<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PUEBLO XTRA INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 6719 65-0415593
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
1300 N.W. 22ND STREET
POMPANO BEACH, FLORIDA 33069
(954) 977-2500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM T. KEON, III
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PUEBLO XTRA INTERNATIONAL, INC.
550 BILTMORE WAY, 9TH FLOOR
CORAL GABLES, FLORIDA 33134
(305) 442-3407
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS)
------------------------
COPY TO:
DONALD B. BRANT, JR.
MILBANK, TWEED, HADLEY & MCCLOY
ONE CHASE MANHATTAN PLAZA
NEW YORK, NEW YORK 10005
(212) 530-5618
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------
9 1/2% Series C Senior Notes
Due 2003................... $85,000,000 90.25% $76,712,500 $23,246
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</TABLE>
(1) Determined pursuant to Rule 457(f) solely for purposes of calculating the
registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY , 1997
PROSPECTUS
OFFER TO EXCHANGE
9 1/2% SERIES C SENIOR NOTES DUE 2003
FOR ALL OUTSTANDING
9 1/2% SERIES B SENIOR NOTES DUE 2003
OF
[PUEBLO XTRA LOGO]
PUEBLO XTRA INTERNATIONAL, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
------------------------
Pueblo Xtra International, Inc., a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), which together with the Prospectus constitute the
"Exchange Offer," to exchange up to an aggregate principal amount of $85,000,000
of its 9 1/2% Series C Senior Notes Due 2003 (the "Exchange Notes") for up to an
aggregate principal amount of $85,000,000 of its outstanding 9 1/2% Series B
Senior Notes Due 2003 (the "Initial Notes"). The terms of the Exchange Notes are
identical in all material respects to those of the Initial Notes and to those of
the Company's 9 1/2% Senior Notes Due 2003 (the "Existing Notes"), except for
certain transfer restrictions, registration rights and penalty interest
provisions relating to the Initial Notes. The Exchange Notes will be issued
pursuant to, and entitled to the benefits of, the Indenture (as hereinafter
defined) governing the Initial Notes. The Exchange Notes and the Initial Notes
are sometimes referred to collectively as the "Notes."
The Exchange Notes will be senior unsecured obligations of the Company and
will rank in right of payment equally with all other existing and future senior
unsecured obligations of the Company, including the Existing Notes. Because the
Company is a holding company that conducts all of its business through
subsidiaries, all existing and future liabilities of its subsidiaries will be
effectively senior to the Notes. As of January 25, 1997, on a pro forma basis
after giving effect to the Refinancing Plan (as hereinafter defined), the
Company would have had approximately $206.2 million of indebtedness outstanding
other than the Notes, of which $180.0 million would have been the Existing Notes
and $26.2 million would have been senior secured indebtedness comprising
guarantees of the total outstanding indebtedness of the Company's subsidiaries.
In addition, after the issuance of standby letters of credit in the amount of
$23.3 million, the Company's operating subsidiary would have had availability of
$41.7 million under the New Bank Credit Agreement (as hereinafter defined),
under which all borrowings are guaranteed by the Company. The terms of the
Indenture will permit the Company and its subsidiaries to incur additional
indebtedness, subject to certain limitations. See "Description of Notes."
The Exchange Notes will bear interest from April 29, 1997, the date of
issuance of the Initial Notes that are tendered in exchange for the Exchange
Notes (or the most recent interest payment date to which interest on such Notes
has been paid), at the rate of 9 1/2% per annum and will be payable
semi-annually on February 1 and August 1 in each year, commencing on August 1,
1997.
(Continued on Next Page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 3
(Continued from Cover)
The Company will accept for exchange any and all Initial Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on , 1997, unless extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Initial Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. In the event the
Company terminates the Exchange Offer and does not accept for exchange any
Initial Notes with respect to the Exchange Offer, the Company will promptly
return the Initial Notes to the holders thereof. The Exchange Offer is not
conditioned upon any minimum principal amount of Initial Notes being tendered
for exchange, but is otherwise subject to certain customary conditions. The
Initial Notes may be tendered only in integral multiples of $1,000.
The Initial Notes were originally issued and sold on April 29, 1997 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemptions provided in Rule 144A,
Regulation S and Regulation D under the Securities Act. Accordingly, the Initial
Notes may not be reoffered, resold or otherwise pledged, hypothecated or
transferred in the United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
April 29, 1997 (the "Registration Rights Agreement") between the Company and
NationsBank Capital Markets, Inc. and Scotia Capital Markets (USA) Inc. (the
"Initial Purchasers"), with respect to the sale of the Initial Notes. The
Company is making the Exchange Offer in reliance on the position of the staff of
the Securities and Exchange Commission (the "Commission") as set forth in
certain no-action letters addressed to other parties in other transactions.
However, the Company has not sought its own no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Based upon
these interpretations by the staff of the Commission, the Company believes that
Exchange Notes issued pursuant to this Exchange Offer in exchange for Initial
Notes may be offered for resale, resold and otherwise transferred by a holder
thereof other than (i) a broker-dealer who purchased such Initial Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" (as
defined in Rule 405 of the Securities Act) of the Company without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of such Exchange Notes. Holders of Initial Notes accepting the Exchange Offer
will represent to the Company in the Letter of Transmittal that such conditions
have been met. Any holder who participates in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes may not rely on the
position of the staff of the Commission as set forth in these no-action letters
and would have to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction.
Each broker-dealer (other than an "affiliate" of the Company) that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it acquired the Initial Notes as a result of market-making
activities or other trading activities and will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Initial Notes where such Initial Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company intends, for a period of 180 days after
the Expiration Date, to make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
There has not previously been any public market for the Initial Notes. The
Company does not intend to list the Exchange Notes on any securities exchange or
to seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the Exchange Notes will develop. See
"Risk Factors -- Absence of Public Market for the Notes."
The Company will not receive any proceeds from the Exchange Offer; however,
pursuant to the Registration Rights Agreement, the Company will pay the expenses
incident to the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF INITIAL NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
ii
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") under the Securities Act, with respect to the
Exchange Notes. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports and other information with the
Commission. Reports and other information concerning the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549; The Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained from the Public Reference Room of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the Internet at http://www.sec.gov.
The Company is a Delaware corporation. Its executive offices are located at
1300 N.W. 22nd Street, Pompano Beach, Florida 33069, and its telephone number is
(954) 977-2500.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company, which have been filed with the
Commission, are hereby incorporated by reference in this Prospectus:
Annual Report on Form 10-K for the year ended January 25, 1997.
Current Reports on Form 8-K filed April 11, 1997 and April 18, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Exchange Offer shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY IS DELIVERING WITH THIS PROSPECTUS, TO EACH PERSON TO WHOM THE
PROSPECTUS IS SENT OR GIVEN, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED JANUARY 25, 1997, INCORPORATED HEREIN BY REFERENCE. THIS
PROSPECTUS ALSO INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
DANIEL CAMMARATA, CONTROLLER AND ASSISTANT SECRETARY, PUEBLO XTRA INTERNATIONAL,
INC., 1300 N.W. 22ND STREET, POMPANO BEACH, FLORIDA 33069, TELEPHONE NUMBER
(954) 977-2500. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY , 1997.
iii
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FORWARD LOOKING INFORMATION
Certain of the matters discussed under the captions "Prospectus Summary",
"Risk Factors", "Summary Financial Data", "Management's Discussion and Analysis
of Financial and Results of Operations", "Business" and elsewhere in this
Prospectus contain certain forward-looking statements concerning the Company's
operations, economic performance and financial condition, including, among other
things, the Company's business strategy. These statements are based on the
Company's expectations and are subject to various risks and uncertainties.
Actual results could differ materially from those anticipated due to a number of
factors, including those identified under "Risk Factors" and elsewhere in this
Prospectus.
Pueblo and Xtra are trademarks of Pueblo International, Inc. and
Blockbuster is a registered trademark of Blockbuster Entertainment, Inc.
iv
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and financial
data, including the consolidated financial statements and notes thereto,
included elsewhere in this Prospectus. All references to "Puerto Rico" in this
Prospectus refer to the Commonwealth of Puerto Rico and all references to the
"U.S. Virgin Islands" in this Prospectus refer to St. Thomas and St. Croix in
the Territory of the U.S. Virgin Islands. For information with respect to the
Commonwealth of Puerto Rico, see "Commonwealth of Puerto Rico" attached as
Appendix A to this Prospectus. All references to market share data in this
Prospectus are based on industry publications or Company estimated data for
calendar year 1996. All references herein to the "Company" refer to Pueblo Xtra
International, Inc. and include its subsidiaries, unless the context otherwise
requires. The Company's fiscal year ends on the last Saturday in January (for
example, "fiscal 1997" refers to the fiscal year ended January 25, 1997).
THE COMPANY
The Company is the largest supermarket chain and video rental operator in
Puerto Rico and in the U.S. Virgin Islands. The Company believes it has
developed significant name recognition, strong customer loyalty and leading
market shares due to the superior quality and large size of its stores, the
breadth and price competitiveness of its product offerings and its extensive
market coverage in prime locations. The Company currently operates 44
supermarkets in Puerto Rico and six supermarkets in the U.S. Virgin Islands. The
Company also currently operates 27 Blockbuster locations in Puerto Rico and two
Blockbuster locations in the U.S. Virgin Islands as the exclusive Blockbuster
franchisee for Puerto Rico and the U.S. Virgin Islands. In fiscal 1997, the
Company generated revenues of $1,020.1 million and EBITDA on a pro forma basis
(as hereinafter defined) of $60.5 million.
SUPERMARKET OPERATIONS
The Company operates in two complementary supermarket formats: conventional
Pueblo supermarkets which emphasize service, variety and high quality products
at competitive prices, and Xtra supermarkets which are typically larger stores
emphasizing everyday low prices. In Puerto Rico, the Company currently operates
14 Pueblo stores and 30 Xtra stores, and has a grocery retailing market share of
approximately 29%. In addition, the Company estimates that it has a 34% market
share in the greater San Juan metropolitan area, the most densely populated
region of Puerto Rico, with more than one-third of the island's 3.7 million
residents. In fiscal 1997 in Puerto Rico, Pueblo stores averaged approximately
28,286 gross sq. ft. and generated an average of approximately $942 of sales per
selling sq. ft., while Xtra stores averaged approximately 45,900 gross sq. ft.
and generated an average of approximately $673 of sales per selling sq. ft.
In fiscal 1997, the six Pueblo stores in the U.S. Virgin Islands averaged
approximately 32,500 gross sq. ft. and generated an average of approximately
$752 of sales per selling sq. ft. The Company has an estimated U.S. Virgin
Islands grocery retailing market share of approximately 50%.
Since the Acquisition (as hereinafter defined) in 1993, the Company has
made capital expenditures totalling approximately $56.2 million in its
supermarket operations in Puerto Rico and the U.S. Virgin Islands, including the
opening of five new Xtra stores, the addition of one new Pueblo store, the
remodelling of 15 existing supermarkets and the conversion of five Pueblo stores
into Xtra stores.
VIDEO OPERATIONS
The Company operates 29 Blockbuster locations as the exclusive Blockbuster
franchisee for Puerto Rico and the U.S. Virgin Islands. In Puerto Rico, the
Company operates five in-store Blockbuster outlets and 22 free standing
Blockbuster stores, the majority of which are adjacent to its supermarkets. In
the U.S. Virgin Islands, the Company operates one in-store Blockbuster outlet
and one free standing Blockbuster store. In fiscal 1997, the Company's free
standing Blockbuster stores averaged approximately 6,000 gross sq. ft., while
the Company's in-store Blockbuster outlets averaged approximately 4,200 gross
sq. ft. In fiscal 1997, the
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Company's Blockbuster video stores had an increase in same store sales of 10.5%.
The Company also currently operates 14 video outlets in its supermarkets under
the name Pueblo Video Clubs.
As part of an aggressive expansion program for its Blockbuster video
operations, the Company has made capital expenditures totalling approximately
$5.2 million since the Acquisition, including the addition of nine new
Blockbuster locations, of which three were new Blockbuster stores and six were
conversions of Pueblo Video Clubs into in-store Blockbuster outlets. As part of
its traffic building strategy, the Company intends to convert all of its
remaining Pueblo Video Clubs to Blockbuster outlets.
BACKGROUND
The Company was organized as a subsidiary of PXC&M Holdings, Inc.
("Holdings") at the initiative of Gustavo and Ricardo Cisneros to effect the
acquisition (the "Acquisition") of Pueblo International, Inc. ("Pueblo") on July
28, 1993. In connection with and following the Acquisition, Holdings and its
affiliates have invested approximately $92 million in the Company. Gustavo and
Ricardo Cisneros have been direct or indirect beneficial owners of interests in
companies that own or are engaged in a number of diverse commercial enterprises
in Venezuela, the United States, Brazil, Chile and Mexico.
Following the Acquisition, the Company continued an existing strategy
designed to significantly expand its market penetration through new supermarket
openings in Puerto Rico and Florida and the opening of new Blockbuster
locations. Primary emphasis was placed on new supermarket development rather
than supermarket operations and as a result of this focus, as well as increased
competition, total sales, same store sales and consolidated operating results
declined.
In October 1995, William T. Keon, III was named President and Chief
Executive Officer of the Company. Following his arrival at the Company, Mr. Keon
conducted a thorough review of the Company's operating business practices and
its financial performance. As a result of such review, the Company determined in
January 1996 to discontinue its retail operations in the competitive Florida
market in order to focus on its core markets where it has a stronger competitive
position and greater profit opportunities. In the spring of 1996, management
also began to take several other actions designed to improve the financial
performance of the Company, including the conversion of five Pueblo stores to
the Xtra format, the closing of two underperforming Xtra stores in Puerto Rico,
an increase in the Company's advertising expenditures in Puerto Rico and the
conversion of six Pueblo Video Clubs into in-store Blockbuster outlets. In the
summer of 1996, in conjunction with the implementation of the Company's revised
business strategy (described below), the Company retained a retail industry
consulting firm to assist management in analyzing the Company's operating
practices. One result of such analysis was the reorganization of labor
scheduling practices, which enabled the Company to eliminate 440 store employees
in January 1997 and reduce annual labor costs by approximately $9.0 million.
It is management's belief that the decision to exit the Florida market,
together with the actions which the Company began to take in the spring of 1996
and the implementation of its revised business strategy, has begun to
contribute, and should continue to contribute, toward improved operating
results. The Company experienced an increase of 3.4% in same store sales for its
Puerto Rican supermarkets in the fourth quarter of fiscal 1997 compared with the
fourth quarter of fiscal 1996, a significant improvement from the declining
annual trend in same store supermarket sales in Puerto Rico during the past four
years. In addition, in fiscal 1997, the Company's U.S. Virgin Islands
supermarkets reversed an annual same store sales decline since fiscal 1994 with
an increase in same store sales of 7.0% over fiscal 1996. While the Company does
not expect such increases to continue on a quarterly basis, the Company believes
that the implementation of its strategic initiatives will continue to contribute
to an overall improvement in operating results.
In March 1997, as part of its effort to recruit senior managers trained in
United States mainland supermarket retailing practices, the Company hired David
L. Aston as President of the Puerto Rico supermarket division. Mr. Aston has
over 28 years of United States supermarket experience, primarily with the Kroger
Company, and most recently as President of Waldbaums and Superfresh Foods, units
of the A&P Company.
2
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COMPETITIVE STRENGTHS
Management believes that the following significant competitive strengths
provide the Company with the necessary platform to successfully implement its
business strategy:
- Leading Market Positions: The Company is the largest supermarket chain
and video rental operator in Puerto Rico and in the U.S. Virgin Islands.
The Company has a grocery retailing market share in Puerto Rico of
approximately 29%, which is larger than that of its three largest
competitors combined. The Company's grocery retailing market share in the
U.S. Virgin Islands is estimated to be approximately 50%, compared to
less than 20% for its nearest competitor. The Company's Blockbuster
operations are currently the only major video chain operating in Puerto
Rico and the U.S. Virgin Islands.
- Modern, Renovated Stores in Prime Locations: The Company's supermarkets
are among the most modern in their markets, with more than 70% of its
stores having been built or remodelled within the past five years. In
addition, as a result of its early entrance into the supermarket industry
in Puerto Rico, the Company's stores are generally located within high
traffic shopping centers in Puerto Rico's major population centers and
are frequently anchor tenants in these shopping centers. These sites are
difficult for competitors to replicate.
- Reputation for Quality, Variety and Service: The Company has built a
strong consumer franchise through the consistent introduction of
innovative marketing and services, beginning with the opening in 1955 of
United States mainland-style, large, modern supermarkets. The Company
believes that its supermarkets offer superior value by emphasizing an
extensive selection of high quality items, excellent customer service, a
large variety of specialty departments and competitive prices. The
Company believes that, compared with its competitors, it carries a wider
selection of items and a more extensive array of specialty departments,
including quality meat, deli, produce, seafood and bakery. The Company's
supermarkets also make available a large selection of complementary
services, such as Blockbuster video outlets, retail bank branches,
automatic teller machines ("ATMs") and cellular phone sale kiosks, in
many of their locations.
- Substantial Purchasing and Distribution Leverage: As the largest
supermarket operator in its markets and one of the largest cargo
importers into Puerto Rico, the Company has substantial purchasing
advantages over its competitors. The Company also owns and operates a
300,000 sq. ft. full-service warehouse and distribution facility, with
both refrigerated and freezer capacity, which is the only such facility
in Puerto Rico. The Company's large warehouse allows it to leverage its
purchasing power for volume discounts and to ensure efficient and
consistent inventory stocking throughout its store locations.
BUSINESS STRATEGY
Based upon management's review of the Company's business practices and
procedures, the Company has developed and is implementing a strategy designed to
increase sales through both higher comparable store performance and selected new
store expansion, and to increase gross profit and operating margins through
improved operating, purchasing and merchandising practices. The components of
this strategy have been designed to build upon the Company's competitive
strengths and consist of the following:
INCREASE SALES
- Increase Store Traffic by Creating Destination Centers: The Company
seeks to increase store traffic by creating destination centers through
the expansion of the variety of brand-name retail outlets available
within many of the Company's supermarkets. The Company currently has six
in-store Blockbuster outlets, leases in-store space to several retail
consumer banks for full service banking and ATMs and to cellular phone
service providers, and has initiated a program to lease out space for in-
store Burger King restaurants, with the first scheduled to open in June
1997. The Company believes that its supermarkets in Puerto Rico, which
average approximately 40,295 gross sq. ft., are better suited
3
<PAGE> 9
for such multi-use formats than the generally smaller grocery stores with
which the Company competes. In addition, the Company is reviewing
opportunities to cross-market other consumer products and services in its
stores.
- Enhance the Company's Price/Value Image: Based on recent market surveys,
the Company believes that its pricing is generally comparable to or lower
than its major competitors and that opportunities exist to improve
customers' perceptions of the Company's price competitiveness. In fiscal
1997, the Company implemented a strategy of increased advertising in
Puerto Rico which emphasized its price competitiveness, particularly for
high volume products which influence customers' perception of its value
image. The Company believes this contributed to the fourth quarter fiscal
1997 increase in same store sales in Puerto Rico of 3.4% compared to the
prior year and intends to continue to purchase a greater share of local
television, radio and print advertising than its competitors in order to
promote this image. The use of the Xtra store format also has been
successful in influencing customers' "everyday low price" perceptions of
the Company. The Company converted five Pueblo stores to the Xtra format
in fiscal 1997 and intends primarily to use this format to promote its
value image when it expands into new markets.
- Expand Blockbuster Video Operations: The Company has been significantly
expanding its Blockbuster operations by converting its existing Pueblo
Video Clubs to Blockbuster outlets. In-store Blockbuster video outlets
generate significantly greater revenues and profitability than Pueblo
Video Club operations and have a positive impact on grocery store
traffic. Six such conversions have been completed since November 1996 and
eight more are planned by the end of fiscal 1998. Since the conversions
are located in existing grocery stores, capital expenditures and
operating costs are significantly lower compared to new free standing
Blockbuster stores. In addition, the Company intends to open three
free-standing Blockbuster stores in fiscal 1998 and to examine further
opportunities to expand the number of free-standing Blockbuster stores it
operates.
- Targeted Supermarket Expansion: The Company intends selectively to
develop new supermarkets in attractive targeted markets, particularly in
the interior of Puerto Rico. Management believes these locations provide
a less competitive environment with lower initial capital requirements
and potentially higher profit margins.
INCREASE GROSS PROFIT AND OPERATING MARGINS
- Increase Store Level Productivity and Reduce Labor Costs: The Company
has implemented numerous measures to enhance productivity and reduce
labor costs. For example, the Company has changed work scheduling
practices in order better to match staffing levels to customer shopping
patterns. In addition, the Company has formed management teams which are
in the process of training store employees and management to implement
new store operating procedures which are designed to create more
efficient work schedules and to reduce store-room inventories, spoilage
and the handling of products. Such changes enabled the Company to
eliminate 440 store employees in January 1997, reducing annual labor
costs by approximately $9.0 million. The Company also expects to generate
additional labor-related cost savings over time by increasing the
percentage of work performed by part-time employees.
- Capitalize on Procurement and Distribution Capabilities: As the largest
buyer of grocery items in Puerto Rico and one of the largest cargo
importers into Puerto Rico, the Company believes it has many
opportunities to improve gross margins through improved buying and
transportation practices. The Company currently buys approximately 45% of
its total dollar volume of product purchases directly from manufacturers
and is seeking to increase this percentage to reduce costs and to obtain
superior payment terms. Moreover, the Company is renegotiating existing
direct buying arrangements with certain manufacturers for the same
purpose and will also seek to increase utilization of its excess
warehouse capacity to take advantage of bulk purchase discounts.
- Initiate Category Management System; Expand Private Label: The Company
is implementing a category management system designed to combine
traditional buying, reordering and pricing functions
4
<PAGE> 10
under the leadership of corporate level category merchandisers. The
Company believes that such a system will improve sales, optimize
inventory levels, reduce purchase costs and thereby enhance gross profit
and operating profit margins. In addition, the Company intends to
continue to expand its sales of profitable Food Club private label
products to price conscious consumers through its arrangement with Topco
Associates, Inc. ("Topco"). The Company also intends to develop its own
private label products aimed at price points below the Topco products.
- Enhance Management and Implement Management Incentive Programs: The
Company intends to maintain an on-going program to recruit senior
managers trained in United States mainland supermarket retailing
practices for strategic positions throughout its operations.
Additionally, the Company has established performance-based compensation
programs to align employees' interests with the implementation of the
Company's revised business strategy.
REFINANCING PLAN
The Company used the net proceeds from the offering of the Initial Notes
(the "Offering"), approximately $73.9 million after deducting expenses of the
Offering, together with available cash of the Company, to repay the senior
secured indebtedness of Pueblo outstanding under Pueblo's Bank Credit Agreement,
dated as of July 21, 1993 (the "Old Bank Credit Agreement"). In connection with
the Offering, Pueblo also entered into an amended bank credit agreement (the
"New Bank Credit Agreement") which provides for a $65.0 million revolving credit
facility and less restrictive covenants compared to the Old Bank Credit
Agreement. After the issuance of standby letters of credit in the amount of
$23.3 million, Pueblo has borrowing availability on a revolving basis of $41.7
million under the New Bank Credit Agreement. Concurrent with the Offering, the
Company satisfied $10 million of indebtedness payable to a related party by
transferring its interest in two real estate properties from its discontinued
Florida operations to the related party. The Company believes its interest in
these properties had a fair market value of no more than $10 million. The sale
of the Initial Notes, the repayment of indebtedness of Pueblo under the Old Bank
Credit Agreement, the transfer of certain real estate properties in satisfaction
of indebtedness owed to a related party and the consummation of the New Bank
Credit Agreement are collectively referred to as the "Refinancing Plan." The
Company believes that the completion of the Refinancing Plan has provided the
Company with extended debt maturities, increased liquidity and less restrictive
financial covenants, which will give it increased operating and financial
flexibility.
5
<PAGE> 11
THE INITIAL OFFERING
The Initial Notes.......... The Initial Notes were sold by the Company on April
29, 1997 to the Initial Purchasers pursuant to a
Purchase Agreement, dated April 24, 1997 (the
"Purchase Agreement"). The Initial Purchasers
subsequently resold the Initial Notes to qualified
institutional buyers pursuant to Rule 144A under
the Securities Act.
Registration Rights
Agreement.................. Pursuant to the Purchase Agreement, the Company and
the Initial Purchasers entered into a Registration
Rights Agreement, dated as of April 29, 1997 (the
"Registration Rights Agreement"), which grants the
holders of the Initial Notes certain exchange and
registration rights. The Exchange Offer is intended
to satisfy such exchange rights which terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
The Exchange Notes......... The forms and terms of the Exchange Notes are
identical in all material respects to the terms of
the Initial Notes for which they may be exchanged
pursuant to the Exchange Offer, except for certain
transfer restrictions and registration rights
relating to the Initial Notes and except for
certain penalty interest provisions relating to the
Initial Notes described below under "-- Terms of
the Exchange Notes."
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Initial Notes. As of the date
hereof, $85,000,000 aggregate principal amount of
Initial Notes are outstanding. The Company will
issue the Exchange Notes to holders on or promptly
after the Expiration Date.
The Company is making the Exchange Offer in
reliance on the position of the staff of the
Commission as set forth in certain no-action
letters addressed to other parties in other
transactions. However, the Company has not sought
its own no-action letter and there can be no
assurance that the staff of the Commission would
make a similar determination with respect to the
Exchange Offer as in such other circumstances.
Based on these interpretations by the staff of the
Commission, the Company believes that Exchange
Notes issued pursuant to this Exchange Offer in
exchange for Initial Notes may be offered for
resale, resold and otherwise transferred by a
holder thereof other than (i) a broker-dealer who
purchased such Initial Notes directly from the
Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act
or (ii) a person that is an "affiliate" (as defined
in Rule 405 of the Securities Act) of the Company
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business
and that such holder is not participating, and has
no arrangement or understanding with any person to
participate, in the distribution of such Exchange
Notes. Holders of Initial Notes accepting the
Exchange Offer will represent to the Company in the
Letter of Transmittal that such conditions have
been met. Any holder who participates in the
Exchange Offer for the purpose of participating in
a distribution of the Exchange Notes may not rely
on the position of the staff of the Commission as
set forth in these no-action letters and would
6
<PAGE> 12
have to comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any secondary resale transaction.
Each broker-dealer (other than an "affiliate" of
the Company) that receives Exchange Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it acquired the Initial Notes as
the result of market-making activities or other
trading activities and will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales
of Exchange Notes received in exchange for Initial
Notes where such Initial Notes were acquired by
such broker-dealer as a result of market-making
activities or other trading activities. The Company
intends for a period of 180 days after the date of
this Prospectus, to make this Prospectus available
to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution".
Interest on the Exchange
Notes...................... The Exchange Notes will bear interest at the rate
of 9 1/2% per annum from April 29, 1997, the date
of issuance of the Initial Notes that are tendered
in exchange for the Exchange Notes (or the most
recent interest payment date to which interest on
such Notes has been paid or duly provided for).
Accordingly, holders of Initial Notes that are
accepted for exchange will not receive at the time
of tender, interest on the Initial Notes that is
accrued but unpaid but such interest will be
payable on the first interest payment date after
the Expiration Date. Interest on the Exchange Notes
will be payable semi-annually on February 1 and
August 1 in each year, commencing August 1, 1997.
Expiration Date; Withdrawal
of Tender.................. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997, or on such
later date and time to which it is extended by the
Company in its sole discretion (the "Expiration
Date"). The tender of Initial Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration
Date. The Expiration Date will not in any event be
extended to a date later than , 1997.
Any Initial Notes not accepted for exchange for any
reason will be returned without expense to the
tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange
Offer.
Certain Conditions to the
Note Exchange Offer........ The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions to the Exchange
Offer."
Procedures for Tendering
Initial Notes.............. Each holder of Initial Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Initial Notes and any other required
documentation to the Exchange Agent (as hereinafter
defined) at the address set forth
7
<PAGE> 13
herein. By executing the Letter of Transmittal,
each holder will represent to the Company that,
among other things, (i) any Exchange Notes to be
received by it will be acquired in the ordinary
course of its business, (ii) it has no arrangement
or understanding with any person to participate in
the distribution of the Exchange Notes and (iii) it
is not an "affiliate," as defined in Rule 405 of
the Securities Act, of the Company or, if it is an
affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities
Act to the extent applicable. With respect to the
exchange of Initial Notes which are registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee, see "The Exchange
Offer -- Procedures for Tendering."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Initial Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Initial Notes in the
Exchange Offer should contact such registered
holder and promptly instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
beneficial owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering his Initial Notes,
either make appropriate arrangements to register
ownership of the Initial Notes in such owner's name
or obtain a properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time and may not be
able to be completed prior to the Expiration Date.
Guaranteed Delivery
Procedure.................. Holders of Notes who wish to tender their Initial
Notes and whose Initial Notes are not immediately
available or who cannot deliver their Initial
Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent, prior to the Expiration Date,
must tender their Initial Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
Registration
Requirements............... The Company has agreed to use its best efforts to
consummate within 120 days of the Closing Date (as
hereinafter defined) the registered Exchange Offer
pursuant to which holders of the Initial Notes will
be offered an opportunity to exchange their Initial
Notes for the Exchange Notes which will be issued
without legends restricting the transfer thereof.
In the event that applicable interpretations of the
staff of the Commission do not permit the Company
to effect the Exchange Offer or in certain other
circumstances, the Company has agreed to file a
shelf registration statement (the "Shelf
Registration Statement") covering resales of the
Initial Notes and to use its best efforts to cause
such Shelf Registration Statement to be declared
effective under the Securities Act and, subject to
certain exceptions, keep such Shelf Registration
Statement effective until two years after the
original issuance of the Initial Notes.
Certain Federal Income Tax
Considerations........... For a discussion of certain federal income tax
considerations relating to the exchange of the
Exchange Notes for the Initial Notes, see
"Taxation."
8
<PAGE> 14
Use of Proceeds............ There will be no cash proceeds to the Company from
the exchange of Notes pursuant to the Exchange
Offer.
Consequences of Failure to
Exchange Initial Notes... As a result of the making of this Exchange Offer on
the terms set forth in the Registration Rights
Agreement, the Company will have fulfilled certain
of its obligations under the Registration Rights
Agreement, and holders of Initial Notes who are
eligible to, but elect not to, tender their Notes
will generally not have any further registration
rights under the Registration Rights Agreement or
otherwise. Such holders will continue to hold the
untendered Initial Notes and will be entitled to
all the rights and subject to all the limitations
applicable thereto under the Indenture, except to
the extent such rights or limitations, by their
terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
All untendered Initial Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, if any Initial Notes are tendered and
accepted in the Exchange Offer, the trading market
for the untendered Initial Notes could be adversely
affected.
Exchange Agent............. United States Trust Company of New York will act as
Exchange Agent (in such capacity, the "Exchange
Agent"). The address and telephone number of the
Exchange Agent are set forth in "The Exchange
Offer -- Exchange Agent."
TERMS OF THE EXCHANGE NOTES
General.................... The form and terms of the Exchange Notes are the
same as the form and terms of the Initial Notes
(which they replace) except that (i) the Exchange
Notes bear a Series C designation, (ii) the
Exchange Notes have been registered under the
Securities Act and, therefore, will not bear
legends restricting the transfer thereof, and (iii)
the holders of Exchange Notes will not be entitled
to certain rights under the Registration Rights
Agreement, including the provisions providing for
an increase in the interest rate on the Initial
Notes in certain circumstances relating to the
timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated.
See "The Exchange Offer -- Consequences of Failure
to Exchange." The Exchange Notes will evidence the
same debt as the Initial Notes and will be entitled
to the benefits of the Indenture. See "Description
of the Notes."
Issuer..................... Pueblo Xtra International, Inc.
Maturity Date.............. August 1, 2003.
Interest Payment Dates..... February 1 and August 1, commencing August 1, 1997.
Ranking.................... The Exchange Notes will be senior unsecured
obligations of the Company and will rank in right
of payment equally with all other existing and
future senior unsecured obligations of the Company,
including the Existing Notes. Because the Company
is a holding company that conducts all of its
business through subsidiaries, all existing and
future liabilities of its subsidiaries will be
effectively senior to the Exchange Notes. As of
January 25, 1997, on a pro forma basis after giving
effect to the Refinancing Plan, the Company would
have had approximately $206.2 million of
indebtedness outstanding other than the Notes, of
which $180.0 million would have been the Existing
Notes and $26.2
9
<PAGE> 15
million would have been senior secured
indebtedness, comprising guarantees of the total
outstanding indebtedness of the Company's
subsidiaries. In addition, after the issuance of
standby letters of credit in the amount of $23.3
million, Pueblo would have had availability of
$41.7 million under the New Bank Credit Agreement
(under which all borrowings are guaranteed by the
Company). The terms of the Indenture permit the
Company and its subsidiaries to incur additional
indebtedness, subject to certain limitations.
Optional Redemption........ The Exchange Notes will be redeemable at the
Company's option, in whole or in part, at any time
on or after August 1, 1998 at the redemption prices
set forth herein, plus accrued and unpaid interest,
if any, to the date of redemption. See "Description
of Notes -- Redemption -- Optional Redemption."
Mandatory Redemption....... None.
Change of Control.......... Upon a Change of Control (as hereinafter defined),
the Company will be required to make an offer to
repurchase all outstanding Notes at 101% of the
principal amount thereof plus accrued and unpaid
interest thereon to the date of repurchase. See
"Description of Notes -- Repurchase of Notes upon a
Change of Control."
Covenants.................. The Indenture restricts, among other things, the
Company's ability to incur additional indebtedness,
pay dividends or make certain other restricted
payments, agree to certain payment restrictions
applicable to Restricted Subsidiaries, enter into
certain transactions with affiliates, sell stock of
Restricted Subsidiaries, incur liens, enter into
sale-leaseback transactions or apply net proceeds
from certain asset sales. See "Description of
Notes -- Certain Covenants."
RISK FACTORS
For a discussion of certain matters that should be considered by
prospective investors in connection with the Exchange Offer, see "Risk Factors."
Such risks include, but are not limited to, the Company's substantial
indebtedness, certain restrictions under the New Bank Credit Agreement and the
indentures covering the Existing Notes and the Notes, the Company's holding
company structure, asset encumbrances and ability to make Change of Control
repurchase offers, recent management changes, the Company's limited geographic
market, competition, the risks to the Company's Blockbuster development
strategy, the control of the Company by the Principal Shareholders (as
hereinafter defined), the risk of fraudulent transfer liability, original issue
discount consequences and the absence of a public market for the Notes.
10
<PAGE> 16
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SALES PER SELLING SQUARE FOOT AMOUNTS)
The summary financial data below for the fiscal years ended January 28,
1995, January 27, 1996 and January 25, 1997 are derived from the Consolidated
Financial Statements that have been audited by Deloitte & Touche LLP,
independent auditors, and are included elsewhere in this Prospectus. The summary
financial data below for the fiscal years ended January 30, 1993 and January 29,
1994 are derived from audited financial statements of the Company's predecessor
and the Company that are not included herein. See note 3 below. The pro forma
financial data is provided for information purposes only, is unaudited and is
not necessarily indicative of future operating results or financial condition or
what the operating results or financial condition would have been had the
Refinancing Plan actually been consummated as of the beginning of the period or
as of the balance sheet date indicated. The information set forth below should
be read in conjunction with "Selected Financial Data", the Consolidated
Financial Statements included elsewhere herein and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" which discusses,
among other things, the closing of the Company's Florida operations in fiscal
1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
---------------------------------------------------------------------------
PRO FORMA
JANUARY JANUARY JANUARY JANUARY JANUARY JANUARY
30, 29, 28, 27, 25, 25,
1993(2) 1994(3) 1995 1996 1997 1997(4)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................ $1,251,726 $1,199,123 $1,166,955 $1,145,370 $1,020,056 $1,020,056
Gross profit..................... 303,158 295,273 295,819 296,880 259,727 259,727
Selling, general and
administrative expenses(5)..... 232,202 230,266 229,197 240,219 213,485 213,485
Unusual charges(6)............... -- -- -- 32,161 4,160 4,160
Operating profit (loss).......... 41,307 27,357 22,757 (19,169) 954 954
Interest expense, net............ 13,047 21,635 32,153 33,346 30,182 30,288
Net income (loss)................ 15,922 (9,751) (4,641) (32,357) (16,918) (16,983)
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents(7)..... $ 7,838 $ 5,471 $ 15,680 $ 6,998 $ 12,148 $ 5,566
Working capital (deficit)........ (8,478) (26,873) (11,534) (31,125) (56,217) (42,979)
Fixed assets, net................ 168,395 224,605 207,935 166,283 150,915 150,915
Total assets..................... 300,012 619,625 602,695 573,383 522,740 507,239
Total debt....................... 123,686 347,124 329,855 308,497 295,204 282,940(8)
Total liabilities................ 251,938 552,728 525,439 528,484 489,759 477,495
Stockholder's equity............. 48,074 66,897 77,256 44,899 32,981 29,744
OTHER DATA:
EBITDA(9)........................ $ 70,956 $ 65,007 $ 66,622 $ 56,661 $ 50,391 $ 60,491(10)
Depreciation and amortization.... 29,649 37,650 43,865 43,669 41,128 41,128
Capital expenditures............. 22,472 23,493 16,401 22,334 14,455 14,455
EBITDA margin(9)................. 5.7% 5.4% 5.7% 4.9% 4.9% 5.9%
Ratio of earnings to fixed
charges(11).................... 2.7x -- -- -- -- --
Ratio of total debt to EBITDA.... 4.7x
Cash interest expense............ $ 28,129
Ratio of EBITDA to cash interest
expense........................ 2.2x
</TABLE>
11
<PAGE> 17
<TABLE>
<CAPTION>
FISCAL YEAR(1)
-------------------------------------------------------
1993(2) 1994(3) 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PUEBLO AND XTRA STORE DATA:
PUERTO RICO
Number of stores (at fiscal year-end)............ 40 42 44 46 44
Average sales per store (12)..................... $21,091 $20,776 $20,263 $20,212 $19,672
Average selling square footage................... 26,818 26,601 26,729 27,536 27,591
Average sales per selling square foot(12)........ $ 786 $ 781 $ 758 $ 731 $ 722
Total sales...................................... 850,139 860,190 874,019 877,603 886,765
Same store sales % change........................ 9.2% (0.9)% (1.3)% (2.8)% (2.6)%
U.S. VIRGIN ISLANDS
Number of stores (at fiscal year-end)............ 5 5 5 6 6
Average sales per store (12)..................... $19,220 $19,003 $15,619 $14,960 $15,110
Average selling square footage................... 20,724 20,724 20,724 20,104 20,104
Average sales per selling square foot(12)........ $ 927 $ 917 $ 754 $ 744 $ 752
Total sales...................................... 97,970 95,014 78,097 76,813 90,659
Same store sales % change........................ 0.9% (1.2)% (17.8)% (3.3)% 7.0%
BLOCKBUSTER STORE DATA:
Number of stores (at fiscal year-end)............ 19 21 22 22 27
Average sales per store (12)..................... $ 1,206 $ 1,123 $ 1,254 $ 1,443 $ 1,588
Average weekly sales............................. 452 467 535 608 794
Total sales...................................... 16,763 23,189 26,994 31,295 35,938
Same store sales % change........................ (3.5)% (8.1)% 10.9% 14.0% 10.5%
</TABLE>
- ---------------
(1) Operating activity for the 26 weeks ended January 29, 1994 and for the
fiscal years 1995, 1996 and 1997 are representative of the Company
subsequent to the Acquisition. All other operating activity pertains to
Pueblo prior to the Acquisition.
(2) Fiscal 1993 was a 53-week year.
(3) Represents the combined results of operations for the 26-week period ended
July 31, 1993 of the Company's predecessor prior to the Acquisition and the
26-week period ended January 29, 1994 of the Company. The results for each
26 week period are as follows:
<TABLE>
<CAPTION>
26 WEEKS ENDED 26 WEEKS ENDED
JULY 31, 1993 JANUARY 29, 1994
-------------- ----------------
<S> <C> <C>
Net sales..................................... $612,454 $586,669
Gross profit.................................. 150,961 144,312
Store operating, selling and administrative
expenses.................................... 117,738 112,528
Operating profit.............................. 17,478 9,879
Interest expense, net......................... 5,533 16,102
Net income (loss)............................. (5,148) (4,603)
EBITDA........................................ 33,223 31,784
Depreciation and Amortization................. 15,745 21,905
</TABLE>
(4) Pro forma income statement data reflect changes in interest expense and
assume completion of the Refinancing Plan as of the first day of fiscal
1997. Pro forma balance sheet data include an extraordinary $5.3 million
write-off of unamortized fees in connection with the Old Bank Credit
Agreement, which has been tax effected, and assume completion of the
Refinancing Plan as of January 25, 1997.
(5) Selling, general and administrative expenses for fiscal years 1996 and 1997
include certain expenses and charges related to the implementation of the
Company's strategic initiatives and other matters. See "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations -- General."
12
<PAGE> 18
(6) The Company recorded unusual charges of approximately $30 million in fiscal
1996 and $4.2 million in fiscal 1997 as a result of the Company's exit from
the Florida market and an unusual charge of $2.2 million in fiscal 1996 as
a result of the Company's restructuring of its Puerto Rico operations.
(7) Highly liquid investments purchased with a maturity of three months or less
are considered cash equivalents.
(8) Reflects the issuance of the Initial Notes at a discount.
(9) EBITDA represents income (loss) before interest, income taxes, sundry,
depreciation and amortization and unusual charges ("EBITDA"). In fiscal
1997, income taxes included $1.5 million representing the tax effect of the
cumulative effect of a change in accounting principle relating to the
adoption of SFAS No. 121 during such fiscal year. See Note 1 to Notes to
Consolidated Financial Statements. EBITDA is not intended to represent cash
flow from operations as defined by generally accepted accounting principles
and should not be considered as an alternative to net income (loss) as an
indication of the Company's operating performance or to cash flows as a
measure of liquidity. EBITDA is included as it is the basis upon which the
Company assesses its financial performance. EBITDA margin represents EBITDA
divided by net sales.
(10) Pro forma EBITDA has been adjusted to exclude $1.1 million in severance
costs recorded in connection with the elimination of 440 store employees in
January 1997 and to include annual cost savings of approximately $9.0
million, inclusive of salaries and benefits, in connection therewith.
(11) In calculating this ratio, earnings consist of income (loss) before income
taxes, extraordinary item and cumulative effect of a change in accounting
principle, plus fixed charges adjusted to exclude interest capitalized.
Fixed charges consist of interest whether expensed or capitalized,
capitalized lease interest expense and amortization of deferred financing
fees, whether expensed or capitalized, plus the portion of rental expense
under operating leases which has been deemed by the Company to be
representative of the interest factor. Earnings were insufficient to cover
fixed charges by $5.6 million, $9.4 million, $52.6 million and $29.1
million in fiscal years 1994, 1995, 1996 and 1997, respectively. During
fiscal years 1996 and 1997, earnings were adversely affected by a number of
unusual charges and other items related to the implementation of the
Company's strategic initiatives and other matters. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General."
(12) Beginning in 1996, average sales are weighted for the period of time stores
are open during the year.
13
<PAGE> 19
RISK FACTORS
Holders of the Initial Notes should consider the specific factors set forth
below as well as the other information set forth elsewhere in this Prospectus in
connection with the Exchange Offer. An investment in the Notes involves a high
degree of risk.
SUBSTANTIAL INDEBTEDNESS; CERTAIN RESTRICTIONS
The Company has a substantial amount of indebtedness. As of January 25,
1997, on a pro forma basis after giving effect to the Refinancing Plan and
reflecting the issuance of the Initial Notes at a discount, consolidated total
indebtedness of the Company would have been $282.9 million, consolidated
stockholder's equity of the Company would have been $29.7 million and the ratio
of the Company's consolidated total indebtedness to consolidated stockholders'
equity would have been 9.5:1. In addition, pro forma for fiscal 1997, the
Company's ratio of EBITDA to total cash interest expense would have been 2.2:1
and the Company's ratio of total debt to EBITDA would have been 4.7:1. See
Selected Financial Data, footnote 9.
The Company's high degree of leverage will have important consequences to
holders of the Notes, including the following: (i) the ability of the Company in
the future to obtain additional financing for working capital, capital
expenditures, acquisitions, store expansions and remodeling or other purposes
may be limited; (ii) a substantial portion of the Company's cash flow from
operations will be required to meet the Company's debt service obligations,
which will reduce the funds available to the Company for its operations and
future business opportunities; (iii) the Company may be more leveraged than its
competitors, which may place it at a competitive disadvantage, including in
relations with suppliers, who may be less willing to extend favorable payment
terms to the Company; (iv) the Company's high degree of leverage may make it
more vulnerable to a downturn in its business and may limit its ability to
respond to price competition or changes in the economy generally; and (v) the
Company may not have sufficient funds to repay the Notes or be able to refinance
the Notes on satisfactory terms at maturity.
The Company believes that the facilities provided by the New Bank Credit
Agreement, together with cash flow from operations, will be adequate for its
liquidity and capital resource needs, including the debt service requirements on
the Existing Notes and the Notes. However, the Company's ability to generate
adequate cash flow from operations will depend on its future operating
performance and financial results, which will be subject to successful
implementation of its business strategy as well as economic, financial,
competitive and other factors beyond its control. In the event that the Company
is unable to generate adequate cash flow, there is no assurance that Holdings or
any of its affiliates would be willing to provide capital or liquidity resources
to the Company.
Like most retailers, the Company's subsidiaries depend upon regular trade
credit to finance the acquisition of a significant portion of their inventory.
The Company believes that payment terms provided by suppliers, together with
available working capital credit facilities, will be adequate to finance
inventory purchases; however, there can be no assurance that this will continue
to be the case.
In the past, the Company has obtained amendments from its lenders under the
Old Bank Credit Agreement in order to maintain its compliance with certain
restrictive covenants contained therein. The New Bank Credit Agreement and the
indentures for the Existing Notes and the Notes also contain numerous financial
and operating covenants. These covenants limit the discretion of the Company's
management with respect to certain business matters by placing significant
restrictions on, among other things, the ability of the Company to incur
additional indebtedness, to create liens or other encumbrances, to make capital
expenditures, acquisitions and investments, to make certain payments, to sell or
otherwise dispose of assets and to merge or consolidate with other entities. See
"Description of New Bank Credit Agreement" and "Description of Notes -- Certain
Covenants." A failure to comply with the covenants contained in the New Bank
Credit Agreement, or the indentures for the Existing Notes and the Notes, could
result in an event of default under the New Bank Credit Agreement or the
respective indentures, which could permit acceleration of the related debt and
acceleration of debt under other instruments that may contain cross-acceleration
or cross-default provisions. See "Description of New Bank Credit Agreement" and
"Description of Notes -- Events of Default."
14
<PAGE> 20
HOLDING COMPANY STRUCTURE
The Company has no operations of its own, and its only assets are its
equity interest in Pueblo and intercompany notes issued to the Company by its
subsidiaries in connection with its investment of the net proceeds of the
Existing Notes and the Notes. The Company has no source of cash to meet its
obligations, including its obligations under the Existing Notes and the Notes,
other than payments by its subsidiaries on such intercompany notes, which are
restricted and effectively subordinated to Pueblo's obligations under the New
Bank Credit Agreement, and dividends from its subsidiaries. The Company has
approximately $175 million of such intercompany indebtedness related to the
Existing Notes and has approximately $73.9 million, net of estimated discount
and associated fees, of such intercompany indebtedness related to the Notes
(which will accrue to $85 million at the maturity date of the Notes).
Accordingly, payments in respect of such indebtedness will not be sufficient to
enable the Company to meet its obligations under the Existing Notes and the
Notes. As a result, it will be necessary for the Company to receive dividends or
other fee income from its subsidiaries in order to meet the Company's
obligations under the Existing Notes and the Notes. For a description of
restrictions on the ability of the Company's subsidiaries to pay dividends, see
"Description of New Bank Credit Agreement." Although the Company expects to
receive sufficient funds from its subsidiaries to enable it to meet its debt
service obligations under the Existing Notes and the Notes, there can be no
assurance that it will be able to do so.
The Company's holding company structure effectively subordinates payments
on the Notes to any liabilities of subsidiaries of the Company, including debt
of Pueblo under the New Bank Credit Agreement. After giving effect to the
Refinancing Plan as if it had occurred on January 25, 1997, the subsidiaries of
the Company would have had approximately $26.2 million of indebtedness and,
after the issuance of standby letters of credit in the amount of $23.3 million,
would have had availability of $41.7 million under the New Bank Credit
Agreement. In addition, the Company's subsidiaries may incur additional
borrowings in the future, subject to the restrictions contained in the
indentures for the Existing Notes and the Notes.
ASSET ENCUMBRANCES; CHANGE OF CONTROL OFFER
The obligations of Pueblo under the New Bank Credit Agreement are
guaranteed by the Company and Holdings, the owner of all of the Company's
outstanding capital stock, and are secured by first priority pledges of all the
outstanding stock of the Company's subsidiaries, by the capital stock of the
Company and by intercompany notes issued by the Company's subsidiaries. If the
Company becomes insolvent or is liquidated, or if payment of obligations under
the New Bank Credit Agreement is accelerated, the lenders under the New Bank
Credit Agreement would be entitled to exercise the remedies available to a
secured lender under applicable law and pursuant to such agreement. Accordingly,
such lenders will have a prior claim with respect to such assets. See
"Description of New Bank Credit Agreement."
Upon a Change of Control, the Company is required to offer to purchase all
outstanding Notes and Existing Notes. In addition, a Change of Control would
result in an event of default under the New Bank Credit Agreement, which could
result in the acceleration of the Company's obligations thereunder. In the case
of any offer to purchase the outstanding Notes and Existing Notes upon a Change
of Control, there can be no assurance that the Company would be able to repay
amounts outstanding under the New Bank Credit Agreement or obtain waivers
necessary to consummate a purchase of the Notes and the Existing Notes. Any such
requirement to offer to purchase outstanding Notes and Existing Notes could
result in the Company having to refinance the indebtedness then outstanding
under the New Bank Credit Agreement and to obtain the funds necessary to offer
to purchase both the Notes and the Existing Notes. There can be no assurance
that the Company would be able to refinance such indebtedness or obtain such
funds or, if it were to do so, that such refinancing or such funds would be
available on terms satisfactory to the Company. See "Description of New Bank
Credit Agreement" and "Description of Notes -- Certain Covenants -- Repurchase
of Notes upon Change of Control."
15
<PAGE> 21
RECENT MANAGEMENT CHANGES
In March 1997, the Company appointed David L. Aston as the new President of
the Puerto Rico supermarket division, the Company's largest division, and as a
director of the Company. Mr. Aston has over 28 years of United States
supermarket experience, nearly all of it with the Kroger Company. Most recently,
Mr. Aston served as President of Waldbaums and Superfresh Foods, units of the
A&P Company. In February 1997, the Company's Chief Financial Officer resigned
his positions with the Company to assume a position with another company. The
Company is actively recruiting candidates to fill this position.
The Company believes that successful implementation of its business
strategy is dependent, in part, on the continued availability of qualified
senior management. The replacement of two of the most senior members of the
Company's management team involves the risk inherent in any significant
management change. While Mr. Aston's significant industry experience in the
United States does not include prior assignments in Puerto Rico, the Company
believes that this experience outweighs any disadvantages he may have during the
near term as he becomes familiar with the market in Puerto Rico. Based upon its
recent recruiting activities, the Company is confident that in the near term it
will identify and employ a qualified new chief financial officer.
While the Company believes that it has been able to, and will continue to
be able to, attract and retain qualified senior management, no assurances can be
given that the Company will be able to attract or retain qualified senior
management or that such new members of management will be able to work with the
Company's personnel or suppliers or to effectively implement the Company's
business strategy. See "Management."
LIMITED GEOGRAPHIC MARKET
The Company's operations are located in Puerto Rico and the U.S Virgin
Islands. As a result, the Company's operations are dependent upon the economies
of these two areas as well as being subject to certain other factors, such as
weather patterns, including tropical storms and hurricanes, which may adversely
affect the Company's operations. Hurricane Hugo in 1989 destroyed one of the
Company's stores in the U.S. Virgin Islands and more recent hurricanes have
caused disruptions in the Company's operations in both Puerto Rico and the U.S.
Virgin Islands. Although the Company believes that it carries adequate property
(including business interruption) and casualty insurance, there can be no
assurance that weather and other factors will not result in adverse effects on
the Company's operations.
In addition, much of the development of the manufacturing sector of the
economy in Puerto Rico can be attributed to various U.S. Federal and
Commonwealth tax incentives, including Section 936 of the Internal Revenue Code
of 1986, as amended (the "Code") which provided certain tax credits for
companies operating in Puerto Rico. The termination of Section 936 is effective
for tax years beginning after December 31, 1995. Special phaseout rules apply to
existing Section 936 credit claimants, such as the Company, for the portion of
Section 936 credit attributable to active business income. Under the phase out
rules, the amount of the credit available to existing Section 936 credit
claimants, including the Company, will decrease for tax years beginning after
December 31, 2001. The termination of Section 936 may have an adverse effect on
the economy of Puerto Rico and, indirectly, on the Company.
COMPETITION
The food retailing business is highly competitive. The number and type of
competitors and the degree of competition experienced by individual stores vary
by location. The Company competes in its different markets with local
supermarket chains, independent supermarkets, warehouse club stores, discount
drug stores and convenience stores. Warehouse club stores and mass
merchandisers, which have entered the Puerto Rico and U.S. Virgin Island markets
since 1990 offering various bulk grocery and general merchandise items, have
increased pricing pressures on grocery retailers including the Company. Certain
competitors have greater financial resources than the Company and could use
those resources to take steps which could adversely affect the Company's market
position. In addition, the Company's Blockbuster video operations compete
against other independent video rental outlets as well as television, cable,
satellite broadcasting, movie theaters and
16
<PAGE> 22
other forms of entertainment. There can be no assurance that future growth in
cable and satellite penetration in the Company's markets will not adversely
affect revenues of the Company's Blockbuster operations.
RISKS TO BLOCKBUSTER DEVELOPMENT STRATEGY
The Company is the exclusive Blockbuster franchisee for Puerto Rico and the
U.S. Virgin Islands pursuant to Area Development Agreements (the "Development
Agreements") with Blockbuster Entertainment Corporation, now known as
Blockbuster Entertainment, Inc. ("BEC"). These agreements contain development
quotas requiring the Company to open a certain number of Blockbuster locations
in Puerto Rico by December 1999 and in the U.S. Virgin Islands by April 1997.
Each Blockbuster location is subject to a franchise agreement (a "Franchise
Agreement") with BEC that provides the right for such location to conduct
Blockbuster operations for a 20 year period so long as the terms of such
Franchise Agreement are complied with. The Company has fulfilled its development
quota in the U.S. Virgin Islands and plans to fulfill its December 1999
development quota in Puerto Rico by the end of the first quarter of fiscal 1998
and otherwise believes it is in full compliance with its obligations under the
Development Agreements. The Development Agreements require the Company and BEC
to negotiate in good faith in order to agree on further development quotas
beyond the achieved quotas to enable the Company to open additional new
Blockbuster locations. While the Company has successfully negotiated revised
development quotas with BEC in the past, and believes it maintains excellent
relations with BEC, if such agreement cannot be reached, there can be no
assurance that BEC will not grant development rights to another franchisee or
seek to establish operations itself in the Company's markets. Each Franchise
Agreement, however, provides that BEC shall not operate or grant a franchise
within a specified territory surrounding the Blockbuster location covered by
such Franchise Agreement for a 20 year period beginning on the date of such
Franchise Agreement.
CONTROL OF THE COMPANY BY THE PRINCIPAL SHAREHOLDERS
As a result of their beneficial ownership of Holdings, which owns all the
issued and outstanding common stock of the Company, the Principal Shareholders
have the ability to exercise control over the business and affairs of Holdings
by virtue of their continuing ability to elect a majority of Holdings' Board of
Directors and their voting power with respect to actions requiring stockholder
approval. By virtue of their control of Holdings, the Principal Shareholders
have the ability to exercise similar control over the business and affairs of
the Company and its subsidiaries.
RISK OF FRAUDULENT TRANSFER LIABILITY
The proceeds of the issuance of the Initial Notes have been used to repay
certain indebtedness (the "Acquisition Indebtedness") of the Company incurred in
connection with the Acquisition. Management of the Company believes that the
Acquisition Indebtedness was incurred for proper purposes and in good faith, and
that, based on forecasts, asset valuations and other financial information, the
Company, both before and after the consummation of the Acquisition, was solvent,
had sufficient capital for carrying on its business and expected to be able to
pay its debts as they matured. Notwithstanding management's belief, if a court
of competent jurisdiction in a suit by an unpaid creditor or a representative of
creditors (such as a trustee in bankruptcy or a debtor-in-possession) were to
find that, at the time of the incurrence of such Acquisition Indebtedness, the
Company was insolvent, was rendered insolvent by reason of such incurrence, was
engaged in a business or transaction for which its remaining assets constituted
unreasonably small capital, intended to incur, or believed that it would incur,
debts beyond its ability to pay as such debts matured, or intended to hinder,
delay or defraud its creditors, such court could avoid or cause the
subordination of such indebtedness. A likely consequence of such action by the
court would be the avoidance, or the subordination to existing and future
indebtedness of the Company, of the Notes (to the extent the proceeds of the
Notes were used to repay Acquisition Indebtedness).
ORIGINAL ISSUE DISCOUNT CONSEQUENCES
The Notes have been issued with original issue discount ("OID") within the
meaning of Section 1273(a) of the Internal Revenue Code of 1986, as amended.
Holders of obligations issued with OID must include such
17
<PAGE> 23
OID in gross income for federal income tax purposes as it accrues, in advance of
the receipt of the cash attributable to such income, under a method that takes
into account the compounding of interest. See "Taxation."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Company does not intend to apply for listing of the Notes on any
national securities exchange. There is currently a trading market for the
Existing Notes. The Notes bear the same interest rate and have the same terms as
the Existing Notes. However, because of the discount at which the Notes have
been issued, the Notes carry OID and have different tax characteristics than the
Existing Notes and may trade differently from the Existing Notes. See
"Taxation." Although the Initial Purchasers currently intend to make a market in
the Notes, they are not obligated to do so, and any such market-making may be
discontinued at any time without notice, in their sole discretion. Accordingly,
no assurance can be given as to the liquidity of, or the existence of trading
markets for, the Notes.
USE OF PROCEEDS OF THE EXCHANGE NOTES
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Company will receive, in exchange, Initial Notes in like principal amount.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Initial Notes, except as otherwise described herein
under "The Exchange Offer -- Terms of the Exchange Offer." The Initial Notes
surrendered in exchange for the Exchange Notes will be retired and cancelled and
cannot be reissued. Accordingly, issuance of the Exchange Notes will not result
in any increase in the outstanding debt of the Company.
18
<PAGE> 24
CAPITALIZATION
Set forth below is the historical consolidated capitalization of the
Company and the pro forma consolidated capitalization of the Company as of
January 25, 1997, assuming that the Refinancing Plan was completed on that date.
The capitalization information set forth below should be read in conjunction
with the Consolidated Financial Statements of the Company appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF
JANUARY 25, 1997
----------------------
ACTUAL PRO FORMA
-------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Short-term borrowing......................................... $ 7,000 $ --
Current maturities(1)........................................ 18,867 8,117
Notes payable to a related party............................. 10,000 --
-------- --------
Total short-term debt..................................... 35,867 8,117
Long-term debt:
Old Bank Credit Agreement.................................... 61,227 --
Existing Notes............................................... 180,000 180,000
9 1/2% Series B Senior Notes due 2003(2)..................... -- 76,713
Payable to a Puerto Rico government agency................... 10,000 10,000
Capital lease obligations, net of current portion............ 8,110 8,110
-------- --------
Total long-term debt, net of current portion.............. 259,337 274,823
-------- --------
Total debt................................................ 295,204 282,940
Total stockholder's equity(3).................................. 32,981 29,744
-------- --------
Total capitalization........................................... $328,185 $ 312,684
======== ========
</TABLE>
- ---------------
(1) Includes $7,500 of notes payable to a Puerto Rico government agency, $10,750
of indebtedness under the Old Bank Credit Agreement and $617 of current
obligations under capital leases.
(2) Reflects the issuance of the Initial Notes at a discount of $8,287.
(3) Pro forma stockholder's equity includes an extraordinary $5.3 million
write-off of unamortized fees in connection with the Old Bank Credit
Agreement, which has been tax effected.
19
<PAGE> 25
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SALES PER SELLING SQUARE FOOT AMOUNTS)
The selected financial data below for the fiscal years ended January 28,
1995, January 27, 1996 and January 25, 1997 are derived from the Consolidated
Financial Statements that have been audited by Deloitte & Touche LLP,
independent auditors, and are included elsewhere in this Prospectus. The
selected financial data below for the fiscal years ended January 30, 1993 and
January 29, 1994 are derived from audited financial statements of the Company's
predecessor and the Company that are not included herein. See note 3 below. The
pro forma financial data is provided for information purposes only, is unaudited
and is not necessarily indicative of future operating results or financial
condition or what the operating results or financial condition would have been
had the Refinancing Plan actually been consummated as of the beginning of the
period or as of the balance sheet date indicated. The information set forth
below should be read in conjunction with the Consolidated Financial Statements
included elsewhere herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which discusses, among other things, the
closing of the Company's Florida operations in fiscal 1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)
---------------------------------------------------------------------------------
PRO FORMA
JANUARY 30, JANUARY 29, JANUARY 28, JANUARY 27, JANUARY 25, JANUARY 25,
1993(2) 1994(3) 1995 1996 1997 1997(4)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales..................... $1,251,726 $1,199,123 $1,166,955 $1,145,370 $1,020,056 $1,020,056
Gross profit.................. 303,158 295,273 295,819 296,880 259,727 259,727
Selling, general and
administrative
expenses(5)................. 232,202 230,266 229,197 240,219 213,485 213,485
Unusual charges(6)............ -- -- -- 32,161 4,160 4,160
Operating profit (loss)....... 41,307 27,357 22,757 (19,169) 954 954
Interest expense, net......... 13,047 21,635 32,153 33,346 30,182 30,288
Net income (loss)............. 15,922 (9,751) (4,641) (32,357) (16,918) (16,983)
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash
equivalents(7).............. $ 7,838 $ 5,471 $ 15,680 $ 6,928 $ 12,148 $ 5,566
Working capital (deficit)..... (8,478) (26,873) (11,534) (31,125) (56,217) (42,979)
Fixed assets, net............. 168,395 224,605 207,935 166,283 150,915 150,915
Total assets.................. 300,012 619,625 602,695 573,383 522,740 507,239
Total debt.................... 123,686 347,124 329,855 308,497 295,204 282,940 (8)
Total liabilities............. 251,938 552,728 525,439 528,484 489,759 477,495
Stockholder's equity.......... 48,074 66,897 77,256 44,899 32,981 29,744
OTHER DATA:
EBITDA(9)..................... $ 70,956 $ 65,007 $ 66,622 $ 56,661 $ 50,391 $ 60,491 (10)
Depreciation and
amortization................ 29,649 37,650 43,865 43,669 41,128 41,128
Capital expenditures.......... 22,472 23,493 16,401 22,334 14,455 14,455
EBITDA margin(9).............. 5.7 % 5.4 % 5.7 % 4.9 % 4.9 % 5.9 %
Ratio of earnings to fixed
charges(11)................. 2.7 x -- -- -- -- --
Ratio of total debt to EBITDA
............................ 4.7 x
Cash interest expense......... $ 28,129
Ratio of EBITDA to cash
interest expense............ 2.2 x
</TABLE>
20
<PAGE> 26
<TABLE>
<CAPTION>
FISCAL YEAR(1)
--------------------------------------------------------
1993(2) 1994(3) 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PUEBLO AND XTRA STORE DATA
PUERTO RICO
Number of stores (at fiscal year-end).......... 40 42 44 46 44
Average sales per store(12).................... $ 21,091 $ 20,776 $ 20,263 $ 20,212 $ 19,672
Average selling square footage................. 26,818 26,601 26,729 27,536 27,591
Average sales per selling square foot(12)...... $ 786 $ 781 $ 758 $ 731 $ 722
Total sales.................................... 850,139 860,190 874,019 877,603 886,765
Same store sales % change...................... 9.2% (0.9)% (1.3)% (2.8)% (2.6)%
U.S. VIRGIN ISLANDS
Number of stores (at fiscal year-end).......... 5 5 5 6 6
Average sales per store(12).................... $ 19,220 $ 19,003 $ 15,619 $ 14,960 $ 15,110
Average selling square footage................. 20,724 20,724 20,724 20,104 20,104
Average sales per selling square foot(12)...... $ 927 $ 917 $ 754 $ 744 $ 752
Total sales.................................... 97,970 95,014 78,097 76,813 90,659
Same store sales % change...................... 0.9% (1.2)% (17.8)% (3.3)% 7.0%
BLOCKBUSTER STORE DATA:
Number of stores (at fiscal year-end).......... 19 21 22 22 27
Average sales per store(12).................... $ 1,206 $ 1,123 $ 1,254 $ 1,443 $ 1,588
Average weekly sales........................... 452 467 535 608 794
Total sales.................................... 16,763 23,189 26,994 31,295 35,938
Same store sales % change...................... (3.5)% (8.1)% 10.9% 14.0% 10.5%
</TABLE>
- ---------------
(1) Operating activity for the 26 weeks ended January 29, 1994 and for the
fiscal years 1995, 1996 and 1997 are representative of the Company
subsequent to the Acquisition. All other operating activity pertains to
Pueblo prior to the Acquisition.
(2) Fiscal 1993 was a 53-week year.
(3) Represents the combined results of operations for the 26-week period ended
July 31, 1993 of the Company's predecessor prior to the Acquisition and the
26-week period ended January 29, 1994 of the Company. The results for each
26 week period are as follows:
<TABLE>
<CAPTION>
26 WEEKS ENDED 26 WEEKS ENDED
JULY 31, 1993 JANUARY 29, 1994
-------------- ----------------
<S> <C> <C>
Net sales..................................... $612,454 $586,669
Gross profit.................................. 150,961 144,312
Store operating, selling and administrative
expenses.................................... 117,738 112,528
Operating profit.............................. 17,478 9,879
Interest expense, net......................... 5,533 16,102
Net income (loss)............................. (5,148) (4,603)
EBITDA........................................ 33,223 31,784
Depreciation and Amortization................. 15,745 21,905
</TABLE>
(4) Pro forma income statement data reflect changes in interest expense and
assume completion of the Refinancing Plan as of the first day of fiscal
1997. Pro forma balance sheet data include an extraordinary $5.3 million
write-off of unamortized fees in connection with the Old Bank Credit
Agreement, which has been tax effected, and assume completion of the
Refinancing Plan as of January 25, 1997.
(5) Selling, general and administrative expenses for fiscal years 1996 and 1997
include certain expenses and charges related to the implementation of the
Company's strategic initiatives and other matters. See "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations -- General."
21
<PAGE> 27
(6) The Company recorded unusual charges of approximately $30 million in fiscal
1996 and $4.2 million in fiscal 1997 as a result of the Company's exit from
the Florida market and an unusual charge of $2.2 million in fiscal 1996 as
a result of the Company's restructuring of its Puerto Rico operations.
(7) Highly liquid investments purchased with a maturity of three months or less
are considered cash equivalents.
(8) Reflects the issuance of the Initial Notes at a discount.
(9) EBITDA represents income (loss) before interest, income taxes, sundry,
depreciation and amortization and unusual charges. In fiscal 1997, income
taxes included $1.5 million representing the tax effect of the cumulative
effect of a change in accounting principle relating to the adoption of SFAS
No. 121 during such fiscal year. See Note 1 to Notes to Consolidated
Financial Statements. EBITDA is not intended to represent cash flow from
operations as defined by generally accepted accounting principles and
should not be considered as an alternative to net income (loss) as an
indication of the Company's operating performance or to cash flows as a
measure of liquidity. EBITDA is included as it is the basis upon which the
Company assesses its financial performance. EBITDA margin represents EBITDA
divided by net sales.
(10) Pro forma EBITDA has been adjusted to exclude $1.1 million in severance
costs recorded in connection with the elimination of 440 store employees in
January 1997 and to include annual cost savings of approximately $9.0
million, inclusive of salaries and benefits, in connection therewith.
(11) In calculating this ratio, earnings consist of income (loss) before income
taxes, extraordinary item and cumulative effect of a change in accounting
principle, plus fixed charges adjusted to exclude interest capitalized.
Fixed charges consist of interest whether expensed or capitalized,
capitalized lease interest expense and amortization of deferred financing
fees, whether expensed or capitalized, plus the portion of rental expense
under operating leases which has been deemed by the Company to be
representative of the interest factor. Earnings were insufficient to cover
fixed charges by $5.6 million, $9.4 million, $52.6 million and $29.1
million in fiscal years 1994, 1995, 1996 and 1997, respectively. During
fiscal years 1996 and 1997, earnings were adversely affected by a number of
unusual charges and other items related to the implementation of the
Company's strategic initiatives and other matters. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General."
(12) Beginning in 1996, average sales are weighted for the period of time stores
are open during the year.
22
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's consolidated financial condition
and results of operations should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
GENERAL
The Company was organized in 1993 to acquire Pueblo in the Acquisition. In
connection with the Acquisition, the Company incurred significant indebtedness
and recorded significant goodwill. Following the Acquisition, the Company
continued an existing operating strategy designed to significantly expand its
supermarket penetration through new supermarket openings in Puerto Rico and
Florida and new Blockbuster locations in Puerto Rico. The number of the
Company's supermarkets in Puerto Rico and the U.S. Virgin Islands grew from 46
to 50 and the number of the Company's Blockbuster locations (including
conversions) grew from 20 to 27, in each case measured from the Acquisition
through the end of fiscal 1997. In addition, the Company added one new
supermarket in Florida after the Acquisition which was subsequently closed in
fiscal 1997, as described below. From the Acquisition through fiscal 1997, the
Company made capital expenditures totalling $67.1 million, of which $61.3
million related to Puerto Rico and the U.S. Virgin Islands. The Company's focus
on new supermarket development rather than supermarket operations, as well as
the effects of increased competition, resulted in a decline in total sales, same
store sales, and consolidated operating results.
Throughout this time period, the Company's markets have been affected by an
increasing level of competition from local supermarket chains, independent
supermarkets, warehouse club stores, discount drug stores and convenience
stores. Warehouse club stores and mass merchandisers, which have entered the
Puerto Rico and U.S. Virgin Islands markets since 1990 offering various bulk
grocery and general merchandise items, have increased pricing pressures on
grocery retailers including the Company. In addition, low inflation in food
prices in recent years has made it difficult for the Company and other grocery
store operators to increase prices and has intensified the competitive
environment by causing such retailers to emphasize promotional activities and
discount pricing to maintain or gain market share. The South Florida market, in
particular, has been characterized by intense competition that negatively
affected the performance of the Company's stores in that market through fiscal
1996.
In October 1995, William T. Keon, III was named President and Chief
Executive Officer of the Company. Following his arrival at the Company, Mr. Keon
conducted a thorough review of the Company's operating business practices and
its financial performance. As a result of such review, the Company determined in
January 1996 to discontinue its retail operations in the competitive Florida
market in order to focus on its core markets where it has a stronger competitive
position and greater profit opportunities. In the spring of 1996, management
also began to take several other actions designed to improve the financial
performance of the Company, including the conversion of five Pueblo stores to
the Xtra format, the closing of two underperforming Xtra stores in Puerto Rico,
an increase in the Company's advertising expenditures in Puerto Rico and the
conversion of six Pueblo Video Clubs into in-store Blockbuster outlets.
In the summer of 1996, in conjunction with the implementation of the
Company's revised business strategy, the Company retained a retail industry
consulting firm to assist management in analyzing the Company's operating
practices. One result of such analysis was the reorganization of labor
scheduling practices, which enabled the Company to eliminate 440 store employees
in January 1997 and reduce annual labor costs by approximately $9.0 million. It
is management's belief that the decision to exit the Florida market, together
with the actions which the Company began to take in the spring of 1996 and the
implementation of its revised business strategy, has begun to contribute, and
should continue to contribute, toward improved operating results.
Other strategic measures being undertaken by the Company include: (i)
continual evaluation of Pueblo store formats relative to the markets they serve
for potential future conversions to Xtra stores; (ii) continued conversion of
its remaining Pueblo Video Clubs to Blockbuster outlets and (iii) other interior
store changes to
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<PAGE> 29
increase customer traffic, such as in-store banking and in-store fast food
restaurants for select locations. The Company believes that these strategic
measures will be an effective means of improving sales by increasing customer
traffic in its supermarkets. See "Business -- Business Strategy."
In connection with the strategic initiatives begun in January 1996 the
Company has incurred a number of unusual charges and other items that have
adversely affected the Company's operating profit, including the following items
which aggregated $36.1 million in fiscal 1996 and $12.3 million in fiscal 1997.
The Company recorded unusual charges of approximately $30.0 million in fiscal
1996 and $4.2 million in fiscal 1997 as a result of the Company's exit from the
Florida market, and an unusual charge of $2.2 million in fiscal 1996 as a result
of the Company's restructuring of its Puerto Rico operations. See Note 2 of
Notes to Consolidated Financial Statements. Other items which adversely affected
the Company's operating profit and were related to the implementation of the
Company's strategic initiatives included the following, which aggregated $3.9
million in fiscal 1996 and $8.1 million in fiscal 1997. In fiscal 1996, an
adjustment to the net realizable value of certain non-operating real property in
Puerto Rico caused a charge of $3.9 million. In fiscal 1997, as a result of the
adoption of SFAS No. 121, the Company recognized operating losses of $4.1
million (or $2.7 million net of deferred taxes) from the discontinued Florida
operations, as discussed below. See Note 1 of Notes to Consolidated Financial
Statements. In addition, in fiscal 1997, the elimination of 440 store employees
resulted in a charge of approximately $1.1 million in severance costs and the
closing of two Puerto Rico stores resulted in a $2.9 million charge.
In addition, the Company established reserves totalling $5.3 million during
fiscal years 1994 through 1997, including $3.1 million and $1.2 million in
fiscal years 1996 and 1997 relating to the costs, including legal fees,
associated with the recently settled Premium Sales litigation described under
"Business -- Legal Proceedings."
RESULTS OF OPERATIONS
Adjustments for Florida Closing
In fiscal 1996, the Company determined to discontinue its retail operations
in Florida. The effective date of the Florida closing was December 30, 1995. All
eight of the Xtra stores in Florida were closed in the first quarter of fiscal
1997. The following table presents selected comparative operating data of the
Company for the three fiscal years ended January 25, 1997 after excluding the
Florida retail division (the "Continuing Business"):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
SELECTED OPERATING RESULTS OF THE PUERTO RICO AND
U.S. VIRGIN ISLANDS OPERATIONS: (dollars in
thousands)
Net sales........................................ $ 979,110 $ 985,711 $ 1,013,363
Gross profit..................................... 250,810 259,508 259,291
Selling, general and administrative expense...... 186,861 201,402 208,900
EBITDA(1)........................................ 63,949 58,106 50,391
Depreciation and amortization.................... 38,418 39,075 41,128
Operating profit................................. 25,531 16,748 9,263
SELECTED OPERATING RESULTS OF THE PUERTO RICO AND
U.S. VIRGIN ISLANDS OPERATIONS: (as a
percentage of sales)
Gross profit..................................... 25.6% 26.3% 25.6%
Selling, general and administrative expenses..... 19.1 20.4 20.6
EBITDA(1)........................................ 6.5 5.9 5.0
Operating profit................................. 2.6 1.7 0.9
</TABLE>
- ---------------
(1) EBITDA represents income (loss) before interest, income taxes, sundry,
depreciation and amortization and unusual charges.EBITDA is not intended to
represent cash flow from operations as defined by
24
<PAGE> 30
generally accepted accounting principles and should not be considered as an
alternative to net income (loss) as an indication of the Company's operating
performance or to cash flows as a measure of liquidity. EBITDA is included
as it is the basis upon which the Company assesses its financial
performance.
Fiscal 1997 vs. Fiscal 1996
As of January 25, 1997, the Company operated a total of 50 supermarkets and
27 Blockbuster locations in Puerto Rico and the U.S. Virgin Islands. During
fiscal 1997, the Company closed all eight of its Xtra stores and its
distribution facility in Florida as part of the disposal of the Company's
Florida retail operations. For further details of the Florida closing, see Note
2 to Notes to Consolidated Financial Statements. In addition, in fiscal 1997,
the Company closed two underperforming Xtra stores in Puerto Rico, converted
five Pueblo stores to Xtra stores in Puerto Rico, and converted four Pueblo
Video Clubs into in-store Blockbuster outlets in Puerto Rico.
Fiscal 1997 net sales decreased by $125.3 million or 10.9% from $1,145.4
million in the prior year to $1,020.1 million. A primary factor in the overall
sales reduction was the closing of the Florida retail operations, which had
sales of $6.7 million and $159.7 million in fiscal 1997 and fiscal 1996,
respectively. Net sales from the Continuing Business increased by $27.7 million
or 2.8% in fiscal 1997 over fiscal 1996. Of this increase, 83% was attributable
to supermarket sales and 17% was attributable to Blockbuster operations. In
fiscal 1997, same store sales, or sales for stores open in comparable 52-week
periods for the Continuing Business, decreased by 1.4%, as compared to a same
store sales decline for the Continuing Business of 2.4% in fiscal 1996. This
decline reflected a same store sales decrease for the year of 2.6% in the
Company's Puerto Rico supermarket operations (which represent approximately
87.5% of the Company's total sales) as competition continued to adversely affect
the operating division's sales performance. However, the Company's Puerto Rico
supermarket operations experienced an increase in same store sales of 3.4% in
the fourth quarter of fiscal 1997 compared to the fourth quarter of fiscal 1996.
U.S. Virgin Islands supermarket operations experienced a same store sales
increase for fiscal 1997 of 7.0%. Blockbuster operations experienced a same
store sales increase for fiscal 1997 of 10.5%.
Gross profit margin in fiscal 1997, as a percentage of sales, was 25.5% or
0.4% below the 25.9% in the prior year. Gross margin for the Continuing Business
decreased 0.7% from 26.3% in fiscal 1996 to 25.6% in fiscal 1997. The primary
factor in this decline was the 4.7% decline in the meat department gross margin
from the prior year in the Puerto Rico supermarkets. The decline in meat margins
was principally the result of a reduction in prices due, in part, to
competition, partially offset by a reduction in shrinkage in the meat
department. The decrease in gross margin was partially offset by improved
margins in the Blockbuster operations.
Selling, general and administrative expenses decreased from the prior year
amount of $240.2 million to $213.5 million, or 11.1%, primarily as a result of
the closing of the Florida operations. Selling, general and administrative
expenses, as a percentage of sales, was 20.9% in fiscal 1997, which was
comparable to that of fiscal 1996. Selling, general and administrative expenses
from the Continuing Business increased from $201.4 million to $208.9 million, or
as a percentage of sales, increased 0.2% from 20.4% in fiscal 1996 to 20.6% in
fiscal 1997. Major factors contributing to the increase were (a) a $2.9 million
charge for the closing of two Xtra stores in Puerto Rico, (b) a $2.7 million
increase in advertising expenditures for the Continuing Business, (c) $1.9
million in consulting fees arising from an ongoing project to improve
supermarket operations in Puerto Rico and (d) $1.1 million in severance costs
recorded in connection with the elimination of 440 store employees in Puerto
Rico.
Depreciation and amortization decreased $2.6 million from $43.7 million in
fiscal 1996 to $41.1 million in fiscal 1997, primarily as a result of the
closing of the Florida operations. Depreciation and amortization from the
Continuing Business increased $2.0 million from $39.1 million in fiscal 1996 to
$41.1 million in fiscal 1997. The increase was due mainly to the full year of
depreciation on fiscal 1996 capital expenditures of $21.8 million. In addition,
the Company recorded an additional $600,000 in depreciation related to a change
in estimated life of its shopping carts. Interest expense, net of interest and
investment income, of $30.1 million decreased by $3.2 million, or 9.5%, as
compared to fiscal 1996. This decrease is primarily due to a reduction in
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<PAGE> 31
interest on capital lease obligations resulting from the Florida closing
combined with lower interest rates and principal amortization on the term loans
under the Old Bank Credit Agreement, partially offset by increased short-term
borrowing during fiscal 1997.
In fiscal 1996, the Company, under then applicable accounting principles,
recorded an unusual charge of $30.0 million, including estimated operating
losses for the phase-out period in fiscal 1997 related to the discontinued
Florida operations. In fiscal 1997, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of". Pursuant to the requirements of this statement, the Company's
results of operations in fiscal 1997 included operations of the Florida stores
for the phase-out period in fiscal 1997. The recognition of these operations
negatively affected the Company's operating profit by $4.1 million in fiscal
1997. Furthermore, in accordance with SFAS No. 121, the Company recorded the
cumulative effect of a change in accounting principle of $2.7 million (net of
deferred income taxes of $1.5 million), the effect of which was to offset the
Florida operating losses recorded in fiscal 1997, as described above. See Notes
1 and 2 to Notes to the Consolidated Financial Statements. In addition, the
Company recorded $4.2 million in unusual charges in fiscal 1997 to write down
assets from the Florida operations in order to reflect a revised estimate of the
fair value of the remaining properties held for sale.
The decrease in the income tax benefit of $10.7 million was primarily the
result of the tax effects of the $30.0 million charge for the Florida disposal
that was recorded in fiscal 1996.
Results for fiscal 1997 were a net loss of $16.9 million, as compared to a
net loss of $32.4 million for fiscal 1996.
Fiscal 1996 vs. Fiscal 1995
As of January 27, 1996, the Company operated 60 supermarkets and 22
Blockbuster locations throughout Puerto Rico, the U.S. Virgin Islands and
Florida. During fiscal 1996, the Company closed one small Pueblo store and
opened three new Xtra stores in Puerto Rico. In addition, the Company opened one
new Pueblo store, which it purchased from a competitor, in the U.S. Virgin
Islands.
Net sales decreased by $21.6 million, or 1.8%, in comparison to the prior
year. Sales of approximately $12.5 million related to Florida retail operations
subsequent to December 30, 1995 (the effective date of closing for accounting
purposes) are included in unusual charges in the consolidated statement of
operations for fiscal 1996. Additionally, sales derived from fiscal 1996 new
store openings were $18.2 million. Same store sales, or sales for stores open in
comparable 52-week periods, decreased by 3.3%. This reflects the effects of
increased competition as same store sales decreases were experienced in all
supermarket operating divisions. The Puerto Rico supermarket operations, the
major contributor to total company sales (with approximately 77.0% of the
total), reflected a same store sales decrease for the year of 2.8%. The effects
of competitors' new store openings in the U.S. Virgin Islands were fully cycled
during the fourth quarter of fiscal 1996 as indicated by a same store sales
increase of 3.8% in the U.S. Virgin Islands for the 12-week period ended January
27, 1996, although such same store sales decreased 3.3% for the entire fiscal
year. Fiscal 1996 Blockbuster video operations experienced a same store sales
increase of 14.0% over the prior year.
Although the Company's operations in the U.S. Virgin Islands were hindered
by Hurricane Marilyn, there were no material net losses in property due to the
adequacy of insurance coverage maintained by the Company. Most stores were
re-opened (with temporary repairs) within a few days of being hit by the
hurricane to ensure that residents could get the necessary food and supplies.
Gross profit margin, as a percentage of sales, was 0.6% greater than that
of the prior year primarily due to a reduction in retail shrink and selective
price increases.
Selling, general and administrative expenses, as a percentage of sales,
increased by 1.3% for fiscal 1996 principally due to higher direct store selling
expenses. Major factors contributing to the increase were (a) higher labor costs
partly caused by selected increases in customer service levels in Puerto Rico as
well as costs associated with the implementation of the frequent shopping
program in Florida through December 30, 1995, the effective closing date of the
Florida operating division, (b) increased advertising and legal costs,
26
<PAGE> 32
(c) higher repairs and maintenance combined with the fixed nature of certain
store expenses such as rent and utilities and (d) an adjustment to net
realizable value for certain non-operating property in Puerto Rico in the amount
of $3.9 million.
Depreciation and amortization for fiscal 1996 was comparable to that of
fiscal 1995.
Interest expense of $33.3 million, net of interest and investment income,
increased by $1.2 million, or 3.7%, primarily due to bank financing fees
incurred during the fiscal year.
During fiscal 1996, the Company recorded unusual charges of $32.2 million
consisting of approximately $30.0 million resulting from the Florida closing and
$2.2 million for restructuring in Puerto Rico operations. Included in the $30.0
million loss from the Florida closing are estimated operating losses during the
phase-out period, a reduction of related assets to their estimated realizable
value, the recognition of net future lease obligations, employee termination
benefits for Florida operations and other store closing costs. See Note 2 of
Notes to Consolidated Financial Statements.
The increase in the income tax benefit of $15.4 million was primarily the
result of the tax effects of the Florida closing, the majority of which is
deferred.
Net results for fiscal 1996 reflect a net loss of $32.4 million as compared
to a net loss of $4.6 million for fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity for the Company's operational needs has historically been
provided by cash flow from operations, along with funds available under the Old
Bank Credit Agreement. The Company believes that the consummation of the
Refinancing Plan has enhanced the Company's liquidity resources.
Cash provided by operating activities was $14.8 million, $24.1 million and
$27.8 million in fiscal 1997, fiscal 1996 and fiscal 1995, respectively. The
major factor contributing to the reduction in net cash provided by operating
activities for fiscal 1997 was net cash outlays totaling $17.0 million related
to the Florida closing (excluding proceeds from the sale of certain fixed assets
from the Florida retail operations).
Net cash used in investing activities was $1.4 million, $21.8 million, and
$15.7 million in fiscal years 1997, 1996, and 1995, respectively. The $20.4
million reduction in cash used in investing activities pertains primarily to
$11.8 million received in fiscal 1997 for the sale of two Xtra stores and
certain store equipment in Florida as part of the Florida closing, coupled with
a net $7.4 million reduction in expenditures from the capital program. Total
capital expenditures, net of proceeds from disposals, were $14.4 million, $21.8
million, and $15.7 million during fiscal years 1997, 1996, and 1995,
respectively.
Working capital during fiscal 1997 decreased $25.1 million from a deficit
of $31.1 million at the end of fiscal 1996 to a deficit of $56.2 million at the
end of fiscal 1997. A decrease in assets held for sale and deferred income
taxes, and the inclusion of notes payable to a related party in current
liabilities, contributed to the decrease in working capital.
As of January 25, 1997 the Company had borrowings outstanding under the Old
Bank Credit Agreement consisting of $63.0 million in term loans and $16.0
million in revolving loans. The Company amended the Old Bank Credit Agreement as
of January 25, 1997 to increase the revolving facility by $10.0 million and to
amend certain restrictive covenants in order to permit the Company to maintain
its compliance with such covenants. The outstanding indebtedness under the Old
Bank Credit Agreement was repaid pursuant to the Refinancing Plan. In connection
with the Offering, Pueblo entered into the New Bank Credit Agreement which was
provided for a $65.0 million revolving credit facility and less restrictive
covenants compared to the Old Bank Credit Agreement. After the issuance of
standby letters of credit in the amount of $23.3 million, Pueblo has borrowing
availability on a revolving basis of $41.7 million under the New Bank Credit
Agreement. See "Description of New Bank Credit Agreement". The Company believes
that the completion of the Refinancing Plan has provided it with extended debt
maturities, increased liquidity and less restrictive financial covenants, which
will give it increased operating and financial flexibility.
27
<PAGE> 33
Outstanding borrowings with a governmental agency of Puerto Rico from the
issuance of industrial revenue bonds were $17.5 million as of January 25, 1997,
including $7.5 million of principal payments due in the current fiscal year.
Management anticipates that the principal payments due will be financed by
operations.
The Company's general liability and certain of its workers compensation
insurance programs are self-insured. The Company maintains insurance coverage
for claims in excess of $250,000. The current portion of the reserve,
representing amounts expected to be paid in the next fiscal year, is $6.7
million as of January 25, 1997 and is anticipated to be funded with cash
provided by operating activities.
Capital expenditures for fiscal 1998 are expected to be approximately $11.1
million. This capital program, which is subject to continuing change and review,
includes the conversion of ten Pueblo Video Clubs to in-store
Blockbusteroutlets, the opening of three new Blockbuster stores and the
remodeling of certain existing locations.
Since the Acquisition, Holdings and its affiliates have supplemented the
Company's capital resources. In April 1996, the Company received a contribution
of $5.0 million from Holdings, which it used to reduce amounts outstanding under
the Old Bank Credit Agreement. In addition, on October 18, 1996, Holdings
provided $10.0 million in additional funds to the Company in return for a
non-interest bearing redeemable note payable to a related party. This $10.0
million in additional funds was used to reduce amounts outstanding under the Old
Bank Credit Agreement. Concurrent with the Offering, the Company satisfied this
indebtedness by transferring its interest in two real estate properties from its
discontinued Florida operations to Holdings. The Company believes its interest
in these properties had a fair market value of no more than $10.0 million.
The Company believes that the facilities provided by the New Bank Credit
Agreement, together with cash flow from operations, will be adequate for its
liquidity and capital resource needs, including the debt service requirements on
the Existing Notes and the Notes. However, the Company's ability to generate
adequate cash flow from operations will depend on its future operating
performance and financial results, which will be subject to successful
implementation of its business strategy as well as economic, financial,
competitive and other factors beyond its control. In the event that the Company
is unable to generate adequate cash flow, there is no assurance that Holdings or
any of its affiliates would be willing to provide additional capital or
liquidity resources to the Company.
28
<PAGE> 34
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Registration Rights Agreement between the Company and the
Initial Purchasers, the Company has agreed to (i) file on or prior to the 30th
calendar day following April 29, 1997 ("the Closing Date") a registration
statement with respect to a registered offer to exchange the Initial Notes for a
new issue of debt securities of the Company to be issued under the Indenture in
the same aggregate principal amount as and with terms that will be identical in
all respects to the Initial Notes (except that the Exchange Notes will not
contain terms with respect to certain transfer restrictions, registration rights
and penalty interest provisions); (ii) use its best efforts to cause such
registration statement to be declared effective under the Securities Act on or
prior to 90th calendar day following the Closing Date and (iii) use its best
efforts to consummate the Exchange Offer on or prior to the 120th calendar day
following the Closing Date. In the event that applicable law or interpretations
of the staff of the Commission do not permit the Company to effect the Exchange
Offer, or for any reason the Exchange Offer is not consummated within 120 days
of the Closing Date, or in certain other circumstances, the Company will use its
best efforts to cause to become effective the Shelf Registration Statement with
respect to the resale of the Initial Notes and to keep the Shelf Registration
Statement effective until two years after the original issuance of the Initial
Notes. The interest rate on the Initial Notes is subject to increase under
certain circumstances if the Company is not in compliance with its obligations
under the Registration Rights Agreement. See "Initial Notes Registration
Rights."
