EXHIBIT B
PRINCIPAL ECONOMIC TERMS
PART I
[WESTERNBANK BUSINESS CREDIT DIVISION]
June 27, 2002
Mr. William T. Keon III, C.E.O.
Mr. Daniel J. O'Leary, C.F.O.
Pueblo Xtra International, Inc.
1300 N.W. 22nd St.
Pompano Beach, Florida 33069
Gentlemen:
You have provided us with certain information and have discussed with us the
current and future needs for the financing of Pueblo Xtra International, Inc.
and its subsidiaries or affiliates (the "Company").
In connection therewith, we are pleased to submit our proposal to provide a
secured revolving credit and term loan facility of up to $80,000,000, to the
Company (the "Credit Facility") to be used for refinancing capital expenditures
and working capital purposes.
The exact structure and terms of the proposed Credit Facility cannot be
precisely stated until the completion of our field examinations and credit
investigations. However, in general, we contemplate that the Credit Facility
may be structured as follows:
1. Revolving Credit Facility
(a) Amount: Revolving loans based upon the lending formulas, and
subject to the sublimits and other terms described below.
(b) Lending Formulas:
(i) Accounts: Net amount of eligible cash, credit cards,
debit cards and all accounts receivable of the
Company. Eligible accounts receivable and the net
amounts thereof will be determined by us pursuant to
general criteria which will be set forth in the loan
documentation.
(ii) Inventory: Up to the lesser of (iii) sixty (65%)
percent multiplied by the cost of this eligible
Non-Perishable Finished Goods inventory of the
Company, with cost determined under the
first-in-first-out method or (iv) eighty percent
(80%) of the "Net Recovery Percentage" for eligible
Non-Perishable Finished Goods inventory
of the Company (with such percentage calculated based
on its cost) multiplied by the cost of such eligible
inventory (or if less, eighty percent (80%) of the
Net Recovery Percentage for the eligible inventory of
the Company (with such percentage calculated based on
its retail value) multiplied by the retail value of
such inventory). The amount of the Net Recovery
Percentage will be determined based on the recovery
from the eligible inventory pursuant to an appraisal
to be conducted on a "going out of business sale"
basis, at the expense of the Company, by appraisers
acceptable to us, net of estimated liquidation
expenses. Eligible inventory will be determined by us
pursuant to general criteria which will be act forth
in the loan documentation. Generally, eligible
inventory will exclude un-inspected and perishable
foods, produce, deli and bakery food products,
expired foods or products and food or products with
short expiration dates or shelf life, purchases in
transit, unfinished or unprocessed food or products,
packaging, supplies, slow-moving, damaged or obsolete
inventories, and those other items which do not
constitute collateral acceptable for lending purposes
pursuant to criteria established by us.
(c) Inventory Loan Limit: The maximum amount of loans available
in respect of eligible inventory shall not exceed $35,000,000,
at any time, notwithstanding the total value of eligible
inventory and including for this purpose our reliance on
eligible inventory to be acquired under commercial letters of
credit opened by or through us under the letter of credit
facility described below.
2. Letter of Credit Facility.
(a) Amount: Letters of credit arranged through us ("LCs") of up
to an aggregate amount at any time outstanding of $10,000,000,
included within the overall Revolving Credit Facility.
(b) LC Reserves Against Availability: Reserves against the
revolving loans otherwise available equal to (1) one hundred
percent (100%) unless the percentage set forth above for the
inventory lending formula multiplied by the cost of the goods
being purchased with the LC, plus (ii) duty, freight and cost
of transport within the U.S., will be required when opening
LCs for the purpose of purchasing eligible inventory, LCs
which are opened for other purposes approved by us will
require reserves of one hundred percent (100%) of the amount
of such LCs.
(c) Letter of Credit Fee: Two and one half percent (2.5%) per
annum on the daily outstanding balance of the LCs payable
monthly in arrears. All applicable bank and opening charges
will be in addition to our fee and charged to the loan account
of the Company.
