EXHIBIT 99.3
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
WESTERNBANK PUERTO RICO
(BUSINESS CREDIT DIVISION)
AS LENDER
AND
PUEBLO INTERNATIONAL, LLC.
FLBN LLC
FLBN/SUB-BASE LLC
AS BORROWERS
AND
NUTRITIONAL SOURCING CORPORATION
DATED: JANUARY 28, 2005
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement, dated as of January 28, 2005, 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 LLC (f/k/a FLBN Corporation and Xtra Super Food
Centers, Inc.), a Delaware limited liability company, FLBN/Sub-Base LLC (f/k/a
FLBN/Sub-Base Corporation and All Truck, Inc.), a Delaware limited liability
company (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 and Pueblo, Xtra Superfood Centers, Inc., Pueblo Entertainment, Inc.,
Xtra Merger Corporation, Caribad, Inc. and All Truck, Inc. and NSC, dated as of
January 30, 2003 (the "Extension Agreement"), Lender (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 Borrowers and certain other persons as a bridge facility;
WHEREAS, the Extension Agreement contemplated that under certain
circumstances Lender and Pueblo, Xtra Superfood Centers, Inc., Pueblo
Entertainment, Inc., Xtra Merger Corporation, Caribad, Inc. and All Truck, Inc
and NSC would 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, pursuant to the Extension Agreement Lender and Pueblo, Xtra
Superfood Centers, Inc., Pueblo Entertainment, Inc., Xtra Merger Corporation,
Caribad, Inc. and All Truck, Inc.(the "Predecessor Borrowers") and NSC have
entered into a Loan And Security Agreement dated as of May 23, 2003 (the
"Existing Loan Agreement") and the other "Financing Agreements"(as defined
therein).
WHEREAS, Xtra Merger Corporation has been merged into NSC, Pueblo
Entertainment, Inc. and Caribad, Inc. have each been merged into Pueblo, the
name of All Truck, Inc. has been changed to FLBN/Sub-Base Corporation and
FLBN/Sub-Base Corporation has been converted to a Delaware limited liability
company named "FLBN/Sub-Base LLC" and the name of Xtra Super Food Centers, Inc.
has been changed to FLBN Corporation and FLBN Corporation has been converted to
a Delaware limited liability company named, "FLBN LLC";
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WHEREAS, Borrowers and NSC have requested that Lender enter into certain
additional financing arrangements with Borrowers pursuant to which Lender may
make additional loans and provide other financial accommodations to Borrowers;
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein; and
WHEREAS, in connection therewith Lender and Borrowers and NSC wish to
amend restate the Existing Loan Agreement as provided 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
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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 plus
(c) the aggregate excess of the appraised value of all assets of such Person and
its subsidiaries over the net book value of all assets of such Person and its
subsidiaries(after deducting from such book values all appropriate reserves in
accordance with GAAP,including all reserves for doubtful receivables,
obsolescence, depreciation and amortization), based on appraisals acceptable to
Lender.
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
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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 "Blocked Accounts" shall have the meaning set forth in section
6.3 hereof.
1.8 "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.
1.9 "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.
1.10 "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.
1.11 "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
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or other interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.12 "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.
1.13 "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
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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.
1.14 "Closing Date" shall mean the date of disbursement of "Term Loan
D"(as hereafter defined) hereunder to be fixed by Lender, on or before March 11,
2005, at such place at such time as shall be specified by Lender.
1.15 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.16 "Collateral" shall have the meaning set forth in Section 5
hereof.
1.17 "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.
1.18 "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.
1.19 "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.
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1.20 "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.
1.21 "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.
1.22 "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.
1.23 "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.
1.24 "Depository" shall have the meaning prescribed in the Note
Purchase Offer.
1.25 "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.
1.26 "Due Date" shall mean March 1, 2010.
1.27 "EBITDA" shall mean, as to any Person, with respect to any
period, an amount
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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.
1.28 "Effective Date" shall mean the date of execution of this
Agreement by Lender.
1.29 "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
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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 account debtor 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.
1.30 "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
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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.
1.31 "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.
1.32 "Equipment" shall mean all of each Borrowers's now owned and
hereafter acquired equipment, machinery, computers and computer hardware and
software (whether
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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.
1.33 "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.
1.34 "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.
1.35 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.36 "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.
1.37 "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.
1.38 "Fixed Charge Coverage Ratio" shall mean as to any Person with
respect to any
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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.
1.39 "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.
1.40 "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).
1.41 "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
the Existing Loan Agreement and 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.
1.42 "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.
1.43 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of
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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.
1.44 "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, (ii) which are Term Loans, other than Term Loan D a
rate of two percent (2%) per annum in excess of the Prime Rate and (iii) which
is Term Loan D, a rate of three percent (3%) per annum in excess of the Prime
Rate, subject to adjustment as provided in Section 3.1(e) hereof 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, other then Term Loan D, 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 other than
Term Loan D and the rate of five percent (5%) per annum in excess of the Prime
Rate as to Term Loan D 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, other than Term Loan D, 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 (x)
six percent (6%) per annum as to Revolving Loans and (y) seven percent (7%) per
annum as to Term Loans.