Each holder of the Initial Notes who wishes to exchange such Initial Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes and (iii) it is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company or, if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. See "Initial Notes
Registration Rights."
RESALE OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain no-action letters addressed to
other parties in other transactions. However, the Company has not sought its own
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances. Based upon these interpretations by the staff of the
Commission, the Company believes that Exchange Notes issued pursuant to this
Exchange Offer in exchange for Initial Notes may be offered for resale, resold
and otherwise transferred by a holder thereof other than (i) a broker-dealer who
purchased such Initial Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an "affiliate" (as defined in Rule 405 of the Securities Act) of
the Company without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of such Exchange Notes. Holders of Initial
Notes accepting the Exchange Offer will represent to the Company in the Letter
of Transmittal that such conditions have been met. Any holder who participates
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may not rely on the position of the staff of the Commission as
set forth in these no-action letters and would have to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it acquired the Initial
Notes as a result of market-making activities or other trading activities and
will deliver a prospectus in connection with any resale of such Exchange Notes.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with
29
<PAGE> 35
resales of Exchange Notes received in exchange for Initial Notes where such
Initial Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Letter of Transmittal states that by
acknowledging and delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" with in the meaning of the Securities Act. The
Company intends for a period of 180 days after the Expiration Date, to make this
Prospectus available to broker-dealers for use in connection with any such
resale. See "Plan of Distribution".
Except as aforesaid, this Prospectus may not be used for an offer to
resell, resale or other retransfer of Exchange Notes.
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Initial Notes in any jurisdiction in which
the Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will, unless such Initial Notes are withdrawn in accordance with the
withdrawal rights specified in "--Withdrawal of Tenders" below, accept any and
all Initial Notes validly tendered prior to 5:00 p.m. New York City time, on the
Expiration Date. The date of acceptance for exchange of the Old Notes, and
consummation of the Exchange Offer, is the Exchange Date, which will be the
first business day following the Expiration Date. The Company will issue, on or
promptly after the Exchange Date, an aggregate principal amount of up to
$85,000,000 of Exchange Notes in exchange for a like principal amount of
outstanding Initial Notes tendered and accepted in connection with the Exchange
Offer. The Exchange Notes issued in connection with the Exchange Offer will be
delivered on the earliest practicable date following the Exchange Date. Holders
may tender some or all of their Initial Notes in connection with the Exchange
Offer. However, Initial Notes may be tendered only in integral multiples of
$1,000.
The terms of the Exchange Notes are identical in all material respects to
the terms of the Initial Notes, except that the Exchange Notes have been
registered under the Securities Act and are issued free from any covenant
regarding transfer restrictions, and except that if the Exchange Offer is not
consummated, or a Shelf Registration Statement is not declared effective, by
August 27, 1997, the interest rate borne by the Initial Notes will increase by
0.5% per annum until the Exchange Offer is consummated (up to a maximum amount
of 1.50% per annum). The Exchange Notes will evidence the same debt as the
Initial Notes and will be issued under and be entitled to the same benefits
under the Indenture as the Initial Notes. As of the date of this Prospectus,
$85,000,000 aggregate principal amount of the Initial Notes is outstanding.
In connection with the issuance of the Initial Notes, the Company arranged
for the Initial Notes originally purchased by qualified institutional buyers to
be issued and transferable in book-entry form through the facilities of The
Depository Trust Company ("DTC"), acting as depositary. Except as described in
"Description of the Notes -- Book-Entry; Delivery and Form," the Exchange Notes
will be issued in the form of a global note registered in the name of DTC or its
nominee and each holder's interest therein will be transferable in book-entry
form through DTC. See "Description of the Notes -- Book-Entry; Delivery and
Form."
Holders of Initial Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Initial Notes which are not tendered for
exchange or are tendered but not accepted in connection with the Exchange Offer
will remain outstanding and be entitled to the benefits of the Indenture, but,
except for Initial Notes held by holders who are ineligible to tender, will not
be entitled to any registration rights under the Registration Rights Agreement.
The Company shall be deemed to have accepted validly tendered Initial Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purposes of receiving the Exchange Notes from the Company.
If any tendered Initial Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Initial Notes will be
30
<PAGE> 36
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Initial Notes in connection with the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Initial Notes in connection with the Exchange Offer. The Company
will pay all charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless extended by the Company in its sole discretion, in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended.
The Company reserves the right, in its sole discretion (i) to delay
accepting any Initial Notes, to extend the Exchange Offer or to terminate the
Exchange Offer and to refuse to accept Initial Notes not previously accepted, if
any of the conditions set forth below under "-- Conditions to the Exchange
Offer" shall not have been satisfied and shall not have been waived by the
Company (if permitted to be waived by the Company) and (ii) to amend the terms
of the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Initial
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the amendment and the
manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such five to ten business day period.
If the Company determines to make a public announcement of any delay,
extension, amendment or termination of the Exchange Offer, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement, other than by making a timely release to an appropriate
news agency.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at the rate of 9 1/2% per annum from
April 29, 1997, the date of issuance of the Initial Notes that are tendered in
exchange for the Exchange Notes (or the most recent interest payment date to
which interest on such Notes has been paid or duly provided for). Accordingly,
Holders of Initial Notes that are accepted for exchange will not receive
interest on the Initial Notes that is accrued but unpaid at the time of tender,
but such interest will be payable on the first interest payment date after the
Expiration Date. Interest on the Exchange Notes will be payable semi-annually on
February 1 and August 1 in each year, commencing August 1, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or to exchange, any Initial Notes for any
Exchange Notes, and may terminate or amend the Exchange Offer before the
acceptance of any Initial Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency relating to the Exchange Offer
which, in the Company's reasonable good faith judgment, would be expected
to impair the ability of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is adopted or enacted, or any
existing law, statute, rule or regulation is interpreted by the Commission
or its staff, which in the Company's reasonable good faith judgment, would
be expected to impair the ability of the Company to proceed with the
Exchange Offer.
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<PAGE> 37
If the Company determines in its reasonable good faith judgment that any of
the foregoing conditions exist, the Company may (i) refuse to accept any Initial
Notes and return all tendered Initial Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Initial Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders who
tendered such Initial Notes to withdraw their tendered Initial Notes which have
not been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
five to ten business days.
PROCEDURES FOR TENDERING
Only a holder of record of Initial Notes may tender such Initial Notes in
connection with the Exchange Offer. To tender in connection with the Exchange
Offer, a holder must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, have the signatures thereon guaranteed if required by the
Letter of Transmittal and mail or otherwise deliver such Letter of Transmittal
or such facsimile, together with the Initial Notes (unless such tender is being
effected pursuant to the procedure for book-entry transfer described below) and
any other required documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Initial Notes by
causing DTC to transfer such Initial Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Initial
Notes may be effected through book-entry transfer into the Exchange Agent's
Account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case other than as set forth in the following paragraph, be transmitted to and
received or confirmed by the Exchange Agent at its addresses set forth under the
caption "Exchange Agent," below, prior to 5:00 p.m., New York City time, on the
Expiration Date.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in place of sending a signed, hard copy of the Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Certificates through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the Letter of Transmittal.
The tender by a holder of Initial Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
The method of delivery of Initial Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the holders. Instead of delivery by mail, it is recommended that holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date. No
Letter of Transmittal or Initial Notes should be sent to the Company. Holders
may request their respective brokers, dealers, commercial banks, trust companies
or nominees to effect the tenders for such holders.
Any beneficial owner whose Initial Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivery of such
owner's Initial Notes, either make appropriate arrangements to register
ownership of the Initial Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
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<PAGE> 38
Signature on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Initial Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal, or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Initial Notes listed therein, such Initial Notes must
be endorsed by such registered holder or accompanied by a properly completed
bond power, in each case signed or endorsed in blank by such registered holder
as such registered holder's name appears on such Initial Notes.
If the Letter of Transmittal or any Initial Notes or bond powers are signed
or endorsed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Initial Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Initial Notes not properly tendered or any Initial Notes whose acceptance by the
Company would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the right to waive any defects, irregularities or
conditions of tender as to any particular Initial Notes either before or after
the Expiration Date. The Company's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Initial Notes must be cured within
such time as the Company shall determine. Although the Company intends to
request the Exchange Agent to notify holders of defects or irregularities with
respect to tenders of Initial Notes, neither the Company, the Exchange Agent nor
any other person shall have any duty or incur any liability for failure to give
such notification. Tenders of Initial Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Initial
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right, as set forth above under the
caption "-- Conditions to the Exchange Offer," to terminate the Exchange Offer.
By tendering, each holder shall be deemed to represent to the Company that,
among other things, the Exchange Notes acquired in connection with the Exchange
Offer are being obtained in the ordinary course of business of the person
receiving such Exchange Notes, whether or not such person is the holder, that
neither the holder nor any such other person has an arrangement or understanding
with any person to participate in the distribution of such Exchange Notes and
that neither the holder nor any such other person is an "affiliate" (as defined
in Rule 405 under the Securities Act) of the Company. If the holder is a
broker-dealer which will receive Exchange Notes for its own account in exchange
of Initial Notes, it shall be deemed to acknowledge that it acquired such
Initial Notes as the result of market making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such Exchange Notes. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Initial Notes and (i) whose Initial Notes
are not immediately available, or (ii) who cannot deliver their Initial Notes,
the Letter of Transmittal or any other required documents to the
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<PAGE> 39
Exchange Agent, or cannot complete the procedure for book-entry transfer, prior
to the Expiration Date, may effect a tender of their Initial Notes if:
(a) The tender is made through an Eligible Institution,
(b) Prior to the Expiration Date, the Exchange Agent received from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Initial Notes and the principal amount of Initial Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
five business days after the Expiration Date the Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing the
Initial Notes to be tendered in proper form for transfer (or confirmation
of a book-entry transfer into the Exchange Agent's account at DTC of
Initial Notes delivered electronically) and any other documents required by
the Letter of Transmittal will be deposited by the Eligible Institution
with the Exchange Agent, and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof) as well as the certificate(s) representing all tendered
Initial Notes in proper from for transfer (or confirmation of a book-entry
transfer into the Exchange Agent's account at DTC of Initial Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Initial Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Initial Notes in connection with the Exchange
Offer, a written or facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person who deposited the Initial Notes to be withdrawn
(the "Depositor"), (ii) identify the Initial Notes to be withdrawn (including
the certificate number or numbers and principal amount of such Initial Notes),
(ii) be signed by the Depositor in the same manner as the original signature on
the Letter of Transmittal by which such Initial Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee (as hereinafter defined) register the transfer of
such Initial Notes into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Initial Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Initial Notes so withdrawn will be deemed not be have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the Initial Notes so withdrawn are validly
re-tendered. Any Initial Notes which have been tendered but which are not
accepted for exchange or which are withdrawn will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Initial Notes may be retendered by following one of the procedures described
above under the caption "-- Procedures for Tendering" at any time prior to the
Expiration Date.
EXCHANGE AGENT
Unites States Trust Company of New York has been appointed as Exchange
Agent in connection with the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal should be directed to the Exchange Agent, at its offices at 114
West 47th Street, New York, New York 10036-1532. The Exchange Agent's telephone
number is (212) 852-1662 and facsimile number is (212) 852-1625.
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<PAGE> 40
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Company will pay certain other expenses to be incurred in connection
with the Exchange Offer, including the fees and expenses of the Exchange Agent,
accounting and certain legal fees.
Holders who tender their Initial Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, Exchange Notes
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Exchange Notes tendered, or if tendered
Initial Notes are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of Initial Notes in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendered holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the Exchange Notes in exchange for the Initial Notes pursuant
to the Exchange Offer will be made only after timely receipt by the Exchange
Agent of such Initial Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the Initial
Notes desiring to tender such Initial Notes in exchange for Exchange Notes
should allow sufficient time to ensure timely delivery. The Company is under no
duty to give notification of defects or irregularities with respect to tenders
of Initial Notes for exchange. Initial Notes that are not tendered or that are
tendered but not accepted by the Company for exchange will, following
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof under the Securities Act and, upon
consummation of the Exchange Offer, certain registration rights under the
Registration Rights Agreement will terminate.
In the event the Exchange Offer is consummated, the Company will not be
required to register any remaining Initial Notes except as provided in the
Registration Rights Agreement. Any remaining Initial Notes will continue to be
subject to the following restrictions on transfer: (i) such Initial Notes may be
resold only if registered pursuant to the Securities Act, if any exemption from
registration is available thereunder, or if neither such registration nor such
exemption is required by law, and (ii) such Initial Notes will bear a legend
restricting transfer in the absence of registration or an exemption therefrom.
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<PAGE> 41
BUSINESS
The Company is the largest supermarket chain and video rental operator in
Puerto Rico and the U.S. Virgin Islands. The Company believes it has developed
significant name recognition, strong customer loyalty and leading market shares
due to the superior quality and large size of its stores, the breadth and price
competitiveness of its product offerings and its extensive market coverage in
prime locations. The Company currently operates 44 supermarkets in Puerto Rico
and six supermarkets in the U.S. Virgin Islands. The Company also currently
operates 27 Blockbuster locations in Puerto Rico and two Blockbuster locations
in the U.S. Virgin Islands as the exclusive Blockbuster franchisee for Puerto
Rico and the U.S. Virgin Islands. In fiscal 1997, the Company generated revenues
of $1,020.1 million and, on a pro forma basis, EBITDA of $60.5 million.
BUSINESS STRATEGY
The Company has developed and is implementing a strategy designed to
increase sales through both higher comparable store performance and selected new
store expansion, and to increase gross profit and operating margins through
improved operating, purchasing and merchandising practices. The components of
this strategy have been designed to build upon the Company's competitive
strengths and consist of the following:
Increase Sales
- Increase Store Traffic by Creating Destination Centers: The Company
seeks to increase store traffic by creating destination centers through
the expansion of the variety of brand-name retail outlets available
within many of the Company's supermarkets. The Company currently has six
in-store Blockbuster outlets, leases in-store space to several retail
consumer banks for full service banking and ATMs and to cellular phone
service providers, and has initiated a program to lease out space for in-
store Burger King restaurants, with the first scheduled to open in June
1997. The Company believes that its supermarkets in Puerto Rico, which
average approximately 40,295 gross sq. ft., are better suited for such
multi-use formats than the generally smaller grocery stores with which
the Company competes. In addition, the Company is reviewing opportunities
to cross-market other consumer products and services in its stores.
- Enhance the Company's Price/Value Image: Based on recent market surveys,
the Company believes that its pricing is generally comparable to or lower
than its major competitors and that opportunities exist to improve
customers' perceptions of the Company's price competitiveness. In fiscal
1997, the Company implemented a strategy of increased advertising in
Puerto Rico which emphasized its price competitiveness, particularly for
high volume products which influence consumers' perception of its value
image. The Company believes this contributed to the fourth quarter fiscal
1997 increase in same store sales in Puerto Rico compared to the prior
year and intends to continue to purchase a greater share of local
television, radio and print advertising than its competitors in order to
promote this image. The use of the Xtra store format also has been
successful in influencing customers' "everyday low price" perceptions of
the Company. The Company converted five Pueblo stores to the Xtra format
in fiscal 1997 and intends primarily to use this format to promote its
value image when it expands into new markets.
- Expand Blockbuster Video Operations: The Company has been significantly
expanding its Blockbuster operations by converting its existing Pueblo
Video Clubs to Blockbuster outlets. In-store Blockbuster video outlets
generate significantly greater revenues and profitability than Pueblo
Video Club operations and have a positive impact on grocery store
traffic. Six such conversions have been completed since November 1996 and
eight more are planned by the end of fiscal 1998. Since the conversions
are located in existing grocery stores, capital expenditures and
operating costs are significantly lower compared to new free standing
Blockbuster stores. In addition, the Company intends to open three
free-standing Blockbuster stores in fiscal 1998 and to examine further
opportunities to expand the number of free-standing Blockbuster stores it
operates.
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<PAGE> 42
- Targeted Supermarket Expansion: The Company intends selectively to
develop new supermarkets in attractive targeted markets, particularly in
the interior of Puerto Rico. Management believes these locations provide
a less competitive environment with lower initial capital requirements
and potentially higher profit margins.
INCREASE GROSS PROFIT AND OPERATING MARGINS
- Increase Store Level Productivity and Reduce Labor Costs: The Company
has implemented numerous measures to enhance productivity and reduce
labor costs. For example, the Company has changed work scheduling
practices in order better to match staffing levels to customer shopping
patterns. In addition, the Company has formed management teams which are
in the process of training store employees and management to implement
new store operating procedures which are designed to create more
efficient work schedules and to reduce store-room inventories, spoilage
and the handling of products. Such changes enabled the Company to
eliminate 440 store employees in January 1997, reducing annual labor
costs by approximately $9.0 million. The Company also expects to generate
additional labor-related cost savings over time by increasing the
percentage of work performed by part-time employees.
- Capitalize on Procurement and Distribution Capabilities: As the largest
buyer of grocery items in Puerto Rico and one of the largest cargo
importers into Puerto Rico, the Company believes it has many
opportunities to improve gross margins through improved buying and
transportation practices. The Company currently buys approximately 45% of
its total dollar volume of product purchases directly from manufacturers
and is seeking to increase this percentage to reduce costs and to obtain
superior payment terms. Moreover, the Company is renegotiating existing
direct buying arrangements with certain manufacturers for the same
purpose and will also seek to increase utilization of its excess
warehouse capacity to take advantage of bulk purchase discounts.
- Initiate Category Management System; Expand Private Label: The Company
is implementing a category management system designed to combine
traditional buying, reordering and pricing functions under the leadership
of corporate level category merchandisers. The Company believes that such
a system will improve sales, optimize inventory levels, reduce purchase
costs and thereby enhance gross profit and operating profit margins. In
addition, the Company intends to continue to expand its sales of
profitable Food Club private label products to price conscious consumers
through its arrangement with Topco. The Company also intends to develop
its own private label products aimed at price points below the Topco
products.
- Enhance Management and Implement Management Incentive Programs: The
Company intends to maintain an on-going program to recruit senior
managers trained in United States mainland supermarket retailing
practices for strategic positions throughout its operations.
Additionally, the Company has established performance-based compensation
programs to align employees' interests with the implementation of the
Company's revised business strategy.
OPERATIONS
Supermarket Industry Overview
The top three chains in the retail grocery industry in Puerto Rico account
for approximately one-half of total industry sales, with the remainder divided
among smaller chains and numerous independent operations. Total supermarket
chain sales in calendar year 1996 were approximately $3.1 billion, a significant
portion of which was attributable to the more densely populated greater San Juan
metropolitan area, where the larger chains are concentrated. The grocery
industry in less populated parts of the island is characterized by smaller
family-run operations with limited selection and less competitive prices. No
major U.S. supermarket chains have established operations in the Puerto Rico
grocery market, although a number of national general merchandise chains have
significant Puerto Rican operations. National warehouse clubs and mass
merchandisers, which have entered the Puerto Rico and U.S. Virgin Islands
markets since 1990 offering various bulk
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<PAGE> 43
grocery and general merchandise items, have increased pricing pressures on
grocery retailers including the Company.
Puerto Rico
The Company operates two complementary supermarket formats: conventional
Pueblo supermarkets which emphasize service, variety and high quality products
at competitive prices, and Xtra supermarkets which are typically larger stores
emphasizing everyday low prices. In Puerto Rico, the Company currently operates
14 Pueblo stores and 30 Xtra stores and has a grocery retailing market share of
approximately 29%. In addition, the Company estimates that it has a 34% market
share in the greater San Juan metropolitan area, the most densely populated
region of Puerto Rico, with more than onethird of the island's 3.7 million
residents. In fiscal 1997 in Puerto Rico, Pueblo stores averaged approximately
28,286 gross sq. ft. and generated an average of approximately $942 of sales per
selling sq. ft., while Xtra stores averaged approximately 45,900 gross sq. ft.
and generated an average of approximately $673 of sales per selling sq. ft.
Since the Acquisition, the Company has constructed five new Xtra stores,
remodelled ten existing supermarkets and converted five Pueblo stores into Xtra
stores in Puerto Rico.
U.S. Virgin Islands
In fiscal 1997, the six Pueblo stores in the U.S. Virgin Islands averaged
32,500 gross sq. ft. and generated an average of approximately $752 sales per
selling sq. ft. The Company has an estimated U.S. Virgin Islands grocery
retailing market share of approximately 50%. Since the Acquisition, the Company
has added one new supermarket and remodeled five existing supermarkets in the
U.S. Virgin Islands.
Video Operations
The Company has been the exclusive franchisee of Blockbuster locations in
Puerto Rico since 1989 and in the U.S. Virgin Islands since 1993 and currently
operates 29 Blockbuster locations in Puerto Rico and the U.S. Virgin Islands. In
Puerto Rico, the Company operates five in-store Blockbuster outlets and 22 free
standing Blockbuster stores, the majority of which are adjacent to its
supermarkets. In the U.S. Virgin Islands, the Company operates one in-store
Blockbuster outlet and one free standing Blockbuster store. The Company's free
standing Blockbuster stores average approximately 6,000 gross sq. ft., while the
Company's in-store Blockbuster outlets average approximately 4,200 gross sq. ft.
In addition, the Company currently operates 14 video outlets in its supermarkets
under the name Pueblo Video Clubs, all of which it intends to convert into in-
store Blockbuster outlets. In order to increase customer traffic in its
supermarkets, the Company's typical in-store Blockbuster outlet has a separate
entrance but its principal exit leads into the supermarket. In addition, the
Company is able to take advantage of cross-marketing opportunities with its
supermarket operations, including promotional video rental and merchandising
offers.
The Company's Blockbuster operations are currently the only major video
chain operating in Puerto Rico and the U.S. Virgin Islands. Each location
carries an average of approximately 10,000 tapes dedicated to video rental. Each
location also offers for sale a selection of recorded and blank video tapes,
accessories and snack food products. Since each Blockbuster location is
typically larger than its competitors, it provides greater depth and breadth in
selections. For promotions of its Blockbuster operations, the Company primarily
utilizes print, radio, billboards and in-store signage, and also benefits from
Blockbuster's television advertising. BEC also provides extensive product and
support services to the Company. These include, among other things, site
selection review, packaging of the initial rental inventory and providing
computer hardware and software.
The Company's successful development of the Blockbuster franchise has been
the result of its ability to leverage its knowledge of Puerto Rico and existing
market and retailing expertise. The Company's knowledge of real estate and its
existing portfolio of desirable supermarket locations has enabled its
Blockbuster division to obtain attractive, high traffic locations. The Company
will continue to evaluate expansion opportunities on the U.S. Virgin Islands.
The Company's Development Agreements with BEC provide for the Company's
exclusive right to open Blockbuster locations in Puerto Rico and the U.S. Virgin
Islands during the term of such agreements. The
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<PAGE> 44
Development Agreements require the Company to open a certain number of
Blockbuster locations in Puerto Rico by December 1999 and in the U.S. Virgin
Islands by April 1997. In 1996, the Company amended its Development Agreements
to allow the necessary flexibility to develop smaller store formats. Each
Blockbuster location is subject to a Franchise Agreement with BEC that provides
the right for such location to conduct Blockbuster operations for a 20 year
period so long as the terms of such Franchise Agreement are complied with. The
Company has fulfilled its development quota in the U.S. Virgin Islands and plans
to fulfill its December 1999 development quota in Puerto Rico by the end of the
first quarter of fiscal 1998 and otherwise believes it is in full compliance
with its obligations under the Development Agreements. The Company is currently
in discussions with BEC to establish new development quotas. See "Risk
Factors -- Risks to Blockbuster Development Strategy".
STORE COMPOSITION
The Company currently has store locations in 23 of the 39 markets in Puerto
Rico with populations of over 30,000 people. The Company believes there are
targeted new store expansion opportunities in Puerto Rico, particularly in
markets outside greater San Juan.
Since the Acquisition, the Company has made capital expenditures of
approximately $56.2 million in its supermarket operations in Puerto Rico and the
U.S. Virgin Islands, including the opening of five new Xtra stores, the addition
of one new Pueblo store, the remodelling of 15 existing stores and the
conversion of five Pueblo stores into Xtra stores. In the same period, the
Company has made capital expenditures totalling approximately $5.2 million in
its Blockbuster operations. The history of store openings, closings and
remodellings, beginning with fiscal 1993, is set forth in the table below:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Stores in Operation:
At beginning of year............................ 65 74 76 79 82
Stores opened:
Supermarkets................................. 2 4 2 4 --
Blockbuster video stores..................... 8 3 1 -- 5
Stores closed:
Puerto Rico.................................. 1 2 -- 1 2
Florida...................................... -- 3 -- -- 8
At end of year.................................. 74 76 79 82 77
== == == == ==
Remodels and/or conversions..................... 8 8 6 1 9
Store Composition at Year-End:
Xtra superstores............................. 29 29 31 34 30
Pueblo supermarkets.......................... 26 26 26 26 20
Blockbuster video stores(1).................. 19 21 22 22 27
By location:
Puerto Rico.................................. 59 62 65 67 70
Florida...................................... 10 8 8 8 --
U.S. Virgin Islands.......................... 5 6 6 7 7
</TABLE>
- ---------------
(1) Subsequent to fiscal 1997, the Company opened two additional locations and
currently operates a total of 29 Blockbuster locations.
SUPERMARKET PURCHASING AND DISTRIBUTION
The Company's buying staff actively purchase products from distributors, as
well as directly from the producer or manufacturer. The Company generally
controls shipping from the point of purchase in an effort to reduce costs and
control delivery times. The Company currently buys approximately 45% of its
total dollar
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<PAGE> 45
volume of product purchases directly from manufacturers and is seeking to
increase this percentage to reduce costs and to obtain superior payment terms.
Moreover, the Company is renegotiating existing direct buying arrangements with
certain manufacturers for the same purpose and will also seek to increase
utilization of its excess warehouse capacity to take advantage of bulk purchase
discounts.
The Company owns a 300,000 square foot full-line warehouse and distribution
center in greater San Juan. The only facility of its type on the island with
both refrigerated and freezer capacity, the San Juan warehouse has capacity to
store approximately 1.5 million cases of assorted products, and acts as the
Company's central distribution center for the island. The warehouse is equipped
with a computerized tracking system which is fully integrated with the Company's
purchasing, inventory management and shipping systems. This system enables the
Company to make rapid procurement decisions, optimize inventory levels and
increase labor productivity. In fiscal 1997, this facility provided
approximately 59% of the goods (measured by purchase cost) supplied to the
Company's stores in Puerto Rico.
SUPERMARKET MERCHANDISING
General
The Company's merchandising strategies, which are differentiated by
division and store type, integrate one-stop shopping convenience, premium
quality products, attractive pricing and effective advertising and promotions.
At Pueblo supermarkets in Puerto Rico and the U.S. Virgin Islands, the Company's
merchandising strategy focuses on offering premium quality products with
attractive pricing, excellent selection, superior customer service and special
buying opportunities. The Company's Xtra superstores combine the merchandising
features of Pueblo supermarkets with everyday low prices. The Company reinforces
its merchandising strategies with friendly and efficient service, effective
promotional programs, in-store activities, and both brand name and high quality
private label product offerings.
Product Offerings
With approximately 23,000 stock keeping units ("SKU"), management believes
the Company's Pueblo and Xtra stores offer the greatest product variety within
their market areas, as its competitors generally lack the sales volume, store
size and procurement efficiencies to stock and merchandise the wide variety of
products and services offered by the Company. The Company believes that the
convenience and quality of its specialty department products contribute to
customer satisfaction.
The following table sets forth the mix of products sold in the Company's
supermarkets for the fiscal years indicated:
PERCENTAGE OF NET SALES BY PRODUCT CATEGORY -- TOTAL SUPERMARKET
OPERATIONS (EXCLUDING FLORIDA OPERATIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
PRODUCT CATEGORY
------------------
Grocery........................................... 46.2% 46.5% 46.9%
Health/Beauty Care/General Merchandise............ 5.8 6.3 6.2
Dairy............................................. 15.9 16.1 16.4
Meat/Seafood...................................... 17.2 16.4 16.0
Produce........................................... 9.8 9.4 9.3
Deli/Bakery....................................... 4.4 4.6 4.5
Video Club........................................ 0.7 0.7 0.7
----- ----- -----
Total................................... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
40
<PAGE> 46
Pricing
As the largest grocery operator in its markets, the Company is able to take
advantage of volume purchase discounts and shipping efficiencies in order to
offer competitive pricing at its Pueblo supermarkets, as well as everyday low
pricing at its Xtra superstores. Pueblo and Xtra supermarkets utilize weekly
circulars to emphasize special offers. The Company's "Family Pack" program
offers bulk sizes of high volume products typically priced equal to or lower
than prices offered by warehouse club stores.
Private Label
An important element of Pueblo's reputation for high-quality and excellent
value, and Xtra's reputation for everyday low prices, is the utilization of Food
Club private label products through the Company's membership with Topco. Topco's
private label program offers its members over 4,000 food and non-food items.
Topco products are sold under the Food Club, World Classic, Top Frost, Top
Crest, Top Care, Top Fresh and Mega labels in the grocery, frozen food, dairy,
fresh meat, poultry and health and beauty care departments. The high quality and
attractive pricing of the Food Club program have made it widely accepted by the
Company's customers as an alternative to national brands. Management estimates
that approximately 17% of the Company's fiscal 1997 grocery item sales were of
Topco products. Topco's private label program allows the Company to pass on
substantial savings to customers, while maintaining a reputation for superior
quality. The low cost of Topco products enables the Company to earn above
average margins compared to national brands despite the lower prices offered to
customers. The Company intends to continue to expand its sales of profitable
Food Club private label products to price-conscious consumers through its
arrangement with Topco. The Company also intends to develop its own private
label products aimed at price points below the Topco products.
Category Management
The Company is currently in the process of implementing a category
management system designed to combine traditional buying, reordering and pricing
functions under the leadership of corporate level category merchandisers. The
system will also allow the Company to assign direct profit management to the
individuals responsible for a product category. The Company believes that such a
system will improve sales, optimize inventory levels, reduce purchase costs and
thereby enhance gross profit and operating profit margins. The Company
anticipates completion of the program's implementation in fiscal 1998.
Advertising and Promotion
The Company primarily utilizes newspaper, radio, television and in-store
advertising in both Puerto Rico and the U.S. Virgin Islands. The Company's
grocery operations run multi-page newspaper inserts and page full-color
shoppers. The Company advertises on television primarily through trailers on
vendor sponsored advertisements. In fiscal 1997, the Company launched a major
advertising campaign. This campaign presents both the Pueblo and Xtra format in
a single advertisement promoting special offers at both store formats. This
market strategy stresses the different store formats yet serves to reduce
advertising costs.
All advertising is created and designed through the Company's wholly-owned
advertising agency, CaribAd (Adteam) ("Adteam"). Adteam, based in Puerto Rico,
develops promotional programs for all of the Company's markets, thereby
providing it with cost advantages over its competitors. In addition, Adteam has
other clients in Puerto Rico, generating incremental income for the Company.
COMPETITION
The grocery retailing business is highly competitive. Competition is based
primarily on price, quality of goods and service, convenience and product mix.
The number and type of competitors and the degree of competition experienced by
individual stores, vary by location.
The Company competes with local food chains such as Supermercados Amigo,
Grande Supermarkets, and Plaza Extra, as well as numerous independent operations
throughout Puerto Rico and the U.S. Virgin
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<PAGE> 47
Islands. In addition, several warehouse clubs and mass merchants, such as Sam's
Warehouse clubs, Wal-Mart, Kmart and Walgreens, have opened locations in Puerto
Rico and the U.S. Virgin Islands. Despite these competitive challenges, the
Company continues to maintain its position as market share leader in each of its
respective markets. See "Risk Factors -- Competition."
Although the Company's Blockbuster operations constitute the only major
video chain in Puerto Rico and the U.S. Virgin Islands, they compete with
numerous local, independent video retailers. In addition, the Company's
Blockbuster video stores compete against television, cable, satellite
broadcasting, movie theaters and other forms of entertainment.
MANAGEMENT INFORMATION SYSTEMS
The Company believes that high levels of automation and technology are
essential to its operations and has invested considerable resources in computer
hardware, systems applications and networking capabilities. These systems
integrate all major aspects of the Company's business, including the monitoring
of store sales, inventory control, merchandise planning, labor utilization,
distribution and financial reporting.
All of the Company's stores are equipped with state-of-the-art point of
sale terminals with full price look-up capabilities that capture sales at the
time of transaction down to the SKU level through the use of bar-code scanners.
These scanners facilitate customer check-out and provide valuable
stock-replenishment information for buyers and realtime financial information
used by management to provide greater control on a line-item basis in
determining true store-by-store costs. To provide the best service possible, the
Company has begun to install a labor scheduling system that schedules the
optimal staffing based on sales, customer traffic and defined service
objectives. The Company's management information systems at its Blockbuster
operations are state-of-the-art systems which are licensed to the Company by
BEC. The conversion of the Company's financial systems to handle the year 2000
is expected to be completed by June 1997. Other system conversions are expected
to be completed by the end of 1998 for year 2000 compatibility.
EMPLOYEES
As of January 25, 1997, the Company had approximately 8,000 employees
(full- and part-time) of whom approximately 6,700 were employed at the
supermarket level, 600 at the corporate offices and distribution center and 700
by the Blockbuster division. Approximately 65% of the Company's supermarket
employees are employed on a part-time basis. Approximately 5,600 store employees
are represented by a non-affiliated collective bargaining organization under a
contract expiring in 1999. The Company considers its relations with its
employees to be good.
As part of the Company's effort to reduce labor costs, the Company has
changed labor scheduling practices, reduced the handling of products and
improved stock room operations. This enabled the Company to eliminate 440 store
employees in its Puerto Rico supermarkets in January 1997, reducing annual labor
costs by approximately $9.0 million.
PROPERTIES
The following table sets forth information as of January 25, 1997 with
respect to the owned and leased stores and support facilities used by the
Company in its business:
<TABLE>
<CAPTION>
OWNED(1) LEASED TOTAL
--------------------- --------------------- ---------------------
NO. GROSS SQ. FT. NO. GROSS SQ. FT. NO. GROSS SQ. FT.
--- ------------- --- ------------- --- -------------
<S> <C> <C> <C> <C> <C> <C>
Pueblo supermarkets:
Puerto Rico...................... 2 91,000 12 305,000 14 396,000
U.S. Virgin Islands.............. 3 112,000 3 83,000 6 195,000
Xtra superstores:
Puerto Rico...................... 7 359,000 23 1,018,000 30 1,377,000
Blockbuster video stores........... 5 31,000 22 120,000 27 151,000
Warehouse and distribution
facilities....................... 1 300,000 1 13,000 2 313,000
--- ------------- --- ------------- --- -------------
</TABLE>
42
<PAGE> 48
- ---------------
(1) Four of the owned stores include land leases: three Xtra stores in Puerto
Rico and one Pueblo store in the Virgin Islands.
The Company also owns the shopping centers at three of its store locations
in Puerto Rico.
The majority of the Company's supermarket operations are conducted on
leased premises which have initial terms generally ranging from 20 to 25 years.
The lease terms typically contain renewal options allowing the Company to extend
the lease term in five to ten year increments. The leases provide for fixed
monthly rental payments subject to various periodic adjustments. The leases
often require the Company to pay certain expenses related to the premises such
as insurance, taxes and maintenance.
The construction of owned facilities has been financed principally with
internally generated funds. All owned properties of the Company are pledged as
collateral under the New Bank Credit Agreement.
The Company owns its corporate offices located in San Juan, Puerto Rico,
and leases its administrative offices located in Pompano Beach, Florida.
The Company has discontinued its operations in Florida and is seeking to
dispose of its remaining Florida retailing assets. Concurrent with the Offering,
the Company satisfied $10.0 million of indebtedness payable to a related party
by transferring its interest in two real estate properties from its discontinued
Florida operations to the related party.
TRADEMARKS, TRADENAMES AND SERVICE MARKS
The Company owns certain trademarks, tradenames and service marks used in
its business. The Company believes that its trademarks, tradenames, and service
marks, including Pueblo and Xtra, are valuable assets due to the fact that brand
name recognition and logos are important considerations in the Company's
consumers' markets. As a franchisee, the Company has exclusive rights to use the
Blockbuster trademark in its specified franchise territories.
LEGAL PROCEEDINGS
The Company is a party to various lawsuits arising in the ordinary course
of business, none of which is believed to be material with respect to the
business, assets and continuing operations of the Company. Pueblo has been party
to various lawsuits alleging a fraud engaged in by Premium Sales Corp., Plaza
Trading Corporation and Windsor Wholesale Company and numerous of their related
subsidiaries ("Premium") in which damages totalling approximately $300 million
(plus treble damages, punitive damages and/or attorneys' fees) were claimed
against each defendant. Premium was ostensibly engaged in the business of
"brokering" or "diverting" groceries throughout the United States and various
foreign countries from 1988 until its official bankruptcy in 1993. Following the
Premium bankruptcy, the Receiver and Bankruptcy Trustee sued numerous grocers,
including Pueblo, claiming that the grocers were liable for Premium's losses,
and a class action was filed against Pueblo and other defendants on behalf of
the investors in the funding entities which lost monies in the Premium fraud.
All litigation against Pueblo has been settled for an amount which, taking into
account all litigation costs and settlement costs, is within the $5.3 million of
reserves established from fiscal years 1994 through 1997 for such purpose. The
settlement received preliminary court approval on February 11, 1997. On May 7,
1997, the settlement was the subject of a final fairness hearing at which no
substantive objections were made to the amount of the settlement to be paid by
the Company; the Company's legal counsel has advised that it expects the
settlement to receive final approval in the near future.
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<PAGE> 49
MANAGEMENT
DIRECTORS AND CORPORATE OFFICERS OF THE COMPANY
Set forth below are the names of the directors and corporate officers of
the Company, their respective ages and their respective positions with the
Company as of May 1, 1997. The terms of the directors and corporate officers of
the Company expire annually, upon the holding of the annual meetings of
stockholders.
<TABLE>
<CAPTION>
NAME AGE POSITION
-------------------------------------- --- --------------------------------------
<S> <C> <C>
Gustavo A. Cisneros................... 51 Chairman of the Board
William T. Keon, III.................. 50 Director; President and Chief
Executive Officer
David L. Aston........................ 50 Director; Executive Vice President;
President, Puerto Rico Division
Steven I. Bandel...................... 44 Director
Cristina Pieretti..................... 45 Director
Alejandro Rivera...................... 54 Director
Lawrence Elias........................ 54 Senior Vice President, Management
Information Systems
Filiberto Berrios..................... 51 Senior Vice President; President,
Blockbuster Division
Thomas F. Johnson..................... 47 Vice President; President, U.S. Virgin
Islands Division
Alicia Echevarria..................... 45 Assistant Secretary; Vice President,
Human Resources, Puerto Rico Division
Dan Cammarata......................... 36 Controller; Chief Accounting Officer;
Assistant Secretary
Richard D. Skelly, Jr. ............... 37 Assistant Treasurer; Assistant
Secretary
</TABLE>
Gustavo A. Cisneros has been the Chairman of the Board of the Company since
its inception (July 28, 1993). He was appointed to the Executive Committee in
October 1995. Since prior to 1992, he has been a direct or indirect beneficial
owner of interests in and a director of certain companies that own or are
engaged in a number of diverse commercial enterprises in Venezuela, the United
States, Brazil, Chile and Mexico (the "Cisneros Group") including the Company.
He is a member of the board of directors of Univision Communications, Inc.,
Evenflo & Spalding Holdings Corporation and RSL Communications, Inc.
William T. Keon, III has been a Director of the Company since October 1995.
He assumed the position of President and Chief Executive Officer and was
appointed Chairman of the Executive Committee and Audit and Risk Committee also
in October 1995. He is also a member of the Compensation and Benefits Committee.
Since January 1983 Mr. Keon has served in senior managerial roles in the
Cisneros Group.
Cristina Pieretti was appointed a Director in March 1997. During most of
the last seven years she has been actively involved in operations of companies
in the Cisneros Group in areas related to consumer goods, retailing and
telecommunications, other than a period from March 1995 to February 1996 during
which she acted as a partner in a consulting firm.
Alejandro Rivera has been a Director of the Company since April 1, 1997. He
was previously a Director of the Company since the Acquisition until June 30,
1995. Since 1976, he has been actively involved in the operations and management
of certain companies in the Cisneros Group. Mr. Rivera is also an Alternate
Director of Univision Communications, Inc. Mr. Rivera is a member of the Audit
and Risk Committee and of the Compensation and Benefits Committee.
David L. Aston joined the Company in March 1997 as a Director, Executive
Vice President and President of the Puerto Rico Division. From June 1993 until
the time he joined the Company, Mr. Aston served as president of Waldbaums and
Superfresh Foods, units of the A&P Company, a supermarket chain in the New
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<PAGE> 50
York area. Prior to June 1993, he served as Vice President of Merchandising and
Operations for the Kroger Company.
Steven I. Bandel has been a Director of the Company since the Acquisition.
He was appointed to the Executive Committee during October 1995. Since prior to
1992, he has been actively involved in the operations and management of certain
companies in the Cisneros Group, other than a period from February 1990 to May
1992 during which he acted as a partner in a Venezuelan investment banking firm.
Lawrence Elias has served as Senior Vice President of Management
Information Systems of the Company since September 1993. He joined the Company
in March 1988 as Vice President of Management Information Systems and was
promoted to Senior Vice President in September 1993.
Filberto Berrios has held a variety of positions with the Company since
1965, most recently as Vice President and General Manager of the Blockbuster
Division. In March 1997, he was promoted to Senior Vice President and President
of the Blockbuster Division.
Thomas F. Johnson joined the Company's Florida division in 1991. In 1994,
Mr. Johnson became General Manager of the U.S. Virgin Islands Division. In March
1997, Mr. Johnson became Vice President and President of the U.S. Virgin Islands
Division. Prior to joining the Company, Mr. Johnson had 24 years of industry
experience, most of it with Safeway Inc.
Alicia Echevarria joined the Company in April 1996 as Vice President of
Human Resources for the Puerto Rico Division. In March 1997 she became Assistant
Secretary to the Company. Prior to joining the Company, she was Director of
Human Resources for R.J. Reynolds Tobacco Company (Inc) in Puerto Rico, where
she was employed for 15 years.
Dan Cammarata joined the Company in December 1989 and became Controller in
October 1996. In March 1997, he became Chief Accounting Officer and Assistant
Secretary of the Company. Prior to joining the Company, Mr. Cammarata spent
seven years in public accounting.
Richard D. Skelly, Jr. joined the Company in March 1990. In March 1997, he
was appointed Assistant Treasurer and Assistant Secretary of the Company. Prior
to joining the Company, Mr. Skelly spent five years in the financial services
industry.
PRINCIPAL SHAREHOLDERS
The Company is a wholly-owned subsidiary of Holdings. Holdings is
beneficially owned by a trust for the benefit of the family of Gustavo Cisneros,
and a trust for the benefit of the family of Ricardo Cisneros (the "Principal
Shareholders"), with each trust having an approximate 50% indirect beneficial
interest in Holdings. Messrs. Gustavo and Ricardo Cisneros disclaim beneficial
ownership of such shares.
DESCRIPTION OF NOTES
The Exchange Notes will be issued, and the Initial Notes were issued, under
an indenture dated as of April 29, 1997 (the "Indenture") between the Company,
as issuer, and United States Trust Company of New York, trustee (in such
capacity, the "Trustee"). For purposes of the following summary, the Initial
Notes and the Exchange Notes are collectively referred to as the "Notes." The
following summary of the material provisions of the Indenture does not purport
to be complete and is subject to, and qualified in its entirety by, reference to
the provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended. For definitions of certain capitalized
terms used in the following summary, see "Certain Definitions" below. A copy of
the Indenture is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
GENERAL
The Notes will mature on August 1, 2003, will be limited to $85,000,000
aggregate principal amount and will be senior unsecured obligations of the
Company. Except as otherwise described below, each Note will
45
<PAGE> 51
bear interest at the rate of 9 1/2% per annum from April 29, 1997 or from the
most recent interest payment date to which interest has been paid or duly
provided for, payable semiannually on February 1 and August 1 in each year,
commencing August 1, 1997, until the principal thereof is paid or duly provided
for, to the person in whose name the Note (or any predecessor Note) is
registered at the close of business on the January 15 or July 15 next preceding
such interest payment date. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The principal of and premium, if any, and interest on the Notes will be
payable, and the Notes will be exchangeable and transferable, at the office or
agency of the Company in The City of New York maintained for such purposes
(which initially will be the office of the Trustee located at 114 West 47th
Street, New York, New York 10036-1532) or, at the option of the Company,
interest may be paid by check mailed to the address of the person entitled
thereto as such address appears in the security register. The Notes will be
issued only in registered form without coupons and only in denominations of
$1,000 and any integral multiple thereof. No service charge will be made for any
registration of transfer or exchange or redemption of Notes, but the Company may
require payment in certain circumstances of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection therewith.
The Notes will not be entitled to the benefit of any sinking fund.
The Company currently has outstanding $180.0 million aggregate principal
amount of Existing Notes issued pursuant to an Indenture dated as of July 28,
1993, the terms of which are substantially identical to the Notes and Indenture,
respectively.
RANKING
The Notes will be senior unsecured obligations of the Company and will rank
in right of payment equally with all other existing and future senior
obligations of the Company. Because the Company is a holding company that
conducts all of its business through subsidiaries, all existing and future
liabilities of its subsidiaries (including, without limitation, Pueblo's
obligations under the New Bank Credit Agreement) will be effectively senior to
the Notes. As of January 25, 1997, on a pro forma basis after giving effect to
the Refinancing Plan, the Company would have had approximately $206.2 million of
indebtedness outstanding (excluding capital leases) other than the Notes, of
which $180.0 million would have been the Existing Notes and $26.2 million would
have been senior secured indebtedness, comprising Guarantees of the total
outstanding indebtedness of the Company's Subsidiaries. Subject to certain
limitations, the Company and its Subsidiaries may incur additional Indebtedness
in the future.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the option of the
Company, as a whole or from time to time in part, at any time on or after August
1, 1998, on not less than 30 nor more than 60 days' prior notice at the
redemption prices (expressed as percentages of principal amount) set forth
below, together with accrued interest, if any, to the redemption date, if
redeemed during the 12-month period beginning on August 1 of the years indicated
below (subject to the right of holders of record on the relevant record date to
receive interest due on an interest payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
------------------------------------------------------------------ ----------
<S> <C>
1998.............................................................. 104.750%
1999.............................................................. 102.375%
</TABLE>
and thereafter at 100% of the principal amount, together with accrued interest,
if any, to the redemption date.
If less than all the Notes are to be redeemed, the particular Notes to be
redeemed will be selected by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, on a
pro rata basis, by lot or by such other method as the Trustee deems fair and
appropriate.
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<PAGE> 52
Purchase of Notes upon Change of Control or Asset Sale. Each Holder of the
Notes will have certain rights to require the Company to purchase such Holder's
Notes upon the occurrence of a Change of Control. See "Certain
Covenants -- Purchase of Notes upon Change of Control" below. Under certain
circumstances, the Company will be required to make an offer to purchase all or
a portion of the Notes with proceeds received from an Asset Sale. See "Certain
Covenants -- Limitation on Asset Sales" below.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness
(a) So long as any of the Notes are outstanding, the Company shall not, and
shall not permit any Restricted Subsidiary to, Incur any Indebtedness except (i)
Indebtedness of the Company if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Consolidated Fixed Charge Ratio of the Company would be greater than 2.25:1;
(ii) Indebtedness under the Old Bank Credit Agreement in an aggregate principal
amount not to exceed (x) $175 million less (y) the amount of any reduction in
the commitments thereunder pursuant to clause (B) in the second paragraph of the
"Limitation on Asset Sales" covenant described below; (iii) Indebtedness
existing on July 28, 1993; (iv) Indebtedness issued in exchange for, or the net
proceeds of which are used to exchange, refinance or refund, outstanding
Indebtedness of the Company or any of its Restricted Subsidiaries, in an amount
(or, if such new Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration thereof,
with an original issue price) not to exceed the amount so exchanged, refinanced
or refunded (plus premiums, accrued interest, fees and expenses); provided that
(A) the Indebtedness issued does not mature prior to the Stated Maturity of, and
does not have an Average Life shorter than, the Average Life of the Indebtedness
being so exchanged, refinanced or refunded and (B) in case the Indebtedness to
be exchanged, refinanced or refunded is expressly subordinated in right of
payment to the Notes, (1) such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is
expressly made subordinate in right of payment to the Notes at least to the
extent that the Indebtedness to be exchanged, refinanced or refunded is
subordinated in right of payment to the Notes, (2) such Indebtedness, determined
as of the date of its Incurrence, does not mature prior to one year after the
Stated Maturity of the Notes and (3) the Average Life of such Indebtedness,
determined as of the date of its Incurrence, is at least one year longer than
the remaining Average Life of the Notes; (v) Indebtedness of the Company to any
Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company, or of a
Restricted Subsidiary to the Company or to any other Restricted Subsidiary that
is a Wholly Owned Subsidiary of the Company; (vi) Acquired Indebtedness;
provided that, at the time of the Incurrence thereof, the Company could Incur at
least $1.00 of Indebtedness under clause (i) of this "Limitation on
Indebtedness" covenant; and refinancings thereof; provided further that any
refinancing Indebtedness may not be Incurred by any Person other than the
Company or the Restricted Subsidiary that is the obligor on such Acquired
Indebtedness; (vii) Indebtedness in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided in the ordinary course of
business; (viii) Indebtedness under Currency Agreements and Interest Rate
Agreements; provided that, in the case of Currency Agreements that relate to
other Indebtedness, such Currency Agreements do not increase the Indebtedness of
the Company or any Subsidiary outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder; (ix) Indebtedness arising from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any Subsidiary pursuant to agreements providing
for indemnification, adjustment of purchase price or similar obligations
Incurred in connection with the disposition of any business, assets or
Subsidiary of the Company in a principal amount not to exceed the gross proceeds
actually received by the Company or any Subsidiary in connection with such
disposition (but excluding Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Subsidiary of the
Company for the purpose of financing such acquisition); (x) Indebtedness
Incurred to finance capital expenditures in a principal amount not to exceed,
together with other Indebtedness Incurred pursuant to this clause (x) during the
preceding 12 month period, $10 million in the aggregate; (xi) Incurrence of
Capitalized Leases in an amount required to be capitalized on the
47
<PAGE> 53
Company's consolidated balance sheet not to exceed, together with other
Indebtedness Incurred pursuant to this clause (xi), $3 million during the
preceding 12 month period or $12.5 million since July 28, 1993; (xii) additional
Indebtedness under the Old Bank Credit Agreement in an aggregate principal
amount not to exceed $50 million; and (xiii) Indebtedness of the Company not
otherwise permitted pursuant to this covenant, in an aggregate amount not to
exceed $25 million at any time outstanding and Indebtedness of Restricted
Subsidiaries not otherwise permitted pursuant to this covenant, in an aggregate
principal amount not to exceed $25 million at any time outstanding.
(b) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, Guarantees of, or obligations with
respect to letters of credit supporting, Indebtedness otherwise included in the
determination of such particular amount shall not be included. For purposes of
determining compliance with this "Limitation on Indebtedness" covenant, (A) in
the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described in the above clauses, the Company, in its
sole discretion, shall classify such item of Indebtedness and shall only be
required to include the amount and type of such Indebtedness in one of such
clauses and (B) the amount of Indebtedness issued at a price that is less than
the principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in conformity with GAAP.
Limitation on Restricted Payments
So long as any of the Notes are outstanding, the Company will not, and will
not permit any Restricted Subsidiary, directly or indirectly, to (i) declare or
pay any dividend or make any distribution on any class of its Capital Stock
(other than dividends or distributions payable solely in shares of its or such
Restricted Subsidiary's Capital Stock (other than Redeemable Stock) of the same
class as such Capital Stock or in options, warrants or other rights to acquire
shares of such Capital Stock) held by Persons other than the Company or any of
its Restricted Subsidiaries which are Wholly Owned Subsidiaries, (ii) purchase,
redeem, retire or otherwise acquire for value any shares of Capital Stock of the
Company, any Restricted Subsidiary or any Unrestricted Subsidiary (including
options, warrants or other rights to acquire any shares of such Capital Stock)
held by Persons other than the Company or another Restricted Subsidiary that is
a Wholly Owned Subsidiary, (iii) make any voluntary or optional principal
payment, or voluntary or optional redemption, repurchase, defeasance or other
acquisition or retirement for value, of Indebtedness of the Company that is
expressly subordinated in right of payment to the Notes, or (iv) make any
Investment in any Affiliate (other than the Company or a Restricted Subsidiary
that is a Wholly Owned Subsidiary) (such payments or any other actions described
in clauses (i) through (iv) being collectively "Restricted Payments") unless at
the time of and after giving effect to the proposed Restricted Payment: (a) no
Event of Default or event that, after the giving of notice or lapse of time or
both would become an Event of Default, shall have occurred and be continuing,
(b) the Company could Incur at least $1.00 of Indebtedness pursuant to clause
(i) in part (a) of the "Limitation on Indebtedness" covenant and (c) the
aggregate amount expended for all Restricted Payments (the amount so expended,
if other than in cash, to be determined in good faith by the Board of Directors)
after July 28, 1993 (together with any amounts paid after such date pursuant to
clauses (i), (iv) and (vi) in the following paragraph) shall not exceed the sum
of (1) 50% of the aggregate amount of Adjusted Consolidated Net Income (or, if
adjusted Consolidated Net Income is a loss, minus 100% of such amount) of the
Company accrued on a cumulative basis during the period (taken as one accounting
period) beginning on August 15, 1993 and ending on the last day of the last
fiscal quarter preceding the Transaction Date plus (2) the aggregate net
proceeds (including the fair market value of noncash proceeds, as determined in
good faith by the Board of Directors) received by the Company from the issuance
and sale of its Capital Stock (other than Redeemable Stock) to any Person other
than a Subsidiary of the Company including an issuance or sale for cash or other
property upon the conversion of any Indebtedness of the Company subsequent to
July 28, 1993, or from the issuance of any options, warrants or other rights to
acquire Capital Stock of the Company (in each case, excluding any Redeemable
Stock or any options, warrants or other rights that are redeemable at the option
of the holder, or are required to be redeemed, prior to the Stated Maturity of
the principal of the Notes) plus (3) an amount equal to the net reduction in
Investments in Unrestricted Subsidiaries resulting from payments of principal of
or interest on Indebtedness, dividends or other transfers of assets, in each
case to the Company or any Restricted Subsidiary from any Unrestricted
Subsidiary, or from
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the redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary
(valued in each case as provided in the definition of "Investments"), not to
exceed, in the case of any Unrestricted Subsidiary, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary plus (4) $10 million.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at the
date of declaration, such payment would comply with the foregoing provision;
(ii) (A) following an initial public offering of the Common Stock of the
Company, the declaration and payment of dividends on the Common Stock of the
Company up to 6% per annum of the net proceeds received by the Company in such
initial public offering or, (B) following an initial public offering of the
Common Stock of Holdings, the declaration and payment of dividends to Holdings
in an amount sufficient to permit Holdings to pay dividends on its Common Stock
in an amount of up to 6% per annum of the net proceeds received by Holdings in
such initial public offering and contributed to the capital of the Company;
(iii) the purchase, redemption, acquisition, cancellation or other retirement
for value of shares of Capital Stock of the Company, Holdings or any Restricted
Subsidiary, options on any such shares or related stock appreciation rights or
similar securities held by officers or employees or former officers or employees
(or their estates or beneficiaries under their estates) and which were issued
pursuant to any stock option plan, upon death, disability, retirement,
termination of employment or pursuant to the terms of such stock option plan or
any other agreement under which such shares of Capital Stock, options, related
rights or similar securities were issued, or the payment of dividends to
Holdings in an amount sufficient to effect such purchase, redemption,
acquisition, cancellation or other retirement for value by Holdings; provided
that the aggregate cash consideration paid for such purchase, redemption,
acquisition, cancellation or other retirement for value of such shares of
Capital Stock, options, related rights or similar securities after July 28, 1993
does not exceed $5 million per annum or $10 million in the aggregate; (iv) the
redemption, repurchase or other acquisition for value of Capital Stock of the
Company or any Subsidiary of the Company in exchange for, or with the proceeds
of a substantially concurrent offering of, other shares of the Capital Stock of
the Company (other than Redeemable Stock); (v) the redemption, repurchase,
defeasance or other acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Notes, including premium, if any, and
accrued and unpaid interest, in exchange for or with the proceeds of a
substantially concurrent issuance of, Indebtedness Incurred under clause (iv) in
part (a) of the "Limitation on Indebtedness" covenant; (vi) the redemption,
repurchase, defeasance or other acquisition or retirement for value of
Indebtedness of the Company that is subordinated in right of payment to the
Notes including premium, if any, and accrued and unpaid interest, in exchange
for, or with the proceeds of a substantially concurrent issuance of, shares of,
the Capital Stock of the Company (other than Redeemable Stock); (vii) the
purchase of shares of Capital Stock of Holdings for contributions to the pension
and other employee benefit plans of the Company and its Subsidiaries; provided
that the aggregate consideration paid for such purchases does not, in any one
fiscal year of the Company, exceed an aggregate amount of $1 million; or (viii)
the making of Investments in Unrestricted Subsidiaries in an aggregate amount
not to exceed $25 million outstanding at any time; provided in each case that no
Event of Default, or event that through the giving of notice or lapse of time or
both would become an Event of Default, shall have occurred and be continuing or
shall occur as a consequence thereof.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
So long as any of the Notes are outstanding, the Company will not, and will
not permit any Restricted Subsidiary to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (i) pay dividends or make any
other distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay interest on or principal of any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or any
other Restricted Subsidiary or (iv) transfer any of its property or assets to
the Company or any other Restricted Subsidiary.
This covenant shall not restrict or prohibit any encumbrances or
restrictions: (i) in the Old Bank Credit Agreement or any other agreements in
effect on July 28, 1993; (ii) with respect to any Person or the property
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or assets of such Person, acquired by the Company or any Restricted Subsidiary
and existing prior to such acquisition, which encumbrances or restrictions are
not applicable to such Person or the property or assets of any Person other than
such Person or property or assets of such Person so acquired; (iii) in any
agreement that extends, refinances, renews or replaces agreements containing
restrictions referred to in clause (i) or (ii) above, which encumbrances or
restrictions are no less favorable in any material respect to the Holders than
those encumbrances or restrictions that are then in effect pursuant to the
agreements that are being extended, refinanced, renewed or replaced; (iv) in the
case of clause (iv) of the first paragraph of this "Limitation on Dividend and
Other Payment Restrictions Affecting Restricted Subsidiaries" covenant, (A)
restricting in a customary manner the subletting, assignment or transfer of any
property or asset that is a lease, license, conveyance or contract or similar
property or asset, (B) arising by virtue of any transfer of, or any agreement to
transfer, option or right with respect to, or any Lien on any property or assets
of the Company or any Restricted Subsidiary not otherwise prohibited by the
Indenture or (C) arising or agreed to in the ordinary course of business and
that do not, individually or in the aggregate, detract from the value of the
property or assets of the Company or any Restricted Subsidiary in any manner
material to the Company or such Restricted Subsidiary; (v) that constitute
Permitted Liens; or (vi) under or by reason of applicable law, rule or
regulation (including, without limitation, applicable currency control laws and
applicable state corporate statutes restricting the payment of dividends in
certain circumstances).
Limitation on Transactions with Shareholders and Affiliates
So long as any of the Notes are outstanding, the Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into,
renew or extend any transaction (including, without limitation, the purchase,
sale, lease or, exchange of property or assets, or the rendering of any service)
involving aggregate consideration in excess of $10 million with any holder (or
any Affiliate of such holder) of 5% or more of any class of Capital Stock of the
Company or any Subsidiary of the Company or with any Affiliate of the Company or
any Subsidiary of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Restricted Subsidiary of the Company, than
could be obtained in a comparable arm's-length transaction with a Person that is
not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to: (i) any
transaction in the ordinary course of business between the Company and any
Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company or
between Restricted Subsidiaries that are Wholly Owned Subsidiaries of the
Company; (ii) transactions approved by a majority of the disinterested members
of the Board of Directors (if any); (iii) any payment of moneys or issuance of
Securities pursuant to employment arrangements and employee benefit plans, in
each case approved by the Board of Directors; (iv) the payment of reasonable and
customary regular fees to directors of the Company or any Subsidiary of the
Company who are not employees of the Company or such Subsidiary of the Company;
(v) any payments or other transactions pursuant to any tax-sharing agreement
between the Company and any other Person with which the Company is required or
permitted to file a consolidated tax return or with which the Company is or
could be part of a consolidated group for tax purposes; (vi) any Restricted
Payments permitted under the "Limitation on Restricted Payments" covenant; (vii)
loans or advances by the Company or a Restricted Subsidiary to employees of the
Company or a Restricted Subsidiary in the ordinary course of business; (viii)
any transaction contemplated by any stock option plan of the Company; or (ix)
the allocation of Indebtedness and interest expense under the Old Bank Credit
Agreement among the Company and one or more Restricted Subsidiaries.
Limitation on the Issuance of Capital Stock of Restricted Subsidiaries
So long as any Notes are outstanding, the Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, issue or sell any
shares of a Restricted Subsidiary's Capital Stock (including securities
convertible into or exchangeable for such Capital Stock or options, warrants or
other rights to purchase shares of such Capital Stock) except to the Company or
another Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company.
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Limitation on Liens
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien
on any asset of the Company or such Restricted Subsidiary, without making
effective provision for all of the Notes and all other amounts due under the
Indenture to be directly secured equally and ratably with (or prior to) the
obligation or liability secured by such Lien unless, after giving effect
thereto, the aggregate amount of any such obligation or liability so secured,
plus the Attributable Indebtedness for all sale-leaseback transactions
restricted as described in the "Limitation on Sale-Leaseback Transactions"
covenant, does not exceed 10% of Consolidated Net Tangible Assets.
Under the terms of the Indenture, the foregoing limitation does not apply
to, and any computation of Indebtedness secured under such limitation shall
exclude: (i) Liens existing on July 28, 1993; (ii) Liens securing obligations
under the Old Bank Credit Agreement, (iii) Liens with respect to Acquired
Indebtedness and refinancings thereof permitted under clause (vi) in part (a) of
the "Limitation on Indebtedness" covenant, provided that such Liens do not
extend to or cover any property or assets of the Company or any Subsidiary of
the Company other than the property or assets of the Subsidiary acquired; (iv)
Liens with respect to the assets of a Restricted Subsidiary granted by such
Restricted Subsidiary to the Company or to a Restricted Subsidiary that is a
Wholly Owned Subsidiary of the Company to secure Indebtedness owing to the
Company or such other Restricted Subsidiary by such Restricted Subsidiary; (v)
Liens granted in connection with the extension, renewal, refinancing or
replacement, in whole or in part, of any secured Indebtedness permitted to be
Incurred under clause (iv) in part (a) of the "Limitation on Indebtedness"
covenant; provided that such Liens do not extend to or cover any property or
assets of the Company or any Restricted Subsidiary other than the property or
assets securing the Indebtedness being refinanced; (vi) Liens in respect of
Capitalized Leases Incurred pursuant to clause (xi) in part (a) of the
"Limitation on Indebtedness" covenant; and (vii) Permitted Liens.
Limitation on Sale-Leaseback Transactions
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, enter into any sale-leaseback transaction, unless
the aggregate amount of all Attributable Indebtedness with respect to such
transactions, plus all Indebtedness secured by Liens (excluding secured
obligations or liabilities that are excluded as described in the second
paragraph of the "Limitation on Liens" covenant), does not exceed 10% of
Consolidated Net Tangible Assets.
The foregoing restriction does not apply to, and any computation of
Attributable Indebtedness under such limitation shall exclude, any
sale-leaseback transaction if, (i) the lease is for a period, including renewal
rights, of not in excess of three years; (ii) the sale or transfer of the
property is entered into prior to, at the time of, or within 12 months after the
later of the acquisition of the property or the completion of construction
thereof; (iii) the lease secures or relates to industrial revenue bonds; (iv)
the transaction is between the Company and any Restricted Subsidiary or between
Restricted Subsidiaries that are Wholly Owned Subsidiaries; or (v) within 12
months after the sale of any property is completed, the Company or such
Restricted Subsidiary applies an amount not less than the net proceeds received
from such sale in the manner described in the second paragraph of the
"Limitation on Asset Sales" covenant.
Repurchase of Notes upon Change of Control
(a) Upon the occurrence of a Change of Control, each Holder shall have the
right to require the Company to repurchase such Holder's Notes in cash pursuant
to the offer described below (the "Change of Control Offer") at a purchase price
equal to 101% of the principal amount thereof, plus accrued interest (if any) to
the date of purchase (the "Change of Control Payment"). Prior to the mailing of
the notice to Holders provided for in the succeeding paragraph, but in any event
within 30 days following the occurrence of a Change of Control, the Company
covenants to (i) repay or cause to be repaid in full all Indebtedness under the
Old Bank Credit Agreement, or to offer to repay in full all such Indebtedness
and to repay the Indebtedness of each Bank which has accepted such offer or (ii)
obtain the requisite consents under the Old Bank Credit Agreement to permit the
repurchase of the Notes, as provided for in the succeeding paragraph.
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<PAGE> 57
The Company shall first comply with the covenant in the preceding sentence
before it shall be required to repurchase Notes pursuant to this "Repurchase of
Notes upon Change of Control" covenant.
(b) Within 30 days after occurrence of a Change of Control, the Company
shall mail a notice to the Trustee and each Holder as of such record date as the
Company shall establish (and deliver such notice to the Trustee at least five
days prior thereto) stating: (i) that a Change of Control has occurred, that the
Change of Control Offer is being made pursuant to this "Repurchase of Notes upon
Change of Control" covenant and that all Notes validly tendered will be accepted
for payment; (ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "Change of Control Payment Date"); (iii) that any Note
not tendered will continue to accrue interest; (iv) that unless the Company
defaults in the payment of the Change of Control Payment, any Note accepted for
payment pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date; (v) that Holders electing to have any
Note purchased pursuant to the Change of Control Offer will be required to
surrender such Note, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of such Note completed, to the Paying Agent
at the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Change of Control Payment Date; (vi) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the third Business Day
immediately preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Notes delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof.
(c) On the Change of Control Payment Date, the Company shall: (i) accept
for payment Notes or portions thereof tendered pursuant to the Change of Control
Offer; (ii) deposit one day prior to the Change of Control Payment Date with the
Paying Agent money sufficient to pay the purchase price of all Notes or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the
Trustee, all Notes or portions thereof so accepted together with an Officers'
Certificate specifying the Notes or portions thereof accepted for payment by the
Company. The Paying Agent shall promptly mail, to the Holders of Notes so
accepted, payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date. For purposes of this "Repurchase of Notes upon
Change of Control" covenant, the Trustee shall act as Paying Agent.
(d) The Company will comply with Rule 14e-1 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
the event that the Company is required to repurchase Notes as described above.
There can be no assurance that the Company will have sufficient funds to
repurchase Notes upon the occurrence of a Change of Control. In particular, the
New Bank Credit Agreement will permit Pueblo to pay dividends to the Company
only in an amount sufficient to make interest payments on the Notes and would
not permit dividend payments to provide funds for the repurchase of Notes upon
the occurrence of a Change of Control.
Limitation on Asset Sales
(a) Under the terms of the Indenture, neither the Company nor any
Restricted Subsidiary shall consummate any Asset Sale (other than an Asset Sale
in connection with a sale-leaseback transaction complying with the "Limitation
on Sale Leaseback Transaction" covenant described above) unless (i) the Company
or such Restricted Subsidiary receives consideration at the time of such Asset
Sale having a value (including the value of any noncash consideration, as
determined in good faith by the Board of Directors) at
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least equal to the fair market value (as determined in good faith by the Board
of Directors) of the shares or assets subject to such Asset Sale, (ii) at least
80% of such consideration is in the form of cash (including, for purposes of
this clause (ii), (A) the principal amount of any Indebtedness (as reflected on
the Company's consolidated balance sheet) of the Company or any Restricted
Subsidiary for which the Company and its Restricted Subsidiaries will cease to
be liable, directly or indirectly, as a result of such Asset Sale; and (B)
securities that are promptly converted into cash) and (iii) 100% of the Net Cash
Proceeds with respect to such Asset Sale are applied by the Company or such
Restricted Subsidiary as set forth in the succeeding paragraph.
In the event and to the extent that the Net Cash Proceeds received by the
Company or any Restricted Subsidiary from one or more Asset Sales occurring on
or after July 28, 1993 in any period of 12 consecutive months (other than Asset
Sales by the Company or another Restricted Subsidiary to the Company or another
Restricted Subsidiary) exceed 15% of Consolidated Net Tangible Assets in any one
fiscal year (determined as of the date closest to the commencement of such
12-month period for which a balance sheet of the Company and its Subsidiaries
has been prepared), then within 12 months following the date of such event, the
Company or such Restricted Subsidiary shall apply such excess Net Cash Proceeds
(A) first, to the extent the Company or such Subsidiary elects, to invest (or to
enter into a definitive agreement committing so to invest within 12 months after
the date of such agreement) in property or assets that (as determined in good
faith by the Board of Directors) are of a nature or type or are used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the property
and assets of, or to the business of, the Company and its Restricted
Subsidiaries existing on the date of such Asset Sale; (B) second, to the extent
of the balance of such excess Net Cash Proceeds after application in accordance
with clause (A) and to the extent the Company or such Restricted Subsidiary
elects, to prepay, repay or purchase the Existing Notes or Indebtedness of any
Restricted Subsidiary; provided that the Company or such Restricted Subsidiary
shall repay such Indebtedness and cause the related loan commitment to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased and (C) third, to the extent of the balance of such excess
Net Cash Proceeds after application in accordance with clauses (A) and (B), to
make an offer to purchase Notes as set forth below. The amount of such excess
Net Cash Proceeds required to be applied (or committed to be applied) during
such 12-month period as set forth in clause (A) or (B) of the preceding sentence
and not applied as so required by the end of such period shall constitute
"Excess Proceeds".
(b) If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as
hereinafter defined) totals at least $10 million, the Company must, not later
than the fifteenth Business Day of such month, make an offer (an "Excess
Proceeds Offer") to purchase from the Holders on a pro rata basis an aggregate
principal amount of Notes equal to the Excess Proceeds on such date (rounded
down to the nearest $1,000), at a purchase price equal to 101% of the principal
amount thereof, plus, in each case, accrued interest (if any) to the date of
purchase (the "Excess Proceeds Payment").
(c) The Company shall commence an Excess Proceeds Offer by mailing a notice
to the Trustee and each Holder as of such record date as the Company shall
establish (and delivering such notice to the Trustee at least five days prior
thereto) stating: (i) that the Excess Proceeds Offer is being made pursuant to
this "Limitation on Asset Sales" covenant and that all Notes validly tendered
will be accepted for payment on a pro rata basis; (ii) the purchase price and
the date of purchase (which shall be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed) (the "Excess Proceeds
Payment Date"); (iii) that any Note not tendered will continue to accrue
interest; (iv) that, unless the Company defaults in the payment of the Excess
Proceeds Payment, any Note accepted for payment pursuant to the Excess Proceeds
Offer shall cease to accrue interest on or after the Excess Proceeds Payment
Date; (v) that Holders electing to have any Note purchased pursuant to the
Excess Proceeds Offer will be required to surrender such Note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side of
such Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately preceding the
Excess Proceeds Payment Date; (vi) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the close of
business on the third Business
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Day immediately preceding the Excess Proceeds Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Notes delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered;
provided that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof.
(d) On the Excess Proceeds Payment Date, the Company shall: (i) accept for
payment on a pro rata basis Notes or portions thereof tendered pursuant to the
Excess Proceeds Offer; (ii) deposit one day prior to the Excess Proceeds Payment
Date with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee, all Notes or portions thereof so accepted, together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof. The Company will publicly announce the
results of the Excess Proceeds Offer as soon as practicable after the Excess
Proceeds Payment Date. For purposes of this "Limitation on Asset Sales"
covenant, the Trustee shall act as the Paying Agent.
(e) The Company will comply with Rule 14e-l under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in the event that the Company is required to
repurchase Notes as described above. The Trustee shall not be responsible for
determining whether compliance with such Rule 14e-1 is required or has been
satisfied.
Provision of Financial Statements
So long as the Notes remain outstanding, the Company shall file with the
Commission quarterly reports (containing unaudited financial statements) for the
first three quarters of each fiscal year and annual reports (containing audited
financial statements and an opinion thereon by the Company's independent
certified public accountants) that it would be required to file under the
Exchange Act if it had a class of securities listed on a national securities
exchange. The Company shall mail such reports to each Holder of the Notes within
15 days of filing.
EVENTS OF DEFAULT
An "Event of Default" occurs with respect to the Notes if: (i) the Company
defaults in the payment of principal of (or premium, if any, on) any Note, when
the same becomes due and payable at maturity, upon acceleration, redemption or
otherwise; (ii) the Company defaults in the payment of interest on any Note, as
and when the same becomes due and payable, and such default continues for a
period of 30 days; (iii) the Company defaults in the performance of or breaches
any other covenant or agreement of the Company in the Indenture or under the
Notes and such default or breach continues for a period of 30 consecutive days
after written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Notes; (iv) the Company or any Restricted Subsidiary
fails to make (a) a principal payment of $10 million or more at the final (but
not any interim) Stated Maturity of any issue of Indebtedness or (b) principal
payments aggregating $10 million or more at the final (but not any interim)
Stated Maturity of more than one issue of Indebtedness and, in the case of
clause (a), such defaulted payment shall not have been made, waived or extended
within 30 days of the payment default and, in the case of clause (b), all such
defaulted payments shall not have been made, waived or extended within 30 days
of the payment default that causes the amount described in clause (b) to exceed
$10 million; (v) there occurs with respect to any Indebtedness of the Company or
any Restricted Subsidiary having an outstanding principal amount, individually
or in the aggregate, of $10 million or more, an event of default that has caused
the holder or holders thereof, or representatives of such holder or holders, to
declare such Indebtedness to be due and payable prior to its Stated Maturity and
such Indebtedness has not been discharged in full or such acceleration has not
been rescinded or annulled within 30 days of such acceleration; (vi) final
judgments or orders (not covered by
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insurance) for the payment of money in excess of $10 million in the aggregate
for all such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be rendered
against the Company or any Restricted Subsidiary and shall not be discharged,
and there shall be any period of 30 consecutive days following entry of the
final judgment or order in excess of $10 million individually or that causes the
aggregate amount for all such final judgments or orders outstanding against all
such Persons to exceed $10 million during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; (vii) a court having jurisdiction in the premises enters a decree
or order for (a) relief in respect of the Company or any Significant Subsidiary
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (b) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or (c) the
winding up or liquidation of the affairs of the Company or any Significant
Subsidiary and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (viii) the Company or any
Significant Subsidiary (a) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under any
such law, (b) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or (c) effects
any general assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in clause
(vii) or (viii) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% of
the aggregate principal amount of the Notes then outstanding, by written notice
to the Company (and to the Trustee if such notice is given by such Holders (the
"Acceleration Notice")), may, and the Trustee at the request of such Holders
shall, declare the entire unpaid principal of, premium, if any, and accrued
interest on the Notes to be due and payable. Upon a declaration of acceleration,
such principal, premium, if any, and accrued interest shall become due and
payable on the earlier of (x) an acceleration of Indebtedness under the Old Bank
Credit Agreement and (y) the fifth day following such declaration (but only if
the relevant Event of Default continues unremedied). In the event of a
declaration of acceleration because an Event of Default set forth in clause (iv)
or (v) above has occurred and is continuing, such declaration of acceleration
shall be automatically rescinded and annulled if the event of default triggering
such Event of Default pursuant to clause (iv) or (v) shall be remedied or cured
by the Company or such Restricted Subsidiary or waived by the holders of the
Indebtedness referred to in such clauses within 60 days after such declaration
of acceleration. If an Event of Default specified in clause (vii) or (viii)
above occurs with respect to the Company, all unpaid principal of, premium, if
any, and accrued interest on the Notes then outstanding shall become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of at least a majority in principal
amount of the outstanding Notes, by written notice to the Company and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default (other
than the nonpayment of the principal of, premium, if any, and interest on the
Notes that have become due solely by such declaration of acceleration) have been
cured or waived and (ii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction. For information as to the waiver of
defaults, see "Modification and Waiver".
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that the Trustee is advised by counsel conflicts with law or the
Indenture, that may cause the Trustee to suffer or incur personal liability or
that the Trustee determines in good faith may be unduly prejudicial to the
rights of Holders not joining in the giving of such direction. A Holder may not
pursue any remedy with respect to the Indenture or the Notes unless: (i) the
Holder gives to the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of outstanding
Notes make a written request to the Trustee to pursue the remedy; (iii) such
Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; (iv) the Trustee does not comply with
the
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request within 60 days after receipt of the request and the offer of indemnity,
and (v) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Notes do not give the Trustee a direction
that is inconsistent with the request. However, such limitations do not apply to
the right of any Holder to receive payment of the principal of, premium, if any,
or interest on the Notes, or to bring suit for the enforcement of any such
payment, on or after the respective due dates expressed in the Notes, which
rights shall not be impaired or affected without the consent of such Holder.
The Indenture requires certain officers of the Company to certify, on or
before a date not more than 120 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Subsidiaries
and the Company's and its Subsidiaries' performance under the Indenture and that
the Company has fulfilled all obligations thereunder, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
and the nature and status thereof. The Company is also obligated to notify the
Trustee of any default or defaults in the performance of any covenants or
agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially as an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company (other than a merger of the Company
with (but not into) a Restricted Subsidiary that is a Wholly Owned Subsidiary of
the Company with a positive stockholder's equity determined in accordance with
GAAP; provided that, in connection with any such merger, no consideration (other
than common stock in the Company) shall be issued or distributed to the
stockholders of the Company) unless: (i) the Company shall be the continuing
Person, or the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or that acquires or leases such property and
assets of the Company shall be a corporation organized and validly existing
under the laws of the United States of America or any jurisdiction thereof and
shall expressly assume, by supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company on all of the Notes and under the Indenture; (ii) immediately after
giving effect to such transaction, no Event of Default, and no event that after
the giving of notice or lapse of time or both would become an Event of Default,
shall have occurred and be continuing; (iii) immediately after giving effect to
such transaction on a pro forma basis, the Company (or any Person that becomes
the successor obligor on the Notes) shall have a Consolidated Net Worth equal to
or greater than the Consolidated Net Worth of the Company immediately prior to
such transaction; (iv) immediately after giving effect to such transaction on a
pro forma basis, the Company (or any Person that becomes the successor obligor
on the Notes) shall be able to Incur at least $1.00 of additional Indebtedness
pursuant to clause (i) of paragraph (a) of the "Limitation on Indebtedness"
covenant; and (v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with clauses
(iii) and (iv)) and an Opinion of Counsel, in each case stating that such
consolidation, merger or transfer and such supplemental indenture comply with
this provision and that all conditions precedent provided for herein relating to
such transaction have been complied with.
DEFEASANCE
The Indenture provides that the Company will be deemed to have paid and
will be discharged from any and all obligations in respect of the Notes on the
123rd day after the deposit referred to below, and the provisions of such
Indenture will no longer be in effect with respect to the Notes (except for,
among other matters, certain obligations to register the transfer or exchange of
the Notes, to replace stolen, lost or mutilated Notes, to maintain paying
agencies and to hold monies for payment in trust) if, among other things, (A)
the Company has deposited with the Trustee, in trust, money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Notes on the Stated Maturity of such payments in accordance with the terms of
the Indenture and the Notes, (B) the Company has delivered to the Trustee (i)
either an Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its
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option under this "Defeasance" provision and will be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit, defeasance and discharge had not occurred or
a ruling directed to the Trustee received from the Internal Revenue Service to
the same effect as the aforementioned Opinion of Counsel and (ii) an Opinion of
Counsel to the effect that the creation of the defeasance trust does not violate
the Investment Company Act of 1940 and after the passage of 123 days following
the deposit, the trust fund will not be subject to the effect of Section 547 of
the United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law, (C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or lapse of
time or both would become an Event of Default, shall have occurred and be
continuing on the date of such deposit or during the period ending on the 123rd
day after the date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which the Company is bound, and
(D) if at such time the Notes are listed on a national securities exchange, the
Company has delivered to the Trustee an Opinion of Counsel to the effect that
the Notes will not be delisted as a result of such deposit, defeasance and
discharge.
The Indenture further provides that the provisions of the Indenture will no
longer be in effect with respect to clauses (iii) and (iv) under "Consolidation,
Merger and Sale of Assets" and all the covenants described herein under
"Covenants," clause (iii) under "Events of Default" with respect to such
covenants and clauses (iii) and (iv) under "Consolidation, Merger and Sale of
Assets", and clauses (iv), (v) and (vi) under "Events of Default" shall be
deemed not to be Events of Default, upon, among other things, the deposit with
the Trustee, in trust, of money and/or U.S. Government Obligations that through
the payment of interest and principal in respect thereof in accordance with
their terms will provide money in an amount sufficient to pay the principal of,
premium, if any, and accrued interest on the Notes, on the Stated Maturity of
such payments in accordance with the terms of Indenture and the Notes the
satisfaction of the provisions described in clauses (B)(ii), (C) and (D) of the
preceding paragraph and the delivery by the Company to the Trustee of an Opinion
of Counsel to the effect that, among other things, the Holders of the Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit and defeasance of certain covenants and Events of Default and
will be subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such deposit and defeasance
had not occurred.
In the event the Company exercises its option to omit compliance with
certain covenants and provisions of the Indenture with respect to the Notes as
described in the immediately preceding paragraph and the Notes are declared due
and payable because of the occurrence of an Event of Default that remains
applicable, the amount of money and/or U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Notes at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
Notes at the time of the acceleration resulting from such Event of Default.
However, the Company shall remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of not less that a majority in
aggregate principal amount of the outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, (ii) reduce the principal amount of, premium, if any,
or interest on, any Note or alter the redemption provisions with respect
thereto, (iii) change the place or currency of payment of principal of, premium,
if any, or interest on, any Note, (iv) impair the right to institute suit for
the enforcement of any payment on or after the Stated Maturity (or, in the case
of a redemption, on or the Redemption Date) of any Note, (v) reduce the
above-stated percentage of outstanding Notes, the consent of whose Holders is
necessary to modify or amend the Indenture, (vi) waive a default in the payment
of principal of, premium, if any, or interest on the Notes, or (vii) reduce the
percentage of aggregate principal amount of outstanding Notes the consent of
whose Holders is necessary for waiver of compliance with certain provisions of
the Indenture or for waiver of certain defaults.
The Holders of a majority in aggregate principal amount of the outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture.
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NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Notes, or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company contained in the Indenture or
in any of the Notes or because of the creation of any Indebtedness represented
thereby, shall be had against any incorporator, or past, present or future
shareholder, officer, director, employee or controlling person of the Company or
of any successor thereof. Each Holder, by accepting such Notes, waives and
releases all such liability.
THE TRUSTEE
United States Trust Company of New York, the Trustee under the Indenture,
is the initial paying agent and registrar for the Notes. United States Trust
Company of New York is also the trustee under the Indenture relating to the
Existing Notes.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. If an Event of Default has occurred and is continuing, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein, contain limitations on the rights of
the Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that, if it
acquires any conflicting interest (as hereinafter defined), it must eliminate
such conflict upon the occurrence of an Event of Default or else resign.
GOVERNING LAW
The Indenture and the Notes are governed by, and are to be construed in
accordance with, the laws of the State of New York.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Exchange Notes will initially be issued in
the form of one Global Note (the "Global Note"). Upon issuance, the Global Note
will be deposited with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary ownership of the Notes evidenced by the Global Note will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of the Depositary's
Participants), the Depositary's Participants and the Depositary's Indirect
Participants. The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to own, transfer or pledge Notes evidenced by the Global Note will be
limited to such extent.
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So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Certificated Notes
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
the form of Certificated Securities under the Indenture then, upon surrender by
the Global Note Holder of its Global Note, Certificated Notes will be issued to
each person that the Global Note Holder and the Depositary identify as being the
beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person became a Subsidiary.
"Adjusted Consolidated Net Income" means, for any Person for any period,
the aggregate net income (or loss) of such Person and its consolidated
Subsidiaries for such period determined in accordance with GAAP, provided that
the following items shall be excluded in computing Adjusted Consolidated Net
Income (without duplication): (i) the net income (or loss) of any Person (other
than a Subsidiary) in which such Person or any of its Subsidiaries has a joint
interest with a third party, except to the extent of the amount of dividends or
other distributions actually paid to such Person or any of its Subsidiaries by
such other Person during such period, (ii) solely for the purpose of calculating
the amount of Restricted Payments that may be pursuant to the first paragraph of
the "Limitation on Restricted Payments" covenant described above (and in such
case, except to the extent includible pursuant to clause (i) above), the net
income (or loss) of any other Person accrued prior to the date it becomes a
Subsidiary of such Person or is merged into or consolidated with such Person or
any of its Subsidiaries or all or substantially all of the property and assets
of such other Person are acquired by such Person or any of its Subsidiaries,
(iii) the net income (or loss) of any Subsidiary of such Person to the extent
that the declaration or payment of dividends or similar distributions by such
Subsidiary of such net income is not at the time permitted by the operation of
the terms of its charter or any agreement, instrument, judgement, decree, order,
statute, rule or governmental regulation applicable to such Subsidiary,
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(iv) any gains or losses (on an after-tax basis) attributable to Asset Sales,
(v) any amounts paid or accrued as dividends on Preferred Stock of any
Subsidiary of such Person, and (vi) all extraordinary gains and extraordinary
losses. Notwithstanding the foregoing, (x) solely for the purposes of
calculating the Consolidated Fixed Charge Ratio (and in such case, except to the
extent includible pursuant to clause (i) above), "Adjusted Consolidated Net
Income" of the Company shall include the amount of all cash dividends received
by the Company or any Subsidiary of the Company from an Unrestricted Subsidiary
and (y) "Adjusted Consolidated Net Income" shall include gains attributable to
sales of equipment made in connection with store renovations and improvements in
an amount not to exceed $1 million in any fiscal year of the Company.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied 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 securities, by contract or otherwise. Solely for the purpose
of the definition of "Change of Control", the term "Affiliate" shall be deemed
to include, with respect to Gustavo Cisneros and Ricardo Cisneros, any member or
members of the family of either Gustavo Cisneros or Ricardo Cisneros or any
trust primarily for the benefit of one or more such Persons.
"Asset Acquisition" means (i) an investment by the Company or any of its
Subsidiaries in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged into or
consolidated with the Company or any of its Subsidiaries or (ii) an acquisition
by the Company or any of its Subsidiaries of the property and assets of any
Person (other than the Company or any of its Subsidiaries) that constitute
substantially all of an operating unit or business of such Person.
"Asset Disposition" means the sale or other disposition by the Company or
any of its Subsidiaries (other than the Company or another Subsidiary of the
Company) of (i) all or substantially all of the Capital Stock of any Subsidiary
of the Company or (ii) all or substantially all of the property and assets that
constitute an operating unit or business of the Company or any of its
Subsidiaries.
"Asset Sale" means, with respect to any Person, any sale, transfer or other
disposition (including by way of merger, consolidation or sale-leaseback
transactions) in one transaction or a series of related transactions by such
Person or any of its Subsidiaries to any Person (other than to the Company or
any of its Subsidiaries) of (i) all or any of the Capital Stock of any
Subsidiary of such Person, (ii) all or substantially all of the property and
assets of an operating unit or business of such Person or any of its
Subsidiaries or (iii) any other property and assets of such Person or any of its
Subsidiaries outside the ordinary course of business and, in each case, that is
not governed by the provisions in the Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the party and assets
of the Company; provided that sales or other dispositions of inventory,
receivables and other current assets in the ordinary course of business shall
not be included within the meaning of such term.
"Attributable Indebtedness" means, when used in connection with a
sale-leaseback transaction referred to in the "Limitation on Sale-Leaseback
Transactions" covenant described above, at any date of determination, the
product of (i) the net proceeds from such sale-leaseback transaction and (ii) a
fraction, the numerator of which is the number of full years of the term of the
lease relating to the property involved in such sale-leaseback transaction
(without regard to any options to renew or extend such term) remaining at the
date of determination and the denominator of which is the number of full years
of the term of such lease (without regard to any options to renew or extend such
term) measured from the first day of such term.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the product of (a)
the number of years from such date of determination to the dates of each
successive schedule principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Banks" means the lenders who are from time to time parties to the Old Bank
Credit Agreement.
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"Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under the Indenture.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designed, whether voting
non-voting) of capital stock of such Person which is outstanding or issued on or
after July 28, 1993, including, without limitation, all Common Stock and
Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in accordance with GAAP, is
required to be capitalized on the balance sheet of such Person; and "Capitalized
Lease Obligation" means the rental obligations, as aforesaid, under such lease.
"Change of Control" shall be deemed to have occurred at such time as (i)
(a) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Exchange Act), other than Gustavo Cisneros, Ricardo Cisneros and their
respective Affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of more than 35% of the total voting power of the then
outstanding Voting Stock of the Company or Holdings and (b) Gustavo Cisneros,
Ricardo Cisneros and their respective Affiliates beneficially own, directly or
indirectly, less than 50% of the total voting power of the then outstanding
Voting Stock of the company; or (ii) at any time when Gustavo Cisneros, Ricardo
Cisneros or their respective Affiliates beneficially own, directly or
indirectly, less than 50% of the total voting power of the then outstanding
Voting Stock of the Company, individuals who at the beginning of any period of
two consecutive calendar years constituted the board of directors of the Company
or Holdings (together with any new directors whose election by the board of
directors of the Company or Holdings or whose nomination for election by the
shareholders of the Company or Holdings was approved by a vote of at least a
majority of the members of the board of directors of the Company or Holdings
then still in office who either were members of the board of directors of the
Company or Holdings at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the board of directors of the Company or
Holdings, as the case may be.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of common stock of such Person which is outstanding or
issued on or after July 28, 1993, including, without limitation, all series and
classes of such common stock.
"Consolidated EBITDA" means, with respect to any Person for any period, the
sum of the amounts for such period of (i) Adjusted Consolidated Net Income, (ii)
Consolidated Fixed Charges, (iii) income taxes (calculated excluding the effect
of extraordinary and nonrecurring gains or losses on sales of assets), (iv)
depreciation expense, (v) amortization expense and (vi) all other noncash items
reducing Adjusted Consolidated Net Income, less all noncash items increasing
Adjusted Consolidated Net Income, all as determined on a consolidated basis for
such Person and its consolidated Subsidiaries in conformity with GAAP; provided
that, if a Person has any Subsidiary that is not a Wholly Owned Subsidiary of
such Person, Consolidated EBITDA of such Person shall be reduced by an amount
equal to the Adjusted Consolidated Net Income of such Subsidiary multiplied by
the quotient of (x) the number of shares of outstanding Common Stock of such
Subsidiary not owned on the last day of such period by such Person or any
Subsidiary of such Person divided by (y) the total number of shares of
outstanding Common Stock of such Subsidiary on the last day of such period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, without duplication, the sum of (i) Consolidated Interest Expense, (ii)
all but the principal component in respect of Capitalized Lease Obligations, and
(iii) cash dividends payable on Preferred Stock issued by a Subsidiary of such
Person and on Redeemable Stock, determined on a consolidated basis for such
Person and its consolidated Subsidiaries in
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accordance with GAAP (except as otherwise expressly specified herein) excluding,
however, any such amounts of any Subsidiary of such Person if the net income (or
loss) of such Subsidiary for such period is excluded in the calculation of
Adjusted Consolidated Net Income for such Person pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income (or loss)
of such Subsidiary is excluded from the calculation of Adjusted Consolidated Net
Income for such Person pursuant to clause (iii) of the definition thereof).