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3. TERM LOANS
Term Loan A:
Amount: A Capital Expenditure Term Loan of up to the lesser of: $5,000,000, or
seventy percent (70%) of eligible construction project costs incurred in the
remodeling and purchase of equipment for new stores (the "Term Loan A"). Such
value will be as determined by appraisals, conducted at the expense of the
Company, by independent appraisers acceptable to us. Eligible equipment and
costs will be determined by us and, in general, shall exclude installations
costs, fixtures, and equipment subject to a security interest or lien of any
other person or entity, leased equipment and worn-out or obsolete equipment.
Amortization: The Term Loan A will be repaid in consecutive equal monthly
installments of principal commencing on the first day of the month after the
closing and on the first day of each month thereafter. The amount of each
monthly installment will be calculated based on a sixty month amortization,
with the final installment to be in the then remaining balance of the Term Loan
A (and including principal, interest and other amounts) due on the earlier of:
(i) the first day of the sixty (60) month after the closing or (ii) the
termination or non-renewal of the Credit Facility or a default under our
financing agreements.
We shall require Company to submit to us individual invoice(s) for inspection
and approval prior to advance(s) and minimum draw(s) will be established by us.
Term Loan B:
Amount: A real property Term Loan of up to the lesser of: $35,000,000, or
seventy five percent (75%) of eligible real estate property as described in the
three appraisal reports dated during 2001 performed by Vallejo and Vallejo
(the "Term Loan B"). Such value will be as determined by appraisals, conducted
at the expense of the Company, by independent appraisers acceptable to us.
Eligible equipment and costs will be determined by us and, in general, shall
exclude fixtures and equipment subject to a security interest or lien of any
other person or entity, leased equipment and worn-out or obsolete equipment.
Amortization: The Term Loan B will be repaid in consecutive equal monthly
installments of principal commencing on the first day of the month after the
closing and on the first day of each month thereafter. The amount of each
monthly installment will be calculated based on a one hundred and eighty month
amortization, with the final
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installment to be in the then remaining balance of the Term Loan B (and
including principal, interest and other amounts) due on the earlier of:
(iii) the first day of the one hundred and eightieth (180th) month
after the closing or (iv) the termination or non-renewal of the Credit
Facility or a default under our financing agreements.
Term Loan C:
Amount: A Term Loan of up to the lesser of: $5,000,000, or fifty
percent (50%) of eligible Leased Property value as described in the
addendum attached (the "Term Loan C"). Such value will be as
determined by appraisals, conducted at the expense of the Company, by
independent appraisers acceptable to us. Eligible leases, improvements
and equipment will be determined by us and, in general, shall exclude
fixtures and equipment subject to a security interest or lien of any
other person or entity, leased equipment and worn-out or obsolete
equipment and fixtures.
Amortization: The Term Loan C will be repaid in consecutive equal
monthly installments of principal commencing on the first day of the
month after the closing and on the first day of each month thereafter.
The amount of such monthly installment will be calculated based on a
sixty month amortization, with the final installment to be in the then
remaining balance of the Term Loan C (and including principal, interest
and other amounts) due on the earlier of: (v) the first day of the
sixty (60th) month after the closing or (vi) the termination or
non-renewal of the Credit Facility or a default under our financing
agreements.
4. Collateral. All obligations of the Company and any corporate
guarantors to us will be secured by first and only security interests
in and liens upon all present and future assets of the Company and any
corporate guarantors, including all accounts, customer lists, contract
rights, general intangibles (including, without limitation, all
trademarks, trademarks, patents and other intellectual property, tax
refunds, and any other claims, payments or recoveries, such as
recoveries or payments from franchises, licenses and all other rights
and agreements), chattel paper, documents, instruments (including stock
or partnership shares in subsidiaries, affiliates and parent companies,
as applicable), checking and deposit accounts, investment property,
inventory, machinery and equipment, equipment, furniture, fixtures,
leases and real property, and all products and proceeds thereof.
5. Interest Rates. The interest rate on Revolving Loans shall be one and
one half (1.5%) percent per annum above the rate announced from time to
time by Westernbank Puerto Rico, as its "prime rate" or at the
Company's option, a rate of three and one half (3.50%) percent per
annum above the adjusted Eurodollar rate used by us (in each case
subject to a higher rate after default). The interest rate on Term
Loans shall be two (2.0%) percent per
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amount above the rate announced from time to time by Westernbank Puerto
Rico, as its "prime rate" or at the Company's option, a rate of four
(4.00%) percent per annum above the adjusted Eurodollar rate used by us
(in each case subject to a higher rate after default). The adjusted
Eurodollar rate will be calculated based on the average of rates of
interest per annum at which Westernbank Puerto Rico is offered deposits
of U.S. dollars in the London interbank market adjusted by the reserve
percentage prescribed by governmental authorities as determined by us.