1.45 "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.
1.46 "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
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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.
1.47 "Loans" shall mean the Revolving Loans and the Term Loans.
1.48 "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.
1.49 "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.
1.50 "Maximum Credit" shall mean the amount of $119,000,000 reduced
by the Reduction Amount .
1.51 "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.
1.52 "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
15
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.
1.53 "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.
1.54 "Net Revenues" shall mean, gross revenues less returns, credits,
discounts and allowances.
1.55 "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.
1.56 "Note Purchase Offer" shall mean the invitation by NSC to
holders of the Senior Secured Notes to offer to sell for cash prices designated
by the offering holders any or all of their holdings of Senior Secured Notes, to
be dated on or about January 28, 2005, as approved by Lender, a copy of which is
attached as Exhibit B hereto.
1.57 "NSC Notes" shall mean the 10.125% Restated Subordinated
Intercompany Note issued by Pueblo and the 10.125% Subordinated Intercompany
Note issued by Pueblo Entertainment, Inc. to NSC, dated June 5, 2003 in the
principal amounts of $70,000,000 and $20,000,000, respectively.
1.58 "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
16
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.
1.59 "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.
1.60 "Payment Account" shall have the meaning set forth in Section
6.3 hereof.
1.61 "PACA" shall mean the "Packers and Stockyards Act", 7 USC
Section 181, et.seq.
1.62 "PASA" shall mean the "Perishable Agricultural Commodities Act",
7 USC Section 499a, et. seq.
1.63 "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.
1.64 "Permitted Liens" shall mean those liens, encumbrances and
security interests (i) allowed by Section 9.8(b) through (g) hereof or (ii) as
may otherwise be consented to by Lender, in writing.
1.65 "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.
1.66 "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.
1.67 "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
17
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.
1.68 "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.
1.69 "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.
1.70 "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).
1.71 "Reduction Amount" shall mean the amount, if any, by which Term
Loan D shall be less than $45,000,000 or if originally $45,000,000, the portion
thereof not used as required in Section 2.3(d) and which is required to be
returned to Lender.
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1.72 "Reference Bank" shall mean Westernbank Puerto Rico or such
other bank as Lender may from time to time designate.
1.73 "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.
1.74 "Retail Store" shall mean the retail stores which are now
existing or hereafter operated by any Borrower and which sell Inventory.
1.75 "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.
1.76 "Security Pledge" shall mean the "Security Pledge And
Intercreditor Agreement between NSC and Wilmington Trust Company, dated June 5,
2003.
1.77 "Senior Secured Notes" shall mean NSC's 10.125% Senior Secured
Notes due August 1, 2009, issued by NSC.
1.78 "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).
1.79 "Special Advance Facility" shall have the meaning prescribed by
Section 2.1(f) hereof.
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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 "Suppressed Revolving Loans" shall mean the difference between
(a)$15,000,000 and (b) the amount of all payments of principal of Term Loan D
multiplied by 0.33.
1.84 "Term Loans" shall mean the term loans made by Lender to
Borrowers as provided for in Section 2.3 hereof.
1.85 "Uniform Commercial Code" or "UCC" shall include the Puerto Rico
"Commercial Transactions Act" and "UCC" shall mean the Uniform Commercial Code.
1.86 "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.
1.87 "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.
1.88 "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
20
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) the percentage of the Value of
Eligible Inventory stated in Schedule 2.1(a)(ii) hereof with
respect to the period specified therein or (B) the percentage of
the "Net Recovery Percentage" for Eligible Inventory stated in
Schedule 2.1(a)(ii) hereof with respect to the period specified
therein, less
(iii) Any Availability Reserves, less
(iv) The amount of Suppressed Revolving Loans; provided that,
except in Lender's discretion, the aggregate amount of Revolving
Loans at any time outstanding pursuant to Section 2.1(a)(i) and
(ii) hereof shall in no event exceed Thirty Five Million Six
Hundred Fifty Thousand Dollars($35,650,000)(but reduced by the
amounts stated in Section 2.1(a)(iii) and(iv) hereof).
(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
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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.
(e) As additional security for the payment of Term Loan D, the
amount of Suppressed Revolving Loans otherwise available to Borrowers under
applicable lending formulas shall not be available to, and shall be withheld
from, Borrowers. Notwithstanding any other provision of this Agreement, Lender
may, in its discretion(but shall not be required to) apply any amount of the
Suppressed Revolving Loans that would otherwise be available to Borrowers, at
any time and from time to time, to any portion of Term Loan D then due.
