affirmative coverages as Lender may request, all in form and substance
satisfactory to Lender.
(ff) Lender shall have received recent surveys of the Real Estate owned by
Borrowers prepared by a licensed engineer, satisfactory to Lender, conforming
to the descriptions and showing no encroachments and certified to Lender.
(gg) Lender shall have received appraisals for the Real Estate from
appraisers acceptable to Lender, addressed to Lender, all in form and
substance and showing such values therefor, as shall be acceptable to Lender.
(hh) Lender shall have received evidence of zoning of the Real Estate
disclosing no violation of applicable regulations, satisfactory to Lender and
flood zone certificates for the Real Estate, satisfactory to Lender.
(ii) Lender shall have received a certified copy of the Security Pledge as in
effect on the Closing Date and same shall be satisfactory to Lender, in form
and substance.Lender may permit Borrowers periods of up to ninety (90) days
from the Closing Date to comply with and satisfy one or more of the conditions
specified in Section 4.1 hereof and may defer funding of, or not fund at all,
such amounts of the initial and future Loans as Lender shall determine,
unless and until such conditions have been satisfied, all in Lender's sole
discretion. Lender shall have no liability to Borrowers whatsoever for not
funding any of the Loans if any such condition is not satisfied within such
90 day period.
4.2 Conditions Precedent to All Loans And Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and providing Letter of Credit Accommodations to or for
Borrowers, including the initial and any future Loans and Letter of Credit
Accommodations:
(a) all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material respects with
the same effect as though such representations and warranties had been made on
and as of the date of the making of each such Loan and after giving effect
thereto;
(b) no Event of Default and no event or condition which, with notice or
passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such
Loan, or providing each such Letter of Credit Accommodation and after giving
effect thereto; and
(c) No law, regulation, order, judgment or decree of any governmental
authority shall exist, and no action, suit, investigation, litigation or
proceeding shall be pending or threatened in any court or before any
arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit,
restrain or otherwise affect
(A) the making of the Loans or providing the Letter of Credit Accommodations,
or (B) the consummation of the transactions contemplated pursuant to the terms
hereof or the other Financing Agreements or (ii) has or could reasonably be
expected to have a Material Adverse Effect.
4.3 Additional Conditions Precedent to Term Loans. Each of the following is
an additional condition precedent to Lender making disbursements of Term Loan
A, Term Loan B and Term Loan C to Borrowers of amounts thereof not disbursed
at closing as part of the initial Loans:
(a) Any condition precedent specified in Section 4.1 hereof or elsewhere
herein to the making of the initial Loans not satisfied at the time of making
of the initial Loans the satisfaction of which had been deferred by Lender
shall have been fulfilled to Lender's satisfaction;
(b) All such conditions shall have been satisfied within the time prescribed,
to Lenders satisfaction;
(c) No material adverse change shall have occurred in the assets, business or
prospects of Borrower since the Closing Date and no change or event shall
have occurred which would impair the ability of Borrowers or any Obligor to
perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce the Obligations or
realize upon the Collateral;
(d) Lender shall have given all approvals to be given by it and Borrowers and
NSC shall have complied with all conditions and performed all covenants to be
performed by any of them in connection with such Term Loan at or prior to the
date of disbursement thereof;
(e) Lender shall have received such appraisals as it may have requested;
and
(f) All conditions specified in Section 4.2 hereof must continue to be
satisfied at and as of the date of each disbursement.
Section 5. Grant of Security Interest.
5.1 Grant of Security Interest. To secure payment and performance of all
Obligations, each Borrower hereby grants to Lender a continuing security
interest in, a lien upon, and a right of set off against, and hereby assigns
to Lender as security, the following property and interests in property of
such Borrower, whether now owned or hereafter acquired or existing, and
wherever located (together with all other collateral security for the
Obligations at any time granted to or held or acquired by Lender collectively
the "Collateral").
(a) all Accounts;
(b) all present and future general intangibles, including all Intellectual
Property and Franchise Agreements;
(c) all Inventory;
(d) All Equipment;
(e) all Real Property and fixtures and all Real Estate Security;
(f) all chattel paper, including all tangible and electronic chattel paper;
(g) all instruments, including all promissory notes;
(h) all documents;
(i) all deposit accounts;
(j) all letters of credit, banker's acceptances and similar instruments and
including all letter of credit rights;
(k) all supporting obligations and all present and future liens, security
interests, rights, remedies, title and interest in, to and in respect of
Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of surety ship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of
an unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other collateral, including returned,
repossessed and reclaimed goods, and (iv) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
(l) all (i) investment property (including securities, whether certificated
or uncertificated, securities accounts, security entitlements, commodity
contracts or commodity accounts) and (ii) monies, credit balances, deposits
and other property of any Borrower, now or hereafter held or received by or
in transit to Lender or at any other depository or other institution from or
for the account of a Borrower whether for safekeeping, pledge, custody,
transmission, collection or otherwise;
(m) all commercial tort claims, including, without limitation, those
identified in the Information Certificate;
(n) to the extent not otherwise described above, all Receivables and all
goods;
(o) all Records;
(p) the Pledged Cash;
(q) all motor vehicles; and
(r) all products and proceeds of the foregoing in any form, including
insurance proceeds and all claims against third parties for loss or damage
to or destruction of or other involuntary conversion of any kind or nature of
any or all of the other collateral.
5.2 Perfection of Security Interest. Borrowers irrevocably and
unconditionally authorizes Lender (or its agent) to file at any time and from
time to time such financing statements with respect to the Collateral naming
Lender or its designee as the secured party and any Borrower as debtor, as
Lender may require, and including any other information with respect to
Borrowers or otherwise required by Article 9 of the Uniform Commercial Code of
such jurisdiction as Lender may determine, together with any amendments
and continuations with respect thereto, which authorization shall apply to
all financing statements filed on, prior to or after the date hereof.
Borrowers hereby ratify and approve all financing statements naming Lender
or its designee as secured party and any Borrower as debtor with respect to
the Collateral (and any amendments with respect to such financing statements)
filed by or on behalf of Lender prior to the date hereof and ratify and
confirm the authorization of Lender to file such financing statements (and
amendments, if any). Borrowers hereby authorize Lender to adopt on behalf of
each Borrower any symbol required for authenticating any electronic filing. In
the event that the description of the Collateral in any financing statement
naming Lender or its designee as the secured party and a Borrower as debtor
includes assets and properties of a Borrower that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements, or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by Borrowers to the extent of the Collateral
included in such description and it shall not render the financing statements
ineffective as to any of the Collateral or otherwise affect the financing
statement as it applies to any of the Collateral. In no event shall Borrowers
at any time file, or permit or cause to be filed, any correction statement or
termination statement with respect to any financing statement (or amendment
or continuation with respect thereto) naming Lender or its designee as
secured party and any Borrower as debtor.
Section 6. Collection And Administration
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrowers and (c) all other appropriate debits
and credits as provided in this Agreement, including fees, charges, costs,
expenses and interest. All entries in the loan account(s) shall be made in
accordance with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrowers each month a
statement setting forth the balance in the Borrowers' loan account(s)
maintained by Lender for Borrowers pursuant to the provisions of this
Agreement, including principal, interest, fees, costs and expenses. Each such
statement shall be subject to subsequent adjustment by Lender but shall,
absent manifest errors or omissions, be considered correct and deemed
accepted by Borrowers and conclusively binding upon Borrowers as an account
stated except to the extent that Lender receives a written notice from
Borrowers' Agent of any specific exceptions of Borrowers thereto within
thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrowers a written
statement as provided above, the balance in Borrowers' loan account(s)
shall be presumptive evidence of the amounts due and owing to Lender by
Borrowers.
6.3 Collection of Accounts.
(a) Borrowers shall establish and maintain, at their expense, blocked
accounts or lock boxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrowers shall promptly deposit and direct their account debtors,
credit card issuers and credit card processors to directly remit all payments
on Receivables, including Accounts and all payments constituting proceeds of
Inventory, Equipment or other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form
and substance satisfactory to Lender, providing that all items received or
deposited in the Blocked Accounts are the property of Lender, that the
depository bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to
time on deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds received
or deposited into the Blocked Accounts to such bank account of Lender as
Lender may from time to time designate for such purpose ("Payment Account").
Borrowers agree that all payments made to such Blocked Accounts or other funds
received and collected by Lender, whether on the Accounts or as proceeds of
Inventory, Equipment or other Collateral or otherwise shall be the property of
Lender.
(b) For purposes of calculating the amount of the Loans available to
Borrowers, such payments will be applied (conditional upon final collection)
to the Obligations on the business day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice
thereof are received in accordance with Lender's usual and customary practices
as in effect from time to time and within sufficient time to credit Borrower's
loan account on such day, and if not, then on the next business day. For the
purposes of calculating interest on the Obligations, payments or other funds
received will be applied (conditional upon final collection) to the
Obligations three (3) business day(s) following the date of receipt of
immediately available funds by Lender in the Payment Account provided such
payments or other funds and notice thereof are received in accordance with
Lender's usual and customary practices as in effect from time to time and
within sufficient time to credit Borrower's loan account on such day, and if
not, then on the next business day.
(c) Borrowers and all of their respective Subsidiaries and other Affiliates,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts
or any other payment relating to and/or proceeds of Accounts or other
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be commingled with
any Borrower's own funds. Borrowers agree to reimburse Lender on demand for
any amounts owed or paid to any bank at which a Blocked Account is established
or any other bank or person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of
such bank or person. The obligation of Borrowers to reimburse Lender for such
amounts pursuant to this Section 6.3 shall survive the termination or non -
renewal of this Agreement.
(d) In addition to the account referred to in Section 6.3(a) hereof,
Borrowers may establish and maintain, at their expense, deposit account
arrangements and merchant payment arrangements with the banks set forth on
Schedule 8.8 hereto, and after compliance with the provisions of Section 7.11
hereof, such other banks as Borrower may hereafter select as are acceptable to
Lender. The banks set forth on Schedule 8.8 hereto constitute all of the banks
with whom Borrowers have deposit account arrangements and merchant payment
arrangements as of the date hereof and identifies each of the deposit accounts
at such banks and describes the nature of the use of such deposit account by
Borrowers. Borrowers shall deposit all proceeds from sales of Inventory in
every form (including, without limitation, cash, checks, credit card sales
drafts, credit card sales or charge slips or receipts and other forms of daily
store receipts and the collections and proceeds thereof in whatever form) from
each store location of a Borrower and all proceeds of Collateral, on each
business day into the deposit accounts of Borrowers used solely for such
purpose and identified to each retail store and location as set forth on
Schedule 8.8 hereto. Borrowers shall irrevocably authorize and direct in
writing, in form and substance satisfactory to Lender, each of the banks into
which proceeds from sales of Inventory from each store location of Borrowers
and any and all other proceeds of Collateral are at any time deposited as
provided above to send by wire transfer on a daily basis, to an account or
accounts designated by Lender, all funds deposited in such account, and shall
irrevocably authorize and direct in writing its account debtors, Credit Card
Issuers and Credit Card Processors to directly remit payments on its Accounts,
Credit Card Receivables and all other payments constituting proceeds of
Inventory and collections to the Blocked Accounts described in Section 6.3(a)
above.
6.4 Payments. All Obligations shall be payable to the Payment
Account as provided in Section 6.3 or such other place as Lender may
designate from time to time. Lender may apply payments received or
collected from Borrowers or for the account of Borrowers (including the
monetary proceeds of collections or of realization upon any Collateral)
to such of the Obligations, whether or not then due, in such order and
manner as Lender determines; provided that, unless an Event of Default
or event or condition which, with notice or passage of time or both,
would constitute an Event of Default, shall exist or have occurred and be
continuing Lender shall not apply payments collected from the proceeds of
Accounts to Term Loans not then due(but the forgoing proviso shall not
prevent Lender at any time and from time to time from applying payments
collected from the proceeds of Accounts to any portion of the Term Loans
then due). At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other
Financing Agreements may be charged directly to the loan account(s) of
Borrowers. Borrowers shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for
or on account of, any setoff, counterclaim, defense, duties, taxes,
levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds
of Collateral applied to the payment of, any of the Obligations, Lender
is required to surrender or return such payment or proceeds to any Person
for any reason, then the Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrowers shall be liable to pay to
Lender, and do hereby indemnify and hold Lender harmless for the amount
of any payments or proceeds surrendered or returned. This Section 6.4
shall remain effective notwithstanding any contrary action which may be
taken by Lender in reliance upon such payment or proceeds. This Section
6.4 shall survive the payment of the Obligations and the termination or non -
renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide Letter of Credit Accommodations based upon telephonic or
other instructions received from anyone purporting to be the Chief Executive
Officer or Chief Financial Officer of a Borrower or Borrowers' Agent or other
authorized person or, at the discretion of Lender, if such Loans are necessary
to satisfy any Obligations. All requests for Loans, hereunder shall specify
the date on which the requested advance is to be made or established (which
day shall be a Business Day) and the amount of the requested Loan and Letter
of Credit Accommodation. Requests received before 11:00 a.m. Atlantic Standard
Time on a Business Day shall be processed on that day. Requests received
after 11:00 a.m. Atlantic Standard time on any day shall be deemed to have
been made as of the opening of business on the immediately following business
day. All Loans and Letter of Credit Accommodations under this Agreement shall
be conclusively presumed to have been made to, and at the request of and for
the benefit of, Borrowers when deposited to the credit of Borrowers or
otherwise disbursed or established in accordance with the instructions of
Borrowers' Agent or in accordance with the terms and conditions of this
Agreement.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the
Loans provided by Lender to Borrowers hereunder only for: (a) payments to
each of the persons listed in the disbursement direction letter furnished by
Borrowers' Agent to Lender on or about the date hereof, (b) payments to NSC,
in reduction of indebtedness of Borrowers to NSC, not exceeding the amount of
$47,000,000 and (c) costs, expenses and fees in connection with the
preparation, negotiation, execution and delivery of this Agreement and the
other Financing Agreements. All other Loans and Letter of Credit
Accommodations made by Lender to Borrowers pursuant to the provisions hereof
shall be used by Borrower only for general operating, working capital and
other proper corporate purposes of Borrowers not otherwise prohibited by the
terms hereof. NSC shall use the proceeds of the Loans paid to it by Borrowers
only for purposes of paying a portion of the amounts payable pursuant to the
Reorganization Plan. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security or
for the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose
which might cause any of the Loans to be considered a "purpose credit" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System, as amended.