"Consolidated Fixed Charge Ratio" means, with respect to any Person on any
Transaction Date, the ratio of (i) the aggregate amount of Consolidated EBITDA
of such Person for the four fiscal quarters for which financial information in
respect thereof is available immediately prior to such Transaction Date (the
"Reference Period") to (ii) the aggregate Consolidated Fixed Charges of such
Person during the Reference Period. In making the foregoing calculation, (a) pro
forma effect shall be given to any Indebtedness Incurred during or after the
Reference Period and on or before the Transaction Date, to the extent such
Indebtedness is outstanding at the Transaction Date, in each case as if such
Indebtedness had been Incurred on the first day of the Reference Period and
after giving effect to the application of the proceeds thereof; (b) Consolidated
Interest Expense attributable to interest on any Indebtedness (whether existing
or being Incurred) computed on a pro forma basis and bearing a floating interest
rate shall be computed as if the rate in effect on the date of computation
(taking into account any Interest Rate Agreement applicable to such Indebtedness
if such Interest Rate Agreement has a remaining term in excess of 12 months) had
been the applicable rate for the entire period; (c) there shall be excluded from
Consolidated Interest Expense any amounts relating to Indebtedness that was
outstanding during or after the Reference Period or thereafter but which is not
outstanding or which has been or is to be repaid with the proceeds of other
Indebtedness Incurred during or after the Reference Period and on or before the
Transaction Date; (d) pro forma effect shall be given to Asset Dispositions and
Asset Acquisitions that occur during or after the Reference Period and on or
before the Transaction Date as if they had occurred on the first day of the
Reference Period; (e) pro forma effect shall be given, in the same manner as
provided in the foregoing clause (d), to asset dispositions and asset
acquisitions made by any Person that has become a Subsidiary of the Company or
has been merged with or into the Company or any Subsidiary of the Company during
or after the Reference Period and on or before the Transaction Date and that
would have been Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Subsidiary of the Company; and (f) with respect
to any Reference Period commencing prior to the date of consummation of the
Refinancing Plan, the Refinancing Plan shall be deemed to have taken place on
the first day of the Reference Period.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate amount of interest in respect of Indebtedness (including
amortization of OID on any Indebtedness and the interest portion of any deferred
payment obligation, calculated in accordance with the effective interest method
of accounting; all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, and the net
costs associated with Interest Rate Agreements); excluding, however, any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the Refinancing Plan, all as determined for such Person and its
consolidated Subsidiaries on a consolidated basis in conformity with GAAP.
"Consolidated Net Tangible Assets" means, at any date of determination, the
total amount of assets of the Company and its Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its consolidated
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the then most recently available consolidated
balance sheet of the Company and its consolidated Subsidiaries prepared in
conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the then most recently available consolidated balance
sheet of the Company and its consolidated Subsidiaries (which shall be as of a
date not more than 60 days prior to the date of such computation), less any
amounts attributable to Redeemable Stock or any equity security convertible into
or exchangeable for Indebtedness,
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the cost of treasury stock and the principal amount of any promissory notes
receivable from the sale of Capital Stock of the Company or any of its
Subsidiaries, each item to be determined in conformity with GAAP (excluding the
effects of foreign currency exchange adjustments under Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 52).
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement destined to protect the
Company or any of its Subsidiaries against fluctuations in currency values to or
under which the Company or any of its Subsidiaries is a party or a beneficiary
on July 28, 1993 or becomes a party or beneficiary thereafter.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of July 28, 1993 applied on a basis consistent with
the principles, methods, procedures and practices employed in the preparation of
the Company's audited financial statements, including, without limitation, those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Holder" or "Securityholder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness;
provided that neither the accrual of interest (whether such interest is payable
in cash or kind) nor the accretion of OID shall be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such Indebtedness shall be
the lesser of (a) the fair market value of such asset at such date of
determination and (b) the amount of such Indebtedness, (vii) all Indebtedness of
other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person, (viii) to the extent not otherwise included in this
definition, all obligations of such Person under Currency Agreements and
Interest Rate Agreements and (ix) all Preferred Stock of Subsidiaries and all
Redeemable Stock, valued in each case at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date; provided that the amount outstanding
at any time of any
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Indebtedness issued with OID is the face amount of such Indebtedness less the
remaining unamortized portion of the OID of such Indebtedness at such time as
determined in conformity with GAAP.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement designed
to protect the Company or any of its Subsidiaries against fluctuations in
interest rates to or under which the Company or any of its Subsidiaries is a
party or a beneficiary on July 28, 1993 or becomes a party or a beneficiary
thereafter.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan (other than advances to customers in the ordinary course of
business that are recorded as accounts receivable on the balance sheet of such
Person or its Subsidiaries) or other extension of credit or capital contribution
to any other Person (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of Capital Stock, bonds,
notes, debentures or other similar instruments issued by any other Person. For
purposes of the definition of "Unrestricted Subsidiary" and the "Limitation on
Restricted Payments" covenant described above, (i) the amount of any
"Investment" in any Unrestricted Subsidiary shall include the fair market value
of the net assets of any Subsidiary of the Company at the time that such
Subsidiary of the Company is designated an unrestricted Subsidiary and the fair
market value of the net assets of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary of the
Company shall be treated as a reduction in Investments in Unrestricted
Subsidiaries, subject to the limitation set forth in clause (3) of the first
paragraph of the "Limitation on Restricted Payments" covenant described above
and (ii) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time such transfer, in each case as
determined by the Board of Directors in good faith.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof, any sale with recourse
against the seller or any Affiliate of the seller, or any agreement to give any
security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds of
such Asset Sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Subsidiary of the Company) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale computed without
regard to the consolidated results of operations of the Company and its
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that is either (a)
secured by a Lien on the property or assets sold or (b) required to be paid as a
result of such sale and (iv) appropriate amounts to be provided by the Company
or any Subsidiary of the Company as a reserve against liabilities associated
with such Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as determined in conformity with GAAP.
"Old Bank Credit Agreement" means the Credit Agreement dated as of July 21,
1993, as amended, among Holdings, the Company, Pueblo and The Chase Manhattan
Bank (National Association) and Scotiabank de Puerto Rico as Administrative
Agents for the Banks party thereto, together with the related documents thereto
(including, without limitation, any guarantees and security documents), which
may consist of a term loan facility and a revolving credit facility, in each
case as such agreements may be amended (including any amendment and restatement
thereof), supplemented, replaced, refinanced or otherwise modified from time to
time (including pursuant to the New Bank Credit Agreement).
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for
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which a reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (ii) statutory Liens of landlords and
carriers, warehousemen, mechanics, supplies, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return of money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or any of its Subsidiaries; (vi) Liens
(including extensions and renewals thereof) upon real or tangible personal
property acquired after July 28, 1993; provided that (a) such Lien is created
solely for the purpose of securing Indebtedness Incurred (1) to finance the cost
(including the cost or improvement or construction) of the item of property or
assets subject thereto and such Lien is created prior to, at the time of or
within 12 months after the later of the acquisition, the completion of
construction or the commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (b) the principal amount of
the Indebtedness secured by such Lien does not exceed 100% of such cost and (c)
any such Lien shall not extend to or cover any property or assets other than
such item of property or assets and any improvements on such item; (vii) leases
or subleases granted to others that do not materially interfere with the
ordinary course of business of the Company or any of its Subsidiaries; (viii)
Liens encumbering property or assets under construction arising from obligations
of the Company or any of its Subsidiaries to make progress or partial payments
relating to such property or assets, (ix) any interest or title of a lessor in
the property subject to any Capitalized Lease; provided that any sale-leaseback
transaction related thereto complies with the "Limitation on Sale-Leaseback
Transactions" covenant described above; (x) Liens arising from filing Uniform
Commercial Code financing statements, chattel mortgages or similar documents
regarding leases or by vendors in respect of inventory on which "advance money"
has been paid; (xi) Liens on property of, or on shares of stock or Indebtedness
of, any corporation existing at the time such corporation becomes, or becomes a
part of, any Restricted Subsidiary; (xii) Liens in favor of the Company or any
Restricted Subsidiary; (xiii) Liens on any facilities, equipment or other
property of the Company or any Subsidiary of the Company in favor of the United
States of America or any State, or any department, agency, instrumentality or
political subdivision thereof (including the Commonwealth of Puerto Rico and the
United States Virgin Islands), in connection with the issuance of industrial
revenue bonds or on any equipment or other property designed primarily for the
purpose of air, or water pollution control; provided, that any such Lien on such
facilities, equipment or other property shall not apply to any other assets of
the Company or such Subsidiary of the Company; (xiv) Liens arising from the
rendering of a final judgment or order against the Company or any Subsidiary of
the Company that does not give rise to an Event of Default; (xv) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the products
and proceeds thereof; (xvi) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (xvii) Liens encumbering customary initial
deposits and margin deposits, and other Liens that are either within the general
parameters customary in the industry and incurred in the ordinary course of
business or otherwise permitted under the terms of the Old Bank Credit
Agreement, in each case securing Indebtedness under Interest Rate Agreements and
Currency Agreements and forward contracts, options, futures contracts, futures
options or similar agreements or arrangements designed to protect the Company or
any of its Subsidiaries from fluctuations in the price of commodities; (xviii)
Liens arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Company or any or its
Subsidiaries in the ordinary course of business in accordance with the past
practices of the Company and its Subsidiaries prior to July 28, 1993; (xix)
Liens on or sales of receivables; (xx) Liens on assets of Restricted
Subsidiaries permitted by the Old Bank Credit Agreement as in effect on July 28,
1993 and other such Liens that are not materially more restrictive (in terms of,
without limitation, the amount secured by such Lien and the scope of such Lien)
than such Liens permitted by the Old Bank Credit
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Agreement; and (xxi) Liens on assets of Restricted Subsidiaries securing
Indebtedness and other obligations permitted under clause (xiii) in part (a) of
the "Limitation on Indebtedness" covenant.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of preferred or reference stock of such Person which is
outstanding or issued on or after July 28, 1993, including, without limitation,
all series and classes of such preferred or preference stock.
"Redeemable Stock" means any class or series of Capital Stock of any Person
that by its terms or otherwise is (i) required to be redeemed prior to the
Stated Maturity of the Initial Notes, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Redeemable Stock but for provisions thereof
giving holders thereof the right to require the Company to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or a "change of
control" occurring prior to the Stated Maturity of the Notes shall not
constitute Redeemable Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions contained in the "Limitation on Asset
Sales" and "Repurchase of Notes upon Change of Control" covenants described
above and such Capital Stock specifically provides that the Company will not
repurchase or redeem any such Capital Stock pursuant to such provisions prior to
the Company's repurchase of Notes required to be repurchased by the Company
under the "Limitation on Asset Sales" or "Repurchase of Notes upon Change of
Control" covenants described above.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any
Subsidiary of the Company that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company or (ii) as of the end of such fiscal year,
was the owner of more than 10% of the consolidated assets of the Company, all as
set forth on the most recently available consolidated financial statements of
the Company for such fiscal year.
"Stated Maturity" means, with respect to any debt security or any
installment of interest thereon, the date specified in such debt security as the
fixed date on which any principal of such debt security or any such installment
of interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the outstanding
voting Stock is owned, directly or indirectly, by the Company or by one or more
other Subsidiaries of the Company, or by such Person and one or more other
Subsidiaries of such Person; provided that, except as the term "Subsidiary" is
used in the definition of "Unrestricted Subsidiary" described above, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary of the Company.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of,
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the Company or any other Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated; provided that either (a) the Subsidiary to
be so designated has total assets of $1,000 or less or (b) if such Subsidiary
has assets greater than $1,000, that such designation would be permitted under
the "Limitation on Restricted Payments" covenant described above. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary of the Company; provided that immediately after giving effect to such
designation (1) the Company could Incur $1.00 of additional Indebtedness under
the clause (i) in part (a) of the "Limitation on Indebtedness" covenant
described above and (2) no Event of Default, or event or condition that through
the giving of notice or the lapse of time or both would become an Event of
Default, shall have occurred and be continuing. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing promptly with the
Trustee a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation compiled with the
foregoing provisions.
"Voting Stock" means, with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors
of such Person.
"Wholly Owned Subsidiary" means, with respect to any Person, any Subsidiary
of such Person if all of the Common Stock or other similar equity ownership
interests (but not including Preferred Stock) in such Subsidiary (other than any
director's qualifying shares or Investments by foreign nationals mandated by
applicable law) is owned directly or indirectly by such Person.
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DESCRIPTION OF NEW BANK CREDIT AGREEMENT
The following summary of the New Bank Credit Agreement does not purport to
be complete and is qualified in its entirety by reference to the New Bank Credit
Agreement a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus is a part.
As part of the Refinancing Plan, Pueblo amended and restated its Old Bank
Credit Agreement. The New Bank Credit Agreement, under which The Bank of Nova
Scotia and NationsBank, N.A. (South) are acting as agents for the lending
institutions thereunder, provides for borrowings in the aggregate principal
amount of up to $65.0 million. The revolving facility will terminate on February
1, 2003.
The obligations of Pueblo under the New Bank Credit Agreement are
guaranteed by the Company and secured by a pledge of the assets of the Company's
subsidiaries and by the capital stock of, and intercompany notes issued by, the
Company's subsidiaries. Subject to certain exceptions, the New Bank Credit
Agreement requires that (i) 100% of the net cash proceeds in excess of
$1,000,000 received from the sale of assets (excluding two properties in Florida
to be transferred to a related party pursuant to the Refinancing Plan) by the
Company or its subsidiaries which have not been reinvested within one year, (ii)
100% of the net cash proceeds received from the issuance of certain debt by the
Company or its subsidiaries and (iii) 60% of the net cash proceeds received from
the issuance of equity by the Company be applied to reduce outstanding loans and
commitments under the facilities. Amounts outstanding under the New Bank Credit
Agreement will bear interest at a rate based, at Pueblo's option, upon either
(i) the Base Rate (as defined in the New Bank Credit Agreement) plus an interest
margin of 1.25%, or (ii) LIBOR (the London Interbank Offered Rate) plus an
interest margin of 2.25%. These interest margins will be subject to decrease
based upon the Company's achievement of certain ratios of consolidated
indebtedness to EBITDA.
The New Bank Credit Agreement contains a number of financial, affirmative
and negative covenants that regulate Pueblo's operations. Financial covenants
require maintenance of ratios of total funded debt and senior debt to EBITDA,
and minimum interest coverage. Negative covenants restrict, among other things,
the incurrence of debt, the existence of liens, transactions with affiliates,
loans, advances and investments by the Company, payment of dividends and other
distributions to shareholders, dispositions of assets, mergers, consolidations
and dissolutions, contingent liabilities, changes in business and acquisitions.
The New Bank Credit Agreement also contains an exception to the restriction on
the payment of dividends which provides that so long as no Default or Event of
Default exists, or would exist as a result thereof, Pueblo is permitted to pay
cash dividends to the Company in an aggregate amount necessary to pay interest
on the Notes then due and payable in accordance with the terms thereof.
INITIAL NOTES REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement the Company has agreed, for
the benefit of the holders of the Initial Notes, at the expense of the Company,
to (i) file on or prior to the 30th calendar day following the Closing Date a
registration statement (the "Exchange Offer Registration Statement") with the
Commission with respect to a registered offer (the "Exchange Offer") to exchange
the Initial Notes for the Exchange Notes, to be issued under the Indenture in
the same aggregate principal amount as and with terms that will be identical in
all respects to the Initial Notes (except for certain transfer restrictions,
registration rights and penalty interest provisions and (ii) use its best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act on or prior to the 90th calendar day
following the Closing Date and (iii) use its best efforts to consummate the
Exchange Offer on or prior to the 120th calendar day following the Closing Date.
The Company will keep the Exchange Offer open for not less than 30 days and not
more than 45 days (or longer if required by applicable law) after the date
notice of the Exchange Offer is mailed to the holders of the Initial Notes. For
each Initial Note tendered to the Company pursuant to the Exchange Offer and not
validly withdrawn by the holder thereof, the holder of such Initial Note will
receive an Exchange Note having a principal amount equal to the principal amount
of such surrendered Initial Note.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain no-action letters addressed to
other parties in other transactions. However, the Company
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has not sought its own no-action letter and there can be no assurance that the
staff of the Commission would make a similar determination with respect to the
Exchange Offer in such other circumstances. Based upon these interpretations by
the staff of the Commission and subject to the immediately following sentence,
the Company believes that the Exchange Notes may be offered for resale, resold
and otherwise transferred by the holders thereof without further compliance with
the registration and prospectus delivery provisions of the Securities Act.
However, any holder of Initial Notes who is an "affiliate" of the Company or has
any arrangement or understanding with any person to participate in the
distribution of the Exchange Notes (i) will not be able to rely on the
interpretation by the staff of the Commission set forth in the above-mentioned
no-action letters, (ii) will not be able to tender its Initial Notes in the
Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Initial Notes unless such sale or transfer is made pursuant to
an exemption from such requirements.
Each holder of Initial Notes who wishes to exchange Initial Notes for
Exchange Notes will be required to represent that (i) it is not an affiliate of
the Company, (ii) any Exchange Notes to be received by it were acquired in the
ordinary course of its business and (iii) at the time of commencement of the
Exchange Offer, it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes. In addition, in connection with any resales of Exchange
Notes, any broker-dealer who acquired the Initial Notes for its own account as a
result of market-making activities or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The Commission has
taken the position that broker-dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sale of the Notes) with the prospectus
contained in the Exchange Offer Registration Statement. Under the Registration
Rights Agreement, the Company is required to allow broker-dealers to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of such Exchange Notes.
In the event that any changes in law or applicable interpretations of the
staff of the Commission do not permit the Company to effect the Exchange Offer,
or if for any reason the Exchange Offer is not consummated within 120 days of
the Closing Date or in certain other circumstances, the Company will, at its
expense, (i) as promptly as practicable, and in any event on or prior to 30 days
after such filing obligation arises, file with the Commission a Shelf
Registration Statement covering resales of the Initial Notes, (ii) use its best
efforts to cause the Shelf Registration Statement to be declared effective under
the Securities Act on or prior to 45 days after such filing occurs and (iii)
keep effective the Shelf Registration Statement until two years after its
effective date (or such shorter period that will terminate when all the Initial
Notes covered thereby have been sold pursuant thereto or in certain other
circumstances). The Company will, in the event of the filing of a Shelf
Registration Statement, provide to each holder of the Initial Notes covered by
the Shelf Registration Statement copies of the prospectus that is a part of the
Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement for the Initial Notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
Initial Notes. A holder of Initial Notes that sells such Initial Notes pursuant
to the Shelf Registration Statement generally will be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus to
the purchaser, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
Holder (including certain indemnification obligations). In addition, each holder
of the Initial Notes will be required to deliver certain information to be used
in connection with the Shelf Registration Statement in order to have its Initial
Notes included in the Shelf Registration Statement.
In the event that either (a) the Exchange Offer Registration Statement is
not filed with the Commission on or prior to the 30th calendar day following the
Closing Date or (b) the Exchange Offer is not consummated or a Shelf
Registration Statement is not declared effective on or prior to the 120th
calendar day following the Closing Date, the interest rate borne by the Initial
Notes will be increased by 0.25 percent per annum for the first 30 days
following the 30-day period referred to in clause (a) above or the first 90 days
following the 120-day period referred to in clause (b) above. Such interest will
increase by an additional 0.25 percent per annum at the beginning of each
subsequent 30-day period in the case of clause (a) above or 90-day period in
69
<PAGE> 75
the case of clause (b) above; provided, however, that in no event will the
interest rate borne by the Initial Notes be increased by more than 1.5 percent.
Upon the filing of the Exchange Offer Registration Statement, the consummation
of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as
the case may be, the interest rate borne by the Initial Notes from the date of
such filing, consummation or effectiveness, as the case may be, will be reduced
to the original interest rate set forth on the cover of this Prospectus;
provided, however, that, if after any such reduction in interest rate, a
different event specified in clause (a) or (b) above occurs, the interest rate
may again be increased pursuant to the foregoing provisions.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement, a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
TAXATION
The following is a general summary of certain material U.S. federal income
tax consequences of the purchase, ownership and disposition of the Notes,
applicable to holders of Notes who purchased the Notes pursuant to the Offering
at the price at which the Notes were sold pursuant to the Offering. The summary
is based on U.S. federal income tax laws, regulations, rulings and decisions now
in effect, all of which are subject to change, possibly with retroactive effect.
This summary also is based on the information included in this Prospectus and
the related documents and on certain representations from the Company and the
Initial Purchasers as to factual matters. This summary is only for United States
Holders (as defined below) who hold the Notes as capital assets and not for sale
to customers in the ordinary course of a trade or business. This discussion does
not cover all aspects of U.S. federal taxation that may be relevant to, or the
actual tax effect that any of the matters described herein will have on,
particular holders and does not address state, local and foreign tax
consequences.
The Company has not sought and will not seek any rulings from the Internal
Revenue Service (the "IRS") with respect to the positions of the Company
discussed below. There can be no assurance that the IRS will not take a
different position concerning the tax consequences of the purchase, holding or
disposition of the Notes or that any such position would not be sustained by a
court.
The tax treatment of a holder of Notes may vary depending on his particular
situation or status. Certain holders (including insurance companies, tax-exempt
organizations, financial institutions, dealers in securities or foreign
currency, persons that hold the Notes as a position in a "straddle" or as part
of a "hedging" or "conversion" transaction for tax purposes, persons that have a
"functional currency" other than the U.S. dollar, investors in pass-through
entities and holders who are not United States Holders) may be subject to
special rules not discussed below. HOLDERS OF NOTES ARE URGED TO CONSULT THEIR
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF
PURCHASING THE NOTES AND OF THE CONTINUED HOLDING AND DISPOSITION OF THE NOTES.
As used herein, a "United States Holder" is (i) an individual citizen or
resident of the United States, (ii) a corporation or partnership created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is
includible in its gross income for U.S. federal income tax purposes without
regard to its source.
TAXATION OF THE NOTES
Original Issue Discount
The Notes were issued with OID for U.S. federal income tax purposes. United
States Holders of debt instruments must include OID in ordinary gross income as
it accrues, under the constant yield method, regardless of their regular method
of accounting. OID equals the amount by which the stated redemption price at
maturity ("SRPM") of a debt instrument exceeds the instrument's "issue price,"
provided such excess exceeds a statutory de minimis amount. The SRPM of a debt
instrument includes all payments of principal and interest on the instrument
other than qualified stated interest ("QSI"), which is stated interest
70
<PAGE> 76
that is unconditionally payable in cash or other property (other than debt
instruments of the issuer) at least annually at a single fixed rate (or certain
variable rates). All interest payments on the Notes will be payments of QSI. The
issue price of the Notes will equal the first price at which a substantial
amount of Notes is sold for cash (other than to bond houses, brokers or similar
persons or organizations acting in the capacity of underwriters, placement
agents or wholesalers).
Each holder of Notes that are issued with OID generally will be required to
include in gross income an amount equal to the sum of the daily portions of OID
on the Notes for all days during the taxable year in which such holder holds the
Notes. The daily portions of OID are determined by allocating to each day during
an accrual period a ratable portion of OID attributable to that accrual period.
The amount of OID attributable to each full accrual period is equal to the
product of the adjusted issue price ("AIP") of the Notes at the beginning of the
accrual period and the yield to maturity of the Notes (determined on the basis
of compounding at the close of each accrual period and properly adjusted for the
length of the accrual period). Except for the first accrual period which begins
on the issue date and ends on August 1, 1997, the Notes have six month accrual
periods that end on August 1 and February 1 of each year for so long as the
Notes are outstanding. The AIP of the Notes at the beginning of an accrual
period is the original issue price of the Notes plus the aggregate amount of OID
that has accrued in all prior accrual periods. The yield to maturity is the
discount rate that, when used in computing the present value of all principal
and interest payments to be made on the Notes, produces an amount equal to their
issue price. A holder increases its basis in the Notes by the amount of any OID
included in income.
If a holder purchases Notes at a premium (i.e., for an amount greater than
the SRPM), the holder does not include any OID in gross income. If a holder
purchases Notes for an amount less than the SRPM but greater than the AIP, the
holder is required to include the daily portion of OID in income like an
original holder, but the daily portion of OID which the holder must include in
income will be reduced by an amount equal to the daily portion multiplied by a
fraction, the numerator of which is equal to the excess of the holder's cost of
the Notes over the holder's adjusted basis in the Notes and the denominator of
which is equal to the excess of the sum of all payments (other than QSI) on the
Notes after the date such Notes are purchased by the holder over the AIP of such
Notes.
Information with respect to OID, if any, accruing during the calendar year,
as well as interest paid during that year is required to be furnished to the
Internal Revenue Service and to holders of Notes that are not exempt from the
reporting requirements. This information will be based upon the adjusted issue
price of the debt instrument as if the holder were the original holder of the
debt instrument. Accordingly, a holder who purchases the Notes for an amount
other than the adjusted issue price or purchases the Notes on a date other than
the beginning of an accrual period will be required to determine the amount of
OID, if any, required to be included in gross income for U.S. federal income tax
purposes. A holder's aggregate includible income may vary, depending upon the
amount paid for the Notes.
Market Discount
The Notes will have market discount to the extent they are acquired for an
amount less than their adjusted issue price as of the purchase date, unless such
market discount is less than a specified de minimis amount. If a holder of Notes
with market discount recognizes gain on the sale, exchange or other disposition
of the Notes, all or a portion of that gain will be taxed to the holder as
ordinary interest income to the extent of any accrued market discount. In
addition, if the holder of Notes receives a partial principal payment with
respect to the Notes, all or a portion of that partial principal payment will be
treated as ordinary interest income to the extent of accrued market discount.
Market discount generally accrues under a ratable method determined by the
product of total market discount and the ratio of days held to the total days
after the date of acquisition up to (and including) the date of maturity of the
Notes. In lieu of the ratable method of accrual, a holder may elect to compute
accrued market discount on the basis of a constant interest rate, i.e., taking
into account the compounding of interest. Further, a purchaser of Notes with
market discount may be required to defer recognition of all or a portion of
interest expense attributable to any indebtedness incurred or continued to
purchase or carry the Notes. The
71
<PAGE> 77
amount of this deferred interest expense would not exceed the market discount
accrued for the year and generally is allowed as a deduction not later than the
year in which the related market discount income is recognized.
A holder of Notes with market discount may elect to include currently
market discount in gross income as the discount accrues. This current inclusion
election applies to all other debt instruments with market discount acquired on
or after the first day of the first taxable year to which the election applies
and may not be revoked without the consent of the IRS. If such an election is
made, the foregoing rules with respect to the recognition of ordinary income on
sales and other dispositions of the Notes with market discount and deferral of
interest on related indebtedness will not apply.
Bond Premium
If a holder acquires the Notes at a premium (i.e., for an amount greater
than the SRPM), the holder does not include OID in gross income and the holder
may amortize such premium as an offset against interest payments made on the
Notes. The amount of amortizable bond premium is generally the excess of the
amount paid by the holder for the Notes over the SRPM of the Notes. The amount
of premium that is amortizable as an offset against each interest payment is
determined using a constant yield method. A holder may amortize premium only if
the holder makes (or has made) a timely election. Such election, if made, would
apply to all debt instruments held at the beginning of the first tax year to
which the election applies or subsequently acquired by the electing holder and
could not be revoked without the consent of the IRS.
Interest Accrual Election
Any holder of Notes may elect to treat all interest on the Notes as OID and
calculate the amount includible in gross income under the constant yield method.
For purposes of this election, interest includes stated interest, acquisition
discount, OID, de minimis OID, market discount, de minimis market discount and
unstated interest, all as adjusted by any amortizable bond premium or
acquisition premium. If a holder makes this election for Notes with market
discount or amortizable bond premium, the election is treated as an election
under the market discount or amortizable bond premium provisions, described
above, and the electing holder will be required to include market discount in
income currently or amortize bond premium for all of its other debt instruments
with market discount or amortizable bond premium, respectively, acquired during
such tax year or in any subsequent tax year. The election is to be made for the
taxable year in which the holder acquired the Notes and may not be revoked
without the consent of the IRS. A holder of Notes should consult with his or her
own tax advisor about this election.
Sale or Exchange
In general, a holder of Notes will recognize gain or loss upon the sale,
exchange, redemption, retirement or other disposition of the Notes measured by
the difference between the amount realized on the disposition and the holder's
adjusted basis in the Notes. In general, a holder of a Note will have an
adjusted tax basis for the Note equal to the Note's cost, increased by the
amount of OID previously included in gross income by the holder and reduced by
prior payments of principal or, to the extent previously included in income and
reflected in the holder's adjusted tax basis, interest made to the holder in
respect of such Note. Subject to the market discount rules discussed above, such
gain or loss generally will be capital gain or loss and will be long-term if the
holder holds the Notes for more than one year prior to disposition. Capital
losses are subject to limitations on deductibility for U.S. federal income tax
purposes.
Exchange Offer
An exchange of Notes for Exchange Notes pursuant to the Exchange Offer will
not be a taxable event for U.S. federal income tax purposes. Receipt of Exchange
Notes will be treated as a continuation of the original investment in the Notes.
Similarly, there would be no U.S. federal income tax consequences to a holder of
Notes that does not participate in the Exchange Offer. In the event that the
Company fails to register the Notes pursuant to an effective registration
statement as described under "Initial Notes Registration Rights,"
72
<PAGE> 78
additional interest payable on the Notes in the manner described therein will be
includible in the gross income of United States Holders.
Backup Withholding
A holder may be subject to backup withholding at a rate of 31% with respect
to certain "reportable payments," which include payments of interest and any
call premium, and, under certain circumstances, principal payments, on the
Notes. These backup withholding rules apply if such holder, among other things,
(i) fails to furnish a social security number or other taxpayer identification
number ("TIN") certified under penalties of perjury to the person subject to the
requirement to backup withhold, (ii) furnishes an incorrect TIN to such person,
(iii) fails to report properly interest or dividends, or (iv) under certain
circumstances, fails to provide to such person a certified statement, signed
under penalty of perjury, that the TIN furnished is correct and that such holder
is not subject to backup withholding. A holder that does not provide the Company
with its correct TIN may be subject to penalties imposed by the IRS. Backup
withholding will not apply, however, with respect to certain exempt recipients,
such as corporations and tax-exempt organizations, and certain foreign persons.
However, the Company will withhold applicable amounts from such a recipient
unless the recipient has established to the satisfaction of the Company that it
is exempt from backup withholding.
If backup withholding applies, the Company is required to withhold 31% from
reportable payments. The amount withheld is not an additional tax but may be
credited against the holder's income tax liability.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Initial Notes if such Initial Notes were acquired as a result of
market-making activities or other trading activities. The Company intends, for a
period of 180 days after the Expiration Date, to make this Prospectus, as
amended or supplemented, available to any broker-dealer that requests such
documents in the Letter of Transmittal, for use in connection with any such
resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account in connection with the Exchange Offer may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
or resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account in connection with the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act, and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Initial Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
73
<PAGE> 79
LEGAL MATTERS
The validity of the Notes has been passed upon for the Company by Milbank,
Tweed, Hadley & McCloy, New York, New York.
EXPERTS
The consolidated financial statements included in this Prospectus and the
related consolidated financial statement schedules included elsewhere in the
Registration Statement, of which this Prospectus forms a part, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein and elsewhere in the Registration Statement (which reports
express an unqualified opinion and include an explanatory paragraph referring to
the Company's adoption of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of "), and have been
so included in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.
74
<PAGE> 80
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report........................................................... F-2
Consolidated Balance Sheets at January 25, 1997 and January 27, 1996................... F-3
Consolidated Statements of Operations for the three fiscal years ended January 25,
1997................................................................................. F-5
Consolidated Statements of Cash Flows for the three fiscal years ended January 25,
1997................................................................................. F-6
Consolidated Statements of Stockholder's Equity for the three fiscal years ended
January 25, 1997..................................................................... F-7
Notes to Consolidated Financial Statements............................................. F-8
</TABLE>
F-1
<PAGE> 81
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Pueblo Xtra International, Inc.
San Juan, Puerto Rico
Pompano Beach, Florida
We have audited the accompanying consolidated balance sheets of Pueblo Xtra
International, Inc. and Subsidiaries as of January 25, 1997 and January 27,
1996, and the related consolidated statements of operations, cash flows and
stockholder's equity for each of the three years in the period ended January 25,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Pueblo Xtra International, Inc.
and Subsidiaries as of January 25, 1997 and January 27, 1996 and the results of
their operations and their cash flows for each of the three years in the period
ended January 25, 1997 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, effective
January 28, 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
April 3, 1997
F-2
<PAGE> 82
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................................................... $ 12,148 $ 6,998
Marketable securities (market value of $89 at January 25, 1997 and $888 at January 27, 1996)... 89 888
Accounts receivable............................................................................ 4,443 10,071
Inventories.................................................................................... 59,503 67,237
Assets held for sale........................................................................... 13,804 26,000
Prepaid expenses............................................................................... 10,428 10,670
Deferred income taxes.......................................................................... 3,316 9,215
-------- --------
TOTAL CURRENT ASSETS..................................................................... 103,731 131,079
-------- --------
PROPERTY AND EQUIPMENT
Land and improvements.......................................................................... 18,278 18,116
Buildings and improvements..................................................................... 62,388 60,766
Furniture, fixtures and equipment.............................................................. 98,138 95,591
Leasehold improvements......................................................................... 35,408 31,617
Construction in progress....................................................................... 4,253 4,139
-------- --------
218,465 210,229
Less accumulated depreciation and amortization................................................. 77,289 55,505
-------- --------
141,176 154,724
Property under capital leases, net............................................................. 9,739 11,559
-------- --------
TOTAL PROPERTY AND EQUIPMENT, NET........................................................ 150,915 166,283
GOODWILL, net of accumulated amortization of $18,050 at January 25, 1997 and $13,018 at January
27, 1996....................................................................................... 183,668 188,700
DEFERRED INCOME TAXES............................................................................ 12,923 10,272
TRADENAMES....................................................................................... 31,570 32,436
DEFERRED CHARGES AND OTHER ASSETS................................................................ 39,933 44,613
-------- --------
TOTAL ASSETS............................................................................. $ 522,740 $ 573,383
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 83
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27,
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
CURRENT LIABILITIES
Accounts payable............................................................................... 74,951 65,112
Accrued expenses............................................................................... 36,054 52,610
Salaries, wages and benefits payable........................................................... 11,563 14,315
Short-term borrowing........................................................................... 7,000 --
Notes payable to a related party............................................................... 10,000 --
Income taxes payable........................................................................... 110 94
Current installments of long-term debt......................................................... 18,250 29,214
Current obligations under capital leases....................................................... 617 859
Deferred income taxes.......................................................................... 1,403 --
-------- --------
TOTAL CURRENT LIABILITIES................................................................ 159,948 162,204
LONG-TERM DEBT, net of current portion........................................................... $ 71,227 $ 89,477
NOTES PAYABLE.................................................................................... 180,000 180,000
CAPITAL LEASE OBLIGATIONS, net of current portion................................................ 8,110 8,947
RESERVE FOR SELF-INSURANCE CLAIMS................................................................ 12,201 12,862
DEFERRED INCOME TAXES............................................................................ 22,921 35,335
OTHER LIABILITIES AND DEFERRED CREDITS........................................................... 35,352 39,659
-------- --------
TOTAL LIABILITIES............................................................................ 489,759 528,484
-------- --------
COMMITMENTS AND CONTINGENCIES.................................................................... -- --
STOCKHOLDER'S EQUITY Common stock, $.10 par value; 200 shares authorized and issued.............. -- --
Additional paid-in capital..................................................................... 91,500 86,500
Accumulated deficit............................................................................ (58,519) (41,601)
-------- --------
TOTAL STOCKHOLDER'S EQUITY............................................................... 32,981 44,899
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............................................... $ 522,740 $ 573,383
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 84
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.............................................. $1,020,056 $1,145,370 $1,166,955
Cost of goods sold..................................... 760,329 848,490 871,136
---------- ---------- ----------
GROSS PROFIT......................................... 259,727 296,880 295,819
---------- ---------- ----------
OPERATING EXPENSES
Selling, general and administrative expenses........... 213,485 240,219 229,197
Depreciation and amortization.......................... 41,128 43,669 43,865
Unusual charges........................................ 4,160 32,161 --
---------- ---------- ----------
OPERATING PROFIT (LOSS).............................. 954 (19,169) 22,757
Sundry, net............................................ 122 (52) (35)
---------- ---------- ----------
INCOME (LOSS) BEFORE INTEREST, INCOME TAXES AND
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE......................................... 1,076 (19,221) 22,722
Interest expense on debt............................... (29,306) (32,002) (30,358)
Interest expense on capital lease obligations.......... (1,152) (2,219) (2,451)
Interest and investment income, net.................... 276 875 656
---------- ---------- ----------
LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE.................... (29,106) (52,567) (9,431)
Income tax benefit................................... 9,535 20,210 4,790
---------- ---------- ----------
LOSS BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE............................ (19,571) $ (32,357) $ (4,641)
Cumulative effect of a change in accounting principle,
net of deferred income taxes of $1,496............... 2,653 -- --
---------- ---------- ----------
NET LOSS............................................. $ (16,918) $ (32,357) $ (4,641)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 85
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $(16,918) $(32,357) $ (4,641)
Adjustments to reconcile net loss to net cash provided by
operating activities, net of effects of disposal of
Florida retail operations:
Cumulative effect of a change in accounting
principle........................................... (2,653) -- --
Unusual charges....................................... 4,160 31,889 --
Depreciation and amortization of property and
equipment........................................... 25,528 29,818 29,278
Amortization of intangible and other assets........... 15,600 14,181 14,587
Deferred income taxes................................. (9,259) (19,145) (7,639)
Loss on disposal of property and equipment, net....... 2,395 4,794 783
Decrease (increase) in deferred charges, goodwill, and
other assets........................................ 2,401 2,755 2,101
Increase (decrease) in reserve for self-insurance
claims.............................................. 896 (3,611) (1,130)
Increase (decrease) in other liabilities and deferred
credits............................................. 161 (3,540) (366)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable.......... 2,621 (3,406) 223
Decrease (increase) in inventories.................. (3,995) (4,267) 538
Decrease (increase) in prepaid expenses............. 278 1,212 (411)
Increase (decrease) in accounts payable and accrued
expenses......................................... 6,427 7,887 (4,850)
Increase (decrease) in income taxes payable......... (20) (2,145) (680)
-------- -------- --------
27,622 24,065 27,793
Decrease attributable to disposal of Florida retail
operations....................................... (12,810) -- --
-------- -------- --------
Net cash provided by operating activities........ 14,812 24,065 27,793
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment...................... (14,455) (20,769) (14,649)
Proceeds from disposal of property and equipment......... 59 502 694
Purchase of leasehold interests.......................... -- (1,565) (1,752)
Purchases of marketable securities....................... (223) -- --
Proceeds from sales of marketable securities............. 1,415 -- --
Proceeds from disposal of Florida retail operations...... 11,840 -- --
Issuance of note receivable from a related party......... -- -- (10,000)
Proceeds from note receivable from a related party....... -- -- 10,000
Net cash used in investing activities............ (1,364) (21,832) (15,707)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in note payable to bank syndicate........... 7,000 -- 8,000
Net decrease in note payable to bank syndicate........... -- -- (8,000)
Principal payments on long-term debt..................... (29,214) (9,614) (15,582)
Principal payments on capital lease obligations.......... (1,084) (1,301) (1,295)
Proceeds from capital contribution....................... 5,000 -- 15,000
Proceeds from notes payable to a related party........... 10,000 -- --
-------- -------- --------
Net cash used in financing activities............ (8,298) (10,915) (1,877)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents....... 5,150 (8,682) 10,209
Cash and cash equivalents at beginning of period........... 6,998 15,680 5,471
-------- -------- --------
Cash and cash equivalents at end of period................. $ 12,148 $ 6,998 $ 15,680
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 86
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDER'S
STOCK CAPITAL DEFICIT EQUITY
------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at January 29, 1994................... $ -- $ 71,500 $ (4,603) $ 66,897
Capital contribution........................ -- 15,000 -- 15,000
Net loss for the year....................... -- -- (4,641) (4,641)
------- ------- -------- --------
Balance at January 28, 1995................... $ -- $ 86,500 $ (9,244) $ 77,256
Net loss for the year....................... -- -- (32,357) (32,357)
------- ------- -------- --------
Balance at January 27, 1996................... $ -- $ 86,500 $ (41,601) $ 44,899
Capital contribution........................ -- 5,000 -- 5,000
Net loss for the year....................... -- -- (16,918) (16,918)
------- ------- -------- --------
Balance at January 25, 1997................... $ -- $ 91,500 $ (58,519) $ 32,981
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Pueblo Xtra
International, Inc. and its wholly-owned subsidiaries ("The Company"). The
Company operated retail supermarkets and video rental locations in Puerto Rico
and the U.S. Virgin Islands during fiscal 1997. Intercompany accounts and
transactions are eliminated in consolidation.
The Company operates and reports financial results on a fiscal year of 52
or 53 weeks ending on the last Saturday in January. Accordingly, fiscal year
1997 ended on January 25, 1997, fiscal 1996 ended on January 27, 1996, and
fiscal 1995 ended on January 28, 1995. All fiscal years comprised 52 weeks.
Cash and Cash Equivalents
Highly liquid investments purchased with a maturity of three months or less
are considered cash equivalents.
Marketable Securities
Marketable securities consist of U.S. Government or agency issues with the
majority of the maturities occurring within the next 12 months. These
investments in debt securities are classified as held-to-maturity and measured
at amortized cost as it is both the Company's positive intent and ability to
hold the investments to maturity.
Inventories
Inventories held for sale are stated at the lower of cost or market. The
cost of inventories held for sale is determined, depending on the nature of the
product, either by the last-in, first-out (LIFO) method or by the first-in,
first-out (FIFO) method. Videocassette rental inventories are recorded at cost,
net of accumulated amortization. Videocassettes held for rental are amortized
over 12 months on a straight-line basis.
Property and Equipment
Property and equipment, including expenditures for remodeling and
improvements, are carried at cost. Routine maintenance, repairs and minor
betterments are charged to operations as incurred. Depreciation and amortization
are computed on a straight-line basis over the estimated useful lives of the
assets or, in relation to leasehold improvements and property under capital
leases, over the lesser of the asset's useful life or the lease term, not to
exceed 20 years. Estimated useful lives are 20 years for buildings and
improvements, 5 to 12 years for furniture, fixtures and equipment, 4 years for
automotive equipment and 3 years for computer hardware and software.
Upon the sale, retirement or other disposition of assets, the related cost
and accumulated depreciation or amortization are eliminated from the accounts.
Any resulting gains or losses from disposals are included in the consolidated
statements of operations.
Goodwill and Other Intangibles
Goodwill represents the excess of cost over the estimated fair value of the
net tangible and other intangible assets acquired in connection with the
transaction described in Note (3) -- Acquisitions. Goodwill and other
intangibles are being amortized using the straight-line method over periods not
exceeding 40 years. The Company periodically evaluates the carrying amount of
goodwill and other intangibles to recognize and measure the possible impairment
of these assets. Based on the recoverability from cash flows method (which
includes evaluating the probability that estimated undiscounted cash flows from
related operations will be less
F-8
<PAGE> 88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
than the carrying amount of goodwill and other long-lived assets), the Company
believes there is no impairment to goodwill and other intangibles.
Self-Insurance
The Company's general liability and certain of its workers compensation
insurance programs are self-insured. The reserve for self-insurance claims is
based upon an annual review by the Company and its independent actuary of claims
filed and claims incurred but not yet reported. Due to inherent uncertainties in
the estimation process, it is at least reasonably possible that the Company's
estimate of the reserve for self-insurance claims could change in the near term.
The liability for self-insurance is not discounted. Individual self-insured
losses are limited to $250,000 per occurrence for general liability and certain
workers compensation. The Company maintains insurance coverage for claims in
excess of $250,000. The current portion of the reserve, representing the amounts
expected to be paid in the next fiscal year, were $6.7 million and $7.7 million
at January 25, 1997 and January 27, 1996, respectively, and are included in the
consolidated balance sheets as accrued expenses.
Pre-Opening Expenses
Store pre-opening expenses are charged to operations in the month the
stores are opened.
Advertising Expenses
Advertising expenses are charged to operations as they are incurred. During
fiscal 1997, fiscal 1996, and fiscal 1995, advertising expenses were $11.0
million, $11.4 million, and $10.8 million, respectively.
Interest Rate Instruments
The Company is a party to an interest rate swap agreement and interest rate
cap agreements to limit its exposure to increases in market interest rates.
The interest rate swap agreement (the "Swap") involves the exchange of
fixed and floating rate interest payment obligations over the life of the
agreement without exchange of the underlying notional principal amount. The
differential to be paid or received is recognized as an adjustment to the
reserve established in purchase accounting as a result of the transaction
described in Note (3) -- Acquisitions. Prior to the acquisition, the
differential was charged to interest expense.
The interest rate cap agreements are three-year contracts entered into with
two banks in the credit facility syndicate discussed more fully in Note
(5) -- Debt. Under the terms of the agreements, interest costs on the underlying
notional principal amount will not exceed a specified amount on a cumulative
basis over a three-year period. The premium paid for the agreements is included
in the consolidated balance sheets as deferred charges and other assets and is
being amortized over the life of the agreements.
Postemployment Benefits
The Company has a policy which provides severance benefits to its salaried
employees. However, the Company cannot reasonably estimate postemployment
benefits, including severance benefits, on an ongoing basis, these costs are
charged to expense only when the probability of payment and the amount of such
payment can be reasonably determined.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109
requires deferred tax assets and liabilities to be determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates currently in effect.
F-9
<PAGE> 89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Earnings Per Common Share
The Company is a wholly-owned subsidiary of PXC&M Holdings, Inc.
("Holdings") with a total of 200 shares of common stock issued and outstanding.
Earnings per share is not meaningful to the presentation of the consolidated
financial statements and is therefore excluded.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Accounting Change
In fiscal 1997, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
The statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for the long-lived assets and certain identifiable
intangibles to be disposed of. Long-lived assets and certain identifiable
intangibles to be held and used by an entity are required to be reviewed for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Measurement of an impairment loss for
long-lived assets and identifiable intangibles that an entity expects to hold
and use should be based on the fair value of the assets. Long-lived assets and
certain identifiable intangibles to be disposed of are required to be reported
generally at the lower of the carrying amount or fair value less cost to sell.
Pursuant to the requirements of SFAS No. 121, in the year the Company adopts
SFAS No. 121, assets to be disposed of are to be recorded at the lower of
carrying amount or fair value less cost to sell. Upon adoption of SFAS No. 121
at the beginning of fiscal 1997 (the "Adoption Date"), the Company recorded a
cumulative effect of a change in accounting principle of $2.7 million, net of
deferred income taxes of $1.5 million, to record assets held for disposal at
fair value as of the Adoption Date. Such adjustment represents the phaseout of
operations of the closed Florida stores in fiscal 1997 that were included in
unusual charges in fiscal 1996 (see Note 2).
Reclassifications
Certain amounts in the prior year's consolidated financial statements and
related notes have been reclassified to conform to the current year's
presentation.
NOTE 2 -- UNUSUAL CHARGES
During January 1996, management implemented several strategic measures.
These measures included the disposal of the Company's Florida retail operations
(the "Florida Disposal") and a restructuring of certain operating functions. As
a result of these measures, the Company recorded approximately $32.2 million in
unusual charges. Of this amount, approximately $30.0 million was recorded in
accordance with APB Opinion No. 30, "Reporting the Results of
Operations -- Reporting the Effects of a Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
("APB No. 30"), related to the decision to exit the Florida retail market (the
"Loss from Florida Disposal"). In addition, the Company recorded costs for
postemployment benefits, including severance pay, under existing benefit
arrangements.
The Florida Disposal included the closing of all eight Xtra units (three of
which are owned) and a warehouse and distribution center in Florida, whether by
sale or abandonment, which was completed in the first quarter of fiscal 1997. In
fiscal 1997, the Company sold one location and the lease rights to another
F-10
<PAGE> 90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
location. The Company is currently negotiating the sale of certain other
locations. In addition, the Company has sold the equipment within all its
stores.
During fiscal 1997, the Company recorded an additional $4.2 million in
unusual charges to write down assets from the Florida operations. This
adjustment was made to reflect a revision in the estimated fair value of the
remaining properties held for sale. After this adjustment and the sale of
certain properties, $10.0 million, relating to the Florida Disposal, is included
in assets held for sale at January 25, 1997 pursuant to their anticipated sale
in the near term.
Included in the $30.0 million loss from the Florida Disposal recorded in
fiscal 1996 were estimated operating losses during the phase-out period, a
reduction of related assets to their estimated realizable value, the recognition
of net future lease obligations, employee termination benefits for Florida
operations and other closing costs. With the adoption of SFAS No. 121, the
Company recorded an additional operating loss in fiscal 1997 of $4.1 million for
the phaseout of operations subsequent to January 27, 1996. Such amount, net of
taxes, was offset by the cumulative effect of a change in accounting principle
recorded in fiscal 1997 (see Note 1).
The Florida operating division reported sales of $6.7 million, $159.7
million, and $187.8 million for fiscal 1997, fiscal 1996, and fiscal 1995,
respectively. The total assets and liabilities of the Florida operating division
as of January 25, 1997 were $51.5 million and $55.0 million, respectively, and
$77.6 million and $83.0 million, respectively, as of January 27, 1996.
Unusual charges include management's best estimates of the amounts expected
to be realized in the near term. However, the amounts the Company will
ultimately realize could differ from those estimates.
NOTE 3 -- ACQUISITIONS
On July 28, 1993, the Company acquired all of the outstanding shares of the
common stock of Pueblo International, Inc. and subsidiaries for an aggregate
purchase price of $283.6 million plus transaction costs (hereinafter referred to
as the "Transaction"). The shares were acquired from an investor group including
affiliates of Metropolitan Life Insurance Company, The First Boston Corporation
and certain current and former members of the Company's management and its Board
of Directors.
The Transaction was financed with $71.5 million of equity, the issuance of
$180.0 million in 10-year, 9 1/2% senior notes and $130.0 million borrowed by
subsidiaries of the Company under a new credit facility. See Note (5) -- Debt
for further details of the senior notes and the new credit facility. Concurrent
with the Transaction, previously existing bank debt of $19.3 million and senior
subordinated notes of $48.6 million were satisfied.
The Transaction has been accounted for as a purchase effective July 31,
1993. Accordingly, the costs of the Transaction were allocated to the assets
acquired and liabilities assumed. The excess of the aggregate purchase price
over the fair market value of net assets acquired of approximately $210.2
million was recognized as goodwill and is being amortized over 40 years.
NOTE 4 -- INVENTORIES
The cost of approximately 76% and 78% of total inventories at January 25,
1997 and January 27, 1996, respectively, is determined by the LIFO method. The
excess of current cost over inventories valued by the LIFO method was $1,980,000
and $1,570,000 as of January 25, 1997 and January 27, 1996, respectively.
F-11
<PAGE> 91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- DEBT
Total debt consists of the following (in thousands):
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27,
1997 1996
----------- -----------
<S> <C> <C>
Note payable to a related party............................... $ 10,000 $ 0
Payable to a bank syndicate under term loan credit
facilities.................................................. 62,977 85,977
Payable to a bank syndicate under a revolving credit
facility.................................................... 16,000 9,000
Senior notes due 2003......................................... 180,000 180,000
Payable to a Puerto Rico governmental agency.................. 17,500 17,500
10% mortgage notes, payable in monthly installments with a
balloon payment due in fiscal 1997.......................... 0 6,214
-------- --------
286,477 298,691
Less current installments..................................... 35,250 29,214
-------- --------
$ 251,227 $ 269,477
======== ========
</TABLE>
The Transaction described in Note (3) -- Acquisitions was financed by the
issuance of $180.0 million in senior notes (the "Senior Notes") and a credit
facility consisting of $115.0 million in term loans and a maximum of $60.0
million in revolving loans (the "Credit Facility") entered into by subsidiaries
of the Company and a syndicate of banks led by The Chase Manhattan Bank
(National Association) and Scotiabank de Puerto Rico ("Bank Syndicate"). The
Credit Facility matures on July 31, 2000.
The term loans of the Credit Facility are reduced over the term of the
facility on a graduated basis in accordance with the credit agreement. Principal
payments aggregating $10.8 million are due under the term loans of the Credit
Facility in the succeeding 12-month period. Of the $60.0 million revolving
facility, $16.0 million remains outstanding at January 25, 1997 and $23.3
million is utilized in the form of standby letters of credit. The Company pays a
fee of .50% per annum on unused commitments under the $60.0 million revolving
facility. The Company has classified as non-current $9.0 million under the
revolving Credit Facility as a result of its intent to maintain this obligation
on a long-term basis. Interest on the Credit Facility fluctuates based on the
availability of Section 936 funds in Puerto Rico, Euroloan rates and the prime
rate. The weighted average interest rate on the Credit Facility, which
approximates that of short-term borrowings under the revolving facility, was
8.57% and 8.82% during fiscal 1997 and fiscal 1996, respectively.
During fiscal 1997 and subsequent thereafter, the Credit Facility has been
amended with the last amendment effective as of January 25, 1997. In accordance
with the amendments, the sole shareholder of the Company, Holdings, contributed
$5.0 million in additional capital to the Company on April 18, 1996. In
addition, Holdings provided $10.0 million in additional funds to the Company on
October 18, 1996 in return for a non-interest-bearing redeemable note payable to
a related party (the "Holdings Note"). The Holdings Note matures after the
expiration of the Credit Facility and can be redeemed earlier subject to the
Company meeting various performance and financial criteria. The proceeds of
these two transactions were used to immediately reduce the Company's term loans
under the Credit Facility. The terms of these amendments also required that the
maximum amount available under the revolving loans of the Credit Facility be
reduced from $60.0 million to $49.3 million, which is comprised of $26.0 million
in revolving loans and a maximum of $23.3 million utilized in the form of
standby letters of credit. The amendments also provide for certain revised
financial covenant requirements. In addition, the amendments require the Company
to pay additional fees on the last business day of each calendar month from
April 1997 through December 1997 equal to 1/9 of 1 1/2% of the revolving
commitment and term loans outstanding as of each respective date for certain
Bank Syndicate members.
The Credit Facility is collateralized by a pledge of the assets of the
Company, by the capital stock of, and intercompany notes issued by, the
Company's subsidiaries and by the capital stock of the Company. The
F-12
<PAGE> 92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company is required, under the terms of the Credit Facility, to meet certain
financial covenants which include minimum consolidated net worth levels,
interest and fixed charges coverage ratios and minimum EBITDA (as defined in the
credit agreement). The agreement also contains certain restrictions on
additional indebtedness, capital expenditures and the declaration and payment of
dividends.
Subsequent to January 25, 1997, the Company began negotiations with the
Bank Syndicate to restructure the Credit Facility and has begun to explore
alternative sources of finances.
The Senior Notes, which mature on August 1, 2003, are general unsecured
obligations of the Company subordinate in right of payment to all existing and
future liabilities (including, without limitation, obligations under the Credit
Facility) of its subsidiaries. The Senior Notes may be called by the holders of
the notes at 101% in the event of a change in control of the Company (as defined
in the indenture). The Senior Notes are senior to all future subordinated
indebtedness which the Company may from time to time incur. The Senior Notes
bear interest at 9.50% per annum which is payable semi-annually on February 1st
and August 1st. Terms of the Senior Notes include covenants which restrict the
Company and its subsidiaries from engaging in certain activities and
transactions.
Outstanding borrowings with a governmental agency of the Commonwealth of
Puerto Rico are $17.5 million from the issuance of industrial revenue bonds. The
bonds, which bear interest at variable rates based on an index of tax-exempt
borrowing, have a weighted average interest rate of 4.08% and 4.00% at January
25, 1997 and January 27, 1996, respectively. Principal payments are due in
fiscal 1998 ($7.5 million) and fiscal 2001 ($10.0 million), which correspond to
the maturity dates of the bonds. Payment of the bonds is guaranteed by standby
letters of credit totaling $17.9 million, issued under the $60.0 million
revolving credit facility discussed above.
The Company is a party to a collateralized Swap to reduce its exposure to
increases in interest rates on the loans payable to the Puerto Rico governmental
agency. Under the terms of the Swap, the Company pays a fixed rate of 5.29% on
the $17,500,000 notional principal amount and receives a variable rate of
interest based on an index of tax-exempt borrowing. Net interest payments under
the Swap were $325,000, $249,000, and $420,000, for fiscal 1997, fiscal 1996,
and fiscal 1995, respectively. The Swap expires in fiscal 1998 and is
collateralized by the Company's pledge of marketable securities in an amount
(reset quarterly) sufficient to offset the market risk, not to exceed
$4,130,000. The required collateral balance of $27,000 as of January 25, 1997 is
included with deferred charges and other assets in the accompanying consolidated
balance sheet. During fiscal 1995, the Company entered into a three-year
interest rate cap transaction with two banks in its Credit Facility syndicate as
a means of managing the cost of the floating rate debt under the Credit
Facility. Under the terms of the interest rate cap agreements, interest costs on
a notional principal amount of $35.0 million will not exceed approximately $7.4
million during the succeeding three-year period. Total cash requirements under
the agreements included the payment of a premium totalling $455,000 which is
being amortized over the term of the agreements and is included in the
consolidated statements of operations. The interest rate cap agreements expire
in fiscal 1998. Counterparties to the interest rate swap and cap agreements are
major financial institutions. Credit loss from counterparty nonperformance is
not anticipated.
Annual maturities of the Company's debt are as follows (in thousands):
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
1998...................................................................... $ 35,250
1999...................................................................... 20,000
2000...................................................................... 21,500
2001...................................................................... 29,727
2002...................................................................... 0
2003 and thereafter....................................................... 180,000
--------
Total........................................................... $286,477
========
</TABLE>
F-13
<PAGE> 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total interest paid on debt, net of interest capitalized, was $34.5
million, $28.7 million, and $26.9 million for fiscal 1997, fiscal 1996, and
fiscal 1995, respectively. Interest payable as of January 25, 1997 and January
27, 1996 was $695,000 and $9.9 million, respectively.
NOTE 6 -- LEASES AND LEASEHOLD INTERESTS
The Company conducts the major part of its operations on leased premises
which have initial terms generally ranging from 20 to 25 years. Substantially,
all leases contain renewal options which extend the lease terms in increments of
5 to 10 years. The Company also has certain equipment leases which have terms of
up to five years. Realty and equipment leases generally require the Company to
pay operating expenses such as insurance, taxes and maintenance. Certain store
leases provide for percentage rentals based upon sales above specified levels.
The Company leases retail space to tenants in certain of its owned and
leased properties. The lease terms generally range from two to five years.
The major classes of property recorded under capital leases are as follows
(in thousands):
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27,
1997 1996
----------- -----------
<S> <C> <C>
Real estate................................................... $12,295 $14,464
Machinery and equipment....................................... 90 424
------- -------
12,385 14,888
Less accumulated amortization................................. 2,646 3,329
------- -------
$ 9,739 $11,559
======= =======
</TABLE>
Amortization of assets recorded under capital leases is included with
depreciation and amortization expense in the consolidated statement of
operations.
As a result of the Florida Disposal discussed further in Note
(2) -- Unusual Charges, the Company eliminated the net property recorded under
capital leases of $7.2 million and the related capital lease obligations of
$10.3 million for the Florida retail operations as of December 30, 1995.
F-14
<PAGE> 94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Minimum rentals under non-cancelable leases at January 25, 1997 are as
follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING OPERATING
LEASES LEASES LEASES
(AS (AS (AS
LESSEE) LESSEE) LESSOR)
----------- ----------- -----------
<S> <C> <C> <C>
1998............................................. $ 1,775 $ 10,608 $ 967
1999............................................. 1,640 10,208 801
2000............................................. 1,524 9,375 712
2001............................................. 1,523 8,729 436
2002............................................. 1,455 8,126 286
2003 and thereafter.............................. 9,739 77,629 780
------ ------- ----
17,656 $ 124,675 $ 3,982
======= ====
Less executory costs............................. 147
------
Net minimum lease payments..................... 17,509
Less amount representing interest................ 8,782
------
Present value of net minimum lease payments under
capital lease.................................. $ 8,727
======
Total minimum sublease rentals to be received in
the future..................................... $ 1,040 $ 5,512
====== =======
</TABLE>
Additionally, the Company is committed to future minimum payments under
leases which it has entered into for stores not opened as of January 25, 1997
totaling $54.5 million over a 20- to 25-year period. Payment on these leases
will commence with occupancy.
Rent expense and the related contingent rentals under operating leases were
$11,899,000 and $567,000 for fiscal 1997, respectively, $12,636,000 and $645,000
for fiscal 1996, respectively, and $12,008,000 and $658,000 for fiscal 1995,
respectively.
Contingent rentals under capital leases, which are directly related to
sales, were $289,000 for fiscal 1997, $331,000 for fiscal 1996, and $387,000 for
fiscal 1995. Interest paid on capital lease obligations was $1,152,000 for
fiscal 1997, $2,286,000 for fiscal 1996, and $2,455,000 for fiscal 1995.
Sublease rental income for operating and capital leases was $1,881,000 for
fiscal 1997, $1,854,000 for fiscal 1996, and $1,747,000 for fiscal 1995.
NOTE 7 -- STOCKHOLDER'S EQUITY
Authorized common stock of the Company consists of 200 shares of $.10 par
value, all of which are issued and outstanding and held by Holdings as of
January 25, 1997 and January 27, 1996.
During April 1994, the Company received additional capital of $15.0 million
from its parent company, Holdings. Under the terms of the Credit Facility, as
amended, the Company used $15.0 million to reduce the amounts outstanding under
its term loan credit facilities and revolving credit facility, including a $5.0
million prepayment on the fiscal 1996 principal amortization of the term loans.
During April 1996, the Company received additional capital of $5.0 million
from its parent company, Holdings, which it used to reduce the amounts
outstanding under its term Credit Facility.
F-15
<PAGE> 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- INCOME TAXES
As described in Note (1) -- Significant Accounting Policies, the Company's
method of accounting for income taxes is the liability method as required by
SFAS No. 109.
The components of income tax expense (benefit) are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
Current.............................................. $ (276) $ (1,065) $ 2,849
Deferred............................................. (9,259) (19,145) (7,639)
------- -------- -------
$(9,535) $(20,210) $(4,790)
======= ======== =======
</TABLE>
The significant components of the net deferred tax liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27,
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Reserve for self-insurance claims........................... $ 8,128 $ 8,964
Employee benefit plans...................................... 6,793 7,293
Property and equipment...................................... 7,144 3,007
Reserve for closed stores................................... 4,116 9,427
Accrued expenses and other liabilities and deferred
credits.................................................. 4,125 4,672
Other operating loss and tax credit carryforwards........... 12,437 2,832
All other................................................... 1,277 3,397
-------- --------
Total deferred tax assets........................... $ 44,020 $ 39,592
-------- --------
Deferred tax liabilities:
Property and equipment...................................... $ (24,057) $ (25,640)
Tradenames.................................................. (12,619) (12,986)
Operating leases............................................ (7,517) (8,057)
Inventories................................................. (4,274) (4,108)
Other assets................................................ (2,313) (2,807)
Accrued expenses and other liabilities and deferred
credits.................................................. (1,046) (1,555)
-------- --------
Total deferred tax liabilities...................... $ (51,826) $ (55,153)
-------- --------
Valuation allowance for deferred tax assets................. (279) (287)
-------- --------
Net deferred tax liabilities ....................... $ (8,085) $ (15,848)
======== ========
</TABLE>
SFAS No. 109 requires a valuation allowance against deferred tax assets if,
based on the weight of the available evidence, it is more likely than not that
some or all of the deferred tax assets may not be realized.
F-16
<PAGE> 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the difference between actual income tax benefit and
income taxes computed at U.S. Federal statutory tax rates is as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
U.S. Federal statutory rate applied to pretax
loss.............................................. $(10,187) $(18,398) $(3,288)
Effect of varying rates applicable in other taxing
jurisdictions..................................... (992) (1,052) (785)
Amortization of goodwill............................ 1,761 1,834 2,133
State and local taxes............................... 708 (775) 58
Effect of rate changes in other taxing
jurisdictions..................................... -- -- (3,034)
All others, net..................................... (825) (1,819) 126
-------- -------- -------
Income tax benefit.................................. $ (9,535) $(20,210) $(4,790)
======== ======== =======
</TABLE>
As of January 25, 1997, the Company has unused net operating loss
carryforwards of $18,000,000 and $8,000,000 available to offset future taxable
income in Puerto Rico and the United States through fiscal years 2004 and 2011,
respectively.
The Company also has unused investment tax credits of approximately
$811,000 available to offset future U.S. income tax liabilities. Such investment
tax credits expire as follows: 1999 -- $97,000; 2000 -- $20,000;
2001 -- $674,000; and 2002 -- $20,000. Utilization of the investment tax credit
carryforward may be limited each year.
Total income taxes paid were $496,600 for fiscal 1997, $1,286,000 for
fiscal 1996, and $1,886,000 for fiscal 1995.
NOTE 9 -- RETIREMENT BENEFITS
The Company has a non-contributory defined benefit plan (the "Retirement
Plan") covering substantially all full-time and certain part-time associates.
Retirement Plan benefits are based on years of service and a base level of
compensation. The Company funds Retirement Plan costs in accordance with the
requirements of the Employee Retirement Income Security Act of 1974.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.
Retirement Plan assets consist primarily of stocks, bonds and U.S. Government
securities. Full vesting for the Retirement Plan occurs upon the completion of
five years of service.
Net pension cost under the Retirement Plan includes the following
components (in thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
------- ------ -------
<S> <C> <C> <C>
Service cost -- benefits earned during the............. $ 1,556 $1,893 $ 2,120
period Interest cost on projected benefit
obligation........................................ 1,512 1,466 1,419
Expected return on plan assets......................... (1,121) (994) (1,118)
Net amortization and deferrals......................... (97) (7) (7)
------- ------ -------
NET PENSION COST.................................. $ 1,850 $2,358 $ 2,414
======= ====== =======
</TABLE>
The average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the net periodic
pension cost for the Retirement Plan are 7.5% and 5.0%, respectively, for fiscal
years 1997, 1996 and 1995. The average expected long-term rate of return on plan
assets is 9.0% for the three-year period.
F-17
<PAGE> 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status and amounts recognized in the Company's consolidated
balance sheets for the Retirement Plan are as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27,
1997 1996
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $15,143 at January 25, 1997 and $14,005
at January 27, 1996...................................... $ 16,540 $ 15,793
======== ========
Plan assets at fair value..................................... $ 12,080 $ 12,251
Projected benefit obligation for service rendered to date..... (20,449) (20,396)
-------- --------
FUNDED STATUS....................................... (8,369) (8,145)
Unrecognized net gain......................................... (1,267) (3,459)
Unrecognized prior service cost............................... (79) (99)
-------- --------
NET PENSION LIABILITY............................... $ (9,715) $ (11,703)
======== ========
</TABLE>
The Company maintains a Supplemental Executive Retirement Plan (the
"Supplemental Plan") for its officers under which the Company will pay, from
general corporate funds, a supplemental pension equal to the difference between
the annual amount of pension calculated under the Supplemental Plan and the
amount the participant will receive under the Retirement Plan. Effective January
1, 1992, the Board of Directors amended the Supplemental Plan in order to
conform various provisions and definitions with those of the Retirement Plan.
The pension benefit calculation under the Supplemental Plan is limited to a
total of 20 years employment and is based on a specified percentage of the
average annual compensation received for the five highest consecutive years
during a participant's last 10 years of service, reduced by the participant's
annual Retirement Plan and social security benefits. Full vesting for the
Supplemental Plan occurs upon the completion of five years of service.
Net pension cost under the Supplemental Plan includes the following
components (in thousands):
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost -- benefits earned during the period............. $ 98 $116 $268
Interest cost on projected benefit obligation................. 328 284 340
Net amortization and deferrals................................ (68) (99) 7
---- ---- ----
NET PENSION COST.................................... $358 $301 $615
==== ==== ====
</TABLE>
The average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the net periodic
pension cost for the Supplemental Plan are 7.5% and 5.0%, respectively, for
fiscal years 1997, 1996 and 1995.
F-18
<PAGE> 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status and amounts recognized in the Company's consolidated
balance sheets for the Supplemental Plan are as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 25, JANUARY 27,
1997 1996
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $3,664 at January 25, 1997 and $3,639
at January 27, 1996...................................... $ 3,681 $ 3,674
======= =======
Projected benefit obligation for service rendered to date..... $(4,384) $(4,475)
------- -------
FUNDED STATUS............................................ (4,384) (4,475)
Unrecognized net gain......................................... (1,433) (1,272)
Unrecognized prior service cost............................... 50 57
------- -------
NET PENSION LIABILITY.................................... $(5,767) $(5,690)
======= =======
</TABLE>
The Company has a non-contributory defined contribution plan covering its
eligible associates in Puerto Rico and the U.S. Virgin Islands. Contributions to
this plan are at the discretion of the Board of Directors. The Company also has
a contributory thrift savings plan in which it matches eligible contributions
made by participating eligible associates in the United States. Expenses related
to these plans, which are recognized in the year the cost is incurred, were
$728,000 for fiscal 1997, $862,000 for fiscal 1996 and $774,000 for fiscal 1995.
NOTE 10 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments.
Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value
due to the short maturity of these instruments.
Marketable Securities
Due to the nature and maturities of the underlying securities in the
portfolio, the carrying amount of marketable securities approximates fair value.
The carrying and fair value amounts include securities which the Company
classifies as marketable securities in the accompanying consolidated balance
sheets, as well as securities held as collateral for the Swap which are included
in the consolidated balance sheets as deferred charges and other assets.
Debt
The fair value of the Company's indebtedness, excluding the Senior Notes,
is estimated based on quoted market prices for similar instruments. The fair
value of the Senior Notes is determined based on market quotes.
Interest Rate Instruments
The fair value of the Swap and interest rate cap agreements used for
hedging purposes is the amount the Company would pay to terminate these
agreements as of the balance sheet dates, taking into account current interest
rates.
F-19
<PAGE> 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The estimated fair value of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 25, 1997 JANUARY 27, 1996
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash and cash equivalents........... $ 12,148 $ 12,148 $ 6,998 $ 6,998
Marketable securities .............. 115 115 1,245 1,245
Debt................................ (286,477) (275,776) (298,691) (289,853)
Interest rate swap agreement........ -- (27) (138) (357)
Interest rate cap agreements........ 57 -- 210 1
</TABLE>
NOTE 11 -- CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents,
marketable securities and the interest rate instruments (described in Note
(5) -- Debt). The Company places its temporary cash investments with
highly-rated financial institutions in investment grade short-term debt
instruments. Marketable securities consist exclusively of obligations issued or
guaranteed by the United States of America or its agencies and mutual funds in
which the underlying securities are obligations of the United States of America.
NOTE 12 -- CONTINGENCIES
At January 25, 1997, the Company is party to various lawsuits arising in
the ordinary course of business. Additionally, the Company is also a defendant,
together with other companies, including those in the grocery industry, in two
legal actions pending in the United States District Court. These lawsuits allege
that diverting companies, collectively known as Premium Sales, which are
presently in bankruptcy, were engaged in fraudulent activities and that Pueblo
and other grocers are liable for their investors' losses. The losses claimed
against each of the defendants in these lawsuits, including Pueblo, are alleged
to be approximately $300 million (plus treble damages, punitive damages and/or
attorney fees). Pueblo's alleged liability is solely based on the claim that one
of its former employees confirmed the validity of certain allegedly false
grocery diverting transactions. The Company contested vigorously such claims. On
October 25, 1996, a settlement was reached between the Company and the
Plaintiffs. The settlement was preliminarily approved on February 11, 1997. A
final fairness hearing has been scheduled for May 7, 1997. The amount of the
settlement is fully reserved by the Company as of January 25, 1997.
F-20
<PAGE> 100
APPENDIX A
THE COMMONWEALTH OF PUERTO RICO
The information set forth in this Appendix has been extracted from Puerto
Rico -- Facts and Figures (July 1996), a publication of FOMENTO, the Economic
Development Administration and the Puerto Rico Industrial Development Company.
Such information has not been independently verified by the Company or the
Initial Purchasers in connection with the Exchange Offer. References in this
Appendix to "fiscal year" are to Puerto Rico's fiscal year, which ends June 30.
OVERVIEW
Puerto Rico is a U.S. commonwealth located 1,612 miles south of New York
and 1,050 miles southeast of Miami. Situated on the northeast periphery of the
Caribbean Sea, Puerto Rico is approximately 100 miles long and 35 miles wide and
had a population of 3.7 million people in 1995.
Puerto Rico was discovered by Christopher Columbus in 1493 and became a
part of the United States as a result of the Spanish-American War in 1898. In
1950, the U.S. Congress authorized Puerto Rico to draft and approve its
Constitution. The current relationship between Puerto Rico and the United States
took effect in 1952.
Puerto Rico has a stable democratic government closely modeled on the
United States system. Its government structure and practices closely resemble
those of the 50 states.
Puerto Ricans are citizens of the U.S. Puerto Rico is represented in the
U.S. Congress by an elected Resident Commissioner who votes in committees and
caucuses of the House of Representatives but not on the House floor. Most
federal taxes, except those such as social security taxes which are imposed by
mutual consent, are not levied in Puerto Rico. No federal income tax is levied
on income earned within Puerto Rico, except for federal employees and U.S.
subsidiaries which are subject to taxes.
The United States and Puerto Rico share a common defense, market and
currency. The official languages of Puerto Rico are Spanish and English.
THE ECONOMY
In fiscal 1995, Puerto Rico's Gross National Product ("GNP") was $28.4
billion and Gross Domestic Product ("GDP") was $42.4 billion. Puerto Rico's real
GNP experienced low growth rates from fiscal 1990 to fiscal 1992 as a result of
the recession in the United States. The GNP growth rate was 2.5% during fiscal
1990, 0.9% in fiscal 1991, and 0.8% in fiscal 1992. Real GNP grew by 3.0% in
fiscal 1993, 2.6% in fiscal 1994 and 2.9% in fiscal 1995. The Puerto Rico
Planning Board forecasts growth of 2.7% and 2.6% for fiscal years 1996 and 1997,
respectively.
Economic Performance by Sector
Puerto Rico has a diversified economy in which manufacturing and service
industries comprise the principal sectors.
A-1
<PAGE> 101
The following table presents annual statistics of GDP by sector and GNP for
the four fiscal years ended June 30, 1995.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
-----------------------------------------------
1992 1993 1994 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Manufacturing........................... $ 14,183 $ 15,428 $ 16,584 $ 17,719
Services(1)............................. 13,168 14,109 15,086 15,892
Government(2)........................... 3,672 3,881 4,071 4,471
Transportation, communication and public
utilities............................. 2,830 3,009 3,114 3,264
Agriculture, Forestry and fisheries..... 420 411 377 366
Construction(3)......................... 798 874 907 959
Statistical Discrepancy................. (439) (789) (605) (306)
-------- -------- -------- --------
Total GDP............................... 34,630 36,923 39,536 42,364
Less Net Payments Abroad................ (10,934) (11,790) (12,945) (13,992)
-------- -------- -------- --------
Total GNP..................... $ 23,696 $ 25,133 $ 26,592 $ 28,371
======== ======== ======== ========
</TABLE>
- ---------------
(1) Includes wholesale and retail trade, finance, insurance and real estate; and
other services.
(2) Includes the central government, its municipalities, and the federal
government; it also includes public corporations.
(3) Includes mining.
Source: Puerto Rico Planning Board.
Note: Aggregates may not equal totals due to rounding.
In fiscal 1995, the manufacturing sector generated 41.8% of Puerto Rico's
GDP. The manufacturing sector employed 153,611 workers in fiscal 1995. As of
January 1996, manufacturing wages averaged 60% of wages in the United States.
The service sector generated 37.5% of GDP in fiscal 1995. As of December
1995, 20 commercial banks and one trust company in Puerto Rico had total assets
of $32.0 billion. The service sector employed 376,000 workers in fiscal 1995.
Within the service sector, tourism has grown substantially in each of the
last ten years. Tourism represented approximately 6.5% of Puerto Rico's GNP in
fiscal 1995. San Juan is the second largest port for cruise ships in the U.S. in
terms of number of visitors.
The public sector contributed 10.6% of Puerto Rico's GDP. In fiscal 1995,
the government provided jobs for 297,000 workers.
Personal Income
Real per capita personal income has grown at an average annual rate of 2.2%
during the past five years. In fiscal 1995, personal income per capita was
$7,296.
Employment and Unemployment
According to the Household Survey of the Department of Labor and Human
Resources the number of persons employed in Puerto Rico during fiscal 1995
averaged 1,051,000. Unemployment, although at a low level compared to the mid
eighties, was 13.8% for fiscal 1995.
A-2
<PAGE> 102
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER COVERED BY THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE INITIAL PURCHASERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 14
Use of Proceeds....................... 18
Capitalization........................ 19
Selected Financial Data............... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
The Exchange Offer.................... 29
Business.............................. 36
Management............................ 44
Principal Shareholders................ 45
Description of Notes.................. 45
Description of New Bank Credit
Agreement........................... 68
Initial Notes Registration Rights..... 68
Taxation.............................. 70
Plan of Distribution.................. 73
Legal Matters......................... 74
Experts............................... 74
Index to Consolidated Financial
Statements.......................... F-1
Appendix A: Commonwealth of Puerto
Rico................................ A-1
</TABLE>
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN SELLING
EXCHANGE NOTES RECEIVED IN EXCHANGE FOR INITIAL NOTES HELD FOR THEIR OWN
ACCOUNT.
======================================================
======================================================
[PUEBLO XTRA LOGO]
PUEBLO XTRA
INTERNATIONAL, INC.
OFFER TO EXCHANGE
9 1/2% SERIES C SENIOR NOTES DUE 2003
FOR ALL OUTSTANDING
9 1/2% SERIES B SENIOR NOTES DUE 2003
------------------------
PROSPECTUS
------------------------
MAY , 1997
======================================================
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a company to
indemnify directors, officers, employees and agents of the Company against
actual and reasonable expenses (including attorneys' fees) incurred by such
person in connection with any action, suit or proceeding if (i) he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the company, and (ii) in the case of a criminal proceeding, he had
no reasonable cause to believe his conduct was unlawful. Except as ordered by a
court, no indemnification shall be made in connection with any proceeding
brought by or in the right of the Company where the person involved is adjudged
to be liable to the Company.
The Company's Certificate of Incorporation, pursuant to Section 102(b)(7)
of the General Corporation Law of Delaware, contains provisions eliminating the
personal liability of a director to the Company or its stockholders for money
damages for breach of fiduciary duty as a director. This provision in the
Certificate of Incorporation does not eliminate the duty of care and in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware law. In addition,
each director will continue to be subject to liability for breach of the
director's duty of loyalty to the Company for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of the law,
for actions leading to improper personal benefits to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
unlawful under Delaware law. The provision does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
Section 5.1 of the Bylaws of the Company provides for indemnification of
the directors and officers of the Company to the full extent permitted by law,
as now in effect or later amended. In addition, the Bylaws provide for
indemnification against expenses incurred by a director or officer to be paid by
the Company at reasonable intervals in advance of the final disposition of such
action, suit or proceeding; provided, however, that, if required by the Delaware
General Corporation Law, an advancement of expenses will be made only upon
receipt of an undertaking by or on behalf of the director or officer to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Company. The Bylaws further provide for a contractual cause
of action on the part of directors and officers of the Company with respect to
indemnification claims which have not been paid by the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement between Pueblo Xtra International, Inc. and NationsBanc Capital
Markets, Inc. and Scotia Capital Markets (USA) Inc., dated April 24, 1997.
3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 to Registrant's Registration Statement No. 33-63372 on Form S-1).
3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit
3.2 to Registrant's Registration Statement No. 33-63372 on Form S-1).
4.1 Specimen Note for Registrant's 9 1/2% Series C Senior Notes Due 2003 (included in
Exhibit 4.2).
4.2 Indenture, dated as of April 24, 1997, between Pueblo Xtra International, Inc. and
United States Trust Company.
4.3 Registration Rights Agreement, dated as of April 29, 1997, between Pueblo Xtra
International, Inc. and NationsBanc Capital Markets, Inc. and Scotia Capital
Markets (USA) Inc.
4.4 Form of Exchange Agent Agreement.
5.1 Opinion of Milbank, Tweed, Hadley & McCloy.
</TABLE>
II-1
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S>
10.1 Amended and Restated Credit Agreement among Pueblo Xtra International, Inc., Pueblo
International, Inc., Xtra Super Food Centers, Inc., various lending institutions
and The Bank of Nova Scotia and NationsBank, N.A. (South) as Agents, dated as of
April 29, 1997.
12.1 Statements re: computation of ratios.
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to
Registrant's Annual Report on Form 10-K for the fiscal year ended January 25,
1997).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Milbank, Tweed, Hadley & McCloy (contained in Exhibit 5.1).
24. Powers of Attorney (included on signature page of Registration Statement).
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of United States
Trust Company of New York under the Trust Indenture Act of 1939.
99.1 Form of Letter of Transmittal for the 9 1/2% Series C Senior Notes due 2003.
99.2 Annual Report on Form 10-K for the year ended January 25, 1997.
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) That insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(d) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
II-2
<PAGE> 105
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York, state of New
York, on May 21, 1997.
PUEBLO XTRA INTERNATIONAL
By: /s/ WILLIAM T. KEON, III
--------------------------------------
William T. Keon, III
President and CEO
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William T. Keon, III and Daniel Cammarata and
each of them his true and lawful attorneys-in-fact and agents, each acting
alone, with full powers of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to this Registration Statement, including post-effective amendments, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all his said attorney-in-fact and
agents, each acting alone, or his substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ----------------------------------- -------------
<C> <S> <C>
Chairman of the Board
- ------------------------------------------
Gustavo A. Cisneros
/s/ WILLIAM T. KEON, III Director; President; Chief May 21, 1997
- ------------------------------------------ Executive Officer
William T. Keon, III
/s/ DAVID L. ASTON Director; Executive Vice President; May 21, 1997
- ------------------------------------------ President of Puerto Rico Food
David L. Aston Retail Division
/s/ DANIEL CAMMARATA Controller and Chief Accounting May 21, 1997
- ------------------------------------------ Officer
Daniel Cammarata
/s/ STEVEN I. BANDEL Director May 21, 1997
- ------------------------------------------
Steven I. Bandel
/s/ CRISTINA PIERRETI Director May 21, 1997
- ------------------------------------------
Cristina Pierreti
Director
- ------------------------------------------
Alejandro Rivera
</TABLE>
II-3
<PAGE> 106
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement between Pueblo Xtra International, Inc. and NationsBanc Capital
Markets, Inc. and Scotia Capital Markets (USA) Inc., dated April 24, 1997.
3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 to Registrant's Registration Statement No. 33-63372 on Form S-1).
3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2
to Registrant's Registration Statement No. 33-63372 on Form S-1).
4.1 Specimen Note for Registrant's 9 1/2% Series C Senior Notes Due 2003 (included in
Exhibit 4.2).
4.2 Indenture, dated as of April 24, 1997, between Pueblo Xtra International, Inc. and
United States Trust Company.
4.3 Registration Rights Agreement, dated as of April 29, 1997, between Pueblo Xtra
International, Inc. and NationsBanc Capital Markets, Inc. and Scotia Capital Markets
(USA) Inc.
4.4 Form of Exchange Agent Agreement.
5.1 Opinion of Milbank, Tweed, Hadley & McCloy.
10.1 Amended and Restated Credit Agreement among Pueblo Xtra International, Inc., Pueblo
International, Inc., Xtra Super Food Centers, Inc., various lending institutions and
The Bank of Nova Scotia and NationsBank, N.A. (South) as Agents, dated as of April
29, 1997.
12.1 Statements re: computation of ratios.
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit 2.1 to Registrant's
Annual Report on Form 10-K for the fiscal year ended January 25, 1997).
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Milbank, Tweed, Hadley & McCloy (contained in Exhibit 5.1).
24. Powers of Attorney (included on signature page of Registration Statement).
25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of United States
Trust Company of New York under the Trust Indenture Act of 1939.
99.1 Form of Letter of Transmittal for the 9 1/2% Series C Senior Notes due 2003.
99.2 Annual Report on Form 10-K for the year ended January 25, 1997.
</TABLE>
<PAGE> 1
Exhibit 1.1
EXECUTION COPY
PUEBLO XTRA INTERNATIONAL, INC.
$85,000,000
9 1/2% SERIES B SENIOR NOTES DUE 2003
PURCHASE AGREEMENT
April 24, 1997
NationsBanc Capital Markets, Inc.
Scotia Capital Markets (USA), Inc.
As Representatives of the Initial Purchasers
c/o NationsBanc Capital Markets, Inc.
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
Pueblo Xtra International, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the parties named in Schedule I hereto
(the "Initial Purchasers" and, individually, each an "Initial Purchaser"), for
whom you are acting as representatives (the "Representatives"), $85,000,000
principal amount of its 9 1/2% Series B Senior Notes Due 2003 (the "Notes"). The
Notes are to be issued under an indenture (the "Indenture") to be dated as of
April 29, 1997 between the Company and United States Trust Company of New York,
as trustee (the "Trustee"). If you are the only Initial Purchasers, all
references herein to the Representatives shall be deemed to be to the Initial
Purchasers.
The sale of the Notes to the Initial Purchasers will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon exemptions from the registration
requirements of the Securities Act. You have advised the Company that the
Initial Purchasers will offer and sell the Notes purchased by them hereunder in
accordance with Section 4 hereof as soon as you deem advisable. The Notes will
have the benefit of certain registration rights, pursuant to a Registration
Rights Agreement, to be dated as of April 29, 1997, between the Company and the
Initial Purchasers (the "Registration Rights Agreement").
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum, dated April 4, 1997, (the "Preliminary
Memorandum") and a final offering memorandum, dated April 24, 1997 (the "Final
Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum sets
forth certain information concerning the Company and the Notes. The Company
hereby confirms that it has authorized the use of the Preliminary Memorandum and
the Final Memorandum, and any amendment or supplement thereto, in connection
with the offer and sale of the
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Notes by the Initial Purchasers. Unless stated to the contrary, all references
herein to the Final Memorandum are to the Final Memorandum at the Execution Time
(as defined below) and are not meant to include any amendment or supplement, or
any information incorporated by reference therein, subsequent to the Execution
Time.
At or prior to the Execution Time, the Company is entering into an
amended and restated Credit Agreement dated as of July 21, 1993 among the
Company and certain of its subsidiaries and The Bank of Nova Scotia and
NationsBank, N.A. (South) as Agents for the Banks party thereto (the "New Bank
Credit Agreement").
1. Representations and Warranties. The Company represents and
warrants to the Initial Purchasers as set forth below in Section 1 of this
Purchase Agreement (the "Agreement").
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Final
Memorandum, at the date hereof, does not, and at the Closing Date (as
defined below) will not (or, if amended or supplemented, the Final
Memorandum as amended or supplemented at the date of any such amendment or
supplement and at the Closing Date, will not), contain any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the Company
makes no representation or warranty as to the information contained in or
omitted from the Preliminary Memorandum or the Final Memorandum, or any
amendment or supplement thereto, in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the
Initial Purchasers through the Representatives specifically for inclusion
therein.
(b) Neither the Company nor any Affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act ("Regulation D")) of the Company
or any person acting on its or their behalf (other than the Initial
Purchasers, as to which no representation is made) has, directly or
indirectly, made offers or sales of any security, or solicited offers to
buy any security, under circumstances that would require the registration
of the Notes under the Securities Act.
(c) Neither the Company nor any Affiliate of the Company, or any
person acting on its or their behalf (other than the Initial Purchasers,
as to which no representation is made) has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D)
in
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connection with any offer or sale of the Notes in the United States.
(d) The Notes satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(e) Neither the Company nor any Affiliate, nor any person acting on
its or their behalf (other than the Initial Purchasers or their respective
Affiliates, as to whom the Company makes no representation) has engaged or
will engage in any directed selling efforts within the meaning of
Regulation S under the Securities Act ("Regulation S") and each of the
Company, its Affiliates and any person acting on its or their behalf
(other than the Initial Purchasers or their respective Affiliates) has
complied with and will comply with the offering restrictions requirement
of Regulation S.
(f) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company
Act"), without taking account of any exemption arising out of the number
of holders of the securities of the Company, as the case may be. In
respect of each taxable year during which any Note is outstanding, neither
the Company nor any subsidiary of the Company is or will be a personal
holding company, as defined in Section 542 of the Internal Revenue Code of
1986, as amended (the "Code"), at any time during which any Note is
outstanding. In respect of the taxable year ending January 25, 1997,
neither the Company nor any subsidiary of the Company will have
undistributed personal holding company income, as defined in Section 545
of the Code. For the purposes of the Puerto Rico Income Tax Act of 1954,
as amended, neither PXC&M Holdings, Inc. nor the Company is or will be
engaged in trade or business in Puerto Rico at any time during which any
Note is outstanding.
(g) The Company is subject to and in full compliance with the
reporting requirements of Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(h) The Company has not paid or agreed to pay to any person any
compensation for soliciting another to purchase any securities of the
Company (except as contemplated by this Agreement).
(i) The consolidated financial statements (including the notes
thereto) and schedules of the Company and its consolidated subsidiaries
set forth in the Final Memorandum fairly present in all material respects
the financial position
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of the Company and its consolidated subsidiaries, and the results of
operations as of the dates and for the periods specified therein; since
the date of the latest of such financial statements, there has been no
change nor any development or event involving a prospective change which
has had a material adverse effect on (i) the business, operations,
properties, assets, liabilities, net worth, condition (financial or
otherwise) or prospects of the Company and its consolidated subsidiaries,
taken as a whole, as the case may be, or (ii) the ability of the Company
to perform any of its obligations under this Agreement, the Registration
Rights Agreement, the Indenture or the Notes (a "Material Adverse
Effect"); such financial statements and schedules have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise expressly
noted in the Final Memorandum); and the summary and selected historical
financial information included in the Final Memorandum has been derived
from the financial statements of the Company and fairly presents, on the
basis stated in the Final Memorandum, the information included therein.