(f)(i) Borrowers shall also have available, upon the request of
Borrowers' Agent, a special revolving advance facility(the "Special Advance
Facility") in the amount of up to the lesser of (x) 30% of the Value of
Inventory that is not Eligible Inventory, but is otherwise acceptable to Lender
for this purpose, but excluding in any event Inventory which is obsolete,
expired or otherwise unsalable, in the ordinary course of business or (y)
$5,000,000 of which at least $1,800,000 must come from Lender's temporarily
allowing Borrowers the use of the amount of Suppressed Availability required to
be maintained by Borrowers pursuant to Section 9.16(a) hereof, on the terms and
subject to the following conditions:
(A) Loans under the Special Advance Facility will not result in the
Maximum Credit or any of the sublimits thereof being exceeded,
(B) Except in Lender's discretion, the amount of Loans under the
Special Advance Facility plus the amount of all other Revolving Loans less all
Availability Reserves shall not exceed $20,650,000,
(C) The Special Advance Facility shall be available only for non
consecutive periods
22
of up to 120 days,
(D) The Special Advance Facility shall be available only if no part
thereof has been outstanding during the preceding 60 day period,
(E) The Special Advance Facility shall be part of the Revolving
Loans and otherwise shall be subject to all other provisions regarding Revolving
Loans hereunder, including repayment, and
(F) 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.
(ii) In order to draw amounts available under the Special Advance
Facility Borrowers' Agent shall submit a written request therefore to Lender
which shall specify:
(A) The amount of the Special Advance Facility requested to be drawn
by Borrowers and
(B) The period for which such amount is to be borrowed, which must
be a period of 30, 60, 90 or 120 days; provided that, if at the time of any such
request any Loan or Loans were already requested and made under the Special
Advance Facility, at any time within the previous 120 days, Borrowers' Agent may
not request, and no Loan will be made under the Special Advance Facility, for a
period which would extend beyond 120 days from the date of the earliest of such
Loans.
(iii) The Special Advance Facility will terminate and Loans thereunder
shall no longer be available to Borrowers at such time as the amount of the
Suppressed Revolving Loans shall be reduced to zero(0).
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)
23
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(c)(i) or Section
2.2(c)(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 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
24
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 has or will be making four (4) Term Loans to
Borrowers as follows:
(a) Lender has made a capital expenditures Term Loan to the
Predecessor 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 $4,000,000. This Term Loan ("Term Loan A") (i) is
evidenced by a Term Loan A Promissory Note in the original aggregate principal
amount of $4,000,000, duly executed and delivered by the Predecessor Borrowers
to Lender concurrently with the disbursement of Term Loan A, (ii) is repayable,
together with interest and other amounts in accordance with this Agreement, the
Term Loan A Promissory Note and the other Financing Agreements and (iii) is
secured by all of the Collateral. Term Loan A shall in no event exceed in the
aggregate the amount outstanding as of the date hereof, during the term of this
Agreement. Borrowers may not request any further disbursements of Term Loan A.
All amounts drawn under Term Loan A and the Term Loan A Promissory Note shall
remain payable calculated on the basis of 60 equal monthly payments of principal
with the final payment of the then remaining principal balance, interest and
other amounts due on June 1, 2008 as provided in the Existing Loan Agreement and
in the Term Loan A Promissory Note.
As of the date hereof:
(x) The amount of Term Loan A previously drawn by the Predecessor
Borrowers is
25
$4,000,000,
(y) The outstanding principal amount of Term Loan A is $2,733,333.27,
and
(z) No further amount of Term Loan A remains available to, or may be
drawn by, Borrowers.
(b) Lender has made a Term Loan to the Predecessor Borrowers for the
purpose of partially refinancing existing indebtedness of Pueblo to NSC and to
be used for working capital, in the original principal amount of $36,000,000.
This Term Loan ("Term Loan B") (i) is evidenced by a Term Loan B Promissory Note
in the original principal amount of $36,000,000, duly executed and delivered by
the Predecessor Borrowers to Lender and will be evidenced by an Amended And
Restated Term Loan B Promissory Note in the original principal amount of
$36,000,000, duly executed and delivered by Borrowers to Lender to be
substituted for the existing Term Loan B Promissory Note, (ii) is and will be
repayable together with interest and other amounts, in accordance with this
Agreement, the Amended And Restated Term Loan B Promissory Note, 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 are each in the principal amount of (A) the amount disbursed divided
by (B) 180 and the last installment and final payment shall be the amount of the
entire unpaid balance of such Term Loan and the Amended And Restated Term Loan B
Promissory Note and due on the Due Date, together with interest and other
amounts as provided herein and in the Amended And Restated Term Loan B
Promissory Note and (iii) is secured by all of the Collateral. On the Closing
Date, Borrowers will execute and deliver to Lender the Amended And Restated Term
Loan B Promissory Note, dated the date of, and in exchange for and in
substitution of the existing Term Loan B Promissory Note. Pursuant to this
Agreement, (i) the due date of Term Loan B is being extended from June 1, 2008
under the Existing Loan Agreement to the Due Date under this Agreement and (ii)
the amount of the last payment of Term Loan B is being adjusted, as a result
thereof, from $24,200,000 under the Existing Loan Agreement to $20,000,000.
As of the date hereof:
(x) the amount of Term Loan B, previously drawn by the Predecessor
Borrowers is $36,000,000,
(y) the outstanding principal amount of Term Loan B is $32,200,000 , and
(z) no further amount of Term Loan B remains available to, or may be
drawn by Borrowers.