Section 7. Collateral Reporting And Covenants.
7.1 Collateral Reporting. Borrowers shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis
as required by Lender, a schedule of Accounts, sales made, credits issued and
cash received; (b) on a monthly basis or more frequently as Lender may
request, (i) perpetual inventory reports, (ii) inventory reports by category,
(iii) aging of accounts payable, (iv) a report of any Inventory shrinkage or
Equipment which has been stolen, and (v) a report of any Equipment which has
been sold, exchanged or otherwise transferred or disposed of, (c) upon
Lender's request, (i) copies of customer statements and credit memos,
remittance advices and reports, and copies of deposit slips and bank
statements, (ii) copies of shipping and delivery documents, and (iii) copies
of purchase orders, invoices and delivery documents for Inventory and
Equipment acquired by Borrowers; (d) aging of accounts receivable on a weekly
basis or more frequently as Lender may request; and (e) such other reports as
to the Collateral as Lender shall request from time to time. If any of
Borrower's records or reports of the Collateral are prepared or maintained by
an accounting service, contractor, shipper or other agent, Borrowers hereby
irrevocably authorize such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material delay in
Borrowers' performance of any of its obligations to any account debtor or the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors, or any settlement, adjustment or
compromise thereof, (ii) all material adverse information relating to the
financial condition of any account debtor and (iii) any event or circumstance
which, to Borrowers' knowledge would cause Lender to consider any then
existing Accounts as no longer constituting Eligible Accounts. No credit,
discount, allowance or extension or agreement for any of the foregoing shall
be granted to any account debtor without Lender's consent, except in the
ordinary course of Borrowers' business in accordance with practices and
policies previously disclosed in writing to Lender. So long as no Event of
Default exists or has occurred and is continuing, Borrower shall have the
right to settle, adjust or compromise any claim, offset, counterclaim or
dispute with any account debtor. At any time that an Event of Default exists
or has occurred and is continuing, Lender shall, at its option, have the
exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or grant any credits, discounts
or allowances.
(b) Without limiting the obligation of Borrowers to deliver any other
information to Lender, Borrowers shall promptly report to Lender any return of
Inventory by any one account debtor if the inventory so returned in such case
has a value in excess of $10,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from
the sale of such returned, reclaimed or repossessed Inventory shall not be
deemed an Eligible Account. In the event any account debtor returns Inventory
when an Event of Default exists or has occurred and is continuing, Borrowers
shall, upon Lender's request, (i) hold the returned Inventory in trust for
Lender, (ii) segregate all returned Inventory from all of its other property,
(iii) dispose of the returned Inventory solely according to Lender's
instructions, and (iv) not issue any credits, discounts or allowances with
respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii) no payments shall be made thereon except payments immediately
delivered to Lender pursuant to the terms of this Agreement,
(iii) no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender
in accordance with this Agreement and except for credits, discounts,
allowances or extensions made or given in the ordinary course of Borrowers'
business in accordance with practices and policies previously disclosed to
Lender, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Lender in accordance with the terms of this Agreement and (v)
none of the transactions giving rise thereto will violate any applicable
Commonwealth, State or Federal laws or regulations, all documentation
relating thereto will be legally sufficient under such laws and regulations
and all such documentation will be legally enforceable in accordance with its
terms.
(d) Lender shall have the right at any time or times, in Lender's name or in
the name of a nominee of Lender, to verify the validity, amount or any other
matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(e) Borrowers shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrowers, all
chattel paper and instruments which a Borrower now owns or may at any time
acquire immediately upon a Borrower's receipt thereof, except as Lender may
otherwise agree.
(f) Lender may, at any time or times that an Event of Default exists or has
occurred and is continuing, (i) notify any or all account debtors or other
obligors in respect thereof that the Receivables, including the Accounts have
been assigned to Lender and that Lender has a security interest therein and
Lender may direct any or all accounts debtors and other obligors to make
payment of thereof directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Receivables including
the Accounts or other obligations included in the Collateral and thereby
discharge or release the account debtor or any other party or parties in any
way liable for payment thereof without affecting any of the Obligations, (iii)
demand, collect or enforce payment of any Receivables, including the Accounts
or such other obligations, but without any duty to do so, and Lender shall
not be liable for its failure to collect or enforce the payment thereof nor
for the negligence of its agents or attorneys with respect thereto and (iv)
take whatever other action Lender may deem necessary or desirable for the
protection of its interests. At any time that an Event of Default exists or
has occurred and is continuing, at Lender's request, all invoices and
statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to Lender and are payable directly and
only to Lender and Borrowers shall deliver to Lender such originals of
documents evidencing the sale and delivery or lease of goods or the
performance of services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrowers shall
at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, each Borrower's cost therefor and daily or
weekly withdrawals therefrom and additions thereto; (b) Borrowers shall
conduct (i) a physical count of the Inventory at least once each year, but at
any time or times as Lender may request on or after an Event of Default, and
(ii) test counts of inventory at any time or times as Lender may request
utilizing a third party service therefore designated by Lender, and promptly
following such physical inventory and test counts of inventory shall supply
Lender with a report in the form and with such specificity as may be
reasonably satisfactory to Lender concerning such physical count and test
counts; (c) Borrowers shall not remove any Inventory from the locations set
forth or permitted herein, without the prior written consent of Lender,
except for sales of Inventory in the ordinary course of a Borrower's business
and except to move Inventory directly from one location set forth or
permitted herein to another such location; (d) upon Lender's request,
Borrowers shall, at their expense, no more than four times in any twelve (12)
month period, but at any time or times as Lender may request on or after an
Event of Default, deliver or cause to be delivered to Lender written reports
or appraisals as to the Inventory in form, scope and methodology acceptable
to Lender and by an appraiser acceptable to Lender, addressed to Lender or
upon which Lender is expressly permitted to rely; (e) Borrowers shall
produce, use, store and maintain the Inventory with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including the requirements of the Federal
Fair Labor Standards Act of 1938, as amended and all rules, regulations and
orders related thereto); (f) Borrowers assume all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (g) except in the ordinary course of business,
and then only on prompt reporting thereof to Lender, Borrowers shall not sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate a Borrower to repurchase such Inventory;
(h) Borrowers shall keep the Inventory in good and marketable condition,
subject to normal deterioration of produce, deli and bakery food products,
expired foods, and products with short expiration dates or shelf - life; and
(i) except in the ordinary course of business and then only on prompt
reporting thereof to Lender, Borrowers shall not, without prior written
notice to Lender, acquire or accept any Inventory on consignment or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon Lender's
request, Borrower shall, at their expense, at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender; (b)
Borrowers shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (c) Borrowers shall
use the Equipment with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with all applicable
laws; (d) the Equipment is and shall be used in Borrowers' business and not
for personal, family, household or farming use; (e) Borrower shall not remove
any Equipment from the locations set forth or permitted herein, except to the
extent necessary to have any Equipment repaired or maintained in the ordinary
course of the business of a Borrower or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrowers in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrowers shall not permit any of the Equipment to be
or become a part of or permanently affixed to real property; and (g)
Borrowers assume all responsibility and liability arising from the use of the
Equipment.
7.5 Tradename Covenants. With respect to their trade names and
trademarks (a) Borrowers shall at all times maintain their registered trade
names and trademarks, except for trade names and trademarks no longer used or
useful in Borrowers' business; (b) Borrowers shall not at any time, grant any
person, other than another Borrower a license except for trade names and
trademarks no longer used or useful in Borrowers' business; to use any trade
name or trademarks; (c) upon Lender's request, Borrowers shall, at their
expense, no more than twice in any twelve (12) months period, but at any time
or times as Lender may request on or after an Event of Default, deliver or
cause to be delivered to Lender written reports or appraisals as to their
trade names and trademarks in form, scope and methodology acceptable to
Lender and by an appraisers acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; and (d) Borrowers shall not use
their trade names or trademarks to sell any assets or property other than
assets and property similar in nature to the types currently being sold by
Borrowers.
7.6 Power of Attorney. Borrowers hereby irrevocably designate and appoint
Lender (and all persons designated by Lender) as Borrowers' true and lawful
attorney-in-fact, and authorizes Lender, in Borrowers' or Lender's name, to:
(a) at any time an Event of Default or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred and
is continuing (i) demand payment on Accounts or chattel paper or other
proceeds of Inventory or other Collateral, (ii) enforce payment of
Receivables including Accounts by legal proceedings or otherwise, (iii)
enforce and exercise all of Borrowers' rights and remedies to collect any
Receivables including Accounts or other Collateral, (iv) sell or assign any
Receivable, including any Accounts upon such terms, for such amount and at
such time or times as the Lender deems advisable, (v) settle, adjust,
compromise, extend or renew any Receivable, including any Account or any
Chattel Paper (vi) discharge and release any Receivable, including any
Account, (vii) prepare, file and sign Borrower's name on any proof of claim
in bankruptcy or other similar document against an account debtor, (viii)
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and dispose of
all mail addressed to Borrower, and (ix) do all acts and things which are
necessary, in Lender's determination, to fulfill Borrowers' obligations under
this Agreement and the other Financing Agreements and (b) at any time to (i)
take control in any manner of any item of payment or proceeds
thereof, (ii) have access to any lockbox or postal box into which any
Borrower's mail is deposited, (iii) endorse any Borrower's name upon any
items of payment or proceeds thereof and deposit the same in the Lender's
account for application to the Obligations, (iv) endorse any Borrower's name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Receivables including Account or any goods
pertaining thereto or any other Collateral, (v) sign any Borrower's name on
any verification of Accounts and notices thereof to account debtors and (vi)
execute in any Borrower's name and file any UCC financing statements or
amendments thereto. Borrowers hereby release Lender and its officers,
employees and designees from any liabilities arising from any act or acts
under this power of attorney and in furtherance thereof, whether of omission
or commission, except as a result of Lender's own gross negligence or willful
misconduct as determined pursuant to a final non - appealable order of a
court of competent jurisdiction.
7.7 Right to Cure. Lender may, at its option, (a) cure any default by a
Borrower under any agreement with a third party, (b) discharge taxes, liens,
security interests or other encumbrances at any time levied on or existing
with respect to the Collateral, (c) when an Event of Default or event or
condition which, with notice or passage of time or both, would constitute an
Event of Default, shall exist or have occurred and be continuing, pay or bond
on appeal any judgement entered against a Borrower and (d) pay any amount,
incur any expense or perform any act which, in Lender's judgment, is
necessary or appropriate to preserve, protect, insure or maintain the
Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge Borrowers' account
therefor, such amounts to be repayable by Borrowers on demand. Lender shall
be under no obligation to effect such cure, payment or bonding and shall not,
by doing so, be deemed to have assumed any obligation or liability of a
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default
hereunder and to proceed accordingly.
7.8 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrowers (a) Lender or its designee shall have complete
access to all of Borrowers' and NSC's premises during normal business hours
and after notice to Borrowers Agent or at any time and without notice to
Borrowers' Agent if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of Borrowers' and NSC's books and records, including the
Records, and (b) Borrowers and NSC shall promptly furnish to Lender such
copies of such books and records or extracts therefrom as Lender may request,
and (c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Accounts and realization of other Collateral.
7.9 Inventory Subject to PACA, Etc.
(a) Borrowers shall pay, on or before the due date thereof, all accounts
payable arising from the purchase by a Borrower of any Inventory which is
subject to or covered by, or with respect to which the seller is protected
under, PACA or PASA and, shall not permit (i) any circumstances to exist
which would subject Lender to any liability and (ii) Lender to become liable,
to any supplier or other third party with respect to such Inventory.
(b) Borrowers shall furnish to Lender, on each Thursday, during the term of
this Agreement, a Certificate which, as of the proceeding Saturday, contains
the following and such other information or matters as Lender may request:
(i) The value and description of all of Borrowers' Inventory subject to PACA
or PASA;
(ii) The amount and aging of accounts payable arising from Inventory
purchased subject to PACA or PASA;
(iii) Payments made during the preceding week of accounts payable arising
from Inventory purchased subject to PACA or PASA;
(iv) A statement that no account payable of Borrowers arising from the
purchase of Inventory subject to PACA or PASA is unpaid after the due date
thereof or if any are unpaid past the due date, identifying such payables in
detail; and
(v) A statement that no Borrower has received any notice from any Person of
intent to preserve any trust established under PACA or PASA or if any such
notice has been received describing in detail the transaction involved,
accompanied by a copy of such notice.