(j) Subsequent to the respective dates as of which information is
given in the Final Memorandum, (i) the Company and the subsidiaries of the
Company have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary
course of business; (ii) the Company has not purchased any of its
outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock; and (iii) there
has not been any material change in the capital stock, short-term debt or
long-term debt of the Company and the subsidiaries of the Company, except
in each case as described in or contemplated by the Final Memorandum.
(k) Each of the Company and the subsidiaries of the Company has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of Delaware or, in the case of each subsidiary of
the Company, the jurisdiction in which it is chartered or organized, and
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification wherein it owns or leases material properties or conducts
material business, except in such jurisdictions in which the failure to so
qualify, singly or in the aggregate, would not have a Material Adverse
Effect.
(l) Each of the Company and the subsidiaries of the Company has full
power (corporate and other) to own or lease its properties and conduct its
business as described in the
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Final Memorandum; and the Company has full power (corporate and other) to
enter into this Agreement, the Registration Rights Agreement, the
Indenture and the New Bank Credit Agreement and to carry out all the terms
and provisions hereof and thereof to be carried out by it.
(m) The Company has the authorized, issued and outstanding
capitalization as set forth in the Final Memorandum under the caption
"Capitalization." All of the issued shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable.
(n) The issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable and, except for directors' qualifying shares and except
as otherwise set forth in the Final Memorandum are owned of record and
beneficially by the Company, either directly or through wholly owned
subsidiaries, free and clear of any pledge, lien, encumbrance, security
interest, restriction on voting or transfer, preemptive rights or other
defect or claim of any third party. No subsidiary of the Company is
prohibited, directly or indirectly, from paying any dividends to the
Company, from making any other distribution on such subsidiary's capital
stock, from repaying to the Company any loans or advances to such
subsidiary from the Company or from transferring any of such subsidiary's
property or assets to the Company or any other subsidiary of the Company,
except as described in or contemplated by the Final Memorandum.
(o) Neither the Company nor any of the subsidiaries of the Company
is in violation of its or any of their charter documents. No default
exists, and no event has occurred which, with notice or lapse of time or
both, would constitute a default in the due performance and observation of
any term, covenant or condition of any indenture, mortgage, deed of trust,
lease or other agreement or instrument to which the Company or any of the
subsidiaries of the Company is a party, or by which the Company or any of
the subsidiaries of the Company or any of their respective properties is
bound, which would have a Material Adverse Effect.
(p) The issuance, offering and sale of the Notes to the Initial
Purchasers by the Company pursuant to this Agreement, the compliance by
the Company with the other provisions of this Agreement and the provisions
of the Registration Rights Agreement, the Indenture, the Notes and the New
Bank Credit Agreement, the consummation of the other
<PAGE> 6
6
transactions herein and therein contemplated and the consummation of the
other transactions contemplated hereby and in the Final Memorandum do not
(i) require the consent, approval, authorization, order, registration or
qualification of or with any governmental authority or court, except such
as may be required under state securities or blue sky laws or except as
may be contemplated by the Registration Rights Agreement or (ii) conflict
with, result in a breach or violation of, or constitute a default under,
or result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries
pursuant to, any material contract, loan agreement, note, indenture,
mortgage, deed of trust, lease or other agreement or instrument to which
the Company or any of the subsidiaries of the Company is a party, or by
which the Company or any of the subsidiaries of the Company or any of
their respective properties is bound, or the charter or by-laws of the
Company or any of the subsidiaries of the Company, or any statute, rule or
regulation or any judgment, order or decree of any governmental authority
or court or arbitrator applicable to the Company or any of the
subsidiaries of the Company, except as rights to indemnity and
contribution may be limited by federal or state securities laws or public
policy.
(q) The Company and the subsidiaries of the Company possess all
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities or bodies necessary to
conduct their respective businesses, and neither the Company nor any of
its subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse Effect.
(r) No legal or governmental proceedings or investigations are
pending to which the Company or any of the subsidiaries of the Company is
a party or to which the property of the Company or any of the subsidiaries
of the Company is subject that are not described in the Final Memorandum,
and no such proceedings or investigations, to the best knowledge of the
Company, have been threatened against the Company or any of the
subsidiaries of the Company, or with respect to any of their respective
properties, except in each case for such proceedings or investigations
that, singly or in the aggregate, are not reasonably likely to result in a
Material Adverse Effect.
(s) The Company and each of the subsidiaries of the Company have
valid title in fee simple to all items of real property and title to all
personal property owned by each of
<PAGE> 7
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them, in each case free and clear of any pledge, lien, encumbrance,
security interest or other defect or claim of any third party, except (i)
such as do not materially and adversely affect the value of such property
and do not interfere with the use made or proposed to be made of such
property by the Company or such subsidiary to an extent that such
interference would have a Material Adverse Effect, and (ii) as otherwise
set forth in the Final Memorandum. Any real property and buildings held
under lease by the Company or any such subsidiary are held under valid,
subsisting and enforceable leases, with such exceptions as do not
materially interfere with the use made or proposed to be made of such
property and buildings by the Company or such subsidiary.
(t) This Agreement has been duly authorized, executed and delivered
by the Company.
(u) The Registration Rights Agreement, the Indenture and the New
Bank Credit Agreement have been duly authorized by all necessary corporate
actions of the Company and, when duly executed and delivered by the
Company and the other parties thereto, will constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the same may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally, including without limitation
the effect of statutory or other laws regarding fraudulent conveyances or
transfers or preferential transfers, or (ii) general principles of equity,
whether considered at law or at equity, and except as rights to indemnity
and contribution in the Registration Rights Agreement may be limited by
federal or state securities laws or public policy.
(v) The Notes have been duly authorized by all necessary corporate
action for issuance and sale pursuant to this Agreement and, when
executed, authenticated, issued and delivered in the manner provided for
in the Indenture and sold and paid for as provided in this Agreement, the
Notes will constitute legal, valid and binding obligations of the Company
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except as the same may be limited
by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally, including without
limitation the effect of statutory or other laws regarding fraudulent
conveyances or transfers or preferential transfers or (ii) general
principles of equity, whether considered at law or at equity.
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(w) Deloitte & Touche LLP, who have audited certain financial
statements of the Company and its consolidated subsidiaries and delivered
their reports with respect to the audited consolidated financial
statements and schedules in the Final Memorandum, are independent public
accountants within the meaning of the Securities Act and the applicable
rules and regulations thereunder.
(x) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(y) Neither the Company nor any of the subsidiaries of the Company
is now or, after giving effect to the issuance of the Notes and the
consummation of the transactions contemplated by the Final Memorandum will
be (i) insolvent, (ii) left with unreasonably small capital with which to
engage in its anticipated businesses or (iii) incurring debts beyond its
ability to pay such debts as they become due.
(z) The Company and the subsidiaries of the Company own or otherwise
possess the right to use all patents, trademarks, service marks, trade
names and copyrights, all applications and registrations for each of the
foregoing, and all other proprietary rights and confidential information
used in the conduct of their respective businesses as currently conducted;
and neither the Company nor any subsidiary of the Company has received any
notice, or is otherwise aware, of any infringement of or conflict with the
rights of any third party with respect to any of the foregoing which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(aa) The Company and the subsidiaries of the Company are insured by
insurers of recognized financial responsibility (or by appropriate
self-insurance) against such losses and risks and in such amounts as are
prudent and customary in the businesses and in the locations in or at
which they are engaged; and neither the Company nor any such subsidiary
has any reason to believe that it will not be able to renew its
<PAGE> 9
9
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(bb) No labor dispute with the employees of the Company, or any of
the subsidiaries of the Company, exists or to the knowledge of the Company
is threatened or imminent which is likely to result in a Material Adverse
Effect.
(cc) The Company has filed all foreign, federal, state and local tax
returns that are required to be filed, except insofar as the failure to
file such returns, singly or in the aggregate, would not have a Material
Adverse Effect, or has requested extensions thereof and in each case has
paid all material taxes required to be paid by it and any other material
assessment, fine or penalty levied against it, to the extent that any of
the foregoing is due and payable, other than those being contested in good
faith and for which adequate reserves have been provided or those
currently payable without penalty or interest.
(dd) Neither of the Company nor any Affiliate of the Company has
taken, directly or indirectly, any action designed to cause or result in,
or which has constituted or which might reasonably be expected to cause or
result in, stabilization or manipulation (as such terms are defined under
the Exchange Act) of the price of any security of the Company to
facilitate the sale or resale of the Notes.
(ee) The Company and its subsidiaries are (i) in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have a Material Adverse Effect.
(ff) The Company shall conduct its business and affairs such that
amounts payable by it on the Notes will be free of any and all taxes,
including, without limitation, withholding taxes, due under the laws of
Puerto Rico or any subdivision or
<PAGE> 10
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locality thereof ("Puerto Rican Taxes") as in effect on the Closing Date.
(gg) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or its counsel shall be deemed to be a
representation and warranty by the Company to the Initial Purchasers as to
the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees,
severally and not jointly, to purchase from the Company at a purchase price of
90.25% of the principal amount thereof, plus accrued interest, if any, from
April 29, 1997 to the Closing Date, the principal amount of Notes set forth
opposite such Initial Purchaser's name in Schedule I hereto.
3. Delivery and Payment. Delivery of and payment for the Notes shall
be made at 9:00 a.m. New York City time, on April 29, 1997, or such later date
(not later than May 6, 1997) as the Representatives shall designate, which date
and time may be postponed by agreement between the Representatives and the
Company (such date and time of delivery and payment for the Notes being herein
called the "Closing Date"). Delivery of the Notes shall be made to the
Representatives for the respective accounts of the Initial Purchasers against
payment by the Initial Purchasers through the Representatives of the purchase
price thereof to or upon the order of the Company in immediately available funds
or such other manner of payment as may be agreed by the Company and the
Representatives. Delivery of the Notes shall be made at such location as the
Representatives shall reasonably designate at least one business day in advance
of the Closing Date and payment for the Notes shall be made at the offices of
Shearman & Sterling ("Counsel for the Initial Purchasers"), 599 Lexington
Avenue, New York, New York, with any transfer taxes payable in connection with
the transfer of the Notes fully paid, against payment of the purchase price
therefor. Certificates for the Notes shall be registered in such names and in
such denominations as the Representatives may request not less than two full
business days in advance of the Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Representatives in New York, New York, not later
than 1:00 p.m. on the business day prior to the Closing Date.
4. Offering of Notes. Each Initial Purchaser severally and not
jointly, represents and warrants to and agrees, with the
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Company that:
(a) It has not offered or sold, and will not offer or sell, any
Notes except to those it reasonably believes to be (i) "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act)
and that, in connection with each such sale, it has taken or will take
reasonable steps to ensure that the purchaser of such Notes is aware that
such sale is being made in reliance on Rule 144A, or (ii) other
institutional "accredited investors" (as defined in Rule 501(a) (1), (2),
(3) or (7) of Regulation D) that, prior to their purchase of the Notes,
deliver to such Initial Purchaser a letter containing the representations
and agreements set forth in the form of Annex A to the Final Memorandum or
(iii) non-U.S. persons outside the United States to whom it reasonably
believes offers and sales of the Notes may be made in reliance upon
Regulation S in transactions meeting the requirements of Regulation S.
(b) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Notes in the United States by means of any
form of general solicitation or general advertising (within the meaning of
Regulation D) in the United States.
(c) With respect to Notes sold in reliance on Regulation S, the
Initial Purchasers have not offered or sold, and will not offer or sell,
any Notes by means of any directed selling efforts (as defined in Rule 902
of Regulation S) in the United States.
(d) Other than as may be required pursuant to Section 5(d) hereof,
(i) the Company is not obligated to take any action that would permit the
offer or sale of the Notes or the distribution of any offering memorandum
or any other offering material relating to the Notes in any jurisdiction
where action for that purpose is required and (ii) the Company will have
no responsibility with respect to the right of any person to offer or sell
Notes or to distribute any offering memorandum or any other offering
material relating to the Notes in any jurisdiction. Therefore, except as
may be required pursuant to Section 5(d) hereof, each Initial Purchaser
will obtain any consent, approval or authorization required for it to
offer or sell Notes, or to distribute any offering memorandum or any other
offering material relating to the Notes, under the laws or regulations of
any jurisdiction where it proposes to make offers or sales of Notes, or to
distribute any offering memorandum or any other offering material relating
to the Notes.
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(e) (i) It has not offered or sold and prior to the date six months
after the Closing Date will not offer or sell any Notes to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in
the United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995, (ii) it has complied, and will comply, with all
applicable provisions of the Financial Services Act of 1986 of Great
Britain with respect to anything done by it in relation to the Notes in,
from or otherwise involving the United Kingdom, and (iii) it has only
issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issuance of the Notes
to a person who is of a kind described in Article 11(3) of the Financial
Services Act of 1986 (Investment Advertisements) (Exemptions) (No. 2)
Order 1996 of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
5. Agreements. The Company agrees with each Initial Purchaser that:
(a) The Company will furnish to each Initial Purchaser and to
Counsel for the Initial Purchasers, without charge, during the period
referred to in paragraph (c) below, as many copies of the Final Memorandum
and any amendments and supplements thereto as it may reasonably request.
The Company will pay the expenses of printing of all documents relating to
the Offering.
(b) The Company will not amend or supplement the Final Memorandum
without the prior written consent of the Representatives (which consent
shall not be unreasonably withheld).
(c) If at any time prior to the completion of the sale of the Notes
by the Initial Purchasers, any event occurs as a result of which the Final
Memorandum, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it should be necessary to
amend or supplement the Final Memorandum to comply with applicable law,
the Company will promptly notify the Representatives of the same and,
subject to the requirements of paragraph (b) of this Section 5, will
prepare and provide to the Representatives pursuant to paragraph (a) of
this Section 5 an amendment or supplement which will
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correct such statement or omission or effect such compliance.
(d) The Company will arrange for the qualification of the Notes for
sale by the Initial Purchasers under the laws of such jurisdictions as the
Initial Purchasers may reasonably designate and will maintain such
qualifications in effect as long as required for the sale of the Notes;
provided, however, that the Company shall not be obligated to qualify as a
foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent
to service of process in any jurisdiction in which it is not now so
subject or to subject itself to taxation in any such jurisdiction. The
Company will promptly advise the Representatives of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Notes for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose.
(e) Whenever the Company publishes or makes available to the public
(by filing with any regulatory authority or securities exchange or by
publishing a press release or otherwise) any information that could
reasonably be expected to be material in the context of the offer and sale
of Notes under this Agreement, the same shall immediately notify the
Initial Purchasers as to the nature of such information or event. Until
the third anniversary of the Closing Date, the Company will notify the
Initial Purchasers of (i) any decrease in the rating of the Notes or any
other debt securities of the Company by any nationally recognized
statistical rating organization (as defined in Rule 436(g) under the
Securities Act) or (ii) any notice given of any intended or potential
decrease in any such rating or of a possible change in any such rating
which does not indicate the direction of the possible change, as soon as
the Company becomes aware of any such decrease or notice. For a period of
three years after the Closing Time, the Company will also deliver to the
Initial Purchasers, as soon as available and to the extent individually
prepared, and without request, copies of its latest annual report and
quarterly statement and any reports of its auditors thereon.
(f) The Company will not, and will not permit any of its Affiliates
to, resell any Notes that have been acquired by any of them.
(g) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf other than the Initial Purchasers, as to
which no agreement is made, will, directly or indirectly, make offers or
sales of any security, or solicit offers to buy any security, under
circumstances
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that would require the registration of the Notes under the Securities Act.
(h) Neither the Company nor any of its Affiliates, nor any person
acting its or on their behalf other than the Initial Purchaser, as to
which no agreement is made, will engage, in connection with the offering
of the Notes, (i) in any form of general solicitation or general
advertising (within the meaning of Regulation D), (ii) in any public
offering within the meaning of Section 4(2) of the Securities Act or (iii)
in any directed selling efforts (as defined in Rule 902 under the
Securities Act and the Securities and Exchange Commission's Release No.
33-6863) and each of them will comply with the offering restrictions
requirement of Regulation S in the United States in connection with the
Notes proposed to be offered and sold pursuant to Regulation S by the
Initial Purchasers in connection with any offer or sale of the Notes.
(i) So long as any of the Notes are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, the Company will,
during any period in which it is not subject to and in compliance with
Section 13 or 15(d) of the Exchange Act, provide to each holder of such
restricted securities and to each prospective purchaser (as designated by
such holder) of such restricted securities, upon the request of such
holder or prospective purchaser, any information required to be provided
by Rule 144A(d)(4) under the Securities Act.
(j) The Company will cooperate with the Representatives and use its
best efforts to (i) permit the Notes to be eligible for clearance and
settlement through The Depository Trust Company and (ii) permit the Notes
to be designated PORTAL-eligible securities in accordance with the rules
and regulations of the National Association of Securities Dealers, Inc.
(the "NASD").
(k) The Company will not, until 180 days following the Closing Date,
without the prior written consent of the Representatives, offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or
announce the offering of, any debt securities issued or guaranteed by the
Company (other than the Notes).
6. Conditions to the Obligations of the Initial Purchasers. The
obligations of the Initial Purchasers to purchase the Notes shall be subject to
the accuracy in all material respects of the representations and warranties on
the part of the Company contained herein at the date and time that this
Agreement is
<PAGE> 15
15
executed and delivered by the parties hereto (the "Execution Time"), and the
Closing Date, to the accuracy in all material respects of the statements of the
Company made in any certificates pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions:
(a) The Company shall have entered into a Registration Rights
Agreement with the Representatives in the form attached hereto as Exhibit
A.
(b) The Company shall have furnished to the Representatives the
opinion of Milbank, Tweed, Hadley & McCloy, counsel for the Company, dated
the Closing Date, substantially to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
Delaware and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction which requires such qualification wherein it owns or
leases material properties or conducts material business, except in
such jurisdictions in which the failure to so qualify, singly or in
the aggregate, would not have a Material Adverse Effect;
(ii) Each of the subsidiaries of the Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction in which it is chartered
or organized and is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each
jurisdiction which requires such qualification wherein it owns or
leases material properties or conducts material business, except in
such jurisdictions in which the failure to so qualify, singly or in
the aggregate, would not have a Material Adverse Effect;
(iii) the Company has the authorized, issued and outstanding
capitalization as set forth in the Final Memorandum under the
caption "Capitalization." All of the issued shares of capital stock
of the Company have been duly authorized and validly issued and are
fully paid and nonassessable;
(iv) the issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and, except for directors'
qualifying shares and except as
<PAGE> 16
16
otherwise set forth in the Final Memorandum are owned of record and
beneficially by the Company, either directly or through wholly owned
subsidiaries, free and clear of any pledge, lien, encumbrance,
security interest, restriction on voting or transfer, preemptive
rights or other defect or claim of any third party;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) each of the Registration Rights Agreement, the Indenture
and the New Bank Credit Agreement have been duly authorized,
executed and delivered by the Company and constitutes a legal, valid
and binding obligations of the Company, enforceable against the
Company in accordance with its terms, except as the same may be
limited by (A) applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally,
including without limitation the effect of statutory or other laws
regarding fraudulent conveyances or transfers or preferential
transfer, or (B) general principles of equity, whether considered at
law or at equity, and except as rights to indemnity and contribution
in the Registration Rights Agreement may be limited by federal or
state securities law or public policy;
(vii) the Notes have been duly authorized and, when executed
and authenticated in accordance with the provisions of the Indenture
and delivered to and paid for by the Initial Purchasers pursuant to
this Agreement, will constitute legal, valid and binding obligations
of the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms,
except as may be limited by (A) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights
generally, including without limitation the effect of statutory or
other laws regarding fraudulent conveyances or transfers or
preferential transfers or (B) general principles of equity, whether
considered at law or at equity;
(viii) the statements set forth under the headings
"Description of Notes," "Description of New Bank Credit Agreement"
and the "Plan of Distribution" and "Taxation" in the Final
Memorandum, insofar as such statements constitute summaries of the
legal matters, documents and proceedings referred to therein, fairly
summarize the matters referred to therein;
<PAGE> 17
17
(ix) the issuance, offering and sale of the Notes to the
Initial Purchasers by the Company pursuant to this Agreement, the
compliance by the Company with the other provisions of this
Agreement and the provisions of the Registration Rights Agreement,
the Indenture, the Notes and the New Bank Credit Agreement do not
(A) require the consent, approval, authorization, order,
registration or qualification of or with any governmental authority
or court, except such as may be required under state securities or
blue sky laws or (B) conflict with, result in a breach or violation
of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to the
charter or by-laws of the Company or any of the subsidiaries of the
Company, or, to the best knowledge of such counsel, any material
contract, loan agreement, note, indenture, mortgage, deed of trust,
lease or other agreement or instrument to which the Company or any
of the subsidiaries of the Company is a party or by which the
Company or any of the subsidiaries of the Company, or any of their
respective properties is bound, or any statute, rule or regulation
or, to the best knowledge of such counsel, any judgment, order or
decree of any governmental authority or court or arbitrator
applicable to the Company or any of the subsidiaries of the Company;
(x) assuming the accuracy of the representations and
warranties of the Initial Purchasers and compliance by it with its
agreements contained herein, no registration of the Notes under the
Securities Act is required, and no qualification of the Indenture
under the Trust Indenture Act of 1939 is necessary, for the offer
and sale by the Initial Purchasers of the Notes in the manner
contemplated by this Agreement; and
(xi) the Company is not an "investment company" within the
meaning of the Investment Company Act without taking account of any
exemption arising out of the number of holders of securities of the
Company.
Such counsel shall also state that they have no reason to believe
that at the Execution Time the Final Memorandum contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading or that the Final Memorandum as
the same may be amended or supplemented includes an untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements
<PAGE> 18
18
therein, in the light of the circumstances under which they were made, not
misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of New York, the State of Delaware or the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable and who are
satisfactory to Counsel for the Initial Purchasers and (B) as to matters
of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials.
All references in this Section 6(b) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the Closing Date.
(c) The Initial Purchasers shall have received from Shearman &
Sterling, Counsel for the Initial Purchasers such opinion or opinions,
dated the Closing Date, with respect to the issuance and sale of the Notes
and other related matters as the Initial Purchasers may reasonably
require, and the Company shall have furnished to such counsel such
documents as they reasonably request for the purpose of enabling them to
pass upon such matters;
(d) (i) the representations and warranties of the Company in this
Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date, and
the Company shall have complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date;
(ii) since the date of the most recent financial statements included
in the Final Memorandum, there shall have been no change nor any
development or event involving a prospective change constituting a
Material Adverse Effect; and
(iii) the Company shall have furnished to the Initial Purchasers a
certificate of the Company, as the case may be, signed by the chief
executive officer and the principal financial or accounting officer of the
Company dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Final Memorandum, any amendment or
supplement to the Final Memorandum and this Agreement and to the effect
set forth in clauses (i) and (ii) above.
<PAGE> 19
19
(e) At the Execution Time and at the Closing Date, Deloitte & Touche
LLP shall have furnished to the Initial Purchasers a letter or letters,
dated respectively as of the Execution Time and as of the Closing Date, in
form and substance satisfactory to the Initial Purchasers, confirming that
they are independent accountants within the meaning of the Securities Act
and the Exchange Act and the applicable rules and regulations thereunder
and Rule 101 of the Code of Professional Conduct of the American Institute
of Certified Public Accountants (the "AICPA") and substantially to the
effect that:
(i) in their opinion the audited financial statements included
in the Final Memorandum and reported on by them comply in form in
all material respects with the applicable accounting requirements of
the Exchange Act and the related published rules and regulations
thereunder; and
(ii) on the basis of a reading of the latest unaudited
financial statements made available by the Company and its
subsidiaries; their limited review in accordance with the standards
established by the AICPA of the unaudited interim financial
information; carrying out certain specified procedures (but not an
examination in accordance with generally accepted auditing
standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter;
a reading of the minutes of the meetings of the stockholders,
directors and audit and compensation committees of the Company and
the subsidiaries; and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters of the
Company and its subsidiaries as to transactions and events
subsequent to January 25, 1997, nothing came to their attention
which caused them to believe that with respect to the period
subsequent to January 25, 1997, there were at a specified date not
more than four business days prior to the date of the letter, any
change in the capital stock, increase in the long-term debt or
decrease in stockholder's equity, in each case, of the Company and
its subsidiaries as compared with the amounts shown on the January
25, 1997 consolidated balance sheet included in the Final
Memorandum, or for the period from January 25, 1997 to such
specified date there were, as compared with the corresponding period
in the preceding year, any decrease in net sales or any increase in
net loss of the Company and its subsidiaries, except in all
instances for changes, decreases or increases set forth in such
letter, in which case the letter shall be
<PAGE> 20
20
accompanied by an explanation by the Company as to the significance
thereof unless said explanation is not deemed necessary by the
Initial Purchasers; and
(iii) on the basis of a reading of the unaudited pro forma
financial information (the "pro forma financial information")
included in the Final Memorandum; carrying out certain specified
procedures; inquiries of certain officials of the Company who have
responsibility for financial and accounting matters; and proving the
arithmetic accuracy of the application of the pro forma adjustments
to the historical amounts in the pro forma financial information,
nothing came to their attention which caused them to believe that
the pro forma financial information do not comply in form in all
material respects with the applicable accounting requirements of
Rule 11-02 of Regulation S-X or that the pro forma adjustments have
not been properly applied to the historical amounts in the
compilation of such information; and
(iv) they have performed certain other specified procedures as
a result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and the subsidiaries of
the Company) set forth in the Final Memorandum, including without
limitation the information set forth under the captions "Offering
Memorandum Summary," "Risk Factors," "Use of Proceeds,"
"Capitalization," "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," "Business," "Description of New Bank Credit Agreement"
and "Description of Notes" in the Final Memorandum, agrees with the
accounting records of the Company and the subsidiaries of the
Company excluding any questions of legal interpretation.
All references in this Section 6(e) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the date of the
letter.
(f) The Notes shall have been designated PORTAL-eligible securities
in accordance with the rules and regulations of the
<PAGE> 21
21
NASD.
(g) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum, there shall not have
been (i) any change or decrease specified in the letter or letters
referred to in paragraph (e) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the business
or properties of the Company and the subsidiaries of the Company the
effect of which, in any case referred to in clause (i) or (ii) above, in
the judgment of the Initial Purchasers is so material and adverse as to
make impractical or inadvisable the marketing of the Notes as contemplated
by the Final Memorandum.
(h) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt securities by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Securities Act) or any notice given of
any intended or potential decrease in any such rating or of a possible
change in any such rating that does not indicate the direction of the
possible change.
(i) The Company and Pueblo International, Inc. shall have entered
into the New Bank Credit Agreement providing for a revolving credit
facility of no less than $65 million.
(j) Prior to the Closing Date, the Company shall have furnished to
the Initial Purchasers such further information, certificates and
documents as the Initial Purchasers may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchasers and Counsel for the Initial Purchasers,
this Agreement and all obligations of the Initial Purchasers hereunder may be
canceled at the Closing Date by the Initial Purchasers. Notice of such
cancellation shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the office of Counsel for the Initial Purchasers, at 599 Lexington
Avenue, New York, New York, on the Closing Date.
<PAGE> 22
22
7. Payment of Expenses. The Company shall, whether or not the
transactions contemplated by this Agreement are consummated, pay all expenses
incident to the performance of its obligations under this Agreement, including
the fees and disbursements of its accountants and counsel, the cost of printing
and delivery of the Preliminary Memorandum, the Final Memorandum, all amendments
thereof and supplements thereto, this Agreement and all other documents relating
to the offering, the cost of preparing, printing, packaging and delivering the
Notes, the fees and disbursements, including fees of counsel, incurred in
compliance with Section 5(d), the fees and disbursements of the Trustee, the
fees of any agency that rates the Notes and the fees and expenses incurred in
connection with the admission of the Notes for trading in the PORTAL system. If
the sale of the Notes provided for herein is not consummated because any
condition to the obligations of the Initial Purchasers set forth in Section 6
hereof is not satisfied or because of any refusal, inability or failure on the
part of the Company to perform any agreement herein or comply with any provision
hereof other than by reason of default by any of the Initial Purchasers in
payment for the Notes on the Closing Date, the Company will reimburse the
Initial Purchasers severally upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the Notes.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser, the directors, officers,
employees and agents of each Initial Purchaser and each person who controls any
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Memorandum or the Final Memorandum, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
<PAGE> 23
23
alleged untrue statement or omission or alleged omission (i) made in the
Preliminary Memorandum or the Final Memorandum, or in any amendment thereof or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Initial Purchasers specifically
for inclusion therein or (ii) made in the Preliminary Memorandum if a copy of
the Final Memorandum was not delivered by or on behalf of the Initial Purchasers
to the person asserting any claim against the Initial Purchasers and the untrue
statement contained in or omission from such Preliminary Memorandum was
corrected in the Final Memorandum. This indemnity agreement will be in addition
to any liability which the Company or the Guarantors may otherwise have.
(b) Each Initial Purchaser severally agrees to indemnify and hold
harmless the Company, its directors, its officers, and each person who controls
the Company within the meaning of either the Securities Act or the Exchange Act,
to the same extent as the foregoing indemnity from the Company to each Initial
Purchaser, but only with reference to written information relating to such
Initial Purchaser furnished to the Company by or on behalf of such Initial
Purchaser through the Representatives specifically for inclusion in the
Preliminary Memorandum or the Final Memorandum (or in any amendment or
supplement thereto). This indemnity agreement will be in addition to any
liability which any Initial Purchaser may otherwise have. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page and under the heading "Plan of Distribution" in the Preliminary Memorandum
and the Final Memorandum constitute the only information furnished in writing by
or on behalf of the Initial Purchasers for inclusion in the Preliminary
Memorandum or the Final Memorandum (or any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expense of any separate counsel
retained by the indemnified party or
<PAGE> 24
24
parties except as set forth below); provided, however, that such counsel
shall be satisfactory to the indemnified party. Notwithstanding the indemnifying
party's election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv)
the indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by NationsBanc
Capital Markets, Inc. in the case of parties indemnified pursuant to paragraph
(a) above and by the Company in the case of parties indemnified pursuant to
paragraph (b) above. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent (not to be
unreasonably withheld), but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the third
and fourth sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 20 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least five days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with
<PAGE> 25
25
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Initial Purchasers agree
to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Company
and one or more of the Initial Purchasers may be subject in such proportion as
is appropriate to reflect the relative benefits received by the Company and by
the Initial Purchasers from the offering of the Notes; provided, however, that
in no case shall any Initial Purchaser (except as may be provided in any
agreement among the Initial Purchasers relating to the offering of the Notes) be
responsible for any amount in excess of the amount by which the total price at
which the Notes resold by it in the initial placement of such Notes were offered
to investors exceeds the amount of any Losses that such Initial Purchaser has
otherwise been required to pay. If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the Company and the Initial
Purchasers shall contribute in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company and of
the Initial Purchasers in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses), and benefits received by
the Initial Purchasers shall be deemed to be equal to the total purchase
discounts and commissions received by the Initial Purchasers from the Company in
connection with the purchase of the Notes hereunder. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Initial Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Initial
Purchasers agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which does
not take into account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any
<PAGE> 26
26
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Initial Purchaser within the meaning
of either the Securities Act or the Exchange Act and each director, officer,
employee and agent of an Initial Purchaser shall have the same rights to
contribution as such Initial Purchaser, and each person who controls the Company
within the meaning of either the Securities Act or Exchange Act and each officer
and director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
9. Default by an Initial Purchaser. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Notes agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions which the principal amount of
Notes set forth opposite their names in Schedule I hereto bears to the aggregate
principal amount of Notes set forth opposite the names of all the remaining
Initial Purchasers) the Notes which the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase; provided, however, that in the event
that the aggregate principal amount of Notes which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase shall exceed 10%
of the aggregate principal amount of Notes set forth in Schedule I hereto, the
remaining Initial Purchasers shall have the right to purchase all, but shall not
be under any obligation to purchase any, of the Notes, and if such
non-defaulting Initial Purchasers do not purchase all the Notes, this Agreement
will terminate without liability to any non-defaulting Initial Purchaser or the
Company. In the event of a default by any Initial Purchaser as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representatives shall determine in order that the required
changes in the Final Memorandum or in any other documents or arrangements may be
effected. Nothing contained in this Agreement shall relieve any defaulting
Initial Purchaser of its liability, if any, to the Company or any non-defaulting
Initial Purchaser for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Notes, if prior to such time (i)
trading in securities generally on the New York Stock Exchange or the Nasdaq
Stock Exchange shall have been suspended or limited or minimum prices shall have
been established on any such exchanges, (ii) a banking moratorium shall have
been declared either by Federal or New York State authorities or (iii) there
shall have occurred any outbreak
<PAGE> 27
27
or escalation of hostilities, declaration by the United States of a national
emergency or war or other calamity or crisis the effect of which on financial
markets is such as to make it, in the judgment of the Representatives,
impracticable or inadvisable to proceed with the offering or delivery of the
Notes as contemplated by the Final Memorandum.
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Initial Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchasers or the Company
or any of the officers, directors or controlling persons referred to in Section
8 hereof, and will survive delivery of and payment for the Notes. The provisions
of Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telecopied and confirmed to them, care of NationsBanc Capital
Markets, Inc., 100 North Tryon Street, Charlotte, North Carolina 28255,
Attention: J. Scott Holmes or, if sent to the Company, will be mailed, delivered
or telecopied and confirmed to the Company at 1300 N.W. 22nd Street, Pompano
Beach, Florida 33069, Attention: General Counsel.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
15. Business Day. For purposes of this Agreement, "business day"
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day an
which banking institutions in The City of New York, New York are authorized or
obligated by law, executive order or regulation to close.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
<PAGE> 28
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement between
the Company and the Initial Purchasers.
Very truly yours,
PUEBLO XTRA INTERNATIONAL, INC.
By: /s/ William T. Keon, III
---------------------------
Name: William T. Keon, III
Title: President and Chief
Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ James G. Rose, Jr.
------------------------
Name: James G. Rose, Jr.
Title: Managing Director
SCOTIA CAPITAL MARKETS (USA), INC.
By: /s/ Steve Ezzes
------------------------
Name: Steve Ezzes
Title: Managing Director
<PAGE> 29
SCHEDULE I
INITIAL PURCHASERS
<TABLE>
<CAPTION>
Principal Amount
of Notes to Be Purchased
Initial Purchasers ------------------------
- ------------------
<S> <C>
NationsBanc Capital Markets, Inc............. $42,500,000
Scotia Capital Markets (USA), Inc............ $42,500,000
-----------
Total...................... $85,000,000
</TABLE>
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
------------------
PUEBLO XTRA INTERNATIONAL, INC.,
as Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
------------------
INDENTURE
Dated as of April 29, 1997
------------------
9 1/2% Series B Senior Notes Due 2003
9 1/2% Series C Senior Notes Due 2003
------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
RECITALS OF THE COMPANY.............................................. 1
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions......................................... 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act... 18
SECTION 1.03. Rules of Construction............................... 18
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating..................................... 19
SECTION 2.02. Restrictive Legends................................. 20
SECTION 2.03. Execution, Authentication and Denominations......... 22
SECTION 2.04. Registrar and Paying Agent.......................... 23
SECTION 2.05. Paying Agent to Hold Money in Trust................. 24
SECTION 2.06. Transfer and Exchange............................... 24
SECTION 2.07. Book-Entry Provisions for U.S. Global Security...... 25
SECTION 2.08. Special Transfer Provisions......................... 26
SECTION 2.09. Replacement Securities.............................. 30
SECTION 2.10. Outstanding Securities.............................. 30
SECTION 2.11. Temporary Securities................................ 31
SECTION 2.12. Cancellation........................................ 31
SECTION 2.13. CUSIP Numbers....................................... 31
SECTION 2.14. Defaulted Interest.................................. 31
SECTION 2.15. Treasury Securities Deemed Outstanding.............. 32
SECTION 2.16. Securities Obligations of Company Only.............. 32
ARTICLE THREE
COVENANTS
SECTION 3.01. Payment of Securities............................... 32
SECTION 3.02. Maintenance of Office or Agency..................... 32
SECTION 3.03. Limitation on Indebtedness.......................... 33
SECTION 3.04. Limitation on Restricted Payments................... 35
ii
<PAGE> 3
Page
----
SECTION 3.05. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries.... 38
SECTION 3.06. Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries........................... 39
SECTION 3.07. Limitation on Transactions with Shareholders and
Affiliates ....................................... 39
SECTION 3.08. Limitation on Liens................................. 40
SECTION 3.09. Limitation on Asset Sales........................... 41
SECTION 3.10. Limitation on Sale-Leaseback Transactions........... 44
SECTION 3.11. Repurchase of Securities upon Change of Control..... 45
SECTION 3.12. Corporate Existence................................. 47
SECTION 3.13. Payment of Taxes and Other Claims................... 47
SECTION 3.14. Maintenance of Properties and Insurance............. 47
SECTION 3.15. Compliance Certificates............................. 48
SECTION 3.16. Commission Reports and Reports to Holders........... 48
SECTION 3.17. Waiver of Stay, Extension or Usury Laws............. 49
SECTION 3.18. Certain Other Limitations........................... 49
ARTICLE FOUR
SUCCESSOR CORPORATION
SECTION 4.01. When Company May Merge, Etc......................... 49
SECTION 4.02. Successor Corporation Substituted................... 50
ARTICLE FIVE
DEFAULT AND REMEDIES
SECTION 5.01. Events of Default................................... 51
SECTION 5.02. Acceleration........................................ 53
SECTION 5.03. Other Remedies...................................... 53
SECTION 5.04. Waiver of Past Defaults............................. 53
SECTION 5.05. Control by Majority................................. 54
SECTION 5.06. Limitation on Suits................................. 54
SECTION 5.07. Rights of Holders to Receive Payment................ 55
SECTION 5.08. Collection Suit by Trustee.......................... 55
SECTION 5.09. Trustee May File Proofs of Claim.................... 55
SECTION 5.10. Priorities.......................................... 56
SECTION 5.11. Undertaking for Costs............................... 56
SECTION 5.12. Restoration of Rights and Remedies.................. 56
SECTION 5.13. Rights and Remedies Cumulative...................... 56
SECTION 5.14. Delay or Omission Not Waiver........................ 57
iii
<PAGE> 4
Page
----
ARTICLE SIX
TRUSTEE
SECTION 6.01. Rights of Trustee................................... 57
SECTION 6.02. Individual Rights of Trustee........................ 58
SECTION 6.03. Trustee's Disclaimer................................ 58
SECTION 6.04. Notice of Default................................... 58
SECTION 6.05. Reports by Trustee to Holders....................... 59
SECTION 6.06. Compensation and Indemnity.......................... 59
SECTION 6.07. Replacement of Trustee.............................. 60
SECTION 6.08. Successor Trustee by Merger, Etc.................... 61
SECTION 6.09. Eligibility......................................... 61
SECTION 6.10. Money Held in Trust................................. 61
ARTICLE SEVEN
DISCHARGE OF INDENTURE
SECTION 7.01. Termination of Company's Obligations................ 61
SECTION 7.02. Defeasance and Discharge of Indenture............... 62
SECTION 7.03. Defeasance of Certain Obligations................... 64
SECTION 7.04. Application of Trust Money.......................... 66
SECTION 7.05. Repayment to Company................................ 66
SECTION 7.06. Reinstatement....................................... 67
ARTICLE EIGHT
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 8.01. Without Consent of Holders.......................... 67
SECTION 8.02. With Consent of Holders............................. 68
SECTION 8.03. Revocation and Effect of Consent.................... 69
SECTION 8.04. Notation on or Exchange of Securities............... 69
SECTION 8.05. Trustee to Sign Amendments, Etc..................... 69
SECTION 8.06. Conformity with Trust Indenture Act................. 70
ARTICLE NINE
MISCELLANEOUS
SECTION 9.01. Trust Indenture Act of 1939......................... 70
SECTION 9.02. Notices............................................. 70
SECTION 9.03. Certificate and Opinion as to Conditions Precedent.. 71
SECTION 9.04. Statements Required in Certificate or Opinion....... 71
SECTION 9.05. Rules by Trustee, Paying Agent or Registrar......... 72
SECTION 9.06. Payment Date Other Than a Business Day.............. 72
SECTION 9.07. Governing Law....................................... 72
SECTION 9.08. No Adverse Interpretation of Other
Agreements........................................ 72
iv
<PAGE> 5
Page
----
SECTION 9.09. No Recourse Against Others.......................... 72
SECTION 9.10. Successors.......................................... 72
SECTION 9.11. Duplicate Originals................................. 73
SECTION 9.12. Separability........................................ 73
SECTION 9.13. Table of Contents, Headings, Etc.................... 73
ARTICLE TEN
REDEMPTION
SECTION 10.01. Right of Redemption............................... 73
SECTION 10.02. Notices to Trustee................................ 73
SECTION 10.03. Selection of Securities to Be Redeemed............ 73
SECTION 10.04. Notice of Redemption.............................. 74
SECTION 10.05. Effect of Notice of Redemption.................... 75
SECTION 10.06. Deposit of Redemption Price....................... 75
SECTION 10.07. Payment of Securities Called for Redemption....... 75
SECTION 10.08. Securities Redeemed in Part....................... 76
SIGNATURES........................................................... 77
EXHIBITS
EXHIBIT A - Form of Security
EXHIBIT B - Form of Certificate to Be Delivered upon Termination
of Restricted Period
EXHIBIT C - Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
EXHIBIT D - Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S
v
<PAGE> 6
INDENTURE, dated as of April 29, 1997, among Pueblo Xtra
International, Inc., a Delaware corporation, as Issuer (the "Company"), and
United States Trust Company of New York, a New York banking corporation, as
Trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of up to $85,000,000 principal amount of
the Company's 9 1/2% Series B Senior Notes Due 2003 (herein called the "Initial
Securities"), and 9 1/2% Series C Senior Notes Due 2003 (the "Exchange
Securities" and, together with the Initial Securities, the "Securities")
issuable as provided in this Indenture. All things necessary to make this
Indenture a valid agreement of the Company, in accordance with its terms, have
been done and the Company has done all things necessary to make the Securities,
when executed by the Company and authenticated and delivered by the Trustee
hereunder and duly issued by the Company, the valid obligations of the Company
as hereinafter provided.
Upon the issuance of the Exchange Securities, if any, or the
effectiveness of the Exchange Offer Registration Statement (as defined herein)
or, under certain circumstances, the effectiveness of the Shelf Registration
Statement (as defined herein), this Indenture will be subject to the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be part of
this Indenture and shall, to the extent applicable, be governed by such
provisions.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person existing at
the time such Person became a Subsidiary.
"Adjusted Consolidated Net Income" means, for any Person for any
period, the aggregate net income (or loss) of such Person and its consolidated
Subsidiaries for such period determined in accordance with GAAP; provided that
the following items shall be excluded in computing Adjusted Consolidated Net
Income (without
<PAGE> 7
duplication): (i) the net income (or loss) of any Person (other than a
Subsidiary) in which such Person or any of its Subsidiaries has a joint interest
with a third party, except to the extent of the amount of dividends or other
distributions actually paid to such Person or any of its Subsidiaries by such
other Person during such period, (ii) solely for the purpose of calculating the
amount of Restricted Payments that may be made pursuant to the first paragraph
of Section 3.04 of this Indenture (and in such case, except to the extent
includible pursuant to clause (i) above), the net income (or loss) of any other
Person accrued prior to the date it becomes a Subsidiary of such Person or is
merged into or consolidated with such Person or any of its Subsidiaries or all
or substantially all of the property and assets of such other Person are
acquired by such Person or any of its Subsidiaries, (iii) the net income (or
loss) of any Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary of such net
income is not at the time permitted by the operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary, (iv) any gains or losses
(on an after-tax basis) attributable to Asset Sales, (v) any amounts paid or
accrued as dividends on Preferred Stock of any Subsidiary of such Person and
(vi) all extraordinary gains and extraordinary losses. Notwithstanding the
foregoing, (i) solely for the purposes of calculating the Consolidated Fixed
Charge Ratio (and in such case, except to the extent includible pursuant to
clause (i) above), "Adjusted Consolidated Net Income" of the Company shall
include the amount of all cash dividends received by the Company or any
Subsidiary of the Company from an Unrestricted Subsidiary and (ii) "Adjusted
Consolidated Net Income" shall include gains attributable to sales of equipment
made in connection with store renovations and improvements in an amount not to
exceed $1 million in any fiscal year of the Company.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied 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 securities, by contract or otherwise. Solely for the purpose
of the definition of "Change of Control," the term "Affiliate" shall be deemed
to include, with respect to Gustavo Cisneros and Ricardo Cisneros, any member or
members of the family of either Gustavo Cisneros or Ricardo Cisneros or any
trust primarily for the benefit of one or more such Persons.
"Agent" means any Registrar, Paying Agent, authenticating agent (if
any) or co-registrar (if any).
<PAGE> 8
3
"Asset Acquisition" means (i) an investment by the Company or any of
its Subsidiaries in any other Person pursuant to which such Person shall become
a Subsidiary of the Company or any of its Subsidiaries or shall be merged into
or consolidated with the Company or any of its Subsidiaries or (ii) an
acquisition by the Company or any of its Subsidiaries of the property and assets
of any Person (other than the Company or any of its Subsidiaries) that
constitute substantially all of an operating unit or business of such Person.
"Asset Disposition" means the sale or other disposition by the
Company or any of its Subsidiaries (other than to the Company or another
Subsidiary of the Company) of (i) all or substantially all of the Capital Stock
of any Subsidiary of the Company or (ii) all or substantially all of the
property and assets that constitute an operating unit or business of the Company
or any of its Subsidiaries.
"Asset Sale" means, with respect to any Person, any sale, transfer
or other disposition (including by way of merger, consolidation or
sale-leaseback transactions) in one transaction or a series of related
transactions by such Person or any of its Subsidiaries to any Person (other than
to the Company or any of its Subsidiaries) of (i) all or any of the Capital
Stock of any Subsidiary of such Person, (ii) all or substantially all of the
property and assets of an operating unit or business of such Person or any of
its Subsidiaries or (iii) any other property and assets of such Person or any of
its Subsidiaries outside the ordinary course of business and, in each case, that
is not governed by Section 4.01; provided that sales or other dispositions of
inventory, receivables and other current assets in the ordinary course of
business shall not be included within the meaning of such term.
"Attributable Indebtedness" means, when used in connection with a
sale-leaseback transaction referred to in Section 3.10, at any date of
determination, the product of (i) the net proceeds from such sale-leaseback
transaction and (ii) a fraction, the numerator of which is the number of full
years of the term of the lease relating to the property involved in such
sale-leaseback transaction (without regard to any options to renew or extend
such term) remaining at the date of determination and the denominator of which
is the number of full years of the term of such lease (without regard to any
options to renew or extend such term) measured from the first day of such term.
"Average Life" means, at any date of determination with respect to
any debt security, the quotient obtained by dividing (i) the sum of the product
of (a) the number of years from such date of determination to the dates of each
successive scheduled principal
<PAGE> 9
4
payment of such debt security and (b) the amount of such principal payment by
(ii) the sum of all such principal payments.
"Bank Credit Agreement" means the Credit Agreement dated as of July
21, 1993, as amended and restated as of April 29, 1997, among the Company,
Pueblo and The Bank of Nova Scotia and NationsBank (N.A.) South, as Agents for
the Banks party thereto, together with the related documents thereto (including,
without limitation, any guaranties and security documents), consisting a
revolving credit facility, in each case as such agreements may be subsequently
amended (including any amendment and restatement thereof), supplemented,
replaced, refinanced or otherwise modified from time to time.
"Banks" means the lenders who are from time to time parties to the
Bank Credit Agreement.
"Board of Directors" means the Board of Directors of the Company or
any committee of such Board of Directors duly authorized to act under this
Indenture.
"Board Resolution" means a copy of a resolution, certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in The City of New York, or in the city of the
Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of capital stock of such Person which is
outstanding or issued on or after July 28, 1993, including, without limitation,
all Common Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in accordance with
GAAP, is required to be capitalized on the balance sheet of such Person; and
"Capitalized Lease Obligation" means the rental obligations, as aforesaid, under
such lease.
"Change of Control" shall be deemed to have occurred at such time as
(i) (a) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Exchange Act), other than
<PAGE> 10
5
Gustavo Cisneros, Ricardo Cisneros and their respective Affiliates, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 35% of the total voting power of the then outstanding Voting Stock of the
Company or Holdings and (b) Gustavo Cisneros, Ricardo Cisneros and their
respective Affiliates beneficially own, directly or indirectly, less than 50% of
the total voting power of the then outstanding Voting Stock of the Company; or
(ii) at any time when Gustavo Cisneros, Ricardo Cisneros or their respective
Affiliates beneficially own, directly or indirectly, less than 50% of the total
voting power of the then outstanding Voting Stock of the Company, individuals
who at the beginning of any period of two consecutive calendar years constituted
the board of directors of the Company or Holdings (together with any new
directors whose election by the board of directors of the Company or Holdings or
whose nomination for election by the shareholders of the Company or Holdings was
approved by a vote of at least a majority of the members of the board of
directors of the Company or Holdings then still in office who either were
members of the board of directors of the Company or Holdings at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
board of directors of the Company or Holdings, as the case may be.
"Change of Control Offer" has the meaning provided in Section 3.11
of this Indenture.
"Change of Control Payment" has the meaning provided in Section 3.11
of this Indenture.
"Change of Control Payment Date" has the meaning provided in Section
3.11 of this Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of common stock of such Person which is
outstanding or issued on or after July 28, 1993, including, without limitation,
all series and classes of such common stock.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to Article Four of this Indenture and thereafter
means the successor.
<PAGE> 11
6
"Consolidated EBITDA" means, with respect to any Person for any
period, the sum of the amounts for such period of (i) Adjusted Consolidated Net
Income, (ii) Consolidated Fixed Charges, (iii) income taxes (calculated
excluding the effect of extraordinary and non-recurring gains or losses on sales
of assets), (iv) depreciation expense, (v) amortization expense and (vi) all
other noncash items reducing Adjusted Consolidated Net Income, less all noncash
items increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
conformity with GAAP; provided that, if a Person has any Subsidiary that is not
a Wholly Owned Subsidiary of such Person, Consolidated EBITDA of such Person
shall be reduced by an amount equal to the Adjusted Consolidated Net Income of
such Subsidiary multiplied by the quotient of (x) the number of shares of
outstanding Common Stock of such Subsidiary not owned on the last day of such
period by such Person or any Subsidiary of such Person divided by (y) the total
number of shares of outstanding Common Stock of such Subsidiary on the last day
of such period.
"Consolidated Fixed Charges" means, with respect to any Person for
any period, without duplication, the sum of (i) Consolidated Interest Expense,
(ii) all but the principal component in respect of Capitalized Lease
Obligations, and (iii) cash dividends payable on Preferred Stock issued by a
Subsidiary of such Person and on Redeemable Stock, determined on a consolidated
basis for such Person and its consolidated Subsidiaries in accordance with GAAP
(except as otherwise expressly specified herein) excluding, however, any such
amounts of any Subsidiary of such Person if the net income (or loss) of such
Subsidiary for such period is excluded in the calculation of Adjusted
Consolidated Net Income for such Person pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income (or loss)
of such Subsidiary is excluded from the calculation of Adjusted Consolidated Net
Income for such Person pursuant to clause (iii) of the definition thereof).
"Consolidated Fixed Charge Ratio" means, with respect to any Person
on any Transaction Date, the ratio of (i) the aggregate amount of Consolidated
EBITDA of such Person for the four fiscal quarters for which financial
information in respect thereof is available immediately prior to such
Transaction Date (the "Reference Period") to (ii) the aggregate Consolidated
Fixed Charges of such Person during the Reference Period. In making the
foregoing calculation, (a) pro forma effect shall be given to any Indebtedness
Incurred during or after the Reference Period and on or before the Transaction
Date, to the extent such Indebtedness is outstanding at the Transaction Date, in
each case as if such Indebtedness had been Incurred on the first day of the
Reference Period and after giving effect to the application of the proceeds
<PAGE> 12
7
thereof; (b) Consolidated Interest Expense attributable to interest on any
Indebtedness (whether existing or being Incurred) computed on a pro forma basis
and bearing a floating interest rate shall be computed as if the rate in effect
on the date of computation (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months) had been the applicable rate for the entire period;
(c) there shall be excluded from Consolidated Interest Expense any amounts
relating to Indebtedness that was outstanding during or after the Reference
Period or thereafter but which is not outstanding or which has been or is to be
repaid with the proceeds of other Indebtedness Incurred during or after the
Reference Period and on or before the Transaction Date; (d) pro forma effect
shall be given to Asset Dispositions and Asset Acquisitions that occur during or
after the Reference Period and on or before the Transaction Date as if they had
occurred on the first day of the Reference Period; (e) pro forma effect shall be
given, in the same manner as provided in the foregoing clause (d), to asset
dispositions and asset acquisitions made by any Person that has become a
Subsidiary of the Company or has been merged with or into the Company or any
Subsidiary of the Company during or after the Reference Period and on or before
the Transaction Date and that would have been Asset Dispositions or Asset
Acquisitions had such transactions occurred when such Person was a Subsidiary of
the Company; and (f) with respect to any Reference Period commencing prior to
the date of consummation of the Related Transactions, the Related Transactions
shall be deemed to have taken place on the first day of the Reference Period.
"Consolidated Interest Expense" means, with respect to any Person
for any period, the aggregate amount of interest in respect of Indebtedness
(including amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in accordance
with the effective interest method of accounting; all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing; and the net costs associated with Interest Rate
Agreements); excluding, however, any premiums, fees and expenses (and any
amortization thereof) payable in connection with the Refinancing Plan, all as
determined for such Person and the consolidated Subsidiaries on a consolidated
basis in conformity with GAAP.
"Consolidated Net Tangible Assets" means, at any date of
determination, the total amount of assets of the Company and its Subsidiaries
(less applicable depreciation, amortization and other valuation reserves),
except to the extent resulting from write-ups of capital assets (excluding
write-ups in connection with accounting for acquisitions in conformity with
GAAP), after deducting therefrom (i) all current liabilities of the Company and
<PAGE> 13
8
its consolidated Subsidiaries (excluding intercompany items) and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all as set forth on the then most recently
available consolidated balance sheet of the Company and its consolidated
Subsidiaries prepared in conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the then most recently available
consolidated balance sheet of the Company and its consolidated Subsidiaries
(which shall be as of a date not more than 60 days prior to the date of such
computation), less any amounts attributable to Redeemable Stock or any equity
security convertible into or exchangeable for Indebtedness, the cost of treasury
stock and the principal amount of any promissory notes receivable from the sale
of Capital Stock of the Company or any of its Subsidiaries, each item to be
determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the office of the Trustee at which
the corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 114 West 47th Street, New York, New York 10036-1532, Attention:
Corporate Trust and Agency Division.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to or
under which the Company or any of its Subsidiaries is a party or a beneficiary
on July 28, 1993 or becomes a party or a beneficiary thereafter.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Event of Default" has the meaning provided in Section 5.01 of this
Indenture.
"Excess Proceeds" has the meaning provided in Section 3.09 of this
Indenture.
"Excess Proceeds Offer" has the meaning provided in Section 3.09 of
this Indenture.
<PAGE> 14
9
"Excess Proceeds Payment" has the meaning provided in Section 3.09
of this Indenture.
"Excess Proceeds Payment Date" has the meaning provided in Section
3.09 of this Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the first recital of
this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that such Exchange
Securities shall not contain terms with respect to the interest rate step-up
provision and transfer restrictions) that are issued and exchanged for the
Initial Securities pursuant to the Registration Rights Agreement and this
Indenture.
"Existing Notes" means the 9 1/2% Senior Notes due 2003 of the
Company issued on July 28, 1993.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of July 28, 1993 applied on a basis consistent
with the principles, methods, procedures and practices employed in the
preparation of the Company's audited financial statements, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations based on GAAP
contained in this Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to
<PAGE> 15
10
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding meaning.
"Holder" or "Securityholder" is defined to mean the registered
holder of any Security.
"Holdings" means PXC&M Holdings, Inc., a Delaware corporation, and
its successors.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness; provided that neither the accrual of interest (whether such
interest is payable in cash or kind) nor the accretion of original issue
discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such Indebtedness shall be
the lesser of (a) the fair market value of such asset at such date of
determination and (b) the amount of such Indebtedness, (vii) all Indebtedness of
other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person, (viii) to the extent not otherwise included in this
definition, all obligations of such Person under Currency Agreements and
Interest Rate Agreements and (ix) all Preferred Stock of Subsidiaries and all
Redeemable Stock, valued in each case at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends. The amount
of Indebtedness of any Person at any date shall be the
<PAGE> 16
11
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; provided
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.
"Indenture" means this Indenture as originally executed or as it may
be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Initial Securities" has the meaning stated in the first recital of
this Indenture.
"Interest Payment Date" means each semiannual interest payment date
on February 1 and August 1 of each year, commencing August 1, 1997.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect the Company or any of its Subsidiaries against
fluctuations in interest rates to or under which the Company or any of its
Subsidiaries is a party or a beneficiary on July 28, 1993 or becomes a party or
a beneficiary thereafter.
"Investment" means, with respect to any Person, any direct or
indirect advance, loan (other than advances to customers in the ordinary course
of business that are recorded as accounts receivable on the balance sheet of
such Person or its Subsidiaries) or other extension of credit or capital
contribution to any other Person (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of Capital Stock,
bonds, notes, debentures or other similar instruments issued by any other
Person. For purposes of the definition of "Unrestricted Subsidiary" and Section
3.04, (i) the amount of any "Investment" in any Unrestricted Subsidiary shall
include the fair market value of the net assets of any Subsidiary of the Company
at the time that such Subsidiary of the Company is designated an Unrestricted
Subsidiary, and the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary of the Company shall be treated as a reduction in
Investments in Unrestricted Subsidiaries, subject to the limitation set forth in
<PAGE> 17
12
clause (3) of the first paragraph of Section 3.04 and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof, any sale with
recourse against the seller or any Affiliate of the seller, or any agreement to
give any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Subsidiary of the Company) and
proceeds from the conversion of other property received when converted to cash
or cash equivalents, net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale, (ii) provisions for all taxes (whether or not such taxes
will actually be paid or are payable) as a result of such Asset Sale computed
without regard to the consolidated results of operations of the Company and its
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that is either (a)
secured by a Lien on the property or assets sold or (b) required to be paid as a
result of such sale and (iv) appropriate amounts to be provided by the Company
or any Subsidiary of the Company as a reserve against liabilities associated
with such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP.
"Non-U.S. Person" means a Person that is not a "U.S. Person" as
defined in Regulation S.
"Officer" means, with respect to the Company, the Chairman of the
Board, the President, any Vice President, the Chief Financial Officer, the
Treasurer or any Assistant Treasurer, or the Secretary or any Assistant
Secretary.
"Officers' Certificate" means a certificate signed by two Officers.
Each Officers' Certificate shall include the statements provided for in Section
9.04.
<PAGE> 18
13
"Opinion of Counsel" means a written opinion signed by legal counsel
who is acceptable to the Trustee. Such counsel may be an employee of or counsel
to the Company or the Trustee. Each such Opinion of Counsel shall include the
statements provided for in Section 9.04.
"Paying Agent" has the meaning provided in Section 2.04, except
that, for the purposes of Article Seven, the Paying Agent shall not be the
Company or a Subsidiary of the Company or an Affiliate of any of them. The term
"Paying Agent" includes any additional Paying Agent.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (ii) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (iii) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens incurred
or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers' acceptances, surety and appeal bonds,
government contracts, performance and return of money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Subsidiaries; (vi) Liens (including extensions and renewals thereof) upon real
or tangible personal property acquired after July 28, 1993; provided that (a)
such Lien is created solely for the purpose of securing Indebtedness Incurred
(1) to finance the cost (including the cost of improvement or construction) of
the item of property or assets subject thereto and such Lien is created prior
to, at the time of or within 12 months after the later of the acquisition, the
completion of construction or the commencement of full operation of such
property or (2) to refinance any Indebtedness previously so secured, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such cost and (c) any such Lien shall not extend to or cover any property or
assets other than such item of property or assets and any
<PAGE> 19
14
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company or
any of its Subsidiaries; (viii) Liens encumbering property or assets under
construction arising from obligations of the Company or any of its Subsidiaries
to make progress or partial payments relating to such property or assets; (ix)
any interest or title of a lessor in the property subject to any Capitalized
Lease; provided that any sale-leaseback transaction related thereto complies
with Section 3.10; (x) Liens arising from filing Uniform Commercial Code
financing statements, chattel mortgages or similar documents regarding leases or
by vendors in respect of inventory on which "advance money" has been paid; (xi)
Liens on property of, or on shares of stock or Indebtedness of, any corporation
existing at the time such corporation becomes, or becomes a part of, any
Restricted Subsidiary; (xii) Liens in favor of the Company or any Restricted
Subsidiary; (xiii) Liens on any facilities, equipment or other property of the
Company or any Subsidiary of the Company in favor of the United States of
America or any State, or any department, agency, instrumentality or political
subdivision thereof (including the Commonwealth of Puerto Rico and the United
States Virgin Islands), in connection with the issuance of industrial revenue
bonds or on any equipment or other property designed primarily for the purpose
of air or water pollution control; provided that any such Lien on such
facilities, equipment or other property shall not apply to any other assets of
the Company or such Subsidiary of the Company; (xiv) Liens arising from the
rendering of a final judgment or order against the Company or any Subsidiary of
the Company that does not give rise to an Event of Default; (xv) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the products
and proceeds thereof; (xvi) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (xvii) Liens encumbering customary initial
deposits and margin deposits, and other Liens that are either within the general
parameters customary in the industry and incurred in the ordinary course of
business or otherwise permitted under the terms of the Bank Credit Agreement, in
each case securing Indebtedness under Interest Rate Agreements and Currency
Agreements and forward contracts, options, futures contracts, futures options or
similar agreements or arrangements designed to protect the Company or any of its
Subsidiaries from fluctuations in the price of commodities; (xviii) Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Company or any of its
Subsidiaries in the ordinary course of business in accordance with the past
practices of the Company and its Subsidiaries prior to July 28,
<PAGE> 20
15
1993; (xix) Liens on or sales of receivables; (xx) Liens on assets of Restricted
Subsidiaries permitted by the Bank Credit Agreement as in effect on July 28,
1993 and other such Liens that are not materially more restrictive (in terms of,
without limitation, the amount secured by such Lien and the scope of such Lien)
than such Liens permitted by the Bank Credit Agreement; and (xxi) Liens on
assets of Restricted Subsidiaries securing Indebtedness and other obligations
permitted under clause (xiii) of Section 3.03(a).
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of preferred or preference stock of such Person
which is outstanding or issued on or after July 28, 1993, including, without
limitation, all series and classes of such preferred or preference stock.
"principal" of a debt security, including the Securities, means the
principal amount due on the Stated Maturity.
"Pueblo" means Pueblo International, Inc., a Delaware corporation,
and its successors.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Securities, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Securities or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Securities; provided that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require the Company to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the Securities shall not
constitute Redeemable Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions contained in Sections 3.09 or 3.11 and
such Capital Stock specifically provides that the Company will not repurchase or
redeem any such Capital Stock pursuant to such provisions prior to the Company's
repurchase of Securities required to be repurchased pursuant to the provisions
of Sections 3.09 or 3.11.
<PAGE> 21
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"Redemption Date" means, with respect to any Security to be
redeemed, the date fixed for such redemption pursuant to this Indenture.
"Redemption Price" means, with respect to any Security to be
redeemed, the price at which such Security is to be redeemed pursuant to this
Indenture.
"Refinancing Plan" means, collectively, the following transactions
occurring substantially concurrently with the issuance of the Securities
hereunder: (i) the repayment of all amounts due under the Bank Credit Agreement,
(ii) the execution of the amendment and restatement dated as of April 29, 1997,
of the Bank Credit Agreement and (iii) the transfer of the Company's interest in
two real estate properties to a related party in satisfaction of indebtedness in
the amount of $10 million to such related party.
"Registrar" has the meaning provided in Section 2.04 of this
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Initial Purchasers named therein, dated as
of April 29, 1997 relating to the Securities.
"Registration Statement" means the Registration Statement as defined
in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the January 15 or July 15 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any assistant vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, any trust officer or assistant trust officer, or any other officer of
the Trustee customarily performing functions similar to those performed by any
of the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
<PAGE> 22
17
"Restricted Payments" has the meaning specified in Section 3.04 of
this Indenture.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" has the meaning provided in Section 2.04 of this
Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination, any
Subsidiary of the Company that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company or (ii) as of the end of such fiscal year,
was the owner of more than 10% of the consolidated assets of the Company, all as
set forth on the most recently available consolidated financial statements of
the Company for such fiscal year.
"Stated Maturity" means, with respect to any debt security or any
installment of interest thereon, the date specified in such debt security as the
fixed date on which any principal of such debt security or any such installment
of interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the outstanding
Voting Stock is owned, directly or indirectly, by the Company or by one or more
other Subsidiaries of the Company, or by such Person and one or more other
Subsidiaries of such Person; provided that, except as the term "Subsidiary" is
used in the definition of "Unrestricted Subsidiary" described below, an
Unrestricted Subsidiary shall not be deemed to be a Subsidiary of the Company
for purposes of this Indenture.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbb), as in effect on the
date this Indenture was executed, except as provided in
<PAGE> 23
18
Section 8.06 of this Indenture.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first paragraph of
this Indenture until a successor replaces it in accordance with the provisions
of Article Six of this Indenture and thereafter means such successor.
"United States Bankruptcy Code" means the Bankruptcy Act of Title 11
of the United States Code, as amended from time to time hereafter, or any
successor federal bankruptcy law.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any other Subsidiary of the Company that is not a Subsidiary
of the Subsidiary to be so designated; provided that either (a) the Subsidiary
to be so designated has total assets of $1,000 or less or (b) if such Subsidiary
has assets greater than $1,000, that such designation would be permitted under
Section 3.04. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary of the Company; provided that immediately after
giving effect to such designation (1) the Company could Incur $1.00 of
additional Indebtedness under clause (i) of Section 3.03(a) and (2) no Default
or Event of Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii)
<PAGE> 24
19
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof at any time prior to the Stated Maturity of the
Securities, and shall also include a depositary receipt issued by a bank or
trust company as custodian with respect to any such U.S. Government Obligation
or a specific payment of interest on or principal of any such U.S. Government
Obligation held by such custodian for the account of the holder of a depository
receipt; provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of interest on or principal
of the U.S. Government Obligation evidenced by such depository receipt.
"Voting Stock" means, with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors of such Person.
"Wholly Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person if all of the Common Stock or other similar equity
ownership interests (but not including Preferred Stock) in such Subsidiary
(other than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) is owned directly or indirectly by such Person.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder or a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or
<PAGE> 25
20
defined by a rule of the Commission and not otherwise defined herein have the
meanings assigned to them therein.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP:
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(vii) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP set
forth above; and
(viii) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A. The Securities may have notations, legends or endorsements
required by law, stock exchange agreements to which the Company is subject or
usage. The Company shall approve the form of the Securities and any notation,
legend or endorsement on the Securities. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the form of the securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and
<PAGE> 26
21
provisions and to be bound thereby.
The definitive Securities shall be printed, lithographed, engraved
or produced by any combination of these methods on a steel engraved border or
steel engraved borders or may be produced in any other manner, all as determined
by the Officers executing such Securities, as evidenced by their execution of
such Securities.
Initial Securities offered and sold in reliance on Rule 144A shall
be issued initially in the form of one or more permanent global Securities
substantially in the form set forth in Exhibit A (the "U.S. Global Security")
deposited with, or on behalf of, the Depositary or with the Trustee, as
custodian for the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the U.S.
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depositary or its
nominee, as hereinafter provided.
Initial Securities offered and sold in reliance on Regulation S
shall be issued initially in the form of temporary certificated Securities in
registered form substantially in the form set forth in Exhibit A (the "Temporary
Offshore Global Securities"). The Temporary Offshore Global Securities will be
registered in the name of, and held by, a temporary certificate holder
designated by NationsBanc Capital Markets, Inc. until the termination of the
"restricted period" (as defined in Regulation S) with respect to the offer and
sale of the Initial Securities (the "Offshore Securities Exchange Date"). At any
time following the Offshore Securities Exchange Date, upon receipt by the
Trustee and the Company of a certificate substantially in the form of Exhibit B
hereto, the Company shall execute, and the Trustee shall authenticate and
deliver, one or more permanent certificated Securities in registered form
substantially in the form set forth in Exhibit A (the "Permanent Offshore
Physical Securities"), in exchange for the surrender of Temporary Offshore
Global Securities of like tenor and amount.
Initial Securities offered and sold other than as described in the
preceding two paragraphs shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
(the "U.S. Physical Securities").
The Temporary Offshore Global Securities, Permanent Offshore
Physical Securities and U.S. Physical Securities are sometimes collectively
herein referred to as the "Physical Securities".
<PAGE> 27
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SECTION 202. Restrictive Legends.
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, each certificate representing a
Security shall contain a legend substantially to the following effect (the
"Private Placement Legend") on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH PUEBLO XTRA INTERNATIONAL, INC. ("THE COMPANY") OR ANY AFFILIATE OF
THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3)
OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR", FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR
FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF
<PAGE> 28
23
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
Each U.S. Global Security, whether or not an Initial Security, shall
also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 2.07 AND 2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Denominations. Two
Officers shall execute the Securities for the Company by facsimile or manual
signature in the name and on behalf of the Company. The seal of the Company
shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee or authenticating agent authenticates the
Security, the Security shall be valid nevertheless.
A Security shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee or an authenticating agent shall authenticate
<PAGE> 29
24
for original issue Securities in the aggregate principal amount of $85,000,000
upon a written order of the Company signed by at least one Officer; provided
that the Trustee shall receive an Officers' Certificate and an Opinion of
Counsel of the Company in connection with such authentication of Securities.
Such order shall specify the amount of Securities to be authenticated and the
date on which the original issue of Securities is to be authenticated. The
aggregate principal amount of Securities outstanding at any time may not exceed
the amount set forth above except as provided in Sections 2.09 and 2.10 of this
Indenture.
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such authenticating agent. An authenticating
agent has the same rights as an Agent to deal with the Company or an Affiliate
of the Company.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 in original principal amount and any
integral multiple thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Company will
appoint an agent for service where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company shall
cause the Registrar to keep a register of the Securities and of their transfer
and exchange (the "Security Register"). The Company may have one or more
co-registrars and one or more additional Paying Agents.
The Company shall enter into an appropriate agency agreement, with
any Agent not a party to this Indenture, which shall incorporate the terms of
the TIA and the relevant terms of this Indenture and shall not be inconsistent
with this Indenture. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall give prompt written
notice to the Trustee of the name and address of any such Agent and any change
in the address of such Agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such Registrar or Paying Agent. The
Company may remove any Agent upon written notice to such Agent and the Trustee;
provided that no such removal shall become effective until (i) the acceptance of
an appointment by a successor Agent to such Agent as evidenced by an appropriate
agency agreement, entered into by the Company and such successor Agent and
delivered to the Trustee, which shall
<PAGE> 30
25
incorporate the terms of the TIA and the relevant terms of this Indenture and
shall not be inconsistent with this Indenture or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company, any
Subsidiary of the Company, or any Affiliate of any of them may act as Paying
Agent, Registrar or co-registrar, or agent for service of notice and demands.
The Company initially appoints the Trustee as Registrar and Paying
Agent. The Company initially appoints CT Corporation System as the agent for
service of notice and demands. If, at any time, the Trustee is not the
Registrar, the Registrar shall make available to the Trustee on or before each
Interest Payment Date and at such other times as the Trustee may reasonably
request the names and addresses of the Holders as they appear in the Security
Register.
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later than
each due date of the principal and interest on any Securities, the Company shall
deposit with the Paying Agent money sufficient to pay such principal and
interest so becoming due. The Company shall require each Paying Agent other than
the Trustee to agree in writing that such Paying Agent shall hold in trust for
the benefit of the Holders or the Trustee all money held by the Paying Agent for
the payment of principal of and interest on the Securities (whether such money
has been paid to it by the Company or any other obligor on the Securities), and
such Paying Agent shall promptly notify the Trustee of any default by the
Company (or any other obligor on the Securities) in making any such payment. The
Company at any time may require a Paying Agent other than the Trustee to pay all
money held by it to the Trustee and account for any funds disbursed, and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon doing so,
the Paying Agent shall have no further liability for the money so paid over to
the Trustee. If the Company or any Subsidiary of the Company or any Affiliate of
any of them acts as Paying Agent, it will, on or before each due date of any
principal of or interest on the Securities, segregate and hold in a separate
trust fund for the benefit of the Holders a sum sufficient to pay such principal
or interest so becoming due until such sums shall be paid to such Holders or
otherwise disposed of as provided in this Indenture, and will promptly notify
the Trustee of its action or failure to act.
SECTION 2.06. Transfer and Exchange. When Securities are presented
to the Registrar or a co-registrar with a request to register the transfer or to
exchange them for an equal principal amount of Securities of other authorized
denominations (including
<PAGE> 31
26
an exchange of Initial Securities for Exchange Securities), the Registrar shall
register the transfer or make the exchange as requested if its requirements for
such transactions are met provided that no exchange of Initial Securities for
Exchange Securities shall occur until an Exchange Offer Registration Statement
shall have been declared effective by the Commission and that the Initial
Securities to be exchanged for the Exchange Securities shall be cancelled by the
Trustee. To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Securities at the Registrar's
request. No service charge shall be made for any registration of transfer or
exchange of the Securities, but the Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or other similar
governmental charge payable upon exchanges pursuant to Section 2.11, 3.09, 3.11,
8.04 or 10.08 of this Indenture).
Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
The Issuer shall not be required to register the transfer of or to
exchange (a) any Securities for a period of 15 days next preceding the first
mailing of notice of redemption of the Securities to be redeemed or (b) any
Securities selected, called or being called for redemption, except in the case
of any Security where public notice has been given that such Security is to be
redeemed in part, the portion thereof not so to be redeemed.
SECTION 2.07. Book-Entry Provisions for U.S. Global Security.
(a) The U.S. Global Security initially shall (i) be registered in
the name of Cede & Co., as nominee of the Depositary, (2) be deposited with, or
on behalf of, the Depositary or with the Trustee, as custodian for such
Depositary, and (iii) bear legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any U.S. Global
Security held on their behalf by the Depositary, or the Trustee as its
custodian, or under the U.S. Global Security, and the Depositary may be treated
by the Company, the Trustee and
<PAGE> 32
27
any agent of the Company or the Trustee as the absolute owner of such U.S.
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Security.
(b) Transfers of the U.S. Global Security shall be limited to
transfers of such U.S. Global Security in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of beneficial
owners in the U.S. Global Security may be transferred in accordance with the
rules and procedures of the Depositary and the provisions of Section 2.08. In
addition, if (i) the Company notifies the Trustee in writing that the Depositary
is no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
Securities in the form of Physical Securities hereunder then, upon surrender by
the Global Security Holder of its Global Security, Physical Securities will be
issued to each Person that the Global Security Holder and the Depositary
identify as being the beneficial owner of the related Securities.
(c) In connection with any transfer of a portion of the beneficial
interest in the U.S. Global Security to beneficial owners pursuant to subsection
(b) of this Section, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the U.S. Global Security in an
amount equal to the principal amount of the beneficial interest in the U.S.
Global Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical Securities of
like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global
Security to beneficial owners pursuant to subsection (b) of this Section, the
U.S. Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the U.S. Global Security, an equal aggregate
principal amount of U.S. Physical Securities of authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for an interest
in the U.S. Global Security pursuant to subsection (c) or subsection (d) of this
Section shall, except as otherwise
<PAGE> 33
28
provided by paragraph (a)(i)(x) and paragraph (f) of Section 2.08, bear the
applicable legend regarding transfer restrictions applicable to the U.S.
Physical Security set forth in Section 2.02.
(f) The Holder of the U.S. Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
SECTION 2.08. Special Transfer Provisions.
Unless and until (i) an Initial Security is sold under an effective
Registration Statement, or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, the following additional
provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to any institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) which is not a QIB (excluding Non-U.S.
Persons):
(i) The Registrar shall register the transfer of any Initial
Security, whether or not such Initial Security bears the Private Placement
Legend, if (x) the requested transfer is at least two years after the
original issue date of the Initial Securities or (y) the proposed
transferee has delivered to the Registrar a certificate substantially in
the form of Exhibit C hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Security to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
U.S. Physical Securities of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial Security to a
QIB (excluding Non-U.S. Persons):
<PAGE> 34
29
(i) If the Security to be transferred consists of U.S. Physical
Securities, Temporary Offshore Global Securities or Permanent Offshore
Physical Securities, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Initial Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee who
has signed the certification provided for on the form of Initial Security
stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Initial Security for its own account or
an account with respect to which it exercises sole investment discretion
and that it, or the Person on whose behalf it is acting with respect to
any such account, is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company
as it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the Initial
Security to be transferred consists of U.S. Physical Securities, Temporary
Offshore Global Securities or Permanent Offshore Physical Securities, upon
receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures therefor, the Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the U.S. Global Security in an amount equal to the principal
amount of the U.S. Physical Securities, Temporary Offshore Global
Securities or Permanent Offshore Physical Securities, as the case may be,
to be transferred, and the Trustee shall cancel the Physical Security so
transferred.
(c) Transfers by Non-U.S. Persons on or Prior to June 9, 1997. The
following provisions shall apply with respect to registration of any proposed
transfer of an Initial Security by a Non-U.S. Person on or prior to June 9,
1997:
(i) The Registrar shall register the transfer of any Initial
Security (x) if the proposed transferee is a Non-U.S. Person and the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto or (y) if the proposed
transferee is a QIB and the proposed transferor has checked the box
provided for on the form of Initial Security stating, or has otherwise
advised the
<PAGE> 35
30
Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has signed
the certification provided for on the form of Initial Security stating, or
has otherwise advised the Company and the Registrar in writing, that it is
purchasing the Initial Security for its own account or an account with
respect to which it exercises sole investment discretion and that it, or
the Person on whose behalf it is acting with respect to any such account,
is a QIB within the meaning of Rule 144A, and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A. Unless clause (ii) below is applicable, the Company shall
execute, and the Trustee shall authenticate and deliver, one or more
Temporary Offshore Physical Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of instructions given in accordance with the Depositary's
and the Registrar's procedures therefor, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the U.S. Global Security in an amount equal to the principal amount of the
Temporary Offshore Global Security to be transferred, and the Trustee
shall cancel the Temporary Offshore Global Security so transferred.
(d) Transfers by Non-U.S. Persons on or After March 10, 1997. The
following provisions shall apply with respect to any transfer of an Initial
Security by a Non-U.S. Person on or after June 9, 1997:
(i) (x) If the Initial Security to be transferred is a Permanent
Offshore Physical Security, the Registrar shall register such transfer,
(y) if the Initial Security to be transferred is a Temporary Offshore
Global Security, upon receipt of a certificate substantially in the form
of Exhibit D from the proposed transferor, the Registrar shall register
such transfer and (z) in the case of either clause (x) or (y), unless
clause (ii) below is applicable, the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Permanent Offshore
Physical Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of instructions given in accordance
<PAGE> 36
31
with the Depositary's and the Registrar's procedures therefor, the
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the U.S. Global Security in an amount equal to
the principal amount of the Temporary Offshore Global Security or
Permanent Offshore Physical Security to be transferred, and the Trustee
shall cancel the Physical Security so transferred.
(e) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Security to a
Non-U.S. Person:
(i) Prior to June 9, 1997, the Registrar shall register any proposed
transfer of an Initial Security to a Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit D hereto from the
proposed transferor and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Temporary Offshore Global Securities
of like tenor and amount.
(ii) On and after June 9, 1997, the Registrar shall register any
proposed transfer to any Non-U.S. Person (w) if the Initial Security to be
transferred is a Permanent Offshore Physical Security, (x) if the Initial
Security to be transferred is a Temporary Offshore Global Security, upon
receipt of a certificate substantially in the form of Exhibit D from the
proposed transferor, (y) if the Initial Security to be transferred is a
U.S. Physical Security or an interest in the U.S. Global Security, upon
receipt of a certificate substantially in the form of Exhibit D from the
proposed transferor and (z) in the case of either clause (w), (x) or (y),
the Company shall execute, and the Trustee shall authenticate and deliver,
one or more Permanent Offshore Physical Securities of like tenor and
amount.
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the document, if any, required by paragraph (i), and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Security to be transferred and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Permanent Offshore Physical Securities of like tenor and amount.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private
<PAGE> 37
32
Placement Legend, the Registrar shall deliver Securities that do not bear the
Private Placement Legend. Upon the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless either (i) the
circumstances contemplated by the fifth paragraph of Section 2.01 or paragraphs
(a)(i)(x), (d)(i) or (e)(ii) of this Section 2.08 exist and the Company directs
the Trustee pursuant to an Officers' Certificate to remove such legend or (ii)
there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(g) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain as required by law copies of all letters,
notices and other written communications received pursuant to Section 2.07 or
this Section 2.08. The Company shall have the right to inspect and make copies
of all such letters, notices or other written communications at any reasonable
time upon the giving of reasonable written notice to the Registrar.
SECTION 2.09. Replacement Securities. If a mutilated Security is
surrendered to the Trustee or if the Holder claims that the Security has been
lost, destroyed or wrongfully taken, then, in the absence of notice to the
Issuer or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall issue and the Trustee shall authenticate a
replacement Security of like tenor and principal amount. If required by the
Trustee or the Company, an indemnity bond must be furnished by the Holder that
is sufficient in the judgment of both the Trustee and the Company to protect the
Company, the Trustee or any Agent from any loss that any of them may suffer if a
Security is replaced. The Company may charge such Holder for its expenses in
replacing a Security. In case any such mutilated, lost, destroyed or wrongfully
taken Security has matured or is about to mature, or has been called for
redemption in full, the Company in its discretion may pay such Security instead
of issuing a new Security in replacement thereof.
Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
<PAGE> 38
33
SECTION 2.10. Outstanding Securities. Securities outstanding at any
time are all Securities that have been authenticated by the Trustee except for
those cancelled by it, those delivered to it for cancellation and those
described in this Section 2.10 as not outstanding. A Security does not cease to
be outstanding because the Company or one of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.09, it ceases to be
outstanding unless and until the Trustee receives proof satisfactory to it that
the replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on a maturity date money sufficient to pay Securities payable on
that date, then on and after that date such Securities cease to be outstanding
and interest on them shall cease to accrue.
SECTION 2.11. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have insertions, substitutions, omissions and
other variations determined to be appropriate by the officers executing the
temporary Securities, as evidenced by their execution of such temporary
Securities. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Securities in exchange for temporary
Securities. Until so exchanged, the temporary Securities shall be entitled to
the same benefits under this Indenture as definitive Securities.
SECTION 2.12. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for transfer,
exchange or payment. The Trustee and no other Person shall cancel all Securities
surrendered for transfer, exchange, payment (including any repurchase) or
cancellation and shall destroy them in accordance with its normal procedure. The
Company may not issue new Securities to replace Securities it has paid in full.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use), and the Trustee shall use
CUSIP numbers in notices of exchange as a convenience to Holders; provided that
any such notice shall state that no representation is made by the Trustee as to
the correctness of such numbers either as printed on the Securities or as
contained in any notice of exchange and that reliance may be placed only on the
other identification numbers printed on the Securities.
<PAGE> 39
34
SECTION 2.14. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, it shall pay, or shall deposit with the
Paying Agent money in immediately available funds sufficient to pay, the
defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest, to the Persons who are Holders on a subsequent special
record date. A special record date, as used in this Section 2.14 with respect to
the payment of any defaulted interest, shall mean the 15th day next preceding
the date fixed by the Company for the payment of defaulted interest, whether or
not such day is a Business Day. At least 15 days before the subsequent special
record date, the Company shall mail to each Holder and to the Trustee a notice
that states the subsequent special record date, the payment date and the amount
of defaulted interest to be paid. Nothing herein shall prohibit the Company from
paying defaulted interest in any lawful manner.
SECTION 2.15. Treasury Securities Deemed Outstanding. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, amendment, supplement, waiver or consent, Securities
owned by the Company or an Affiliate of the Company or any of its Affiliates
shall be deemed not to be outstanding, except that, for the purpose of
determining whether a Responsible Officer shall be protected in relying on any
such direction, waiver or consent, only Securities which a Responsible Officer
actually knows are so owned shall be so disregarded. Also, subject to the
foregoing, only Securities outstanding at the time shall be considered in any
such determination.
SECTION 2.16. Securities Obligations of Company Only. The Holders
acknowledge, by their acceptance of Securities, that such Securities are solely
obligations of the Company and that the Indebtedness under the Bank Credit
Agreement constitutes obligations of one or more of the Company's Subsidiaries.
ARTICLE THREE
COVENANTS
SECTION 3.01. Payment of Securities. The Company shall pay the
principal of and interest on the Securities on the dates and in the manner
provided in the Securities and this Indenture. An installment of principal or
interest shall be considered paid on the date due if the Trustee or Paying Agent
(other than the Company, a Subsidiary of the Company, or any Affiliate of any of
them) holds on that date money designated for and sufficient to pay the
installment. If the Company, any Subsidiary of the Company, or any Affiliate of
any of them, acts as Paying Agent, an installment
<PAGE> 40
35
of principal or interest shall be considered paid on the due date if the entity
acting as Paying Agent complies with the last sentence of Section 2.05 of this
Indenture.
The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at the rate per annum
therefor indicated in the Securities.
SECTION 3.02. Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, The City of New York an office or agency
where securities may be surrendered for registration of transfer or exchange or
for presentation for payment and where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 9.02 of this Indenture.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided that no such designation or rescission shall in any manner relieve the
company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby initially designates the office of the Trustee,
located in the Borough of Manhattan, The City of New York as such office of the
Company in accordance with Section 2.04 of this Indenture.
SECTION 3.03. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, Incur any Indebtedness
except:
(i) Indebtedness of the Company if, after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the
proceeds therefrom, the Consolidated Fixed Charge Ratio of the Company
would be greater than 2.25:1;
(ii) Indebtedness under the Bank Credit Agreement in an aggregate
principal amount not to exceed (x) $175,000,000 less (y) the amount of any
reduction in the commitments thereunder
<PAGE> 41
36
pursuant to clause (B) in the second paragraph of Section 3.09(a));
(iii) Indebtedness existing on July 28, 1993;
(iv) Indebtedness issued in exchange for, or the net proceeds of
which are used to exchange, refinance or refund, outstanding Indebtedness
of the Company or any of its Restricted Subsidiaries in an amount (or, if
such new Indebtedness provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration
thereof, with an original issue price) not to exceed the amount so
exchanged, refinanced or refunded (plus premiums, accrued interest, fees
and expenses); provided that (A) the Indebtedness issued does not mature
prior to the Stated Maturity of, and does not have an Average Life shorter
than, the Average Life of the Indebtedness being so exchanged, refinanced
or refunded and (B) in case the Indebtedness to be exchanged, refinanced
or refunded is expressly subordinated in right of payment to the
Securities, (1) such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is
expressly made subordinate in right of payment to the Securities at least
to the extent that the Indebtedness to be exchanged, refinanced or
refunded is subordinated in right of payment to the Securities, (2) such
Indebtedness, determined as of the date of its Incurrence, does not mature
prior to one year after the Stated Maturity of the Securities and (3) the
Average Life of such Indebtedness, determined as of the date of its
Incurrence, is at least one year longer than the remaining Average Life of
the Securities;
(v) Indebtedness of the Company to any Restricted Subsidiary that is
a Wholly Owned Subsidiary of the Company, or of a Restricted Subsidiary to
the Company or to any other Restricted Subsidiary that is a Wholly Owned
Subsidiary of the Company;
(vi) Acquired Indebtedness; provided that, at the time of the
Incurrence thereof, the Company could Incur at least $1.00 of the
Indebtedness under clause (i) of this Section 3.03(a); and refinancings
thereof; provided further that any refinancing Indebtedness may not be
Incurred by any Person other than the Company or the Restricted Subsidiary
that is the obligor on such Acquired Indebtedness;
(vii) Indebtedness in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided in the ordinary course of
business;
<PAGE> 42
37
(viii) Indebtedness under Currency Agreements and Interest Rate
Agreements; provided that, in the case of Currency Agreements that relate
to other Indebtedness, such Currency Agreements do not increase the
Indebtedness of the Company or any Subsidiary outstanding at any time
other than as a result of fluctuations in foreign currency exchange rates
or by reason of fees, indemnities and compensation payable thereunder;
(ix) Indebtedness arising from Guarantees or letters of credit,
surety bonds or performance bonds securing any obligations of the Company
or any Subsidiary pursuant to agreements providing for indemnification,
adjustment of purchase price or similar obligations Incurred in connection
with the disposition of any business, assets or Subsidiary of the Company,
in a principal amount not to exceed the gross proceeds actually received
by the Company or any Subsidiary in connection with such disposition (but
excluding Guarantees of Indebtedness Incurred by any Person acquiring all
or any portion of such business, assets or Subsidiary of the Company for
the purpose of financing such acquisition);
(x) Indebtedness incurred to finance capital expenditures in a
principal amount not to exceed, together with other Indebtedness Incurred
pursuant to this clause (x) during the preceding 12-month period, $10
million in the aggregate;
(xi) Incurrence of Capitalized Leases in an amount required to be
capitalized on the Company's consolidated balance sheet not to exceed,
together with other Indebtedness Incurred pursuant to this clause (xi), $3
million during the preceding 12-month period or $12.5 million since July
28, 1993;
(xii) additional Indebtedness under the Bank Credit Agreement in an
aggregate principal amount not to exceed $50 million; and
(xiii) Indebtedness of the Company not otherwise permitted by this
Section 3.03(a), in an aggregate amount not to exceed $25 million at any
time outstanding and Indebtedness of Restricted Subsidiaries not otherwise
permitted by this Section 3.03(a), in an aggregate amount not to exceed
$25 million at any time outstanding.
(b) For purposes of determining any particular amount of
Indebtedness under this Section 3.03, Guarantees of, or obligations with respect
to letters of credit supporting, Indebtedness otherwise included in the
determination of such particular amount shall not be included. For purposes of
determining compliance with
<PAGE> 43
38
this Section 3.03, (A) in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify such item of
Indebtedness and shall only be required to include the amount and type of such
Indebtedness in one of such clauses and (B) the amount of Indebtedness issued at
a price that is less than the principal amount thereof shall be equal to the
amount of the liability in respect thereof determined in conformity with GAAP.