(c) Lender has made a Term Loan to the Predecessor Borrowers to be
used for working capital in the original principal amount of $5,000,000. This
Term Loan ("Term Loan C") (i) is evidenced by a Term Loan C Promissory Note in
the original aggregate principal amount of $5,000,000, duly executed and
delivered by the Predecessor Borrowers to Lender concurrently with the
disbursement of Term Loan C, (ii) is repayable, together with interest and other
amounts in accordance with this Agreement, the Term Loan C Promissory Note and
the other Financing Agreements and (iii) is secured by all of the Collateral.
Term Loan C shall in no event exceed in the aggregate the amount outstanding as
of the date hereof, during the term of this Agreement. Borrowers may not request
any further disbursements of Term Loan C. All
26
amounts drawn under Term Loan C and the Term Loan C Promissory Note shall remain
payable calculated on the basis of 60 equal monthly payments of principal with
the final payment of the then remaining principal balance, interest and other
amounts due on June 1, 2008 as provided in the Existing Loan Agreement and in
the Term Loan C Promissory Note.
As of the date hereof:
(x) The amount of Term Loan C previously drawn by the Predecessor
Borrowers is $5,000,000,
(y) The outstanding principal amount of Term Loan C is $$3,416,666.73,
and
(z) No further amount of Term Loan C remains available to, or may be
drawn by, Borrowers.
(d)(i) Lender intends to make a Term Loan to Borrowers for the purpose
of repaying a portion of the $70,000,000 NSC Note of Pueblo to NSC and to be
used by NSC as provided in Section 6.6 hereof; provided that, any amount of Term
Loan D not used as permitted herein will be repaid to Lender by NSC and
Borrowers on demand. This Term Loan ("Term Loan D") is and will be (A) evidenced
by a Term Loan D Promissory Note in the original principal amount disbursed duly
executed and delivered by Borrowers to Lender on the Closing Date, (B) repaid
together with interest and other amounts, in accordance with this Agreement, the
Term Loan D Promissory Note, 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 D Promissory Note and due on the Due Date, together with
interest and other amounts as provided herein and in the Term Loan D Promissory
Note and (C) secured by all of the Collateral.
(ii) A portion of Term Loan D equal to the principal of and interest
on the Senior Secured Notes to be purchased pursuant to the Note Purchase Offer
will be disbursed by Lender, to the Depository on behalf of and for the account
of Borrowers and NSC; subject to:
(A) The Depository entering into satisfactory agreements with
Lender;
(B) Any portion of the amount so disbursed not used for the purposes
specified in this Section 2.3(d) being forthwith returned to Lender by the
Depository; and
(C) Satisfaction and fulfillment of all conditions elsewhere
specified herein.
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
27
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- $ 35,650,000;
(b) Term Loan A- $ 2,733,333.27;
(c) Term Loan B- $ 32,200,000;
(d) Term Loan C- $ 3,416,666.73; and
(e) Term Loan D- $ 45,000,000 reduced by the Reduction
Amount, if any.
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, except Term Loan D, 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
(except Term Loan D), 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
28
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.
(e) Term Loan D may in no event be converted to a Eurodollar Rate
Loan; but at all times shall be a Prime Rate Loan. At such time as (i) the
amount of the Loans, other than Revolving Loans, shall be less than $51,600,000,
(ii) the amount of the Obligations, other than Revolving Loans, shall be equal
to or less than sixty five percent(65%) of the value of the
29
Collateral, as determined by appraisals acceptable to Lender, shown on Schedule
3.1(e) hereto and (iii) the amount of Revolving Loans shall not exceed the
amounts available to Borrowers determined pursuant to Section 2.1 hereof, then
the number of percentage points in excess of the Prime Rate used to determine
the Interest Rate with respect to Term loan D as specified in Section
1.44(a)(iii) hereof, shall upon the written request of Borrowers be reduced from
3% to 2%, effective the first day of the second succeeding month following
submission to Lender of proof satisfactory to Lender by Borrowers of the
occurrence of such event.
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 this Agreement is
terminated prior to the end of then current term or any renewal term of this
Agreement, 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) $1,050,000 plus 3% of the then From the date hereof to and including
outstanding balance of the Term February 28, 2007;
Loans at and as of the date of such
failure or termination.
(b) $700,000 plus 2% of the then From March 1, 2007 to and including
outstanding balance of the Term February 29, 2008; and
Loans as of the date of such
termination.
30
(c) $350,000 plus 1% of the then From March 1, 2008 to and including
outstanding balance of the Term February 28, 2010 or if this Agreement
Loans as of the date of such is extended for an additional period as
termination. 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
31
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 Success Fee. Borrowers shall pay to Lender a "success" fee of
$1,134,000 in respect of the purchase of the Senior Secured Notes by NSC. Such
fee is in addition to all other fees, interest and charges payable by Borrowers
to Lender and shall be fully earned as of, and payable on, the date NSC accepts
for payment the tendered Senior Secured Notes.
3.8 Closing Fee. Borrowers shall pay to Lender as a closing fee the
amount of $225,000 or five tenths of one percent (0.5%) of Term Loan D,
whichever is greater, which shall be fully earned as of and payable on the date
of execution hereof.