Collections will be credited to the loan account of the Company on a
daily basis, allowing two (2) business days after our receipt of a wire
transfer of federal funds into our payment account designated for such
purpose.
At no time shall interest rates be lower than six (6%) percent on Revolving
Loans and seven (7) percent on Term Loans.
6. Fees. All fees listed below are in addition to interest and other fees
and charges provided for herein and may, at our option, be charged
directly to any loan account(s) of the Company maintained with us.
(a) Closing Fee: One and one half percent (1.5%) of the Credit
Facility, earned and payable in full at closing. If, upon the
request of the Company, we elect to issue a commitment letter,
the closing fee will be payable to us upon issuance of the
commitment letter as a non-refundable commitment fee.
(b) Servicing Fee: $5,000.00 for each month or part thereof
during the term of the arrangements, payable monthly in
advance.
(c) Unused Line Fee: One half of one percent (.50%) per annum on
the difference between the average monthly balance of
revolving loans and LCs outstanding under the Credit Facility
and $30,000,000, payable monthly.
(d) Early Termination Fee: If the Credit Facility is terminated
for any reason prior to the end of the then current term:
(i) Five percent (5%) of the Credit Facility if
terminated on or prior to six months from the date of
closing.
(ii) Three percent (3%) of the Credit Facility if
terminated after the sixth month and on or prior to
the second anniversary of the date of closing; and
(iii) Two percent (2%) of the Credit Facility if terminated
after the second anniversary and on or prior to the
third anniversary of the date of closing; and
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(iv) One percent (1%) of the Credit Facility if terminated after the third
anniversary and on or at any other time prior to the end of the then
current term and thereafter.
7. Term. The Credit Facility will have an initial term of five (5) years from
the date of closing, and automatic annual renewals thereafter unless either
party gives ninety (90) days prior written notice to the other party of the
intention to terminate the Credit Facility.
8. Expenses. The Company agrees to pay all reasonable legal and closing
expenses, including attorneys' fees and disbursements, filing and search fees,
appraisal fees and field examination expenses and per diem field examination
charges, whether or not this transaction closes. We charge $1,000, per person
per day for our field examiners in the field and in the office, plus travel,
hotel and all other out-of-pocket expenses. All such expenses shall be paid to
us upon demand, together with such advance funds on account of such expenses
and charges as we may from time to time request. This Section shall survive the
expiration or termination of this letter.
9. Deposits. As evidence of our mutual good faith, and in consideration of
our having incurred and continuing to incur certain expenses in the expectation
of establishing the financing arrangements between us and the Company, we
request that the Company deposit with us $100,000 against our expenses. This
amount, together with any other deposits at any time received by us will be:
(a) Retained in the Company, less the cost of our field examinations,
legal fees and other expenses directly related to the loan application
and credit review, if our credit approval of the proposed financing is
not obtained;
(b) Retained by us, and credited to the loan account of the Company, less
the expenses described in paragraph (a) above, if the credit is
approved and booked;
(c) Retained by us, as a fee in addition to expenses payable by the
Company as set forth above, if our credit approval of the proposed
financing is obtained and the transaction does not close within
forty-five (45) days from the date of such approval, whether as a
result of your election not to do business with us or a failure to
fulfill any of the conditions of the proposed financing as approved by
us; and
(d) Retained by us, as a fee in addition to expenses payable by the
Company as set forth above, if at any time during the loan and credit
review, the Company intentionally misleads us or intentionally fails
to disclose material information which, if disclosed, would have had a
material adverse impact on the loan approval.
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10. Other Information and Conditions. This proposal does not represent a
commitment to lend. Our proposal is expressly subject to review of certain
other information, satisfactory completion of our field examinations, credit
investigations and analysis and approval by our committee. Such approval, if
obtained at all, shall be contingent upon a closing taking place within
forty-five (45) days thereafter, after which time this proposal will require
reapproval by our credit committee even if we continue to work on this
transaction. Such reapproval, if obtained, may result in different terms or
conditions, or in a determination not to consummate the transaction. No
commitment to lend shall be implied from any action by us or on our behalf.