SECTION 3.04. Limitation on Restricted Payments. The Company will
not, and will not permit any Restricted Subsidiary, directly or indirectly, to
(i) declare or pay any dividend or make any distribution on any class of its
Capital Stock (other than dividends or distributions payable solely in shares of
its or such Restricted Subsidiary's Capital Stock (other than Redeemable Stock)
of the same class as such Capital Stock or in options, warrants or other rights
to acquire shares of such Capital Stock) held by Persons other than the Company
or any of its Restricted Subsidiaries which are Wholly Owned Subsidiaries, (ii)
purchase, redeem, retire or otherwise acquire for value any shares of Capital
Stock of the Company, any Restricted Subsidiary or any Unrestricted Subsidiary
(including options, warrants or other rights to acquire any shares of such
Capital Stock) held by Persons other than the Company or another Restricted
Subsidiary that is a Wholly Owned Subsidiary, (iii) make any voluntary or
optional principal payment, or voluntary or optional redemption, repurchase,
defeasance or other acquisition or retirement for value, of Indebtedness of the
Company that is expressly subordinated in right of payment to the Securities, or
(iv) make any Investment in any Affiliate (other than the Company or a
Restricted Subsidiary that is a Wholly Owned Subsidiary) (such payments or any
other actions described in clauses (i) through (iv) being collectively
"Restricted Payments") unless at the time of and after giving effect to the
proposed Restricted Payment: (a) no Default or Event of Default shall have
occurred and be continuing, (b) the Company could Incur at least $1.00 of
Indebtedness pursuant to clause (i) of Section 3.03(a) and (c) the aggregate
amount expended for all Restricted Payments (the amount so expended, if other
than in cash, to be determined in good faith by the Board of Directors and
evidenced by a Board Resolution) after July 28, 1993 (together with any amounts
paid after such date pursuant to clauses (i), (iv) and (vi) in the following
paragraph) shall not exceed the sum of (1) 50% of the aggregate amount of
Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is
a loss, minus 100% of such amount) of the Company accrued on a cumulative basis
during the period (taken as one accounting period) beginning on August 15, 1993
and ending on the last day of the last fiscal quarter preceding the Transaction
Date plus (2) the aggregate net proceeds (including the fair market value of
noncash proceeds as determined
<PAGE> 44
39
in good faith by the Board of Directors, whose determination shall be evidenced
by a Board Resolution) received by the Company from the issuance and sale of its
Capital Stock (other than Redeemable Stock) to any Person other than a
Subsidiary of the Company, including an issuance or sale for cash or other
property upon the conversion of any Indebtedness of the Company subsequent to
July 28, 1993, or from the issuance of any options, warrants or other rights to
acquire Capital Stock of the Company (in each case, excluding any Redeemable
Stock or any options, warrants or other rights that are redeemable at the option
of the holder, or are required to be redeemed, prior to the Stated Maturity of
the principal of the Securities) plus (3) an amount equal to the net reduction
in Investments in Unrestricted Subsidiaries resulting from payments of principal
of or interest on Indebtedness, dividends or other transfers of assets, in each
case to the Company or any Restricted Subsidiary from any Unrestricted
Subsidiary, or from the redesignation of any Unrestricted Subsidiary as a
Restricted Subsidiary (valued in each case as provided in the definition of
"Investments"), not to exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary plus (4) $10 million.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if, at the date of declaration, such payment would
comply with the foregoing provision;
(ii) (A) following an initial public offering of the Common Stock of
the Company, the declaration and payment of dividends on the Common Stock
of the Company of up to 6% per annum of the net proceeds received by the
Company in such initial public offering, or (B) following an initial
public offering of the Common Stock of Holdings, the declaration and
payment of dividends to Holdings in an amount sufficient to permit
Holdings to pay dividends on its Common Stock in an amount of up to 6% per
annum of the net proceeds received by Holdings in such initial public
offering and contributed to the capital of the Company;
(iii) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company, Holdings
or any Restricted Subsidiary, options on any such shares or related stock
appreciation rights or similar securities held by officers or employees or
former officers or employees (or their estates or beneficiaries under
their estates) and which were issued pursuant to any stock option plan,
upon death, disability,
<PAGE> 45
40
retirement, termination of employment or pursuant to the terms of such
stock option plan or any other agreement under which such shares of
Capital Stock, options, related rights or similar securities were issued,
or the payment of dividends to Holdings in an amount sufficient to effect
such purchase, redemption, acquisition, cancellation or other retirement
for value by Holdings; provided that the aggregate cash consideration paid
for such purchase, redemption, acquisition, cancellation or other
retirement for value of such shares of Capital Stock, options, related
rights or similar securities after July 28, 1993 does not exceed $5
million per annum or $10 million in the aggregate;
(iv) the redemption, repurchase or other acquisition for value of
Capital Stock of the Company or any Subsidiary of the Company in exchange
for, or with the proceeds of a substantially concurrent offering of, other
shares of Capital Stock of the Company (other than Redeemable Stock);
(v) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the Securities, including premium, if any, and accrued and
unpaid interest, in exchange for, or with the proceeds of a substantially
concurrent issuance of, Indebtedness Incurred under clause (iv) of Section
3.03(a);
(vi) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness of the Company that is subordinated
in right of payment to the securities including premium, if any, and
accrued and unpaid interest, in exchange for, or with the proceeds of a
substantially concurrent issuance of, shares of the Capital Stock of the
Company (other than Redeemable Stock);
(vii) the purchase of shares of Capital Stock of Holdings for
contributions to the pension and other employee benefit plans of the
Company and its Subsidiaries; provided that the aggregate consideration
paid for such purchases do not, in any one fiscal year of the Company,
exceed an aggregate amount of $1 million; or
(viii) the making of Investments in Unrestricted Subsidiaries in an
aggregate amount not to exceed $25 million outstanding at any time;
provided in each case, no Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof.
SECTION 3.05. Limitation on Dividend and Other Payment
<PAGE> 46
41
Restrictions Affecting Restricted Subsidiaries. The Company will not, and will
not permit any Restricted Subsidiary to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (i) pay dividends or make any
other distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay interest on or principal of any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or any
other Restricted Subsidiary or (iv) transfer any of its property or assets to
the Company or any other Restricted Subsidiary.
The foregoing provision shall not restrict or prohibit any
encumbrances or restrictions:
(i) in the Bank Credit Agreement or any other agreements in effect
on July 28, 1993;
(ii) with respect to any Person or the property or assets of such
Person, acquired by the Company or any Restricted Subsidiary and existing
prior to such acquisition, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired;
(iii) in any agreement that extends, refinances, renews or replaces
agreements containing restrictions referred to in clause (i) or (ii)
above, which encumbrances or restrictions are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect pursuant to the agreements that are being
extended, refinanced, renewed or replaced;
(iv) in the case of clause (iv) of the first paragraph of this
Section 3.05, (A) restricting in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset, (B) arising by virtue
of any transfer of, agreement to transfer, option or right with respect
to, or any Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by this Indenture or (C)
arising or agreed to in the ordinary course of business and that do not,
individually or in the aggregate, detract from the value of the property
or assets of the Company or any Restricted Subsidiary in any manner
material to the Company or such Restricted Subsidiary;
(v) that constitute Permitted Liens; or
<PAGE> 47
42
(vi) under or by reason of applicable law, rule or
regulation (including, without limitation, applicable currency control
laws and applicable state corporate statutes restricting the payment of
dividends in certain circumstances).
SECTION 3.06. Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, issue or sell any shares of a
Restricted Subsidiary's Capital Stock (including securities convertible into or
exchangeable for such Capital Stock or options, warrants or other rights to
purchase shares of such Capital Stock) except to the Company or another
Restricted Subsidiary that is a Wholly Owned Subsidiary of the Company.
SECTION 3.07. Limitation on Transactions with Shareholders and
Affiliates. The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) involving aggregate
consideration in excess of $10 million with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Company or any
Subsidiary of the Company or with any Affiliate of the Company or any Subsidiary
of the Company, except upon fair and reasonable terms no less favorable to the
Company or such Restricted Subsidiary than could be obtained in a comparable
arm's-length transaction with a Person that is not such a holder or an
Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) any transaction in the ordinary course of business between the
Company and any Restricted Subsidiary that is a Wholly Owned Subsidiary of
the Company or between Restricted Subsidiaries that are Wholly Owned
Subsidiaries of the Company;
(ii) transactions approved by a majority of the disinterested
members of the Board of Directors (if any);
(iii) any payment of moneys or issuance of securities pursuant to
employment arrangements and employee benefit plans, in each case approved
by the Board of Directors;
(iv) the payment of reasonable and customary regular fees to
directors of the Company or any Subsidiary of the Company who are not
employees of the Company or such Subsidiary of the
<PAGE> 48
43
Company;
(v) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company
is required or permitted to file a consolidated tax return or with which
the Company is or could be part of a consolidated group for tax purposes;
(vi) any Restricted Payments permitted by Section 3.04;
(vii) loans or advances by the Company or a Restricted Subsidiary to
employees of the Company or a Restricted Subsidiary in the ordinary course
of business;
(viii) any transaction contemplated by any stock option plan of the
Company; or
(ix) the allocation of Indebtedness and interest expense under the
Bank Credit Agreement among the Company and one or more Restricted
Subsidiaries.
SECTION 3.08. Limitation on Liens. The Company will not, and will
not permit any Restricted Subsidiary to, create, incur, assume or suffer to
exist any Lien on any asset of the Company or such Restricted Subsidiary,
without making effective provision for all of the Securities and all other
amounts due under this Indenture to be directly secured equally and ratably with
(or prior to) the obligation or liability secured by such Lien unless, after
giving effect thereto, the aggregate amount of any such obligation or liability
so secured, plus the Attributable Indebtedness for all sale-leaseback
transactions restricted as described in Section 3.10, does not exceed 10% of
Consolidated Net Tangible Assets.
The foregoing limitation does not apply to, and any computation of
Indebtedness secured under such limitation shall exclude:
(i) Liens existing on July 28, 1993;
(ii) Liens securing obligations under the Bank Credit Agreement;
(iii) Liens with respect to Acquired Indebtedness and refinancings
thereof permitted under clause (vi) of Section 3.03(a); provided that such
Liens do not extend to or cover any property or assets of the Company or
any Subsidiary of the Company other than the property or assets of the
Subsidiary acquired;
<PAGE> 49
44
(iv) Liens with respect to assets of a Restricted Subsidiary granted
by such Restricted Subsidiary to the Company or to a Restricted Subsidiary
that is a Wholly Owned Subsidiary of the Company to secure Indebtedness
owing to the Company or such other Restricted Subsidiary by such
Restricted Subsidiary;
(v) Liens granted in connection with the extension, renewal,
refinancing or replacement, in whole or in part, of any secured
Indebtedness permitted to be incurred under clause (iv) of Section
3.03(a); provided that such Liens do not extend to or cover any property
or assets of the Company or any Restricted Subsidiary other than the
property or assets securing the Indebtedness being refinanced;
(vi) Liens in respect of Capitalized Leases Incurred pursuant to
clause (xi) in Section 3.03(a); and
(vii) Permitted Liens.
SECTION 3.09. Limitation on Asset Sales. (a) Neither the Company nor
any Restricted Subsidiary shall consummate any Asset Sale (other than an Asset
Sale in connection with a sale-leaseback transaction complying with Section
3.10) unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Sale having a value (including the value
of any noncash consideration, as determined in good faith by the Board of
Directors) at least equal to the fair market value (as determined in good faith
by the Board of Directors) of the shares or assets subject to such Asset Sale,
(ii) at least 80% of such consideration is in the form of cash (including, for
purposes of this clause (ii), (A) the principal amount of any Indebtedness (as
reflected on the Company's consolidated balance sheet) of the Company or any
Restricted Subsidiary for which the Company and its Restricted Subsidiaries will
cease to be liable, directly or indirectly, as a result of such Asset Sale; and
(B) securities that are promptly converted into cash) and (iii) 100% of the Net
Cash Proceeds with respect to such Asset Sale are applied by the Company or such
Restricted Subsidiary as set forth in the succeeding paragraph.
In the event and to the extent that the Net Cash Proceeds received
by the Company or any Restricted Subsidiary from one or more Asset Sales
occurring on or after July 28, 1993 in any period of 12 consecutive months
(other than Asset Sales by the Company or another Restricted Subsidiary to the
Company or another Restricted Subsidiary) exceed 15% of Consolidated Net
Tangible Assets in any one fiscal year (determined as of the date closest to the
commencement of such 12-month period for which a balance sheet of the Company
and its Subsidiaries has been prepared), then within 12 months following the
date of such event, the Company or such
<PAGE> 50
45
Restricted Subsidiary shall apply such excess Net Cash Proceeds (A) first, to
the extent the Company or such Subsidiary elects, to invest (or to enter into a
definitive agreement committing so to invest within 12 months after the date of
such agreement) in property or assets that (as determined in good faith by the
Board of Directors) are of a nature or type or are used in a business (or in a
company having property and assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property and assets
of, or to the business of, the Company and its Restricted Subsidiaries existing
on the date of such Asset Sale; (B) second, to the extent of the balance of such
excess Net Cash Proceeds after application in accordance with clause (A) and to
the extent the Company or such Restricted Subsidiary elects, to prepay, repay or
purchase the Existing Notes or Indebtedness of any Restricted Subsidiary;
provided that the Company or such Restricted Subsidiary shall repay such
Indebtedness and cause the related loan commitment to be permanently reduced in
an amount equal to the principal amount so prepaid, repaid or purchased and (C)
third, to the extent of the balance of such excess Net Cash Proceeds after
application in accordance with clauses (A) and (B), to make an offer to purchase
Securities as set forth below. The amount of such excess Net Cash Proceeds
required to be applied (or committed to be applied) during such 12-month period
as set forth in clause (A) or (B) of the preceding sentence and not applied as
so required by the end of such period shall constitute "Excess Proceeds."
(b) If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer
(as defined below) totals at least $10 million, the Company must, not later than
the fifteenth Business Day of such month, make an offer (an "Excess Proceeds
Offer") to purchase from the Holders on a pro rata basis an aggregate principal
amount of Securities equal to the Excess Proceeds on such date (rounded down to
the nearest $1,000), at a purchase price equal to 101% of the principal amount
of such Securities, plus, in each case, accrued interest (if any) to the date of
purchase (the "Excess Proceeds Payment").
(c) The Company shall commence an Excess Proceeds Offer by mailing a
notice to the Trustee and each Holder as of such record date as the Company
shall establish (and delivering such notice to the Trustee at least five days
prior thereto) stating:
(i) that the Excess Proceeds Offer is being made pursuant to this
Section 3.09 and that all Securities validly tendered will be accepted for
payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Excess
<PAGE> 51
46
Proceeds Payment Date");
(iii) that any Security not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in the payment of the Excess
Proceeds Payment, any Security accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Excess
Proceeds Payment Date;
(v) that Holders electing to have any Security purchased pursuant to
the Excess Proceeds Offer will be required to surrender such Security,
together with the form entitled "Option of the Holder to Elect Purchase"
on the reverse side of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the
Business Day immediately preceding the Excess Proceeds Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Excess Proceeds Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of such Holder, the principal amount of Securities delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Securities purchased; and
(vii) that Holders whose Securities are being purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided that each Security
purchased and each new Security issued shall be in a principal amount of
$1,000 or integral multiples thereof.
At least five days prior to the date notice is mailed to each
Holder, the Company shall furnish the Trustee with an Officers' Certificate
stating the amount of the Excess Proceeds Payment.
(d) On the Excess Proceeds Payment Date, the Company shall:
(i) accept for payment on a pro rata basis Securities or portions
thereof tendered pursuant to the Excess Proceeds Offer;
(ii) deposit one day prior to the Excess Proceeds Payment Date with
the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof so
<PAGE> 52
47
accepted; and
(iii) deliver; or cause to be delivered, to the Trustee, all
Securities or portions thereof so accepted, together with an Officers'
Certificate specifying the Securities or portions thereof accepted for
payment by the Company.
The Paying Agent shall promptly mail to the Holders of Securities so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders a new Security equal in principal
amount to any unpurchased portion of the Security surrendered; provided that
each Security purchased and each new Security issued shall be in a principal
amount of $1,000 or integral multiples thereof.
The Company will publicly announce the results of the Excess
Proceeds Offer as soon as practicable after the Excess Proceeds Payment Date.
For purposes of this Section 3.09, the Trustee shall act as the Paying Agent.
(e) The Company will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in the event that the Company is required to
repurchase Securities as described above. The Trustee shall not be responsible
for determining whether compliance with such Rule 14e-1 is required or has been
satisfied.
SECTION 3.10. Limitation on Sale-Leaseback Transactions. The Company
will not, and will not permit any Restricted Subsidiary to, enter into any
sale-leaseback transaction, unless the aggregate amount of all Attributable
Indebtedness with respect to such transactions, plus all Indebtedness secured by
Liens (excluding secured obligations or liabilities that are excluded as
described in the second paragraph of Section 3.08), does not exceed 10% of
Consolidated Net Tangible Assets.
The foregoing restriction does not apply to, and any computation of
Attributable Indebtedness under such limitation shall exclude, any
sale-leaseback transaction if:
(i) the lease is for a period, including renewal rights, of not in
excess of three years;
(ii) the sale or transfer of the property is entered into prior to,
at the time of, or within 12 months after the later of the acquisition of
the property or the completion of construction thereof;
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48
(iii) the lease secures or relates to industrial revenue bonds;
(iv) the transaction is between the Company and any Restricted
Subsidiary or between Restricted Subsidiaries that are Wholly Owned
Subsidiaries; or
(v) within 12 months after the sale of any Property is completed,
the Company or such Restricted Subsidiary applies an amount not less than
the net proceeds received from such sale in the manner described in the
second paragraph of Section 3.09(a).
SECTION 3.11. Repurchase of Securities upon Change of Control. (a)
Upon the Occurrence of a Change of Control, each Holder shall have the right to
require the Company to repurchase such Holder's Securities by the Company in
cash pursuant to the offer described below (the "Change of Control Offer") at a
purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the date of purchase (the "Change of Control Payment").
Prior to the mailing of the notice to Holders provided for in the succeeding
paragraph, but in any event within 30 days following the occurrence of a Change
of Control, the Company covenants to (i) repay or cause to be repaid in full all
Indebtedness under the Bank Credit Agreement, or to offer to repay in full all
such Indebtedness and to repay the Indebtedness of each Bank which has accepted
such offer or (ii) obtain the requisite consents under the Bank Credit Agreement
to permit the repurchase of the Securities, as provided for in the succeeding
paragraph. The Company shall first comply with the covenant in the preceding
sentence before it shall be required to repurchase Securities pursuant to this
Section 3.11. The notice to Holders shall contain all instructions and material
necessary to enable such Holders to tender Securities.
(b) Within 30 days after the occurrence of a Change of Control, the
Company shall mail a notice to the Trustee and each Holder as of such record
date as the Company shall establish (and deliver such notice to the Trustee at
least five days prior thereto) stating:
(i) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this Section 3.11 and that all
Securities validly tendered will be accepted for payment;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Change of Control Payment Date");
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49
(iii) that any Security not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in the payment of the Change
of Control Payment, any Security accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest on and after the
Change of Control Payment Date;
(v) that Holders electing to have any Security purchased pursuant to
the Change of Control Offer will be required to surrender such Security,
together with the form entitled "Option of the Holder to Elect Purchase"
on the reverse side of such Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the
Business Day immediately preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of such Holder, the principal amount of Securities delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Securities purchased; and
(vii) that Holders whose Securities are being purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; provided that each Security
purchased and each new Security issued shall be in a principal amount of
$1,000 or integral multiples thereof.
(c) On the Change of Control Payment Date, the Company shall:
(i) accept for payment Securities or portions thereof tendered
pursuant to the Change of Control Offer;
(ii) deposit one day prior to the Change of Control Payment Date
with the Paying Agent money sufficient to pay the purchase price of all
Securities or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee, all
Securities or portions thereof so accepted together with an Officers'
Certificate specifying the Securities or portions thereof accepted for
payment by the Company.
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The Paying Agent shall promptly mail, to the Holders of Securities
so accepted, payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders a new Security equal in
principal amount to any unpurchased portion of the Securities surrendered;
provided that each Security purchased and each new Security issued shall be in a
principal amount of $1,000 or integral multiples thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 3.11, the Trustee shall act as Paying Agent.
(d) The Company will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in the event that a Change of Control occurs
under this Section 3.11 and the Company is required to repurchase Securities as
described above.
SECTION 3.12. Corporate Existence. Subject to Articles Three and
Four of this Indenture, the Company will do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate existence of each Subsidiary in accordance with the respective
organizational documents of the Company and of each Subsidiary of the Company
and the material rights (charter and statutory), licenses and franchises of the
Company and its Subsidiaries; provided that the Company shall not be required to
preserve any such right, license or franchise, or the corporate existence of any
Subsidiary of the Company, if the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries taken as a whole
and if the failure to preserve such right, license, franchise or corporate
existence shall not be adverse to any Holder.
SECTION 3.13. Payment of Taxes and Other Claims. The Company will
pay or discharge, or cause to be paid or discharged, before any penalty accrues
thereon (i) all material taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary of the Company or upon the income,
profits or property of the Company or any Subsidiary of the Company and (ii) all
material lawful claims for labor, materials and supplies that, if unpaid, might
by law become a Lien upon the property of the Company or any Subsidiary of the
Company; provided that the Company shall not be required to pay or discharge, or
cause to be paid or discharged, any such tax, assessment, charge or claim the
amount, applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate reserves have been made.
<PAGE> 56
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SECTION 3.14. Maintenance of Properties and Insurance. The Company
will cause all properties used or useful in the conduct of its business or the
business of any Subsidiary of the Company and material to the Company and its
Subsidiaries taken as a whole to be maintained and kept in normal condition,
repair and working order, all as in the judgment of the Company may be necessary
for the conduct of the business of the Company in the ordinary course.
The Company will provide or cause to be provided, for itself and its
Subsidiaries, insurance (including appropriate self-insurance) against loss or
damage of the kinds customarily insured against by corporations similarly
situated and owning like properties in such amounts, with such deductibles and
by such methods as shall be customary for corporations similarly situated in the
industry.
SECTION 3.15. Compliance Certificates. (a) The Company shall deliver
to the Trustee, within 60 days after the end of each of the first three fiscal
quarters of each year and 120 days after the end of the last fiscal quarter of
each year, an Officers' Certificate stating whether or not the signers know of
any Default or Event of Default that occurred during such fiscal quarter. In the
case of the Officers' Certificate delivered within 120 days of the end of the
Company's fiscal year, such certificate shall contain a certification from the
principal executive officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's compliance with all
conditions and covenants under this Indenture. For purposes of this Section
3.15, such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture. If such officers know of
such a Default or Event of Default, the certificate shall describe any such
Default or Event of Default and its status. The first certificate to be
delivered pursuant to this Section 3.15(a) shall be for the first fiscal quarter
ending after the execution of this Indenture.
(b) The Company shall deliver to the Trustee, within 120 days after
the end of the Company's fiscal year, a certificate signed by the Company's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the
Securities as they relate to accounting matters, (ii) that they have read the
Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of this
Section 3.15 for the last quarter of the fiscal year and (iii) whether, in
connection with their audit examination, anything came to their attention that
caused them to believe that the Company was not in compliance with any of the
terms, covenants, provisions or conditions of Article Three and Section 4.01 of
this Indenture as they pertain to accounting matters and, if any Default or
Event of Default has come to their attention, specifying the nature and
<PAGE> 57
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period of existence thereof; provided that such independent certified public
accountants shall not be liable in respect of such statement by reason of any
failure to obtain knowledge of any such Default or Event of Default that would
not be disclosed in the course of an audit examination conducted in accordance
with generally accepted auditing standards in effect at the date of such
examination.
SECTION 3.16. Commission Reports and Reports to Holders. Within 15
days after the Company files with the Commission copies of its annual reports
and other information, documents and reports (or copies of such portions of any
of the foregoing as the Commission may by rules and regulations prescribe) that
it is required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act, the Company shall file the same with the Trustee. So long as
the Securities remain outstanding, the Company shall file with the Commission
quarterly reports (containing unaudited financial statements) for the first
three quarters of each fiscal year and annual reports (containing audited
financial statements and an opinion thereon by the Company's independent
certified public accountants) that it would be required to file under Section 13
of the Exchange Act if it had a class of securities listed on a national
securities exchange and shall cause to be mailed to the Holders at their
addresses appearing in the Security Register within 15 days of when such report
would have been required to be filed under Section 13 of the Exchange Act. The
Company also shall comply with the other provisions of TIA Section 314(a).
SECTION 3.17. Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or that may affect the covenants
or the performance of this Indenture; and (to the extent that it may lawfully do
so) the Company hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE FOUR
SUCCESSOR CORPORATION
SECTION 4.01. When Company May Merge, Etc. The Company shall not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company (other than a merger of the Company with (but not into) a Restricted
Subsidiary that is a Wholly Owned Subsidiary of the Company with a positive
stockholder's equity determined in accordance with GAAP; provided that, in
connection with any such merger, no consideration (other than Common Stock in
the Company) shall be issued or distributed to the stockholders of the Company)
unless:
(i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the
Company is merged or that acquires or leases such property and assets of
the Company shall be a corporation organized and validly existing under
the laws of the United States of America or any jurisdiction thereof and
shall expressly assume, by supplemental indenture, executed and delivered
to the Trustee, in form satisfactory to the Trustee, all of the
obligations of the Company on all of the Securities and under this
Indenture;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a pro
forma basis, the Company (or any Person that becomes the successor obligor
on the Securities) shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of the Company immediately prior to such
transaction;
(iv) immediately after giving effect to such transaction on a pro
forma basis, the Company (or any Person that becomes the successor obligor
on the Securities) shall be able to Incur at least $1.00 of additional
Indebtedness pursuant to clause (i) of Section 3.03(a); and
(v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that
such
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consolidation, merger or transfer and such supplemental indenture comply
with this provision and that all conditions precedent provided for herein
relating to such transaction have been complied with.
SECTION 4.02. Successor Corporation Substituted. Upon any
consolidation or merger, or any sale, conveyance, transfer, lease or other
disposition of all or substantially all of the property and assets of the
Company in accordance with Section 4.01 of this Indenture, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such sale, conveyance, transfer, lease or other disposition is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
corporation had been named as the Company herein.
ARTICLE FIVE
DEFAULT AND REMEDIES
SECTION 5.01. Events of Default. An "Event of Default" occurs with
respect to the Securities if:
(a) the Company defaults in the payment of principal of (or premium,
if any, on) any Security, when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on any Security,
as and when the same becomes due and payable, and such default continues
for a period of 30 days;
(c) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture or under the
Securities and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount of the Securities;
(d) the Company or any Restricted Subsidiary fails to make (i) a
principal payment of $10 million or more at the final (but not any
interim) Stated Maturity of any issue of Indebtedness or (ii) principal
payments aggregating $10 million or more at the final (but not any
interim) Stated Maturity of more than one issue of Indebtedness and, in
the case of clause (i), such defaulted payment shall not have been made,
waived or extended within 30 days of the payment default and, in the case
of clause (ii), all such defaulted
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payments shall not have been made, waived or extended within 30 days of
the payment default that causes the amount described in clause (ii) to
exceed $10 million;
(e) there occurs with respect to any Indebtedness of the Company or
any Restricted Subsidiary having an outstanding principal amount,
individually or in the aggregate, of $10 million or more, an event of
default that has caused the holder or holders thereof, or representatives
of such holder or holders, to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration;
(f) final judgments or orders (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Restricted Subsidiary and shall not be
discharged, and there shall be any period of 30 consecutive days following
entry of the final judgment or order in excess of $10 million individually
or that causes the aggregate amount for all such final judgments or orders
outstanding against all such Persons to exceed $10 million during which a
stay of enforcement of such final judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (i) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (ii)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant
Subsidiary or for all or substantially all of the property and assets of
the Company or any Significant Subsidiary or (iii) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(h) the Company or any Significant Subsidiary (i) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (ii) consents
to the appointment of or taking possession by a receiver,
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liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Company or any Significant Subsidiary or for all or substantially
all of the property and assets of the Company or any Significant
Subsidiary, or (iii) effects any general assignment for the benefit of
creditors.
A Default under clause (c) is not an Event of Default until the
Trustee notifies the Company in writing, or the Holders of at least 25% of the
principal amount of the Securities outstanding notify the Company and the
Trustee in writing, of the Default and the Company does not cure the Default
within 30 days after receipt of the notice. The notice must specify the Default,
demand that it be remedied and state that the notice is a "Notice of Default."
Such notice shall be given by the Trustee if so requested in writing by the
Holders of 25% of the principal amount of the Securities then outstanding.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which constitutes an Event of Default or which with the giving of
notice or the lapse of time or both would become an Event of Default under
clause (c), (d), (e) or (f), its status and what action the Company is taking or
proposes to take with respect thereto.
SECTION 5.02. Acceleration. If an Event of Default (other than an
Event of Default specified in clause (g) or (h) above that occurs with respect
to the Company) occurs and is continuing under this Indenture, the Trustee or
the Holders of at least 25% in aggregate principal amount of the Securities then
outstanding, by written notice to the Company (and to the Trustee if such notice
is given by such Holders (the "Acceleration Notice")), may, and the Trustee at
the request of such Holders shall, declare the entire unpaid principal of,
premium, if any, and accrued interest on the Securities to be due and payable.
Upon a declaration of acceleration, such principal, premium, if any, and accrued
interest shall become due and payable on the earlier of (x) an acceleration of
Indebtedness under the Bank Credit Agreement and (y) the fifth day following
such declaration (but only if the relevant Event of Default continues
unremedied). In the event of a declaration of acceleration because an Event of
Default set forth in clause (d) or (e) above has occurred and is continuing,
such declaration of acceleration shall be automatically rescinded and annulled
if the event of default triggering such Event of Default pursuant to clause (d)
or (e) shall be remedied or cured by the company or such Restricted Subsidiary
or waived by the holders of the Indebtedness referred to in such clause within
60 days after such declaration of acceleration. If an Event of Default specified
in clause (g) or
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(h) above occurs with respect to the Company, all unpaid principal of, premium,
if any, and accrued interest on the Securities then outstanding shall become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. The Holders of at least a majority in principal
amount of the outstanding Securities, by written notice to the Company and to
the Trustee, may waive all past Defaults or Events of Default and rescind and
annul a declaration of acceleration and its consequences if (i) all existing
Events of Default (other than the non-payment of the principal of, premium, if
any, and interest on the Securities that have become due solely by such
declaration of acceleration) have been cured or waived (subject to Section 5.04)
and (ii) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction.
SECTION 5.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or interest on the Securities
or to enforce the performance of any provision of the Securities or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding.
SECTION 5.04. Waiver of Past Defaults. Subject to Sections 5.02,
5.07 and 8.02 of this Indenture, the Holders of at least a majority in principal
amount of the outstanding Securities, by notice to the Trustee, may waive an
existing Default or Event of Default and its consequences, except a Default in
the payment of principal of or interest on any Security as specified in clause
(a) or (b) of Section 5.01 of this Indenture. Upon any such waiver, such Default
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured, for every purpose of this Indenture; but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon.
SECTION 5.05. Control by Majority. The Holders of at least a
majority in aggregate principal amount of the outstanding Securities may direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that the Trustee is
advised by counsel conflicts with law or this Indenture, that may cause the
Trustee to suffer or incur personal liability, or that the Trustee determines in
good faith may be unduly prejudicial to the rights of Holders of Securities not
joining in
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the giving of such direction.
SECTION 5.06. Limitation on Suits. A Holder may not pursue any
remedy with respect to this Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(iii) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any costs, liability or expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Securities do not give the
Trustee a direction that is inconsistent with the request.
For purposes of Section 5.05 of this Indenture and this Section
5.06, the Trustee shall comply with TIA Section 316(a) in making any
determination of whether the Holders of the required aggregate principal amount
of outstanding Securities have concurred in any request or direction of the
Trustee to pursue any remedy available to the Trustee or the Holders with
respect to this Indenture or the Securities or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 5.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder of a Security to
receive payment of principal of, premium, if any, or interest on the Security on
or after the respective due dates expressed in the Security, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of the Holder.
SECTION 5.08. Collection Suit by Trustee. If an Event of Default in
payment of principal or interest specified in clause (a) or (b) of Section 5.01
of this Indenture occurs and is
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59
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor of the Securities for
the whole amount of principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate borne by the Securities, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 5.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 6.06 of this Indenture) and the Holders allowed in any judicial
proceedings relative to the Company (or any other obligor of the Securities),
its creditors or its property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any custodian in any such judicial proceedings
is hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 6.06 of this
Indenture. To the extent that such payment of reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel out of the
estate in any such judicial proceeding shall be denied for any reason, payment
of the same shall be secured by a first lien on, and shall be paid out of, any
and all dividends, distributions, monies, securities and other property that the
Holders may be entitled to receive in such judicial proceedings, whether in
liquidation or under any plan of reorganization, arrangement or otherwise.
Nothing herein contained shall be deemed to empower the Trustee to authorize or
consent to, or accept or adopt on behalf of any Holder, any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 5.10. Priorities. If the Trustee collects any money pursuant
to this Article Five, it shall pay out the money in the following order:
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First: to the Trustee for amounts due under Section 6.06 of this
Indenture;
Second: to Holders for amounts then due and unpaid for principal of
and interest on the Securities in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal and interest, respectively; and
Third: to the Company or any other obligors of the Securities, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this Section
5.10. At least 15 days prior to such record date, the Company (or upon the
failure of the Company to act, the Trustee) shall mail by first-class mail to
each Holder a notice that states the record date, the payment date and the
amount to be paid.
SECTION 5.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 5.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 5.07 of this Indenture, or a
suit by Holders of more than 10% in principal amount of the outstanding
Securities.
SECTION 5.12. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then,
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 5.13. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment
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of mutilated, destroyed, lost or wrongfully taken Securities in Section 2.09 of
this Indenture, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.14. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article Five or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
ARTICLE SIX
TRUSTEE
SECTION 6.01. Rights of Trustee. (a) Subject to TIA Sections 315(a)
through (d):
(i) the Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document;
(ii) before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and/or an Opinion of Counsel, which shall conform
to Section 9.04 of this Indenture. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion;
(iii) the Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care;
(iv) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses
and liabilities that might be incurred by it in compliance
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with such request or direction;
(v) the Trustee or Paying Agent shall not be liable for interest on
any money received by it except as the Trustee or Paying Agent may agree
in writing with the Company. Money held in trust by the Trustee or Paying
Agent need not be segregated from other funds except to the extent
required by law or expressly required hereunder; and
(vi) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
its rights or powers; provided that the Trustee's conduct does not
constitute negligence or bad faith.
(b) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its rights or powers, if it shall have reasonable grounds
to believe that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(c) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 6.01 and to the provisions of the TIA.
SECTION 6.02. Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 6.03. Trustee's Disclaimer. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the
Securities, (ii) shall not be accountable for the Company's use of the proceeds
from the Securities and (iii) shall not be responsible for any statement in the
Indenture or in the Securities other than its certificate of authentication or
in any document issued in connection with the sale of the Securities.
SECTION 6.04. Notice of Default. If any Default or any Event of
Default occurs and is continuing and if such Default or Event of Default is
actually known by a Responsible Officer of the Trustee charged with
administration of this Indenture, the Trustee shall mail to each Holder in the
manner and to the extent provided in TIA Section 313(c) notice of the Default or
Event of Default within 45 days after it occurs, unless such Default or Event of
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Default has been cured; provided, however that, except in the case of a default
in the payment of the principal of or interest on any Security, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interest of the Holders.
The Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Section
3.01, 5.01(a) or 5.01(b) of this Indenture or (ii) any Default or Event of
Default of which a Responsible Officer of the Trustee charged with
administration of this Indenture shall have received written notification or
obtained actual knowledge, and such notification shall not be deemed to include
receipt of information obtained in any report or other documents furnished under
Section 3.17 of this Indenture, which reports and documents the Trustee shall
have no duty to examine.
SECTION 6.05. Reports by Trustee to Holders. Within 60 days after
each April 1, beginning with April 1, 1998, the Trustee shall mail to each
Holder as provided in TIA Section 313(c) a brief report dated as of such April 1
if required by TIA Section 313(a).
SECTION 6.06. Compensation and Indemnity. The Company shall pay to
the Trustee such compensation as shall be agreed upon in writing for its
services. The compensation of the Trustee shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses and advances
incurred or made by it. Such expenses shall include the reasonable compensation
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence or
bad faith on its part in connection with the administration of this Indenture
and its duties under this Indenture and the Securities, including the costs and
expenses of enforcing this Indenture and of defending itself against any claim
or liability and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under this Indenture and the Securities. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall cooperate in
the defense. The Trustee may have
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separate counsel and the Company shall pay reasonable fees and expenses of such
counsel. The Company need not pay for any settlements made without its consent;
provided that such consent shall not be unreasonably withheld. The Company need
not reimburse any expense or indemnify against any loss or liability incurred by
the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section 6.06,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of and interest on the Securities.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (g) or (h) of Section 5.01
of this Indenture, the expenses and the compensation for the services will be
intended to constitute expenses of administration under Title 11 of the United
States Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
SECTION 6.07. Replacement of Trustee. A resignation or removal of
the Trustee and appointment of a successor Trustee shall become effective only
upon the successor Trustee's acceptance of appointment as provided in this
Section 6.07.
The Trustee may resign by so notifying the Company in writing at
least 30 Business Days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Trustee in writing and (subject to the
following paragraph) may appoint a successor Trustee with the consent of the
Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 6.09 of this Indenture;
(ii) the Trustee is adjudged a bankrupt or an insolvent;
(iii) a receiver or other public officer takes charge of the Trustee
or its property; or
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Securities may appoint a
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successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not take office within 60 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
6.06 of this Indenture, (i) the retiring Trustee shall transfer all property
held by it as Trustee to the successor Trustee, (ii) the resignation or removal
of the retiring Trustee shall become effective and (iii) the successor Trustee
shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If the Trustee fails to comply with Section 6.09 of this Indenture,
any Holder who satisfies the requirements of TIA Section 310(b) may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
6.07, the company's obligations under Section 6.06 of this Indenture shall
continue for the benefit of the retiring Trustee.
SECTION 6.08. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking,
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 6.09. Eligibility. This Indenture shall always have a
Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee
shall have a combined capital and surplus of at least $25,000,000 as set forth
in its most recent published annual report of condition.
SECTION 6.10. Money Held in Trust. The Trustee shall not be liable
for interest on any money received by it except as the Trustee may agree with
the Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law and except for money held in
trust under
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Article Seven of this Indenture.
ARTICLE SEVEN
DISCHARGE OF INDENTURE
SECTION 7.01. Termination of Company's Obligations. Except as
otherwise provided in this Section 7.01, the Company may terminate its
obligations under the Securities and this Indenture if:
(i) all Securities previously authenticated and delivered (other
than destroyed, lost or stolen Securities that have been replaced or
Securities that are paid pursuant to Section 3.01 of this Indenture or
Securities for whose payment money or securities have theretofore been
held in trust and thereafter repaid to the Company, as provided in Section
7.05 of this Indenture) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder; or
(ii) (A) the Securities mature within one year or all of them are to
be called for redemption within one year under arrangements satisfactory
to the Trustee for giving the notice of redemption, (B) the Company
irrevocably deposits in trust with the Trustee during such one-year
period, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee, as trust funds solely for the
benefit of the Holders for that purpose, money or U.S. Government
Obligations sufficient (in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee), without consideration of any
reinvestment of any interest thereon, to pay principal and interest on the
Securities to maturity or redemption, as the case may be, and to pay all
other sums payable by it hereunder, (C) no Default or Event of Default
with respect to the Securities shall have occurred and be continuing on
the date of such deposit, (D) such deposit will not result in a breach or
violation of, or constitute a default under, this Indenture or any other
agreement or instrument to which the Company is a party or by which it is
bound and (E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the satisfaction and
discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's
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obligations under Section 6.06 of this Indenture shall survive. With respect to
the foregoing clause (ii), the Company's obligations in Sections 2.03, 2.04,
2.05, 2.06, 2.09, 2.14, 3.01, 3.02, 6.06, 6.07, 7.04, 7.05 and 7.06 of this
Indenture shall survive until the Securities are no longer outstanding.
Thereafter, only the Company's obligations in Sections 6.06, 7.05 and 7.06 of
this Indenture shall survive. After any such irrevocable deposit, the Trustee
upon request shall acknowledge in writing the discharge of the Company's
obligations under the Securities and this Indenture except for those surviving
obligations specified above.
SECTION 7.02. Defeasance and Discharge of Indenture. The Company
will be deemed to have paid and will be discharged from any and all obligations
in respect of the Securities on the 123rd day after the date of the deposit
referred to in clause (A) of this Section 7.02, and the provisions of this
Indenture will no longer be in effect with respect to the Securities, and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same, except as to (i) rights of registration of transfer and
exchange, (ii) substitution of, apparently mutilated, defaced, destroyed, lost
or stolen Securities, (iii) rights of Holders to receive payments of principal
thereof and interest thereon, (iv) the Company's obligations under Section 3.02,
(v) the rights, obligations and immunities of the Trustee hereunder and (vi) the
rights of the Holders as beneficiaries of this Indenture with respect to the
property so deposited with the Trustee payable to all or any of them; provided
that the following conditions shall have been satisfied:
(A) with reference to this Section 7.02, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 6.09 of this
Indenture) and conveyed all right, title and interest for the benefit of
the Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust,
specifically pledged to the Trustee for the benefit of the Holders as
security for payment of the principal of, premium, if any, and interest,
if any, on the Securities, and dedicated solely to, the benefit of the
Holders, in and to (1) money in an amount, (2) U.S. Government Obligations
that, through the payment of interest and principal in respect thereof in
accordance with their terms, will provide, not later than one day before
the due date of any payment referred to in this clause (A), money in an
amount or (3) a combination thereof in an amount sufficient to pay and
discharge, after payment of all federal, state and local taxes or other
charges and
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assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Securities at the Stated
Maturity of such principal or interest; provided that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such principal,
premium, if any, and interest with respect to the Securities;
(B) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(C) immediately after giving effect to such deposit on a pro forma
basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on the
123rd day after such date of deposit;
(D) the Company shall have delivered to the Trustee (1) either (x) a
ruling directed to the Company received from the Internal Revenue Service
to the effect that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of the Company's exercise of its
option under this Section 7.02 and will be subject to federal income tax
on the same amount and in the same manner and at the same times as would
have been the case if such option had not been exercised or (y) an Opinion
of Counsel to the same effect as the ruling described in clause (x) above,
and (2) an Opinion of Counsel to the effect that (x) the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and
(y) after the passage of 123 days following the deposit (except, with
respect to any trust funds for the account of any Holder who may be deemed
to be an "insider" for purposes of the United States Bankruptcy Code,
after one year following the deposit), the trust funds will not be subject
to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law in a case commenced by
or against the Company under either such statute, and either (I) the trust
funds will no longer remain the property of the Company (and therefore
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally) or (II) if a court were to rule under any such law in any case
or proceeding that the trust funds remained property of the Company, (a)
assuming such trust funds remained in the possession of the Trustee prior
to such court ruling, to the extent not paid to the Holders,
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the Trustee will hold, for the benefit of the Holders, a valid and
perfected security interest in such trust funds that is not avoidable in
bankruptcy or otherwise except for the effect of Section 552(b) of the
United States Bankruptcy Code on interest on the trust funds accruing
after the commencement of a case under such statute and (b) the Holders
will be entitled to receive adequate protection of their interests in such
trust funds if such trust funds are used in such case or proceeding;
(E) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an opinion of
Counsel to the effect that the Securities will not be delisted as a result
of such deposit, defeasance and discharge; and
(F) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 7.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day
period from the date of the deposit referred to in clause (A) above, none of the
Company's obligations under this Indenture shall be discharged. Subsequent to
the end of such 123-day period with respect to this Section 7.02, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.09, 2.14, 3.01, 3.02, 6.06,
6.07, 7.05 and 7.06 of this Indenture shall survive until the Securities are no
longer outstanding. Thereafter, only the Company's obligations in Sections 6.06,
7.05 and 7.06 of this Indenture shall survive. If and when a ruling from the
Internal Revenue Service or an Opinion of Counsel referred to in clause (D)
above is able to be provided specifically without regard to, and not in reliance
upon, the continuance of the Company's obligations under Section 3.01 of this
Indenture, then the Company's obligations under such Section 3.01 of this
Indenture shall cease upon delivery to the Trustee of such ruling or Opinion of
Counsel and compliance with the other conditions precedent provided for herein
relating to the defeasance contemplated by this Section 7.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 7.03. Defeasance of Certain Obligations. The Company may
omit to comply with any term, provision or condition
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set forth in clauses (iii) and (iv) of Section 4.01 and Sections 3.03 through
3.16 of this Indenture, and clause (c) of Section 5.01 of this Indenture with
respect to clauses (iii) and (iv) of Section 4.01 and Sections 3.03 through 3.16
of this Indenture, and clauses (d), (e) and (f) of Section 5.01 of this
Indenture shall be deemed not to be Events of Default, in each case with respect
to the outstanding Securities 123 days after the deposit referred to in clause
(i) below if:
(i) with reference to this Section 7.03, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 6.09 of this
Indenture) and conveyed all right, title and interest to the Trustee for
the benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust funds
in trust, specifically pledged to the Trustee for the benefit of the
Holders as security for payment of the principal of, premium, if any, and
interest, if any, on the Securities, and dedicated solely to, the benefit
of the Holders, in and to (A) money in an amount, (B) U.S. Government
Obligations that, through the payment of interest and principal in respect
thereof in accordance with their terms, will provide, not later than one
day before the due date of any payment referred to in this clause (i),
money in an amount or (C) a combination thereof in an amount sufficient to
pay and discharge, after payment of all federal, state and local taxes or
other charges and assessments in respect thereof payable by the Trustee,
the principal of, premium, if any, and interest on the outstanding
Securities on the Stated Maturity of such principal or interest; provided
that the Trustee shall have been irrevocably instructed to apply such
money or the proceeds of such U.S. Government Obligations to the payment
of such principal, premium, if any, and interest with respect to the
Securities;
(ii) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(iii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that (A) the creation of the defeasance trust does not
violate the Investment Company Act of 1940, (B) the Holders have a valid
first-priority security interest in the trust funds, (C) the Holders will
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not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance of certain obligations and will be
subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such deposit and
defeasance had not occurred and (D) after the passage of 123 days
following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes of
the United States Bankruptcy Code, after one year following the deposit),
the trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (1) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (2) if a court were to rule
under any such law in any case or proceeding that the trust funds remained
property of the Company, (x) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not
paid to the Holders, the Trustee will hold, for the benefit of the
Holders, a valid and perfected security interest in such trust funds that
is not avoidable in bankruptcy or otherwise except for the effect of
Section 552(b) of the United States Bankruptcy Code on interest on the
trust funds accruing after the commencement of a case under such statute
and (y) the Holders will be entitled to receive adequate protection of
their interests in such trust funds if such trust funds are used in such
case or proceeding;
(v) if the Securities are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit, defeasance and discharge will not
cause the Securities to be delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 7.03 have been complied with.
SECTION 7.04. Application of Trust Money. Subject to Section 7.06 of
this Indenture, the Trustee or Paying Agent shall hold in trust money or U.S.
Government obligations deposited with it pursuant to Section 7.01, 7.02 or 7.03
of this Indenture, as the case may be, and shall apply the deposited money and
the
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money from U.S. Government Obligations in accordance with the Securities and
this Indenture to the payment of principal of, premium, if any, and interest on
the Securities; but such money need not be segregated from other funds except to
the extent required by law.
SECTION 7.05. Repayment to Company. Subject to Sections 6.06, 7.01,
7.02 and 7.03 of this Indenture, the Trustee and the Paying Agent shall promptly
pay to the Company upon request set forth in an Officers' Certificate any excess
money held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall pay
to the Company upon request any money held by them for the payment of principal,
premium, if any, or interest that remains unclaimed for two years; provided that
the Trustee or the Paying Agent shall cause to be published at the expense of
the Company once in a newspaper of general circulation in The City of New York
or mail to each Holder entitled to such money at such Holder's address (as set
forth in the Security Register) notice that such money remains unclaimed and
that after a date specified therein (which shall be at least 30 days from the
date of such publication or mailing) any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company, Holders
entitled to such money must look to the Company for payment as general creditors
unless an applicable law designates another Person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
SECTION 7.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
Section 7.01, 7.02 or 7.03 of this Indenture, as the case may be, by reason of
any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 7.01, 7.02 or 7.03 of this Indenture, as the case may be (such revival
and reinstatement to be deemed effective as of the date on which such deposit
had occurred pursuant to Section 7.01, 7.02 or 7.03 of this Indenture, as the
case may be), until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
7.01, 7.02 or 7.03 of this Indenture, as the case may be; provided that, if the
Company has made any payment of principal of, premium, if any, or interest on
any Securities because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or
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Paying Agent.
ARTICLE EIGHT
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 8.01. Without Consent of Holders. The Company, when
authorized by a resolution of its Board of Directors, and the Trustee may amend
or supplement this Indenture or the Securities without notice to or the consent
of any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article Four of this Indenture;
(3) to comply with the obligation to secure the Securities pursuant
to Section 3.08 of this Indenture;
(4) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA;
(5) to provide for uncertificated Securities in addition to or in
place of certificated Securities; or
(6) to make any change that does not adversely affect the rights of
any Holder.
SECTION 8.02. With Consent of Holders. Subject to Sections 5.04 and
5.07 of this Indenture and without prior notice to the Holders, the Company,
when authorized by its Board of Directors (as evidenced by a Board Resolution),
and the Trustee may amend this Indenture and the Securities with the written
consent of the Holders of a majority in principal amount of the Securities then
outstanding, and the Holders of a majority in principal amount of the Securities
then outstanding by written notice to the Trustee may waive future compliance by
the Company with any provision of this Indenture or the Securities.
Notwithstanding the provisions of this Section 8.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 5.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon, or adversely affect any right of
repayment at the option of any Holder of any Security, or change any place
of payment where, or the currency in which, any Security or the
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interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date);
(ii) reduce the percentage in principal amount of the outstanding
Securities required for any such supplemental indenture, for any waiver of
compliance with certain provisions of this Indenture or certain defaults
and their consequences provided for in this Indenture;
(iii) waive a default in the payment of principal of or interest on,
any Security; or
(iv) modify any of the provisions of this Section 8.02, except to
increase any such percentage or to provide that certain other provisions
of this Indenture cannot be modified or waived without the consent of the
Holder of each outstanding Security affected thereby.
It shall not be necessary for the consent of the Holders under this
Section 8.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 8.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
SECTION 8.03. Revocation and Effect of Consent. Until an amendment
or waiver becomes effective, a consent to it by a Holder is a continuing consent
by the Holder and every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the Security of the consenting Holder, even if
notation of the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to its Security or portion of its
Security. Such revocation shall be effective only if the Trustee receives the
notice of revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Securities.
The Company may, but shall not be obligated to, fix a
<PAGE> 80
75
record date for the purpose of determining the Holders entitled to consent to
any amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date.
After an amendment, supplement or waiver becomes effective as set
forth in Sections 8.01 and 8.02, it shall bind every Holder and every subsequent
Holder of a Security in the manner set forth herein.
SECTION 8.04. Notation on or Exchange of Securities. If an
amendment, supplement or waiver changes the terms of a Security, the Trustee may
require the Holder to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Security about the changed terms and return it to
the Holder and the Trustee may place an appropriate notation on any Security
thereafter authenticated. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the changed terms.
SECTION 8.05. Trustee to Sign Amendments, Etc. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Eight is authorized or permitted by this
Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the rights
of the Trustee. The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 8.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Eight shall conform to
the requirements of the TIA as then in effect.
<PAGE> 81
76
ARTICLE NINE
MISCELLANEOUS
SECTION 9.01. Trust Indenture Act of 1939. Upon the issuance of the
Exchange Securities, if any, or the effectiveness of the Exchange Offer
Registration Statement (as defined herein) or, under certain circumstances, the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to the provisions of the TIA that are required to be
part of this Indenture and shall, to the extent applicable, be governed by such
provisions.
SECTION 9.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company:
Pueblo Xtra International, Inc.
1300 N.W. 22nd Street
Pompano Beach, Florida 33069
Attention: Chief Financial Officer
if to the Trustee:
United States Trust Company
of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust and Agency Division
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to
him at his address as it appears on the Security Register by first class mail
and shall be sufficiently given to him if so mailed within the time prescribed.
Copies of any such communication or notice to a Holder shall also be mailed to
the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. Except for
a notice to the Trustee, which is deemed given only when received, and except as
otherwise provided in this Indenture, if a notice or communication is mailed in
the manner provided above, it is duly given, whether or not the addressee
receives it.
<PAGE> 82
77
SECTION 9.03. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 9.04. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that the person making such certificate or opinion
has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinion contained in such
certificate or opinion is based;
(iii) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(iv) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with, and such other
opinions at the Trustee may reasonably request; provided that, with
respect to matters of fact, an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 9.05. Rules by Trustee, Paying Agent or Registrar. The
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 9.06. Payment Date Other Than a Business Day. If an Interest
Payment Date, Redemption Date, Stated Maturity or date of maturity of any
Security shall not be a Business Day at any place of payment, then payment of
principal of or interest on such Security, as the case may be, need not be made
on such date, but may be made on the next succeeding Business Day at such place
<PAGE> 83
78
of payment with the same force and effect as if made on the Interest Payment
Date or Redemption Date, or at the Stated Maturity or date of maturity of such
Security; provided that no interest shall accrue for the period from and after
such Interest Payment Date, Redemption Date, Stated Maturity or date of
maturity, as the case may be.
SECTION 9.07. Governing Law. The laws of the State of New York shall
govern this Indenture and the Securities. The Trustee, the Company and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Indenture or
the Securities.
SECTION 9.08. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any Subsidiary of the Company. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 9.09. No Recourse Against Others. No recourse for the
payment of the principal of, premium, if any, or interest on any of the
Securities, or for any claim based thereon or otherwise in respect thereof, and
no recourse under or upon any obligation, covenant or agreement of the Company
contained in this Indenture, or in any of the Securities, or because of the
creation of any Indebtedness represented thereby, shall be had against any
incorporator or against any past, present or future shareholder, officer,
director, employee or controlling person, as such, of the company or of any
successor Person, either directly or through the Company or any successor
Person, whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Securities.
SECTION 9.10. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 9.11. Duplicate Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 9.12. Separability. In case any provision in this Indenture
or in the Securities shall be invalid, illegal or
<PAGE> 84
79
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 9.13. Table of Contents, Headings, Etc. The Table of
Contents and headings of the Articles and Sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms and provisions
hereof.
ARTICLE TEN
REDEMPTION
SECTION 10.01. Right of Redemption. The Securities may be redeemed
at the election of the Company, in whole or in part, at any time on or after
August 1, 1998 and prior to maturity, at the Redemption Prices specified in the
form of Securities annexed hereto as Exhibit A, plus accrued interest to the
Redemption Date.
SECTION 10.02. Notices to Trustee. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the Redemption Date and the principal amount of Securities
to be redeemed.
The Company shall give each notice provided for in this Section
10.02 in an Officers' Certificate at least 45 days before the Redemption Date
(unless a shorter period shall be satisfactory to the Trustee).
SECTION 10.03. Selection of Securities to Be Redeemed. If less than
all of the Securities are to be redeemed at any time, the Trustee shall select
the Securities to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the securities are
listed or, if the Securities are not listed on a national securities exchange,
on a pro rata basis, by lot or by such method as the Trustee in its sole
discretion shall deem fair and appropriate; provided that no Securities of
$1,000 in principal amount or less shall be redeemed in part.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption. Securities in denominations of $1,000
in principal amount may only be redeemed in whole. The Trustee may select for
redemption portions (equal to $1,000 in principal amount or any integral
multiple thereof) of the principal of Securities that have
<PAGE> 85
80
denominations larger than $1,000 in principal amount. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Trustee shall notify the Company and
the Registrar promptly in writing of the Securities or portions of Securities to
be called for redemption.
SECTION 10.04. Notice of Redemption. At least 30 days but not more
than 60 days before a Redemption Date, the Company shall mail a notice of
redemption by first class mail to each Holder whose Securities are to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Securities called for redemption must be surrendered to
the Paying Agent in order to collect the Redemption Price;
(v) that the redemption does not violate any agreement binding upon
the Company;
(vi) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the Holders
is to receive payment of the Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Securities to the Paying Agent;
(vii) that, if any Security is being redeemed in part, the portion
of the principal amount (equal to $1,000 in principal amount or any
integral multiple thereof) of such Security to be redeemed and that, on
and after the Redemption Date, upon surrender of such Security, a new
Security or Securities in principal amount equal to the unredeemed portion
thereof will be reissued; and
(viii) that, if any Security contains a CUSIP number as provided in
Section 2.13 of this Indenture, no representation is being made as to the
correctness of the CUSIP number either as printed on the Securities or as
contained in the notice of redemption and that reliance may be placed only
on the other identification numbers printed
<PAGE> 86
81
on the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the name and at the expense of the Company. Concurrently with the
giving of such notice by the Company to the Holders, the Company shall deliver
to the Trustee an Officers' Certificate stating that such notice has been given.
SECTION 10.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the Redemption Date and at the Redemption Price. Upon surrender of any
Securities to the Paying Agent, such Securities shall be paid at the Redemption
Price, plus accrued interest to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed,
whether or not the Holder receives the notice. In any event, failure to give
such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of the Securities.
SECTION 10.06. Deposit of Redemption Price. On or prior to any
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, shall segregate and hold in trust as
provided in Section 2.05 of this Indenture) money sufficient to pay the
Redemption Price of and accrued interest on all Securities to be redeemed on
that date other than Securities or portions thereof called for redemption on
that date that have been delivered by the Company to the Trustee for
cancellation.
SECTION 10.07. Payment of Securities Called for Redemption. If
notice of redemption has been given in the manner provided above, the Securities
or portion of Securities specified in such notice to be redeemed shall become
due and payable on the Redemption Date at the Redemption Price stated therein,
together with accrued interest to such Redemption Date, and on and after such
date (unless the Company shall default in the payment of such Securities at the
Redemption Price and accrued interest to the Redemption Date, in which case the
principal, until paid, shall bear interest from the Redemption Date at the rate
prescribed in the Securities), such Securities shall cease to accrue interest.
Upon surrender of any Security for redemption in accordance with a notice of
redemption, such Security shall be paid and redeemed by the Company at the
Redemption Price, together with accrued interest to the Redemption Date;
provided that installments of interest whose Stated Maturity is on or prior to
the Redemption Date shall be payable to the Holders registered as such at the
close of business on the relevant Regular Record Date.
<PAGE> 87
82
SECTION 10.08. Securities Redeemed in Part. Upon surrender of any
Security that is redeemed in part, the Trustee shall authenticate for the Holder
a new Security equal in principal amount to the unredeemed portion of such
surrendered Security.
<PAGE> 88
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
PUEBLO XTRA INTERNATIONAL,
INC., as Issuer
By /s/ William T. Keon, III
--------------------------------------------
Name: William T. Keon, III
Title: President and Chief Executive Officer
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By /s/ Gerard F. Ganey
-------------------------------------------
Name: Gerard F. Ganey
Title: Senior Vice President
<PAGE> 89
STATE OF NEW YORK )
) ss
COUNTY OF NEW YORK )
On this __th day of April, before me personally came ______________,
to me known, who, being by me duly sworn, did depose and say that he resides
at______________________________________________________________________________
_______________________________, that he is ________________________ of Pueblo
Xtra International, Inc., one of the corporations described in and that executed
the above instrument; and that he signed his name thereto by authority of the
Board of Directors of said corporation.
Notary Public
(Notarial Seal)
STATE OF NEW YORK )
) ss
COUNTY OF NEW YORK )
On this __th day of April, before me personally came ______________,
to me known, who, being by me duly sworn, did depose and say that he resides at
________________________________________________________________________________
_______________________________________________________________________________,
that he is _____________ of United States Trust Company of New York, one of the
entities described in and that executed the above instrument; and that he signed
his name thereto by authority of the by-laws of United States Trust Company of
New York.
Notary Public
(Notarial Seal)
<PAGE> 90
EXHIBIT A
(FACE OF NOTE)
PUEBLO XTRA INTERNATIONAL, INC.
9 1/2% Series [B]* [C]** Senior Note Due 2003
No. [CUSIP] _______
$
The following information is supplied for purposes of Sections 1273
and 1275 of the Internal Revenue Code:
Original issue discount
Issue Date: April 29, 1997 under Section 1273 of the Internal
Revenue Code (for each $1,000
Yield to maturity for period principal amount at maturity):
from Issue Date to August 1, $____
2003: ___% (rounded to two
decimal places), compounded Issue Price (for each $1,000
semiannually on February 1 and principal amount at maturity):
August 1 commencing August __, $____
1997 (computed without giving
effect to the additional
payments of interest in the
event the issuer fails to
commence the exchange offer
and fails to cause the shelf
registration statement to be
declared effective, each as
referred to on the reverse
hereof)
PUEBLO XTRA INTERNATIONAL, INC., a Delaware corporation (the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, promises to pay to
____________________, or registered assigns, the principal sum of
____________________ Dollars, on August 1, 2003.
Interest Payment Dates: February 1 and August 1, commencing August
1, 1997.
Regular Record Dates: January 15 and July 15.
- --------
* Include only for Initial Securities.
** Include only for Exchange Securities.
<PAGE> 91
A-2
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Date: PUEBLO XTRA INTERNATIONAL, INC.
By
Title:
By
Title:
<PAGE> 92
A-3
(Form of Trustee's Certificate of Authentication)
This is one of the 9 1/2% Series [B]* [C]** Senior Notes Due 2003 described in
the within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By
Authorized Signature
- --------
* Include only for Initial Securities.
** Include only for Exchange Securities.
<PAGE> 93
A-4
(REVERSE SIDE OF NOTE)
PUEBLO XTRA INTERNATIONAL, INC.
9 1/2% Series [B]* [C]** Senior Note Due 2003
1. Principal and Interest.
The Company will pay the principal of this Note on August 1, 2003.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate of [9 1/2%
per annum (subject to adjustment as provided below)]* [9 1/2% per annum, except
that interest accrued on this Note pursuant to the penultimate paragraph of this
Section 1 for periods prior to the applicable Exchange Date (as such term is
defined in the Registration Rights Agreement referred to below) will accrue at
the rate or rates borne by the Notes from time to time during such periods].**
Interest will be payable semiannually (to the holders of record of
the Notes at the close of business on January 15 or July 15 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
August 1, 1997.
[The Holder of this Note is entitled to the benefits of the
Registration Rights Agreement, dated April 29, 1997, between the Company and the
Initial Purchasers named therein (the "Registration Rights Agreement"). In the
event that either (a) the Exchange Offer Registration Statement (as such term is
defined in the Registration Rights Agreement) is not filed with the Securities
and Exchange Commission on or prior to the 30th calendar day following the date
of original issue of the Notes or (b) the Exchange Offer (as such term is
defined in the Registration Rights Agreement) is not consummated or a Shelf
Registration Statement (as such term is defined in the Registration Rights
Agreement) is not declared effective on or prior to the 120th calendar day
following the date of original issue of the Notes, the interest rate borne by
this Note shall be increased by 0.25% per annum for the first 30 days following
the 30-day period referred to in clause (a) above or the first 90 days following
the 120-day period referred to in clause (b) above. Such interest will be
increased by an additional 0.25% per annum at the beginning of each subsequent
30-day period in
- --------
* Include only for Initial Securities.
** Include only for Exchange Securities.
<PAGE> 94
A-5
the case of clause (a) above or 90-day period in the case of clause (b) above;
provided, however, that in no event will the interest rate borne by the Notes be
increased by more than 1.50% per annum. Upon the filing of the Exchange Offer
Registration Statement, the consummation of the Exchange Offer or the
effectiveness of a Shelf Registration Statement, as the case may be, the
interest rate borne by this Note from the date of such filing, consummation or
effectiveness, as the case may be, will be reduced to the original interest rate
set forth above; provided, however, that, if after such reduction in interest
rate, a different event specified in clause (a) or (b) above occurs, the
interest rate may again be increased pursuant to the foregoing provisions.]*
Interest on the Notes will accrue from the most recent date to which
interest has been paid [on this Note or the Note surrendered in exchange
herefor]** or, if no interest has been paid, from April 29, 1997; provided that,
if there is no existing default in the payment of interest and if this Note is
authenticated between a Regular Record Date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from such
Interest Payment Date. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
The Company shall pay interest on overdue principal and interest on
overdue installments of interest, to the extent lawful, at the rate of 9 1/2%
per annum.
2. Method of Payment.
The Company will pay interest (except defaulted interest) on the
principal amount of the Notes on each February 1 and August 1 to the persons who
are Holders (as reflected in the Security Register at the close of business on
such January 15 and July 15 immediately preceding the Interest Payment Date), in
each case, even if the Note is cancelled on registration of transfer or
registration of exchange after such record date; provided that, with respect to
the payment of principal, the Company will make payment to the Holder that
surrenders this Note to a Paying Agent on or after August 1, 2003. The Company
will pay principal and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts. However, the
Company may pay principal and interest by its check
- --------
* Include only for Initial Securities.
** Include only for Exchange Securities.
<PAGE> 95
A-6
payable in such money. It may mail an interest check to a Holder's registered
address (as reflected in the Security Register). If a payment date is a date
other than a Business Day at a place of payment, payment may be made at that
place on the next succeeding day that is a Business Day and no interest shall
accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice. The Company,
any Subsidiary of the Company, or any Affiliate of any of them may act as Paying
Agent, Registrar or co-registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of April
29, 1997 (the "Indenture"), between the Company and United States Trust Company
of New York, as trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are general obligations of the Company. The Indenture
limits the original aggregate principal amount of the Notes to $85,000,000.
5. Optional Redemption.
The Company may redeem all of the Notes at any time or any portion
of the Notes from time to time, on or after August 1, 1998, at a redemption
price equal to the applicable percentage of the then outstanding principal
amount thereof set forth below, plus accrued interest to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date), if redeemed during the 12-month period commencing on or after
August 1 in the years set forth below:
<PAGE> 96
A-7
Redemption
Year Price
---- ----------
1998............. 104.750%
1999............. 102.375%
and on or after August 1, 2000, at 100% of the principal amount, plus accrued
interest to the Redemption Date.
6. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder to be redeemed at his
last address as it appears in the Security Register. Notes in denominations
larger than $1,000 may be redeemed in part. On and after the Redemption Date,
interest ceases to accrue on Notes or portions of Notes called for redemption,
unless the Company defaults in the payment of the Redemption Price.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in denominations of
$1,000 in principal amount and integral multiples thereof. A Holder may register
the transfer or exchange of Notes in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture.
8. Persons Deemed Owners.
A Holder may be treated as the owner of a Note for all purposes.
9. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent will pay the money back to the
Company. After that, Holders entitled to the money must look to the Company for
payment, unless an abandoned property law designates another person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
10. Discharge Prior to Maturity.
<PAGE> 97
A-8
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of the Notes and
interest thereon (a) to redemption or maturity, the Company will be discharged
from the Indenture and the Notes, except, in certain circumstances, for certain
sections thereof, and (b) to the Stated Maturity of such principal and interest,
the Company will be discharged from certain covenants set forth in the
Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing default or
compliance with any provision may be waived with the consent of the Holders of a
majority in principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes and make any change that does not adversely affect the rights
of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries, among other things, to pay dividends,
create Liens, sell assets, engage in transactions with Affiliates or incur
Indebtedness. At the end of each fiscal quarter, the Company must report to the
Trustee on compliance with such limitations.
13. Successor Corporations.
When a successor person or other entity assumes all the obligations
of its predecessor under the Notes and the Indenture, the predecessor person
will be released from those obligations.
14. Defaults and Remedies.
An Event of Default is: a default in payment of principal on the Notes; default
in the payment of interest on the Notes for 30 days; failure by the Company for
30 days after notice to it to comply with any of its other agreements in the
Indenture; certain events of bankruptcy or insolvency; certain final judgments
which
<PAGE> 98
A-9
remain undischarged; and certain events of default on other Indebtedness of the
Company or one or more of its Restricted subsidiaries.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable as provided in the
Indenture. If a bankruptcy or insolvency default with respect to the Company
occurs and is continuing, the Notes automatically become due and payable.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
at least a majority in principal amount of the Notes then outstanding may direct
the Trustee in its exercise of any trust or power.
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Company or its Affiliates with the same rights it would have if it were not
the Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to TIA Sections 310(b) and 311.
16. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator as such,
past, present or future, of the Company or any successor corporation shall have
any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
17. Authentication.
This Note shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this Note.
<PAGE> 99
A-10
18. Obligation of Company Only.
The Holder of this Note acknowledges, by acceptance hereof, that
this Note is solely an obligation of the Company and that the Indebtedness under
the Bank Credit Agreement constitutes obligations of one or more of the
Company's subsidiaries.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Pueblo Xtra
International, Inc., 1300 N.W. 22nd Street, Pompano Beach, Florida 33069,
Attention: Chief Financial Officer.
<PAGE> 100
A-11
ASSIGNMENT
I or we assign and transfer this Note to:
Please insert social security or other identifying number of assignee
Print or type name, address and zip code of assignee and irrevocably
appoint
, as agent, to transfer this Note on the
books of
the Company. The agent may substitute another to act for him.
Dated _____________________
Signed _____________________
(Sign exactly as name appears on the other side of the Note)
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of the date of an effective Registration Statement or
April 29, 1999 the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which
<PAGE> 101
A-12
comply with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date: ____________________ _________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
NOTICE: To be executed by an
executive officer
<PAGE> 102
A-13
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 3.09 or 3.11 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 3.09 or 3.11 of the Indenture, state the amount (in
principal amount) which must be an integral multiple of $1,000:
$________________________.
Date: Your Signature:
(Sign exactly as your name appears on the other side of this Note)
*Signature Guarantee:
- --------
* Signature must be guaranteed by an institution which falls within the
definition of "Eligible Guarantor Institution" as such term is defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended.
<PAGE> 103
Exhibit B
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
On or after May __, 1997
Pueblo Xtra International, Inc.
1300 N.W. 22nd Street
Pompano Beach, Florida 33069
c/o
United States Trust Company
of New York
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Division
Re: Pueblo Xtra International, Inc. (the "Company")
9 1/2% Series B Senior Notes Due 2003 (the "Notes")
Ladies and Gentlemen:
This letter relates to $________ principal amount of Notes
represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 2.02 of the Indenture dated as of April 29,
1997 relating to the Notes (the "Indenture"), we hereby certify that (1) we are
the beneficial owner of such principal amount of Notes represented by the
Temporary Certificate and (2) we are a person outside the United States to whom
the Notes could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you
are hereby requested to issue a Certificated Note representing the undersigned's
interest in the principal amount of Notes represented by the Temporary
Certificate, all in the manner provided by the Indenture.
<PAGE> 104
B-2
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
Authorized Signature
<PAGE> 105
Exhibit C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
___________________, ____
Pueblo Xtra International, Inc.
1300 N.W. 22nd Street
Pompano Beach, Florida 33069
c/o
United States Trust Company
of New York
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Division
Re: Pueblo Xtra International, Inc. (the "Company")
9 1/2% Series B Senior Notes Due 2003 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed purchase of $____________ aggregate
principal amount of the Notes:
1. We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act"), or an entity in which all of the
equity owners are accredited investors within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act (an
"Institutional Accredited Investor");
(ii) any purchase of the Notes by us will be for our own
account or for the account of one or more other Institutional
Accredited Investors;
<PAGE> 106
C-2
(iii) in the event that we purchase any of the Notes, we will
acquire Notes having a minimum purchase price of not less than
$100,000 for our own account or for any separate account for which
we are acting;
(iv) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and
risks of purchasing the Notes;
(v) we are not acquiring the Notes with a view to any
distribution thereof in a transaction that would violate the
Securities Act or the securities laws of any State of the United
States or any other applicable jurisdictions, provided that the
disposition of our property and the property of any accounts for
which we are acting as fiduciary shall remain at all times within
our control;
(vi) we have had access to such financial and other
information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers
thereto, as we deem necessary in connection with our decision to
purchase the Notes.
2. We understand that the Notes are being offered in a transaction
not involving any public offering within the meaning of the Securities Act
and that the Notes have not been registered under the Securities Act, and
we agree, on our own behalf and on behalf of each account for which we
acquire any Notes, that such Notes may be offered, resold, pledged or
otherwise transferred only (i) to a person whom we reasonably believe to
be a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, in
a transaction meeting the requirements of Rule 144 under the Securities
Act or in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
if the Company so requests), (ii) to the Company or (iii) pursuant to an
effective registration statement under the Securities Act, and, in each
case, in accordance with any applicable securities laws of any State of
the United States or any other applicable jurisdiction. We understand that
the registrar and transfer agent will not be required to accept for
registration of transfer any Notes, except upon presentation of evidence
satisfactory to the Company as applicable, that the foregoing
<PAGE> 107
C-3
restrictions on transfer have been complied with. We further understand
that the Notes will be in the form of definitive physical certificates and
that any such certificates will bear a legend reflecting the substance of
this paragraph.
3. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:
(NAME OF PURCHASER)
Date:
Upon transfer, the Notes should be registered in the name of the new
beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
<PAGE> 108
Exhibit D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_________________, ___
Pueblo Xtra International, Inc.
1300 N.W. 22nd Street
Pompano Beach, Florida 33069
c/o
United States Trust Company
of New York
114 West 47th Street
New York, NY 10036
Attention: Corporate Trust Division
Re: Pueblo Xtra International, Inc. (the "Company")
9 1/2% Series B Senior Notes Due 2003 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows
<PAGE> 109
D-2
that the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
Authorized Signature
<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into April 29, 1997, among PUEBLO XTRA INTERNATIONAL, INC., a
Delaware corporation (the "Company"), and NATIONSBANC CAPITAL MARKETS, INC.
and SCOTIA CAPITAL MARKETS, INC. (the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated
April 24, 1997 among the Company and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Company to the Initial
Purchasers of an aggregate of $85,000,000 principal amount of the Company's 9
1/2% Series B Senior Notes Due 2003 (the "Securities"). In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Company has agreed
to provide to the Initial Purchasers and their direct and indirect transferees
the registration rights set forth in this Agreement. The execution of this
Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Company" shall have the meaning set forth in the preamble and also
includes the Company's successors.
"Depositary" shall mean the Depository Trust Company, or any other
depositary appointed by the Company; provided, however, that such
depositary must have an address in the Borough of Manhattan, in the City
of New York.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2(a)
hereof.
<PAGE> 2
2
"Exchange Offer Registration" shall mean a registration under the
1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Exchange Securities" shall mean 9 1/2% Series C Senior Notes Due
2003 issued by the Company under the Indenture containing terms identical
to the Securities (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Securities or, if no such
interest has been paid, from the date of their original issue, (ii) the
transfer restrictions thereon shall be eliminated and (iii) certain
provisions relating to an increase in the stated rate of interest thereon
shall be eliminated), to be offered to Holders of Securities in exchange
for Securities pursuant to the Exchange Offer.
"Holders" shall mean the Initial Purchasers, for so long as they own
any Registrable Securities, and each of their successors, assigns and
direct and indirect transferees who become registered owners of
Registrable Securities under the Indenture.
"Indenture" shall mean the Indenture relating to the Securities
dated as of April 29, 1997 between the Company and United States Trust
Company of New York, as trustee, as the same may be amended from time to
time in accordance with the terms thereof.
"Initial Purchaser" shall have the meaning set forth in the
preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding applicable Registrable
Securities; provided that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company shall be disregarded in
determining whether such consent or approval was given by the Holders of
such required percentage or amount.
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus,
<PAGE> 3
3
and any such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms of
the offering of any portion of the Registrable Securities covered by a
Shelf Registration Statement, and by all other amendments and supplements
to a prospectus, including post-effective amendments, and in each case
including all material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Registrable Securities" shall mean the Securities; provided,
however, that the Securities shall cease to be Registrable Securities when
(i) a Registration Statement with respect to such Securities shall have
been declared effective under the 1933 Act and such Securities shall have
been disposed of pursuant to such Registration Statement, (ii) such
Securities shall have been sold to the public pursuant to Rule 144 (or any
similar provision then in force, but not Rule 144A) under the 1933 Act,
(iii) such Securities shall be eligible to be sold to the public pursuant
to Rule 144(k) under the 1933 Act, (iv) such Securities shall have ceased
to be outstanding or (v) such Securities have been exchanged for Exchange
Securities upon consummation of the Exchange Offer. All references to
Registrable Securities in connection with a Shelf Registration Statement
shall be deemed to refer to the Securities to which the obligation to file
such Shelf Registration Statement applies, as provided in clause (A) of
Section 2(b).
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all
fees and expenses incurred in connection with compliance with state
securities or blue sky laws and compliance with the rules of the NASD
(including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with blue sky qualification of any
of the Exchange Securities or Registrable Securities), (iii) all expenses
of any Persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements, securities
sales agreements and other documents relating to the performance of and
compliance with this Agreement, (iv) all rating agency fees, (v) all fees
and expenses incurred in
<PAGE> 4
4
connection with the listing, if any, of any of the Registrable Securities
on any securities exchange or exchanges, (vi) the fees and disbursements
of counsel for the Company and of the independent public accountants of
the Company, including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and
compliance, (vii) the fees and expenses of the Trustee, and any escrow
agent or custodian, and (viii) any fees and disbursements of the
underwriters customarily required to be paid by issuers of securities and
the reasonable fees and expenses of any special experts retained by the
Company in connection with any Registration Statement, but excluding fees
of counsel to the underwriters or the Holders and underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement of
the Company which covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement, and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Securities" shall have the meaning set forth in the preamble.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of
this Agreement which covers all of the Registrable Securities on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Securities
under the Indenture.
2. Registration Under the 1933 Act. (a) Exchange
<PAGE> 5
5
Offer Registration. To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company shall (A) file on
or prior to the 30th calendar day following the Closing Date an Exchange Offer
Registration Statement with the SEC covering the offer by the Company to the
Holders to exchange all of the Registrable Securities for Exchange Securities,
(B) use its best efforts to cause such Exchange Offer Registration Statement to
be declared effective under the 1933 Act on or prior to the 90th calendar day
following the Closing Date and (C) use its best efforts to consummate the
Exchange Offer on or prior to the 120th calendar day following the Closing Date.
Consummation of the Exchange Offer shall be deemed to have occurred upon the
fulfillment by the Company of its obligations set forth in clauses (i) through
(v) of the second paragraph of this Section 2(a) and in clauses (i) through
(iii) of the third paragraph of this Section 2(a). The Exchange Securities will
be issued under the Indenture. Promptly after the Exchange Offer Registration
Statement is declared effective, the Company shall promptly commence the
Exchange Offer, it being the objective of such Exchange Offer to enable each
Holder (other than Participating Broker-Dealers (as defined in Section 3(f)))
eligible and electing to exchange Registrable Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company within the meaning
of Rule 405 under the 1933 Act, acquires the Exchange Securities in the ordinary
course of such Holder's business and has no arrangements or understandings with
any person to participate in the Exchange Offer for the purpose of distributing
the Exchange Securities) to trade such Exchange Securities from and after their
receipt without any limitations or restrictions under the 1933 Act and without
material restrictions under the securities laws of a substantial proportion of
the several states of the United States.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days and not
more than 45 days after the date notice thereof is mailed to the Holders
(or longer if required by applicable law);
(iii) use the services of the Depositary for the Exchange Offer;
<PAGE> 6
6
(iv) permit Holders to withdraw tendered Registrable Securities at
any time prior to the close of business, New York City time, on the last
business day on which the Exchange Offer shall remain open, by sending to
the institution specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Registrable Securities delivered for exchange, and a
statement that such Holder is withdrawing his election to have such
Securities exchanged; and
(v) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange Registrable Securities duly tendered and not
validly withdrawn pursuant to the Exchange Offer in accordance with the
terms of the Exchange Offer Registration Statement and the letter of
transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities so accepted for exchange by the
Company; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Securities to each Holder of Registrable Securities equal in
amount to the Registrable Securities of such Holder so accepted for
exchange.
Interest on each Exchange Security will accrue from the last date on
which interest was paid on the Registrable Securities surrendered in exchange
therefor or, if no interest has been paid on the Registrable Securities, from
the date of its original issue. The Exchange Offer shall not be subject to any
conditions, other than that the Exchange Offer, or the making of any exchange by
a Holder, does not violate applicable law or any applicable interpretation of
the Staff of the SEC. Each Holder of Registrable Securities (other than
Participating Broker-Dealers) who wishes to exchange such Registrable Securities
for Exchange Securities in the Exchange Offer will be required to represent that
(i) it is not an affiliate of the Company, (ii) any Exchange Securities to be
received by it were acquired in the ordinary course of its business and (iii) at
the time of the commencement of the Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Securities. The Company shall
inform the Initial Purchasers of
<PAGE> 7
7
the names and addresses of the Holders to whom the Exchange Offer is made, and
the Initial Purchasers shall have the right at the Initial Purchasers' expense
to contact such Holders and otherwise facilitate the tender of Registrable
Securities in the Exchange Offer.
(b) Shelf Registration. (i) If, because of any change in law or
applicable interpretations thereof by the Staff of the SEC, the Company is not
permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof,
or (ii) if for any other reason the Exchange Offer is not consummated within 120
days after the Closing Date, or (iii) upon the request, received no later than
30 days after the Exchange Offer is consummated, of any Holder (other than an
Initial Purchaser) who is not eligible to participate in the Exchange Offer and
so notifies the Company setting forth the reason for such ineligibility or (iv)
upon the request, received no later than 30 days after the Exchange Offer is
consummated, of any Initial Purchaser (with respect to any Registrable
Securities which it acquired directly from the Company) who holds Registrable
Securities which it acquired directly from the Company if such Initial Purchaser
is not permitted, in the opinion of counsel to such Initial Purchaser, pursuant
to applicable law or applicable interpretation of the Staff of the SEC to
participate in the Exchange Offer, the Company shall, at its expense,
(A) as promptly as practicable, and in any event on or prior to the
30th calendar day after the occurrence of the event described in clause
(i) or (ii) above or the receipt by the Company of the notice described in
clause (iii) or (iv) above, file with the SEC a Shelf Registration
Statement relating to the offer and sale of the Registrable Securities, in
the case of clause (i) or (ii) above, held by all Holders and, in the case
of clause (iii) or (iv) above, held by the requesting Holders, from time
to time in accordance with the methods of distribution elected by the
Majority Holders of such Registrable Securities and set forth in such
Shelf Registration Statement, and use its best efforts to cause such Shelf
Registration Statement to be declared effective by the SEC on or prior to
the 45th day after such filing occurs. In the event that the Company is
required to file a Shelf Registration Statement upon the request of any
Holder (other than an Initial Purchaser) not eligible to participate in
the Exchange Offer pursuant to clause (iii) above or upon the request of
any Initial Purchaser pursuant to clause (iv) above, the Company shall
file and have declared effective by the SEC both an Exchange Offer
Registration Statement pursuant to Section 2(a) with respect to all
Registrable Securities and a Shelf Registration Statement (which may be a
combined Registration
<PAGE> 8
8
Statement with the Exchange Offer Registration Statement) with respect to
offers and sales of Registrable Securities held by such Holder or such
Initial Purchaser after completion of the Exchange Offer.
(B) keep the Shelf Registration Statement continuously effective in
order to permit the Prospectus forming part thereof to be usable by
Holders for a period of two years from the date the Shelf Registration
Statement is declared effective by the SEC (or one year from the date the
Shelf Registration Statement is declared effective if such Shelf
Registration Statement is filed upon the request of any Initial Purchaser
pursuant to clause (iv) above) or such shorter period which will terminate
when all of the Registrable Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement.
(C) notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
supplement thereto complies in all material respects with the 1933 Act and
the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any supplement to such Prospectus (as amended
or supplemented from time to time), does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to
make the statements, in light of the circumstances under which they were
made, not misleading.
The Company further agrees, if necessary, to supplement or amend the
Shelf Registration Statement if reasonably requested by the Majority Holders
with respect to information relating to the Holders and otherwise as required by
Section 3(b) below, to use all reasonable efforts to cause any such amendment to
become effective and such Shelf Registration to become usable as soon as
thereafter practicable and to furnish to the Holders of Registrable Securities
copies of any such supplement or amendment promptly after its being used or
filed with the SEC.
(c) Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or 2(b) and, in the
case of any Shelf Registration Statement, will reimburse the Holders (including
the Initial
<PAGE> 9
9
Purchasers) for the reasonable fees and disbursements of one firm or counsel
designated in writing by the Majority Holders to act as counsel for the Holders
of the Registrable Securities in connection therewith. Each Holder shall pay all
expenses of its counsel other than as set forth in the preceding sentence,
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement.
(d) Effective Registration Statement. (i) The Company will be deemed
not to have used its best efforts to cause the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, to become, or
to remain, effective during the requisite period if it voluntarily takes any
action that would result in any such Registration Statement not being declared
effective or in the Holders of Registrable Securities covered thereby not being
able to exchange or offer and sell such Registrable Securities during that
period unless (A) such action is required by applicable law or (B) such action
is taken by the Company in good faith and for valid business reasons (not
including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly complies
with the requirements of Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to Section
2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that either (i) the
Exchange Offer Registration Statement is not filed with the SEC on or prior to
the 30th calendar day following the Closing Date or (ii) the Exchange Offer is
not consummated or a Shelf Registration Statement is not declared effective on
or prior to the 120th calendar day following the Closing Date, the interest rate
borne by the Securities will be increased by 0.25% per annum for the first 30
days following the 30-day period referred to in clause (i) above or the first 90
days following the 120-day period referred to in clause (ii) above. Such
interest will be increased by an additional 0.25% per annum at
<PAGE> 10
10
the beginning of each subsequent 30-day period in the case of clause (i) above
or 90-day period in the case of clause (ii) above; provided, however, that in no
event will the interest rate borne by the Securities by increased by more than
1.50% per annum. Upon the filing of the Exchange Offer Registration Statement,
the consummation of the Exchange Offer or the effectiveness of a Shelf
Registration Statement, as the case may be, the interest rate borne by the
Securities from the date of such filing, consummation or effectiveness, as the
case may be, will be reduced to the original interest rate; provided, however,
that, if after such reduction in interest rate, a different event specified in
clause (i) or (ii) above occurs, the interest rate may again be increased
pursuant to the foregoing provisions.
(f) Specific Enforcement. Without limiting the remedies available to
the Initial Purchasers and the Holders, the Company acknowledges that any
failure by the Company to comply with its obligations under Section 2(a) and
Section 2(b) hereof may result in material irreparable injury to the Initial
Purchasers or the Holders for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that, in
the event of any such failure, the Initial Purchasers or any Holder may obtain
such relief as may be required to specifically enforce the Company's obligations
under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations of
the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement, within
the time period specified in Section 2, on the appropriate form under the
1933 Act, which form (i) shall be selected by the Company, (ii) shall, in
the case of a Shelf Registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and (iii) shall
comply as to form in all material respects with the requirements of the
applicable form and include or incorporate by reference all financial
statements required by the SEC to be filed therewith, and use its best
efforts to cause such Registration Statement to become effective and
remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary under
applicable law to keep such Registration Statement effective for the
applicable period; cause each Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed
<PAGE> 11
11
pursuant to Rule 424 under the 1933 Act; and comply with the provisions of
the 1933 Act with respect to the disposition of all securities covered by
each Registration Statement during the applicable period in accordance
with the intended method or methods of distribution by the selling Holders
thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities, at least five days prior to filing, that a Shelf
Registration Statement with respect to the Registrable Securities is being
filed and advising such Holders that the distribution of Registrable
Securities will be made in accordance with the method elected by the
Majority Holders; and (ii) furnish to each Holder of Registrable
Securities, to counsel for the Initial Purchasers, to counsel for the
Holders and to each underwriter of an underwritten offering of Registrable
Securities, if any, without charge, as many copies of each Prospectus,
including each preliminary Prospectus, and any amendment or supplement
thereto and such other documents as such Holder or underwriter may
reasonably request, including financial statements and schedules and, if
the Holder so requests, all exhibits (including those incorporated by
reference) in order to facilitate the public sale or other disposition of
the Registrable Securities; and (iii) subject to the last paragraph of
Section 3, hereby consent to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Registrable
Securities in connection with the offering and sale of the Registrable
Securities covered by the Prospectus or any amendment or supplement
thereto;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement and each underwriter of an underwritten offering of
Registrable Securities shall reasonably request by the time the applicable
Registration Statement is declared effective by the SEC, to cooperate with
the Holders in connection with any filings required to be made with the
NASD, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder to consummate the disposition
in each such jurisdiction of such Registrable Securities owned by such
Holder; provided, however, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d) or (ii) take any action which would subject it to
general service of
<PAGE> 12
12
process or taxation in any such jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities and counsel for the Initial Purchasers promptly
and, if requested by such Holder or counsel, confirm such advice in
writing promptly (i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities
authority for post-effective amendments and supplements to a Registration
Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
SEC or any state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to such offering
cease to be true and correct in all material respects, (v) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose, (vi)
of the happening of any event or the discovery of any facts during the
period a Shelf Registration Statement is effective which makes any
statement made in such Registration Statement or the related Prospectus
untrue in any material respect or which requires the making of any changes
in such Registration Statement or Prospectus in order to make the
statements therein not misleading and (vii) of any determination by the
Company that a post-effective amendment to a Registration Statement would
be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Securities for Exchange Securities for the resale of such
Exchange Securities, (ii) furnish to each broker-dealer who desires to
participate in the Exchange Offer, without charge, as many copies of each
Prospectus included in the Exchange Offer Registration Statement,
including any preliminary prospectus, and any amendment or supplement
thereto, as such broker-dealer may reasonably request, (iii)
<PAGE> 13
13
include in the Exchange Offer Registration Statement a statement that any
broker-dealer who holds Registrable Securities acquired for its own
account as a result of market-making activities or other trading
activities (a "Participating Broker-Dealer"), and who receives Exchange
Securities for Registrable Securities pursuant to the Exchange Offer, may
be a statutory underwriter and must deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of such
Exchange Securities, (iv) subject to the last paragraph of Section 3,
hereby consent to the use of the Prospectus forming part of the Exchange
Offer Registration Statement or any amendment or supplement thereto, by
any broker-dealer in connection with the sale or transfer of the Exchange
Securities covered by the Prospectus or any amendment or supplement
thereto, and (v) include in the transmittal letter or similar
documentation to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Securities. If the undersigned is a
broker-dealer that will receive Exchange Securities for its own
account in exchange for Registrable Securities, it represents that
the Registrable Securities to be exchanged for Exchange Securities
were acquired by it as a result of market-making activities or other
trading activities and acknowledges that it will deliver a
prospectus meeting the requirements of the 1933 Act in connection
with any resale of such Exchange Securities pursuant to the Exchange
Offer; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the 1933 Act";
(B) to the extent any Participating Broker-Dealer participates in
the Exchange Offer, the Company shall use its best efforts to cause to be
delivered at the request of an entity representing the Participating
Broker-Dealers (which entity shall be one of the Initial Purchasers,
unless they elect not to act as such representative) only one, if any,
"cold comfort" letter with respect to the Prospectus in the form existing
on the last date for which exchanges are accepted pursuant to the Exchange
Offer and with respect to each subsequent amendment or supplement, if any,
effected during the period specified in clause (C) below; and
(C) to the extent any Participating Broker-Dealer
<PAGE> 14
14
participates in the Exchange Offer, the Company shall use its best efforts
to maintain the effectiveness of the Exchange Offer Registration Statement
for a period of 180 days following the closing of the Exchange Offer; and
(D) the Company shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement as would
otherwise be contemplated by Section 3(b), or take any other action as a
result of this Section 3(f), for a period exceeding 180 days after the
last date for which exchanges are accepted pursuant to the Exchange Offer
(as such period may be extended by the Company) and Participating
Broker-Dealers shall not be authorized by the Company to, and shall not,
deliver such Prospectus after such period in connection with resales
contemplated by this Section 3.