3.9 Special Advance Facility Fee; Interest. Borrowers shall pay to
Lender a "special advance" fee of one third of one percent (0.3333%) per 30 days
of the amount of the Loans requested by Borrowers under the Special Advance
Facility for the period requested and any renewal or extension thereof, as may
be consented to by Lender in its discretion. Such fee is in addition to all
other fees, interest and charges payable by Borrowers to Lender and shall be
fully earned as of, and payable on, the date of making of each request by
Borrowers for a Loan under the Special Advance Facility. Such fee shall be
payable with respect to each thirty (30) day period for which Loans are
requested to be made under the Special Advance Facility. Interest shall be
payable on or with respect to Loans under the Special Advance Facility as
provided in Section 3.1 hereof; provided that, all Loans under the Special
Advance Facility shall only be Prime Rate Loans.
Section 4. CONDITIONS PRECEDENT.
4.1 Conditions Precedent to Term Loan D.
Each of the following is a condition precedent to Lender making the
initial Loans (including Term Loan D) and providing the initial Letter of Credit
Accommodations hereunder:
(a) All of the representations and warranties of Borrowers and NSC
contained herein 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
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and NSC to such effect.
(c) No court or administrative agency shall have issued any
injunction or restraining order or other order with respect to the Note Purchase
Offer 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 Permitted Liens, 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
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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
(i) the Financing Agreements, (ii) the security interests and liens of Lender in
the Collateral, (iii) the Note Purchase Offer and (iv) such other matters as
Lender may request.
(j) The other Financing Agreements requested or submitted by Lender
from or to Borrowers or NSC 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) To the extent not previously delivered pursuant to the Existing
Loan Agreement, 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) To the extent not previously delivered pursuant to the Existing
Loan Agreement, 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) To the extent not previously delivered pursuant to the Existing
Loan Agreement, 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) To the extent not previously delivered pursuant to the Existing
Loan Agreement, 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) The Note Purchase Offer as proposed to be consummated shall be
acceptable to Lender and all conditions to NSC's purchase of the Senior Secured
Notes thereunder shall have been satisfied.
(p) The amount payable by Borrowers to NSC and by NSC in connection
with the purchase of the Senior Secured Notes shall not exceed $45,000,000.
(q) Excess Availability as of the Closing Date, shall not be less
than $10,000,000, after giving effect to the Loans already made and to be made
and the Letter of Credit Accommodations already provided and to be provided
hereunder in connection with the transactions hereunder and under the Note
Purchase Offer.
(r) 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.
(s) 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(under
assumptions consistent with the pro forma financial statements delivered in
connection with the Note Purchase Offer), 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 Term Loan D as
provided herein and (C)
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the consummation of the Note Purchase Offer 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 Effective 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.
(t) 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.
(u) Borrowers shall not have granted any liens or security interests
in any of their assets to any Person except (i) Permitted Liens; (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.
(v) 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.
(w) To the extent not previously delivered pursuant to the Existing
Loan Agreement, Lender shall have received assignments of all Material
Contracts, leases, rent proceeds from leases and Intellectual Property, as
Lender shall have requested, all in form and substance satisfactory to Lender.
(x) All fees, costs and expenses payable to Lender, including the
fees and disbursements of Lender's counsel shall have been or concurrent with
the making of Term Loan D shall be, paid.
(y) To the extent not previously delivered pursuant to the Existing
Loan Agreement, 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.
(z) To the extent not previously delivered pursuant to the Existing
Loan Agreement, 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.
(aa) Borrowers shall have furnished evidence to Lender that all
property taxes on the Real Estate then due have been paid.
(bb) Lender shall have received a certified copy of the Note Purchase
Offer in effect on the Closing Date and same shall be satisfactory to Lender, in
form and substance.
(cc) Lender shall have received a ratification and assumption
agreement, in form and substance satisfactory to it from Borrowers and such
other agreements, documents and instruments as Lender may request in connection
with or on account of the merger of Pueblo Entertainment, Inc. into Pueblo and
conversion of each of FLBN Corporation and FLBN/Sub-Base Corporation into
limited liability companies.
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
35
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.
(dd) The Information Certificates, Schedules and Exhibits required to
be furnished to Lender by Borrowers, pursuant to Section 12.10 hereof, (i) shall
have been so furnished on or prior to the date required therein, (ii) shall be
satisfactory to Lender in all respects and (iii) shall not reflect any fact,
information or condition, which in Lender's discretion could have a Material
Adverse Effect.