Communication to you of credit committee approval or reapproval shall not
constitute a commitment to lend, unless expressly so stated in a commitment
letter signed by us and you.
In addition, subject to such conditions as may be established in connection
with the credit approval, we would anticipate that the closing of the Credit
Facility will be subject to the satisfaction, in a manner acceptable to us, of
the following:
(a) The Company continuing to furnish us with all financial information,
projections, budgets, business plans, cash flows and such other
information as we reasonably request from time to time. We shall have
received current agings of receivables, current perpetual inventory
records and/or rollforwards of accounts and inventory through the date
of closing, together with supporting documentation, and other
documents and information that will enable us to accurately indemnify
and verify the eligible collateral at or before closing in a manner
satisfactory to us and including documentation with respect to
inventory in transit, goods in bonded warehouses or at other
third-party locations. We may require daily or weekly reporting of
collateral information from the Company and/or may establish in our
records a loan account for the Company prior to closing. Such actions
should not be construed as a commitment to lend or to waive or modify
any conditions to lending.
(b) Satisfactory legal review of the terms of this Credit Facility and its
structure by our counsel, and execution and delivery of loan
documents, all in form and substance satisfactory to us. The loan
documents will include, among other documents, a loan agreement,
security agreements, UCC financing statements, intercreditor
agreements (if applicable), agreements from certain third parties,
opinion letters of counsel, the guarantee of the obligations of the
Company to us by its parent company, corporate subsidiaries and
affiliates and which guarantee by such entities shall be secured by a
stock pledge. Such loan documents will contain provisions,
representation, warranties, conditions, covenants and events of default
satisfactory to us and our counsel. With respect to financial
covenants, the loan documents will include various financial
covenants. Such financial covenants will require the Company to
maintain tangible net worth, working capital and an Excess Cash Flow
formula or ratios in amounts to be determined, which amount will be
acceptable to us and to the Company. Under the
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terms of the loan documents, the Company will be entitled to
pay dividends under certain criteria to be established by us
(including maintaining certain excess availability) so long as
no default exists or is expected.
(c) The Company shall deliver, at its expense, environmental
audits of its plants and real estate conducted by an
independent environmental engineering firm acceptable to us
and in form, scope and methodology satisfactory to us,
confirming that (i) the Company is in compliance with all
applicable environmental use laws, regulations, codes and
ordinances in all material respects and (ii) there is no
material potential or actual liability of the Company for any
remedial action with respect to any environmental condition or
any other significant environmental problems.
(d) The excess availability under the lending formulas provided
for above, subject to sublimits and reserves, shall be not
less than $5,000,000, at the closing, and $1,800,000,
thereafter as suppressed availability or cash, after the
payment of fees and expenses of the transaction and the
application of the proceeds of the initial loans, and after
deduction for past due payables and other obligations.
Accounts payable of the Company must be at a level and in a
condition reasonably acceptable to us.
(e) We shall receive Assignment(s) of Leases and Proceeds thereof
of all major tenants of the company; and, Assignment(s) of
Leases of all existing and future Leases of Pueblo Supermarket
stores and Blockbuster Video stores, and terms and conditions
acceptable to us. The company shall endeavor on a best efforts
basis to secure Landlords Consent and Waivers.
(f) Company shall have disclosed within one hundred and twenty
(120) days from closing or prior thereto a definitive plan for
the refinancing or purchase of the outstanding corporate bonds
which mature in 2003, amounting to approximately
$175,000,000, on terms and conditions satisfactory to us.
(g) No material adverse change in the business, operations,
profits or prospects of the Company or in the condition of the
assets of the Company shall have occurred since the date of
our latest field examinations.
(h) This transaction and the events contemplated herein must close
by September 15, 2002 or forty-five (45) days from the date of
our final credit approval, whichever is earlier.
The terms and conditions described in this proposal letter are intended as an
outline only and this proposal letter does not purport to include or summarize
all of the terms, conditions, covenants and other provisions which will be
contained in the loan documents.