(c) Lender may, at its option at any time, (a) pay and discharge any accounts
payable of Borrowers arising from the purchase of any Inventory subject to
PACA or PASA, and discharge any liens, security interests other encumbrances
or trusts at any time levied on or existing with respect to such Inventory or
the proceeds thereof and (b) pay any amount, incur any expense or perform any
act which, in Lender's judgment, is necessary or appropriate to preserve,
protect, insure or maintain the rights of Lender with respect thereto or so
that Lender does not become liable to any supplier or other third party with
respect thereto. Lender may add any amounts so expended to the Obligations
and charge Borrowers' account therefor, such amounts to be repayable by
Borrowers on demand. Lender shall be under no obligation to make such
payment or effect such discharge and shall not, by doing so, be deemed to
have assumed any obligation or liability of Borrowers. Any payment made or
other action taken by Lender under this Section 7.9 shall be without
prejudice to any right to assert an Event of Default hereunder and to
proceed accordingly.
(d) Lender may, in its discretion, add to the amount of
Availability Reserves, amounts which it deems appropriate to reserve for
liability under PACA or PASA.
7.10 Chattel Paper Covenants.
(a) Borrowers represent and warrant to Lender that Borrowers do not have any
chattel paper (whether tangible or electronic) or instruments as of the date
hereof, except as set forth in Schedule 7.10 hereto. In the event that
Borrowers shall at any time, be entitled to or shall receive chattel paper
or instruments after the date hereof having a face amount of, or with respect
to which payment thereunder will be in the amount of, $100,000 or more as to
all such chattel paper and instruments, Borrowers shall promptly notify
Lender thereof in writing. Promptly upon the receipt thereof by or on behalf
of any Borrower (including by any agent or representative), Borrowers shall
deliver, or cause to be delivered to Lender, all such tangible chattel paper
and instruments that a Borrower has or may at any time acquire, accompanied by
such instruments of transfer or assignment duly executed in blank as Lender
may from time to time specify in each case except as Lender may otherwise
agree. At Lender's option, Borrowers shall, and Lender may at any time on
behalf of Borrowers, cause the original of any such instrument or chattel
paper to be conspicuously marked in a form and manner acceptable to Lender
with the following legend referring to chattel paper or instruments as
applicable: "This _______________________ ___________________ is subject to
the security interest of Westernbank Puerto Rico and any sale, transfer,
assignment or encumbrance of this _______________________ ___________________
violates the rights of such secured party".
(b) In the event that Borrowers shall at any time hold or acquire an
interest in any electronic chattel paper or any "transferable record"
(as such term is defined in Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction),
Borrowers shall promptly notify Lender thereof in writing. Promptly upon
Lenders request, Borrowers shall take, or cause to be taken, such actions as
Lender may request to give Lender control of such electronic chattel paper
under Section 9 - 105 of the UCC and control of such transferable record under
Section 201 of the Federal Electronic Signatures in Global and National
Commence Act or, as the case may be, Section 16 of the Uniform Electronic
Transactions Act, as in effect in such jurisdiction.
7.11 Deposit Accounts. Borrowers represent and warrant to Lender that
Borrowers do not have any deposit accounts as of the date hereof, except as
set forth in Schedule 8.8 hereto. Borrowers shall not, directly or
indirectly, after the date hereof open, establish or maintain any deposit
account unless each of the following conditions is satisfied: (i) Lender
shall have received not less than fifteen (15) Business Days prior
written notice of the intention of a Borrower to open or establish such
account which notice shall specify in reasonable detail and specificity
acceptable to Lender the name of the account, the owner of the account, the
name and address of the bank at which such account is to be opened or
established, the individual at such bank with whom such Lender is dealing and
the purpose of the account and Lender shall have consented thereto in writing,
(ii) the bank where such account is opened or maintained shall be reasonably
acceptable to Lender and (iii) on or before the opening of such deposit
account, Borrowers shall as Lender may specify, either (A) deliver to Lender a
Deposit Account Control Agreement in form and substance satisfactory to Lender
with respect to such deposit account duly authorized, executed and delivered
by such Person and the bank at which such deposit account is opened and
maintained or (B) arrange for Lender to become the customer of the bank with
respect to the deposit account on terms and conditions acceptable to lender.
The terms of this subsection 7.11 shall not apply to deposit accounts
specifically and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of a Borrower's
salaried employees.
7.12 Investment Property. Borrowers represent and warrant to Lender that
Borrowers do not own or hold, directly or indirectly, beneficially or as
record owner or both, any investment property, as of the date hereof, or have
any investment account, securities account, commodity account or other similar
account with any bank or other financial institution or other securities
intermediary or commodity intermediary as of the date hereof, in each case
except as set forth in Schedule 7.12 hereto. In the event that any Borrower
shall be entitled to or shall at any time after the date hereof hold or
acquire any certificated securities, Borrower shall promptly endorse, assign
and deliver the same to Lender, accompanied by such instruments of transfer or
assignment duly executed in blank as Lender may from time to time specify. If
any securities now owned or hereafter acquired by Borrowers are uncertificated
and are issued to a Borrower or its nominee directly by the issuer thereof,
Borrowers shall immediately notify Lender thereof and shall as Lender may
specify, either (i) cause the issuer to agree to comply with instructions from
Lender as to such securities, without further consent of any of Borrowers or
such nominee, or (ii) arrange for Lender to become the registered owner of the
securities. Borrowers shall not, directly or indirectly, after the date
hereof open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or commodity intermediary unless each of the
following conditions is satisfied (i) Lender shall have received not less
than fifteen (15) Business Days prior written notice of the intention of
Borrowers to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Lender the name of the
account, the owner of the account, the name and address of the securities
intermediary or commodity intermediary at which such account is to be
opened or established, the individual at such intermediary with whom
Borrowers are dealing and the purpose of the account and Lender shall
have consented thereto in writing, (ii) the securities intermediary or
commodity intermediary (as the case may be) where such account is opened
or maintained shall be acceptable to Lender, and (iii) on or before
the opening of such investment account, securities account or other
similar account with a securities intermediary or commodity intermediary,
such person shall as Lender may specify, either (A) execute and
deliver, and cause to be executed and delivered to Lender, a Pledge
Agreement and an Investment Property Control Agreement in form and substance
satisfactory to Lender with respect thereto duly authorized, executed and
delivered by Borrower and such securities intermediary or
commodity intermediary or (B) arrange for Lender to become the entitlement
holder with respect to such investment property on terms and conditions
acceptable to Lender.
7.13 Letters of Credit. Borrowers represent and warrant to Lender that no
Borrower is the beneficiary or otherwise entitled to any right to payment
under any letter of credit, banker's acceptance or similar instrument as of
the date hereof. In the event that a Borrower shall be entitled to or shall
receive any right to payment under any Letter of Credit banker's acceptance
or any similar instrument, whether as beneficiary thereof or otherwise after
the date hereof, Borrowers' Agent shall promptly notify Lender thereof in
writing. Borrowers shall immediately, as Lender may specify, either (i)
deliver, or cause to be delivered to Lender, with respect to any such letter
of credit, banker's acceptance or similar instrument, the written agreement
of the issuer and any other nominated person obligated to make any payment
in respect thereof (including any confirming or negotiating bank), in form
and substance satisfactory to Lender consenting to the assignment of the
proceeds of the letter of credit to Lender by such Borrower and agreeing to
make all payment thereon directly to Lender or as Lender may otherwise direct
or (ii) cause Lender to become, at such person's expense, the transferee
beneficiary of the letter of credit, banker's acceptance or similar
instrument (as the case may be).
7.14 Tort Claims. Borrowers represent and warrant to Lender that no Borrower
has any commercial tort claims as of the date hereof, except as set forth on
Schedule 7.14 hereto. In the event that a Borrower shall at any time after
the date hereof have any commercial tort claims such Borrower shall promptly
notify Lender thereof in writing, which notice shall (i) set forth in
reasonable detail the basis for and nature of such commercial tort claim and
(ii) include the express grant by such Borrower to Lender of a security
interest in such commercial tort claim (and the proceeds thereof). In the
event that such notice does not include such grant of a security interest,
the sending thereof by such Borrower to Lender shall be deemed to constitute
such grant to Lender. Upon the sending of such notice, any commercial tort
claim described therein shall constitute part of the Collateral and shall be
deemed included therein. Without limiting the authorization of Lender
provided herein or otherwise arising by the execution by Borrowers of this
Agreement or any of the other Financing Agreements, Lender is hereby
irrevocably authorized from time to time and at any time to file such
financing statements naming Lender or its designee as secured party and
such Borrower as debtor, or any amendments to any financing statements,
covering any such commercial tort claim as Collateral. In addition, each
Borrower shall promptly upon request by Lender, execute and deliver, or
cause to be executed and delivered, to Lender such other agreements,
documents and instruments as Lender may require in connection with such
commercial tort claim.
7.15 Third Party Possession. Borrowers represent and warrant to Lender that
they do not have any goods, documents of title or other collateral in the
custody, control or possession of a third party as of the date hereof, except
for goods located in the United States in transit to a location of a Borrower
permitted herein in the ordinary course of business of such Borrower in the
possession of the carrier transporting such goods. In the event that any
goods, documents of title or other collateral are at any time after the date
hereof in the custody, control or possession of any other person or such
carriers, Borrowers shall promptly notify Lender thereof in writing; provided
that, as to such carriers, Borrowers need only notify Lender on an aggregate
basis. Promptly upon Lender's request, Borrowers shall deliver a Collateral
Access Agreement in form and substance satisfactory to Lender, duly authorized,
executed and delivered by any such person and Borrower.
7.16 Franchise Agreements. (a) To the extent, and only to extent, that any
Franchise Agreement is not fully lawfully or contractually assignable to or
collectable by Lender, either for purposes of obtaining a security interest
therein or foreclosing on, collecting or otherwise realizing on any such
Franchise Agreement, Lender shall nevertheless retain a security interest and
right of collection and all other rights provided for under this Agreement:
(i) To the extent permitted under applicable laws, regulations and third party
contractual terms governing such Franchise Agreements;
(ii) In the proceeds of such Franchise Agreements; and
(iii) After the occurrence and during the continuance of an Event of Default
the right to require Borrowers to do all things and take all actions,
including making demands and filing suit (or authorizing Lender to make
demand or file suit) in any Borrower's name to collect or otherwise realize
upon such Franchise Agreements for Lender's benefit.
(b) Borrowers agree that, on request from Lender, after the occurrence and
during the continuance of an Event of Default, each Borrower will give any
consents or notices required or permitted under any of the Franchise
Agreements.
7.17 Additional Actions. Borrowers shall take any other actions reasonably
requested by Lender from time to time to cause the attachment, perfection and
first priority of, and the ability of Lender to enforce, the security
interest of Lender in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing,
financing statements and amendments relating thereto under the UCC or other
applicable law, to the extent, if any, a Borrower's signature thereon is
required therefor, (ii) causing Lender's name to be noted as secured party on
any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Lender to enforce, the
security interest of Lender in such Collateral, (iii) complying with any
provision of any statute, regulation or treaty of the United State, Puerto
Rico and the United States Virgin Islands as to any Collateral if compliance
with such provision is a condition to attachment, perfection or priority of,
or ability of Lender to enforce, the security interest of Lender in such
Collateral, (iv) obtaining the consents and approvals of any governmental
authority or third party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, and taking all
actions required by any earlier versions of the UCC or by other law, as
applicable in any relevant jurisdiction and (v) transferring any and all
deposit accounts and investment property to a financial institution or
account specified by Lender.
Section 8. Representations And Warranties.
Borrowers and NSC hereby, jointly and severally, represent and warrant to
Lender the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations by Lender to
Borrowers:
8.1 Corporate Existence, power and authority; Subsidiaries. Except for
Pueblo, each Borrower and NSC is a corporation duly organized and in good
standing under the laws of its state of incorporation and Pueblo is a limited
liability company, duly organized and in good standing under the laws of the
state of its organization, and each is duly qualified as a foreign
corporation or limited liability company and in good standing in all states or
other jurisdictions where the nature and extent of the business transacted
by it or the ownership of assets makes such qualification necessary, except
for those jurisdictions in which the failure to so qualify would not have a
material adverse effect on a Borrower's or NSC's financial condition, results
of operations or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement,
the other Financing Agreements and the transactions contemplated hereunder
and thereunder (a) are all within each Borrower's and NSC's corporate or
limited liability company powers, (b) have been duly authorized, (c) are not
in contravention of law or the terms of any Borrower's or NSC's certificate
of incorporation, by-laws, or other organizational documentation, or any
indenture, agreement or undertaking to which a Borrower or NSC is a party
or by which a Borrower or NSC or their respective property are bound and
(d) except for those arising pursuant to the Financing Agreements and the
Security Pledge will not result in the creation or imposition of, or
require or give rise to any obligation to grant, any lien, security
interest, charge or other encumbrance upon any property of any
Borrower or NSC. This Agreement and the other Financing Agreements constitute
legal, valid and binding obligations of Borrowers and NSC enforceable in
accordance with their respective terms. As of the date hereof no Borrower
nor NSC has any Subsidiaries except as set forth on the Information
Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrowers and NSC which have been or may hereafter be
delivered by Borrowers to Lender have been prepared in accordance with GAAP
and fairly present the financial condition and the results of operations of
Borrower and NSC as of the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by
Borrowers to Lender prior to the date of this Agreement, there has been no
material adverse change in the assets, liabilities, properties and
condition, financial or otherwise, of Borrowers and NSC since the date of
the most recent audited financial statements furnished by Borrowers to
Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief
executive office of Borrowers and NSC and each such Person's Records
concerning Accounts are located only at the address set forth below on the
signature page hereto and their respective only other places of business and
the only other locations of Collateral, if any, are the addresses set forth
in the Information Certificate. The Information Certificate correctly
identifies any of such locations which are not owned by Borrowers or NSC and
sets forth the owners and/or operators thereof and to the best of Borrowers'
knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests
and liens granted to Lender under this Agreement and the other Financing
Agreements constitute valid and perfected first priority liens and security
interests in and upon the Collateral subject only to those non material liens
indicated on Part 1 of Schedule 8.4. Borrower has good and marketable title
to all of its properties and assets subject to no liens, mortgages, pledges,
security interests, encumbrances or charges of any kind, except those granted
to Lender and such others as are specifically listed on Parts 1 and 2 of
Schedule 8.4 hereto.