(g) (A) in the case of an Exchange Offer, furnish counsel for the
Initial Purchasers and (B) in the case of a Shelf Registration, furnish
counsel for the Holders of Registrable Securities copies of any request by
the SEC or any state securities authority for amendments or supplements to
a Registration Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement as soon as
practicable and provide immediate notice to each Holder of the withdrawal
of any such order;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, without charge, at least one conformed copy of
each Registration Statement and any post-effective amendment thereto
(without documents incorporated therein by reference or exhibits thereto,
unless requested);
(j) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold
and not bearing any restrictive legends; and cause such Registrable
Securities to be in such denominations (consistent with the provisions of
the Indenture) and registered in such names as the selling Holders or the
underwriters, if any, may reasonably request at least two business days
prior to the closing of any sale of Registrable Securities;
<PAGE> 15
15
(k) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Section
3(e)(vi) hereof, use its best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities, such Prospectus will not contain at the
time of such delivery any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
Company agrees to notify each Holder to suspend use of the Prospectus as
promptly as practicable after the occurrence of such an event, and each
Holder hereby agrees forthwith upon receipt of such notice to suspend use
of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission. At such time as such
public disclosure is otherwise made or the Company determines that such
disclosure is not necessary, in each case to correct any misstatement of a
material fact or to include any omitted material fact, the Company agrees
promptly to notify each Holder of such determination and to furnish each
Holder such numbers of copies of the Prospectus, as amended or
supplemented, as such Holder may reasonably request;
(l) obtain a CUSIP number for all Exchange Securities, or
Registrable Securities, as the case may be, not later than the effective
date of a Registration Statement, and provide the Trustee with printed
certificates for the Exchange Securities or the Registrable Securities, as
the case may be, in a form eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Securities, or Registrable Securities, as the
case may be, (ii) cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to be
so qualified in accordance with the terms of the TIA and (iii) execute,
and use its best efforts to cause the Trustee to execute, all documents as
may be required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all
<PAGE> 16
16
other customary and appropriate actions (including those reasonably
requested by the Majority Holders) in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection whether
or not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(i) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings as may be reasonably
requested by them;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if
any, and the Majority Holders) addressed to each selling Holder and
the underwriters, if any, covering the matters customarily covered
in opinions requested in sales of securities or underwritten
offerings as may be reasonably requested by such Holders and
underwriters;
(iii) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants addressed to
the underwriters, if any, and will use reasonable best efforts to
have such letters addressed to the selling Holders of Registrable
Securities, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters to
underwriters in connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Securities, which agreement
shall be in form, substance and scope customary for similar
offerings;
(v) if an underwriting agreement is entered into, cause the
same to set forth indemnification provisions and procedures
substantially equivalent to the indemnification provisions and
procedures set forth in Section 5 hereof with respect to the
underwriters; and
(vi) deliver such documents and certificates as
<PAGE> 17
17
may be reasonably requested and as are customarily delivered in
similar offerings.
The above shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective amendment thereto) and
(ii) each closing under any underwriting or similar agreement as and to
the extent required thereunder. In the case of any underwritten offering,
the Company shall provide written notice to the Holders of all Registrable
Securities of such underwritten offering at least 30 days prior to the
filing of a prospectus supplement for such underwritten offering. Such
notice shall (x) offer each such Holder the right to participate in such
underwritten offering, (y) specify a date, which shall be no earlier than
10 days following the date of such notice, by which such Holder must
inform the Company of its intent to participate in such underwritten
offering and (z) include the instructions such Holder must follow in order
to participate in such underwritten offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable Securities
and any underwriters participating in any disposition pursuant to a Shelf
Registration Statement and any counsel or accountant retained by such
Holders or underwriters, all financial and other records, pertinent
corporate documents and properties of the Company reasonably requested by
any such persons, and cause the respective officers, directors, employees,
and any other agents of the Company to supply all information reasonably
requested by any such representative, underwriter, special counsel or
accountant in connection with a Registration Statement;
(p) (i) a reasonable time prior to the filing of any Exchange Offer
Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or
supplement to a Prospectus, provide copies of such document to the Initial
Purchasers, and make such changes in any such document prior to the filing
thereof as any of the Initial Purchasers or their counsel may reasonably
request; (ii) in the case of a Shelf Registration, a reasonable time prior
to filing any Shelf Registration Statement, any Prospectus forming a part
thereof, any amendment to such Shelf Registration Statement or amendment
or supplement to such Prospectus, provide copies of such document to the
Holders of Registrable Securities and their counsel and to the underwriter
or underwriters of an underwritten offering of Registrable
<PAGE> 18
18
Securities, if any, and make such changes in any such document prior to
the filing thereof as the Majority Holders, their counsel and any
underwriter may promptly and reasonably request; and (iii) cause the
representatives of the Company to be available for discussion of such
document as shall be promptly and reasonably requested by the Majority
Holders or any underwriter and shall not at any time make any filing of
any such document of which such Majority Holders and their counsel or any
underwriter shall not have previously been advised and furnished a copy or
to which such Majority Holders and their counsel or any underwriter shall
reasonably object;
(q) in the case of a Shelf Registration, use its best efforts to
cause all Registrable Securities to be listed on any securities exchange
on which similar debt securities issued by the Company are then listed if
requested by the Majority Holders or by the underwriter or underwriters of
an underwritten offering of Registrable Securities, if any;
(r) in the case of a Shelf Registration, use its best efforts to
cause the Registrable Securities to be rated with the appropriate rating
agencies, if so requested by the Majority Holders or by the underwriter or
underwriters of an underwritten offering of Registrable Securities, if
any, unless the Registrable Securities are already so rated;
(s) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
at least 12 months which shall satisfy the provisions of Section 11(a) of
the 1933 Act and Rule 158 thereunder; and
(t) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter and its counsel.
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Company such information
regarding such Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
or the discovery of any facts, each of the kind described in Section
3(e)(ii)-(vi) hereof, such
<PAGE> 19
19
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to a Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. If the Company shall give any
such notice to suspend the disposition of Registrable Securities pursuant to a
Shelf Registration Statement as a result of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(vi) hereof,
the Company shall be deemed to have used its best efforts to keep the Shelf
Registration Statement effective during such period of suspension provided that
the Company shall use its best efforts to file and have declared effective (if
an amendment) as soon as practicable an amendment or supplement to the Shelf
Registration Statement and shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from and including the date of the giving of such
notice to and including the date when the Holders shall have received copies of
the supplemented or amended Prospectus necessary to resume such dispositions,
provided that in no event shall such extension extend beyond the second
anniversary of the Closing Date.
4. Underwritten Registrations. If any of the Registrable Securities
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Majority Holders of such Registrable
Securities included in such offering and shall be reasonably acceptable to the
Company. The Company shall have the right to select an investment banker to act
as co-manager reasonably acceptable to the Majority Holders.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
5. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company agrees to indemnify and hold harmless each
Holder of Registrable Securities (including any Initial Purchaser and
Participating Broker-
<PAGE> 20
20
Dealers) their respective affiliates and their respective directors, officers,
employees and agents, and each Person who controls any of such parties within
the meaning of either the 1933 Act or the 1934 Act, against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the 1933 Act, the 1934 Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in such Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, and agrees to reimburse each such indemnified party, as incurred,
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability (or action
in respect thereof); provided, however, that the Company will not be liable in
any case to the extent that any such loss, claim, damage or liability arises out
of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any such
Holder specifically for inclusion therein.
(b) Each Holder of Securities covered by a Registration Statement
severally agrees to indemnify and hold harmless (i) the Company, (ii) each of
the directors of the Company, (iii) each of the officers of the Company who
signs such Registration Statement and (iv) each Person who controls the Company
within the meaning of either the 1933 Act or the 1934 Act to the same extent as
the foregoing indemnity from the Company to each such Holder, but only with
respect to written information furnished to the Company by or on behalf of such
Holder specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability that
any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 5, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under
<PAGE> 21
21
paragraph (a) or (b) above unless and to the extent it did not otherwise learn
of such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses, and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel (including
local counsel) of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (x) the fees and expenses of
more than one separate firm (in addition to any local counsel) for the Initial
Purchasers and each Person who controls an Initial Purchaser within the meaning
of either the 1933 Act or the 1934 Act, (y) the fees and expenses of more than
one separate firm (in addition to any local counsel) for the Company and each
Person who controls the Company within the meaning of either the 1933 Act or the
1934 Act, or (z) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Holders and each Person who controls a
Holder within the meaning of either the 1933 Act or the 1934 Act, and that all
such fees and expenses shall be reimbursed as they are incurred. In such case
involving the Initial Purchasers and Persons who control the Initial Purchasers,
such firm shall be designated in writing by NationsBanc Capital Markets, Inc. In
<PAGE> 22
22
such case involving the Holders and Persons who control the Holders, such firm
shall be designated in writing by the Majority Holders. In all other cases, such
firm shall be designated by the Company. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written consent
(not to be unreasonably withheld), but if settled with such consent or if there
be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the third and fourth sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 20
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall have received notice of the proposed terms of such
settlement at least five days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 5 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending the same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Registration Statement that resulted in such Losses; provided, however, that in
no case shall any Holder be responsible, in the aggregate, for any amount in
excess of the amount by which (i) the total price at which the Securities it has
registered were offered to investors in the initial placement
<PAGE> 23
23
of such Securities, or in the case of Exchange Securities, the price applicable
to the Securities that were exchangeable into such Exchange Securities, exceeds
(ii) the amount of any Losses that such Holder has otherwise been required to
pay. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the indemnifying party and the indemnified party
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of such indemnifying party, on the
one hand, and such indemnified party, on the other hand, in connection with the
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the total net proceeds from the initial placement (before
deducting expenses) of the Securities as set forth on the cover page of the
Offering Memorandum relating to the Securities. Benefits received by the Initial
Purchasers shall be deemed to be equal to the total purchase discounts and
commissions as set forth on the cover page of the Offering Memorandum relating
to the Securities, and benefits received by any other Holders shall be deemed to
be equal to the value of receiving Securities or Exchange Securities, as
applicable, registered under the 1933 Act. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of
allocation that did not take account of the equitable considerations referred to
above. Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 5, each person
who controls a Holder within the meaning of either the 1933 Act or the 1934 Act
and each director, officer, employee and agent of such Holder shall have the
same rights to contribution as such Holder, and each person who controls the
Company within the meaning of either the 1933 Act or the 1934 Act, each officer
of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d).
(e) The provisions of this Section 5 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any of the officers,
<PAGE> 24
24
directors or controlling persons referred to in Section 5 hereof, and will
survive the sale by a Holder of Securities covered by a Registration Statement.
6. Miscellaneous. (a) Rule 144 and Rule 144A. The Company covenants
that if it ceases to be required to file the reports required to be filed by it
under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder, it will upon the request of any
Holder of Registrable Securities (i) make publicly available such information as
is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (ii)
deliver such information to a prospective purchaser as is necessary to permit
sales pursuant to Rule 144A under the 1933 Act and (iii) take such further
action as is required of an issuer by the 1933 Act or the rules and regulations
adopted by the SEC thereunder to enable such Holder to sell its Registrable
Securities without registration under the 1933 Act within the limitation of the
exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may be
amended from time to time, or (z) any similar rules or regulations hereafter
adopted by the SEC. Upon the request of any Holder of Registrable Securities,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) No Inconsistent Agreements. The Company has not entered into nor
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure; provided, however, that no amendment, modification,
supplement or waiver or consent to any departure from the provisions of Section
5 hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder.
(d) Notices. All notices and other communications
<PAGE> 25
25
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address given by such
Holder to the Company by means of a notice given in accordance with the
provisions of this Section 6(d), which address initially is, with respect to an
Initial Purchaser, the address set forth in the Purchase Agreement and with
respect to any Holder thereafter, the address for such Holder in the Company's
Security Register; and (ii) if to the Company, initially at the Company's
address set forth in the Purchase Agreement and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 6(d).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Securities,
in any manner, whether by operation of law or otherwise, such Registrable
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Registrable Securities, such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such
<PAGE> 26
26
agreements directly to the extent they deem such enforcement necessary or
advisable to protect their rights hereunder. Any Holder (other than any Initial
Purchaser) who benefits from any of the provisions hereof or who elects to
exercise any rights provided to the Holders hereunder shall be deemed to have
assumed the Holders' obligations and agreed to all the agreements of the Holders
hereunder and it shall be a condition to the inclusion of any Holders' (other
than the Initial Purchasers) Securities in a Shelf Registration Statement for
such Holder to execute and deliver to the Company, upon written request of the
Company, an express written agreement to such effect.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE> 27
27
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PUEBLO XTRA INTERNATIONAL, INC.
By: /s/ William T. Keon, III
----------------------------
Name: William T. Keon, III
Title: President and Chief
Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ James G. Rose, Jr.
-------------------------
Name: James G. Rose, Jr.
Title: Managing Director
SCOTIA CAPITAL MARKETS (USA), INC.
By: /s/ Steve Ezzes
-------------------------
Name: Steve Ezzes
Title: Managing Director
<PAGE> 1
Exhibit 4.4
May __, 1997
Exchange Agent Agreement
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Ladies and Gentlemen:
Pueblo Xtra International, Inc. (the "Company") proposes to make an
offer (the "Exchange Offer") to exchange an aggregate principal amount of up to
$85,000,000 of its 9 1/2% Series C Senior Notes Due 2003 (the "Exchange Notes"),
for a like principal amount of its outstanding 9 1/2% Series B Senior Notes Due
2003 (the "Initial Notes"). The terms and conditions of the Exchange Offer as
currently contemplated are set forth in a prospectus dated May __, 1997 (the
"Prospectus"), proposed to be distributed to all record holders of the Initial
Notes. The Initial Notes and the Exchange Notes are collectively referred to
herein as the "Notes" or the "Securities".
The Company hereby appoints United States Trust Company of New York
to act as exchange agent (the "Exchange Agent") in connection with the Exchange
Offer. References hereinafter to "you" shall refer to United States Trust
Company of New York.
The Exchange Offer is expected to be commenced by the Company on or
about May __, 1997. The Letter of Transmittal accompanying the Prospectus is to
be used by the holders of the Initial Notes to accept the Exchange Offer, and
contains instructions with respect to the delivery of certificates for Initial
Notes tendered.
The Exchange Offer shall expire at 5:00 p.m., New York City time, on
_____________, 1997, or on such later date or time to which the Company may
extend the Exchange Offer (the "Expiration Date"). Subject to the terms and
conditions set forth in the Prospectus, the Company expressly reserves the right
to extend the Exchange Offer from time to time and may extend the Exchange Offer
by giving oral (confirmed in writing) or written notice to you before 5:00 p.m.,
New York City time, on the business day following the previously scheduled
Expiration Date.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Initial Notes not theretofore
accepted for exchange, upon the
<PAGE> 2
2
occurrence of any of the conditions of the Exchange Offer specified in the
Prospectus under the caption "The Exchange Offer--Conditions to the Exchange
Offer". The Company will give oral (confirmed in writing) or written notice of
any amendment, termination or nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer" and as specifically set forth herein and such duties which are
necessarily incidental thereto; provided, however, that in no way will your
general duty to act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Initial Notes
at The Depository Trust Company (the "Book-Entry Transfer Facility") for
purposes of the Exchange Offer within two business days after the date of the
Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the
Initial Notes by causing the Book-Entry Transfer Facility to transfer such
Initial Notes into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and
certificates for Initial Notes (or confirmation of book-entry transfer into your
account at the Book-Entry Transfer Facility) and any other documents delivered
or mailed to you by or for holders of the Initial Notes to ascertain whether:
(i) the Letters of Transmittal and any such other documents are duly executed
and properly completed in accordance with instructions set forth therein and
(ii) the Initial Notes have otherwise been properly tendered. In each case where
the Letter of Transmittal or any other document has been improperly completed or
executed or any of the certificates for Initial Notes are not in proper form for
transfer or some other irregularity in connection with the acceptance of the
Exchange Offer exists, you will endeavor to inform the presenters of the need
for fulfillment of all requirements and to take any other action as may be
necessary or advisable to cause such irregularity to be corrected.
4. With the approval of the Chairman of the Board, President, or any
Vice President of the Company (such approval, if given orally, to be confirmed
in writing) or any other party designated by such an officer in writing, you are
authorized to waive any defects, irregularities or conditions of tender in
<PAGE> 3
3
connection with any tender of Initial Notes pursuant to the Exchange Offer.
5. Tenders of Initial Notes may be made only as set forth in the
Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer--Procedures for Tendering", and Initial Notes shall be considered
properly tendered to you only when tendering in accordance with the
procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Initial Notes
which the Chairman of the Board, President or any Vice President of the Company
or any other party designated by such officer in writing shall approve as having
been properly tendered shall be considered to be properly tendered (such
approval, if given orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Initial Notes
delivered subsequent to the Expiration Date and accept its instructions with
respect to disposition of such Initial Notes.
7. You shall accept tenders:
(a) in cases where the Initial Notes are registered in
two or more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only
when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of Initial Notes
provided that customary transfer requirements, including any applicable
transfer taxes, are fulfilled.
You shall accept partial tenders of Initial Notes where so indicated
and as permitted in the Letter of Transmittal and deliver certificates for
Initial Notes to the transfer agent for split-up and return any untendered
Initial Notes to the holder (or such other person as may be designated in the
Letter of Transmittal) as promptly as practicable after expiration or
termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Company will notify you (such notice if given orally, to be
confirmed in writing) of its acceptance, promptly after the Expiration Date, of
all Initial Notes properly tendered and you, on behalf of the Company, will
exchange such Initial Notes for Exchange Notes and cause such
<PAGE> 4
4
Initial Notes to be canceled. Delivery of Exchange Notes will be made on behalf
of the Company by you at the rate of $1,000 principal amount of Exchange Notes
for each $1,000 principal amount of the Initial Notes tendered promptly after
notice (such notice, if given orally, to be confirmed in writing) of acceptance
of said Initial Notes by the Company; provided, however, that in all cases,
Initial Notes tendered pursuant to the Exchange Offer will be exchanged only
after timely receipt by you of certificates for such Initial Notes (or
confirmation of book-entry transfer into your account at the Book-Entry Transfer
Facility), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees and any other required
document. You shall issue Exchange Notes only in denominations of $1,000 or any
integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except
that, subject to the terms and upon the conditions set forth in the Prospectus
and the Letter of Transmittal, Initial Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Date.
10. The Company shall not be required to exchange any Initial Notes
tendered if any of the conditions set forth in the Exchange Offer are not met.
Notice of any decision by the Company not to exchange any Initial Notes tendered
shall be given (such notice, if given orally, shall be confirmed in writing) by
the Company to you.
11. If, pursuant to the Exchange Offer, the Company does not accept
for exchange all or part of the Initial Notes tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus under
the caption "The Exchange Offer--Conditions to the Exchange Offer" or otherwise,
you shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Initial Notes (or effect
appropriate book-entry transfer), together with any related required documents
and the Letters of Transmittal relating thereto that are in your possession, to
the persons who deposited them.
12. All certificates for reissued Initial Notes, unaccepted Initial
Notes or for Exchange Notes shall be forwarded by (a) first-class mail, postage
prepaid under a blanket surety bond protecting you and the Company from loss or
liability arising out of the nonreceipt or nondelivery of such certificates or
(b) by registered mail insured separately for the replacement value of each of
such certificates.
<PAGE> 5
5
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
(a) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of
any of the certificates or the Initial Notes represented thereby deposited
with you pursuant to the Exchange Offer, and will not be required to and
will make no representation as to the validity, value or genuineness of
the Exchange Offer; provided, however, that in no way will your general
duty to act in good faith be discharged by the foregoing;
(b) shall not be obligated to take any legal action hereunder which
might in your reasonable judgment, involve any expense or liability,
unless you shall have been furnished with reasonable indemnity;
(c) shall not be liable to the Company for any action taken or
omitted by you, or any action suffered by you to be taken or omitted,
without negligence, misconduct or bad faith on your part, by reason of or
as a result of the administration of your duties hereunder in accordance
with the terms and conditions of this Agreement or by reason of your
compliance with the instructions set forth herein or with any written or
oral instructions delivered to you pursuant hereto, and may reasonably
rely on and shall be protected in acting in good faith in reliance upon
any certificate, instrument, opinion, notice, letter, facsimile or other
document or security delivered to you and reasonably believed by you to be
genuine and to have been signed by the proper party or parties;
(d) may reasonably act upon any tender, statement, request, comment,
agreement or other instrument whatsoever not only as to its due execution
and validity and effectiveness of its provisions, but also as to the truth
and accuracy of any information contained therein, which you in good faith
reasonably believe to be genuine or to have been signed or represented by
a proper person or persons;
(e) may rely on and shall be protected in acting upon written or
oral instructions from any officer of the Company with respect to the
Exchange Offer;
<PAGE> 6
6
(f) shall not advise any person tendering Initial Notes pursuant to
the Exchange Offers to the wisdom of making such tender or as to the
market value or decline or appreciation in market value of any Initial
Notes; and
(g) may consult with your counsel and the written opinion of such
counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by you hereunder in good faith
and in accordance with such written opinion of such counsel.
15. You shall take such action as may from time to time be requested
by the Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery, as defined in the Prospectus, or such other forms
as may be approved from time to time by the Company, to all persons requesting
such documents and to accept and comply with telephone requests for information
relating to the Exchange Offer, provided that such information shall relate only
to the procedures for accepting (or withdrawing from) the Exchange Offer. The
Company will furnish you with copies of such documents at your request. All
other requests for information relating to the Exchange Offer shall be directed
to the Company, Attention: Daniel Cammarata, Controller of the Company, at the
Company's offices at 1300 N.W. 22nd Street, Pompano Beach, Florida 33134,
telephone (954) 977-2500.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to Daniel Cammarata of the Company,
Milbank, Tweed, Hadley & McCloy, counsel for the Company, and such other person
or persons as it may request, daily and more frequently if reasonably requested,
up to and including the Expiration Date, as to the number of the Initial Notes
which have been tendered pursuant to the Exchange Offer and the items received
by you pursuant to this Agreement, separately reporting and giving cumulative
totals as to items properly received and items improperly received. In addition,
you will also inform, and cooperate in making available to, the Company or any
such other person or persons as the Company requests from time to time prior to
the Expiration Date of such other information as it or he reasonably requests.
Such cooperation shall include, without limitation, the granting by you to the
Company and such person as the Company may request of access to those persons on
your staff who are responsible for receiving tenders, in order to ensure that
immediately prior to the Expiration Date the Company shall have received
information in sufficient detail to enable it to decide whether to extend the
Exchange Offer. You shall prepare a final list of all persons whose tenders were
accepted, the aggregate principal amount of
<PAGE> 7
7
Initial Notes tendered, the aggregate principal amount of Initial Notes accepted
and deliver said list to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall
be stamped by you as to the date and time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or right of
set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reason of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation and reimbursement of out-of-pocket expenses as set
forth on Schedule I attached hereto.
20. You hereby acknowledge receipt of the Prospectus and the Letter
of Transmittal attached hereto and further acknowledge that you have examined
each of them. Any inconsistency between this Agreement, on the one hand, and the
Prospectus and the Letter of Transmittal (as they may be amended from time to
time), on the other hand, shall be resolved in favor of the latter two
documents, except with respect to the duties, liabilities and indemnification of
you as Exchange Agent, which shall be controlled by this Agreement.
21. The Company agrees to indemnify and hold you harmless in your
capacity as Exchange Agent hereunder against any liability, cost or expense,
including reasonable attorneys' fees, arising out of or in connection with any
act, omission, delay or refusal made by you in reasonable reliance upon any
signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document reasonably believed by you to be
valid, genuine and sufficient and in accepting any tender or effecting any
transfer of Initial Notes reasonably believed by you in good faith to be
authorized, and in delaying or refusing in good faith to accept any tenders or
effect any transfer of Initial Notes; provided, however, that the Company shall
not be liable for indemnification or otherwise for any loss, liability, cost or
expense to the extent arising out of your negligence, wilful misconduct or bad
faith. In no case shall the Company be liable under this indemnity with respect
to any claim against you unless the Company shall be notified by
<PAGE> 8
8
you, by letter or cable or by facsimile confirmed by letter, of the written
assertion of a claim against you or of any other action commenced against you,
promptly after you shall have received any such written assertion or
commencement of action. The Company shall be entitled to participate at its own
expense in the defense of any such claim or other action, and, if the Company so
elects, the Company shall assume the defense of any suit brought to enforce any
such claim. In the event that the Company shall assume the defense of any such
suit, the Company shall not be liable for the fees and expenses of any
additional counsel thereafter retained by you so long as the Company shall
retain counsel reasonably satisfactory to you to defend such suit.
22. You shall arrange to comply with all requirements under the tax
laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service in accordance with applicable regulations.
23. You shall deliver or cause to be delivered, in a timely manner
to each governmental authority to which any transfer taxes are payable in
respect of the exchange of Initial Notes, your check in the amount of all
transfer taxes so payable, and the Company shall reimburse you for the amount of
any and all transfer taxes payable in respect of the exchange of Initial Notes;
provided, however, that you shall reimburse the Company for amounts refunded to
you in respect of your payment of any such transfer taxes, at such time as such
refund is received by you.
24. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
26. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and
<PAGE> 9
9
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
27. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
28. Unless otherwise provided herein, all notices, requests and
other communications to any party hereunder shall be in writing (including
facsimile) and shall be given to such party, addressed to it, as its address or
telecopy number set forth below:
If to the Company:
Pueblo Xtra International, Inc.
1300 N.W. 22nd Street
Pompano Beach, Florida 33134
Facsimile: (954) 979-5770
Attention: Daniel Cammarata
With a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Facsimile: (212) 530-5219
Attention: Donald B. Brant, Jr., Esq.
If to the Exchange Agent:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Facsimile: (212) 852-1625
Attention: Robert Lee
29. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 18, 19, 21 and 23 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly deliver to
the Company any certificates for Notes, funds or property (including, without
limitation, Letters of Transmittal and any other
<PAGE> 10
10
documents relating to the Exchange Offer) then held by you as Exchange Agent
under this Agreement.
30. This Agreement shall be binding and effective as of the date
hereof.
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
PUEBLO XTRA INTERNATIONAL, INC.
By___________________________
Name:
Title:
Accepted as of the date
first above written:
UNITED STATES TRUST COMPANY
OF NEW YORK
By__________________________
Name:
Title:
<PAGE> 11
SCHEDULE I
Compensation and Reimbursement
[to be inserted by US Trust]
<PAGE> 1
Exhibit 5.1
May 21, 1997
Pueblo Xtra International, Inc.
1300 N.W. 22nd Street
Pompano Beach, Florida 33069
Re: Pueblo Xtra International, Inc.
Offer to Exchange
9 1/2% Series C Senior Notes Due 2003
for all outstanding
9 1/2% Series B Senior Notes Due 2003
Ladies and Gentlemen:
We are acting as special counsel for Pueblo Xtra International,
Inc., a Delaware corporation (the "Company"), in connection with the filing by
the Company with the Securities and Exchange Commission (the "Commission") of a
registration statement (the "Registration Statement") on Form S-4 under the
Securities Act of 1933, as amended, relating to the proposed issuance, in
exchange for $85,000,000 aggregate principal amount of the Company's 9 1/2%
Series B Senior Notes Due 2003 (the "Initial Notes"), of $85,000,000 aggregate
principal amount of the Company's 9 1/2% Series C Senior Notes Due 2003 (the
"Exchange Notes"). The Exchange Notes are to be issued pursuant to an indenture
dated as of April 29, 1997 (the "Indenture"), between the Company and United
States Trust Company of New York, as trustee (the "Trustee"). Capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed
thereto in the Indenture.
We have examined originals, or copies certified to our satisfaction,
of such corporate records of the Company, agreements and other instruments,
certificates of public officials, certificates of officers and representatives
of the Company and other documents as we have deemed it necessary to require as
a basis for the opinions hereinafter expressed, including the Indenture, the
Registration Rights Agreement, dated
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as of April 29, 1997 (the "Registration Rights Agreement"), between the Company
and the Initial Purchasers named therein, the form of the Exchange Notes and the
Registration Statement.
In rendering the opinions expressed below, we have assumed (a) the
due authorization, execution and delivery of each of the Indenture and the
Registration Rights Agreement by each of the parties thereto other than the
Company, (b) that each of such parties has the legal power to act in the
respective capacity or capacities in which it is to act thereunder, (c) the
conformity to the original documents of all documents submitted to us as copies,
(d) the authenticity of all documents submitted to us as copies and (e) the
genuineness of all signatures on all documents submitted to us.
Based upon the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that the Exchange Notes, when duly
executed and authenticated in accordance with the provisions of the Indenture
and issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement, will constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture and enforceable in accordance with
their terms except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or transfer or
other similar laws relating to or affecting the rights of creditors generally
and except as the enforceability of the Exchange Notes is subject to the
application of general principles of equity (regardless of whether considered
in a proceeding in equity or at law), including without limitation (i) the
possible unavailability of specific performance, injunctive relief or any other
equitable remedy and (ii) concepts of materiality, reasonableness, good faith
and fair dealing.
We hereby consent to the use of our name under the heading "Legal
Matters" in the Prospectus constituting a part of the Registration Statement and
to the filing of this opinion as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ Milbank, Tweed, Hadley & McCloy
DBB/RSO
<PAGE> 1
Exhibit 10.1
$65,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
among
PUEBLO XTRA INTERNATIONAL, INC.,
PUEBLO INTERNATIONAL, INC.,
XTRA SUPER FOOD CENTERS, INC.,
VARIOUS LENDING INSTITUTIONS,
THE BANK OF NOVA SCOTIA
AS ADMINISTRATIVE AGENT
and
NATIONSBANK, N.A. (SOUTH)
AS SYNDICATION AGENT
-----------------------------
Dated as of April 29, 1997
-----------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1. Amount and Terms of Credit.............................. 1
1.01 Commitments............................................. 1
1.02 Minimum Borrowing Amounts, etc.......................... 3
1.03 Notice of Borrowing..................................... 3
1.04 Disbursement of Funds................................... 5
1.05 Notes................................................... 6
1.06 Conversions............................................. 7
1.07 Pro Rata Borrowings..................................... 7
1.08 Interest................................................ 7
1.09 Interest Periods........................................ 8
1.10 Increased Costs, Illegality, etc........................ 9
1.11 Compensation............................................ 12
1.12 Change of Lending Office................................ 13
1.13 Notice of Certain Costs................................. 13
1.14 Replacement of Banks.................................... 13
SECTION 2. Letters of Credit....................................... 14
2.01 Letters of Credit....................................... 15
2.02 Letter of Credit Participations......................... 16
2.03 Letter of Credit Requests; Notices of
Issuance............................................ 19
2.04 Agreement to Repay Letter of Credit
Drawings............................................ 19
2.05 Increased Costs......................................... 20
SECTION 3. Fees; Commitments....................................... 21
3.01 Fees.................................................... 21
3.02 Voluntary Reduction of Commitments...................... 23
3.03 Mandatory Reductions of Commitments, etc................ 23
SECTION 4. Payments................................................ 24
4.01 Voluntary Prepayments................................... 24
4.02 Mandatory Prepayments................................... 25
(A) Requirements.................................. 25
(B) Application................................... 25
4.03 Method and Place of Payment............................. 26
4.04 Net Payments............................................ 26
SECTION 5. Conditions Precedent.................................... 29
5.01 Conditions Precedent to Restatement
Effective Date...................................... 29
(a) Effectiveness; Notes........................... 29
(b) Opinions of Counsel............................ 29
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Page
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(c) Corporate Proceedings.......................... 29
(d) Original Credit Agreement...................... 30
(e) Issuance of PXI Senior Notes................... 30
(f) Pledge Agreements.............................. 30
(g) Subsidiary Guaranty............................ 32
(h) Security Agreements............................ 32
(i) Mortgages; Intercompany Mortgages;
Title Insurance; Surveys; Etc.................. 33
(j) Solvency Certificate........................... 34
(k) Insurance Policies............................. 34
(l) Consent Letter................................. 35
(m) Payment of Fees................................ 35
(n) Adverse Change................................. 35
(o) Litigation..................................... 35
(p) Depositary Account Agreement................... 35
5.02 Conditions Precedent to All Credit Events............... 35
SECTION 6. Representations, Warranties and
Agreements......................................... 36
6.01 Corporate Status........................................ 37
6.02 Corporate Power and Authority........................... 37
6.03 No Violation............................................ 37
6.04 Litigation.............................................. 37
6.05 Use of Proceeds......................................... 38
6.06 Governmental Approvals.................................. 38
6.07 Investment Company Act.................................. 38
6.08 Public Utility Holding Company Act...................... 38
6.09 True and Complete Disclosure............................ 38
6.10 Financial Condition; Financial Statements............... 39
6.11 Security Interests...................................... 40
6.12 Tax Returns and Payments................................ 41
6.13 Compliance with ERISA................................... 41
6.14 Subsidiaries............................................ 42
6.15 Patents, etc............................................ 43
6.16 Compliance with Statutes, etc........................... 43
6.17 Properties.............................................. 44
6.18 Labor Relations; Collective Bargaining
Agreements.......................................... 44
6.19 Indebtedness............................................ 45
6.20 Restrictions on Subsidiaries............................ 45
6.21 PXI Senior Notes, etc................................... 45
SECTION 7. Affirmative Covenants................................... 46
7.01 Information Covenants................................... 46
(a) Annual Financial Statements.................... 46
(b) Quarterly Financial Statements................. 46
(c) Monthly Reports................................ 47
(d) Budgets; etc................................... 47
(e) Officer's Certificates......................... 47
(ii)
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Page
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(f) Notice of Default or Litigation................ 47
(g) Environmental Matters.......................... 48
(h) Other Information.............................. 48
7.02 Books, Records and Inspections.......................... 49
7.03 Payment of Taxes........................................ 49
7.04 Corporate Franchises.................................... 49
7.05 Compliance with Statutes, etc........................... 50
7.06 ERISA................................................... 51
7.07 Good Repair............................................. 52
7.08 End of Fiscal Years; Fiscal Quarters.................... 53
7.09 Maintenance of Property; Insurance...................... 53
7.10 Additional Security; Further Assurances................. 53
7.11 Maintenance of Corporate Separateness................... 55
SECTION 8. Negative Covenants...................................... 55
8.01 Consolidation, Merger, Sale or Purchase of
Assets, etc......................................... 55
8.02 Liens................................................... 57
8.03 Indebtedness............................................ 59
8.04 Capital Expenditures.................................... 60
8.05 Advances, Investments and Loans......................... 60
8.06 Dividends, etc.......................................... 62
8.07 Transactions with Affiliates............................ 63
8.08 Changes in Business..................................... 63
8.09 EBITDA to Total Cash Interest Expense................... 63
8.10 Consolidated Indebtedness to EBITDA..................... 64
8.11 Senior Secured Debt to EBITDA........................... 65
8.12 Limitation on Voluntary Payments; Preferred
Stock............................................... 65
8.13 Issuance of Subsidiary Stock............................ 66
8.14 Limitation on Restrictions Affecting
Subsidiaries........................................ 66
SECTION 9. Events of Default....................................... 66
9.01 Payments................................................ 66
9.02 Representations, etc.................................... 67
9.03 Covenants............................................... 67
9.04 Default Under Other Agreements.......................... 67
9.05 Bankruptcy, etc......................................... 67
9.06 ERISA................................................... 68
9.07 Security Documents...................................... 69
9.08 Guaranties.............................................. 69
9.09 Judgments............................................... 69
9.10 Change of Control....................................... 69
SECTION 10. Definitions............................................ 70
(iii)
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Page
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SECTION 11. The Administrative Agent, etc.......................... 94
11.01 Appointment............................................ 94
11.02 Delegation of Duties................................... 95
11.03 Exculpatory Provisions................................. 95
11.04 Reliance by Administrative Agent, etc.................. 96
11.05 Notice of Default...................................... 96
11.06 Non-Reliance on Administrative Agent and
Other Banks......................................... 96
11.07 Indemnification........................................ 97
11.08 Individual Capacity.................................... 98
11.09 Resignation; Removal; Successors....................... 98
SECTION 12. Miscellaneous.......................................... 98
12.01 Payment of Expenses, etc............................... 98
12.02 Right of Setoff........................................ 99
12.03 Notices................................................100
12.04 Benefit of Agreement...................................100
12.05 No Waiver; Remedies Cumulative.........................102
12.06 Payments Pro Rata......................................103
12.07 Calculations; Computations.............................103
12.08 Governing Law; Submission to Jurisdiction;
Venue...............................................104
12.09 Counterparts...........................................105
12.10 Headings Descriptive...................................105
12.11 Amendment or Waiver....................................105
12.12 Survival...............................................106
12.13 Domicile of Loans......................................106
12.14 Registry...............................................106
SECTION 13. Guaranty...............................................107
13.01 The Guaranty...........................................107
13.02 Bankruptcy.............................................108
13.03 Nature of Liability....................................108
13.04 Independent Obligation.................................108
13.05 Authorization..........................................109
13.06 Reliance...............................................110
13.07 Subordination..........................................110
13.08 Waiver.................................................110
13.09 Limitation on Enforcement..............................112
13.10 Rights of Contribution.................................112
13.11 Post Closing Actions...................................112
(a) Depository Account Agreement...................112
(b) Mortgage Amendments............................113
(c) Intellectual Property..........................113
(d) Insurance Certificates ........................113
(iv)
<PAGE> 6
SCHEDULE I - Banks/Commitments
SCHEDULE II - Existing Letters of Credit
SCHEDULE III - Liabilities
SCHEDULE IV - Reportable Events
SCHEDULE V - Subsidiaries
SCHEDULE VI - Real Property
SCHEDULE VII - Collective Bargaining Agreements
SCHEDULE VIII - Permitted Existing Indebtedness
SCHEDULE IX - Insurance
SCHEDULE X - Permitted Liens
SCHEDULE XI - Existing Investments
EXHIBIT A-1 - Revolving Note
EXHIBIT A-2 - Swingline Note
EXHIBIT B - Letter of Credit Request
EXHIBIT C - Officer's Certificate
EXHIBIT D-1 - Opinion of Milbank, Tweed, Hadley
& McCloy
EXHIBIT D-2 - Opinion of White & Case
EXHIBIT E-1 - PXI Pledge Agreement
EXHIBIT E-2 - Borrower Pledge Agreement
EXHIBIT E-3 - Xtra Pledge Agreement
EXHIBIT E-4 - XM Pledge Agreement
EXHIBIT F - Subsidiary Guaranty
EXHIBIT G-1 - Borrower Security Agreement
EXHIBIT G-2 - Subsidiary Security Agreement
EXHIBIT H - Solvency Certificate
EXHIBIT I - Consent Letter
EXHIBIT J-1 - Subordinated Intercompany Real Estate
Note
EXHIBIT J-2 - Subordinated Intercompany Notes
EXHIBIT K - Assignment Agreement
EXHIBIT L - Depositary Account Agreement
EXHIBIT M - Cancelled Subordinated Note
(v)
<PAGE> 7
AMENDMENT AND RESTATEMENT dated as of April 29, 1997 to Credit
Agreement, dated as of July 21, 1993, among PUEBLO XTRA INTERNATIONAL, INC., a
Delaware corporation ("PXI"), PUEBLO INTERNATIONAL, INC., a Delaware corporation
(the "Borrower"), XTRA SUPER FOOD CENTERS, INC., a Delaware corporation
("Xtra"), the lending institutions listed from time to time on Schedule I hereto
(each a "Bank" and, collectively, the "Banks"), THE BANK OF NOVA SCOTIA as
Administrative Agent and NATIONSBANK, N.A. (SOUTH) as Syndication Agent. Unless
otherwise defined herein, all capitalized terms used herein and defined in
Section 10 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, the Borrower, PXI, Xtra and certain financial institutions
are party to a Credit Agreement dated as of July 21, 1993 (as the same has been
amended, modified or supplemented prior to the Restatement Effective Date, the
"Original Credit Agreement"); and
WHEREAS, the parties hereto wish to amend and restate the Original
Credit Agreement as herein provided;
NOW, THEREFORE, the parties hereto agree that the Original Credit
Agreement shall be and hereby is amended and restated in its entirety as
follows, provided if the Restatement Effective Date has not occurred on or prior
to June 30, 1997 this amendment and restatement shall be void and of no further
effect, with the Original Credit Agreement to remain in effect;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. (A) Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees to make a loan or loans (each a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower,
which Loans (i) may be incurred by the Borrower at any time and from time to
time on and after the Restatement Effective Date and prior to the Maturity Date,
(ii) except as hereinafter provided, may, at the option of the Borrower, be
incurred and maintained as, and/or converted into, Base Rate Loans or
<PAGE> 8
Eurodollar Loans, provided that all Revolving Loans made by all Banks pursuant
to the same Borrowing shall, unless otherwise specifically provided herein,
consist entirely of Loans of the same Type, (iii) may be repaid and reborrowed
in accordance with the provisions hereof, (iv) shall not exceed in aggregate
principal amount for any Bank at any time outstanding the amount which, when
combined with such Bank's Adjusted Percentage of the sum of (x) the L/C
Outstandings plus (y) the outstanding principal amount of Swingline Loans, in
each case at such time, equals the Revolving Commitment of such Bank at such
time and (v) shall not exceed in aggregate principal amount at any time
outstanding the amount which, when added to the outstanding principal amount of
Swingline Loans and the L/C Outstandings, would equal the sum of (x) the
Adjusted Total Revolving Commitment plus (y) the outstanding principal amount of
Revolving Loans of Defaulting Banks.
(B) Subject to and upon the terms and conditions herein set forth,
Scotiabank, in its individual capacity, agrees to make at any time and from time
to time after the Restatement Effective Date and prior to the Swingline
Termination Date, a loan or loans to the Borrower (each a "Swingline Loan," and
collectively the "Swingline Loans"), which Swingline Loans (i) shall be made and
maintained as Base Rate Loans, (ii) shall have the benefit of the provisions of
Section 1.01(C), (iii) may be repaid and reborrowed in accordance with the
provisions hereof, (iv) shall not exceed in aggregate principal amount at any
time outstanding, when combined with the aggregate principal amount of all
Revolving Loans made by Non-Defaulting Banks then outstanding and all L/C
Outstandings at such time, the Adjusted Total Revolving Commitment then in
effect and (v) shall not exceed in aggregate principal amount at any time
outstanding the Maximum Swingline Amount. Scotiabank will not make a Swingline
Loan after it has received written notice from the Borrower, either Agent or the
Required Banks that a Default or Event of Default exists until such time as
Scotiabank shall have received written notice of (x) rescission of all such
notices from the party or parties originally delivering same or (y) the waiver
of such Default or Event of Default by the Required Banks.
(C) On any Business Day, Scotiabank may, in its sole discretion,
give notice to the Banks (with an information copy to the Borrower, provided
that the failure to give such notice to the Borrower shall in no way affect the
validity and effectiveness of such notice) that its outstanding Swingline Loans
shall be funded with a Borrowing of
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<PAGE> 9
Revolving Loans (provided that each such notice shall be deemed to have been
automatically given upon the occurrence of an Event of Default under Section
9.05), in which case a Borrowing of Revolving Loans constituting Base Rate Loans
(each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately
succeeding Business Day by all Banks pro rata based on each Bank's Adjusted
Percentage, and the proceeds thereof shall be applied directly to repay
Scotiabank for such outstanding Swingline Loans. Each Bank hereby irrevocably
agrees to make such Base Rate Loans upon one Business Day's notice pursuant to
each Mandatory Borrowing in the amount and in the manner specified in the
preceding sentence and on the date specified in writing by Scotiabank
notwithstanding (i) that the amount of the Mandatory Borrowing may not comply
with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any
conditions specified in Section 5 are then satisfied, (iii) whether a Default or
an Event of Default (including an Event of Default under Section 9.05) has
occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v)
any reduction in the Adjusted Total Revolving Commitment or the Total Revolving
Commitment after any such Swingline Loans were made. In the event that any
Mandatory Borrowing cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code in respect of the Borrower), each Bank
(other than Scotiabank) hereby agrees that it shall forthwith purchase from
Scotiabank (without recourse or warranty) such assignment of the outstanding
Swingline Loans as shall be necessary to cause the Banks to share in such
Swingline Loans ratably based upon their respective Adjusted Percentages,
provided that all interest payable on the Swingline Loans shall be for the
account of Scotiabank until the date the respective assignment is purchased and,
to the extent attributable to the purchased assignment, shall be payable to the
Bank purchasing same from and after such date of purchase.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount
of each Borrowing shall not be less than the Minimum Borrowing Amount (except
that Mandatory Borrowings shall be made in the amounts required by Section
1.01(C)). More than one Borrowing may be incurred on any day, provided that at
no time shall there be outstanding more than ten Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) The Revolving Loans to be incurred by
the Borrower on the Restatement Effective Date shall be set forth in a written
notice (or telephonic notice promptly confirmed in writing) delivered by
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<PAGE> 10
the Borrower to the Administrative Agent at its Notice Office no later than
12:00 Noon (New York time) on the Business Day immediately prior to the
Restatement Effective Date. Whenever the Borrower desires to incur Revolving
Loans after the Restatement Effective Date, it shall give the Administrative
Agent at its Notice Office, written notice (or telephonic notice promptly
confirmed in writing) of each Borrowing of Eurodollar Loans prior to 12:00 Noon
(New York time) on the third Business Day preceding the date of the proposed
Borrowing and written notice (or telephonic notice promptly confirmed in
writing) of each Borrowing of Base Rate Loans to be made hereunder prior to
10:00 A.M. (New York time) on the date of the proposed Borrowing. Each of the
foregoing notices (each, together with each notice of a Borrowing of Swingline
Loans, a "Notice of Borrowing") shall be irrevocable and shall specify (i) the
aggregate principal amount of the Revolving Loans to be incurred, (ii) the date
of incurrence (which shall be a Business Day) and (iii) whether the respective
incurrence shall consist of Base Rate Loans or, to the extent otherwise
permitted, Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Administrative Agent shall promptly give each
Bank written notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing, of the proportionate share thereof of each Bank and of the
other matters covered by the Notice of Borrowing.
(b) Whenever the Borrower desires to incur a Swingline Loan
hereunder, it shall give Scotiabank not later than 12:00 Noon (New York time) on
the day such Swingline Loan is to be incurred, written notice or telephonic
notice promptly confirmed in writing of such Swingline Loan. Each such notice
shall be irrevocable and specify in each case (i) the date of incurrence (which
shall be a Business Day) and (ii) the principal amount of the Swingline Loan to
be incurred.
(c) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(C), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section.
(d) Without in any way limiting the obligation of the Borrower to
confirm in writing any notice it may give hereunder by telephone, the
Administrative Agent may act prior to receipt of written confirmation without
liability upon the basis of such telephonic notice, believed by the
Administrative Agent in good faith to be from an Authorized
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<PAGE> 11
Officer of the Borrower as a person entitled to give telephonic notices under
this Agreement on behalf of the Borrower. In each such case the Borrower hereby
waives the right to dispute the Administrative Agent's record of the terms of
any such telephonic notice.
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (2:00 P.M.
in the case of Swingline Loans) (New York time) on the date specified in each
Notice of Borrowing, each Bank will make available its pro rata share of each
Borrowing requested to be made on such date (or, in the case of Swingline Loans,
Scotiabank shall make available the full amount thereof) in the manner provided
below. Except as otherwise agreed among the Borrower and the Agents with respect
to the disbursement of funds on the Restatement Effective Date, all amounts
shall be made available to the Administrative Agent in U.S. dollars and
immediately available funds at the Payment Office and the Administrative Agent
promptly will make available to the Borrower by depositing to its account at the
Payment Office the aggregate of the amounts so made available in the type of
funds received. Unless the Administrative Agent shall have been notified by any
Bank prior to the date of Borrowing that such Bank does not intend to make
available to the Administrative Agent its portion of the Borrowing or Borrowings
to be made on such date, the Administrative Agent may assume that such Bank has
made such amount available to the Administrative Agent on such date of
Borrowing, and the Administrative Agent, in reliance upon such assumption, may
(in its sole discretion and without any obligation to do so) make available to
the Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Bank and the Administrative
Agent has made available same to the Borrower, the Administrative Agent shall be
entitled to recover such corresponding amount from such Bank. If such Bank does
not pay such corresponding amount forthwith upon the Administrative Agent's
demand therefor, the Administrative Agent shall promptly notify the Borrower,
and the Borrower shall pay such corresponding amount to the Administrative
Agent. The Administrative Agent shall also be entitled to recover from such Bank
or the Borrower, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made available
by the Administrative Agent to the Borrower to the date such corresponding
amount is recovered by the Administrative Agent, at a rate per annum equal to
(x) if to be paid by such Bank, the customary rate set by the Administrative
Agent for the correction of errors among banks for each day during the period
consisting of the first three
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<PAGE> 12
Business Days following such date of availability and thereafter at the Base
Rate or (y) if to be paid by the Borrower, the then applicable rate of interest,
calculated in accordance with Section 1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its commitments hereunder to make Loans or to prejudice
any rights which any Borrower may have against any Bank as a result of any
default by such Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of,
and interest on, the Loans made to it by each Bank shall be evidenced (i) if
Revolving Loans, by a promissory note duly executed and delivered by the
Borrower substantially in the form of Exhibit A-1, with blanks appropriately
completed in conformity herewith (each a "Revolving Note" and collectively the
"Revolving Notes"), and (ii) if Swingline Loans, by a promissory note duly
executed and delivered by the Borrower substantially in the form of Exhibit A-2
with blanks appropriately completed in conformity herewith (the "Swingline
Note").
(b) The Revolving Note issued to each Bank shall (i) be payable to
the order of such Bank and be dated the Restatement Effective Date, (ii) be in a
stated principal amount equal to the Revolving Commitment of such Bank and be
payable in the principal amount of the Revolving Loans evidenced thereby, (iii)
mature on the Maturity Date, (iv) bear interest as provided in the appropriate
clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans,
as the case may be, evidenced thereby, (v) be subject to mandatory repayment as
provided in Section 4.02 and (vi) be entitled to the benefits of this Agreement
and the other Credit Documents.
(c) The Swingline Note shall (i) be payable to the order of
Scotiabank and be dated the Restatement Effective Date, (ii) be in a stated
principal amount equal to the Maximum Swingline Amount and be payable in the
principal amount of the Swingline Loans evidenced thereby, (iii) mature on the
Swingline Termination Date, (iv) bear interest as provided in Section 1.08(a)
and (v) be entitled to the benefits of this Agreement and the other Credit
Documents.
(d) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will, prior to any
transfer of any of its Notes, endorse on the reverse side thereof the
outstanding
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<PAGE> 13
principal amount of Loans evidenced thereby and the last date or dates on which
interest has been paid in respect of the Loans evidenced thereby. Failure to
make any such notation shall not affect the Borrower's obligations in respect of
such Loans, or affect the validity of such transfer by any Bank of such Note.
1.06 Conversions. The Borrower shall have the option to convert on
any Business Day (or as otherwise, and to the extent, agreed to by the Agents),
all or a portion at least equal to the applicable Minimum Borrowing Amount of
the outstanding principal amount of the Revolving Loans into a Borrowing or
Borrowings of another Type of Loan provided that (i) no partial conversion of a
Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of
the Loans pursuant to such Borrowing to less than the Minimum Borrowing Amount
applicable thereto, (ii) Loans may only be converted into Eurodollar Loans if no
Default or Event of Default is in existence on the date of the conversion and
(iii) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be
limited in number as provided in Section 1.02. Each such conversion shall be
effected by the Borrower giving the Administrative Agent at its Notice Office,
prior to 12:00 Noon (New York time), at least three Business Days (or one
Business Day in the case of a conversion into Base Rate Loans) prior written
notice (or telephonic notice promptly confirmed in writing) (each a "Notice of
Conversion") specifying the Loans to be so converted, the Type of Loans to be
converted into and, if to be converted into a Borrowing of Eurodollar Loans, the
Interest Period to be initially applicable thereto. The Administrative Agent
shall give each Bank prompt notice of any such proposed conversion affecting any
of its Loans.
1.07 Pro Rata Borrowings. All Borrowings of Revolving Loans shall be
made from the Banks pro rata on the basis of their Revolving Commitments,
provided that all Mandatory Borrowings shall be made from the Banks pro rata on
the basis of their Adjusted Percentages. It is understood that no Bank shall be
responsible for any default by any other Bank in its obligation to make or
support Loans hereunder and that each Bank shall be obligated to make or support
the Loans provided to be made or supported by it hereunder, regardless of the
failure of any other Bank to fulfill its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base Rate
Loan shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration
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or otherwise) at a rate per annum which shall at all times be the Base Rate plus
the Base Rate Margin.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum which shall at all times be the
relevant Eurodollar Rate plus the Eurodollar Margin.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to the Base Rate in effect from time to time plus the sum of (i) 2% and (ii) the
Base Rate Margin, provided that no Loan shall bear interest after maturity
(whether by acceleration or otherwise) at a rate per annum less than 2% plus the
rate of interest applicable thereto at maturity.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable in arrears (i) in respect of each Base Rate Loan, quarterly on the last
Business Day of each calendar quarter, (ii) in respect of each Eurodollar Loan,
on the last day of each Interest Period applicable thereto and, in the case of
an Interest Period of six months on the date occurring three months, after the
first day of such Interest Period and (iii) in respect of each Loan, on any
prepayment (on the amount prepaid), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Administrative Agent, upon determining the interest rate for
any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify
the Borrower and the Banks thereof.
1.09 Interest Periods. At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of the Interest Period applicable to such Borrow-
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<PAGE> 15
ing, which Interest Period shall, at the option of such Borrower, be a one, two,
three or six month period. Notwithstanding anything to the contrary contained
above:
(i) the initial Interest Period shall commence on the date of such
Borrowing (including the date of any conversion from a Borrowing of
another Type of Loan) and each Interest Period occurring thereafter in
respect of such Borrowing shall commence on the day on which the next
preceding Interest Period expires;
(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day
of such calendar month;
(iii) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) no Interest Period may be elected if it would extend beyond the
Maturity Date; and
(v) no Interest Period may be elected at any time when a Default or
Event of Default is then in existence.
If upon the expiration of any Interest Period, the Borrower has failed to elect
a new Interest Period to be applicable to the respective Borrowing of Eurodollar
Loans as provided above, or is unable to elect a new Interest Period as a result
of clause (v) above, the Borrower shall be deemed to have elected to convert
such Borrowing into a Borrowing of Base Rate Loans effective as of the
expiration date of such Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that (x) in
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Bank shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
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(i) on any date for determining the Eurodollar Rate for any Interest
Period that, by reason of any changes arising after the Restatement
Effective Date affecting the London interbank Eurodollar market, adequate
and fair means do not exist for ascertaining generally the applicable
interest rate on the basis provided for in the definition of Eurodollar
Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a change
in the rate of taxes or similar charges) because of (x) any change since
the Restatement Effective Date in any applicable law, governmental rule,
regulation, guideline, order or request (whether or not having the force
of law) or in the interpretation or administration thereof and including
the introduction of any new law or governmental rule, regulation,
guideline, order or request (such as, for example, but not limited to, a
change in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the
computation of the Euro-dollar Rate) and/or (y) other circumstances
adversely affecting the London interbank Eurodollar market or the position
of such Bank in such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has become unlawful by compliance by such Bank in good faith with any
law, governmental rule, regulation, guideline or order (or would conflict
with any such governmental rule, regulation, guideline or order not having
the force of law but with which such Bank customarily complies even though
the failure to comply therewith would not be unlawful), or has become
impracticable as a result of a contingency occurring after the Restatement
Effective Date which adversely affects the London interbank Eurodollar
market;
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above) shall (x) on such date and (y) within three Business Days
of the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and (except in the case of clause (i)) to
the Administrative Agent of such determination (which notice the Administrative
Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the
case of clause (i) above, Eurodollar Loans shall no longer be
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<PAGE> 17
available until such time as the Administrative Agent notifies the Borrower and
the Banks that the circumstances giving rise to such notice by the
Administrative Agent no longer exist, and any Notice of Borrowing or Notice of
Conversion given by the Borrower with respect to Eurodollar Loans, which have
not yet been incurred shall be deemed rescinded, (y) in the case of clause (ii)
above, the Borrower shall pay to such Bank, upon written demand therefor, such
additional amounts (in the form of an increased rate of, or a different method
of calculating, interest or otherwise as such Bank in its sole discretion shall
determine) as shall be required to compensate such Bank for such increased costs
or reductions in amounts receivable hereunder (a written notice as to the
additional amounts owed to such Bank, showing in reasonable detail the basis for
the calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding upon all parties hereto) and
(z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii),
shall) either (i) if the affected Eurodollar Loan is then being made pursuant to
a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that such
Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii) or (ii)
if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Administrative Agent, require the affected Bank to
convert each such Eurodollar Loan into a Loan of another Type, provided that if
more than one Bank is affected at any time, then all affected Banks must be
treated the same pursuant to this Section 1.10(b).
(c) If any Bank determines at any time that the adoption or
effectiveness of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or actual
compliance by such Bank with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of in-
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<PAGE> 18
creasing the costs to such Bank to a level above that, or reducing the rate of
return on such Bank's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that, which such Bank could have achieved
but for such adoption, effectiveness, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy), then from
time to time, upon written demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such reduction. Each Bank, in
determining additional amounts owing under this Section 1.10(c) will act
reasonably and in good faith and will use averaging and attribution methods
which are reasonable, provided that such Bank's determination of such additional
amounts so performed shall, absent manifest error, be final and conclusive and
binding on all parties hereto. Each Bank, upon determining that any additional
amounts will be payable pursuant to this Section 1.10(c), will give prompt
written notice thereof to the Borrower, which notice shall set forth the basis
of the calculation of such additional amounts, although the failure to give any
such notice shall not release or diminish any of the Borrower's obligations to
pay additional amounts pursuant to this Section 1.10(c) upon receipt of such
notice.
1.11 Compensation. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth the basis for requesting such
compensation), for all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by such Bank to
fund its Eurodollar Loans to the Borrower) which such Bank may sustain: (i) if
for any reason (other than a default by such Bank or the Administrative Agent) a
Borrowing of Eurodollar Loans does not occur on a date specified therefor in a
Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the
Borrower or deemed withdrawn pursuant to Section 1.10); (ii) if, for any reason,
any repayment or conversion of any of its Eurodollar Loans occurs on a date
which is not the last day of an Interest Period applicable thereto; (iii) if,
for any reason, any prepayment of any of its Eurodollar Loans is not made on any
date specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other default by the Borrower to repay its Eurodollar
Loans when required by the terms of this Agreement or (y) an election made
pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank with
respect to Eurodollar Loans under this Section 1.11 shall be made as though that
Bank had actually
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<PAGE> 19
funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit
bearing interest at the Eurodollar Rate in an amount equal to the amount of that
Loan, having a maturity comparable to the relevant Interest Period and through
the transfer of such Eurodollar deposit from an offshore office of that Bank to
a domestic office of that Bank in the United States of America (or if such Bank
has no offshore office, from an offshore office of the Administrative Agent to
the domestic office of the Administrative Agent); provided, however, that each
Bank may fund each of its Eurodollar Loans in any manner it sees fit and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this Section 1.11.
1.12 Change of Lending Office. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office of such Bank for any Loans or
Letters of Credit affected by such event, provided that such designation is made
on such terms that such Bank or its respective lending offices suffer no
economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of any such Section.
Nothing in this Section 1.12 shall affect or postpone any of the obligations of
the Borrower or the right of any Bank provided in Section 1.10, 2.05 or 4.04.
1.13 Notice of Certain Costs. Notwithstanding anything in this
Agreement to the contrary, to the extent any notice required by Section 1.10 or
2.05 is given by any Bank more than 100 days after the occurrence of the event
giving rise to the additional cost, reduction in amounts or other additional
amounts of the type described in such Section, such Bank shall not be entitled
to compensation under Section 1.10 or 2.05, as the case may be, for any such
amounts incurred or accruing prior to the giving of such notice to the Borrower
or Borrowers.
1.14 Replacement of Banks. (a) If (x) any Bank becomes a Defaulting
Bank or otherwise defaults in its obligations to make Revolving Loans or fund
Unpaid Drawings or (y) any Bank is owed increased costs under Section 1.10(a)
(ii) or (iii), 1.10(c), 2.05 or 4.04, the Borrower shall have the right, in any
such case, if no Event of Default exists and, in the case of clause (y), the
affected Bank has not taken actions to eliminate such increased costs, to
replace
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such Bank (a "Replaced Bank") as a Bank hereunder, with one or more existing
Banks or Eligible Assignees reasonably satisfactory to the Administrative Agent
(collectively, the "Replacement Bank").
(b) In the case of a replacement of a Bank pursuant to this Section
1.14, (I) the Replacement Bank shall enter into one or more Assignment
Agreements as provided for in Section 12.04(b) (and with all fees payable
pursuant to said Section 12.04(b) to be paid by the Replacement Bank) pursuant
to which the Replacement Bank shall acquire all of the Revolving Commitment and
outstanding Revolving Loans of, and the existing participations, if any, in L/C
Outstandings by, the Replaced Bank and, in connection therewith, shall pay to
(x) the Replaced Bank an amount equal to the sum of (A) an amount equal to the
principal of, and all accrued interest on, all outstanding Revolving Loans of
the Replaced Bank, (B) an amount, if any, equal to all Unpaid Drawings that have
been funded by (and not reimbursed to) such Replaced Bank, together with all
then unpaid interest with respect thereto at such time and (C) an amount equal
to all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant
to Section 3.01 and (y) Scotiabank an amount, if any, equal to such Replaced
Bank's Adjusted Percentage (prior to any adjustment thereto described in clause
(y) of the immediately succeeding sentence) of any Unpaid Drawing (which at such
time remains an Unpaid Drawing) to the extent such amount was not theretofore
funded by such Replaced Bank, and (II) all obligations of the Borrower owing to
the Replaced Bank (other than those specifically described in clause (I) above
in respect of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full by the Borrower to such Replaced Bank
concurrently with such replacement. Upon the execution of the respective
Assignment Agreements, the payment of amounts referred to in clauses (I) and
(II) above and, if so requested by the Replacement Bank, delivery of a Revolving
Note executed by the Borrower, (x) the Replacement Bank shall become a Bank
hereunder, the Replaced Bank shall cease to constitute a Bank hereunder, except
with respect to indemnification provisions under this Agreement, which shall
survive as to such Replaced Bank and (y) the Adjusted Percentages of the Banks
shall be automatically adjusted at such time to give effect to such replacement.
SECTION 2. Letters of Credit.
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<PAGE> 21
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request the Letter of Credit
Issuer at any time and from time to time on or after the Restatement Effective
Date and prior to the Maturity Date to issue, for the account of the Borrower
and in support of commercial and/or trade obligations incurred in the ordinary
course of business, insurance obligations, workers compensation, bonding
obligations in respect of taxes, licenses and similar requirements, support of
the Borrower's AFICA obligations and other obligations (including such other
obligations as specified in the respective Letter of Credit Request and
consented to by the Letter of Credit Issuer, such consent not to be unreasonably
withheld, it being understood that the Letter of Credit Issuer will notify the
Borrower of its withholding any such consent within 24 hours of its receipt of
the respective Letter of Credit Request) of the Borrower, Xtra and/or other
wholly-owned Subsidiaries of PXI, and subject to and upon the terms and
conditions herein set forth the Letter of Credit Issuer agrees to issue from
time to time, irrevocable letters of credit so requested by the Borrower in such
form as may be approved by the Letter of Credit Issuer in its sole discretion
(not to be unreasonably withheld) (each such letter of credit, together with
each Existing Letter of Credit, a "Letter of Credit" and collectively, the
"Letters of Credit").
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the L/C Outstandings at such
time would exceed either (x) $30,000,000 or (y) when added to the aggregate
principal amount of all Revolving Loans made by Non-Defaulting Banks and all
Swingline Loans then outstanding, the Adjusted Total Revolving Commitment at
such time (after giving effect to any reductions to the Adjusted Total Revolving
Commitment on such date); (ii) each Letter of Credit shall have an expiry date
occurring not later than one year after such Letter of Credit's date of issuance
(subject to extension provisions acceptable to the Administrative Agent and the
Letter of Credit Issuer, which acceptance is not to be unreasonably withheld, or
except as may be otherwise agreed by the Administrative Agent and the Letter of
Credit Issuer with respect to Letters of Credit issued in respect of the AFICA
Bonds) and in no event occurring later than the third Business Day preceding the
Maturity Date; (iii) each Letter of Credit shall be denominated in U.S. dollars;
(iv) no Letter of Credit shall have a Stated Amount of less than $50,000 unless
otherwise agreed to by the Letter of Credit Issuer; and (v) no Letter of Credit
shall be issued by the
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Letter of Credit Issuer after it has received a written notice from the
Borrower, either Agent or the Required Banks stating that a Default or Event of
Default has occurred and is continuing until such time as the Letter of Credit
Issuer shall have received a written notice of (i) rescission of such notice
from the party or parties originally delivering such notice or (ii) the waiver
of such Default or Event of Default by the Required Banks.
(c) Schedule II hereto contains a description of all letters of
credit issued under the Original Credit Agreement that are to be outstanding on,
and to continue in effect after, the Restatement Effective Date. Each such
letter of credit shall constitute a "Letter of Credit" for all purposes of this
Agreement, issued, for purposes of Section 2.02(a) on the Restatement Effective
Date, and the Borrower, the Letter of Credit Issuer, the Agents and the Banks
hereby agree that, from and after such date, the terms of this Agreement shall
apply to such Letters of Credit, superseding the Original Credit Agreement.
2.02 Letter of Credit Participations. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Bank
(each such other Bank, in its capacity under this Section 2.02, a "Participating
Bank"), and each such Participating Bank shall be deemed irrevocably and
unconditionally to have purchased and received from the Letter of Credit Issuer,
without recourse or warranty, an undivided interest and participation, to the
extent of such Participating Bank's Adjusted Percentage, in such Letter of
Credit, each substitute letter of credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto, and any
security therefor or guaranty pertaining thereto (although L/C Fees will be paid
directly to the Administrative Agent for the ratable account of the
Participating Banks as provided in Section 3.01(b) and the Participating Banks
shall have no right to receive any portion of any Facing Fees). Upon any change
in the Revolving Commitments of the Banks pursuant to Section 1.14 or 12.04 or
upon the occurrence of a Bank Default, it is hereby agreed that, with respect to
all outstanding Letters of Credit and Unpaid Drawings, there shall be an
automatic adjustment to the participations pursuant to this Section 2.02 to
reflect the new Adjusted Percentages of the assignor and assignee Bank or of all
Non-Defaulting Banks, as the case may be.
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(b) In determining whether to pay under any Letter of Credit, the
Letter of Credit Issuer issuing same shall have no obligation relative to any
other Bank other than to confirm that any documents required to be delivered
under such Letter of Credit have been delivered and that they appear to comply
on their face with the requirements of such Letter of Credit. Any action taken
or omitted to be taken by the Letter of Credit Issuer under or in connection
with any Letter of Credit issued by it if taken or omitted in the absence of
gross negligence or willful misconduct, shall not create for the Letter of
Credit Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes any payment
under any Letter of Credit issued by it and the Borrower shall not have
reimbursed such amount in full to the Letter of Credit Issuer pursuant to
Section 2.04(a), the Letter of Credit Issuer shall promptly notify the
Administrative Agent and after receipt of such notice, the Administrative Agent
will notify each Participating Bank of such failure, and each Participating Bank
shall promptly and unconditionally pay to the Administrative Agent for the
account of the Letter of Credit Issuer, the amount of such Participating Bank's
Adjusted Percentage of such unreimbursed payment in lawful money of the United
States of America and in same day funds, together with interest at the customary
rate set by the Letter of Credit Issuer for the correction of errors among banks
for each day during the period consisting of the first three days following such
date of notice and thereafter at the Base Rate; provided, however, that no
Participating Bank shall be obligated to pay to the Administrative Agent for the
account of the Letter of Credit Issuer its Adjusted Percentage of such
unreimbursed amount for any wrongful payment made by the Letter of Credit Issuer
under a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer. If
the Letter of Credit Issuer so notifies, prior to 11:00 A.M. (New York time) on
any Business Day, any Participating Bank required to fund a payment under a
Letter of Credit, such Participating Bank shall make available to the
Administrative Agent for the account of the Letter of Credit Issuer such
Participating Bank's Adjusted Percentage of the amount of such payment on such
Business Day in same day funds. If and to the extent such Participating Bank
shall not have so made its Adjusted Percentage of the amount of such payment
available to the Administrative Agent for the account of the Letter of Credit
Issuer, such Participating Bank agrees to pay to the Administrative Agent for
the account of the Letter of Credit Issuer, forthwith on demand
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<PAGE> 24
such amount, together with interest thereon, for each day from such date until
the date such amount is paid to the Administrative Agent for the account of such
Letter of Credit Issuer at the overnight Federal Funds Rate. The failure of any
Participating Bank to make available to the Administrative Agent for the account
of the Letter of Credit Issuer its Adjusted Percentage of any payment under any
Letter of Credit shall not relieve any other Participating Bank of its
obligation hereunder to make available to the Administrative Agent for the
account of the Letter of Credit Issuer its Adjusted Percentage of any payment
under any Letter of Credit on the date required, as specified above, but no
Participating Bank shall be responsible for the failure of any other
Participating Bank to make available to the Administrative Agent, such other
Participating Bank's Adjusted Percentage of any such payment.
(d) Whenever the Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Administrative Agent has received for
the account of the Letter of Credit Issuer any payments from the Participating
Banks pursuant to clause (c) above, the Letter of Credit Issuer shall pay to the
Administrative Agent and the Administrative Agent shall promptly pay to each
Participating Bank which has paid its Adjusted Percentage thereof, in lawful
money of the United States of America and in same day funds, an amount equal to
such Participating Bank's Adjusted Percentage of the principal amount of such
reimbursement and of interest reimbursed thereon accruing from and after the
date of the purchase of the respective participations.
(e) The obligations of the Participating Banks to make payments to
the Administrative Agent for the account of the Letter of Credit Issuer with
respect to Letters of Credit shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right which
the Borrower may have at any time against a beneficiary named in a Letter
of Credit, any transferee of any Letter of Credit (or any Person for whom
any such transferee may be acting), any Agent, the
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Letter of Credit Issuer, any Bank, or other Person, whether in connection
with this Agreement, any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying transaction
between the Borrower and the beneficiary named in any such Letter of
Credit);
(iii) any draft, certificate or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Credit Documents; or
(v) the occurrence of any Default or Event of Default.
2.03 Letter of Credit Requests; Notices of Issuance. (a) Whenever it
desires that a Letter of Credit be issued, the Borrower shall give the
Administrative Agent and the Letter of Credit Issuer written notice (including
by way of telecopier) thereof in substantially the form of Exhibit B hereto
prior to 1:00 P.M. (New York time) at least three Business Days (or such shorter
period as may be acceptable to the Letter of Credit Issuer) prior to the
proposed date (which shall be a Business Day) of issuance (each a "Letter of
Credit Request"), which Letter of Credit Request shall include an application
for the Letter of Credit and any other documents that such Letter of Credit
Issuer customarily requires in connection therewith. The Administrative Agent
shall promptly notify each Bank of each Letter of Credit Request.
(b) The delivery of each Letter of Credit Request shall be deemed a
representation and warranty by the Borrower that the Letter of Credit may be
issued in accordance with and will not violate the requirements of Section
2.01(b). The Letter of Credit Issuer shall, on the date of each issuance of a
Letter of Credit by it, give the Administrative Agent, each Bank and the
Borrower written notice of the issuance of such Letter of Credit, accompanied by
a copy to the Administrative Agent of the Letter of Credit or Letters of Credit
issued by it.
2.04 Agreement to Repay Letter of Credit Drawings. (a) The Borrower
hereby agrees to reimburse the Letter of
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Credit Issuer, by making payment to the Administrative Agent in U.S. dollars in
immediately available funds at the Payment Office, for any payment or
disbursement made by the Letter of Credit Issuer under any Letter of Credit
issued by it (each such amount so paid or disbursed until reimbursed, an "Unpaid
Drawing") immediately after, and in any event on the date of, notice from the
Letter of Credit Issuer of such payment or disbursement with interest on the
amount so paid or disbursed by the Letter of Credit Issuer, to the extent not
reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or
disbursement, from and including the date paid or disbursed to but not including
the date the Letter of Credit Issuer is reimbursed therefor at a rate per annum
which shall be the Base Rate Margin plus the Base Rate as in effect from time to
time (plus an additional 2% per annum if not reimbursed by the third Business
Day after the date of notice of such payment or disbursement), such interest to
be payable on demand.
(b) The Borrower's obligation under this Section 2.04 to reimburse
the Letter of Credit Issuer with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Letter of Credit Issuer, the
Administrative Agent, any Agent or any Bank, including, without limitation, any
defense based upon the failure of any drawing under a Letter of Credit to
conform to the terms of the Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such drawing; provided,
however, that the Borrower shall not be obligated to reimburse the Letter of
Credit Issuer for any wrongful payment made by the Letter of Credit Issuer under
a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer.
2.05 Increased Costs. If at any time after the Restatement Effective
Date, the adoption or effectiveness of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or actual compliance by the
Letter of Credit Issuer or any Participating Bank with any request or directive
(whether or not having the force of law) by any such authority, central bank or
comparable agency shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against
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Letters of Credit issued by the Letter of Credit Issuer or such Participating
Bank's participation therein, or (ii) shall impose on the Letter of Credit
Issuer or any Participating Bank any other conditions affecting this Agreement,
any Letter of Credit or such Participating Bank's participation therein; and the
result of any of the foregoing is to increase the cost to the Letter of Credit
Issuer or such Participating Bank of issuing, maintaining or participating in
any Letter of Credit, or to reduce the amount of any sum received or receivable
by the Letter of Credit Issuer or such Participating Bank hereunder (other than
any increased cost or reduction in the amount received or receivable resulting
from the imposition of or a change in the rate of taxes or similar charges),
then, upon demand to the Borrower by the Letter of Credit Issuer or such
Participating Bank (a copy of which notice shall be sent by the Letter of Credit
Issuer or such Participating Bank to the Administrative Agent), the Borrower
shall pay to the Letter of Credit Issuer or such Participating Bank such
additional amount or amounts as will compensate the Letter of Credit Issuer or
such Participating Bank for such increased cost or reduction. Each of the Letter
of Credit Issuer and each Participating Bank, in determining additional amounts
owing under this Section, will act reasonably and in good faith and will use
averaging and attribution methods which are reasonable, provided that such
Person's determination of such additional amounts so performed shall, absent
manifest error, be final and conclusive and binding on all parties hereto. A
certificate shall be submitted to the Borrower by the Letter of Credit Issuer or
such Participating Bank, as the case may be (a copy of which certificate shall
be sent by the Letter of Credit Issuer or such Participating Bank to the
Administrative Agent) setting forth the basis for the determination of such
additional amount or amounts necessary to compensate the Letter of Credit Issuer
or such Participating Bank as aforesaid, although the failure to deliver any
such certificate shall not release or diminish any of the Borrower's obligations
to pay additional amounts pursuant to this Section 2.05 upon receipt of such
certificate.
SECTION 3. Fees; Commitments.
3.01 Fees. (a) The Borrower agrees to pay to the Administrative
Agent a commitment commission ("Commitment Commission") for the account of each
Non-Defaulting Bank for the period from and including the Restatement Effective
Date to but not including the date the Total Revolving Commitment has been
terminated, computed at a rate for each day equal to
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the then CC Percentage on the daily average of such Bank's Unutilized Revolving
Commitment. Such Commitment Commission shall be due and payable quarterly in
arrears on the last Business Day of each calendar quarter and on the date upon
which the Total Revolving Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent for the
account of the Non-Defaulting Banks pro rata on the basis of their respective
Revolving Commitments, a fee in respect of each Letter of Credit (the "L/C Fee")
in an amount equal to the applicable Eurodollar Margin per annum on the average
daily Stated Amount of such Letter of Credit. Accrued L/C Fees shall be due and
payable quarterly in arrears on the last Business Day of each calendar quarter
and on the date upon which the Total Revolving Commitment shall be terminated.
(c) The Borrower agrees to pay to the Administrative Agent for the
account of the Letter of Credit Issuer a fee in respect of each Letter of Credit
issued by it (the "Facing Fee") computed at the rate of 1/8 of 1% per annum on
the average daily Stated Amount of such Letter of Credit. Accrued Facing Fees
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter and on the date upon which the Total Revolving Commitment shall
be terminated.
(d) The Borrower hereby agrees to pay to any Letter of Credit Issuer
upon each issuance of, drawing under and/or amendment of, a Letter of Credit
such amount as shall at the time of such issuance, drawing and/or amendment
equal the administrative charge which such Letter of Credit Issuer is
customarily charging at such time for issuances of, drawings under and/or
amendments of letters of credit issued by it other than with respect to standby
letters of credit issued by such Letter of Credit Issuer.
(e) The Borrower shall pay to the Administrative Agent (x) on the
Restatement Effective Date for its own account and/or for distribution to the
Agents and/or the Banks such fees as heretofore agreed by such Borrower and the
Agents and (y) for the account of the Agents, such other fees as may be agreed
to from time to time between the Borrower and the Agents, when and as due.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
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3.02 Voluntary Reduction of Commitments. Upon at least three
Business Days' prior written notice (or telephonic notice confirmed in writing)
to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Banks), the Borrower
shall have the right, without premium or penalty, to terminate the Total
Unutilized Revolving Commitment, in part or in whole, provided that (x) any such
termination shall apply to proportionately and permanently reduce the Revolving
Commitment of each of the Banks and (y) partial reduction pursuant to this
sentence shall be in the amount of at least $2,000,000.
3.03 Mandatory Reductions of Commitments, etc. (a) The Total
Revolving Commitment shall terminate on the Maturity Date.
(b) The Total Revolving Commitment shall be reduced:
(I) On the date that is ten Business Days after the date of receipt
by PXI or any of its Subsidiaries of the Cash Proceeds of any Asset Sale (other
than the Hialeah & Dadeland Transfer), by an amount equal to the Net Cash
Proceeds of such Asset Sale, provided the Total Revolving Commitment shall not
be so reduced as a result of any Asset Sale to the extent the Borrower elects,
as hereinafter provided, to cause such Net Cash Proceeds to be reinvested in
Reinvestment Assets (a "Reinvestment Election"). The Borrower may exercise its
Reinvestment Election with respect to an Asset Sale provided that (x) no Default
or Event of Default exists at the time of such Asset Sale and (y) the Borrower
delivers a Reinvestment Notice to the Administrative Agent no later than thirty
days after the end of the second and fourth fiscal quarters of each fiscal year
with respect to the Asset Sales occurring during the previous two or four fiscal
quarters respectively, with such Reinvestment Election being effective with
respect to the Net Cash Proceeds of such Asset Sales equal to the respective
Reinvestment Amounts specified in such Reinvestment Notice;
(II) On the date of the receipt by PXI or any of its Subsidiaries of
the proceeds of any incurrence of Indebtedness (other than Indebtedness
permitted by Section 8.03 as such Section is in effect on the Restatement
Effective Date), by an amount equal to the Net Debt Issuance Proceeds of such
incurrence;
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(III) On each date that is five Business Days after the date of the
receipt by PXI of proceeds from the issuance of equity, by an amount equal to
60% of the Net Equity Issuance Proceeds of any such issuance; and
(IV) (x) On the date of delivery of any Reinvestment Notice with
respect to an Asset Sale, by an amount equal to the difference between the Net
Cash Proceeds of such Asset Sale and the Reinvestment Amount specified in such
Reinvestment Notice with respect to such Asset Sale and (y) on the Reinvestment
Reduction Date with respect to an Asset Sale, by an amount equal to the
Reinvestment Reduction Amount, if any, for such Asset Sale.
(c) Each reduction of the Total Revolving Commitment pursuant to
this Section 3.03 shall apply proportionately to the Revolving Commitment of
each Bank.
SECTION 4. Payments.
4.01 Voluntary Prepayments. The Borrower shall have the right to
prepay Loans owing by it in whole or in part, without penalty or fee except as
otherwise provided in this Agreement, from time to time on the following terms
and conditions: (i) the Borrower shall give the Administrative Agent at the
Notice Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay Loans, whether such Loans are Revolving Loans
or Swingline Loans, the amount of such prepayment and (in the case of Eurodollar
Loans) the specific Borrowing(s) pursuant to which made, which notice shall be
given by the Borrower at least two Business Days prior to (or in the case of
Swingline Loans prior to 12:00 Noon (New York Time) on) the date of such
pre-payment, which notice shall promptly be transmitted by the Administrative
Agent to each of the Banks (except in respect of Swingline Loans); (ii) each
partial prepayment of any Borrowing shall be in an aggregate principal amount of
at least $2,000,000 (or, in respect of a partial prepayment of any Borrowing of
Swingline Loans, in such lesser principal amount as may be satisfactory to
Scotiabank), provided that no partial prepayment of Eurodollar Loans shall
reduce the aggregate principal amount of Eurodollar Loans outstanding pursuant
to a Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto; and (iii) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among such Loans provided that at the
Borrower's election no portion of any voluntary prepayment shall be applied to
the Revolving Loans of a Defaulting Bank.
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4.02 Mandatory Prepayments.
(A) Requirements:
(a) If on any date the sum of the aggregate outstanding principal
amount of Revolving Loans made by Non-Defaulting Banks and Swingline Loans and
the aggregate amount of L/C Outstandings exceeds the Adjusted Total Revolving
Commitment as then in effect, the Borrower shall repay on such date the
principal of Swingline Loans (and, after Swingline Loans have been paid in full,
Revolving Loans of Non-Defaulting Banks) in an aggregate amount equal to such
excess. If, after giving effect to the prepayment of all outstanding Swingline
Loans and Revolving Loans of Non-Defaulting Banks, the aggregate amount of L/C
Outstandings exceeds the Adjusted Total Revolving Commitment then in effect, the
Borrower shall pay to the Administrative Agent an amount in cash and/or Cash
Equivalents equal to such excess and the Administrative Agent shall hold such
payment as security for the obligations of the Borrower hereunder pursuant to a
cash collateral agreement to be entered into in form and substance satisfactory
to the Administrative Agent (which shall permit certain investments in Cash
Equivalents, until the proceeds are applied to the Obligations).
(b) If on any date the outstanding principal amount of Revolving
Loans made by a Defaulting Bank exceeds the Revolving Commitment of such
Defaulting Bank, the Borrower shall repay the Revolving Loans of such Defaulting
Bank in an amount equal to such excess.
(c) On the date of any equity contribution to the Borrower by PXI in
an amount equal to the principal amount of any PXI Subordinated Notes (which
equity contribution PXI agrees to make upon its receipt of the proceeds of any
PXI Subordinated Notes), the Borrower shall apply the proceeds of such equity
contribution to reduce the principal amount of then outstanding Revolving Loans
to the extent thereof (but such prepayment shall not reduce the Revolving
Commitment).
(B) Application:
(a) With respect to each repayment of Loans required by Section
4.02(A), the Borrower may designate the specific Borrowing(s) to be repaid,
provided that (i) each repayment of any Loans made pursuant to a Borrowing shall
be applied pro rata among such Loans; (ii) if any repayment of Eurodollar Loans
made pursuant to a single Borrowing shall reduce the outstanding Loans made
pursuant to such Borrowing
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to an amount less than the Minimum Borrowing Amount for such Eurodollar Loans,
such Borrowing shall be immediately converted into Base Rate Loans; and (iii)
notwithstanding the provisions of the preceding clause (i), no repayment of
Revolving Loans pursuant to Section 4.02(A)(a) shall be applied to the Revolving
Loans of a Defaulting Bank. In the absence of a designation by any Borrower as
described in the preceding sentence, the Administrative Agent shall, subject to
the above, make such designation in its sole discretion with a view, but no
obligation, to minimize breakage costs owing under Section 1.11.
4.03 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement shall be made to the
Administrative Agent for the ratable account of the Banks entitled thereto, not
later than 1:00 P.M. (New York time) on the date when due and shall be made in
immediately available funds and in lawful money of the United States of America
at the Payment Office. Any payments under this Agreement which are made later
than 1:00 P.M. (New York time) shall be deemed to have been made on the next
succeeding Business Day. Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder,
under any Note or under any other Credit Document will be made without setoff,
counterclaim or other defense. All such payments will be made free and clear of,
and without deduction or withholding for, any present or future taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein (but excluding, except as provided below, any tax
imposed on or measured by the net income of a Bank pursuant to the laws of the
jurisdiction in which the principal office or applicable lending office of such
Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or applicable
lending office of such Bank is located) and all interest, penalties or similar
liabilities with respect thereto (collectively, "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every payment of all
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amounts due from such Borrower hereunder, under any Note or under any other
Credit Document, after withholding or deduction for or on account of any Taxes,
will not be less than the amount provided for herein or in such Note. The
Borrower shall also reimburse each Bank, upon the written request of such Bank,
for taxes imposed on or measured by the net income of such Bank pursuant to the
laws of the jurisdiction in which the principal office or applicable lending
office of such Bank is located or of any political subdivision or taxing
authority of any such jurisdiction as such Bank shall determine are payable by
such Bank in respect of Taxes paid to or on behalf of such Bank pursuant to this
or the preceding sentence by the Borrower. The Borrower will furnish to the
Administrative Agent within five days after the date the payment of any Taxes,
or any withholding or deduction on account thereof, is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by such
Borrower. The Borrower will indemnify and hold harmless the Administrative Agent
and each Bank, and reimburse the Administrative Agent or such Bank upon its
written request, for the amount of any Taxes so levied or imposed and paid or
withheld by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes
agrees to deliver to the Borrower and the Administrative Agent on or prior to
the Restatement Effective Date, or in the case of a Bank that is an assignee or
transferee of an interest under this Agreement pursuant to Section 1.14 (unless
the respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement, under any Note and under
any Credit Document, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit C (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement, under
any Note and under any Credit Document. In addition, each Bank agrees that from
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time to time after the Restatement Effective Date, when a lapse in time or
change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section
4.04(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Bank to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement, any Note and under any Credit
Document, or it shall immediately notify the Borrower and the Administrative
Agent of its inability to deliver any such Form or Certificate, in which case
such Bank shall not be required to deliver any such Form or Certificate pursuant
to this Section 4.04(b). Notwithstanding anything to the contrary contained in
Section 4.04(a), but subject to the immediately succeeding sentence, (x) the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
Fees or other amounts payable hereunder for the account of any Bank which is not
a United States person (as such term is defined in Section 7701(a)(30) of the
Code) for U.S. Federal income tax purposes to the extent that such Bank has not
provided to the Borrower U.S. Internal Revenue Service Forms that establish a
complete exemption from such deduction or withholding and (y) the Borrower shall
not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be
made to a Bank in respect of income or similar taxes imposed by the United
States if (I) such Bank has not provided to the Borrower the Internal Revenue
Service Forms required to be provided to the Borrower pursuant to this Section
4.04(b) or (II) in the case of a payment, other than interest, to a Bank
described in clause (ii) above, to the extent that such Forms do not establish a
complete exemption from withholding of such taxes. Notwithstanding anything to
the contrary contained in the preceding sentence or elsewhere in this Section
4.04 and except as set forth in Section 12.04(a), the Borrower agrees to pay any
additional amounts and to indemnify each Bank in the manner set forth in Section
4.04(a) (without regard to the identity of the jurisdiction requiring the
deduction or withholding) in respect of any Taxes deducted or withheld by it as
described in the immediately preceding sentence as a result of any changes after
the Restatement Effective Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of such Taxes.
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SECTION 5. Conditions Precedent.
5.01 Conditions Precedent to Restatement Effective Date. This
Agreement shall become effective on the date (the "Restatement Effective Date")
when each of the following conditions are first satisfied:
(a) Effectiveness; Notes. On or prior to the Restatement Effective
Date (i) the Borrower and each of the Banks shall have signed a copy of this
Agreement (whether the same or different copies) and shall have delivered the
same to the Administrative Agent at its Notice Office or, in the case of the
Banks, shall have given to the Administrative Agent telephonic (confirmed in
writing), written, telex or facsimile transmitted notice (actually received) at
its Notice Office that the same has been signed and mailed to it and (ii) there
shall have been delivered to the Administrative Agent for the account of each
Bank the appropriate Note or Notes executed by the Borrower, in each case, in
the amount, maturity and as otherwise provided herein.
(b) Opinions of Counsel. On the Restatement Effective Date, the
Administrative Agent shall have received opinions, addressed to the Agents and
each of the Banks and dated the Restatement Effective Date, from (i) Milbank,
Tweed, Hadley & McCloy, counsel to the Credit Parties in the form of Exhibit D-1
hereto, which opinion shall cover such other matters incident to the
transactions contemplated herein as the Agents may reasonably request, (ii)
Fiddler, Gonzalez & Rodriguez, which opinion shall cover enforceability,
validity and binding effect of certain Security Documents, the perfection and
priority of the security interests granted pursuant to certain Security
Documents, the applicability of Puerto Rican withholding taxes to the
transactions contemplated herein and such other matters incident to the
transactions contemplated herein or therein, as the Agents may reasonably
request and shall be in form and substance satisfactory to the Agents and (iii)
White & Case, special counsel to the Banks, in the form of Exhibit D-2 hereto.
(c) Corporate Proceedings. (i) On the Restatement Effective Date,
the Agents shall have received from each Credit Party a certificate, dated the
Reinstatement Effective Date, signed by an Authorized Officer of each Credit
Party in the form of Exhibit C hereto with appropriate insertions and deletions,
together with (x) copies of the articles of
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incorporation and the by-laws (or other organizational documents) of each Credit
Party, (y) the resolutions of each Credit Party which shall be satisfactory to
the Agents and (z) a statement that all of the applicable conditions set forth
in Sections 5.01(g), (m), (n) and (o) and 5.02 exist as of such date.
(ii) On the Restatement Effective Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Credit Documents shall
be satisfactory in form and substance to the Agents and the Agents shall have
received all information and copies of all certificates and any other records of
corporate proceedings and governmental approvals, if any, which the Agents may
have requested in connection therewith, such records, where appropriate, to be
certified by proper corporate or governmental authorities.
(d) Original Credit Agreement. On the Restatement Effective Date and
concurrently with the initial borrowing hereunder, the Borrower and Xtra shall
have (i) repaid in full the outstanding principal amount of all Loans under and
as defined in the Original Credit Agreement, (ii) terminated all letters of
credit issued thereunder (other than Existing Letters of Credit) and (iii) paid
all accrued but unpaid interest and fees under the Original Credit Agreement,
whether or not otherwise then due and payable.