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This letter is delivered to the Company on the condition that its existence and
its contents will not be disclosed by the Company without our prior written
approval except (i) as may be required to be disclosed in any legal proceeding
or as may otherwise be required by law and (ii) on a confidential and "need to
know" basis, to your directors, officers, employees, advisers and agents.
Unless accepted by the Company and as so accepted, received by us by the close
of business in San Juan on Puerto Rico, July 5, 2002 with the deposit referred
to above, this proposal shall expire at such time.
This letter is solely for your benefit and is not to be relied upon by any
third party.
This letter, upon acceptance by you, supersedes and replaces our letter to the
Company, dated May 10, 2002.
We look forward to continuing to work with you and your associates in this
transaction.
Very truly yours,
WESTERNBANK BUSINESS CREDIT
/s/ Miguel A. Vasquez
Miguel A. Vasquez
President
ACCEPTED on this _____ date of ___________, 2002:
___________________________
William T. Keon III, C.E.O.
___________________________
Daniel J. O'Leary, C.F.O.
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EXHIBIT B
ADDITIONAL TERMS
Part 2
1. Expenses: Borrowers will pay all of the reasonable
out-of-pocket expenses and customary administrative
charges incurred by Lender, including, without
limitation, appraisal fees, reasonable legal
costs and expenses, filing and search charges,
recording taxes and field examination charges and
expenses (including a charge of $1,000 per person per
day for the examiners of Lender in the field and in
the office, plus travel, hotel and all other
out-of-pocket expenses).
2. Loan Documentation: Definitive loan documentation (collectively, the
"Financing Agreement"), including, without
limitation, a loan and security agreement,
supplemental security agreement, pledge agreements,
mortgages, deeds of trust, guarantees, debentures,
security assignments, intercreditor and
subordination agreements, UCC financing statements
and other lien registrations, lien waivers and
access agreements in favor of Lender from mortgages,
landlords and other persons in possession or control
of Collateral, borrowing base certificates, opinion
letters of counsel to Borrowers and Guarantors, and
related documents, each in form and substance
satisfactory to Lender. All of the Financing
Agreements will be prepared or approved by Lender
and counsel to Lender and incorporate Lender's
customary terms and provisions, and such other
provisions as Lender may require in the context of
the transactions contemplated hereby. The loan
documentation will also provide that Lender may
syndicate and/or sell participations in the Credit
Facility. Lender may act as agent on behalf of other
financial institutions who purchase interests in the
Credit Facility and the Financing Agreements may
provide accordingly. Borrowers and Guarantors will
assist Lender in the syndication of, and the sale of
participation in, the Credit Facility.
B-1
(a) Reserves: Lender will have a continuing right to establish reserves
against the loan availability under the lending
formulas to reflect events, conditions,
contingencies or risks which, as determined by Lender
in good faith, do or may affect either the Collateral
or its value, or the assets, business or prospectus of
any Borrower or Guarantor, or Lender's security
interests and other rights in the Collateral (excluding
the enforceability, realization, perfection and
priority thereof) or (ii) to reflect the good faith
belief of Lender that any collateral report or
financial information furnished by or on behalf of any
Borrower or Guarantor to Lender is or may have been
incomplete, inaccurate or misleading in any
material respect or (iii) in respect of any state of
facts which Lender determines in good faith constitutes
an event of default under the Financing Agreements (as
defined below) or may, with notice or passage of time or
both, constitutes such an event of default or (iv) to
reflect the reserves for LCs.
Without limiting the foregoing, Lender may establish
reserves for, among other things, (i) priority payables
including liabilities which have a trust imposed to
provide for payment of a lien or charge or other right
to payment ranking senior or pari passu to the
obligations of any Borrower to Lender, such as taxes,
employee claims and certain supplier's claims, payments
to insolvency administrators and value added taxes;
(ii) to reflect that dilution with respect to the
accounts of any Borrower exceeds or is reasonably
anticipated to exceed 5%
(iii) to reflect a change in the turnover, mix or
quality of the categories of inventory that adversely
affects the value of such inventory,
(iv) to reflect that the orderly liquidation
value of the eligible equipment or the fair market
value of the eligible real property as set forth in the
most recent acceptable appraisal thereof received by
Lender has declined.
and (v) to reflect the maximum amount of any
indebtedness or claim which may have a lien or
administrative claim upon property of any Borrower or
Guarantor superior to or in parity with the lien and
security interest of Lender therein or thereon
(including without limitation, the fees and expenses of
the Clerk of the Bankruptcy Court and the Office of the
US Trustee and fees and expenses of professionals whose
retention is approved by the Bankruptcy Court during the
Chapter 11 case of NSC).