8.5 Tax Returns. Borrowers have filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension, except as previously disclosed
in writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Borrowers
have paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by any of them, except taxes the validity
of which are being contested in good faith by appropriate proceedings
diligently pursued and available to Borrowers and with respect to which
adequate reserves have been set aside on their books. Adequate provision has
been made for the payment of all accrued and unpaid Federal, State,
Commonwealth, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there
is no present investigation by any governmental agency pending, or to the
best of Borrowers' knowledge threatened, against or affecting any Borrower,
its assets or business and there is no action, suit, proceeding or claim by
any Person pending, or to the best of Borrowers' knowledge threatened,
against any Borrower or its assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely determined
against a Borrower would result in any material adverse change in the assets,
business or prospects of such Borrower or would impair the ability of such
Borrower to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Except in
respect of the proceedings identified in items 117, 120 and 130 of the
Schedule of Litigation attached to the Information Certificate, no Borrower
is in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease
or other commitment to which it is a party or by which it or any of its assets
are bound and Borrowers are in compliance in all material respects
with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, Federal, State or local
governmental authority.
8.8 Bank Accounts. All of the deposit accounts, merchant payment
accounts, investment accounts or other accounts in the name of or used
by any Borrower maintained at any bank or other financial institution are
set forth on Schedule 8.8 hereto.
8.9 Accuracy and Completeness of Information. All information furnished by
or on behalf of Borrowers or NSC or in writing to Lender in connection with
this Agreement, or any other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material
fact necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to
have a Material Adverse Effect which has not been fully and accurately
disclosed to Lender in writing.
8.10 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing
Agreements shall survive the execution and delivery of this Agreement and
shall be deemed to have been made again to Lender on the date of each
additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The representations
and warranties set forth herein shall be cumulative and in addition to any
other representations or warranties which Borrowers or NSC shall now or
hereafter give, or cause to be given, to Lender.
8.11 Intellectual Property. Borrowers own or license or otherwise have the
right to use all Intellectual Property materially necessary for the operations
of their business as presently conducted or proposed to be conducted. As of
the date hereof, Borrowers do not have any Intellectual Property registered,
or subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State
thereof, any political subdivision thereof or in any other country, other
than those described in Schedule 8.11 hereto and have not granted any
licenses with respect thereto other than as set forth in Schedule 8.11 hereto.
To Borrowers' knowledge, after reasonable investigation, no event has
occurred which permits or would permit after notice or passage of time or
both, the revocation, suspension or termination of such rights. Except as
otherwise disclosed by Borrowers to Lender in writing to the best of
Borrowers' knowledge, no slogan or other advertising device, product,
process, method, substance or other Intellectual Property or goods bearing or
using any Intellectual Property presently contemplated to be sold by or
employed by a Borrower infringes any patent, trade ▇▇▇▇, service ▇▇▇▇, trade
name, copyright, license or other Intellectual Property owned by any other
Person presently and no claim or litigation is pending or threatened against
or affecting any Borrower or contesting its rights to sell or use any such
Intellectual Property. Schedule 8.11 sets forth all of the agreements or
other arrangements of Borrowers pursuant to which any Borrower has a license
or other right to use any trademarks, logos, designs, representations or
other intellectual Property owned by another person as in effect on the date
hereof and the dates of the expiration of such agreements or other
arrangements of such Borrower as in effect on the date hereof. No trademark,
service ▇▇▇▇ or other Intellectual Property at any time used by a Borrower
which is owned by another person, or owned by a Borrower subject to any
security interest, lien, collateral assignment, pledge or other encumbrance
in favor of any person other than Lender, is affixed to any Eligible
Inventory.
8.12 Capitalization.
(a) All of the issued and outstanding shares of Capital Stock of each
Borrower and of NSC are directly and beneficially owned and held by those
persons specified on Schedule 8.12 hereto, in the amounts specified therein
and all of such Capital Stock have been duly issued and are fully paid and
non - assessable, free and clear of all claims, liens, pledges and
encumbrances of any kind except those in favor of Lender.
(b) Except for the Borrowers, NSC has no Subsidiaries and each of Pueblo
Markets, Inc, Pueblo Super Videos, Inc., Xtra Drugstores, Inc. and Pueblo
Caribbean Videos, Inc. have been dissolved.
(c) Borrowers are Solvent and will continue to be Solvent after (i) the
creation of Obligations and the security interests of Lender, (ii) the
payments to NSC contemplated hereunder and (iii) the consummation of the
other transactions contemplated hereunder.
8.13 Environmental Compliance.
(a) Except as set forth on Schedule 8.13 hereto, neither (i) Borrowers nor
(ii) NSC with respect to any Real Property including any Real Estate Security,
has generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off their respective
premises (whether or not owned by any of them) in any manner which at any time
violates any applicable Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder and the operations of Borrowers
and NSC complies in all material respects with all Environmental Laws and all
licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) Except as set forth on Schedule 8.13 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrowers' knowledge threatened, with respect to any non -
compliance with or violation of the requirements of any Environmental Law by
(i) Borrowers or (ii)NSC with respect to any Real Property including any Real
Estate Security or the release, spill or discharge, threatened or actual, of
any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
any Borrower or NSC with respect to any Real Property including any Real
Estate Security or any Borrower's or NSC's business, operations or assets or
any properties at which a Borrower or NSC has transported, stored or disposed
of any Hazardous Materials.
(c) Neither (i) Borrowers nor (ii) NSC has any material liability (contingent
or otherwise) in connection with a release, spill or charge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrowers and NSC have all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or filed in
connection with the operations of Borrowers or NSC under any Environmental Law
and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
8.14 Employee Benefits.
(a) Except as set forth on Schedule 8.14 hereto, Borrowers have not
engaged in any transaction in connection with which Borrowers or any of their
ERISA Affiliates could be subject to either a civil penalty assessed pursuant
to Section 502(i) of ERISA or a tax imposed by Section 4975 of the code,
including any accumulated funding deficiency described in Section 8.14(c)
hereof and any deficiency with respect to vested accrued benefits described in
Section 8.14(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has been or
is expected by Borrowers to be incurred with respect to any employee benefit
plan of Borrowers or any of their ERISA Affiliates. There has been no
reportable event (without the meaning of Section 4043(b) of ERISA) or any
other event or condition with respect to any employee pension benefit plan of
Borrowers or any of their ERISA Affiliates which presents a risk of
termination of any such plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrowers or any of
their ERISA Affiliates is required under Section 302 of ERISA and Section 412
of the Code to have paid under the terms of each employee benefit plan as
contributions to such plan as of the last day of the most recent fiscal year
of such plan ended prior to the date hereof, and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any employee benefit plan,
including any penalty or tax described in Section 8.14(a) hereof and any
deficiency with respect to vested accrued benefits described in section
8.14(d) hereof.
(d) Except as set forth on schedule 8.14 hereto, the current value of all
vested accrued benefits under all employee benefit plans maintained by
Borrowers that are subject to Title IV of ERISA does not exceed the current
value of the assets of such plans allocable to such vested accrued benefits,
including any penalty or tax described in Section 8.14(a) hereof any
accumulated funding deficiency described in Section 8.14(c) hereof. The terms
"current value" and "accrued benefit" have the meanings specified in ERISA.
(e) Neither Borrowers nor any of their respective ERISA Affiliates is or
has ever been obligated to contribute to any "multiemployer plan" (as such
term is defined in section 4001(a)(3) of ERISA) that is subject to Title
IV of ERISA.
8.15 Credit Card Agreements. Set forth in Schedule 8.15 hereto is a correct
and complete list of (a) all of the Credit Card Agreements and all other
agreements, documents and instruments existing as of the date hereof between
or among Borrowers, the Credit Card Issuer, the Credit Card Processors and any
of their affiliates, (b) the percentage of each sale payable to the Credit
Card Issuer or Credit Card Processor under the terms of the Credit Card
Agreements,(c) all other fees and charges payable by Borrowers under or in
connection with the Credit Card Agreements and (d) the terms of such Credit
Card Agreements. The Credit Card Agreements constitute all of such agreements
necessary for Borrowers to operate their business as presently conducted with
respect to credit cards and debit cards and no Accounts of Borrowers arise
from purchases by customers of Inventory with credit cards or debit cards,
other than those which are issued by Credit Card Issuers with whom Borrowers
have entered into one of the Credit Card Agreements set forth on Schedule
8.15 hereto. Each of the Credit Card Agreements constitute the legal, valid
and binding obligations of the Borrower party thereto, and to the best of
Borrowers' knowledge, the other parties thereto, are enforceable in
accordance with their respective terms and are in full force and effect. No
default or event of default, or act, condition or event which after notice or
passage of time or both, would constitute a default or an event of default
under any of the Credit Card Agreements exists. Borrowers have complied with
all of the terms and conditions of the Credit Card Agreements to the extent
necessary for Borrowers to be entitled to receive all payments thereunder.
Borrowers have delivered, or caused to be delivered to Lender, true, correct
and complete copies of all of the Credit Card Agreement.
8.16 Interrelated Business. Borrowers share an identity of interest such that
any benefit received by each Borrower benefits the others. Each Borrower
renders services to or for the benefit of the other Borrowers, make loans and
advances to or for the benefit of the other Borrowers and provides
administrative, marketing, payroll and management services to or for the
benefit of the other Borrowers. Borrowers have centralized accounting and
legal services.
Section 9. Affirmative And Negative Covenants.
9.1 Maintenance of Existence. Borrowers and NSC shall at all times
preserve, renew and keep in full, force and effect their respective corporate
or other existence and rights and franchises with respect thereto and maintain
in full force and effect all permits, licenses, trademarks, trade names,
approvals, authorizations, leases and contracts necessary to carry on their
business as presently or proposed to be conducted. Borrowers and NSC shall
give Lender thirty (30) days prior written notice of any proposed change in any
of their corporate or other names, which notice shall set forth the new
name(s) and Borrowers and NSC shall deliver to Lender a copy of the amendment
to the Certificate of Incorporation or other organizational document of a
Borrower or NSC providing for the name change certified by the Secretary of
State of the jurisdiction of incorporation or organization of such Person as
soon as it is available.
9.2 New Collateral Locations. Any Borrower may open any new store
location within Puerto Rico or the United States Virgin Island provided
Borrowers' Agent (a) gives Lender thirty (30) days prior written notice of
the intended opening of any such new location and (b) such Borrower executes
and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral at such location,
including UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc. (a) Borrowers and NSC shall,
at all times, comply in all material respects with all laws, rules,
regulations, licenses, permits, approvals and orders applicable to it and
duly observe all requirements of any Federal, State or local governmental
authority, including the Employee Retirement Security Act of 1974, as
amended, the Occupational Safety and Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, and all statutes,
rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including all of the
Environmental Laws.
(b) Borrowers and NSC shall establish and maintain, at their expense, a
system to assure and monitor their continued compliance with all Environmental
Laws in all of their operations, which system shall include annual reviews of
such compliance by employees or agents of Borrowers who are familiar with the
requirements of the Environmental Laws. Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished, by
Borrowers to Lender. Borrowers and NSC shall take prompt and appropriate
action to respond to any non-compliance with any of the Environmental Laws
and shall regularly report to Lender on such response.
(c) Borrowers and NSC shall give both oral and written notice to Lender
immediately upon a Borrower's or NSC's receipt of any notice of, or a
Borrower's otherwise obtaining knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non -
compliance with or violation of any Environmental Law by (1)
Borrower or (2) any Guarantor with respect to any Real Estate Security or
(B) the release, spill or discharge, threatened or actual, of any Hazardous
Material or (C) the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or
(D) any other environmental, health or safety matter, which affects (1) any
Borrower or NSC, or their respective business, operations or assets or any
properties at which a Borrower transported, stored or disposed of any
Hazardous Materials or (2) any Real Estate Security given by any Guarantor.