(e) Issuance of PXI Senior Notes. On or prior to the Restatement
Effective Date, (i) PXI shall have consummated the issuance of the Additional
PXI Senior Notes and received net cash proceeds therefrom (after the payment of
fees and expenses in connection therewith) in an aggregate amount of at least
$73,000,000, and (ii) the Agents and the Banks shall have received copies of the
Additional PXI Senior Note Documents certified as true and correct by PXI in a
certificate signed by an Authorized Officer, and the PXI Senior Note Documents
shall be in full force and effect and the terms and conditions thereof shall be
substantially identical to the Existing PXI Senior Notes Documents and otherwise
shall be in form and substance satisfactory to the Agents and the Required
Banks. All of the proceeds of the Additional PXI Senior Notes shall have been
contributed to the Borrower and used to repay outstandings under the Original
Credit Agreement.
(f) Pledge Agreements. (i) On the Restatement Effective Date, PXI
shall have duly authorized, executed and
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delivered an amended and restated Pledge Agreement substantially in the form of
Exhibit E-1, together with such changes (or with such other documents) as may be
requested by the Collateral Agent in connection with local law (each as
modified, supplemented, amended or restated from time to time, a "PXI Pledge
Agreement") and shall have delivered to the Collateral Agent, as Pledgee, all
the Pledged Securities referred to therein (including the Subordinated
Intercompany Real Estate Note and Subordinated Intercompany Notes, each of which
shall have been endorsed in favor of the Collateral Agent, and all shares of
capital stock) then owned by PXI, (x) endorsed in blank in the case of
promissory notes (except as set forth above) and (y) together with executed and
undated stock powers, in the case of capital stock.
(ii) On the Restatement Effective Date, the Borrower shall have duly
authorized, executed and delivered an amended and restated Pledge Agreement
substantially in the form of Exhibit E-2 (as modified, supplemented, amended or
restated from time to time, the "Borrower Pledge Agreement") and shall have
delivered to the Collateral Agent, as Pledgee, all the Pledged Securities
referred to therein then owned by the Borrower, (x) endorsed in blank in the
case of promissory notes and (y) together with executed and undated stock
powers, in the case of capital stock.
(iii) On the Restatement Effective Date, Xtra shall have duly
authorized, executed and delivered an amended and restated Pledge Agreement
substantially in the form of Exhibit E-3 (as modified, supplemented, amended or
restated from time to time, the "Xtra Pledge Agreement") and shall have
delivered to the Collateral Agent, as Pledgee, all of the Pledged Securities
referred to therein then owned by Xtra (x) endorsed in blank in the case of
promissory notes and (y) together with executed and undated stock powers, in the
case of capital stock.
(iv) On the Restatement Effective Date, Xtra Merger Corporation shall
have duly authorized, executed and delivered an amended and restated Pledge
Agreement substantially in the form of Exhibit E-4 (as modified, supplemented,
amended or restated from time to time, the "XM Pledge Agreement") and shall have
delivered to the Collateral Agent, as Pledgee, all of the Pledged Securities
referred to therein then owned by Xtra Merger Corporation (x) endorsed in blank
in the case of promissory notes and (y) together with executed and undated stock
powers, in the case of capital stock.
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(g) Subsidiary Guaranty. On the Restatement Effective Date, each
Subsidiary of PXI (other than the Borrower, Xtra and Caribad, Inc.) shall have
duly authorized, executed and delivered an amended and restated Guaranty in the
form of Exhibit F (as modified, supplemented or amended from time to time, the
"Subsidiary Guaranty").
(h) Security Agreements. On the Restatement Effective Date, (i) the
Borrower shall have duly authorized, executed and delivered an amended and
restated Security Agreement substantially in the form of Exhibit G-1, together
with such changes (or with such other documents) as may be requested by the
Collateral Agent in connection with local law (each, as modified, supplemented
or amended from time to time, the "Borrower Security Agreement") covering all of
the Borrower's respective present and future Security Agreement Collateral and
(ii) Xtra and each Subsidiary Guarantor shall have duly authorized, executed and
delivered the Security Agreement substantially in the form of Exhibit G-2,
together with such changes (or with such other documents) as may be requested by
the Collateral Agent in connection with local law (each, as modified,
supplemented or amended from time to time, the "Subsidiary Security Agreement")
covering all of each Subsidiary's respective present and future Security
Agreement Collateral, together in each case with:
(A) executed copies of Financing Statements (Forms UCC-1 or
UCC-3) or appropriate local equivalent in appropriate form for
filing under the UCC or appropriate local equivalent of each
jurisdiction as may be necessary to perfect or maintain the security
interests purported to be created by the Security Agreements and
capable of being perfected by the filing of such Financing
Statements or appropriate local equivalent;
(B) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, each of recent date listing
all effective financing statements that name PXI, the Borrower or,
Xtra as debtor and that are filed in the jurisdictions referred to
in clause (A), together with copies of such financing statements
(none of which shall cover the Collateral except (x) those with
respect to which appropriate termination statements executed by the
secured lender there-under have been delivered to the Administrative
Agent and (y) to the extent evidencing Permitted Liens);
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(C) evidence of the completion of all other recordings and
filings of, or with respect to, the Security Agreements as may be
necessary or, in the opinion of the Collateral Agent, desirable to
perfect the security interests intended to be created by the
Security Agreements; and
(D) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect and
protect the security interests purported to be created by the
Security Agreements have been taken.
(i) Mortgages; Intercompany Mortgages; Title Insurance; Surveys;
Etc. (i) On the Restatement Effective Date, the Collateral Agent shall
have received fully executed counterparts of amendments to the Mortgages
in form and substance satisfactory to the Collateral Agent, and
arrangements reasonably satisfactory to the Collateral Agent shall be in
place to provide that counterparts of such amendments shall be recorded on
the Restatement Effective Date or within one Business Day thereof in all
places to the extent necessary or desirable, in the judgment of the
Collateral Agent, effectively to maintain a valid and enforceable first
priority Lien, subject only to Permitted Encumbrances, on each Mortgaged
Property in favor of the Collateral Agent for the benefit of the Secured
Parties.
(ii) On the Restatement Effective Date, (A) the Collateral Agent shall
have received certified copies of fully executed counterparts of
amendments to (x) deeds of trust, leasehold deeds of trust, mortgages,
leasehold mortgages and similar documents in each case in form and
substance satisfactory to the Collateral Agent (each an "Intercompany
Mortgage" and collectively the "Intercompany Mortgages") and covering all
of the PRMP, (y) one or more amendments to chattel mortgages covering the
Borrower's personal property located in Puerto Rico and (z) amendments to
other Security Documents with respect to personal property of the Borrower
located in Puerto Rico, and arrangements reasonably satisfactory to the
Collateral Agent shall be in place to provide that counterparts of such
amendments shall be presented for recording on the Restatement Effective
Date or within one Business Day thereof in all places to the extent
necessary or desirable, in the judgment of the Collateral Agent,
effectively to maintain a valid and
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enforceable first priority Lien, subject only to Permitted Encumbrances,
on each such PRMP and such personal property and (B) PXI and the Borrower
shall have executed an amendment to pledge agreement (the "Puerto Rico
Pledge Agreement") and the Borrower shall have delivered to the Collateral
Agent the Mortgage Notes (as defined in the Puerto Rico Pledge Agreement)
in respect of such Intercompany Mortgages and chattel mortgages.
(iii) The Collateral Agent shall have received updated ALTA mortgagee
title insurance policies or the equivalent thereof (or binding commitments
to issue such title insurance policies) issued by title insurers
satisfactory to the Collateral Agent (the "Mortgage Policies") in amounts
satisfactory to the Collateral Agent and assuring the Collateral Agent
that the Mortgages and Intercompany Mortgages are valid and enforceable
first priority mortgage Liens on the respective Mortgaged Properties, free
and clear of all defects and encumbrances except Permitted Encumbrances.
Such Mortgage Policies shall be in form and substance satisfactory to the
Collateral Agent and shall include an endorsement for future advances (to
the extent available in the respective jurisdiction of each Mortgaged
Property) under this Agreement, the Notes and the Mortgages and
Intercompany Mortgages, for mechanics' liens (to the extent available in
the respective jurisdiction of each Mortgaged Property) and for any other
matter that the Collateral Agent in its discretion may reasonably request
prior to the Restatement Effective Date, and shall provide for affirmative
insurance and such reinsurance (including direct access agreements) as the
Collateral Agent in its discretion may request prior to the Restatement
Effective Date.
(j) Solvency Certificate. On the Restatement Effective Date, the
Agents shall have received from the President and Chief Executive Officer of
PXI, acting on behalf of PXI, a certificate in the form of Exhibit H hereto,
expressing opinions of value and other appropriate facts or information
regarding the solvency of PXI and its Subsidiaries taken as a whole and of the
Borrower.
(k) Insurance Policies. On the Restatement Effective Date, the
Agents shall have received evidence of insurance complying with the requirements
of Section 7.09 for the business and properties of PXI and its Subsidiaries, in
form and substance satisfactory to the Agents and, with
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respect to all casualty insurance, naming the Collateral Agent on behalf of the
Secured Parties, as mortgagee/secured party and loss payee.
(l) Consent Letter. On the Restatement Effective Date, the
Administrative Agent shall have received a letter from CT Corporation System,
presently located at 1633 Broadway, New York, NY 10019, in the form of Exhibit I
indicating its consent to its appointment by each Credit Party as their agent to
receive service of process.
(m) Payment of Fees. On or prior to the Restatement Effective Date,
all costs, fees and expenses, and all other compensation contemplated by this
Agreement, due to the Agents or the Banks (including, without limitation, legal
fees and expenses) shall have been paid by the Borrower to the extent due.
(n) Adverse Change. From January 25, 1997 to the Restatement
Effective Date, nothing shall have occurred which the Required Banks or either
Agent shall determine has, or is reasonably likely to have, a material adverse
effect on the rights or remedies of the Banks, or the Agents, or on the ability
of any Credit Party to perform its obligations to the Banks or the Agents under
this Agreement or any other Credit Document.
(o) Litigation. No litigation by any entity (private or
governmental) shall be pending or threatened on the Restatement Effective Date
(a) with respect to this Agreement or any other Credit Document or (b) which
either Agent or the Required Banks shall determine could reasonably be expected
to have a Material Adverse Effect.
(p) Depositary Account Agreement. On the Restatement Effective Date,
the Borrower shall have duly authorized, executed and delivered a Depositary
Account Agreement substantially in the form of Exhibit L hereto.
5.02 Conditions Precedent to All Credit Events. The obligation of
each Bank to make any Loans and the obligation of the Letter of Credit Issuer to
issue any Letter of Credit is subject, at the time of each such Credit Event
(including Credit Events occurring on the Restatement Effective Date) to the
satisfaction of the following conditions at such time:
(a) At the time of each Credit Event and also after giving effect
thereto (i) there shall exist no Default
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or Event of Default and (ii) all representations and warranties contained herein
or in the other Credit Documents in effect at such time 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 such
Credit Event (except to the extent any representation or warranty is expressly
made as of a specific date, in which case such representation and warranty shall
be true and correct in all material respects as of such date).
(b) The Administrative Agent shall have received a Notice of
Borrowing with respect to such Borrowing of Loans meeting the requirements of
Section 1.02 or a Letter of Credit Request for such issuance of a Letter of
Credit meeting the requirements of Section 2.03, as the case may be.
The acceptance of the benefits of each Credit Event shall constitute
a representation and warranty by each Credit Party to each of the Banks that all
of the applicable conditions specified in this Section 5 are then satisfied. All
of the certificates, legal opinions and other documents and papers referred to
in this Section 5, unless otherwise specified, shall be delivered to the
Administrative Agent at its Notice Office for the account of each of the Banks
and, except for the Notes, in sufficient counterparts or copies for each of the
Banks and shall be satisfactory in form and substance to the Agents.
SECTION 6. Representations, Warranties and Agreements. In order to
induce the Banks to enter into this Agreement and the Banks to make the Loans
and participate in Letters of Credit and the Letter of Credit Issuer to issue
Letters of Credit as provided for herein, each of PXI, the Borrower or Xtra make
the following representations and warranties to, and agreements with, the Banks
and the Letter of Credit Issuer, all of which shall survive the execution and
delivery of this Agreement and the making of the Loans and the issuance of
Letters of Credit (with the occurrence of each Credit Event being deemed to
constitute a representation and warranty that the matters specified in this
Section 6 are true and correct in all material respects on and as of the date
hereof and as of the date of each such Credit Event, except to the extent that
any representation or warranty is expressly made as of a specific date, in which
case such representation or warranty shall be true and correct in all material
respects as of such specific date):
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6.01 Corporate Status. Each of the Credit Parties (i) is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction of its organization and has the corporate power and authority
to own its property and assets and to transact the business in which it is
engaged and presently proposes to engage and (ii) has duly qualified and is
authorized to do business and is in good standing in all jurisdictions where it
is required to be so qualified and where the failure to be so qualified is
reasonably likely to have a Material Adverse Effect.
6.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Credit Documents to which it is a party. Each Credit Party has duly
executed and delivered each Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Credit Party enforceable in accordance with its terms.
6.03 No Violation. Neither the execution, delivery and performance
by any Credit Party of the Credit Documents to which it is a party nor
compliance with the terms and provisions thereof, nor the consummation of the
transactions contemplated therein (i) will contravene any applicable provision
of any law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will result in any breach of any of
the terms, covenants, conditions or provisions of, or constitute a default
under, or (other than pursuant to the Security Documents) result in the creation
or imposition of (or the obligation to create or impose) any Lien upon any of
the property or assets of any Credit Party pursuant to the terms of any
indenture, mortgage, deed of trust, agreement or other instrument to which any
Credit Party is a party or by which it or any of its property or assets are
bound or to which it may be subject, including without limitation any Permitted
Existing Indebtedness Agreements but excluding any agreements in respect of
pre-existing indebtedness that is being refinanced on the Restatement Effective
Date, or (iii) will violate any provision of the Certificate of Incorporation or
ByLaws of any Credit Party.
6.04 Litigation. There are no actions, suits or proceedings pending
or threatened with respect to any Credit Party (i) that are likely to have a
Material Adverse Effect or (ii) that could have a material adverse effect on the
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rights or remedies of the Administrative Agent or the Banks or on the ability of
any Credit Party to perform its obligations to them hereunder and under the
other Credit Documents to which it is, or will be, a party.
6.05 Use of Proceeds. (a) The proceeds of all Revolving Loans
incurred on the Restatement Effective Date shall be utilized to repay Loans
under and as defined in the Original Credit Agreement.
(b) The proceeds of Revolving Loans incurred after the Restatement
Effective Date and also Swingline Loans shall be utilized for general corporate
purposes of the Borrower and its Subsidiaries.
(c) No part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock.
6.06 Governmental Approvals. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with
(other than UCC and other "security interest perfection" filings and/or mortgage
recordings contemplated by this Agreement in respect of the Collateral), or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability of any
Credit Document.
6.07 Investment Company Act. No Credit Party is an "investment
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
6.08 Public Utility Holding Company Act. No Credit Party is a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
6.09 True and Complete Disclosure. All factual information (taken as
a whole) heretofore or contemporaneously furnished by or on behalf of any Credit
Party in writing to either Agent or any Bank for purposes of or in connection
with this Agreement or any transaction contemplated
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herein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any Credit Party in writing to any Bank will be,
true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided. The projections and pro forma financial information
contained in such materials are based on good faith estimates and assumptions
believed by the Credit Parties to be reasonable at the time made, it being
recognized by the Banks that such projections as to future events are not to be
viewed as facts and that actual results during the period or periods covered by
any such projections may differ from the projected results in any material
respect. There is no fact known to any Credit Party which has, or is reasonably
likely to have, a Material Adverse Effect which has not been disclosed herein or
in such other documents, certificates and statements furnished to the Banks for
use in connection with the transactions contemplated hereby.
6.10 Financial Condition; Financial Statements. (a) On and as of the
Restatement Effective Date on a pro forma basis after giving effect to the
Refinancing and all Indebtedness incurred, and to be incurred, and Liens created
and to be created, by each Credit Party in connection therewith, with respect to
each of PXI and its Subsidiaries taken as a whole, and of the Borrower (x) the
sum of its or their assets, at a fair valuation, will exceed its or their debts,
(y) it or they will not have incurred nor intended to, or believes that it or
they will not, incur debts beyond its or their ability to pay such debts as such
debts mature during the period prior to the Maturity Date and (z) it and they
will have sufficient capital with which to conduct its or their businesses. For
purposes of this Section 6.10(a), "debt" means any liability on a claim, and
"claim" means (i) right to payment whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or (ii) right to
an equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(b) The consolidated and consolidating balance sheets of PXI and its
Subsidiaries at January 25, 1997, January 26, 1996 and January 27, 1995 and the
related con-
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solidated and consolidating statements of income and (in consolidated form only)
cash flows of PXI and its Subsidiaries for the fiscal years ended as of said
dates, which have been examined by Deloitte & Touche, independent certified
public accountants, and the unaudited pro forma (after giving effect to the
Refinancing) balance sheet of PXI and its Subsidiaries as at January 25, 1997,
copies of which have heretofore been furnished to each Bank, present fairly in
all material respects the consolidated and consolidating financial position of
PXI and its Subsidiaries at the dates of said statements and the consolidated
and consolidating income and cash flows for the periods covered thereby (or, in
the case of the pro forma consolidated balance sheet, present a good faith
estimate of the consolidated pro forma financial condition of PXI and its
Subsidiaries at the date thereof). All such financial statements (other than the
aforesaid pro forma balance sheet) have been prepared in accordance with GAAP
and practices consistently applied except to the extent provided in the notes to
said financial statements.
(c) There has been no material adverse change in the business,
property, assets, liabilities, condition (financial or otherwise) or prospects
of PXI and its Subsidiaries taken as a whole since January 25, 1997.
(d) Except as fully reflected in the pro forma financial statements,
and in the audited financial statements for the fiscal year ended January 25,
1997, described in Section 6.10(b), there were as of the Restatement Effective
Date (and after giving effect to any Loans made on such date), no liabilities or
obligations (excluding current obligations incurred in the ordinary course of
business) with respect to PXI or any of its Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due), and PXI does not know of any basis for the assertion against PXI or
any of its Subsidiaries of any such liability or obligation which, either
individually or in aggregate, are or would be reasonably likely to be material
to PXI and its Subsidiaries taken as a whole.
6.11 Security Interests. On and after the Restatement Effective
Date, each of the Security Documents creates, as security for the Obligations, a
valid and enforceable perfected security interest in and Lien on all of the
Collateral, superior to and prior to the rights of all third persons and subject
to no other Liens (except (i) that the Security Agreement Collateral may be
subject to the security interests evidenced by Permitted Liens relating
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thereto and (ii) the Mortgaged Properties may be subject to Permitted
Encumbrances relating thereto), in favor of the Collateral Agent for the benefit
of the respective Secured Parties. No filings or recordings are required in
order to perfect the security interests created under any Security Document
except for filings or recordings required in connection with any such Security
Document which shall have been made, or provided for as contemplated by Sections
5.01(i), on or prior to the Restatement Effective Date.
6.12 Tax Returns and Payments. Each Credit Party has filed all
federal income tax returns and all other material tax returns, domestic and
foreign, required to be filed by it and has paid all material taxes and
assessments payable by it which have become due, other than those not yet
delinquent and except for those contested in good faith. Holdings, PXI and each
of its Subsidiaries has paid, or has provided adequate reserves (in accordance
with GAAP) for the payment of, all federal, state and foreign income taxes
applicable for all prior fiscal years and for the current fiscal year to the
date hereof. There is no material action, suit, proceeding, investigation,
audit, or claim now pending or, to the knowledge of the Borrower or any of its
subsidiaries, threatened by any authority regarding any taxes relating to the
Borrower or any of its subsidiaries. Neither the Borrower nor any of its
subsidiaries has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending any statute of limitations relating to the
payment or collection of taxes of the Borrower or any of its subsidiaries.
6.13 Compliance with ERISA. Each Plan is in compliance with its
terms and with ERISA and the Code; each Plan (and each related trust, if any),
which is intended to be qualified under Section 401(a) of the Code has received
a determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Section 401(a) and 501(a) of the Code; no Reportable
Event has occurred with respect to a Plan other than as set forth in Schedule
IV; no Plan is insolvent or in reorganization; no Plan has an Unfunded Current
Liability in excess of $2,500,000 and the aggregate Unfunded Current Liabilities
for all Plans does not exceed $2,500,000; no Plan has an accumulated or waived
funding deficiency or permitted decreases in its funding standard account or has
applied for an extension of any amortization period within the meaning of
Section 412 of the Code or Section 303 or 304 of ERISA; all contributions
required to be made with respect to a Plan have been timely made; no Credit
Party nor any of its ERISA Affiliates has
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incurred any liability to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971 or 4975 of the Code, or expects to incur any liability
under any of the foregoing Sections with respect to any Plan; no proceedings
have been instituted to terminate or appoint a trustee to administer any Plan;
no condition exists which presents a risk to any Credit Party or any ERISA
Affiliate of incurring a liability to or on account of a plan pursuant to the
foregoing provisions of ERISA and the Code; no action, suit, proceeding,
hearing, audit or investigation with respect to the administration, operation or
the investment of assets of any Plan (other than routine claims for benefits) is
pending, expected or threatened; except to the extent that any breach of the
representations set forth above in this Section 6.13 (except where specific
standards have been established) could not have a Material Adverse Effect. Using
actuarial assumptions and computation methods consistent with Part 1 of subtitle
E of Title IV of ERISA, the aggregate liabilities of all Credit Parties and
their ERISA Affiliates to all Plans which are multiemployer plans (as defined in
Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as
of the close of the most recent fiscal year of each such Plan ended prior to the
date of the most recent Credit Event would not exceed $1,000,000. Each group
health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the
Code) which covers or has covered employees or former employees of any Credit
Party or any ERISA Affiliate has at all times been operated in compliance with
the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of
the Code. No lien imposed under the Code or ERISA on the assets of any Credit
Party or any ERISA Affiliate exists or is likely to arise on account of any Plan
which would violate Section 8.02 and all Credit Parties and their Subsidiaries
do not maintain or contribute to any employee welfare benefit plan (as defined
in Section 3(1) of ERISA) which provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any
employee pension benefit plan (as defined in Section 3(2) of ERISA) the
obligations with respect to which could reasonably be expected to have a
Material Adverse Effect.
6.14 Subsidiaries. Schedule V hereto lists each Subsidiary of PXI,
and the direct and indirect ownership interest of PXI therein, in each case as
of the Restatement Effective Date.
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6.15 Patents, etc. PXI and each of its Subsidiaries owns or holds a
valid license to use all material patents, trademarks, servicemarks, trade
names, copyrights, licenses and other rights, that are necessary for, and no
restriction applicable to any such patent, trademark, servicemark, trade name,
copyright, license or other right would interfere in any material respect with,
the operation of their businesses taken as a whole as presently conducted and as
proposed to be conducted.
6.16 Compliance with Statutes, etc. (a) Each Credit Party is in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls), except such noncompliance as
is not likely to, in the aggregate, have a Material Adverse Effect.
(b) Each Credit Party is in compliance with all applicable
Environmental Laws governing its business for which failure to comply is likely
to have a Material Adverse Effect, and no Credit Party is liable for any
material penalties, fines or forfeitures for failure to comply with any of the
foregoing in the manner set forth above. All licenses, permits, registrations or
approvals required for the business of any Credit Party, as conducted as of the
Restatement Effective Date, under any Environmental Law have been secured and
each Credit Party is in substantial compliance therewith, except such licenses,
permits, registrations or approvals the failure to secure or to comply therewith
is not likely to have a Material Adverse Effect. No Credit Party is in any
respect in noncompliance with, breach of or default under any applicable writ,
order, judgment, injunction, or decree to which such Credit Party is a party or
which would affect the ability of such Credit Party to operate any Real Property
and no event has occurred and is continuing which, with the passage of time or
the giving of notice or both, would constitute noncompliance, breach of or
default thereunder, except in each such case, such noncompliance, breaches or
defaults as are not likely to, in the aggregate, have a Material Adverse Effect.
There are as of the Restatement Effective Date no Environmental Claims pending
or, to the best knowledge of any Credit Party, threatened, which (a) question
the validity, term or entitlement of such Credit Party for any permit, license,
order or registration required for the operation of any facility which such
Credit Party currently operates and (b) wherein an unfavorable decision, ruling
or
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finding would be reasonably likely to have a Material Adverse Effect. There are
no facts, circumstances, conditions or occurrences on any Real Property or, to
the knowledge of any Credit Party, on any property adjacent to any such Real
Property that could reasonably be expected (i) result in an Environmental Claim
against such Credit Party or any Real Property of such Credit Party, or (ii) to
cause such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property under any Environmental
Law, except in each such case, such Environmental Claims or restrictions that
individually or in the aggregate are not reasonably likely to have a Material
Adverse Effect.
(c) Hazardous Materials have not at any time been (i) generated,
used, treated or stored on, or transported to or from, any Real Property of any
Credit Party or (ii) Released on any Real Property, in each case where such
occurrence or event is reasonably likely to have a Material Adverse Effect.
6.17 Properties. Except as set forth in Schedule VI, each Credit
Party has good and legal title to all properties owned by it and valid and
subsisting leasehold interests in all properties leased by it, in each case,
including all property reflected in the financial statements referred to in
Section 6.10(b) (except as sold or otherwise disposed of since the date of the
January 27, 1997 financial statements in the ordinary course of business) free
and clear of all Liens, other than Liens permitted by Section 8.02. Schedule VI
contains a true and complete list of each Real Property owned and each Real
Property leased by any Credit Party on the Restatement Effective Date and the
type of interest therein held by such Credit Party.
6.18 Labor Relations; Collective Bargaining Agreements. (a) Set
forth on Schedule VII hereto is a list and description (including dates of
termination) of all collective bargaining agreements between or applicable to
any Credit Party and any union, labor organization or other bargaining agent in
respect of the employees of any Credit Party on the Restatement Effective Date.
(b) No Credit Party is engaged in any unfair labor practice that is
reasonably likely to have a Material Adverse Effect. There is (i) no significant
unfair labor practice complaint pending against any Credit Party or, to the best
knowledge of any Credit Party, threatened against it, before the National Labor
Relations Board, and no significant griev-
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ance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is now pending against any Credit Party or, to
the best knowledge of any Credit Party, threatened against it, (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against any
Credit Party or, to the best knowledge of any Credit Party, threatened against
it and (iii) to the best knowledge of each Credit Party, no union representation
question exists with respect to the employees of such Credit Party, except (with
respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as is not reasonably likely to have a
Material Adverse Effect.
6.19 Indebtedness. Schedule VIII sets forth a true and complete list
of (x) all Indebtedness (other than intercompany indebtedness) of PXI and each
of its Subsidiaries outstanding as of the Restatement Effective Date and which
is to remain outstanding after the Restatement Effective Date and (y) all
agreements existing on the Restatement Effective Date and which are to remain
outstanding after the Restatement Effective Date pursuant to which PXI or any of
its Subsidiaries is entitled to incur Indebtedness (other than intercompany
indebtedness) (whether or not any condition to such incurrence could be met)
(collectively, as in effect and outstanding on the Restatement Effective Date
and without giving effect to any extension, renewal or refinancing thereof, the
"Permitted Existing Indebtedness"), in each case showing the aggregate principal
amount thereof and the name of the respective borrower and any other entity
which directly or indirectly guaranteed such debt.
6.20 Restrictions on Subsidiaries. Except for restrictions contained
in the Credit Documents and the PXI Senior Note Documents, as of the Restatement
Effective Date there are no contractual or consensual restrictions on any Credit
Party which prohibit or otherwise restrict (i) the transfer of cash or other
assets (x) between PXI and any of its Subsidiaries or (y) between any
Subsidiaries of PXI or (ii) the ability of any Credit Party or any of its
Subsidiaries to grant security interests to the Banks in their respective
assets.
6.21 PXI Senior Notes, etc. As of the Restatement Effective Date,
the PXI Senior Notes have been duly authorized, issued and delivered in
accordance with applicable law.
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SECTION 7. Affirmative Covenants. PXI, the Borrower and Xtra
covenant and agree that on the Restatement Effective Date and thereafter for so
long as this Agreement is in effect and until the Revolving Commitments have
terminated, no Letters of Credit are outstanding and the Loans, Unpaid Drawings
together with interest, Fees and all other Obligations (other than any
indemnities described in Section 12.13 hereof which are not then due and
payable) incurred hereunder are paid in full:
7.01 Information Covenants. PXI and the Borrower will furnish to
each Bank:
(a) Annual Financial Statements. Within 90 days after the close of
each fiscal year of PXI, the consolidated and consolidating balance sheets of
PXI and its Subsidiaries, as at the end of such fiscal year and the related
statements of income and cash flows (other than consolidating annual statements
of cash flows) for such fiscal year, setting forth comparative figures for the
preceding fiscal year, and in the case of such consolidated statements examined
by Coopers & Lybrand (or other independent certified public accountants of
recognized national standing acceptable to the Required Banks) whose opinion
shall not be qualified as to the scope of audit and as to the status of PXI or
any of its Subsidiaries as a going concern, together, in each case, with a
certificate of the accounting firm referred to above stating that in the course
of its regular audit of the business of PXI and its Subsidiaries, which audit
was conducted in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge of any payment default or Default or
Event of Default under any of Sections 8.09, 8.10 and 8.11 which has occurred
and is continuing or, if in the opinion of such accounting firm such a Default
or Event of Default has occurred and is continuing, a statement as to the nature
thereof.
(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the close of each of the first three quarterly
accounting periods in each fiscal year of PXI, the consolidated and
consolidating balance sheets of PXI and its Subsidiaries, as at the end of such
quarterly period and the related statements of income and cash flows (other than
consolidating quarterly statements of cash flows) for such quarterly period and
for the elapsed portion of the fiscal year ended with the last day of such
quarterly period, and setting forth commencing with the quarterly statements for
the period ended in May 1997, comparative figures for the related periods in the
prior fiscal
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year, in each case, certified by PXI in a certificate signed by an Authorized
Officer, subject to changes resulting from audit and normal year-end audit
adjustments.
(c) Monthly Reports. As soon as practicable, and in any event within
30 days, after the end of each monthly accounting period of each fiscal year,
the consolidated and consolidating operating reports for PXI and its
Subsidiaries for such period, in reasonable detail and in a form acceptable to
the Agents.
(d) Budgets; etc. Not less than 30 days after the commencement of
each fiscal year of PXI a budget in form satisfactory to the Agents prepared by
PXI for each of the four fiscal quarters of such fiscal year, setting forth,
with appropriate discussion, the principal assumptions upon which such budgets
are based. Together with each delivery of consolidated financial statements of
PXI pursuant to Section 7.01(a) and (b), a comparison of the current year to
date financial results (other than in respect of the balance sheets and
statements of cash flow included therein) against the budgets required to be
submitted pursuant to this clause (d) shall be presented.
(e) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 7.01(a) and (b), a certificate of
PXI signed by an Authorized Officer to the effect that no Default or Event of
Default exists or, if any Default or Event of Default does exist, specifying the
nature and extent thereof, which certificate shall set forth the calculations
required to establish whether PXI and its Subsidiaries were in compliance with
the provisions of Section 8.04 and Sections 8.09, 8.10 and 8.11, as at the end
of such fiscal quarter or year, as the case may be.
(f) Notice of Default or Litigation. Promptly, and in any event
within three Business Days after an officer of PXI or the Borrower obtains
knowledge thereof, notice of (x) the occurrence of any event which constitutes a
Default or Event of Default, which notice shall specify the nature thereof, the
period of existence thereof and what action the appropriate Credit Party
proposes to take with respect thereto and (y) the commencement of or any
significant development in any litigation or governmental proceeding pending
against Holdings, PXI or any of its Subsidiaries which could have a Material
Adverse Effect or a material adverse effect on the ability of any Credit Party
to perform its obligations hereunder or under any other Credit Document.
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(g) Environmental Matters. Promptly upon obtaining knowledge
thereof, notice of (i) any pending or threatened Environmental Claim against
Holdings, PXI or any of its Subsidiaries or any Real Property of Holdings, PXI
or any of its Subsidiaries unless such Environmental Claim could not,
individually or when aggregated with all other such Environmental Claims,
reasonably be expected to have a Material Adverse Effect; (ii) any condition or
occurrence on any Real Property of Holdings, PXI or any of its Subsidiaries that
(a) results in material noncompliance by Holdings, PXI or such Subsidiary with
any applicable Environmental Law, or (b) could reasonably be anticipated to
result in an Environmental Claim against Holdings, PXI or such Subsidiary or any
Real Property of Holdings, PXI or such Subsidiary, unless, with respect to
clauses (a) and (b) above, such noncompliance or such Environmental Claim could
not, individually or when aggregated with all other such non-compliance claims,
reasonably be expected to have a Material Adverse Effect; (iii) any condition or
occurrence on any Real Property of Holdings, PXI or any of its Subsidiaries that
could reasonably be anticipated to cause such Real Property to be subject to any
restrictions on the ownership, occupancy, use or transferability of such Real
Property under any Environmental Law unless such restrictions could not,
individually or when aggregated with all other such restrictions, reasonably be
expected to have a Material Adverse Effect; and (iv) the taking of any removal
or remedial action in response to the actual or alleged presence of any
Hazardous Material on any Real Property of Holdings, PXI or any of its
Subsidiaries, unless the presence of such Hazardous Materials and the removal or
remedial action in response thereto could not, individually or when aggregated
with all such other occurrences or events, reasonably be expected to have a
Material Adverse Effect. All such notices shall describe in reasonable detail
the nature of the claim, investigation, condition, occurrence or removal or
remedial action and the response thereto of Holdings, PXI or such Subsidiary. In
addition, each Credit Party will provide the Agents with copies of all material
written communications with any government or governmental agency relating to
Environmental Laws, all communications with any government or governmental
agency relating to Environmental Claims, and such detailed reports of any
Environmental Claim, in each case as may reasonably be requested in writing from
time to time by the Agents.
(h) Other Information. (i) Promptly upon trans- mission thereof,
copies of any filings and registrations with, and reports to, the SEC by any
Credit Party or any of
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its Subsidiaries, copies of all press releases and copies of all financial
statements, notices and reports that any Credit Party or any of its Subsidiaries
shall send to analysts or the holders of the PXI Senior Notes or any other
publicly issued debt of any Credit Party or any of its Subsidiaries (in each
case, to the extent not theretofore delivered to the Banks pursuant to this
Agreement) and (ii) with reasonable promptness, such other information or
documents (financial or otherwise) as the Administrative Agent on its own behalf
or on behalf of the Required Banks may reasonably request from time to time.
7.02 Books, Records and Inspections. PXI will, and will cause each
of its Subsidiaries to, permit, upon notice to the Chief Financial Officer or
any other Authorized Officer of PXI, officers and designated representatives of
the Administrative Agent or the Banks to visit and inspect any of the properties
or assets of PXI and any of its Subsidiaries in whomsoever's possession, and to
examine the books of account and other financial and operating records
(including, without limitation, any reports or "management letters" submitted by
independent accountants) of PXI and any of its Subsidiaries and discuss the
affairs, finances and accounts of PXI and any of its Subsidiaries with, and be
advised as to the same by, the officers and independent accountants of PXI or
such Subsidiary, all at such reasonable times and intervals and to such
reasonable extent as the Administrative Agent or any Bank may request.
7.03 Payment of Taxes. PXI will, and will cause each of its
Subsidiaries to, pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims which, if unpaid, might become a Lien or charge upon any
properties of PXI or any of its Subsidiaries, provided that neither PXI nor any
of its Subsidiaries shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings
if it has maintained adequate reserves (in the good faith judgment of the
management of such Person) with respect thereto in accordance with GAAP.
7.04 Corporate Franchises. PXI will, and will cause each of its
Subsidiaries to, do or cause to be done, all things necessary to preserve and
keep in full force and effect its existence, material rights and authority to do
business, provided that any transaction permitted by Section 8.01 will not
constitute a breach of this Section 7.04.
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7.05 Compliance with Statutes, etc. (a) PXI will, and will cause
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable Environmental Laws) other than
those the non-compliance with which (individually or in the aggregate) would not
have a Material Adverse Effect or a material adverse effect on the ability of
any Credit Party to perform its obligations under any Credit Document to which
it is party. Neither PXI nor any of its Subsidiaries will generate, use, treat,
store, Release or dispose of, or permit the generation, use, treatment, storage,
Release or disposal of Hazardous Materials on any of its Real Property, or
transport or permit the transportation of Hazardous Materials to or from any
such Real Property, except for quantities used or stored at such Real Properties
in material compliance with all applicable Environmental Laws and required in
connection with the normal operation, use and maintenance of such Real Property.
If required to do so under any applicable Environmental Law, each Credit Party
agrees to undertake, and agrees to cause each of its Subsidiaries to undertake,
any cleanup, removal, remedial or other action necessary to remove and clean up
any Hazardous Materials from any Real Property in accordance with the
requirements of all such applicable Environmental Laws and in accordance with
orders and directives of all governmental authorities; provided that no Credit
Party nor any of their Subsidiaries shall be required to take any such action
where same is being contested by appropriate legal proceedings in good faith by
such Credit Party or such Subsidiary.
(b) At the request of the Agents or the Required Banks, at any time
and from time to time, but in any event no more frequently than once in any
calendar year, each of the Borrower and Xtra will provide, at its sole cost and
expense, an environmental site assessment report concerning any Real Property of
the Borrower or Xtra or any of their respective Subsidiaries, prepared by an
environmental consulting firm approved by the Agents, indicating the presence or
Release of Hazardous Materials and the potential cost of any removal or remedial
action in connection with any Hazardous Materials on such Real Property,
provided that no such request may be made unless the Agents or the Required
Banks reasonably believe that (i) the Borrower or Xtra or any of their
respective Subsidiaries is in noncompliance with any Environmental Law with
respect to such Real Property and that such noncompliance could, individually,
or when aggregated with all such other noncompliance claims, reasonably be
expected
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to have a Material Adverse Effect, (ii) such non-compliance was not disclosed in
the environmental reports delivered in connection with the closing of the
Original Credit Agreement or (iii) an Event of Default is in existence. If the
Borrower or Xtra fails to provide the same after 60 days' written notice, the
Administrative Agent may order the same, and the Borrower or Xtra, as the case
may be, shall grant and hereby grants to the Administrative Agent and the Banks
and their agents access to such Real Property at all reasonable times and
without unreasonably interfering with the Borrower's or Xtra's operations and
specifically grant the Administrative Agent and the Banks an irrevocable
nonexclusive license, subject to the rights of tenants, to undertake such an
assessment all at the Borrower's or Xtra's, as the case may be, sole expense,
provided that the Borrower and Xtra shall have 120 days to obtain any necessary
governmental approvals to provide an environmental site assessment report that
includes subsurface soil or ground water sampling or analysis.
7.06 ERISA. As soon as possible and, in any event, within 15 days
after any Credit Party or any of its Subsidiaries or any ERISA Affiliate knows
or has reasonable cause to know of the occurrence of any of the following, PXI
will deliver to each of the Banks a certificate of PXI signed by an Authorized
Officer setting forth details as to such occurrence and the action, if any,
which such Credit Party, such Subsidiary or such ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be given to
or filed with or by such Credit Party, such Subsidiary, the ERISA Affiliate, the
PBGC, a Plan participant or the Plan administrator with respect thereto: that a
Reportable Event has occurred (except to the extent that PXI has previously
delivered to the Banks a certificate and notices (if any) concerning such event
pursuant to the next clause hereof); that a contributing sponsor (as defined in
Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject
to the advance reporting requirement of PBGC Regulation Section 4043.61 (without
regard to subparagraph (b)(1) thereof), and an event described in subsection
.62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is
reasonably expected to occur with respect to such Plan within the following 30
days; that an accumulated funding deficiency, within the meaning of Section 412
of the Code or Section 302 of ERISA has been incurred or an application may be
or has been made to the Secretary of the Treasury for a waiver or modification
of the minimum funding standard (including any required installment payments) or
an extension of any amortization period under
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Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan;
that a Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability
giving rise to a lien under ERISA or the Code; that proceedings may be or have
been instituted to terminate or appoint a trustee to administer a Plan; that a
proceeding has been instituted pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan; or that any Credit Party, any of its
Subsidiaries or any ERISA Affiliate will or may incur any material liability
(including any indirect, contingent or secondary liability) to or on account of
the termination of or withdrawal from a Plan under Section 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 4971,
401(a)(29), or 4975 of the Code or Section 409 or 502(i) or 502(l) of ERISA or
with respect to a group health plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code) under Section 4980B of the Code. PXI will
deliver to each of the Banks a complete copy of the Internal Revenue Service
Annual Report (Form 5500) of each Plan, other than a multiemployer plan (as
defined in Section 3(37) of ERISA), required to be filed with the Internal
Revenue Service and copies of any records, documents or other information that
must be furnished to the PBGC with respect to any Plan pursuant to Section 4010
of ERISA. In addition to any certificates or notices delivered to the Banks
pursuant to the first sentence hereof, copies of (i) annual reports filed by any
Credit Party or any of its Subsidiaries or any ERISA Affiliate with respect to
any Plan and (ii) any material notices received by any Credit Party or any of
its Subsidiaries or any ERISA Affiliate from any governmental agency or court
with respect to any Plan, shall in either case be delivered to the Banks no
later than 15 days after the date such report or notice has been filed with the
Internal Revenue Service or received by Holdings or such Subsidiary or the ERISA
Affiliate, as applicable.
7.07 Good Repair. PXI will, and will cause each of its Subsidiaries
to, use its best efforts to ensure that its properties and equipment used or
useful in its business in whomsoever's possession they may be, are kept in good
repair, working order and condition, normal wear and tear excepted and, subject
to Section 8.04, that from time to time there are made in such properties and
equipment all needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, to the extent and in the manner
customary for companies in similar businesses.
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7.08 End of Fiscal Years; Fiscal Quarters. PXI will, for financial
reporting purposes, cause (i) each of its, and of each of its Subsidiaries'
fiscal years to end on the last Saturday of January each year and (ii) each of
its, and each of its Subsidiaries' fiscal quarters to end on dates consistent
with the end of such fiscal years.
7.09 Maintenance of Property; Insurance. PXI will, and will cause
each of its Subsidiaries to, at all times maintain in full force and effect
insurance with carriers rated A- or better by A.M. Best (or such other carriers
as are acceptable to the Agents giving due consideration to market conditions
and availability for similar businesses in the same geographic region) in such
amounts, covering such risks and liabilities and with such deductibles or
self-insured retentions as are in accordance with normal industry practice,
provided that in no event will any such deductible or self-insured retention in
respect of liability claims or in respect of casualty damage exceed, in each
such case, $1,000,000 per occurrence, except that casualty damage insurance for
earthquake or windstorm (hurricane) may have a deductible of up to five percent
(5%) of values or as may be the standard for like businesses in the same
geographic area. At any time that insurance at the levels described in Schedule
IX is not being maintained by PXI and its Subsidiaries, PXI will notify the
Agents in writing thereof and, if thereafter notified by the Agents to do so,
PXI will obtain insurance at such levels at least equal to those set forth in
Schedule IX to the extent then generally available (but in any event within the
deductible or self-insured retention limitations set forth in the preceding
sentence) or otherwise as are acceptable to the Agents. PXI will furnish on the
Restatement Effective Date and annually thereafter to the Agents a summary of
the insurance carried in respect of it and its Subsidiaries and its or their
assets together with certificates of insurance and other evidence of such
insurance, if any, naming the Collateral Agent as mortgagee/ secured party
and/or loss payee on applicable policies insuring the assets of PXI and its
Subsidiaries.
7.10 Additional Security; Further Assurances. (a) As and to the
extent requested from time to time by the Agents or the Required Banks, PXI
will, and will cause each of its Subsidiaries to, grant to the Collateral Agent,
for the benefit of the Secured Parties, security interests and mortgages in such
assets and properties of PXI or its Subsidiaries acquired after the Restatement
Effective Date and not otherwise covered by the original Security Documents,
other than assets encumbered by Liens permitted by Section 8.02(i),
(collectively, the "Additional Security Documents").
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Such security interests and mortgages shall be granted pursuant to documentation
satisfactory in form and substance to the Administrative Agent and shall
constitute valid and enforceable perfected security interests superior to and
prior to the rights of all third persons and subject to no other Liens except as
are permitted by Section 8.02 at the time of perfection thereof. The Additional
Security Documents or other instruments related thereto shall be duly recorded
or filed in such manner and in such places as are required by law to establish,
perfect, preserve and protect the Liens in favor of the Collateral Agent for the
benefit of the Secured Parties, required to be granted pursuant to the
Additional Security Documents and all taxes, fees and other charges payable in
connection therewith shall have been paid in full.
(b) PXI will, and will cause each of its Subsidiaries to, at its own
expense, make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agent from time to time such vouchers, invoices, schedules,
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, reports
and other assurances or instruments and take such further steps relating to the
collateral covered by any of the Security Documents as the Collateral Agent may
reasonably require. Furthermore, PXI shall, and shall cause each of its
Subsidiaries to, cause to be delivered to the Collateral Agent such opinions of
counsel, title insurance and other related documents as may be requested by the
Collateral Agent to assure themselves that this Section 7.10 has been complied
with.
(c) At the written request of the Agents or the Required Banks given
only after, and as a result of, a change in such law and/or the rules and
regulations thereunder and/or in the interpretation of any thereof, in each case
occurring after the Restatement Effective Date and requiring the delivery of
such appraisals, PXI shall, and shall cause each of its Subsidiaries to, provide
to the Agents appraisals satisfying applicable requirements of the Real Estate
Appraisal Reform Amendments of the Financial Institution Reform, Recovery and
Enforcement Act of 1989 in respect of the Real Property of PXI and its
Subsidiaries constituting Collateral, in form and substance satisfactory to the
Agents.
(d) Each Credit Party hereto agrees that each action required by
clauses (a) through (d) of this Section 7.10 shall be completed as soon as
possible, but in no event later than 30 days (60 days in the case of clause (c)
above) after such action is requested to be taken by the Administrative Agent or
the Required Banks.
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7.11 Maintenance of Corporate Separateness. PXI will, and will cause
each of its Subsidiaries to, satisfy customary corporate formalities, including
the holding of regular board of directors' and shareholders' meetings and the
maintenance of corporate offices and records. Neither the Borrower nor any other
Subsidiary of PXI shall make any payment to a creditor of Holdings or PXI in
respect of any liability of Holdings or PXI, and no bank account of Holdings or
PXI shall be commingled with any bank account of the Borrower or any other
Subsidiary of PXI. Any financial statements distributed to any creditors of
Holdings or PXI shall, to the extent permitted by GAAP, clearly establish the
corporate separateness of Holdings and PXI from the Borrower and each of PXI's
other Subsidiaries. Finally, no Credit Party nor any of their Subsidiaries shall
take any action, or conduct its affairs in a manner, which is likely to result
in the separate corporate existence of Holdings or PXI from that of any or all
of PXI's Subsidiaries being ignored, or in the assets and liabilities of the
Borrower or any other Subsidiary of PXI being substantively consolidated with
those of Holdings or PXI in a bankruptcy, reorganization or other insolvency
proceeding.
SECTION 8. Negative Covenants. PXI, the Borrower and Xtra hereby
covenant and agree that on the Restatement Effective Date and thereafter for so
long as this Agreement is in effect and until the Commitments have terminated,
no Letters of Credit are outstanding and the Loans, Unpaid Drawings, together
with interest, Fees and all other Obligations (other than any indemnities
described in Section 12.13 hereof which are not then due and payable) incurred
hereunder, are paid in full:
8.01 Consolidation, Merger, Sale or Purchase of Assets, etc. PXI
will not, and will not permit any of its Subsidiaries to, wind up, liquidate or
dissolve its affairs, or enter into any transaction of merger or consolidation,
sell or otherwise dispose of all or any part of its property or assets (other
than inventory, obsolete equipment, excess equipment no longer needed in the
conduct of business or equipment being replaced with other equipment, in each
case in the ordinary course of business) or purchase, lease or otherwise acquire
(in one transaction or a series of related transactions) all or any part of the
property or assets of any Person (other than purchases, leases or other
acquisitions of inventory and equipment in the ordinary course of business) or
agree to do any of the foregoing at any future time, except that the following
shall be permitted:
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(a) Capital Expenditures to the extent within the limitations set
forth in Section 8.04;
(b) the investments, acquisitions and transfers or dispositions of
properties permitted pursuant to Section 8.05;
(c) (i) the merger or consolidation of any Subsidiary of PXI (other
than the Borrower or Xtra) with or into, or the liquidation thereof into, the
Borrower, Xtra or another Wholly-Owned Subsidiary of PXI which is a Subsidiary
Guarantor (so long as the Borrower, Xtra or such Subsidiary Guarantor is the
surviving corporation), and (iv) the conveyance, lease, sale or other transfer
of all or any part of the business, properties and assets of any Subsidiary of
PXI (other than the Borrower or Xtra) to the Borrower, Xtra or another
Wholly-Owned Subsidiary of PXI which is a Subsidiary Guarantor;
(d) leases of stores or warehouses by the Borrower, Xtra or their
Subsidiaries in the ordinary course of business and otherwise in compliance with
this Agreement;
(e) asset sales generating proceeds (A) individually in an amount
equal to or less than $25,000 or (B) individually in an amount greater than
$25,000 but in the aggregate for all such sales not in excess of $1,000,000 in
any fiscal year; provided that the Borrower shall deliver to the Administrative
Agent within thirty days of the end of the second and fourth fiscal quarters of
each fiscal year a schedule showing the asset sales made pursuant to this
Section 8.01(e)(B) during the previous two or four fiscal quarters respectively;
(f) the Hialeah & Dadeland Transfer;
(g) Asset Sales of the Florida Division Assets and the Rio Grande,
Melania and North Mayaquez properties in Puerto Rico for consideration at the
time of such Asset Sale having a value (including the value of any noncash
consideration, as determined in good faith by the Board of Directors of PXI) at
least equal to the appraised value thereof so long as at least 80% of such
consideration is in cash; provided that at the time of any such Asset Sales the
Borrower shall have delivered to the Agents a certificate describing such Asset
Sale and stating that it is permitted under this Section 8.01(g) and under the
PXI Senior Note Documents; and
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(h) any acquisition of assets (not including Capital Expenditures)
to be employed in the business of the Borrower, Xtra or their Subsidiaries;
provided that (x) there are no Loans then outstanding, (y) the Leverage Ratio
for the most recently ended Test Period shall have been no greater than 3.5:1.00
and (z) such acquisition (taken together with all such prior acquisitions and
purchases, redemptions or prepayments of PXI Senior Notes since the Restatement
Date pursuant to Section 8.12(b)(ii) do not exceed the lesser of (i) 75% of
Excess Cash Flow for the period from and including January 25, 1997 to and
including the last day of the fiscal quarter ending on or most recently ended
prior to such acquisition and (ii) $25,000,000.
To the extent the Required Banks waive the provisions of this
Section 8.01 with respect to the disposition of any Collateral, or any
Collateral is disposed of as permitted by this Section 8.01, such Collateral in
each case shall be sold free and clear of the Liens in favor of the Secured
Parties created by the Security Documents and the Administrative Agent shall
take such actions (including, without limitation, directing the Collateral Agent
to take such actions) as the Administrative Agent deems appropriate in
connection therewith.
8.02 Liens. PXI will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of PXI or any of its Subsidiaries, whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets
(including sales of accounts receivable or notes with recourse to PXI or any of
its Subsidiaries) or assign any right to receive income, or file or permit the
filing of any financing statement under the UCC or any other similar notice of
Lien under any similar recording or notice statute, except:
(a) Liens for taxes not yet due and payable or Liens for taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of PXI) have been
established;
(b) Liens (other than any Lien imposed by ERISA) in respect of
property or assets of PXI, PXI or any of its Subsidiaries imposed by law which
were incurred in the ordinary course of business, such as carriers',
warehousemen's and mechanics' Liens, statutory landlord's Liens, Liens in favor
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of customs and revenue authorities to secure payment of customs duties in
connection with the importation of goods, and other similar Liens arising in the
ordinary course of business, and (x) which, if any such property or asset is
material, do not in the aggregate materially detract from the value of such
property or assets or materially impair the use thereof in the operation of the
business of PXI or such Subsidiary or (y) which are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement or the other
Credit Documents;
(d) Liens on the assets of PXI and its Subsidiaries created prior
to, but that will remain outstanding on and after, the Restatement Effective
Date and listed on Schedule X hereto, without giving effect to any subsequent
extensions or renewals thereof ("Permitted Liens");
(e) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with (x)
liability insurance, workers' compensation, unemployment insurance and other
types of social security, or (y) to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations incurred in
the ordinary course of business, in an aggregate amount not to exceed $5,000,000
(exclusive of obligations in respect of borrowed money);
(f) leases or subleases granted to third Persons not interfering
with the ordinary course of business of the Borrower or any of its Subsidiaries;
(g) Capital Leases to the extent permitted under Section 8.03(b)
hereof;
(h) Permitted Encumbrances; and
(i) Liens (x) arising pursuant to purchase money mortgages securing
Indebtedness representing the purchase price (or financing of the purchase price
within 180 days after the respective purchase) of property or other assets
acquired by the Borrower, Xtra or any other operating Subsidiary Guarantor,
provided that (i) any such Liens attach only to the assets so purchased, (ii)
the Indebtedness secured by any such Lien does not exceed 100% of the purchase
price of the assets being purchased and (iii) the
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Indebtedness secured thereby is permitted by Section 8.03(b); or (y) existing on
specific tangible assets at the time acquired by the Borrower or any other
Subsidiary of PXI or on assets of a Person at the time such Person first becomes
a Subsidiary of PXI, provided that (i) any such Liens were not created at the
time of or in contemplation of the acquisition of such assets or Person by PXI
or any of its Subsidiaries, (ii) in the case of any such acquisition of a
Person, any such Lien attaches only to specific tangible assets of such Person
and not assets of such Person generally, (iii) the Indebtedness secured by any
such Lien does not exceed 100% of the fair market value of the asset to which
such Lien attaches, determined at the time of the acquisition of such asset or
the time at which such Person becomes a Subsidiary of PXI and (iv) the
Indebtedness secured thereby is permitted by Section 8.03(b).
8.03 Indebtedness. PXI will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Capitalized Lease Obligations, and other Indebtedness secured by
Liens permitted by Section 8.02(i), of the Borrower, Xtra or any other operating
Subsidiary Guarantor so long as the aggregate principal amount of all
Indebtedness permitted by this clause (b) that is incurred (i) in any fiscal
year of PXI does not exceed $3,000,000 and (ii) in the aggregate does not exceed
$20,000,000;
(c) Indebtedness under Interest Rate Protection Agreements of the
Borrower to the extent entered into in respect of the Subordinated Intercompany
Real Estate Note, provided that the Interest Rate Protection Agreements entered
into pursuant to this clause (ii) are, taken as a whole, in the opinion of the
Agents, reasonably likely to result in the incurrence by the Borrower of no
greater liability in respect of interest payments than the stated interest rate
liability of PXI in respect of a like principal amount of the PXI Senior Notes;
(d) Permitted Existing Indebtedness;
(e) Indebtedness of PXI evidenced by (i) the PXI Senior Notes and
(ii) any PXI Subordinated Notes outstanding on the Restatement Effective Date
after giving effect to the Refinancing;
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(f) Indebtedness evidenced by the Subordinated Intercompany Real
Estate Note or any of the other intercompany notes issued on or prior to the
Initial Borrowing Date;
(g) Other intercompany Indebtedness permitted by Section 8.05; and
(h) PXI Subordinated Notes incurred after the Restatement Effective
Date in an aggregate principal amount not to exceed $25,000,000; provided that
at the time of incurrence of any such PXI Subordinated Notes, PXI shall be in
compliance with Sections 8.09 and 8.10 hereof calculated on a pro forma basis
after giving effect to such incurrence.
8.04 Capital Expenditures. (a) PXI will not, and will not permit any
of its Subsidiaries to, incur Capital Expenditures except Capital Expenditures
made in compliance with this Section 8.04. During each fiscal year of PXI ending
after the Restatement Effective Date, Capital Expenditures shall be permitted to
be made by the Borrower, Xtra and their respective Subsidiaries in an aggregate
amount for all such Persons not in excess of $25,000,000 (or pro rata portion
thereof for the portion of the then-current fiscal year that has elapsed prior
to the Maturity Date) other than Capital Expenditures made with funds received
by the Borrower pursuant to Section 8.05(l).
(b) To the extent Capital Expenditures made in any fiscal year are
less than the amount set forth for such fiscal year in clause (a) above (without
taking into account any increase pursuant to this clause (b)), an amount equal
to 100% of such difference but no greater than $10,000,000 may be carried
forward and used by the Borrower, Xtra and their respective Subsidiaries to make
Capital Expenditures pursuant to clause (a) in the immediately succeeding fiscal
year of PXI.
8.05 Advances, Investments and Loans. PXI will not, and will not
permit any of its Subsidiaries to, lend money or credit or make advances to any
Person, or purchase or acquire any stock, obligations or securities of, or any
other interest in, or make any capital contribution to any Person, except:
(a) PXI and its Subsidiaries may invest in cash and Cash
Equivalents;
(b) the Borrower, Xtra and Subsidiary Guarantors may acquire and
hold receivables owing to them, if created or
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acquired in its ordinary course of business and payable or dischargeable in
accordance with its customary trade terms;
(c) loans and advances to employees in the ordinary course of
business in an aggregate principal amount not to exceed $500,000 at any time
outstanding shall be permitted;
(d) Interest Rate Protection Agreements entered into in compliance
with Section 8.03(c) shall be permitted;
(e) advances, investments and loans existing on the Restatement
Effective Date (and which are to remain outstanding after the Restatement
Effective Date) and listed on Schedule XI hereto, without giving effect to any
additions thereto or replacements thereof shall be permitted;
(f) the Borrower, Xtra and Subsidiary Guarantors may acquire and own
investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers in
the ordinary course of business;
(g) any Subsidiary of PXI may make advances, loans or contributions
to the Borrower, Xtra or any Subsidiary Guarantor in the ordinary course of
business;
(h) each Subsidiary of PXI may make (x) payments to its parent
corporation, PXI or Holdings, and PXI may make payments to Holdings, in each
case in satisfaction of its obligations under the Approved Tax Sharing Agreement
and/or (y) loans and/or advances to PXI and/or Holdings to the same extent as,
and in lieu of, Dividends otherwise permitted by Section 8.06(c);
(i) the Borrower and Xtra may make loans or advances to limited
partnerships in which the Borrower or Xtra, as the case may be, is a limited
partner for the purpose of developing shopping centers so long as the aggregate
amount of loans and advances permitted hereunder shall not exceed $3,000,000 at
any time outstanding;
(j) the Borrower and Xtra may make additional loans, advances and
investments of a nature not contemplated by the foregoing clauses (a) through
(i), provided that (x) all loans, advances and investments made pursuant to this
clause (i) shall not exceed $1,000,000 at any time outstanding and (y) no such
loan, advance or investment shall be made in or to (A) Holdings or its
Affiliates (other than
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Subsidiaries of PXI) or (B) a Subsidiary that is not, or which upon receipt
thereof does not become, a Subsidiary Guarantor;
(k) PXI may make the equity contributions to the Borrower and Xtra
required by Section 4.02(A)(c);
(l) PXI may make equity contributions to, or purchase common equity
of, the Borrower or Xtra, provided, that the proceeds of such equity
contributions or purchases shall be exclusively used by the Borrower or Xtra, as
the case may be, for the purpose of making Capital Expenditures; and
(m) the Hialeah & Dadeland Transfer shall be permitted.
8.06 Dividends, etc. PXI will not, and will not permit any
Subsidiary to, declare or pay any dividends (other than dividends payable solely
in capital stock of PXI) or return any capital to, its stockholders or authorize
or make any other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for a consideration, any shares of any class of its capital stock
now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing purposes and PXI will not, and will not permit any of
its Subsidiaries to, purchase or otherwise acquire for consideration any shares
of any class of the capital stock of Holdings or PXI now or hereafter
outstanding (or any warrants for or options or stock appreciation rights issued
by such Person in respect of any such shares) (all of the foregoing
"Dividends"), except that:
(a) any Subsidiary of PXI may pay dividends to the Borrower, Xtra or
a Subsidiary Guarantor;
(b) any Subsidiary of PXI may pay dividends to its parent
corporation, and PXI may pay dividends to Holdings, in each case to the extent
such dividends are in satisfaction of, or otherwise reduce, such entity's
obligations under an Approved Tax Sharing Agreement; and
(c) PXI's Subsidiaries may pay cash dividends to PXI in an aggregate
amount necessary and to the extent immediately used by PXI to pay (i) accrued
fees and expenses arising from ongoing reporting and related requirements (or to
immediately dividend same to Holdings to be utilized immediately by Holdings to
pay such fees and expenses) and
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(ii) so long as no Default or Event of Default then exists or would exist as a
result thereof, interest on the PXI Senior Notes to the extent then due and
payable in accordance with the terms thereof (but only to the extent the funds
required for such interest have not been paid to PXI in respect of interest on
the Subordinated Intercompany Real Estate Note or Xtra's Subordinated
Intercompany Note.
8.07 Transactions with Affiliates. Holdings and PXI will not, and
PXI will not permit any of its Subsidiaries to, enter into any transaction or
series of transactions, whether or not in the ordinary course of business, with
any Affiliate other than on terms and conditions substantially as favorable (or
more favorable) to, PXI or such Subsidiary as would be obtainable by, PXI or
such Subsidiary at the time in a comparable arm's-length transaction with a
Person other than an Affiliate, except the foregoing shall not prohibit
transactions permitted pursuant to Section 8.05.
8.08 Changes in Business. Except as otherwise permitted by Sections
8.01 and 8.05, the Borrower and Xtra will not alter the character of the
business of the Borrower and Xtra and their Subsidiaries from the business
(including grocery retailing and wholesaling) conducted by the Borrower and Xtra
and their Subsidiaries on the Restatement Effective Date.
8.09 EBITDA to Total Cash Interest Expense. PXI will not permit the
ratio of (x) EBITDA to (y) Total Cash Interest Expense for any Test Period
ending on the last day of any fiscal quarter set forth below to be less than the
amount set forth opposite such fiscal quarter below.
Fiscal Quarter Ending Ratio
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May 18, 1997 1.50:1.00
August 9, 1997 1.50:1.00
November 1, 1997 1.50:1.00
January 31, 1998 1.50:1.00
May 23, 1998 1.50:1.00
August 15, 1998 1.50:1.00
November 7, 1998 1.50:1.00
January 30, 1999 1.75:1.00
May 22, 1999 1.75:1.00
August 14, 1999 1.75:1.00
November 6, 1999 1.75:1.00
January 29, 2000 2.00:1.00
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May 20, 2000 2.00:1.00
August 14, 2000 2.00:1.00
November 4, 2000 2.00:1.00
January 27, 2001 2.25:1.00
May 19, 2001 2.25:1.00
August 11, 2001 2.25:1.00
November 3, 2001 2.25:1.00
January 26, 2002 2.25:1.00
May 18, 2002 2.25:1.00
August 10, 2002 2.25:1.00
November 2, 2002 2.25:1.00
January 25, 2003 2.25:1.00
8.10 Consolidated Indebtedness to EBITDA. PXI will not permit the
ratio of (i) Consolidated Indebtedness on the last day of any fiscal quarter set
forth below to (ii) EBITDA for the Test Period ending at the end of such fiscal
quarter to be greater than the amount set forth opposite such fiscal quarter
below:
Fiscal Quarter Ending Ratio
--------------------- -----
May 18, 1997 6.50:1.00
August 9, 1997 6.75:1.00
November 1, 1997 6.75:1.00
January 31, 1998 6.50:1.00
May 23, 1998 6.25:1.00
August 15, 1998 6.00:1.00
November 7, 1998 5.75:1.00
January 30, 1999 5.50:1.00
May 22, 1999 5.50:1.00
August 14, 1999 5.50:1.00
November 6, 1999 5.50:1.00
January 29, 2000 5.00:1.00
May 20, 2000 5.00:1.00
August 14, 2000 5.00:1.00
November 4, 2000 5.00:1.00
January 27, 2001 4.50:1.00
May 19, 2001 4.50:1.00
August 11, 2001 4.50:1.00
November 3, 2001 4.50:1.00
January 26, 2002 4.50:1.00
May 18, 2002 4.50:1.00
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August 10, 2002 4.50:1.00
November 2, 2002 4.50:1.00
January 25, 2003 4.50:1.00
8.11 Senior Secured Debt to EBITDA. PXI will not permit the ratio of
(i) Senior Secured Debt on the last day of any fiscal quarter to (ii) EBITDA for
the Test Period ending at the end of such fiscal quarter to be greater than
1.50:1.00.
8.12 Limitation on Voluntary Payments; Preferred Stock. (a) PXI will
not, and will not permit any of its Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or
optional payment or prepayment of principal on or voluntary or optional
redemption of or acquisition for value of (including, without limitation, by way
of depositing with the trustee with respect thereto money or securities before
due for the purpose of paying when due), the Indebtedness described in Section
8.03(d) (except for the AFICA Bonds included therein), (e) (other than
cancellation of the $10 million subordinated note of PXI in favor of Holdings as
part of the Hialeah & Dadeland Transfer), (f) and (h);
(ii) amend or modify, or permit the amendment or modification of,
any provision of any such Indebtedness or any provision of its Certificate of
Incorporation or By Laws; or
(iii) issue any preferred or preference stock.
(b) Notwithstanding the foregoing Section 8.12(a) and so long as no
Default or Event of Default then exists (before and after giving effect to the
purchase, redemption or prepayment described below), PXI may purchase, redeem or
prepay PXI Senior Notes (i) on or after the date of any reduction of the Total
Revolving Commitment pursuant to Section 3.03(b)(III) in an amount equal to up
to 40% of the Net Equity Issuance Proceeds relating thereto or (ii) at any other
time provided in the case of this clause (ii) that (x) there are no Revolving
Loans then outstanding, (y) the Leverage Ratio for the most recently ended Test
Period shall have been no greater than 3.50:1.00 and (z) such purchase,
redemption or prepayment is made in an aggregate amount for all such payments
since the Restatement Effective Date (taken together with acquisitions made
during such period pursuant to Section 8.01(h)) not to exceed the lesser of 75%
of Excess Cash Flow for the period from and including January 25, 1997 to and
including the last day of the fiscal quarter ending on
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or most recently ended prior to such purchase, redemption or prepayment and
$25,000,000.
8.13 Issuance of Subsidiary Stock. PXI will not permit any of its
Subsidiaries to issue, sell, assign, pledge or otherwise encumber or dispose of
any shares of its capital stock or other equity securities (or warrants, rights
or options to acquire shares or other equity securities) except as part of the
Hialeah & Dadeland Transfer and except to the extent permitted by Sections
8.01(c) and 8.05 (to the extent such securities are pledged in favor of the
Collateral Agent), to PXI, the Borrower, Xtra or any Subsidiary Guarantor.
8.14 Limitation on Restrictions Affecting Subsidiaries. PXI will
not, and will not permit any Subsidiary to, directly, or indirectly, create or
otherwise cause or suffer to exist any encumbrance or restriction which
prohibits or limits the ability of PXI or any Subsidiary to (a) pay dividends or
make other distributions or pay any Indebtedness owed to any Credit Party or any
Subsidiary thereof, (b) make loans or advances to any Credit Party or any
Subsidiary thereof, (c) transfer any of its properties or assets to any Credit
Party or any Subsidiary thereof or (d) create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, other than encumbrances and restrictions arising under (i)
applicable law, (ii) this Agreement and the other Credit Documents, (iii)
Indebtedness permitted pursuant to Sections 8.03(b), (d) and (e), (iv) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of any Credit Party or any of its Subsidiaries and (v)
customary restrictions on dispositions of real property interests found in
reciprocal easement agreements of any Credit Party or any of its Subsidiaries.
SECTION 9. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment when
due of any principal of the Loans or any Unpaid Drawing or (ii) default, and
such default shall continue for two or more Business Days, in the payment when
due of any interest on the Loans or Unpaid Drawings or any Fees or any other
amounts owing hereunder or under any other Credit Document; or
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9.02 Representations, etc. Any representation, warranty or statement
made by any Credit Party herein or in any other Credit Document or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of
which made or deemed made; or
9.03 Covenants. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Sections 7.10, 7.11, or 8, or (b) default in the due performance or observance
by it of any term, covenant or agreement (other than those referred to in
Section 9.01, 9.02 or clause (a) of this Section 9.03) contained in this
Agreement and such default shall continue unremedied for a period of at least 15
days after notice to the defaulting party by any Agent or the Required Banks; or
9.04 Default Under Other Agreements. (a) Any Credit Party or any of
their respective Subsidiaries (collectively, the "Designated Parties") shall (i)
default in any payment in respect of any Indebtedness (other than the
Obligations) in excess of $1,000,000 individually or $5,000,000 in the aggregate
of such entities or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, any such Indebtedness to become due prior to its stated maturity; or (b)
any such Indebtedness of any Designated Party shall be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
9.05 Bankruptcy, etc. Any Designated Party shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy", as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against any
Designated Party and the petition is not controverted within 10 Business Days,
or is not dismissed within 60 days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of any Designated Party; or any
Designated Party commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or
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similar law of any jurisdiction whether now or hereafter in effect relating to
any Designated Party; or there is commenced against any Designated Party any
such proceeding which remains undismissed for a period of 60 days; or any
Designated Party is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or any Designated
Party suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or any Designated Party makes a general assignment for the
benefit of creditors; or any corporate action is taken by any Designated Party
for the purpose of effecting any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding
standard required for any plan year or part thereof under Section 412 of the
Code or Section 302 of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66,
.67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur
with respect to such Plan within the following 30 days, any Plan is, shall have
been or is reasonably likely to have a trustee appointed to administer such
Plan, any Plan is, shall have been or is reasonably likely to be terminated or
the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, any Designated Party or any ERISA Affiliate has
incurred or is reasonably likely to incur a liability to or on account of a Plan
under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or
4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code, or on account of
a group health plan (as defined in Section 607(1) of ERISA or Section
4980B(g)(2) of the Code) under Section 4980B of the Code, or any Designated
Party or any ERISA Affiliate has incurred or is reasonably likely to incur
liabilities pursuant to one or more employee welfare benefit plans (as defined
in Section 3(1) of ERISA) that provide benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or employee
pension benefit plans (as defined in Section 3(2) of ERISA); (b) there shall
result from any event or events described in clause (a) of this Section 9.06,
the imposition of a lien, the granting of a security interest, or a liability or
a material risk of incurring a liability; and
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(c) which lien, security interest or liability referred to in clause (b) of this
Section 9.06, in the opinion of the Required Banks, will have a Material Adverse
Effect; or
9.07 Security Documents. On and after the date required to be filed
and/or recorded pursuant to Section 5.01 or 7.11, any Security Document shall
cease to be in full force and effect, or shall cease to give the Collateral
Agent on behalf of the Secured Parties the material Liens, rights, powers and
privileges purported to be created thereby in favor of the Collateral Agent, or
any Credit Party shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to any
such Security Document; or
9.08 Guaranties. The Guaranties or any provision thereof shall cease
to be in full force and effect, or any Guarantor thereunder or any Person acting
by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's
obligations under any Guaranty or any Guarantor shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any Guaranty; or
9.09 Judgments. One or more judgments or decrees shall be entered
against PXI and/or any of PXI's Subsidiaries (and not paid when due or fully
covered by insurance) involving a liability of $1,000,000 or more in the case of
any one such judgment or decree and $5,000,000 or more in the aggregate for all
such judgments and decrees for PXI and all PXI's Subsidiaries and all such
judgments or decrees shall not have been vacated, discharged or stayed or bonded
pending appeal within 30 days from the entry thereof; or
9.10 Change of Control. A Change of Control shall have occurred;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Banks, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of the
Administrative Agent or any Bank to enforce its claims against the Borrowers,
except as otherwise specifically provided for in this Agreement (provided that,
if an Event of Default specified in Section 9.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Administrative Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
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Revolving Commitment terminated, whereupon the Revolving Commitment of each Bank
shall forthwith terminate immediately and any Commitment Commission shall
forthwith become due and payable without any other notice of any kind; (ii)
declare the principal of and any accrued interest in respect of all Loans and
all obligations owing hereunder (including Unpaid Drawings) to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by each
Borrower; (iii) direct the Collateral Agent to enforce any or all of the Liens
and security interests created pursuant to the Security Documents; (iv)
terminate any Letter of Credit which may be terminated in accordance with its
terms; and (v) direct the Borrower to pay (and the Borrower hereby agrees upon
receipt of such notice, or upon the occurrence of any Event of Default specified
in Section 9.05 in respect of the Borrower, it will pay) to the Administrative
Agent at the Payment Office such additional amounts of cash, to be held as
security for the Borrower's reimbursement obligations in respect of Letters of
Credit then outstanding equal to the aggregate Stated Amount of all Letters of
Credit then outstanding.
SECTION 10. Definitions. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Additional PXI Senior Note Documents" shall mean and include each
of the Additional PXI Notes and all securities purchase agreements, indentures
and other documents and agreements related thereto.
"Additional PXI Senior Notes" shall mean the aggregate of
$85,000,000 of Senior Notes due August 1, 2003, issued by PXI at or prior to the
Restatement Effective Date.
"Additional Security Documents" shall have the meaning provided in
Section 7.10.
"Adjusted Cash Flow" for any period (taken as one accounting period)
shall mean Consolidated Net Income for such period (after provision for taxes)
plus the amount of all non-cash charges (including, without limitation,
amortization, depreciation, deferred tax expense and non-cash interest expense)
minus any non-cash credits (including in respect of deferred taxes) in each case
that were deducted in arriving at Consolidated Net Income for such fiscal period
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less the gains from sales of assets (other than sales of inventory and equipment
in the ordinary course of business) that were added in arriving at Consolidated
Net Income for such period.
"Adjusted Percentage" shall mean (x) at a time when no Bank Default
exists, for each Bank such Bank's Percentage and (y) at a time when an Bank
Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for
each Bank that is a Non-Defaulting Bank, the percentage determined by dividing
such Bank's Revolving Commitment at such time by the Adjusted Total Revolving
Commitment at such time, it being understood that all references herein to
Revolving Commitments at a time when the Total Revolving Commitment has been
terminated shall be references to the Revolving Commitments in effect
immediately prior to such termination, provided that (A) an increase in a Bank's
Adjusted Percentage pursuant to the foregoing upon the occurrence of a Bank
Default will only be effected to the extent that after giving effect to such
increase, and any repayment of Revolving Loans pursuant to Section 4.02(A)(a) or
otherwise, the sum of (x) such Bank's new Adjusted Percentage of L/C
Outstandings and Swingline Loans plus (y) the outstanding principal amount of
such Bank's Revolving Loans equals its Revolving Commitment and (B) any changes
to the Adjusted Percentages not effected as a result of the preceding clause (A)
shall become effective on the first date or dates thereafter on which the
Revolving Outstandings are reduced, in each case to the extent permitted at such
time pursuant to clause (A).
"Adjusted Total Revolving Commitment" shall mean at any time the
Total Revolving Commitment less the aggregate Revolving Commitments of all
Defaulting Banks.
"Administrative Agent" shall mean Scotiabank in its capacity as
Administrative Agent hereunder and shall include any successor to the
Administrative Agent appointed pursuant to Section 11.09.
"AFICA Bonds" shall mean the Series A, B and C Industrial Revenue
Bonds issued on October 1, 1985, November 1, 1985 and December 5, 1985
respectively by the Puerto Rico Industrial, Medical and Environmental Pollution
Control
Facilities Finance Authority.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including, but not limited to, all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to con-
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trol a corporation if such Person possesses, directly or indirectly, the power
(i) to vote 10% or more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"Agent" shall mean and include the Administrative Agent and the
Syndication Agent.
"Agreement" shall mean this Amended and Restated Credit Agreement,
as the same may be from time to time modified, amended and/or supplemented.
"Approved Tax Sharing Agreement" shall mean a tax sharing and/or tax
allocation agreement with Holdings in form and substance satisfactory to the
Agents and providing, inter alia, for an allocation for the payment of U.S.
income taxes on a basis no less favorable to PXI and its Subsidiaries than they
would be obligated to pay on a stand-alone basis.
"Asset Sale" shall mean and include (i) the sale, transfer or other
disposition by PXI or any of its Subsidiaries to any Person (other than the
Borrower or Xtra or any of their respective Wholly-Owned Subsidiaries) of any
asset of PXI or any of its Subsidiaries (other than (x) sales, transfers or
other dispositions in the ordinary course of business of inventory and/or
obsolete or excess equipment, (y) sales generating proceeds individually in an
amount equal to or less than $25,000 or (z) other sales generating proceeds in
the aggregate for all such sales not in excess of $1,000,000 in any fiscal year)
and (ii) the sale, transfer or other disposition by PXI to any Person of any
capital stock of the Borrower owned by PXI.
"Assignment Agreement" shall have the meaning provided in Section
12.04(b).
"Authorized Officer" shall mean any senior officer of any Person
designated as such in writing to the Administrative Agent by the President or
Chief Financial Officer of such Person.
"Bank" shall have the meaning provided in the first paragraph of
this Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of an Bank to make available its portion of any Borrowing of
Revolving Loans (including a Man-
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datory Borrowing) or to fund its portion of any unreimbursed drawing under
Section 2.02(c) or (ii) a Bank having notified the Administrative Agent and/or
the Borrower that it does not intend to comply with the obligations under
Section 1.01(A) or 1.01(C) or under Section 2.02(c), in either case as a result
of the appointment of a receiver or conservator with respect to such Bank at the
direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" shall mean the higher of (i) Federal Funds Rate plus 1/2
of 1%, or (ii) the Prime Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Base Rate Margin" shall mean 1.25% minus the then applicable
Reduction Percentage.
"Blockbuster PR" shall mean a division of the Borrower.
"Blockbuster VI" shall mean a division of Xtra, a Wholly-Owned
Subsidiary of the Borrower.
"Borrower" shall mean Pueblo International Inc.
"Borrower Pledge Agreement" shall have the meaning provided in
Section 5.01(f).
"Borrower Security Agreement" shall have the meaning provided in
Section 5.01(h).
"Borrowing" shall mean the incurrence of one Type of Loan by the
Borrower from all of the Banks on a given date (or resulting from conversions on
a given date), having in the case of Eurodollar Loans the same Interest Period,
provided that Base Rate Loans incurred pursuant to Section 1.10(b) shall be
considered part of any related Borrowing of Eurodollar Loans.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York or San Juan, Puerto Rico a legal holiday or a day on
which banking institutions are authorized by law or other governmental actions
to close and (ii) with respect to all notices and determinations in connection
with, and payments
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of principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
in U.S. dollar deposits in the New York interbank Eurodollar market.
"Capital Expenditures" shall mean, for any period, the aggregate of
all expenditures (whether paid in cash or accrued as liabilities, including
Capitalized Lease Obligations but excluding Tape Expenditures, by PXI and its
Subsidiaries during that period that, in conformity with GAAP, are or are
required to be included in the property, plant or equipment reflected in the
balance sheet of PXI and its Subsidiaries, provided that Capital Expenditures
shall in any event include the purchase price paid in connection with the
acquisition of any Person (including through the purchase of all of the capital
stock or other ownership interests of such Person or through merger or
consolidation) to the extent allocable to property, plant and equipment.
"Capital Lease," as applied to any Person, shall mean any lease of
any property (whether real, personal or mixed) by that Person as lessee which,
in conformity with GAAP, is accounted for as a capital lease on the consolidated
balance sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of PXI and its Subsidiaries in each case taken at the amount
thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition, (ii) U.S. dollar denominated
time deposits, certificates of deposit and bankers acceptances of (x) any Bank
that is a commercial bank having capital and surplus in excess of $500,000,000
or (y) any bank whose short-term commercial paper rating from S&P is at least
A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank, an "Approved Bank"), in each case with maturities of not
more than six months from the date of acquisition, (iii) commercial paper issued
by any Bank or Approved Bank or by the parent company of any Bank or Approved
Bank and commercial paper issued by, or guaranteed by, any industrial or
financial company with a short-term commercial paper rating of at least A-1 or
the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
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Moody's (any such company, an "Approved Company"), or guaranteed by any
industrial company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody's, as the case may be, and
in each case maturing within six months after the date of acquisition and (iv)
any fund or funds investing solely in investments of the type described in
clauses (i) through (iv) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by PXI or a Subsidiary of PXI, as the case may be,
from such Asset Sale.
"CC Percentage" shall mean (x) at all times that the Reduction
Percentage is less than 1/2 of 1%, .50%, (y) at all times that the Reduction
Percentage is 1/2 of 1%, 40%, and (z) at all times that the Reduction Percentage
is 3/4 of 1%, .30%.
"CELA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq.
"Change of Control" shall mean (i) the direct or indirect
acquisition by any Person or group (as such term is defined in Section 13(d)(3)
of the Securities Exchange Act of 1934 (the "Exchange Act")), other than a group
composed in whole or substantially in whole of the Cisneros Group and/or the
Management Group, of beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) of 33-1/3% or more of the outstanding shares
of Voting Stock of Holdings, (ii) the failure of PXI to own 100% of the capital
stock of the Borrower or (directly or indirectly through the Borrower) Xtra,
(iii) the failure of the Cisneros Group to beneficially own and control 80% of
the Voting Stock of Holdings (and indirectly of PXI) or after an initial public
offering of Voting Stock of Holdings or PXI, a majority of the Voting Stock of
Holdings (and indirectly of PXI) or (iv) any "change of control" or similar
event shall occur under the PXI Senior Note Documents.
"Cisneros Group" shall mean the group of companies directly or
indirectly controlled by Gustavo or Ricardo Cisneros and trusts for the benefit
of their families.
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"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor. For purposes of Sections 6.13,
7.06, and 9.06 of this Agreement and the defined terms "ERISA Affiliate" and
"Unfunded Current Liability," all references to the Code shall include the
comparable sections of the Puerto Rico Internal Revenue Code of 1994, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
"Collateral" shall mean all of the Collateral as defined in each of
the Security Documents or other property of any Credit Party on which a Lien is
granted pursuant to any Security Document.
"Collateral Agent" shall mean Scotiabank acting as collateral agent
for the Secured Parties under the Security Documents.
"Commitment Commission" shall have the meaning provided in Section
3.01(a).
"Consolidated Indebtedness" shall mean the principal amount of all
Indebtedness of PXI and its Subsidiaries required to be accounted for as debt in
accordance with GAAP, determined on a consolidated basis.
"Consolidated Net Income" shall mean for any period, the
consolidated net income (or loss) of PXI and its Subsidiaries for such period
taken as a single accounting period determined in conformity with GAAP provided
that there shall be excluded the income (or loss) of any Person in which any
other Person (other than the Borrower, Xtra or a Wholly-Owned Subsidiary of the
Borrower or Xtra) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to the Borrower or Xtra by such
Person during such period.
"Contingent Obligations" shall mean as to any Person any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
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or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; provided, however, that
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Documents" shall mean this Agreement, the Notes, the
Security Documents and the Subsidiary Guaranty.
"Credit Event" shall mean and include the making of a Loan and the
issuance of a Letter of Credit.
"Credit Party" shall mean each of (i) PXI, (ii) the Borrower, (iii)
Xtra and (iv) the other Subsidiary Guarantors.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, specified in Section 9 would constitute an Event of
Default.
"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Designated Parties shall have the meaning provided in Section 9.04.
"Dividends" shall have the meaning provided in Section 8.06.
"EBIT" shall mean, for any period, Consolidated Net Income, before
interest income, interest expense, LIFO adjustment and provision for income
taxes and Puerto Rico withholding taxes and without giving effect to any
non-recurring charges, extraordinary gains, extraordinary losses
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or gains from sales of assets (other than sales of inventory in the ordinary
course of business).
"EBITDA" for any period shall mean EBIT, adjusted by (i) adding
thereto the amount during such period of all amortization of intangibles and
depreciation plus all non-cash charges in respect of deferred profit sharing
plans, deferred compensation plans, pension plans and employee health plans and
(ii) subtracting therefrom the amount of Tape Expenditures during such period;
provided that for purposes of determining EBITDA for Sections 8.09, 8.10 and
8.11 for any period ending in May, August or November, EBITDA shall not include
any adjustment for non-cash charges in respect of deferred profit-sharing plans,
deferred compensation plans, pension plans and employee health plans during such
period, but EBITDA determined for any period ending in January shall include all
such adjustments since the end of the preceding fiscal year. In calculating
EBITDA for purposes of Sections 8.10 and 8.11, EBITDA for the Test Period ending
(i) on May 17, 1997 shall be multiplied by 4.0, (ii) on August 9, 1997 shall be
multiplied by 2.0 and (iii) on November 1, 1997 shall be multiplied by 4/3.
"Environmental Claims" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations (other than internal reports prepared
by PXI or any of PXI's Subsidiaries solely in the ordinary course of such
Person's business and not in response to any third party action or request of
any kind) or proceedings relating in any way to any Environmental Law or any
permit issued, or any approval given, under any such Environmental Law
(hereafter, "Claims"), including, without limitation, (a) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials arising from alleged injury
or threat of injury to health, safety or the environment.
"Environmental Law" means any applicable Federal, state, foreign or
local statute, law, rule, regulation, ordinance, code and rule of common law now
or hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety
or Hazardous Materials, including, without limitation, CELA; RA; the Federal
Water
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Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Section 7401 et seq.; the Clean Air Act, 42
U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3808
et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq. and any
applicable state and local or foreign counterparts or equivalents.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at the
date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with PXI or any Subsidiary of Holdings would be deemed
to be a "single employer" within the meaning of Section 414(b) or (c) of the
Code, and with respect to Sections 412 and 4971 of the Code and Section 302 of
ERISA, Section 414(b), (c), (m) or (o) of the Code.
"Eurodollar Loans" shall mean each Loan bearing interest at the
rates provided in Section 1.08(b).
"Eurodollar Margin" shall mean 2.25% less the then applicable
Reduction Percentage.
"Eurodollar Rate" shall mean with respect to each Interest Period
for a Eurodollar Loan, (i) the rate determined by the Administrative Agent to be
the arithmetic mean (rounded to the nearest 1/100 of 1%) of the offered
quotation to first-class banks in the London interbank Eurodollar market by each
Reference Bank for Dollar deposits of amounts in same day funds comparable to
the outstanding principal amount of the Eurodollar Loan of such Reference Bank
for which an interest rate is then being determined with maturities comparable
to the Interest Period to be applicable to such Eurodollar Loan, determined as
of 11:00 A.M. (London time) on the date which is two Business Days prior to the
commencement of such Interest Period, divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation
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D), provided that if one or more of the Reference Banks fail to provide the
Administrative Agent with its aforesaid rate, then the Eurodollar Rate shall be
determined based on the rate or rates provided to the Administrative Agent by
the other Reference Bank or Banks.
"Event of Default" shall have the meaning provided in Section 9.
"Excess Cash Flow" shall mean, for any period, the remainder of (A)
the sum of (i) Adjusted Cash Flow for such period, and (ii) to the extent not
included in (A)(i) above, any amounts (net of reasonable fees, expenses and
other costs incurred in connection therewith) received by PXI or any of its
Subsidiaries in settlement of, or in payment of any judgments resulting from,
actions, suits or proceedings with respect to PXI or such Subsidiary from the
first day to the last day of such period, minus (B) the sum of (i) the increase
(or plus any decrease) in LIFO reserves established by PXI and its Subsidiaries
from the first day to the last day of such period, (ii) the sum of (x) the
excess of the amount of Capital Expenditures made during such period pursuant to
Section 8.04(a), as modified by Section 8.04(b), over all Capital Expenditures
made during such period pursuant to said Section 8.04(a) (as so modified) that
are financed by Indebtedness (other than the Revolving Loans hereunder) plus (y)
the amount, if any, of Capital Expenditures that the Borrower, Xtra and their
respective Subsidiaries may make pursuant to Section 8.04(a) in the next
following fiscal year in excess of the amount of Capital Expenditures set forth
in said Section for such next fiscal year as a result of the operation of
Section 8.04(b), (iii) all Third Party Debt Repayments made during such period,
and (iv) any Net Debt Issuance Proceeds and Net Equity Issuance Proceeds to the
extent included in Adjusted Cash Flow for such period.
"Existing Letter of Credit" shall mean each of the letters of credit
described in Schedule II.
"Existing PXI Senior Note Documents" shall mean and include each of
the Existing PXI Senior Notes and all securities purchase agreements, indentures
and other documents and agreements related thereto, all as in effect on March 1,
1997.
"Existing PXI Senior Notes" shall mean the aggregate $180,000,000 of
Senior Notes due 2003, issued by PXI at the time of the Initial Borrowing Date.
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"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds
brokers of recognized standing selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 3.01.
"Florida Division Assets" shall mean any of the retail stores and
the distribution center operated by Xtra in Florida and all equipment, inventory
and receivables constituting part of or arising from the business conducted at
such stores and the distribution center.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect on the date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 8, including defined terms as used therein, are subject (to the
extent provided therein) to Section 12.07(a).
"Guaranties" shall mean and include the guarantees set forth in
Section 13 of this Agreement and the Subsidiary Guaranty.
"Guarantor" shall mean and include PXI, Xtra and each Subsidiary
Guarantor.
"Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that
contained, electric fluid containing levels of polychlorinated biphenyls, and
radon gas; and (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contamin-
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ants," or "pollutants," or words of similar import, under any applicable
Environmental Law.
"Hialeah & Dadeland Transfer" shall mean, collectively, a transfer
or series of related transfers of the Hialeah and Dadeland properties as a
result of which Holdings owns, directly or indirectly, the Hialeah and Dadeland
properties and the subordinated note of PXI in favor of Holdings in the
principal amount of $10,000,000 (a copy of which is attached hereto as Exhibit
M) is satisfied.
"Holdings" shall mean PXC&M Holdings, Inc., a Delaware corporation.
"Indebtedness" of any Person shall mean without duplication (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services (other than deferred allowance relating to merchandise)
which in accordance with generally accepted accounting principles would be shown
on the liability side of the balance sheet of such Person, (iii) the face amount
of all letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease Obligations
of such Person, (vi) all obligations of such Person to pay a specified purchase
price for goods or services whether or not delivered or accepted, i.e.,
take-or-pay and similar obligations, (vii) all obligations of such Person under
Interest Rate Protection Agreements, (viii) all reimbursement or other monetary
obligations with respect to surety, performance and bid bonds, and (ix) all
Contingent Obligations of such Person, provided that Indebtedness shall not
include trade payables and accrued expenses, in each case arising in the
ordinary course of business.
"Initial Borrowing Date" shall have the meaning provided in the
Original Credit Agreement.
"Intercompany Mortgages" shall have the meaning provided in Section
5.01(i)(ii).