(b) Representations
B-2
and Warranties. To include, but not be limited to representations
and warranties concerning: the Collateral; corporate
existence and good standing, power and authority;
accuracy of financial information; absence of
material adverse changes; locations of chief
executive office and Collateral; priority of
Lender's security interests, charges and hypothecs,
ownership of properties, and absence of other liens
(except as specifically agreed to by Lender); filing
of tax returns and payment of taxes; absence of
material litigation or investigations; compliance
with other agreements and applicable law,
regulation, etc., identification of bank accounts;
environmental matters; employee benefit matters;
effectiveness of the Financing Orders; accuracy and
completeness of information furnished to Lender;
survival and continuing nature of representations
and warranties.
(c) Affirmative Covenants: To include, but not be limited to: maintenance of
corporate existence and rights; requirements for new
locations; compliance with laws; performance of
obligations; maintenance of properties in good
repair; maintenance of appropriate and adequate
insurance; Lender's rights to inspect books and
properties; payment of taxes and claims; delivery of
financial statements, financial projections and
other information; retention of consultants
acceptable to Lender; collateral reporting, notices
and appraisal requirements; and further assurances.
All reports with respect to Collateral shall include
the US dollar equivalent of the values thereof.
(d) Negative Covenants: To include, but not be limited to, prohibitions or
limitations on: dividends; redemptions and
repurchases of capital stock; incurrence of debt
(including capital leases) and guarantees (subject
to such exceptions and limitations as are agreed to
by the parties); repurchases or prepayment of debt;
creation or suffering of liens (including, without
limitation, a prohibition of liens on Collateral
other than the liens granted in favor of Lender and
such other liens as Lender may specifically permit);
loans, investments and acquisitions (subject to such
exceptions and limitations as are agreed to by the
parties); affiliate transactions, changes in
business conducted; asset sales; mergers and
consolidations (subject to such exceptions and
limitations as are agreed to by the parties);
restrictions affecting subsidiaries; opening new
bank accounts.
B-3
(e) Events of Default: To include, but not be limited to: payment and
performance defaults under any of the loan
documentation, cross-defaults to other indebtedness
and documents, breach of representations and
warranties, actions in the Chapter 11 case of NSC
which Lender deems adverse to its interests, any
plan of reorganization is confirmed without Lender's
consent, judgments and attachments, insolvency,
voluntary or involuntary bankruptcy for any Borrower
or Guarantor revocation of any guaranty,
dissolution, change in control or senior management,
material adverse change in any Borrower's or
Guarantor's business, assets or prospects as
otherwise stated in the Extension Agreement.
(g) Waivers: To include, but not be limited to a waiver by Lender,
each Borrower and each Guarantor of its rights to
jury trial; waiver by each Borrower and each
Guarantor of claims for special, indirect or
consequential damages in respect any breach or
alleged breach by Lender of any of the loan
documentation.
3. Conditions Precedent: Those conditions precedent customarily required by
Lender in similar financings and any additional
conditions precedent deemed appropriate by Lender in
good faith in the context of this transaction,
including, without limitation, the following:
(a) Borrowers and Guarantors shall continue to furnish,
or cause to be furnished, to Lender all financial
information, projections, budgets, business plans,
cash flows and such other information as Lender
shall reasonably request from time to time. Lender
shall have received current agings of accounts,
current perpetual inventory records and/or roll
forward of accounts and inventory through the date
of closing, together with supporting documentation
and other documents and information that will enable
Lender to accurately identify and verify the
eligible collateral at or immediately prior to
closing in a manner satisfactory to Lender and
including documentation with respect to inventory in
transit, goods in bonded warehouses or other third
party locations.
B-4
(b) Execution and delivery of the Financing Agreement.