(d) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of Borrowers or NSC with respect to any
Real Estate Security, in order to avoid any material non - compliance, with
any Environmental Law, Borrowers shall, at Lender's request and Borrowers'
expense: (i) cause an independent environmental engineer acceptable to
Lender to conduct such tests of the site where a Borrower's or NSC's non -
compliance or alleged non-compliance with such Environmental Laws has occurred
as to such non - compliance and prepare and deliver to Lender a report as to
such non - compliance setting forth the results of such tests, a proposed
plan for responding to any environmental problems described therein, and an
estimate of the costs thereof and (ii) provide to Lender a supplemental
report of such engineer whenever the scope of such non-compliance, or
Borrowers' or NSC's response thereto or the estimated costs thereof, shall
change in any material respect.
(e) Borrowers and NSC shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives,
successors and assigns, from and against any and all losses, claims,
damages, liabilities, costs, and expenses (including attorneys' fees and
legal expenses) directly or indirectly arising out of or attributable to
the use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material,
including the costs of any required or necessary repair, cleanup or other
remedial work with respect to any property of any Borrower or NSC or any
Real Estate Security given by any of them and the preparation and
implementation of any closure, remedial or other required
plans. All representations, warranties, covenants and indemnifications
in this Section 9.3 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrowers and NSC shall duly pay and
discharge all taxes, assessments, contributions and governmental charges upon
or against it or its properties or assets or any Real Estate Security of any
Guarantor, except for taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrowers
and with respect to which adequate reserves have been set aside on their
books. Borrowers shall be liable for any tax or penalties imposed on Lender
as a result of the financing arrangements provided for herein and Borrowers
agree to indemnify and hold Lender harmless with respect to the foregoing,
and to repay to Lender on demand the amount thereof, and until paid by
Borrowers such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrowers to pay
any income or franchise taxes attributable to the income of Lender from any
amounts charged or paid hereunder to Lender. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non - renewal
of this Agreement.
9.5 Insurance. Borrowers and NSC shall at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer. Borrowers' Agent shall furnish certificates,
policies or endorsements to Lender as Lender shall require as proof of such
insurance, and, if Borrowers' Agent fails to do so, Lender is authorized, but
not required, to obtain such insurance at the expense of Borrowers. All
policies shall provide for at least thirty (30) days prior written notice to
Lender of any cancellation or reduction of coverage and that Lender may act as
attorney for each Borrower and NSC in obtaining, and at any time an Event of
Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Each Borrower and NSC shall cause
Lender to be named as a loss payee and an additional insured (but without any
liability for any premiums) under such insurance policies and each Borrower
and NSC shall obtain non-contributory lender's loss payable endorsements to
all insurance policies in form and substance satisfactory to Lender. Such
lender's loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Lender as its interests may appear and further
specify that Lender shall be paid regardless of any act or omission by
Borrowers or any of their Affiliates. At its option, Lender may apply any
insurance proceeds received by Lender at any time to the cost of repairs or
replacement of Collateral and/or to payment of the Obligations, whether or not
then due, in any order and in such manner as Lender may determine or hold such
proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Each Borrower and NSC shall keep proper books and records in which
true and complete entries shall be made of all dealings or transactions of or
in relation to the Collateral and the business of such Borrower and NSC and
their respective Subsidiaries (if any) in accordance with GAAP. Borrowers'
Agent shall (i) promptly furnish or cause to be furnished to Lender all such
financial and other information as Lender may request relating to the
Collateral and the assets, business and operations of each Borrower and NSC
and shall notify the independent public accountants acting as auditors to
Borrowers and NSC that Lender is authorized to obtain such information
directly from such accountants. Without limiting the foregoing Borrowers
shall cause to be furnished to Lender: (i) within thirty (30) days after the
end of each fiscal month, (A) monthly unaudited consolidated and consolidating
financial statements of NSC and Borrowers (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of NSC and Borrowers as
of the end of and through such fiscal month and (B) monthly operating
statements of each Retail Store, (ii) within forty five (45) days after
the end of each fiscal quarter, (A) unaudited consolidated and consolidating
financial statements of NSC and Borrowers (including the information
specified in Section 9.6(a)(i) (A) hereof),as of the end and through the
fiscal quarter then ended and (B) quarterly operating statements of each
Retail Store, (iii) within sixty (60) days after the consummation of NSC's
Plan of the Reorganization, audited consolidated and consolidating financial
statements of NSC and Borrowers (including in each case balance sheets,
statements of income and loss, statements of cash flow and statements of
shareholders" equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of NSC and Borrowers as of the end of and for the immediately
preceding fiscal year, together with the unqualified opinion of independent
certified public accountants, which accountants shall be an independent
accounting firm selected by Borrowers and reasonably acceptable to Lender,
that such financial statements have been prepared in accordance with GAAP,
and present fairly the results of operations and financial condition of NSC
and Borrowers as of the end of and for such fiscal year, and (iv) within
ninety (90) days after the end of each fiscal year ending after November 2,
2002, audited consolidated financial statements and supporting consolidating
financial schedules of NSC and Borrowers (including in each case balance
sheets, statements of income and loss, statements of cash flow and statements
of shareholders equity), and the accompanying notes thereto and the
accompanying consolidating and combining schedules and financial statements
of NSC and Borrowers, all in reasonable detail, fairly presenting the
financial position and the results of the operations of NSC and Borrowers
as of the end of and for such fiscal year, together with the unqualified
opinion of independent certified public accountants, which accountants
shall be an independent accounting firm selected by Borrowers and
reasonably acceptable to Lender, that such consolidated financial
statements have been prepared in accordance with GAAP, and present fairly
the results of operations and financial condition of NSC and Borrowers. The
financial statements referred to in Section 9.6(a)(i) and (ii) hereof shall
be accompanied by a certificate of the Chief Financial Officer of Borrowers
to the effect (i) that such financial statements are correct in all material
respects, subject to normal year end audit adjustments and (ii) that
Borrowers are in compliance with the covenants set forth in Sections 9.14,
9.15, 9.16 and 9.17 hereof , as of the close of the period to which such
financial statements relate, together with a schedule showing the
calculations used in determining such compliance and that no Event of
Default or event which would with the giving of notice or passage of time,
constitute an Event of Default exists and is continuing.
(b) Borrowers shall promptly notify Lender in writing of the details of
(i) any loss, damages, investigation, action, suit, proceeding or claim which
has or could result in a Material Adverse Effect, (ii) any Material Contract
of a Borrower being terminated or amended or any new Material Contract
entered into (in which event Borrowers' Agent shall provide Lender with a
copy of such Material Contract), (iii) any order, judgment or decree in
excess of $1,000,000 which has been entered against a Borrower or NSC or any
of their properties or assets, (iv) any notification from a Governmental
Authority of violation of laws or regulations received by a Borrower or NSC,
(v) any ERISA Event and (vi) the occurrence of any Event of Default or act,
condition or event which with the giving of notice or the passage of time or
both, would constitute an Event of Default.
(c) NSC shall promptly after the sending or filing thereof furnish or cause
to be furnished to Lender copies of all reports which any of them sends to
their stockholders generally and copies of all reports and registration
statements which any of them files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d) Borrower and NSC shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrowers as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of a
Borrower or NSC to any court or other government agency upon request therefor
or to any participant or assignee or prospective participant or assignee.
Borrowers and NSC hereby irrevocably authorize and direct all accountants or
auditors to deliver to Lender, at Borrowers' expense, copies of the financial
statements of NSC and each of its Subsidiaries and any reports or management
letters prepared by such accountants or auditors on behalf of NSC and its
Subsidiaries and to disclose to Lender such information as they may have
regarding the business of NSC and its Subsidiaries. Any documents,
schedules, invoices or other papers delivered to Lender may be destroyed or
otherwise disposed by Lender one (1) year after the same are delivered to
Lender, except as otherwise designated by Borrowers to Lender in writing.
(e) Borrowers shall deliver, or cause to be delivered, to Lender, within
sixty (60) days after the Closing Date, opening consolidated and
consolidating balance sheets of NSC and Borrowers after giving effect to
the transactions contemplated by this Agreement, together with the
certification of the Chief Executive Officer and Chief Financial Officer
of each Borrower and NSC to the effect that such opening balance sheets
have been prepared in accordance with GAAP and present fairly the financial
condition of NSC and Borrowers as of such date.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Borrowers and NSC shall not directly or indirectly, (a) merge into or
with or consolidate with any other Person or permit any other Person to
merge into or with or consolidate with any of them or (b) sell, assign,
lease, transfer, abandon or otherwise dispose of(i) any Capital Stock or
indebtedness to any other Person or (ii) any of their assets to any other
Person (except for (i) sales of Inventory in the ordinary course of
business and (ii) the disposition of worn - out or obsolete Equipment or
Equipment no longer used in the business of Borrowers so long as (A) any
proceeds are paid to Lender and (B) such sales do not involve Equipment
having an aggregate fair market value in excess of $500,000 for all such
Equipment disposed of in any fiscal year of Borrowers) or (c) form or
acquire any Subsidiaries, or transfer any assets to any Subsidiary, or
(d) wind up, liquidate or dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances. Borrowers and NSC shall not create, incur, assume or
suffer or permit to exist any security interest, mortgage, pledge, lien,
charge or other encumbrance of any nature whatsoever on any of their
respective assets or properties, including the Collateral, except: (a) liens
and security interests of Lender; (b) liens securing the payment of taxes,
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to
Borrowers or NSC and with respect to which adequate reserves have been set
aside on its books; (c) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrowers'
or NSC's business to the extent: (i) such liens secure indebtedness which
is not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith
by appropriate proceedings diligently pursued and available to Borrowers or
NSC, in each case prior to the commencement of foreclosure or other similar
proceedings and with respect to which adequate reserves have been set aside
on their books; (d) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of Real Property which do not interfere
in any material respect with the use of such Real Property or ordinary conduct
of the business of Borrowers or NSC as presently conducted thereon or
materially impair the value of the Real Property which may be subject
thereto; (e) purchase money security interests in Equipment (including
Capital Leases entered into after the date hereof) and purchase money
mortgages on Real Property, not to exceed $250,000 in the aggregate at any
time outstanding so long as such security interests and mortgages do not
apply to any property of a Borrower or NSC other than the Equipment or Real
Property so acquired, and the indebtedness secured thereby does not exceed
the cost of the Equipment or Real Property so acquired, as the case may
be; (f) the security interests and liens set forth on Schedule 8.4
hereto; and (g) the security interests pursuant to the Security Pledge.
9.9 Indebtedness. No Borrower nor NSC shall incur, create, assume, become
or be liable in any manner with respect to, or suffer or permit to exist, any
obligations or indebtedness, except:
(a) the Obligations;
(b) trade accounts payable not unpaid more than the greater of (i) sixty
(60) days past the invoice date or (ii) the due date thereof, unless Lender
has established Availability Reserves with respect thereto, and other trade
obligations and normal accruals in the ordinary course of business not yet due
and payable, or with respect to which a Borrower or NSC is contesting in good
faith the amount or validity thereof by appropriate proceedings diligently
pursued and available to such Borrower or NSC and with respect to which
adequate reserves have been set aside on their books;
(c) purchase money indebtedness (including Capital Leases) to the extent not
incurred or secured by liens (including Capital Leases) in violation of any
other provision of this Agreement;
(d) unsecured indebtedness of NSC to Borrowers described in Section
9.10(f) hereof and unsecured indebtedness of a Borrower or NSC for borrowed
money incurred after the date hereof, owing to any Person, other than any
shareholder, officer, director, agent, employee or Affiliate of a Borrower, on
commercially reasonable rates and terms pursuant to an arm's length
transaction; provided, that, (i) Lender shall have received not less than five
(5) business days prior written notice of the intention to incur such
indebtedness, which notice shall set forth in reasonable detail satisfactory
to Lender, the amount of such indebtedness, the person to whom such
indebtedness will be owed, the interest rate, the schedule of repayments and
maturity date with respect thereto and such other information as Lender may
reasonably request with respect thereto, (ii) Lender shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such indebtedness, (iii) the aggregate
amount of such indebtedness at any time outstanding shall not exceed $250,000,
(iv) on and before the date of incurring such indebtedness and after giving
effect thereto, no Event of Default, or event which with the giving notice or
the passage of time or both would constitute an Event of Default, shall exist
or have occurred and be continuing, (v) Borrowers or NSC may only make
regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date of
the execution thereof, and (vi) Borrowers or NSC shall not, directly or
indirectly, (A) make any prepayments or other non - mandatory payments in
respect of such indebtedness, or (B) amend, modify, alter or change the terms
of such indebtedness or any agreement, document or instrument related thereto,
or (C) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (vii) Borrowers or NSC shall furnish to Lender all notices,
demands or other materials in connection with such indebtedness either
received by Borrower or NSC or on its behalf, promptly after the receipt
thereof, or sent by a Borrower, NSC or on its behalf, concurrently with the
sending thereof, as the case may be;
(e) indebtedness of Borrowers and NSC described on Schedule 9.9(e) hereto;
provided, that: (i) the individual principal amounts of such indebtedness
and aggregate principal amounts of all such indebtedness shall not exceed the
amounts shown on such Schedule 9.9 hereto less the aggregate amount of all
repayments, repurchases or redemptions, whether optional or mandatory in
respect thereof, plus interest thereon at the rate provided for in such
agreement or instrument as in effect on the date hereof, (ii) Borrowers and
NSC may only make (A) regularly scheduled payments of principal and interest
in respect of such indebtedness in accordance with the terms of the agreement
or instrument evidencing or giving rise to such indebtedness and (B) with
respect to NSC a one time payment on the Closing Date, as contemplated by
the Reorganization Plan, (iii)Borrowers and NSC shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such
indebtedness or any agreement, document or instrument related thereto or
(B) redeem, retire, defease, purchase or otherwise acquire such indebtedness,
or set aside or otherwise deposit or invest any sums for such purpose, and
(iv) Borrowers and NSC shall furnish to Lender all notices or demands in
connection with such indebtedness either received by any Borrower or NSC or
on its behalf, promptly after the receipt thereof, or sent by a Borrower or
NSC or on their behalf, concurrently with the sending thereof, as the case
may be; and
(f) unsecured obligations and indebtedness owed by any Borrower to any of the
other Borrowers.