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 Term Loan D 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, make claims with respect to, or otherwise affect (A) the
making of the Loans or providing the Letter of Credit Accommodations, (B) the
consummation of the transactions contemplated pursuant to the terms hereof or
the other Financing Agreements or (C) the consummation of the transactions
contemplated by the Note Purchase Offer 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 D 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 (including Term Loan D) not
satisfied at and as of the Closing Date 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
36
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, including that Intellectual
Property described on Schedule 5.1(b) hereto;
(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;
37
(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) all motor vehicles; and
(q) 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
38
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
39
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
40
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 proceeds of Term Loan D
and any other Loans provided by Lender to Borrowers hereunder on or about the
date hereof 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 in respect of the NSC Notes not exceeding the amount of
$45,000,000 and (c) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements. NSC shall use the proceeds of Term Loan D and payments by Borrowers
in reduction of the NSC Notes only for (a) the purchase of the Senior Secured
Notes, (b) the payment of accrued interest thereon and (c) the payment of
expenses incurred in connection therewith, as provided in the Agreement. 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 Term
Loan D paid to it by Borrowers only for purposes of paying the amounts payable
pursuant to the Note Purchase Offer. None of the proceeds will be used,
41
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
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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,
43
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
44
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
appraiser 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
45
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 judgment 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
46
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
47
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
48
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
49
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.
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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. NSC is a
corporation duly organized and in good standing under the laws of its state of
incorporation and each Borrower 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
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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
52
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 130of 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.
Except as set forth on Schedule 8.11 hereto Borrowers own and have good and
marketable title to all such Intellectual Property, free and clear of all liens,
security interests, claims, charges, encumbrances and rights of third parties,
(including claims for infringement) and all such Intellectual Property is
recorded or registered in the name
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of a Borrower in the United States Patent And Trademark Office, if a patent or
trademark, or in the United States Copyright Office if a copyright and in the
appropriate state office. 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, the United States Copyright 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 (i) each
of Pueblo Markets, Inc, Pueblo Super Videos, Inc., Xtra Drugstores, Inc. and
Pueblo Caribbean Videos, Inc. have been dissolved, (ii) Xtra Merger Corporation
has been merged into NSC, (iii) the name of All Truck, Inc. has been changed to
FLBN/Sub-Base Corporation, which has been converted to a Delaware limited
liability company, named "FLBN/Sub-Base LLC", (iv) the name of XTRA Superfood
Centers, Inc. has been changed to FLBN Corporation, which has been converted to
a Delaware limited liability company, named "FLBN LLC" and (v) Pueblo
Entertainment and Caribad, Inc. have each been merged into Pueblo International
LLC.
(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,
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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 discharge,
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
55
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.
8.17 Financial Ratios.
(a) As of October 30, 2004, NSC and Borrowers had a consolidated
Adjusted Net Worth of not less than $13,000,000.
(b) For the fiscal year ended October 30, 2004, NSC and Borrowers
had (i) a consolidated Fixed Change Coverage Ratio (computed as determined in
Section 9.17(a) hereof)
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equal to or greater then 1.3 to 1, (ii) consolidated EBITDA of not less then
$22,000,000 and (iii) consolidated Net Revenue of not less than $525,000,000.
(c) As of October 30, 2004 NSC and Borrowers had a ratio of
consolidated Debt to consolidated EBITDA not in excess of 10 to 1.
8.18 Note Purchase Offer . The Note Purchase Offer complies, and the
purchase of the Senior Secured Notes will comply, 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 and all statements contained in the Note Purchase Offer are true,
correct and complete in all material respects and that there is no omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
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
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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
58
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
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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,
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
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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.
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
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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
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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 the Note Purchase Offer, a one time payment on the Closing Date, from the
proceeds of Term Loan D as contemplated by Section 6.6 hereof, (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,
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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, (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 and (g) a contribution by NSC to the
capital of Pueblo(or a reduction of the amount of the NSC Notes) to the extent
of any discount derived by NSC on the purchase of the Senior Secured Notes
pursuant to the Note Purchase Offer.
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
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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. NSC and Borrowers shall, at all times, maintain
consolidated Working Capital of not less than $5,000,000.
9.15 Adjusted Net Worth. NSC and Borrowers shall maintain a
consolidated Adjusted Net Worth of not less than: (a)$7 ,000,000 during their
fiscal year ending October 29, 2005, (b) $6,000,000 during their fiscal year
ending October 28, 2006, (c) $6,000,000 during their the fiscal year ending
November 3, 2007,(d) $7,000,000 during their the fiscal year ending November 1,
2008 and (e) $7,000,000 during their the fiscal year ending October 31, 2009.
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.
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9.17 Additional Financial Covenants. (a) NSC and Borrowers shall, as
of the close of their fiscal year ending October 29, 2005, 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 1.30 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) NSC and Borrowers shall, as of the close of their fiscal year
ending October 29, 2005 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 $22,000,000
and (ii) consolidated Net Revenue of not less than $525, 000,000.
(c) NSC and Borrowers shall not permit, as of the close of their
fiscal year ending October 29, 2005, 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) Payment by Pueblo to NSC of up to $45,000,000 to be used by NSC
in accordance with the requirements of Section 6.6 hereof; 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
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(c) 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
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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 Lenders's
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
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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,
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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 Note Purchase Offer.
(a) NSC shall not change or amend or agree to change or amend the
terms of the Note Purchase Offer or extend or terminate the original stated
"Expiration Date"(as defined therein) thereof, without giving notice thereof to
Lender.