(c) Lender shall have preferred, first priority security interest in,
pledges of and liens upon the Collateral, and as hypothec.
All UCC financing statements, mortgages and other lien registrations
relating to the Collateral shall have been duly filed and recorded and
Lender shall have received UCC and other lien search results from the
various jurisdictions showing the financing statements and other lien
registrations in favor of Lender filed of record prior to closing.
(d) The aggregate amount of the Excess Availability of Borrowers under
the lending formulas provided for above, and within all applicable
sublimits after the application of proceeds of the initial Revolving
Loans and after provision for payment of all fees and expenses of the
transaction, shall be not less than $5,000,000 at closing. The accounts
payable of Borrowers shall be at a level and in a condition reasonably
Acceptable to Lender.
The term "Excess Availability" as used herein shall mean as to
Borrowers, on an aggregate basis, the US dollar equivalent of the
amounts calculated at any time equal to: (a) the lesser of (i) the
borrowing base of such Borrowers or (ii) the amount equal to the
Maximum Credit minus the then outstanding amount of Revolving Loans
and LCs provided to the Borrowers (in the case of clauses (a)(i) and
(a)(ii) above, after giving effect to any reserves), minus (b) the sum
of (i) the amount of all then outstanding and unpaid obligations of
Borrowers to Lender (other than the obligations arising pursuant to
the guarantee by a Borrower of the obligations of the other
Borrowers), plus (ii) the aggregate amount of all trade payables and
other obligations of Borrowers which remain unpaid more than the
greater of (A) 60 days past invoice date or (B) the due date as of
such time plus (iii) the amount of checks issued by such Borrower to
pay trade payables and other obligations which are more than 60 days
past due, but not yet sent (without duplication of amounts included in
clause (b)(ii) herein).
(e) Lender shall have received, in form and substance reasonably
satisfactory to Lender, all releases, terminations and such other
documents as Lender may request to evidence and effectuate the
termination by the Existing Lenders 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.
B-5
and Guarantor in connection with such financing arrangements,
duly authorized, executed and delivered by it or each of them,
including, but not limited to, UCC termination statements for
all UCC financing statements previously filed by or on behalf
of any Existing Lender or its predecessor, as secured party
and any Borrower or Guarantor, as debtor.
(f) NSC shall comply in full with the notice and other
requirements of the U.S. Bankruptcy Code in a manner
acceptable to Lender and its counsel.
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(g) No trustee, examiner, receiver or other disinterested person
with expanded powers pursuant to Section 1104(c) of the Bankruptcy Code, shall
have been appointed or designated with respect to NSC or its respective
business, properties or assets, including, without limitation the Collateral.
(h) Lender shall have received evidence, in form and substance
reasonably satisfactory to it, that all consents, approvals or withholding of
objections, appropriate or necessary to consummate the Credit Facility have
been obtained or waived in writing.
(i) 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.
(j) Lender shall have received written appraisals, conducted at
the expense of Borrowers by an appraiser acceptable to Lender, addressed to
Lender and upon which Lender is expressly permitted to rely, in form, scope and
methodology satisfactory to Lender as stated in Part 1 of this Exhibit B as to
the real estate of Borrowers and Guarantors. The appraisal of the real estate
shall satisfy the requirements of FIRREA.
(k) Lender shall have received an appraisal with respect to all
of the collateral conducted at the expense of Borrowers by appraisers
acceptable to Lender, addressed to Lender and upon which Lender is expressly
permitted to rely, in form, scope and methodology satisfactory to Lender.
(l) Lender shall have received, at the expense of Borrowers,
environmental audits of their plants and real estate conducted by an
independent environmental engineering firm acceptable to Lender, and in form,
scope and methodology satisfactory to Lender, confirming that (i) Borrowers are
in substantial compliance with all significant applicable environmental use
laws, regulations, codes and ordinances in all material respects and (ii) there
is no material potential or actual liability of Borrowers or any remedial
action with respect to any environmental condition or any other
B-7
significant environmental problems except as otherwise disclosed and
which are acceptable to Lender.