9.10 Loans, Investments, Guarantees, Etc. Borrowers and NSC shall not
directly or indirectly, make or permit to exist any loans or advance money or
property to any person, or invest in (by capital contribution, dividend or
otherwise) or purchase or repurchase the Capital Stock or indebtedness or all
or a substantial part of the assets or property of any person, or form or
acquire any Subsidiaries or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
except: (a) the endorsement of instruments for collection or deposit in the
ordinary course of business; (b) investments in cash or Cash Equivalents;
provided that, as to any of the foregoing, unless waived in writing by
Lender, Borrowers and NSC shall take such actions as are deemed necessary by
Lender to perfect the security interest of Lender in such investments; (c)
the loans, advances and guarantees set forth on Schedule 9.10 hereto;
provided, that, as to such loans, advances and guarantees, (i) Borrower and
NSC shall not, directly or indirectly, (A) amend, modify, alter or change the
terms of such loans, advances or guarantees or any agreement, document or
instrument related thereto, or (B) as to such guarantees, redeem, retire,
defease, purchase or otherwise acquire the obligations arising pursuant to
such guarantees, or set aside or otherwise deposit or invest any sums for
such purpose, and (ii) Borrowers and NSC shall furnish to Lender all notices
or demands in connection with such loans, advances or guarantees or other
indebtedness subject to such guarantees either received by a Borrower or NSC
or on its behalf, promptly after the receipt thereof, or sent by a Borrower or
NSC or on its behalf, concurrently with the sending thereof, as the case may
be; (d) loans and advances not in excess of the amount of $500,000
outstanding in the aggregate for all such loans and advances during the term
of this Agreement; provided that, no such loan or advance shall be made to
any Affiliate of a Borrower or any Person described on Schedule 9.22 hereto;
(e) loans or advances by any Borrower to any of the other Borrowers and (f)
loans and advances by Borrowers to NSC not in
excess of the amount of $250,000 incurred in any fiscal year to be used by
NSC for the payment of its ordinary and necessary expenses.
9.11 Transactions with Affiliates. Borrowers shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any officer, director, agent or Person
Affiliated with a Borrower or NSC which is not also a Borrower, except in the
ordinary course of and pursuant to the reasonable requirements of such
Borrower's business and upon fair and reasonable terms no less favorable to
such Borrower than such Person would obtain in a comparable arm's length
transaction with an unaffiliated person (but in no event may a Borrower sell,
transfer or lease any property to any Subsidiary) or (b) make any payments
(i) of any indebtedness owing to any officer, employee, shareholder, director
or other person Affiliated with any Borrower or NSC, which is not also a
Borrower or (ii) of any compensation to any employee, except reasonable
compensation to employees for services rendered to in the ordinary course of
business, not in violation of Section 9.22 hereof; provided that, Borrowers
may make the transfers and payments permitted by Section 9.19(b) and (c)
hereof.
9.12 Additional Bank Accounts. Borrowers shall not, directly or
indirectly, open, establish or maintain any deposit account, investment
account or any other account with any bank or other financial institution,
other than the Blocked Accounts and the accounts set forth in Schedule 8.8
hereto, except:(a) as to any new or additional Blocked Accounts and (b) as
permitted by Sections 7.11 and 7.12 hereof.
9.13 Compliance with ERISA.
(a) Borrowers and NSC shall not, with respect to any "employee benefit
plans" maintained by a Borrower or any of its ERISA Affiliates:
(i) terminate any of such employee benefit plans so as to incur any liability
to the Pension Benefit Guaranty Corporation established pursuant to ERISA,
(ii) allow or suffer to exist any prohibited transaction involving any of
such employee benefit plans or any trust created thereunder which would
subject any Borrower or such ERISA Affiliate to a tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code
or ERISA, (iii) fail to pay to any such employee benefit plan any
contribution which it is obligated to pay under Section 302 of ERISA, Section
412 of the Code or the terms of such plan, (iv) allow or suffer to exist any
accumulated funding deficiency, whether or not waived, with respect to any
such employee benefit plan, (v) allow or suffer to exist any occurrence of a
reportable event(other than those as to which the Pension Benefit Guaranty
Corporation has waived notice pursuant to Regulation) or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such employee benefit plan that is a single
employer plan, that is a single employer plan, which termination could result
in any liability to the Pension Benefit Guaranty Corporation, (vi) incur any
withdrawal liability with respect to any multi employer pension plan; and
(vii) fail to maintain each employee benefit plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
Federal State and Commonwealth Law.
(b) As used in this Section 9.13 and Section 8.14 the terms (i)
"employee benefit plans", "accumulated funding deficiency" and "reportable
event" shall have the respective meanings assigned to them in ERISA, and the
term "prohibited transaction" shall have the meaning assigned to it in Section
4975 of the Code and ERISA, (ii) "ERISA Affiliate" shall mean any Person
required to be aggregated with a Borrower or any of its Subsidiaries under
Sections 414(b), 414 (c) , 414(m) or 414(o) of the Code and "ERISA" shall mean
the United States Employee Retirement Income Security Act of 1974 .
9.14 Working Capital. Borrowers and NSC shall, at all times, maintain
consolidated Working Capital of not less than $5,000,000.
9.15 Adjusted Net Worth. Borrowers and NSC shall at all times, maintain
a consolidated Adjusted Net Worth of not less than $ 25,000,000.
9.16 Suppressed Availability. (a) Borrowers shall, maintain with Lender,
at all times after the date hereof, Suppressed Availability of not less than
$1,800,000. Lender may, but shall not be required to and in addition to its
other rights, in its discretion, use the amount of Suppressed Availability
(i) to pay costs and expenses incurred by Borrowers or chargeable to
Borrowers under this Agreement, (ii) to cure defaults of Borrowers or NSC
under this Agreement, or by Borrower or NSC or any other Obligor under any of
the other Financing Agreements or any other agreement of any Borrower or NSC
with any third party, (iii) to pay taxes of Borrowers or NSC and (iv) for,
any other purpose permitted by, or to make any other payment which Lender is
authorized to make, under this Agreement.
(b) If the amount of Suppressed Availability shall at any time be less
than $1,800,000 Borrowers shall, at all times, on notice by Lender,
immediately take such actions as are required by Lender, including delivery to
Lender of additional Pledged Cash, so that the amount of Suppressed
Availability shall not be less than $1,800,000.
9.17 Additional Financial Covenants.
(a) Borrowers and NSC shall, as of the close of their fiscal year ending
November 2, 2002, and for the 52 - 53 week period then ending, and as of the
close of each of their fiscal years thereafter and for the respective 52 - 53
week periods then ending have a consolidated Fixed Charge Coverage Ratio
equal to or greater than 1.5 to 1; provided that, in determining such Ratio
there shall be excluded as current maturities of Debt the amount of the Loans
and the amount of the NSC Notes, as such of each such date.
(b) Borrowers and NSC shall, as of the close of their fiscal year ending
November 2, 2002, and for the 52 - 53 week period then ending and as of the
close of each of their fiscal years thereafter and for the respective 52 - 53
week periods then ending, derive (i)consolidated EBITDA of not less than
$25,000,000 and (ii) consolidated Net Revenue of not less than $525,000,000.
(c) Borrowers and NSC shall not permit , as of the close of their fiscal
year ending November 2, 2002, and for the 52 - 53 week period then ending and
as of the close of each of their fiscal years thereafter and for the respective
52 - 53 week periods then ending, the ratio of their consolidated Debt to
consolidated EBITDA to be greater than 10 to 1.
9.18 Changes in Equity. Borrowers and NSC shall not (a) cease to have
their respective Capital Stock or other equity interests owned by the Persons
now owning such Capital Stock or other equity interests in the same
percentages of ownership now held by such Persons or (b) issue, sell or
deliver any shares of their respective Capital Stock or other equity
interests or rights, options, warrants or calls to purchase any shares of
their respective Capital Stock other equity interests or securities
convertible into shares of their respective Capital Stock or other equity
interests.
9.19 Restricted Junior Payments. Borrowers shall not, directly or
indirectly, make, or agree to make, any Restricted Junior Payments, except:
(a) As may be permitted by Sections 9.11 (a) and 9.10(f) hereof;
(b) Issuance and delivery to NSC of the NSC Notes;
(c) Payment by Pueblo to NSC of the amount of $51,000,000 to be used by NSC
for consummation of its Reorganization Plan; provided that, each of the
following conditions are satisfied:
(i) such payment shall be made with funds legally available therefor,
(ii) such payment shall not violate any law or regulation or the terms of
any indenture, agreement or undertaking to which any Borrower is a party or by
which any Borrower or its properties are bound,
(iii) as of the date of such payment (A) no Event of Default or act,
condition or event which with the giving of notice or passage of time or both
would constitute an Event of Default shall exist or have occurred and be
continuing and (B) the making of such payment would not cause the occurrence
of an Event of Default, including a failure to comply with any of the
provisions of Sections 9.14, 9.15, 9.16 or 9.17 hereof; and
(iv) as of the date of such payment and after giving effect thereto,
Borrowers, taken as whole, shall be Solvent; and
(d) Payments to NSC of regularly scheduled interest payments on the NSC
Notes to be used by NSC for the purposes of paying regularly scheduled
payments of interest on the Senior Secured Notes; provided that, each of the
following conditions are satisfied:
(i) such payment shall be made with funds legally available therefor,
(ii) such payment shall not violate any law or regulation or the terms of
any indenture, agreement or undertaking to which any Borrower is a party or by
which any Borrower or its properties are bound,
(iii) as of the date of such payment (A) no Event of Default or act,
condition or event which with the giving of notice or passage of time or both
would constitute an Event of Default shall exist or have occurred and be
continuing and(B) the making of such payment would not cause the occurrence
of an Event of Default, including a failure to comply with any of the
provisions of Sections 9.14, 9.15, 9.16 or 9.17 hereof;
(iv) as of the date of such payment and after giving effect thereto,
Borrowers, taken as whole, shall be Solvent;
(v) The making of such payment does not and will not result in, as
determined by Lender, Revolving Loans in excess of those permitted under
Section 2.1(a) hereof; and
(e) A Borrower may declare and pay dividends to another Borrower.
9.20 Costs and Expenses. Borrowers shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and
all other documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or not
executed) or entered into in respect hereof and thereof, including: (a) all
costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles
taxes and mortgage recording taxes and fees, if applicable); (b) all costs and
expenses and fees for insurance premiums, environmental audits, surveys,
assessments, engineering reports and inspections, appraisal fees and search
fees; (c) costs and expenses of remitting loan proceeds, collecting checks and
other items of payment, and establishing and maintaining the Blocked Accounts,
together with Lender's customary charges and fees with respect thereto; (d)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (e) costs and expenses of preserving and
protecting the Collateral; (f) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters);(g)
all out-of-pocket expenses and costs heretofore and from time to time
hereafter incurred by Lender during the course of periodic field examinations
of the Collateral and Borrower's operations including the costs of field
testing by third party providers retained by Lender, plus a per diem charge
at the rate of $1,000.00 per person per day plus travel, hotel and all other
out of pocket expenses for Lender's examiners in the field and office; and
(h) the fees and disbursements of counsel (including legal assistants) to
Lender in connection with any of the foregoing.
9.21 Environmental Audits. Within ninety (90) days from the date of a
request by Lender, from time to time, Borrowers shall deliver to Lender, at
their expense updated environmental audits of the Real Property and the Real
Estate Security conducted by an environmental firm acceptable to Lender and in
form, scope and methodology satisfactory to Lender confirming that (a)
Borrowers and NSC are in compliance with all Environmental Laws, in all
material respects and (b) there is no material potential or actual liability
of any Borrower or NSC for any remedial action with respect to any
environmental condition or any other significant environmental problems;
provided that, if such audits cannot confirm such compliance or that there
is no such liability, Borrowers shall forthwith at their expense, diligently
take all remedial action necessary to cure such condition, effect such
compliance and discharge such liability, to such firm's satisfaction.
9.22 Management Compensation. Borrowers and NSC will not pay compensation
or management, consulting or other fees for management or similar services
directly or indirectly, to or for the benefit of (a) as to those Persons
listed on Schedule 9.22 hereto in per annum amounts in the aggregate in excess
of that set forth and determined as described on Schedule 9.22 hereto,
including performance and incentive bonuses, for each such person, (b) as to
any Affiliate or direct or indirect or beneficial stockholder an additional
per annum amount in excess of $120,000 and (c) as to all other officers,
directors or consultants amounts in excess of that which is reasonable,
ordinary and necessary.