(b) NSC and Borrowers will repay to Lender on demand, any portion of
the Loans to be used by NSC (i) to purchase the Senior Secured Notes, (ii) to
pay accrued interest thereon or (iii)to pay expenses in connection therewith,
not so used by March 11, 2005.
9.29 Security Pledge. NSC shall not amend or agree to amend the
Security Pledge, without the prior written consent of Lender.
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9.30 Loan To Value Ratio. (a) At no time after any reduction of the
Interest Rate with respect to Term Loan D, as provided in Section 3.1(e) hereof,
shall Borrowers permit (i) the amount of the Loans, other than Revolving Loans
to exceed $51,600,000, (ii) the amount of the Obligations, other than Revolving
Loans, to exceed 65% of the value of the Collateral, as determined by appraisals
acceptable to Lender, shown on Schedule 3.1(e) hereto or (iii) the amount of
Revolving Loans and Letter Of Credit Accommodations to exceed the amounts
available pursuant to Sections 2.1 and 2.2 hereof.
(b) Borrowers shall reduce the amount of Revolving Loans and Letter
Of Credit Accommodations so that at no time shall the amount thereof exceed the
amounts specified on Schedule 2.1((a)(ii) hereof; subject to reduction as
provided in Section 2.1(b) hereof.
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
(including any mandatory repayment in respect thereof) 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;
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(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 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 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 in 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) NSC shall not comply with the Note Purchase Offer in any
material respect;
(o) any proceeds of Term Loan D not used by NSC to fund to purchase
of the Senior Secured Notes or pay accrued interest thereon or expenses in
connection therewith on or prior to March 11, 2005, shall not be repaid to
Lender on demand, together with interest thereon, as provided herein.
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(q) 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) shall be reopened at any time;
(p) 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
(q) Any Loans under the Special Advance Facility are outstanding and
remain unpaid for (i) a period greater than the period permitted under Section
2.1(f)(ii) hereof or (ii)120 consecutive days after the making thereof,
whichever occurs first.
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
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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.
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(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
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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
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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 (a) 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, (b) arising out of or in connection
with, the Note Purchase Offer or the purchase of any of the Senior Secured Notes
by NSC or (c) in connection with any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including in each case, 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 March 1, 2010 (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, Borrowers 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
their 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
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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
78
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; provided that, for purposes of determining the amount of Revolving Loans
and Letter of Credit Accommodations available to Borrowers pursuant to section
2.1 and 2.2 hereof , inventory shall be valued on a first in, first out basis.
(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.
79
(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, Term 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 Existing Loan Agreement. (a) Upon closing of the
transactions contemplated herein and the making of Term Loan D hereunder by
Lender, effective as of the Closing Date, this Agreement will amend and restate
the Existing Loan Agreement; provided that:
(i) there shall be no novation of the Existing Loan Agreement;
(ii) there shall be no novation of any of the other Financing
Agreements under the Existing Loan Agreement, all of which shall continue in
full force and effect and shall be Financing Agreements under this Agreement;
(iii) Collateral under the Existing Loan Agreement shall continue to
be Collateral under this Agreement.
(b) The Information Certificate, the Schedules and the Exhibits
furnished to Lender under, in connection with or as part of the Existing Loan
Agreement shall constitute the
80
Information Certificate, Schedules and Exhibits under this Agreement and are
hereby made a part hereof and all of which Borrowers and NSC represent and
warrant to be true, correct and complete in all material respects, as of the
Effective Date and will be true, correct and complete in all material respects,
as of the as of the Closing Date and which do not and will not omit to state any
material fact required to be stated therein or necessary in order to make the
information contained therein not false or misleading, except as may be set
forth in Schedule 12.10(b) hereto. Borrowers shall furnish to Lender (i) not
later than February 22, 2005, in form and substance satisfactory to Lender (A)
new Information Certificates, Schedules and Exhibits hereunder with respect to
FLBN LLC and FLBN/Sub-Base LLC, (B) all Schedules and Exhibits required by this
Agreement that were not required by the Existing Loan Agreement, including
Schedule 12.10(b) and (C) executed counterparts of all Financing Agreements and
other instruments and documents to be furnished or delivered to Lender
hereunder, by or on behalf of Borrowers, except those shown on Schedule
12.10(b)(i)(C) hereof, (ii) on or before the Closing Date executed counterparts
of all Financing Agreements and other instruments and documents to be furnished
or delivered to Lender hereunder shown on Schedule 12.10(b)(i)(C) hereto and
(iii) on the Effective Date, together with this Agreement, Exhibit B and
Schedule 12.10(b)(i)(C) hereto.
(c) In the event the transactions contemplated by this Agreement
shall not close on or prior to March 11, 2005:
(i) Lender's closing fee specified in Section 3.8 hereof shall be
fully earned and Borrowers shall pay all of Lender's costs and expenses incurred
in connection herewith, including the fees, costs and expenses of Lender's
counsel,
(ii) The amount of Revolving Loans and Letter Of Credit
Accommodations available to Borrowers shall be as stated in the Existing Loan
Agreement and the other terms and provisions Existing Loan Agreement shall not
be modified as provided herein, and
(iii) Lender shall be under no obligation to disburse Term Loan D.