(m) Lender shall have received, on form and substance satisfactory
to Lender, evidence of insurance coverage, including (i) mortgagee's and
lender's loss payee endorsements in favor of Lender as to casualty and business
interruption insurance and containing all endorsements, assurances or
affirmative coverage requested by Lender for protection of its interests and
(ii) mortgagee's title insurance by a company and agent acceptable to Lender,
(A) insuring the priority, amount and sufficiency of the mortgage, deed of trust
or deed to secure debt in favor of Lender on each parcel or real estate included
in the Collateral, (B) insuring against matters that would be disclosed by
surveys and (C) containing any endorsements, assurances of affirmative coverage
requested by Lender for protection of its interests.
(n) Each Borrower shall have established a lockbox and related
lockbox account and/or blocked accounts, as Lender may specify, for collections
and the transfer thereof to Lender, which shall be in form and substance
acceptable to Lender.
(o) Lender shall have completed updated field examinations of the
business, operations and assets of Borrowers and Guarantors in accordance with
its customary procedures and practices and as otherwise required by the nature
and circumstances of the businesses of Borrowers and Guarantors, the results of
which shall be satisfactory to Lender.
(p) There shall exist no event of default or incipient default
under any of the Financing Agreements.
(q) Lender and its counsel will have had the opportunity to
conduct customary legal due diligence (all of which shall be satisfactory to
Lender and its counsel).
B-8
(r) No material adverse change in the business,
operations or prospects of any Borrower shall have
occurred since the date of the commencement of
Lender's field examinations conducted prior to the
date of this Commitment Letter. Lender may conduct
additional or updated field examinations, at
Borrowers' expense, prior to closing and/or
commencing financing, the results of which must be
satisfactory to Lender. Without limiting the
generality of the foregoing (i) no investigation,
litigation or other proceedings shall be pending or
threatened against any Borrower or any Guarantor or
any affiliate as of the closing which could have a
material adverse effect in the determination of
Lender, and (ii) the Collateral shall not have
materially declined in value from the values set
forth in any of the appraisals or field examinations
previously done.
(s) Lender shall be satisfied that, to as of the
closing date, Borrowers and Guarantors are not
insolvent or will not become insolvent as a
result of the transactions contemplated hereby, (ii)
each of such Borrowers and Guarantors do not have
unreasonably small capital after the consummation of
the transactions contemplated hereby to continue to
engage in their respective business and (iii) each
of such Borrowers and Guarantors have not incurred
liabilities as a result of the transactions
contemplated hereby that are beyond its ability to
pay as such liabilities mature.
5. Indemnity Borrowers and Guarantors shall indemnify and hold
harmless Lender and its directors, officers,
Lenders, representatives and employees from and
against all losses, claims, damages, expenses, or
liabilities including, but not limited to, legal or
other expenses incurred in connection with
investigating, preparing to defend, or defending any
such loss, claim, damage, expenses or liability,
incurred in respect of the Credit Facility or the
relationship between Lender and any Borrower or
Guarantor.
6. Governing Law Puerto Rico
B-9
7. Financial Covenants. Including but not limited to on a consolidated
basis, minimum Adjusted Net Worth - Fiscal 2003 -
$25mm, 2004 - $18mm, 2005 - $13mm, 2006 - $9mm and
2007 - $8mm; minimum Working Capital - $5mm; minimum
Fixed Charge Coverage Ratio - 1.50:1, minimum EBITDA
- $23mm; Debt to EBITDA - not greater than 10:1;
minimum Net Revenues - $525mm. For fiscal 2003 tests
need only be met at fiscal year end; thereafter, on
a rolling 12 month basis, tested quarterly.
8. Additional Covenants,
Representations, etc. The applicable representations, warranties covenants
and conditions in the Extension Agreement will be
included.
9. Standard Real Estate. Standard Real Estate conditions including but not
limited to Appraisals by appraisers acceptable to
Lender. ALTA title policies showing Bank's mortgages
or first liens subject to no exception. Evidence of
zoning, use permits payment of property taxes to
date. Recent surveys address to the Bank showing no
encroachments.
B-10
This Summary of Principal Terms and Conditions is not meant to be, nor shall it
be construed as an attempt to describe the specific phrasing of documentation
clauses. Rather, it is intended only to outline principal terms to be included
in the Financing Agreements. It is anticipated that NSC may be made a Borrower.
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