9.23 Business Names. Borrowers and NSC shall not use any trade names in
the conduct of their business and operations other than (a)those listed on
Schedule 8.11 hereto and (b)those trade names which a Borrower may hereafter
use after (i) having given Lender at least 15 Business Days notice after the
filing for registration of such name and (ii) taking all such actions and
executing and delivering all such agreements, instruments, notices and
documents as Lender shall request to(A) grant to Lender a valid and perfected
first and prior security interest and lien therein and (B) protect and
preserve ▇▇▇▇▇▇▇'▇ security interests and liens in the other Collateral.
9.24 Franchise Agreements.
(a) Each Borrowers shall (i) observe and perform and perform all of the
material terms, covenants, conditions and provisions of the Franchise
Agreements to be observed and performed by any of them at the times set forth
therein, if any, (ii) not do, permit, suffer or refrain from doing anything
which could reasonably be expected to result in a material default under or
material breach of any of the terms of any Franchise Agreement, (iii) not
cancel, surrender, modify, amend, waive or release any Franchise Agreement in
any material respect or any term, provision or right of a Borrower thereunder
in any material respect, or consent to or permit to occur any of the
foregoing; except that, subject to Section 9.24(b) below, a Borrower may
cancel, surrender or release any Franchise Agreement in the ordinary course
of the business of such Borrower; provided that, Borrowers shall give Lender
not less than ten (10) days prior written notice of the intention to so
cancel, surrender and release any such Franchise Agreement, (iv) give Lender
prompt written notice of any Franchise Agreement entered into by any Borrower
after the date hereof, together with a true, correct and complete copy
thereof and such other information with respect thereto as lender may
reasonably request, (v) give Lender prompt written notice of any material
breach of any obligation, or any default, by any party under any Franchise
Agreement, and deliver to Lender (promptly upon the receipt thereof by a
Borrower in the case of a notice to a Borrower, and concurrently with the
sending thereof in the case of a notice from a Borrower) a copy of each
notice of default received or delivered by a Borrower in connection with any
Franchise Agreement, and (vi) furnish to Lender, promptly upon the request of
Lender, such information and evidence as Lender may reasonable require from
time to time concerning the observance, performance and compliance by any
Borrower or the other party or parties thereto with the terms, covenants or
provisions of any Franchise Agreement.
(b) Each Borrower will either exercise any option to renew or extend the
term of each Franchise Agreement in such manner as will cause the term of such
Franchise Agreement to be effectively renewed or extended in accordance with,
and subject to, the terms thereof, for the period provided by such option and
give prompt written notice thereof to Lender or give Lender prior written
notice that such Borrower does not intend to renew or extend the term of any
such Franchise Agreement or that the term thereof shall otherwise be expiring,
not less than ten (10) days prior to the date of any such non - renewal or
expiration. In the event of the failure of a Borrower to extend or renew any
Franchise Agreement, Lender shall have, and is hereby granted, the irrevocable
right and authority, at its option in accordance with, and subject to, the
terms thereof to renew or extend the term of such Franchise Agreement, whether
in its own name and behalf, or in the name and behalf of a designee or nominee
of Lender or in the name of or on behalf of any Borrower, as Lender shall
determine, at any time that an Event of Default shall exist or have occurred
and be continuing. Any sums so paid by Lender shall constitute part of the
Obligations.
9.25 Additional Covenants.
(a) Borrowers shall deliver to Lender, within 10 days of the close of each
fiscal month a report of essential payments made and expenses incurred, by
Borrowers during such month in such detail as Lender may request.
(b) Borrowers shall deliver to Lender, within 10 days of the close of each
fiscal quarter a progress report with respect to Borrowers' store remodeling,
relocation and opening plans.
(c) Borrowers shall deliver to Lender, within 10 days of the close of each
fiscal month, a comparison of its actual "availability" for such month with
its budgeted "availability" for such month.
(d) Borrowers shall furnish to Lender, within 10 days of the close of each
fiscal quarter, a status report on its leased properties, in form and detail
and covering those matters requested by Lender.
9.26 Loan Amount Certificate. Borrowers and NSC shall, promptly upon the
request of Lender, but not more often the 4 times in any fiscal year and in
any event together with the audited Financial Statements referred to in
Section 9.6 hereof furnish to Lender a certificate, signed by their President
and Chief Financial Officer, stating as of the date thereof (a) the then
outstanding balance of the Loans, (b) that no defense, offset or counterclaim
exists with respect to Borrowers obligation to pay such Loans or if any such
defense, offset or counterclaim does exist, specifying in detail the nature
and amount thereof and the facts upon which based and (c) they have reviewed
this Agreement and the other Financing Agreements to which any Borrower is a
party and have made, or caused to be made under their supervision, a review
in reasonable detail of the transactions and condition of the Borrowers and
that, based on such review, the Borrowers have observed or performed all of
their covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Financing Agreements to be
observed, performed or satisfied by the Borrowers and that such review has
not disclosed the existence, and that such officers do not have knowledge of
the existence as at the date of the certificate, of any Event of Default or
event or condition which, with the giving of notice or the lapse of time or
both, would constitute an Event of Default or if such officer has any
knowledge of any such Event of Default or other event or condition,
specifying same and what action the Borrowers are taking or proposes to take
with respect thereto.
9.27 Further Assurances. At the request of Lender at any time and from
time to time, Borrowers and NSC shall at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests of Lender, and the priority thereof, in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of
the other Financing Agreements. Lender may at any time and from time to time
request a certificate from an officer of Borrowers' Agent representing that
all conditions precedent to the making of Loans and providing Letter of
Credit Accommodations contained herein are satisfied. In the event of such
request by Lender, Lender may, at its option, cease to make any further Loans
and providing Letter of Credit Accommodations until Lender has received such
certificate and, in addition, Lender has determined that such conditions are
satisfied. Where permitted by law, each Borrower hereby authorizes Lender to
execute and file one or more UCC financing statements signed only by Lender.
9.28 Closing The Chapter 11 Case. NSC shall use its reasonable best
efforts to close its Chapter 11 Case on or before September 30, 2003 and
shall not file a motion to reopen the case without the Bank's prior written
consent.
9.29 Security Pledge. NSC shall (a) deliver to lender, on or prior to the
Closing Date, a certified copy of the Security Pledge as in effect on such
date and (b) shall not thereafter amend or agree to amend the Security
Pledge, without the prior written consent of Lender.
Section 10. Events of Default And Remedies.
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default" and collectively as "Events of Default":
(a) Borrowers (i) fail to pay when due any of the Obligations or (ii)
Borrowers or NSC fail to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing
Agreements except those described in Section 10(a)(i) above and such failure
shall continue for ten (10) days; except that, such ten (10) day cure
period shall not be applicable in the case of (A) any failure which cannot be
cured at all or within such ten (10) day period, (B) an intentional breach by
a Borrower or NSC or (C) a failure which has been the subject of a prior
failure within the preceding six (6) months;
(b) any representation, warranty or statement of fact made by Borrowers
or NSC to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when
made or deemed made be false or misleading in any material respect;
(c) NSC or any other Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement
or other agreement of such party in favor of Lender or any representation,
warranty or statements of fact made by any such Person in any such document
shall when made or deemed made be false or misleading in any material respect;
(d) any judgment for the payment of money is rendered against any Borrower
or NSC or any other Obligor in excess of $250,000 in any one case, or in
excess of $500,000 in the aggregate and shall remain undischarged or
unvacated for a period in excess of sixty (60) days or execution shall at
any time not be effectively stayed, or any judgment other than for the payment
of money, or injunction, attachment, garnishment or execution is rendered
against any Borrower or NSC or any other Obligor or any of their assets;
(e) any Borrower, NSC or any other Obligor which is a partnership, limited
liability company, limited liability partnership or a corporation, dissolves
or suspends or discontinues doing business;
(f) Borrowers shall not be Solvent or any Borrower or NSC makes an
assignment for the benefit of creditors, makes or sends notice of a bulk
transfer or calls a meeting of its creditors or principal creditors;
(g) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction now or hereafter in effect (whether at law or in equity)
is filed against any Borrower or NSC(except the Chapter 11 Case) or any other
Obligor or all or any part of their respective properties and such petition or
application is not dismissed within thirty(30) days after the date of its
filing or any Borrower or NSC or any other Obligor shall file any answer
admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of any such action or proceeding or
the relief requested is granted sooner.
(h) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction now or hereafter in effect (whether at a law or equity) is
filed by any Borrower or NSC(except the Chapter 11 Case) or any other Obligor
or for all or any part of its property;
(i) any default by a Borrower or NSC or any other Obligor under any
agreement, document or instrument relating to any indebtedness for borrowed
money owing to any person other than Lender, or under any Capital Lease
obligations, contingent indebtedness in connection with any guarantee, letter
of credit, indemnity or similar type of instrument in favor of any person
other than Lender, in any case in an amount in excess of $200,000, which
default continues for more than the applicable cure period, if any, with
respect thereto, or any default by any Borrower or NSC or any other Obligor
under any Material Contract, lease, license, or other obligation to any
person other than Lender, which default continues for more than the
applicable cure period, if any, with respect thereto;
(j) there shall be a Change of Control or change in the present senior
management of Borrowers or NSC;
(k) the indictment, or as Lender may reasonably and good faith determine,
threatened indictment of a Borrower or NSC or any other Obligor under any
criminal statute, or commencement or threatened commencement of any criminal
or civil proceedings against any Borrower or NSC or any other Obligor,
pursuant to which statute or proceedings the penalties or remedies sought or
available include forfeiture of any of the property of any Borrower or NSC or
any other Obligor;
(l) there shall be a material adverse change in the business, assets or
prospects of Borrower or NSC or any other Obligor after the date hereof;
(m) there shall be an event of default under any of the other Financing
Agreements;
(n) the Reorganization Plan shall not be consummated on or prior to
September 30, 2003 or shall not be complied with in any material respect;
(o) the Chapter 11 Case shall (i) be converted to a case under Chapter 7
of the Bankruptcy Code, (ii) be dismissed or (iii) have a trustee appointed
therein;
(p) the Chapter 11 Case shall be reopened at any time after closing
thereof;
(q) the security interests granted to the Trustee, pursuant to the
Security Pledge do not continue to be to Lender's satisfaction, validly
and effectively junior and subordinate to the liens of and security
interests of Lender; or
(r) NSC shall have failed to file objections to proofs of claim filed on or
before the date hereof in the Chapter 11 Case that it deems necessary to
object to, on or before the thirtieth (30th) day after the Closing Date.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law, all of which rights and remedies may be exercised
without notice to or consent by Borrowers or NSC or any other Obligor except as
such notice or consent is expressly provided for hereunder or required by
applicable law. All rights, remedies and powers granted to Lender hereunder,
under any of the other Financing Agreements, the Uniform Commercial Code or
other applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on any one
or more occasions, and shall include, without limitation, the right to apply
to a court of equity for an injunction to restrain a breach or threatened
breach by a Borrower or NSC of this Agreement or any of the other Financing
Agreements. Lender may, at any time or times, proceed directly against any
Borrower or NSC or any other Obligor to collect the Obligations without prior
recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of
any Event of Default described in Sections 10.1(g), or 10.1(h), all
Obligations shall automatically become immediately due and payable), (ii)
with or without judicial process or the aid or assistance of others, enter
upon any premises on or in which any of the Collateral may be located and
take possession of the Collateral or complete processing, manufacturing and
repair of all or any portion of the Collateral, (iii) require Borrowers at
Borrowers' expense, to assemble and make available to Lender any part or all
of the Collateral at any place and time designated by Lender, (iv) collect,
foreclose, receive, appropriate, setoff and realize upon any and all
Collateral, (v) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting
the sale, foreclosure or other disposition thereof or for any other purpose,
(vi) sell, lease, transfer, assign, deliver or otherwise dispose of any and
all Collateral (including entering into contracts with respect thereto, public
or private sales at any exchange, broker's board, at any office of Lender or
elsewhere) at such prices or terms as Lender may deem reasonable, for cash,
upon credit or for future delivery, with the Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of a
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrowers and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, five (5) days prior notice by Lender to
Borrowers' Agent designating the time and place of any public sale or the time
after which any private sale or other intended disposition of Collateral is to
be made, shall be deemed to be reasonable notice thereof and Borrowers waive
any other notice. In the event Lender institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy,
Borrowers waive the posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually received by
Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such
order as Lender may elect, whether or not then due. Borrowers shall remain
liable to Lender for the payment of any deficiency with interest at the
highest rate provided for herein and all costs and expenses of collection
or enforcement, including attorneys" fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or providing Letter of Credit Accommodations or reduce the
lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrowers and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made
or provided by Lender to Borrowers.
(e) For the purpose of enabling Lender to exercise the rights and remedies
hereunder, each Borrower hereby grants to Lender, effective as of the
occurrence of any Event of Default, to the extent assignable, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Borrowers) to use or assign any of the trademarks, service
marks, trade names, business names, trade styles, designs, logos and other
source of business identifiers and other Intellectual Property and general
intangibles now owned or hereafter acquired by any Borrower, wherever the same
maybe located, including in such license reasonable access to all media in
which any of the licensed items may be recorded or stored and to all computer
programs used for the complication or printout thereof.