(d) Until the Closing Date and disbursement of Term Loan D, the
amount of Revolving Loans and Letter Of Credit Accommodations available to
Borrowers shall be as stated in the Existing Loan Agreement and the other terms
and provisions of the Existing Loan Agreement shall not be modified as provided
herein.
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/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Business Credit Division
81
Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ 6th Floor
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
BORROWERS:
Attest: Pueblo International, LLC
(f/k/a Pueblo International, Inc.)
/s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------
Secretary By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
(Seal) ------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FLBN LLC
Attest: (f/k/a FLBN Corporation and Xtra Super
Food Centers, Inc.)
/s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------- By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Secretary -------------------------------------
(Seal) Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Executive
Vice President and Chief
Financial Officer
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FLBN/ Sub-Base LLC
Attest:
(f/k/a FLBN/Sub
Base Corporation and All Truck, Inc.)
82
/s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------- By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Secretary -------------------------------------
(Seal) Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Executive
Vice President and Chief
Financial Officer
Chief Executive Office:
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
OTHER OBLIGOR:
Attest: Nutritional Sourcing Corporation
(f/k/a Pueblo Xtra International, Inc.)
/s/ ▇▇▇▇ ▇. ▇▇▇▇
---------------- By: /s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Secretary -------------------------------------
(Seal) Name: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
Title: Executive Vice President And
Chief Financial Officer
Chief Executive Office:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Commonwealth Of Puerto Rico )
)ss
Municipality Of San ▇▇▇▇ )
Affidavit No.
Amended And Restated Loan And Security Agreement, acknowledged and
subscribed to before me by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, of legal age, married, executive
and resident of San ▇▇▇▇, Puerto Rico as President of the Business Credit
Division of Westernbank Puerto Rico, personally known to me this day of
January, 2005, at San ▇▇▇▇, Puerto Rico.
----------------------------------------
NOTARY PUBLIC
83
State Of Florida )
)ss:
County of )
Amended And Restated Loan And Security Agreement, acknowledged and
subscribed to before me by ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, of legal age, married, executive
and resident of Florida, in his capacity as Executive Vice President and Chief
Financial Officer of Pueblo International, LLC, FLBN LLC (f/k/a FLBN Corporation
and Xtra Super Food Centers, Inc.) and FLBN/Sub-Base LLC (f/k/a FLBN/Sub-Base
Corporation and All Truck, Inc.) and personally known to me at Boca Raton,
Florida, this ________ day of January, 2005.
----------------------------------------
NOTARY PUBLIC
84
SCHEDULE 2.1(a)(II)
PERCENTAGE OF
NET RECOVERY
PERCENTAGE
PERCENTAGE OF VALUE FOR ELIGIBLE
PERIOD OF ELIGIBLE INVENTORY INVENTORY
------------------- --------------------- --------------
2/05 75% 100%
3/05 75% 100%
4/05 74% 98%
5/05 74% 98%
6/05 74% 98%
7/05 73% 96%
8/05 73% 96%
9/05 73% 96%
10/05 72% 94%
11/05 72% 94%
12/05 72% 94%
1/06 71% 92%
2/06 71% 92%
3/06 71% 92%
4/06 70% 90%
5/06 70% 90%
6/06 70% 90%
7/06 69% 88%
8/06 69% 88%
9/06 69% 88%
10/06 68% 86%
11/06 68% 86%
12/06 68% 86%
1/07 67% 84%
2/07 67% 84%
3/07 67% 84%
4/07 66% 82%
5/07 66% 82%
6/07 66% 82%
7/07 and thereafter 65% 80%
SCHEDULE 3.1(e)
LTV Reduction Analysis
APPRAISED AMOUNT TO BE
VALUE LTV AVAILABLE REDUCED
------------ ---------- ------------ ---------------
Property
COMPANY OWNED: $ 26,500,000
Campo Rico Warehouse 10,000,000
Campo Rico Store 11,500,000
Condado De Diego
48,000,000 75% 36,000,000 4,800,000
Total Company Owned:
LEASED PROPERTIES
7,000,000
Isla Verde 8,000,000
Plaza Las Americas 3,500,000
Plaza del Caribe (1) -
Mayaguez Mall (2) 108,000
Old San ▇▇▇▇* 378,000
Guayama * 1,212,300
▇▇▇▇▇ ▇▇▇▇ * 1,300,300
▇▇▇▇ Baja * 593,120
Manati* 747,633
Fajardo* 528,227
Hatillo* 328,900
San German* 800,000
Caguas*
24,496,480 37% 9,063,698 5,634,190.00
Total Leased Properties (3)
TRADENAME 26,000,000 25% 6,500,000 6,500,000.00
TOTAL $ 79,496,480 $ 51,563,698 $ 16,934,190
ROUNDED TOTAL $ 79,500,000 $ 51,600,000
LTV(51,600,000/79,500,000) 65%
SCHEDULE 12.10(b)(I)(C)
1. Opinions of Counsel
2. Pay Proceeds Letter
3. Depository Request For Funding
4. Certificate re: compliance with representations, warranties and conditions.
5. Closing Certificate