10.3 Special Event of Default. (a) The occurrence or existence of the
following event shall be an additional "Event of Default":
(i) Any condition precedent specified in Section 4.1 hereof, the
satisfaction of which has been deferred by Lender in writing, is not fulfilled
and satisfied on or prior to the date to which fulfillment and satisfaction
thereof has been deferred (whether or not such condition is capable of being
fulfilled or satisfied by Borrowers); and
(ii) Lender shall give notice to Borrowers that it is declaring an Event
of Default.
(b) On the occurrence and during the continuance of an Event of Default
specified in this Section 10.3 Lender shall be entitled to all rights and
remedies hereunder, including without limitation those set forth in Section
10.2 hereof, under the other Financing Agreements, and at law.
Section 11. Jury Trial Waiver; Other Waivers And Consents; Governing Law.
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto with respect thereto, whether in contract, tort,
equity or otherwise, shall be governed by the internal laws of the
Commonwealth of Puerto Rico (without giving effect to principles of conflicts
of law).
(b) Borrowers and NSC and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the United States District Court for the
District of Puerto Rico and to the Court of First Instance, (Superior Court)
of San ▇▇▇▇, Puerto Rico and waive any objection based on venue or forum non
conveniences with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in
respect of this Agreement or any of the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and
agree that any dispute with respect to any such matters shall be heard only
in the courts described above (except that Lender shall have the right to
bring any action or proceeding against any Borrower or NSC or their
respective property in the courts of any other jurisdiction which Lender
deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against Borrowers or NSC and their respective
property).
(c) Each Borrower and NSC hereby waive personal service of any and all
process upon each of them and consent that all such service of process may be
made by certified mail (return receipt requested) directed to its address set
forth on the signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Lender's option, by service upon a Borrower or NSC in any
other manner provided under the rules of any such courts. Within thirty
(30) days after such service, the Person so served shall appear in answer to
such process, failing which such Person shall be deemed in default and
judgment may be entered by Lender against such Person for the amount of the
claim and other relief requested.
(d) BORROWERS AND NSC AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWERS AND NSC AND LENDER EACH HEREBY AGREE AND CONSENT THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT BORROWERS AND NSC OR LENDER MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
(e) Lender shall not have any liability to Borrowers or NSC (whether
in tort, contract, equity or otherwise) for losses suffered by any of them in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non -
appealable judgment or court order binding on Lender, that the losses were the
result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit
of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement.
11.2 Waiver of Notices. Each Borrower and NSC hereby expressly
waive demand, presentment, protest and notice of protest and notice of
dishonor with respect to any and all instruments and commercial paper,
included in or evidencing any of the Obligations or the Collateral, and
any and all other demands and notices of any kind or nature whatsoever with
respect to the Obligations, the Collateral and this Agreement, except such as
are expressly provided for herein. No notice to or demand on a Borrower or
NSC which Lender may elect to give shall entitle any of them to any other
or further notice or demand in the same, similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrowers and NSC. Lender shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights,
powers and/or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. Any such waiver shall be enforceable only to
the extent specifically set forth therein. A waiver by Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to
or waiver of any such right, power and/or remedy which Lender would otherwise
have on any future occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrowers and NSC waive all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature
(other than compulsory counterclaims) in any action or proceeding with respect
to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.5 Indemnification. Each Borrower and NSC shall, jointly and
severally, indemnify and hold Lender, and its directors, agents, employees
and counsel (collectively "Indemnified Persons"), harmless from and
against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with
any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing
Agreement, or any undertaking or proceeding related to any of the
transactions contemplated hereby or any act, omission, event or
transaction related or attendant thereto, including amounts paid in
settlement, court costs, and the fees and expenses of counsel (the
"Indemnified Liabilities"). To the extent that the undertaking
to indemnify, pay and hold harmless set forth in this Section may be
unenforceable because it violates any law or public policy, Borrowers and NSC
shall pay the maximum portion which it is permitted to pay under applicable
law to Lender in satisfaction of indemnified matters under this Section. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
Section 12. Term of Agreement; Miscellaneous.
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the Effective Date and shall continue in full force and effect
for a term ending on June 22, 2008 (the "Renewal Date") and from year to year
thereafter, unless sooner terminated pursuant to the terms hereof. Lender or
Borrowers may terminate this Agreement and the other Financing Agreements
effective on the Renewal Date or on the anniversary of the Renewal Date in any
year by giving the other party at least sixty (60) days prior written notice;
provided that, this Agreement and all other Financing Agreements must be
terminated simultaneously. Upon the effective date of termination or non -
renewal of the Financing Agreements, Borrower shall pay to Lender, in full,
all outstanding and unpaid Obligations and shall furnish cash collateral to
Lender in such amounts as Lender determines are reasonably necessary to
secure Lender from loss, cost, damage or expense, including attorneys'
fees and legal expenses, in connection with any contingent Obligations,
including issued and outstanding Letter of Credit Accommodations and checks
or other payments provisionally credited to the Obligations and/or as to
which Lender has not yet received final and indefeasible payment. Such
payments in respect of the Obligations and cash collateral shall be remitted
by wire transfer in Federal funds to such bank account of Lender, as Lender
may, in its discretion, designate in writing to Borrowers' Agent for such
purpose. Interest shall be due until and including the next business day,
if the amounts so paid by Borrowers to the bank account designated by
Lender are received in such bank account later than 12:00 noon, Atlantic
Standard time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrowers or NSC or any other Obligor of its
respective duties, obligations and covenants under this Agreement, the other
Financing Agreements, until all Obligations have been fully and finally
discharged and paid, and Lender's continuing security interest in the
Collateral and the rights and remedies of Lender hereunder, under the other
Financing Agreements, and applicable law, shall remain in effect until all
such Obligations have been fully and finally discharged and paid.
(c) Upon the written request of Borrowers' Agent, after the effective date
of the termination or non - renewal of this Agreement, Lender shall deliver to
Borrowers, at Borrowers' cost and expense, UCC - 3 termination statements and
a release and reassignment of trademarks, patents, and copyrights, each in form
and substance satisfactory to Lender, necessary to evidence the termination of
Lender's security interests in and lien upon the Collateral, provided that,
each of the following conditions is satisfied: (i) Lender shall have received
payment in full in cash and performance of all outstanding and unpaid
Obligations and the delivery to Lender of cash collateral in such amounts as
Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including attorneys' fees and legal expenses, in connection
with any contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and checks or other payments provisionally credited to
the Obligations and/or as to which Lender has not yet received final and
indefeasible payment, and upon the release of all claims against Lender, (ii)
Lender shall have received a written release by Borrowers and NSC and all
other Obligors, of Lender and the other Indemnified Parties, in form and
substance satisfactory to Lender, duly authorized, executed and delivered by
Borrowers and NSC and all other Obligors, and (iii) no suits, actions,
proceedings or claims are pending or threatened against any Indemnified
Person asserting any damages, losses or liabilities that are Indemnified
Liabilities. Accordingly Borrowers and NSC waive any rights which any of
them may have under the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral and Lender shall not
be required to send such termination statements to Borrowers or NSC or to
file them with any filing office, unless and until this Agreement is
terminated in accordance with its terms, the conditions specified in this
Section 12.1(c) satisfied and all of the Obligations indefeasibly paid in
immediately available funds.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrowers
or NSC at Borrowers' Agent's chief executive office set forth below, or to
such other address as any party may designate by written notice to the other
in accordance with this provision, and (b) deemed to have been given or made:
if delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with
instructions to deliver the next business day, one (1) business day after
sending; and if by certified mail, return receipt requested, five (5) days
after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed
as though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by Lender, Borrowers and their
respective successors and assigns, except that Borrowers and NSC may not
assign their rights under this Agreement, the other Financing Agreements and
any other document referred to herein or therein without the prior written
consent of Lender. Lender may, after notice to Borrowers' Agent, assign its
rights and delegate its obligations under this Agreement and the other
Financing Agreements and further may assign, or sell participation in, all
or any part of the Loans, the Letter of Credit Accommodations or any other
interest herein to another financial institution or other person, in which
event, the assignee or participant shall have, to the extent of such
assignment or participation, the same rights and benefits as it would have
if it were the Lender hereunder, except as otherwise provided by the terms of
such assignment or participation.
12.5 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or
documents delivered or to be delivered in connection herewith or therewith
represents the entire agreement and understanding concerning the subject
matter hereof and thereof between the parties hereto, and supersedes all
other prior agreements, understandings, negotiations and discussions,
representations, warranties, commitments, proposals, offers and contracts
concerning the subject matter hereof, whether oral or written. In the event
of any inconsistency between the terms of this Agreement and any schedule
or exhibit hereto, the terms of this Agreement shall govern.
12.6 Additional Interpretative Provision.
(a) All financial computations hereunder shall be computed unless
otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as
used in the preparation of the financial statements of Borrowers most recently
received by Lender prior to the date hereof.
(b) In the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including", the words "to" and
"until" each mean "to but excluding" and the word "through" means "to and
including".
(c) Unless otherwise expressly provided herein, (i) references herein to any
agreement, document or instrument shall be deemed to include all subsequent
amendments, modifications, supplements, extensions, renewals, restatements or
replacements with respect thereto, but only to the extent the same are not
prohibited by the terms hereof or of any other Financing Agreement, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
recodifying, supplementing or interpreting the statute or regulation.
(d) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(e) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(f) This Agreement and the other Financing Agreements are the results of
negotiations among and have been reviewed by counsel to Lender and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Lender merely
because of Lender's involvement in their preparation.
12.7 Counterparts, Etc. This Agreement or any of the other
Financing Agreements may be executed in any number of counterparts, each of
which shall be an original, but all of which taken together shall constitute
one and the same agreement. Delivery of an executed counterpart of this
Agreement or any of the other Financing Agreements by telefacsimile shall have
the same force and effect as the deliver of an original executed counterpart
of this Agreement or any of such other Financing Agreements. Any party
delivering an executed counterpart of any such agreement by telefacsimile
shall also deliver an original executed counterpart, but the failure to do
so shall not affect the validity, enforceability or binding effect of such
agreement.
12.8 Appointment of Borrowers' Agent.
(a) Each Borrower hereby irrevocably appoints Pueblo as Borrowers'
Agent hereunder and Pueblo hereby agrees to act in such capacity as agent for
such Borrowers hereunder. Each Borrower further irrevocably authorizes
Borrowers' Agent to take such action on such Borrowers' behalf and to exercise
such rights and powers hereunder as are delegated to Borrowers' Agent by the
terms hereof, together with such rights and powers as are reasonably incident
al thereto.
(b) Borrowers' Agent is hereby expressly and irrevocably authorized by
each Borrower, without hereby limiting any implied or express authority,
(i) to give and receive on behalf of such Borrower all notices and other
materials delivered or provided to be delivered by Lender to such Borrower
or by such Borrower to lender pursuant to the Financing Agreements,
(ii) to request Revolving Loans and Letter of Credit Accommodations on
behalf of such Borrower, and (iii) to pay, on behalf of such Borrower, all
Obligations at any time due Lender for the benefit of Lender pursuant to
the terms of this Agreement.
12.9 Multiple Borrowers. References to Borrowers wherever used in this
Agreement, shall mean each and all of Borrowers and their respective
successors and assigns, individually and collectively, jointly and
severally, primarily and unconditionally. The liability of each
Borrower hereunder shall be absolute, primary and unconditional,
joint and several.
12.10 Effect On Extension Agreement. Upon closing of the transactions
contemplated herein and the making of the initial Loans by Lender, effective
as of the Closing Date, this Agreement will supercede and replace the
Extension Agreement; provided that, if the Closing Date has not occurred
on or prior to June 30, 2003 Lender may terminate this Agreement and the
Extension Agreement, all other Extension Agreement Financing Agreements
and all Collateral (as defined therein) therefore or thereunder will
remain in full force and effect.
IN WITNESS WHEREOF, Lender and Borrowers and NSC have caused these presents to
be duly executed as of the day and year first above written.
LENDER:
Westernbank Puerto Rico
By: /S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
Business Credit Division
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, 6th Floor
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
BORROWERS:
Attest: Pueblo International, LLC
(f/k/a Pueblo International, Inc.)
__________________
Secretary By: /S/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
(Seal) Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Executive Vice President
and Chief Financial Officer
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FLBN Corporation
Attest: (f/k/a Xtra Super Food Centers, Inc.)
__________________ By: /S/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Secretary Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
(Seal) Title: Executive Vice President
and Chief Financial Officer
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attest: Pueblo Entertainment, Inc.,
__________________ By: /S/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Secretary Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
(Seal) Title: Executive Vice President
and Chief Financial Officer
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attest: Xtra Merger Corporation
__________________ By: /S/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Secretary Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
(Seal) Title: Executive Vice President
and Chief Financial Officer
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attest: All Truck, Inc.
____________________ By: /S/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Secretary Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
(Seal) Title: Executive Vice President
and Chief Financial Officer
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attest: Caribad, Inc.
_________________ By: /S/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Secretary Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
(Seal) Title: Executive Vice President
and Chief Financial Officer
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
OTHER OBLIGOR:
Attest: Nutritional Sourcing Corporation
(f/k/a Pueblo Xtra International, Inc.)
_______________ By: /S/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Secretary Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
(Seal) Title: Executive Vice President
and Chief Financial Officer
Chief Executive Office:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