"Interest Period", with respect to any Loan, shall mean the interest
period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate
swap agreement, any interest rate cap agreement, any interest rate collar
agreement or other similar
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agreement or arrangement designed to hedge the risks for a Person with respect
to, or otherwise manage, interest rates.
"L/C Fee" shall have the meaning provided in Section 3.01(b).
"L/C Outstandings" shall mean, at any time, the sum of, without
duplication, (i) the aggregate Stated Amount of all outstanding Letters of
Credit and (ii) the aggregate amount of all Unpaid Drawings.
"Leasehold" of any Person means all of the right, title and interest
of such Person as lessee or licensee in, to and under leases or licenses of
land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Issuer" shall mean and include Scotiabank and/or
its Affiliates.
"Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).
"Leverage Ratio" shall mean the ratio described in Section 8.10.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" shall mean each and every Loan made by any Bank hereunder,
including Revolving Loans and Swingline Loans.
"Management Group" shall mean the group of shareholders of Holdings
that are employees of PXI or its Subsidiaries.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(C).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on
the business, properties, assets, liabili-
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ties, condition (financial or otherwise) or prospects of the Borrower or PXI and
its Subsidiaries taken as a whole.
"Maturity Date shall mean February 1, 2003.
"Maximum Swingline Amount" shall mean $5,000,000.
"Minimum Assignment Amount" shall mean, with respect to any
assignment by any Bank of its Revolving Commitment hereunder an amount equal to
$5,000,000.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans (other
than Swingline Loans), $1,000,000, (ii) for Eurodollar Loans $2,000,000 and
(iii) for Swingline Loans, $500,000.
"Moody's" shall mean Moody's Investors Services, Inc.
"Mortgages" shall mean deeds of trust, leasehold deeds of trust,
mortgages, leasehold mortgages or similar documents covering the Mortgaged
Properties located in Florida and the U.S. Virgin Islands.
"Mortgage Policies" shall have the meaning provided in Section
5.01(i).
"Mortgaged Properties" shall mean and include (i) all Real
Properties owned or leased by PXI or any of its Subsidiaries, to the extent
designated as such on Schedule VI hereto and (ii) each Real Property subjected
to a mortgage in favor of the Collateral Agent for the benefit of the Secured
Parties pursuant to Section 7.11.
"NationsBank" shall mean NationsBank, N.A. (South).
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the
Cash Proceeds resulting therefrom net of reasonable costs and expenses of sale
and related cash settlements (including payment of severance and other
termination costs, other current liabilities attaching to the assets sold and
retained by the seller and principal, premium and interest of Indebtedness other
than the Loans, required to be, and which is, repaid under the terms thereof as
a result of such Asset Sale) and incremental taxes paid or payable as a result
thereof.
"Net Debt Issuance Proceeds" shall mean the proceeds (net of
reasonable costs associated therewith) received from the incurrence of
Indebtedness.
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"Net Equity Issuance Proceeds" shall mean the proceeds (net of
underwriting discounts and commissions and other reasonable costs associated
therewith) received from the sale of equity.
"Non-Defaulting Bank" shall mean and include each Bank other than a
Defaulting Bank.
"Note" shall mean each Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.02.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent at
600 Peachtree Street, NE, Suite 2700, Atlanta, Georgia 30308, or such other
office as the Administrative Agent may designate to the Borrowers and the Banks
from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Collateral Agent, any Agent or any Bank pursuant to the terms of this
Agreement or any other Credit Document.
"Participating Bank" shall have the meaning provided in Section
2.02(a).
"Payment Office" shall mean the office of the Administrative Agent
in Atlanta or such other office as the Administrative Agent may designate to the
Borrower and the Banks from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Percentage" shall mean at any time for each Bank, the percentage
obtained by dividing such Bank's Revolving Commitment by the Total Revolving
Commitment.
"Permitted Encumbrances" shall mean (i) those liens, encumbrances
and other matters affecting title to any Mortgaged Property listed in the
Mortgage Policies in respect thereof and found reasonably acceptable by the
Administrative Agent (which shall include all thereof specified in the Mort-
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gage Policies delivered to and accepted by the Collateral Agent pursuant to
Section 5.01(i)(iii)), (ii) as to any particular Mortgaged Property at any time,
such easements, encroachments, covenants, rights of way, minor defects,
irregularities or encumbrances on title which are not unusual with respect to
property similar in character to any such Mortgaged Property and which do not,
materially impair such Mortgaged Property for the purpose for which it is held
by the mortgagor thereof, or the lien held by the Collateral Agent, (iii)
municipal and zoning ordinances, which are not violated by the existing
improvements and the present use made by the mortgagor thereof of the Premises
(as defined in the respective Mortgage), (iv) general real estate taxes and
assessments not yet delinquent, (v) as to any Mortgage encumbering any PRMP, the
lien of the Intercompany Mortgage and (vi) such other items as the
Administrative Agent may consent to.
"Permitted Existing Indebtedness" shall have the meaning provided in
Section 6.19.
"Permitted Liens" shall have the meaning provided in Section
8.02(d).
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of), any Credit Party or any ERISA Affiliate, and each
such plan for the five year period immediately following the latest date on
which any Credit Party or any ERISA Affiliate maintained, contributed to or had
an obligation to contribute to such plan.
"Pledge Agreements" shall mean and include the PXI Pledge Agreement,
the Borrower Pledge Agreement, the Xtra Pledge Agreement and the XM Pledge
Agreement.
"Pledged Securities" shall mean and include the Pledged Securities
as defined in each of the Pledge Agreements.
"Prime Lending Rate" shall mean the rate which Scotiabank announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference
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rate and does not necessarily represent the lowest or best rate actually charged
to any customer. Scotiabank may make commercial loans or other loans at rates of
interest at, above or below the Prime Lending Rate.
"PRMP" shall mean and include each Mortgaged Property located in
Puerto Rico.
"Puerto Rico Pledge Agreement" shall have the meaning provided in
Section 5.01(i)(ii).
"PXI" shall have the meaning provided in the first paragraph of this
Agreement.
"PXI Pledge Agreement" shall have the meaning provided in Section
5.01(f).
"PXI Senior Note Documents" shall mean and include the Existing PXI
Senior Note Documents and the Additional PXI Senior Note Documents.
"PXI Senior Notes" shall mean and include the Existing PXI Senior
Notes and the Additional PXI Senior Notes.
"PXI Subordinated Notes" shall mean any subordinated indebtedness of
PXI to any member of the Cisneros Group, the entire proceeds of which are
provided immediately to the Borrower and used immediately thereafter to prepay
Revolving Loans; provided that (i) no such Indebtedness shall be guaranteed by
any Subsidiary of PXI, (ii) no such Indebtedness shall be secured by any asset
of PXI or any of its Subsidiaries, (iii) any such Indebtedness shall be
subordinated to the Obligations to the satisfaction of the Administrative Agent,
(iv) no PXI Subordinated Notes shall mature prior to July 31, 2004, (v) no PXI
Subordinated Notes shall bear interest at a rate per annum in excess of 1% in
excess of the interest rate applicable to the Loans, (vi) the incurrence of such
Indebtedness is permitted pursuant to the terms of the PXI Senior Note Documents
and (vii) all other terms and conditions of such Indebtedness are in form and
substance reasonably satisfactory to the Administrative Agent. The incurrence of
PXI Subordinated Notes shall be deemed to be a representation and warranty by
PXI that all conditions thereto have been satisfied and that same is permitted
in accordance with the terms of this Agreement, which representation and
warranty shall be deemed to be a representation and warranty for all purposes
hereunder, including, without limitation, Sections 5.02 and 9.02.
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"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Reduction Percentage" shall mean (a) initially zero, (b) at any
time there exists a Default or Event of Default, zero and (c) from and after the
first day of any fiscal quarter of PXI (such first day being the "Start Date")
commencing after the Restatement Effective Date to and including the last day of
such fiscal quarter, the applicable percentage set forth below to the extent
that the ratio (the "Leverage Ratio") of (x) Consolidated Indebtedness on the
last day of the second to last fiscal quarter ending prior to the Start Date to
(y) EBITDA for the period of four consecutive fiscal quarters (taken as a whole)
ending on the last day of the second to last fiscal quarter ending prior to the
Start Date equals the ratio set forth opposite such percentage, and no less than
5 Business Days before the Start Date, a certificate signed by the Chief
Financial Officer of PXI is delivered to the Administrative Agent certifying as
to the entitlement to, and the amount of, a Reduction Percentage (and providing
for the calculation thereof):
Leverage Reduction
Ratio Percentage
------------------- ----------
4.5:1 or greater, 1/4 of 1%
but less than 5.0:1
4.0:1 or greater 1/2 of 1%
but less than 4.5:1
less than 4.0:1 3/4 of 1%
"Reference Banks" shall mean and include Scotiabank and NationsBank.
"Refinancing" shall mean the issuance of the Additional PXI Senior
Notes and the repayment of all Loans under and as defined in the Original Credit
Agreement.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing margin requirements.
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"Reinvestment Amount" shall mean, with respect to any Asset Sale,
the amount specified in the Reinvestment Notice delivered by the Borrower in
connection therewith as the portion of the Net Cash Proceeds from such Asset
Sale that the Borrower and/or Xtra has used or intends to use to purchase,
construct or otherwise acquire Reinvestment Assets.
"Reinvestment Assets" shall mean any assets to be employed in the
business of the Borrower, Xtra and their Subsidiaries as permitted in Section
8.08.
"Reinvestment Election" shall have the meaning provided in Section
3.03(b)(I).
"Reinvestment Notice" shall mean a written notice signed by an
Authorized Officer of the Borrower stating that the Borrower and/or Xtra has
used or in good faith intends and expects to use the portion specified therein
of the Net Cash Proceeds of an Asset Sale to purchase, construct or otherwise
acquire Reinvestment Assets.
"Reinvestment Reduction Amount" shall mean, with respect to any
Asset Sale, the amount, if any, on the Reinvestment Reduction Date relating
thereto by which (a) the Reinvestment Amount in respect of such Asset Sale
exceeds (b) the aggregate amount thereof expended by the Borrower, Xtra and
their Subsidiaries to acquire Reinvestment Assets.
"Reinvestment Reduction Date" shall mean, with respect to any Asset
Sale, the earlier of (i) the date occurring one year after such Asset Sale and
(ii) the date on which the Borrower and/or Xtra shall have determined not to, or
shall have otherwise ceased to, proceed with the purchase, construction or other
acquisition of Reinvestment Assets with the related Reinvestment Amount.
"Release" shall mean disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like, into or upon any land or water or air, or otherwise entering into the
environment.
"Reportable Event" shall mean an event described in Section 4043(c)
of ERISA with respect to a Plan other than those events as to which the 30-day
notice period is waived under Subsection .22, .23, .25, .27 or .28 of PBGC
Regulation Section 4043.
"Required Banks" shall mean, at any time, Banks whose Adjusted
Percentages exceed 50%.
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"Restatement Effective Date" shall have the meaning provided in
Section 5.01.
"Revolving Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Schedule I hereto directly below
the column entitled "Revolving Commitment", as same may be reduced from time to
time pursuant to Section 3.02, 3.03 and/or 9.
"Revolving Loan" shall have the meaning provided in Section 1.01(A).
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"Revolving Outstandings" shall mean, at any time, the sum of the
outstanding principal amount of Revolving Loans and Swingline Loans at such time
plus the L/C Outstandings at such time.
"S&P" shall mean Standard & Poor's Corporation.
"Scotiabank" shall mean The Bank of Nova Scotia.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Secured Parties" shall mean the Banks, the Agents, and the
Collateral Agent.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreements.
"Security Agreements" shall mean and include (i) the Borrower
Security Agreement, (ii) the Subsidiary Security Agreements and (iii) any other
security agreement executed by PXI or any of its Subsidiaries pursuant to
Section 7.10.
"Security Documents" shall mean and include the Security Agreements,
the Pledge Agreements, the Mortgages, the Intercompany Mortgages, the Puerto
Rico Pledge Agreement, any other document entered into by any Credit Party
granting a Lien in favor of the Collateral Agent on property in Puerto Rico and
after the execution and delivery thereof, each Additional Security Document.
"Senior Secured Debt" shall mean at any time (x) Consolidated
Indebtedness less (y) Indebtedness included in Consolidated Indebtedness that
(x) is expressly subordinated
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to the Obligations on a basis satisfactory to the Agents and/or (y) is
unsecured.
"Stated Amount" of each Letter of Credit shall mean the maximum
available to be drawn thereunder (regardless of whether any conditions for
drawing could then be met).
"Subordinated Intercompany Notes" shall mean the promissory notes,
copies of which are attached hereto as Exhibit J-2.
"Subordinated Intercompany Real Estate Note" shall mean a
Subordinated Intercompany Real Estate Note, a copy of which is attached hereto
as Exhibit J-1.
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of PXI.
"Subsidiary Guarantor" shall mean any Subsidiary party to the
Subsidiary Guaranty on the Restatement Effective Date or any Subsidiary that,
after the Restatement Effective Date, executes a counterpart of the Subsidiary
Guaranty.
"Subsidiary Guaranty" shall have the meaning provided in Section
5.01(g).
"Subsidiary Security Agreement" shall have the meaning provided in
Section 5.01(h).
"Swingline Loan" shall have the meaning provided in Section 1.01(B).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Swingline Termination Date" shall mean the date which is three
Business Days prior to the Maturity Date.
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"Syndication Agent" shall mean NationsBank.
"Tape Expenditures" shall mean all cash payments in respect of the
acquisition by Blockbuster PR or Blockbuster VI of video tapes.
"Taxes" shall have the meaning provided in Section 4.04.
"Test Period" shall mean, with respect to any Test Period ending (x)
on or prior to January 31, 1998, a period (taken as one accounting period)
commencing on January 26, 1997 and ending on (i) May 17, 1997, (ii) August 9,
1997 and (iii) November 1, 1997, respectively, and (y) thereafter, the four
consecutive fiscal quarters of PXI (taken as one accounting period) then last
ended.
"Third Party Debt Repayments" shall mean any repayment by the
Borrower, Xtra or any of their Subsidiaries of principal on Indebtedness of the
Borrower, Xtra or any such Subsidiary provided that Third Party Debt Repayments
shall not include (i) any repayment on the Revolving Loans except to the extent
the Total Revolving Commitment has been permanently reduced in connection with
such repayment, (ii) any repayment on any other revolving loans of the Borrower,
Xtra or any Subsidiary other than any such repayment at the final maturity
thereof but then only to the extent such revolving loans have not been replaced
or refinanced through a new loan or credit facility, (iii) any repayment
financed through the incurrence of new Indebtedness (excluding any repayment
financed through the incurrence of Revolving Loans), (iv) any repayment of
Indebtedness with proceeds of the sale of assets or issuance of equity and (v)
any repayments of Capital Lease Obligations and/or other indebtedness, to the
extent in each case described in this clause (v) deducted in computing Adjusted
Cash Flow for the applicable period.
"Total Cash Interest Expense" shall mean for any period total
interest expense (net of interest income) of PXI and its Subsidiaries on a
consolidated basis (including, without limitation, the interest expense
associated with Capitalized Lease Obligations but excluding expense for interest
not payable in cash).
"Total Revolving Commitment" shall mean the sum of the Revolving
Commitments of each of the Banks.
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"Total Unutilized Revolving Commitment" shall mean, at any time, the
excess, if any, of (i) the Total Revolving Commitment over (ii) the sum of (x)
the outstanding principal amount of all Revolving Loans and Swingline Loans plus
(y) the L/C Outstandings, in each case at such time.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year, determined in accordance
with Statement of Financial Accounting Standards No. 87, based upon the
actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan, exceeds the fair market value of the assets allocable
thereto, determined in accordance with Section 412 of the Code.
"Unpaid Drawing" shall have the meaning provided in Section 2.04(a).
"Unutilized Revolving Commitment" for any Bank at any time shall
mean an amount (not less than zero) equal to the excess of (x) the Revolving
Commitment of such Bank over (y) the sum of (i) the aggregate outstanding
Revolving Loans of such Bank plus (ii) such Bank's Adjusted Percentage of the
L/C Outstandings plus (iii) in the case of Scotiabank, the aggregate outstanding
principal amount of Swingline Loans.
"Voting Stock" shall mean the shares of capital stock and any other
securities of any Person entitled to vote generally for the election of
directors of such Person or any other securities (including, without limitation,
rights and options), convertible into, exchangeable into or exercisable for, any
of the foregoing (whether or not presently exercisable, convertible or
exchangeable).
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' qualifying shares, is owned directly
or indirectly by such Person.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, telecopier device, telegraph
or cable.
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"XM Pledge Agreement" shall have the meaning provided in Section
5.01(f)(iv).
"Xtra" shall have the meaning provided in the first paragraph of
this Agreement.
"Xtra Pledge Agreement" shall have the meaning provided in Section
5.01(f)(iii).
SECTION 11. The Administrative Agent, etc.
11.01 Appointment. Each Bank hereby irrevocably designates and
appoints Scotiabank as Administrative Agent (such term as used in this Section
11 to include Scotiabank in its capacity as Collateral Agent), and NationsBank
as Syndication Agent, for such Bank to act as specified herein and in the other
Credit Documents, and each such Bank hereby irrevocably authorizes Scotiabank as
the Administrative Agent, and NationsBank as Syndication Agent, for such Bank,
to take such action on its behalf under the provisions of this Agreement and the
other Credit Documents and to exercise such powers and perform such duties as
are expressly delegated to the Administrative Agent or Syndication Agent or the
Agents, as the case may be, by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent and Syndication Agent each agrees to act as such upon
the express conditions contained in this Section 11. Notwithstanding any
provision to the contrary elsewhere in this Agreement, neither the
Administrative Agent nor the Syndication Agent shall have any duties or
responsibilities, except those expressly set forth herein or in the other Credit
Documents, or any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Administrative Agent
or Syndication Agent. Provisions of this Section 11 are solely for the benefit
of the Administrative Agent, the Syndication Agent and the Banks, and no Credit
Party shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
the Administrative Agent and Syndication Agent each shall act solely as agent of
the Banks and the Administrative Agent and Syndication Agent each does not
assume and shall not be deemed to have assumed any obligation or relationship of
agency or trust with or for any Credit Party.
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11.02 Delegation of Duties. The Administrative Agent and Syndication
Agent each may execute any of its duties under this Agreement or any other
Credit Document by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent and Syndication Agent each shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 11.03.
11.03 Exculpatory Provisions. Neither Agent, nor any of its
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties made by any Credit Party or any of their
respective officers contained in this Agreement, any other Credit Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by either Agent under or in connection with, this Agreement or
any other Credit Document or for any failure of any Credit Party or any of their
respective officers to perform its obligations hereunder or thereunder. Neither
Agent shall be under any obligation to any Bank to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement, or to inspect the properties, books or records of
any Credit Party. Neither Agent shall be responsible to any Bank for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any Credit Document or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by either Agent to the Banks or by or on behalf of any Credit
Party to either Agent or any Bank or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence of any Default
or Event of Default.
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11.04 Reliance by Administrative Agent, etc. Each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Credit Parties), independent accountants and other experts selected by either
Agent. Each Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Credit Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
or it shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Credit Documents in accordance with a request of the Required Banks, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Banks.
11.05 Notice of Default. Neither Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it has received notice from a Bank or the Borrower or any other
Credit Party referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Agent receives such a notice, it shall give prompt notice thereof to the
Banks. Each Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Banks, provided that,
unless and until an Agent shall have received such directions, such Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
11.06 Non-Reliance on Administrative Agent and Other Banks. Each
Bank expressly acknowledges that neither Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by either Agent
hereinafter taken, including any review of the affairs of any Credit Party,
shall be deemed to constitute any representation or warranty by an Agent to any
Bank. Each Bank represents to the Agents that it has, independently and
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without reliance upon either Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, assets, operations, property, financial
and other conditions, prospects and creditworthiness of the Credit Parties and
made its own decision to make its Loans hereunder and enter into this Agreement.
Each Bank also represents that it will, independently and without reliance upon
either Agent or any other Bank, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Credit Parties. Neither Agent shall have
any duty or responsibility to provide any Bank with any credit or other
information concerning the business, operations, assets, property, financial and
other conditions, prospects or creditworthiness of any Credit Party which may
come into the possession of such Agent or any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates.
11.07 Indemnification. The Banks agree to indemnify each Agent and
Syndication Agent in its capacity as such ratably according to the Banks'
aggregate Loans and Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
reasonable expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against such Agent in its
capacity as such in any way relating to or arising out of this Agreement or any
other Credit Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be taken
by such Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by the Borrower, provided that no
Bank shall be liable to either Agent for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the gross negligence or
willful misconduct of such Agent. If any indemnity furnished to either Agent for
any purpose shall, in the opinion of such Agent, be insufficient or become
impaired, the Agents may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The
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agreements in this Section 11.07 shall survive the payment of all Obligations.
11.08 Individual Capacity. The Administrative Agent and the
Syndication Agent and their respective affiliates may make loans to, accept
deposits from and generally engage in any kind of business with any Credit Party
as though such Agent were not an Agent hereunder. With respect to the Loans made
by it and all Obligations owing to it, each Agent shall have the same rights and
powers under this Agreement as any Bank and may exercise the same as though it
were not an Agent and the terms "Bank" and "Banks" shall include the each Agent
in its individual capacity.
11.09 Resignation; Removal; Successors. Either Agent may resign as
Agent upon 20 days' notice to the Banks, and either Agent may be removed at any
time with or without cause by the Required Banks. Upon the resignation or
removal of the Administrative Agent, the Required Banks shall appoint from among
the Banks a successor Administrative Agent for the Banks subject to prior
approval by the Borrower (such approval not to be unreasonably withheld),
whereupon such successor agent shall succeed to the rights, powers and duties of
the Administrative Agent, and the term "Administrative Agent" shall include such
successor agent effective upon its appointment, and the resigning or removed
Administrative Agent's rights, powers and duties as the Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement. After
the retiring Administrative Agent's resignation or removal hereunder as the
Administrative Agent, the provisions of this Section 11 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
SECTION 12. Miscellaneous.
12.01 Payment of Expenses, etc. The Borrower agrees to: (i) whether
or not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agents in connection with the
negotiation, preparation, execution and delivery of the Credit Documents and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of White & Case and any local counsel) and of the Agents and each
of the Banks in connection with the enforcement of the Credit Documents and the
documents and instru-
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ments referred to therein (including, without limitation, the reasonable fees
and disbursements of counsel for the Agents and for each of the Banks); (ii) pay
and hold each of the Banks harmless from and against any and all present and
future stamp and other similar taxes with respect to the foregoing matters and
save each of the Banks harmless from and against any and all liabilities with
respect to or resulting from any delay or omission (other than to the extent
attributable to such Bank) to pay such taxes; and (iii) indemnify each Agent and
each Bank, their respective officers, directors, employees, representatives and
agents (each, an "indemnified person") from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses incurred by
any of them as a result of, or arising out of, or in any way related to, or by
reason of, (a) any investigation, litigation or other proceeding (whether or not
any Bank is a party thereto) related to the entering into and/or performance of
any Credit Document or the use of the proceeds of any Loans hereunder or the
consummation of any other transactions contemplated in any Credit Document, (b)
any settlement entered into in connection with the foregoing to the extent such
settlement has been consented to by the Borrower or PXI, which consent shall not
be unreasonably withheld or (c) the actual or alleged presence of Hazardous
Materials on, or Released from, any Real Property of any Credit Party or any
Environmental Claim with respect to any Credit Party, in each case including,
without limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation, Environmental Claim or any
of such Credit Party's acts, omissions, business, operations or Real Property,
or other proceeding (but excluding any such losses, liabilities, claims, damages
or expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified). To the extent that the undertaking
to indemnify and hold harmless set forth in this Section 12.01 may be
unenforceable because it is violative of any law or public policy as determined
by a final judgment of a court of competent jurisdiction, the Borrower shall
make the maximum contribution to the payment and satisfaction of each of the
liabilities giving rise to claims under the indemnification provisions of this
12.01 which is permissible under applicable law.
12.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Bank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Bor-
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rower or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such Bank (including,
without limitation, by branches and agencies of such Bank wherever located) to
or for the credit or the account of any Credit Party hereto against and on
account of the Obligations and liabilities of such Credit Party to such Bank
under this Agreement or under any of the other Credit Documents, including,
without limitation, all interests in Obligations of such Credit Party (but
excluding any amounts held by such Bank in a trustee capacity) purchased by such
Bank pursuant to Section 12.06(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other Credit
Document, irrespective of whether or not such Bank shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured.
12.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing and
mailed, telegraphed, telexed, telecopied, cabled or delivered, if to PXI, the
Borrower or Xtra, at the address specified opposite its signature below; if to
any Bank, at its address specified for such Bank on Schedule I hereto; or, at
such other address as shall be designated by any party in a written notice to
the other parties hereto. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and
shall be effective when received.
12.04 Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided that no Credit Party may assign or
transfer any of its rights or obligations hereunder (except as expressly
provided herein) without the prior written consent of the Banks. Each Bank may
at any time grant participations in any of its rights hereunder or under any of
the Notes to a Person that is a commercial bank, other financial institution,
mutual fund or "Accredited Investor" as such term is defined in Regulation D of
the Securities Act of 1933, as amended, provided that in the case of any such
participation, the participant shall not have any rights under this Agreement or
any of the other Credit Documents (the participant's rights against such Bank in
respect of such participation to be those set forth in the agreement executed by
such Bank in favor of the participant relating thereto) and all amounts payable
by any Borrower hereunder shall be
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determined as if such Bank had not sold such participation, except that the
participant shall be entitled to the benefits of Sections 1.10, 1.11, 2.04 and
4.04 of this Agreement to the extent that such Bank would be entitled to such
benefits if the participation had not been entered into or sold, and provided
further, that no Bank shall transfer, grant or assign any participation under
which the participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such amendment
or waiver would (i) extend the final scheduled maturity of any Loan or Note in
which such participant is participating (it being understood that any waiver of
any prepayment of Loans shall not constitute an extension of the final maturity
date) or reduce the rate or extend the time of payment of interest or Fees
thereon (except in connection with a waiver of the applicability of any
post-default increase in interest rates), or reduce the principal amount
thereof, or increase such participant's participating interest in any Commitment
over the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Commitment,
or a mandatory prepayment, shall not constitute a change in the terms of any
Commitment), (ii) release all or substantially all of the Collateral (except as
expressly provided herein) or (iii) consent to the assignment or transfer by any
Credit Party of any of its rights and obligations under this Agreement (except
as expressly provided herein or therein).
(b) Notwithstanding the foregoing, (x) any Bank may assign all or a
portion of its Revolving Commitment (and the outstanding Revolving Loans
thereunder) and its rights and obligations hereunder to its parent company
and/or any affiliate of such Bank which is at least 50% owned by such Bank or
its parent company or to one or more Banks and (y) any Bank may, after
consultation with, but with no obligation to obtain the consent of, PXI, assign
a portion, in an amount equal to at least the Minimum Assignment Amount (or the
remaining balance thereof if less) of its Revolving Commitment and its rights
and obligations hereunder to a Person that is a commercial bank, other financial
institution, mutual fund or "Accredited Investors" as such term is defined in
Regulation D of the Securities Act of 1933, as amended (each an "Eligible
Assignee"), each of which Eligible Assignees to become a party to this Agreement
as a Bank prior to or after the Restatement Effective Date by executing an
assignment agreement in the form of Exhibit K hereto, appropriately completed
(an "Assignment Agreement") with the assigning Bank, provided that, in each
case, (i) at such time Schedule I shall be deemed to have been modified to
reflect the Loans
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and/or Commitments of such new Bank and of the existing Banks, (ii) if requested
by such new Bank or the assigning Bank, the Borrower shall issue new Notes to
such new Bank and to the assigning Bank in conformity with the requirements of
Section 1.05, and (iii) the Administrative Agent shall have received at the time
of each such assignment from either the assigning or assignee Bank the payment
of a nonrefundable assignment fee of $5,000. To the extent of any assignment
pursuant to this Section 12.04(b), the assigning Bank shall be relieved of its
obligations hereunder with respect to its assigned Loans and/or Commitment. No
Bank may assign all or a portion of its Revolving Commitment to an Eligible
Assignee not already a Bank hereunder unless the Letter of Credit Issuer shall
have consented in writing to such assignment.
(c) Notwithstanding any other provisions of this Section 12.04, no
transfer or assignment of the interests or obligations of any Bank hereunder or
any grant of participations therein shall be permitted if such transfer,
assignment or grant would require any Borrower to file a registration statement
or qualify an indenture with the SEC or to qualify the Loans under the "Blue
Sky" laws of any State.
(d) Each Bank initially party to this Agreement hereby represents,
and each Person that becomes a Bank pursuant to an assignment permitted by this
Section 12.04 will, upon its becoming party to this Agreement, represent that it
is a commercial lender, other financial institution or other "Accredited
Investor" which makes and/or invests in loans in the ordinary course of its
business and that it will make or acquire Loans or participations for its own
account in the ordinary course of such business, provided that, subject to the
preceding clauses (a) and (b), the disposition of any promissory notes or other
evidences of or interests in Indebtedness held by such Bank shall at all times
be within its exclusive control.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Administrative Agent or any Bank in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between any Credit Party and either Agent or any Bank shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which each Agent or any
Bank would otherwise have. No notice to or demand on any Credit Party
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in any case shall entitle any Credit Party to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the Agents or the Banks to any other or further action in any circumstances
without notice or demand.
12.06 Payments Pro Rata. (a) The Administrative Agent agrees that
promptly after its receipt of each payment from or on behalf of any Borrower in
respect of any Obligations, it shall, except as otherwise provided in this
Agreement, distribute such payment to the Banks (other than any Bank that has
consented in writing to waive its pro rata share of such payment) pro rata based
upon their respective shares, if any, of the Obligations with respect to which
such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligations then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
in such amount as shall result in a proportional participation by all of the
Banks in such amount, provided that if all or any portion of such excess amount
is thereafter recovered from such Bank, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
12.07 Calculations; Computations. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP consistently applied throughout the periods involved (except as set
forth in the notes thereto or as otherwise disclosed in writing by any Borrower
to the Banks), provided that, except as otherwise specifically provided herein,
all computations determining compliance with Section 8, including definitions
used therein, shall utilize accounting principles and policies in effect at the
time of the preparation of, and in conformity with those used to prepare, the
historical financial statements delivered to the Banks pursuant to Section
6.10(b) provided that FAS 109 shall be utilized in making all
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such determinations. At any time the computations determining compliance with
Section 8 utilize accounting principles or treatments different from those
utilized in the financial statements then being furnished to the Banks pursuant
to Section 7.01, such financial statements shall be accompanied by
reconciliation work-sheets.
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
12.08 Governing Law; Submission to Jurisdiction; Venue. (a) This
Agreement and the other Credit Documents and the rights and obligations of the
parties hereunder and thereunder shall, except as otherwise provided in the
Mortgages or certain other Security Documents, be construed in accordance with
and be governed by the law of the State of New York. Any legal action or
proceeding with respect to this Agreement or any other Credit Document may be
brought in the courts of the State of New York or of the United States for the
Southern District of New York, and, by execution and delivery of this Agreement,
each Credit Party hereto hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each Credit Party hereto hereby irrevocably designates, appoints and
empowers CT Corporation System with offices on the date hereof at 1633 Broadway,
New York, NY 10019 as its designee, appointee and agent to receive, accept and
acknowledge for and on its behalf, and in respect of its property, service of
any and all legal process, summons, notices and documents which may be served in
any such action or proceeding. The Administrative Agent agrees to use reasonable
good faith efforts to mail, by registered or certified mail, to the respective
Credit Party, at its address set forth opposite its signature below, copies of
any and all legal process, summons, notices and documents mailed or delivered to
CT Corporation System in connection with the immediately preceding sentence;
provided that the failure of any Credit Party to receive, for any reason, copies
of such correspondence shall not in any way affect the effectiveness of the
delivery of any legal process, summons, notice or documents delivered to CT
Corporation System. If for any reason such designee, appointee and agent shall
cease to be available to act as such, each Credit Party hereto agrees to
designate a new designee, appointee and agent in New York City on the terms and
for the purposes of this provision satisfactory to the Administrative Agent.
Each Credit Party hereto further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies there-
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of by registered or certified mail, postage prepaid, to such Credit party, at
its address set forth opposite its signature below, such service to become
effective thirty days after such mailing. Nothing herein shall affect the right
of the Administrative Agent, any Bank or the holder of any Note to serve process
in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against any Credit Party in any other jurisdiction.
(b) Each Credit Party hereto hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum. Each Credit Party hereto
further waives any right it may have to trial by jury in any court or
jurisdiction, including without limitation those referred to in clause (a)
above, in respect of any matter arising out of or relating to this Agreement and
the other Credit Documents.
12.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with each Credit Party and
the Administrative Agent.
12.10 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.11 Amendment or Waiver. Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by PXI and the Borrower and the Required Banks, provided that
no such change, waiver, discharge or termination shall, without the consent of
each Bank (other than a Defaulting Bank) affected thereby (or its Obligations
being directly affected in the case of the following clause (i)), (i) extend the
final scheduled maturity of any Unpaid Drawing, Loan or Note (it being
understood that any waiver of any prepayment of the Loans shall not constitute
an extension of the final maturity
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date), or reduce the rate or extend the time of payment of interest (other than
as a result of waiving the applicability of any post-default increase in
interest rates) thereon or Fees, or reduce the amount thereof, or increase the
Commitments of any Bank over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitment, or mandatory prepayment, shall not constitute
a change in the terms of any Commitment of any Bank), (ii) release all or
substantially all of the collateral (except as expressly provided in the Credit
Documents), (iii) amend, modify or waive any provision of this Section, or
Section 9.01, 11.07, 12.01, 12.02, 12.04, 12.06 or 12.07(b), (iv) reduce the
percentage specified in the definition of Required Banks (it being understood
that, with the consent of the Required Banks, additional extensions of credit
pursuant to this Agreement may be included in the determination of the Required
Banks on substantially the same basis as the Revolving Commitments are included
on the Restatement Effective Date), (v) consent to the assignment or transfer by
any Credit Party of any of its rights and obligations under any Credit Document
(except as expressly provided herein or therein). No provision of Section 2 or
Section 11 may be amended without the consent of the affected Letter of Credit
Issuer or affected Agent, respectively. All modifications and amendments to this
Agreement and to Schedules I and II described in Section 12.04 may be effective
as described therein.
12.12 Survival. All indemnities set forth herein including, without
limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01 shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loans and the satisfaction of all other Obligations.
12.13 Domicile of Loans. Each Bank may transfer and carry its Loans
or participations at, to or for the account of any branch office, subsidiary or
affiliate of such Bank, provided that no Borrower shall be responsible for costs
arising under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer
to the extent not otherwise applicable to such Bank prior to such transfer.
12.14 Registry. The Borrower hereby designates the Administrative
Agent to serve as the Borrower's agent, solely for purposes of this Section
12.14, to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Banks, the Revolving Loans made by
each of the Banks and each repayment in respect of the principal amount of the
Revolving Loans of
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each Bank. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Revolving Loans. With respect to any Bank, the transfer of the Commitments of
such Bank and the rights to the principal of, and interest on, any Revolving
Loan made pursuant to such Commitments shall not be effective until such
transfer is recorded on the Register maintained by the Administrative Agent with
respect to ownership of such Revolving Commitments and Revolving Loans and prior
to such recordation all amounts owing to the transferor with respect to such
Revolving Commitments and Revolving Loans shall remain owing to the transferor.
The registration of assignment or transfer of all or part of any Revolving
Commitments and Revolving Loans shall be recorded by the Administrative Agent on
the Register only upon the acceptance by the Administrative Agent of a properly
executed and delivered Assignment Agreement pursuant to Section 12.04(b).
Coincident with the delivery of such an Assignment Agreement to the
Administrative Agent for acceptance and registration of assignment or transfer
of all or part of a Revolving Loan, or as soon thereafter as practicable, the
assigning or transferor Bank shall surrender the Revolving Note evidencing such
Revolving Loan, and thereupon one or more new Revolving Notes in the same
aggregate principal amount shall be issued to the assigning or transferor Bank
and/or the new Bank. The Borrower agrees to indemnify the Administrative Agent
from and against any and all losses, claims, damages and liabilities of
whatsoever nature which may be imposed on, asserted against or incurred by the
Administrative Agent in performing its duties under this Section 12.14.
SECTION 13. Guaranty.
13.01 The Guaranty. In order to induce the Banks to enter into this
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by each Guarantor from the proceeds of the Loans and the
issuance of the Letters of Credit, each Guarantor hereby agrees with the Banks
as follows (for purposes of this Section 13, Guarantor shall mean PXI and Xtra):
each Guarantor hereby unconditionally and irrevocably, jointly and severally,
guarantees as primary obligor and not merely as surety the full and prompt
payment when due, whether upon maturity, by acceleration or otherwise, of any
and all indebtedness of the Borrower to the Banks. If any or all of the
indebtedness of the Borrower to the Banks becomes due and payable hereunder,
each Guarantor, jointly and severally, unconditionally promises to pay such
indebtedness to the Banks, or order, on
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demand, together with any and all reasonable expenses which may be incurred by
any Agent or the Banks in collecting any of the indebtedness. The word
"indebtedness" is used in this Section 13 in its most comprehensive sense and
means any and all advances, debts, obligations and liabilities of the Borrower
arising in connection with this Agreement, heretofore, now, or hereafter made,
incurred or created, whether voluntarily or involuntarily, absolute or
contingent, liquidated or unliquidated, determined or undetermined, whether or
not such indebtedness is from time to time reduced, or extinguished and
thereafter increased or incurred, whether the Borrower may be liable
individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.
13.02 Bankruptcy. Additionally, each Guarantor unconditionally and
irrevocably, jointly and severally, guarantees the payment of any and all
indebtedness of the Borrower to the Banks whether or not due or payable by such
Borrower upon the occurrence in respect of the Borrower of any of the events
specified in Section 9.05, and unconditionally and irrevocably, jointly and
severally promises to pay such indebtedness to the Banks, or order, on demand,
in lawful money of the United States.
13.03 Nature of Liability. The liability of each Guarantor hereunder
is exclusive and independent of any security for or other guaranty of the
indebtedness of the Borrowers whether executed by such Guarantor, any other
Guarantor, any other guarantor or by any other party, and the liability of each
Guarantor hereunder shall not be affected or impaired by (a) any direction as to
application of payment by the Borrower or by any other party, or (b) any other
continuing or other guaranty, undertaking or maximum liability of a guarantor or
of any other party as to the indebtedness of the Borrower, or (c) any payment on
or in reduction of any such other guaranty or undertaking, or (d) any
dissolution, termination or increase, decrease or change in personnel by the
Borrower, or (e) any payment made to the Agents or the Banks on the indebtedness
which the Agents or such Banks repay to the Borrower pursuant to court order in
any bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and each Guarantor waives any right to the deferral or modification
of its obligations hereunder by reason of any such proceeding.
13.04 Independent Obligation. The obligations of each Guarantor
hereunder are independent of the obligations
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of any other Guarantor, any other guarantor of the Borrower, and a separate
action or actions may be brought and prosecuted against each Guarantor whether
or not action is brought against any other Guarantor, any other guarantor of the
Borrower and whether or not any other Guarantor, any other guarantor or the
Borrower be joined in any such action or actions. Each Guarantor waives, to the
fullest extent permitted by law, the benefit of any statute of limitations
affecting its liability hereunder or the enforcement thereof. Any payment by the
Borrower or other circumstance which operates to toll any statute of limitations
as to the Borrower shall operate to toll the statute of limitations as to each
Guarantor.
13.05 Authorization. Each Guarantor authorizes the Agents and the
Banks without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to:
(a) change the manner, place or terms of payment of, and/or change
or extend the time of payment of, renew, increase, accelerate or alter,
any of the indebtedness (including any increase or decrease in the rate of
interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the Guaranty herein made
shall apply to the indebtedness as so changed, extended, renewed or
altered;
(b) take and hold security for the payment of the indebtedness and
sell, exchange, release, surrender, realize upon or otherwise deal with in
any manner and in any order any property by whomsoever at any time pledged
or mortgaged to secure, or howsoever securing, the indebtedness or any
liabilities (including any of those hereunder) incurred directly or
indirectly in respect thereof or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors,
the Borrower or other obligors;
(e) settle or compromise any of the indebtedness, any security
therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate
the payment
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of all or any part thereof to the payment of any liability (whether due
or not) of the Borrower to its creditors other than the Banks;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of any Borrower to the Banks regardless of what
liability or liabilities of the Guarantors or the Borrower remain unpaid;
and/or
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this
Agreement or any of such other instruments or agreements.
13.06 Reliance. It is not necessary for any Agent or the Banks to
inquire into the capacity or powers of the Borrower or the officers, directors,
partners or agents acting or purporting to act on behalf of any of them, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
13.07 Subordination. Any indebtedness of the Borrower now or
hereafter owing to a Guarantor, is hereby subordinated to the indebtedness of
the Borrower owing to the Agents and the Banks, provided that payment may be
made by the Borrower on any such indebtedness owing to a Guarantor so long as
the same is not prohibited by this Agreement, and provided further, that if the
Administrative Agent so requests at a time when an Event of Default exists, all
such indebtedness of the Borrower to such Guarantor shall be collected, enforced
and received by such Guarantor as trustee for the Banks and be paid over to the
Banks on account of the indebtedness of the Borrower to the Banks, but without
affecting or impairing in any manner the liability of such Guarantor under the
other provisions of this Guaranty, and provided further that this Section 13.07
shall not apply to the Subordinated Intercompany Real Estate Note or other
Subordinated Intercompany Notes. Prior to the transfer by any Guarantor of any
note or negotiable instrument evidencing any indebtedness of the Borrower to
such Guarantor, such Guarantor shall mark such note or negotiable instrument
with a legend that the same is subject to this subordination.
13.08 Waiver. (a) Each Guarantor waives any right (except as shall
be required by applicable statute and cannot be waived) to require the
Administrative Agent or the Banks to (i) proceed against the Borrower, any other
Guarantor, any other guarantor or any other party, (ii) proceed against or
exhaust any security held from the Borrower, any
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other Guarantor, any other guarantor or any other party or (iii) pursue any
other remedy in the Administrative Agent's or the Banks' power whatsoever. Each
Guarantor waives any defense based on or arising out of any defense of the
Borrower, any other Guarantor, any other guarantor or any other party other than
payment in full of the indebtedness, including, without limitation, any defense
based on or arising out of the disability of the Borrower, any other Guarantor,
any other guarantor or any other party, or the unenforceability of the
indebtedness or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower other than payment in full of the indebtedness.
The Administrative Agent and the Banks may, at their election, foreclose on any
security held by the Administrative Agent, the Collateral Agent or the Banks by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Administrative Agent
and the Banks may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the indebtedness has been paid. Each Guarantor
waives any defense arising out of any such election by the Administrative Agent
and the Banks, even though such election operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. Each Guarantor assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the indebtedness and
the nature, scope and extent of the risks which such Guarantor assumes and
incurs hereunder, and agrees that the Administrative Agent and the Banks shall
have no duty to advise any Guarantor of information known to them regarding such
circumstances or risks.
(c) Until such time as all the Obligations have been paid in full in
cash or Cash Equivalents, each Guarantor hereby waives all rights of subrogation
which it may at any time otherwise have as a result of this Guaranty (whether
contractual, under Section 509 of the Bankruptcy Code, or otherwise) to the
claims of the Banks against the Borrower or
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any other guarantor of the Obligations and all contractual, statutory or common
law rights of reimbursement, contribution or indemnity from the Borrower or any
other guarantor which it may at any time otherwise have as a result of this
Guaranty.
13.09 Limitation on Enforcement. The Banks agree that this Guaranty
may be enforced only by the action of the Administrative Agent, in each case
acting upon the instructions of the Required Banks and that no Bank shall have
any right individually to seek to enforce or to enforce this Guaranty it being
understood and agreed that such rights and remedies may be exercised by the
Administrative Agent for the benefit of the Banks upon the terms of this
Agreement. The Banks further agree that this Guaranty may not be enforced
against any director, officer, employee or stockholder of any Guarantor.
13.10 Rights of Contribution. Without in any manner modifying its
obligations to the Banks under this Guaranty, to the extent that any Guarantor
makes any payment under this Guaranty in respect of any indebtedness (other than
indebtedness of any Subsidiary of such Guarantor) that is in excess of its
Percentage of the aggregate payments made by all Guarantors under this Guaranty
in respect of such indebtedness, then such Guarantor shall have a right of
contribution from each other Guarantor whose payments, if any, in respect of
such indebtedness are less than its percentage of the aggregate payments made by
all Guarantors under this Guaranty in respect of such indebtedness in an amount,
and with the effect, that after giving effect to any such contribution right,
such Guarantor shall be responsible only for its Percentage of all payments made
hereunder by all Guarantors in respect of such indebtedness. As used in this
Section 13.10, a Guarantor's Percentage shall mean the percentage obtained by
dividing (i) the amount by which the present fair saleable value of its assets
on the date of this Guaranty exceeds its liabilities on such date (without
giving effect to this Guaranty) (such excess for such Guarantor, its "Net
Worth") by (ii) the aggregate Net Worth of all Guarantors at such time.
13.11 Post Closing Actions. Notwithstanding any- thing to the
contrary contained in this Agreement or the other Credit Documents, the parties
hereto acknowledge and agree that:
(a) Depository Account Agreement. The Borrower shall not be required
to have authorized, executed and delivered the depository account
agreement on the
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Restatement Effective Date, but instead if the effective date of the
Puerto Rico Commercial Transactions Act (Act No. 241 enacted on September
19, 1996) does not occur on or prior to July 2, 1997, then the Borrower
shall authorize, execute and deliver a depositary account agreement
satisfactory in form and substance to the Administrative Agent and the
Borrower, among the Borrower, the Collateral Agent and a depository bank
organized under the laws of the Commonwealth of Puerto Rico and having an
office in Puerto Rico, within 60 days of receipt of a written request from
the Administrative Agent that the Borrower do so, provided that no such
request may be made by the Administrative Agent prior to July 2, 1997.
(b) Mortgage Amendments. The amendments to the Mortgages with
respect to Mortgaged Properties located in the U.S. Virgin Islands shall
not be required to be delivered by the Borrower on the Restatement
Effective Date but shall instead be required to be delivered by the
Borrower within 60 days following the Restatement Effective Date.
(c) Intellectual Property. The Borrower shall not be required to
deliver any additional assignments of security interests relating to
intellectual property on the Restatement Effective Date provided that the
Borrower shall deliver such additional assignments of security interests
relating to intellectual property as the Administrative Agent may request
in form and substance satisfactory to the Administrative Agent within 30
days of receipt of a written request from the Administrative Agent to do
so.
(d) Insurance Certificates. The Borrower shall not be required to
deliver all of the evidence of insurance complying with the requirements
of Section 7.09, instead the Borrower will deliver, within 30 days
following the Restatement Effective Date to the Agents, evidence of
insurance in form and substance satisfactory to the Agents, which evidence
of insurance shall comply with the requirements of Section 5.01(k).
All conditions precedent and representations contained in this
Agreement and the other Credit Documents shall be deemed modified to the extent
necessary to effect the foregoing (and to permit the taking of the actions
described above within the time periods required above, rather than as elsewhere
provided in the Credit Documents); provided, that (x) to the extent any
representation and warranty would not
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be true because the foregoing actions were not taken on the Restatement
Effective Date, the respective representation and warranty shall be required to
be true and correct in all material respects at the time the respective action
is taken (or was required to be taken) in accordance with the foregoing
provisions of Section 13.11 and (y) all representations and warranties relating
to the Security Documents shall be required to be true immediately after the
actions required to be taken by Section 13.11 have been taken (or were required
to be taken). The acceptance of the benefits of each Credit Event shall
constitute a representation, warranty and covenant by the Borrower to each of
the Banks that the actions required pursuant to this Section 13.11 will be taken
within the relevant time periods referred to in this Section 13.11 and that, at
such time, all representations and warranties contained in this Agreement and
the other Credit Documents shall then be true and correct without any
modification pursuant to this Section 13.11. Any failure to comply with the
requirements of this Section 13.11 shall constitute a breach of covenant by the
Borrower (including, without limitation, for purposes of Section 9.03 of this
Agreement).
-114-
<PAGE> 121
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
Address for Notices: PUEBLO XTRA INTERNATIONAL,
1300 N.W. 22nd Street INC.
Pompano Beach, FL 33069
Tel: (954) 977-2500 By /s/ William T. Keon,III
Fax: (954) 979-5770 -----------------------------
Attn: Chief Financial Officer Title: President/CEO
Address for Notices: PUEBLO INTERNATIONAL, INC.
1300 N.W. 22nd Street
Pompano Beach, FL 33069 By /s/ William T. Keon,III
Tel: (954) 977-2500 -----------------------------
Fax: (954) 979-5770 Title: President/CEO
Attn: Chief Financial Officer
Address for Notices: XTRA SUPER FOOD CENTERS, INC.
1300 N.W. 22nd Street
Pompano Beach, FL 33069 By /s/ William T. Keon,III
Tel: (954) 977-2500 -----------------------------
Fax: (954) 979-5770 Title: President/CEO
Attn: Chief Financial Officer
THE BANK OF NOVA SCOTIA, as
Administrative Agent and a Bank
By /s/ William J. Brown
-----------------------------
Title: Vice President
NATIONSBANK, N.A. (SOUTH), as
Syndication Agent and a Bank
By /s/ Andrew M. Airheart
-----------------------------
Title: Senior Vice President
-115-
<PAGE> 122
EXHIBIT A-1
[FORM OF REVOLVING NOTE]
$[_____________] New York, New York
No.___________ [April __], 1997
FOR VALUE RECEIVED, PUEBLO INTERNATIONAL, INC., a corporation
organized and existing under the laws of the State of Delaware (the "Borrower"),
hereby promises to pay to the order of [_________________________] (the "Bank"),
in lawful money of the United States of America in immediately available funds,
at the office of The Bank of Nova Scotia (the "Administrative Agent") located at
600 Peachtree Street, NE Suite 2700, Atlanta, Georgia, 30308 on the Maturity
Date (as defined in the Agreement referred to below) the principal sum of
[_______________] or, if less, the then unpaid principal amount of all Revolving
Loans (as defined in the Agreement) made by the Bank pursuant to the Agreement.
The Borrower also promises to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at the rates and at the times provided in Section 1.08 of the Agreement
referred to below.
This Note is one of the Revolving Notes referred to in the
Amendment and Restatement, dated as of April __, 1997, amending and restating
the Credit Agreement, dated as of July 21, 1993, among the Borrower, Pueblo Xtra
International, Inc., Xtra Super Food Centers, Inc., the lending institutions
from time to time party thereto (including the Bank), the Administrative Agent
and NationsBank, N.A. (South) as Syndication Agent (as from time to time in
effect, the "Agreement") and is entitled to the benefits thereof. This Note is
guaranteed pursuant to the Guaranties and is secured by the Security Documents
(each as defined in the Agreement), including one or more Mortgages (as defined
in the Agreement). As provided in the Agreement, this Note is subject to
voluntary prepayment and mandatory repayment prior to the Maturity Date, in
whole or in part, and Revolving Loans may be converted from one Type (as defined
in the Agreement) into another Type to the extent provided in the Agreement.
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due
<PAGE> 123
EXHIBIT A-1
Page 2
and payable in the manner and with the effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
PUEBLO INTERNATIONAL, INC.
By
------------------------------
Name:
Title:
<PAGE> 124
EXHIBIT A-2
[FORM OF SWINGLINE NOTE]
$5,000,000 New York, New York
No. 1 [April __], 1997
FOR VALUE RECEIVED, PUEBLO INTERNATIONAL, INC., a corporation
organized and existing under the laws of the State of Delaware (the "Borrower"),
hereby promises to pay to the order of THE BANK OF NOVA SCOTIA (the "Bank"), in
lawful money of the United States of America in immediately available funds, at
the office of The Bank of Nova Scotia (the "Administrative Agent") located at
600 Peachtree Street, NE, Suite 2700, Atlanta, Georgia 30308, on the Swingline
Termination Date (as defined in the Agreement referred to below) the principal
sum of $5,000,000.00 (FIVE MILLION DOLLARS) or, if less, the then unpaid
principal amount of all Swingline Loans (as defined in the Agreement) made by
the Bank pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at the rates and at the times provided in Section 1.08(a) of the Agreement
referred to below.
This Note is one of the Swingline Notes referred to in the
Amendment and Restatement, dated as of April __, 1997, amending and restating
the Credit Agreement, dated as of July 21, 1993, among the Borrower, Pueblo Xtra
International, Inc., Xtra Super Food Centers, Inc., the lending institutions
from time to time party thereto (including the Bank), the Administrative Agent
and NationsBank, N.A. (South) as Syndication Agent (as from time to time in
effect, the "Agreement") and is entitled to the benefits thereof. This Note is
guaranteed pursuant to the Guaranties and is secured by the Security Documents
(each as defined in the Agreement), including one or more Mortgages (as defined
in the Agreement). As provided in the Agreement, this Note is subject to
voluntary prepayment and mandatory repayment prior to the Swingline Termination
Date, in whole or in part.
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may be declared to be due
<PAGE> 125
EXHIBIT A-2
Page 2
and payable in the manner and with the effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
PUEBLO INTERNATIONAL, INC.
By
---------------------------------
Name:
Title:
<PAGE> 126
EXHIBIT B
[FORM OF LETTER OF CREDIT REQUEST]
No. _______________(1) Dated ______________(2)
To: The Bank of Nova Scotia, as
Administrative Agent for the Banks party to
the Credit Agreement referred to below and
_____________,(3) as Letter of Credit
Issuer, under the Amendment and Restatement,
dated as of April __, 1997, amending and
restating the Credit Agreement, dated as of
July 21, 1993 (as subsequently amended from
time to time, the "Credit Agreement"), among
Pueblo Xtra International, Inc., Pueblo
International, Inc., Xtra Super Food
Centers, Inc., the lending institutions from
time to time party thereto (the "Banks"),
The Bank of Nova Scotia, as Administrative
Agent, and NationsBank, N.A. (South), as
Syndication Agent.
Ladies and Gentlemen:
Pursuant to Section 2.03 of the Credit Agreement, the undersigned
hereby requests that the Letter of Credit Issuer issue a Letter of Credit on
_____________(4) (the "Date of
- ----------
(1) Letter of Credit Request Number.
(2) Date of Letter of Credit Request (prior to 1:00 P.M. (New York time) at
least three Business Days prior to the Date of Issuance or such shorter period
as may be agreed by the relevant Letter of Credit Issuer).
(3) Name of Letter of Credit Issuer.
(4) Date of Issuance.
<PAGE> 127
EXHIBIT B
Page 2
Issuance") in the aggregate stated amount of __________________.(5)
For purposes of this Letter of Credit Request, unless otherwise
defined, all capitalized terms used herein which are defined in the Credit
Agreement shall have the respective meaning provided therein.
The beneficiary of the requested Letter of Credit will be
______________,(6) and such Letter of Credit will be in support of
______________(7) and will have a stated termination date of
_________________.(8)
The undersigned hereby certifies that:
(1) the representations and warranties contained in the Credit
Documents will be true and correct in all material respects on and as of
the Date of Issuance, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as
of such earlier date); and
(2) no Default or Event of Default has occurred and is continuing nor,
after giving effect to the
- ----------
(5) Aggregate initial stated amount of Letter of Credit (not less than $50,000
or such lower amount agreed to by the Letter of Credit Issuer).
(6) Insert name and address of beneficiary.
(7) Insert description of supported obligations and name of agreement, if any,
or, in the case of trade Letters of Credit, the commercial transaction, to which
it relates.
(8) Insert last date upon which drafts may be presented (not later than (x)
one year after the Date of Issuance (unless otherwise agreed by the
Administrative Agent and the Letter of Credit Issuer with respect to Letters of
Credit Issued in respect of the AFICA Bonds) and (y) the third Business Day
preceding the Maturity Date).
<PAGE> 128
EXHIBIT B
Page 3
issuance of the Letter of Credit requested hereby, would such a Default or
Event of Default occur.
Copies of all documentation with respect to the supported transaction
are attached hereto.
PUEBLO INTERNATIONAL, INC.
By
--------------------------------
Name:
Title:
<PAGE> 129
EXHIBIT E-1
[FORM OF PXI PLEDGE AGREEMENT]
AMENDMENT AND RESTATEMENT dated as of April [___], 1997 to
PLEDGE AGREEMENT, dated as of July 28, 1993 (as amended, modified, supplemented
or restated from time to time, the "Agreement"), made by PUEBLO XTRA
INTERNATIONAL, INC. ("Pledgor"), a Delaware corporation, in favor of THE BANK OF
NOVA SCOTIA, as Collateral Agent (the "Pledgee") for the benefit of (x) the
Banks, the Syndication Agent and the Administrative Agent under and as defined
in the Credit Agreement hereinafter referred to (the Banks, the Syndication
Agent and the Administrative Agent are hereinafter called the "Bank Creditors")
and (y) each Bank which enters into one or more interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements or other similar
agreements or arrangements with any Borrower designed to hedge the risks for
such Borrower with respect to interest rates as permitted by Section 8.03(c) of
the Credit Agreement (each such agreement or arrangement with a Bank, an
"Interest Rate Protection Agreement", and any such Bank (even if such Bank
subsequently ceases to be a Bank under the Credit Agreement for any reason) and
such Bank's assigns, if any, collectively, the "Interest Rate Protection
Creditors" and, together with the Bank Creditors, herein called the "Secured
Parties"). Except as otherwise defined herein, terms used herein and defined in
the Credit Agreement shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, the Pledgor, Pueblo International, Inc., a Delaware
corporation, Xtra Super Food Centers, Inc., a Delaware corporation, the Banks
party thereto, The Bank of Nova Scotia, as Administrative Agent, and
NationsBank, N.A. (South), as Syndication Agent, have entered into an Amendment
and Restatement, dated as of April [___], 1997, amending and restating the
Credit Agreement, dated as of July 21, 1993 (as modified, supplemented, amended
or restated from time to time, the "Credit Agreement"), providing for the making
of Loans and the issuance of, and participation in, Letters of Credit as
contemplated therein;
<PAGE> 130
EXHIBIT E-1
Page 2
WHEREAS, the Borrower desires to incur Loans and to have
Letters of Credit issued for its account to the extent provided in the Credit
Agreement;
WHEREAS, the Borrower may enter into Interest Rate Protection
Agreements with the Interest Rate Protection Creditors as permitted by Section
8.03(c) of the Credit Agreement;
WHEREAS, pursuant to Section 13 of the Credit Agreement (the
"Credit Agreement Guaranty"), Pledgor has unconditionally guaranteed the
obligations and liabilities of the Borrower under the Credit Agreement;
WHEREAS, the Borrower is a direct or indirect Wholly-Owned
Subsidiary of Pledgor;
WHEREAS, it is a condition precedent to the above-described
extensions of Credit that the Pledgor shall have executed and delivered to the
Pledgee this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to
satisfy the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to
the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by the
Pledgor for the benefit of the Secured Parties to secure:
(i) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations and
liabilities of the Pledgor to the Bank Creditors under the Credit
Agreement Guaranty and the due performance of and compliance with all
of the terms, conditions and agreements contained in the Credit
Agreement by the Pledgor (all such obligations and liabilities under
this clause (i), except to the extent consisting of obligations under
or with respect to
<PAGE> 131
EXHIBIT E-1
Page 3
Interest Rate Protection Agreements, being herein collectively called
the "Credit Agreement Obligations");
(ii) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations and
liabilities of the Pledgor pursuant to any guaranty by the Pledgor of
any Interest Rate Protection Agreement entered into by the Borrower
(all such obligations and liabilities under this clause (ii) being
herein collectively called the "Interest Rate Protection Obligations");
(iii) any and all sums reasonably advanced by the Pledgee in
order to preserve the Collateral (as hereinafter defined) or preserve
its security interest in the Collateral (as hereinafter defined); and
(iv) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred
to in clauses (i), (ii) and (iii) above, after an Event of Default
(such term, as used in this Agreement, shall mean any Event of Default
under, and as defined in, the Credit Agreement, or any payment default
by the Borrower under any Interest Rate Protection Agreement and shall
in any event include, without limitation, any payment default (after
the expiration of any applicable grace period) on any of the
Obligations (as hereinafter defined)) shall have occurred and be
continuing, the reasonable expenses of re-taking, holding, preparing
for sale or lease, selling or otherwise disposing or realizing on the
Collateral, or of any exercise by the Pledgee of its rights hereunder,
together with reasonable attorneys' fees and court costs;
all such obligations, liabilities, sums and expenses set forth in clauses (i) -
(iv) of this Section 1 being herein collectively called the "Obligations".
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used
herein, (i) the term "Stock" shall mean, collectively, (x) all of the issued
and outstanding shares of stock at any time owned by the Pledgor of any
corporation (other than any corporation organized outside of the United States
(any such corporation, a "Foreign Corporation")) and (y) 65% of
<PAGE> 132
EXHIBIT E-1
Page 4
the issued and outstanding shares of stock at any time owned by the Pledgor of
any Foreign Corporation, (ii) the term "Notes" shall mean all promissory notes
at any time issued to the Pledgor by any of its Subsidiaries (including any
Subordinated Intercompany Note and Subordinated Intercompany Real Estate Note)
and (iii) the term "Securities" shall mean all of the Stock and Notes. The
Pledgor represents and warrants, as to the stock of corporations and promissory
notes owned by the Pledgor, that (a) the Stock consists of the number and type
of shares of the stock of the corporations as described in Annex A hereto, and
that such Stock constitutes that percentage of the issued and outstanding
capital stock of the issuing corporation as is set forth in Annex A hereto; (b)
the Notes consist of the promissory notes described in Annex B hereto; (c) the
Pledgor is the holder of record and sole beneficial owner of such Securities;
and (d) on the date hereof the Pledgor owns no other Securities.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations and for the purposes
set forth in Section 1 hereof, the Pledgor hereby (i) grants to the Pledgee a
security interest in all of the Collateral (as hereinafter defined) owned by the
Pledgor; (ii) pledges and deposits as security with the Pledgee the Securities
owned by the Pledgor on the date hereof, and delivers to the Pledgee
certificates or instruments therefor, duly endorsed in blank in the case of
promissory notes and accompanied by undated stock powers duly executed in blank
by the Pledgor in the case of capital stock, or such other instruments of
transfer as are acceptable to the Pledgee, and (iii) assigns, transfers,
hypothecates, mortgages, charges and sets over to the Pledgee all of the
Pledgor's right, title and interest in and to such Securities (and in and to all
certificates or instruments evidencing such Securities), to be held by the
Pledgee, upon the terms and conditions set forth in this Agreement.
3.2. Subsequently Acquired Securities. If the Pledgor shall
acquire (by purchase, stock dividend or otherwise) any additional Securities at
any time or from time to time after the date hereof, the Pledgor will forthwith
pledge and deposit such Securities (or certificates or instruments representing
such Securities) as security with the Pledgee
<PAGE> 133
EXHIBIT E-1
Page 5
and deliver to the Pledgee certificates therefor or instruments thereof, duly
endorsed in blank in the case of promissory notes and accompanied by undated
stock powers duly executed in blank in the case of capital stock, or such other
instruments of transfer as are acceptable to the Pledgee, and will promptly
thereafter deliver to the Pledgee a certificate executed by any of the Chairman
of the Board, the President, a Vice Chairman, the Vice President-Finance or the
Treasurer of the Pledgor describing such Securities and certifying that the same
have been duly pledged with the Pledgee hereunder; provided that the Pledgor
shall not be required at any time to pledge hereunder more than 65% of the
aggregate amount of issued and outstanding shares of stock at any time owned by
the Pledgor of any Foreign Corporation.
3.3 Uncertificated Securities. Notwithstanding anything to
the contrary contained in Sections 3.1 and 3.2 hereof, if any Securities
(whether or not now owned or hereafter acquired by the Pledgor) are
uncertificated securities, the Pledgor shall promptly notify the Pledgee
thereof, and shall promptly take all actions required to perfect the security
interest of the Pledgee under applicable law (including, in any event, under
Sections 8-313 and 8-321 of the New York Uniform Commercial Code if applicable).
The Pledgor further agrees to take such actions as the Pledgee deems necessary
or desirable to effect the foregoing and to permit the Pledgee to exercise any
of its rights and remedies hereunder, and agrees to provide an opinion of
counsel reasonably satisfactory to the Pledgee with respect to any such pledge
of uncertificated Securities promptly upon request of the Pledgee.
3.4 Definition of Pledged Stock, Pledged Notes, Pledged
Securities and Collateral. All Stock at any time pledged or required to be
pledged hereunder is hereinafter called the "Pledged Stock", all Notes at any
time pledged or required to be pledged hereunder are hereinafter called the
"Pledged Notes," all of the Pledged Stock and Pledged Notes together are
hereinafter called the "Pledged Securities," which together with all proceeds
thereof, including any securities and moneys received and at the time held by
the Pledgee hereunder, is hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The
Pledgee shall have the right to appoint one or more sub-
<PAGE> 134
EXHIBIT E-1
Page 6
agents for the purpose of retaining physical possession of the Pledged
Securities, which may be held (in the discretion of the Pledgee) in the name of
the Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any
nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee.
5. ASSIGNMENT; VOTING, ETC. (a) On the date hereof, the
Pledgor hereby has, and at all times during the term of this Agreement, the
Pledgor shall have, assigned and transferred to Pledgee all of its rights,
title, and interest to and under the Subordinated Intercompany Notes made
payable to it and Subordinated Intercompany Real Estate Notes, including,
without limitation, all rights to receive and direct payments (other than
payments of interest which are permitted under the Credit Agreement to be
applied to the payment of interest on the PXI Senior Notes), all rights and
remedies thereunder (including the right to accelerate same) and under any
Intercompany Mortgages securing same and all rights to grant or make waivers or
modifications to the provisions thereof, all without any notice to or consent
from, the Pledgor, who at no time shall have any rights with respect to same.
(b) Unless and until an Event of Default shall have
occurred and be continuing, the Pledgor shall be entitled to vote any and all
Pledged Stock and to give consents, waivers or ratifications in respect thereof,
provided that no vote shall be cast or any consent, waiver or ratification given
or any action taken which would violate or be inconsistent with any of the terms
of this Agreement, the Credit Agreement, any Interest Rate Protection Agreement
or any other Credit Document, or which would have the effect of impairing the
position or interests of the Pledgee or any Secured Party. All such rights of
the Pledgor to vote and to give consents, waivers and ratifications shall cease
in case an Event of Default shall occur and be continuing, and Section 7 hereof
shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of
Default shall have occurred and be continuing, all cash dividends payable in
respect of the Pledged Stock and all payments in respect of the Pledged Notes
(other than the Subordinated Intercompany Notes and Subordinated Intercompany
Real Estate Notes, payments with respect to which shall be
<PAGE> 135
EXHIBIT E-1
Page 7
governed by paragraph 5(a) of this Agreement) shall be paid to the Pledgor,
provided that all cash dividends payable in respect of the Pledged Stock in
connection with the dissolution, liquidation, recapitalization or
reclassification of the capital of any corporation (other than any such
transaction permitted by the Credit Agreement) which are determined by the
Pledgee to represent in whole or in part an extraordinary, liquidating or other
distribution in return of capital shall be paid, to the extent so determined to
represent an extraordinary, liquidating or other distribution in return of
capital, to the Pledgee and retained by it as part of the Collateral (unless
such cash dividends are applied to the repayment of the Obligations on the basis
set forth in Section 9 hereof). The Pledgee shall also be entitled to receive
directly, and to retain as part of the Collateral:
(a) all other or additional stock or securities or property
(other than cash) paid or distributed by way of dividend or otherwise
in respect of the Pledged Stock;
(b) all other or additional stock or other securities or
property (including cash, unless such cash dividends are applied to the
repayment of the Obligations on the basis set forth in Section 9
hereof) paid or distributed in respect of the Pledged Stock by way of
stock-split, spin-off, split-up, reclassification, combination of
shares or similar rearrangement; and
(c) all other or additional stock or other securities or
property (including cash, unless such cash is applied to the repayment
of the Obligations on the basis set forth in Section 9 hereof) which
may be paid in respect of the Collateral by reason of any
consolidation, merger, exchange of stock, conveyance of assets,
liquidation or similar corporate reorganization (other than any such
transaction permitted by the Credit Agreement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event
of Default shall have occurred and be continuing, the Pledgee shall be entitled
to exercise all of the rights, powers and remedies (whether vested in it by this
Agreement, the Credit Agreement, by any Interest Rate Protection Agreement or by
any other Credit Document or by law) for the
<PAGE> 136
EXHIBIT E-1
Page 8
protection and enforcement of its rights in respect of the Collateral, and the
Pledgee shall be entitled, without limitation, to exercise the following rights,
which the Pledgor hereby agrees to be commercially reasonable:
(a) to receive all amounts payable in respect of the
Collateral otherwise payable under Section 6 hereof to the Pledgor;
(b) to transfer all or any part of the Pledged Securities into
the Pledgee's name or the name of its nominee or nominees;
(c) to accelerate the Pledged Notes, whether or not a default
under the Subordinated Intercompany Real Estate Note shall have
occurred, and take any other action to collect upon the Pledged Notes
(including, without limitation, to make any demand for payment thereon
and realize upon any underlying collateral security for the Pledged
Notes);
(d) to vote all or any part of the Pledged Stock (whether or
not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise
act with respect thereto as though it were the outright owner thereof
(the Pledgor hereby irrevocably constituting and appointing the Pledgee
the proxy and attorney-in-fact of the Pledgor, with full power of
substitution to do so); and
(e) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention to
sell or of the time or place of sale or adjournment thereof or to
redeem or otherwise (all of which are hereby waived by the Pledgor),
for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or
prices and on such terms as the Pledgee in its absolute discretion may
determine, provided that at least 10 days' notice of the time and place
of any such sale shall be given to the Pledgor. The Pledgor hereby
waives and releases to the
<PAGE> 137
EXHIBIT E-1
Page 9
fullest extent permitted by law any right or equity of redemption with
respect to the Collateral, whether before or after sale hereunder, and
all rights, if any, of marshalling the Collateral and any other
security for the Obligations or otherwise. At any such sale, unless
prohibited by applicable law, the Pledgee on behalf of the Secured
Parties may bid for and purchase all or any part of the Collateral so
sold free from any such right or equity of redemption. Neither the
Pledgee nor any Secured Party shall be liable for failure to collect or
realize upon any or all of the Collateral or for any delay in so doing
nor shall any of them be under any obligation to take any action
whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy
of the Pledgee provided for in this Agreement, the Credit Agreement, the
Interest Rate Protection Agreements, or the other Credit Documents or now or
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise by the Pledgee or any Secured Party of
any one or more of the rights, powers or remedies provided for in this
Agreement, the Credit Agreement, the Interest Rate Protection Agreements or the
other Credit Documents or now or hereafter existing at law or in equity or by
statute or otherwise shall not preclude the simultaneous or later exercise by
the Pledgee or any Secured Party of all such other rights, powers or remedies,
and no failure or delay on the part of the Pledgee or any Secured Party to
exercise any such right, power or remedy shall operate as a waiver thereof.
9. APPLICATION OF PROCEEDS. All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral, together with all
other moneys received by the Pledgee hereunder, shall be applied to the payment
of the Obligations in the manner provided by Section 7.4 of the Borrower
Security Agreement.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to
<PAGE> 138
EXHIBIT E-1
Page 10
the purchaser or purchasers of the Collateral so sold, and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Pledgee or such officer or be answerable in any
way for the misapplication or nonapplication thereof.
11. INDEMNITY. The Pledgor agrees (a) to indemnify and hold
harmless the Pledgee and each Secured Party from and against any and all claims,
demands, losses, judgments and liabilities (including liabilities for penalties)
of whatsoever kind or nature, and (b) to reimburse the Pledgee and each Secured
Party for all reasonable costs and expenses, including reasonable attorneys'
fees, growing out of or resulting from this Agreement or the exercise by the
Pledgee or any Secured party of any right or remedy granted to it hereunder or
under the Credit Agreement, the Interest Rate Protection Agreements or under the
other Credit Documents except, with respect to clauses (a) and (b) above, for
those arising from the Pledgee's or any Secured Party's gross negligence or
willful misconduct. In no event shall the Pledgee or any Secured Party be
liable, in the absence of gross negligence or willful misconduct on its part,
for any matter or thing in connection with this Agreement other than to account
for moneys actually received by it in accordance with the terms hereof. If and
to the extent that the obligations of the Pledgor under this Section 11 are
unenforceable for any reason, the Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
12. FURTHER ASSURANCES. The Pledgor agrees that it will join
with the Pledgee in executing and, at the Pledgor's own expense, file and refile
under the Uniform Commercial Code such financing statements, continuation
statements and other documents in such offices as the Pledgee may deem necessary
or appropriate and wherever required or permitted by law in order to perfect and
preserve the Pledgee's security interest in the Collateral and hereby authorizes
the Pledgee to file financing statements and amendments thereto relative to all
or any part of the Collateral without the signature of the Pledgor where
permitted by law, and agrees to do such further acts and things and to execute
and deliver to the Pledgee such additional conveyances, assignments, agreements
and instru-
<PAGE> 139
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Page 11
ments as the Pledgee may reasonably require or deem advisable to carry into
effect the purposes of this Agreement or to further assure and confirm unto the
Pledgee its rights, powers and remedies hereunder.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. By accepting the benefits hereof, each
Secured Party shall be deemed to have agreed to the terms and conditions set
forth in Article X of the Borrower Security Agreement, as the same may be
amended, supplemented or otherwise modified from time to time, which is
incorporated herein by reference in its entirety; provided that all references
therein to "this Agreement" shall be a reference to this Agreement, provided
further that all references therein to the "Assignor" shall be a reference to
the "Pledgor", and provided further that all references therein to the
"Collateral Agent" shall be a reference to the "Pledgee". The Pledgee shall act
hereunder on the terms and conditions set forth in said Article X and the rights
of each Secured Party shall be enforceable solely by the Pledgee in accordance
with said Article X.
14. TRANSFER BY PLEDGOR. The Pledgor will not sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral or any interest therein (except in
accordance with the terms of this Agreement, the Credit Agreement and the other
Credit Documents).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. The
Pledgor represents, warrants and covenants that (a) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Securities
pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation,
security interest, charge, option or other encumbrance whatsoever, except the
liens and security interests created by this Agreement; (b) it has full power,
authority and legal right to pledge all the Securities pledged by it pursuant to
this Agreement; (c) this Agreement has been duly authorized,
<PAGE> 140
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executed and delivered by the Pledgor and constitutes a legal, valid and binding
obligation of the Pledgor enforceable in accordance with its terms, except to
the extent that the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws generally
affecting creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law); (d) no consent of any other party
(including, without limitation, any stockholder or creditor of the Pledgor or
any of its Subsidiaries) and no consent, license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required to be obtained by the
Pledgor in connection with the execution, delivery or performance of this
Agreement, except those which have been obtained or made or as may be required
by laws affecting the offering and sale of securities generally in connection
with the exercise by the Pledgee of its remedies hereunder; (e) the execution,
delivery and performance of this Agreement does not violate any provision of any
applicable law or regulation or of any order, judgment, writ, award or decree of
any court, arbitrator or governmental authority, domestic or foreign, or of the
certificate of incorporation or by-laws of the Pledgor or of any securities
issued by the Pledgor or any of its Subsidiaries, or of any mortgage, indenture,
lease, deed of trust, loan agreement, credit agreement or other material
agreement, instrument or undertaking to which the Pledgor or any of its
Subsidiaries is a party or which purports to be binding upon the Pledgor or any
of its Subsidiaries or upon any of their respective assets and will not result
in the creation or imposition of any lien or encumbrance on any of the assets of
the Pledgor or any of its Subsidiaries except as contemplated by this Agreement;
(f) all the shares of the Stock pledged by the Pledgor hereunder have been duly
and validly issued, are fully paid and non-assessable; (g) each of the Pledged
Notes pledged by the Pledgor hereunder, when executed by the obligor thereof,
will be the legal, valid and binding obligation of such obligor, enforceable in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law);
and (h) the pledge and assignment of the Securities pledged by the Pledgor
pursuant to
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Page 13
this Agreement, together with the delivery of such Securities pursuant to this
Agreement and any relevant filings or recordings (which delivery, filings and
recordings have been made or obtained), creates a valid and perfected first
security interest in such Securities and the proceeds thereof, subject to no
prior lien or encumbrance or to any agreement purporting to grant to any third
party a lien or encumbrance on the property or assets of the Pledgor which would
include such Securities. The Pledgor covenants and agrees that it will defend
the Pledgee's right, title and security interest in and to the Securities
pledged by the Pledgor hereunder and the proceeds thereof against the claims and
demands of all persons whomsoever; and the Pledgor covenants and agrees that it
will have like title to and right to pledge any other property at any time
hereafter pledged to the Pledgee as Collateral hereunder and will likewise
defend the right thereto and security interest therein of the Pledgee and the
Secured Parties.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of
the Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance
or occurrence whatsoever, including, without limitation: (a) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from the Interest Rate Protection Agreements, the Credit Documents or any other
instrument or agreement referred to therein, or any assignment or transfer of
any thereof; (b) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such agreement or instrument or this
Agreement; (c) any furnishing of any additional security to the Pledgee or its
assignee or any acceptance thereof or any release of any security by the Pledgee
or its assignee; (d) any limitation on any party's liability or obligations
under any such instrument or agreement or any invalidity or unenforceability, in
whole or in part, of any such instrument or agreement or any term thereof; or
(e) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to the Pledgor or
any Subsidiary of the Pledgor, or any action taken with respect to this
Agreement by any trustee or receiver, or by any court, in any such proceeding,
whether or not the
<PAGE> 142
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Page 14
Pledgor shall have notice or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and the Pledgor shall have received from the Pledgee
a written request or requests that the Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock of the Pledgor,
the Pledgor as soon as practicable and at its expense will use its best efforts
to cause such registration to be effected (and be kept effective) and will use
its best efforts to cause such qualification and compliance to be effected (and
be kept effective) as may be so requested and as would permit or facilitate the
sale and distribution of such Pledged Stock, including, without limitation,
registration under the Securities Act of 1933 as then in effect (or any similar
statute then in effect), appropriate qualifications under applicable blue sky or
other state securities laws and appropriate compliance with any other government
requirements, provided that the Pledgee shall furnish to the Pledgor such
information regarding the Pledgee as the Pledgor may request in writing and as
shall be required in connection with any such registration, qualification or
compliance. The Pledgor will cause the Pledgee to be kept reasonably advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee and all others participating in the distribution of such Pledged Stock
against all claims, losses, damages and liabilities caused by any untrue
statement (or alleged untrue statement) of a material fact contained therein (or
in any related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related registration
statement, notification or the like) a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same may have been caused by an untrue statement or omission
based upon information furnished in writing to the Pledgor by the Pledgee
expressly for use therein.
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(b) If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Securities pursuant to
Section 7 hereof, such Pledged Securities or the part thereof to be sold shall
not, for any reason whatsoever, be effectively registered under the Securities
Act of 1933, as then in effect, the Pledgee may, in its sole and absolute
discretion, sell such Pledged Securities or part thereof by private sale in such
manner and under such circumstances as Pledgee may deem necessary or advisable
in order that such sale may legally be effected without such registration,
provided that at least 10 days' notice of the time and place of any such sale
shall be given to the Pledgor. Without limiting the generality of the foregoing,
in any such event the Pledgee, in its sole and absolute discretion (i) may
proceed to make such private sale notwithstanding that a registration statement
for the purpose of registering such Pledged Securities or part thereof shall
have been filed under such Securities Act, (ii) may approach and negotiate with
a single possible purchaser to effect such sale, and (iii) may restrict such
sale to a purchaser who will represent and agree that such purchaser is
purchasing for its own account, for investment, and not with a view to the
distribution or sale of such Pledged Securities or part thereof. In the event of
any such sale, the Pledgee shall incur no responsibility or liability for
selling all or any part of the Pledged Securities at a price which the Pledgee,
in its sole and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until after registration as
aforesaid.
18. TERMINATION. (a) After the Termination Date (as defined
below), this Agreement shall terminate and the Pledgee, at the request and
expense of the Pledgor, will execute and deliver to the Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the Pledgor (without
recourse and without any representation or warranty) such of the Collateral of
the Pledgor as may be in the possession of the Pledgee and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the Pledgee hereunder.
As used in this Agreement, "Termination Date" shall mean the date upon which the
Total Revolving
<PAGE> 144
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Commitment and all Interest Rate Protection Agreements are terminated, when no
Note or Letter of Credit is outstanding and when all Obligations have been paid
in full.
(b) The Pledgee shall, at the request and expense of the
Pledgor, release (without recourse and without any representation or warranty)
any or all of the Collateral of the Pledgor and deliver an appropriate
instrument acknowledging such release, provided that either (x) such Collateral
is sold pursuant to a sale permitted under Section 8.01 of the Credit Agreement
(it being understood and agreed that the sale of any Person that owns, directly
or indirectly, such Collateral shall be deemed to be a sale of such Collateral
for purposes of this clause (x)) or (y) such release has been approved in
writing by the Required Banks (or all Banks if required by Section 12.11 of the
Credit Agreement).
(c) At any time that the Pledgor desires that Collateral of
the Pledgor be released as provided in the foregoing Section 18(a) or (b), it
shall deliver to the Pledgee a certificate signed by its chief financial officer
stating that the release of the respective Collateral is permitted pursuant to
Section 18(a) or (b). The Pledgee shall have no liability whatsoever to any
Secured Party as the result of any release of Collateral by it as permitted by
this Section 18.
19. NOTICES, ETC. All notices and other communications
hereunder shall be in writing and shall be delivered or mailed by first class
mail, postage prepaid, addressed:
(a) if to the Pledgor, at:
Pueblo Xtra International, Inc.
1300 N.W. 22nd Street
Pompano Beach, FL 33069
Tel: (954) 977-2500
Fax: (954) 979-5770
Attention: Chief Financial Officer;
<PAGE> 145
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Page 17
(b) if to the Pledgee, at:
The Bank of Nova Scotia
Suite 2700
600 Peachtree Street, NE
Atlanta, GA 30308
Tel: (404) 877-1505
Fax: (404) 888-8998
Attention: Frank F. Sandler;
(c) if to any Bank (other than the Pledgee), at such address
as such Bank shall have specified in Schedule I to the Credit
Agreement; and
(d) if to any Interest Rate Protection Creditor, at such
address as such Interest Rate Protection Creditor shall have specified
in writing to the Pledgor and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by the Pledgor and the Pledgee (with
the consent of the Required Banks or, to the extent required by Section 12.11 of
the Credit Agreement, with the consent of each of the Banks); provided that no
such change, waiver, modification or variance shall be made to Section 9 hereof
or this Section 20 without the consent of each Secured Party adversely affected
thereby; and provided, further, that any change, waiver, modification or
variance affecting the rights and benefits of a single Class of Secured Parties
(and not all Secured Parties in a like or similar manner) shall require the
written consent of the Required Class Banks of such Class. For the purpose of
this Agreement, the term "Class" shall mean each class of Secured Parties, i.e.,
whether (x) the Bank Creditors as holders of the Credit Agreement Obligations
(except for the Interest Rate Protection Obligations) or (y) the Interest Rate
Protection Creditors as holders of the Interest Rate Protection Obligations. For
the purpose of this Agreement, the term "Required Class Banks" of any Class
shall mean each
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Page 18
of (x) with respect to the Credit Agreement Obligations, the Required Banks and
(y) with respect to the Interest Rate Protection Obligations, the holders of 51%
of all obligations outstanding from time to time under the Interest Rate
Protection Agreements.
21. CONSENT TO JURISDICTION; SERVICE OF PROCESS. Any legal
action or proceeding with respect to this Agreement may be brought in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and, by execution and delivery of this Agreement, the
Pledgor hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts and hereby irrevocably
waives any right it may have to object to the laying of venue of any such action
or proceeding in the aforesaid courts and hereby further irrevocably waives and
agrees not to plead or claim that any such action or proceeding has been brought
in an inconvenient forum. The Pledgor hereby irrevocably designates, appoints
and empowers CT Corporation System with offices on the date hereof at 1633
Broadway, New York, New York 10019 as its designee, appointee and agent to
receive, accept and acknowledge for and on its behalf, and in respect of its
property, service of any and all legal process, summons, notices and documents
which may be served in any such action or proceeding. If for any reason such
designee, appointee and agent shall cease to be available to act as such, the
Pledgor agrees to designate a new designee, appointee and agent in New York City
on the terms and for the purposes of this provision satisfactory to the Pledgee
for the Secured Parties under this Agreement. The Pledgor further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Pledgor at its address set forth
opposite its signature below. Nothing herein shall affect the right of any of
the Secured Parties to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Pledgor in any other
jurisdiction.
22. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL
BE CONSTRUED AND
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ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
The headings in this Agreement are for purposes of reference only and shall not
limit or define the meaning hereof. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which shall
constitute one instrument. In the event that any provision of this Agreement
shall prove to be invalid or unenforceable, such provision shall be deemed to be
severable from the other provisions of this Agreement which shall remain binding
on all parties hereto.
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Page 20
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused
this Agreement to be executed by their duly elected officers duly authorized as
of the date first above written.
PUEBLO XTRA INTERNATIONAL, INC.,
as Pledgor
By________________________________
Title:
THE BANK OF NOVA SCOTIA,
as Pledgee
By________________________________
Title:
<PAGE> 149
ANNEX A
to
EXHIBIT E-1
LIST OF SECURITIES
<TABLE>
<CAPTION>
Percentage of
Name of Issuing Type of Number Outstanding Shares
Corporation Shares of Shares of Capital Stock
- --------------------- ------- --------- ------------------
<S> <C> <C> <C>
Pueblo International, common 100 100%
Inc.
</TABLE>
<PAGE> 150
ANNEX B
to
EXHIBIT E-1
LIST OF NOTES
<TABLE>
<CAPTION>
Amount Maturity Date
Lender Obligor (if any) (if any)
- ------ ------- -------- -------------
<S> <C> <C> <C>
PXI Pueblo International, $125,000,000
Inc.
PXI Xtra Super Food $ 25,000,000
Centers, Inc.
PXI Xtra Merger $ 25,000,000
Corporation
</TABLE>
<PAGE> 151
EXHIBIT E-2
[FORM OF BORROWER PLEDGE AGREEMENT]
AMENDMENT AND RESTATEMENT, dated as of April __, 1997 to
PLEDGE AGREEMENT, dated as of July 28, 1993 (as amended, modified, supplemented
or restated from time to time, the "Agreement"), made by PUEBLO INTERNATIONAL,
INC., a Delaware corporation (the "Pledgor") in favor of THE BANK OF NOVA
SCOTIA, as Collateral Agent (the "Pledgee") for the benefit of (x) the Banks,
the Syndication Agent and the Administrative Agent under and as defined in the
Credit Agreement hereinafter referred to (the Banks, the Syndication Agent and
the Administrative Agent are hereinafter called the "Bank Creditors") and (y)
each Bank which enters into one or more interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements or other similar agreements
or arrangements with any Pledgor designed to hedge the risks for such Pledgor
with respect to interest rates as permitted by Section 8.03(c) of the Credit
Agreement (each such agreement or arrangement with a Bank, an "Interest Rate
Protection Agreement", and any such Bank (even if such Bank subsequently ceases
to be a Bank under the Credit Agreement for any reason) and such Bank's assigns,
if any, collectively, the "Interest Rate Protection Creditors" and, together
with the Bank Creditors, herein called the "Secured Parties"). Except as
otherwise defined herein, terms used herein and defined in the Credit Agreement
shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, the Pledgor, Pueblo Xtra International, Inc., a
Delaware corporation ("PXI"), Xtra Super Food Centers, Inc., the Banks party
thereto, The Bank of Nova Scotia, as Administrative Agent, and NationsBank, N.A.
(South), as Syndication Agent, have entered into an Amendment and Restatement,
dated as of April __, 1997, amending and restating the Credit Agreement, dated
as of July 21, 1993 (as modified, supplemented, amended or restated from time to
time, the "Credit Agreement"), providing for the making of Loans and the
issuance of, and participation in, Letters of Credit as contemplated therein;
<PAGE> 152
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Page 2
WHEREAS, the Pledgor desires to incur Loans and to have
Letters of Credit issued for its account to the extent provided in the Credit
Agreement;
WHEREAS, the Pledgor may enter into Interest Rate Protection
Agreements with the Interest Rate Protection Creditors as permitted by Section
8.03(c) of the Credit Agreement;
WHEREAS, it is a condition precedent to the making of Loans to
the Pledgor and the issuance of Letters of Credit for the account of the Pledgor
under the Credit Agreement that the Pledgor shall have executed and delivered to
the Pledgee this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to
satisfy the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to
the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by the
Pledgor for the benefit of the Secured Parties to secure:
(i) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of (x) the principal of
and interest on the Notes issued by, and the Loans made to, the Pledgor
under the Credit Agreement and all reimbursement obligations and Unpaid
Drawings with respect to the Letters of Credit issued for the account
of the Pledgor under the Credit Agreement, and (y) all other
obligations and indebtedness (including, without limitation,
indemnities, Fees and interest thereon) of the Pledgor, now existing or
hereafter incurred under, arising out of or in connection with the
Credit Agreement and the other Credit Documents and the due performance
of and compliance with the terms of the Credit Documents by the Pledgor
(all such principal, interest, obligations, and liabilities
<PAGE> 153
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Page 3
under this clause (i), except to the extent consisting of obligations
under or with respect to Interest Rate Protection Agreements, being
herein collectively called the "Credit Agreement Obligations");
(ii) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations and
liabilities owing by the Pledgor under any Interest Rate Protection
Agreement or with respect thereto, whether such Interest Rate
Protection Agreement is now in existence or hereafter arising, and the
due performance and compliance by the Pledgor with all of the terms,
conditions and agreements contained therein (all such obligations and
liabilities under this clause (ii) being herein collectively called the
"Interest Rate Protection Obligations");
(iii) any and all sums reasonably advanced by the Pledgee in
order to preserve the Collateral (as hereinafter defined) or preserve
its security interest in the Collateral (as hereinafter defined); and
(iv) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred
to in clauses (i), (ii) and (iii) above, after an Event of Default
(such term, as used in this Agreement, shall mean any Event of Default
under, and as defined in, the Credit Agreement, or any payment default
by the Pledgor under any Interest Rate Protection Agreement and shall
in any event include, without limitation, any payment default(after the
expiration of any applicable grace period) on any of the Obligations
(as hereinafter defined)) shall have occurred and be continuing, the
reasonable expenses of re-taking, holding, preparing for sale or lease,
selling or otherwise disposing or realizing on the Collateral, or of
any exercise by the Pledgee of its rights hereunder, together with
reasonable attorneys' fees and court costs;
all such obligations, liabilities, sums and expenses set forth in clauses (i) -
(iv) of this Section 1 being herein collectively called the "Obligations".
<PAGE> 154
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Page 4
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used
herein, (i) the term "Stock" shall mean, collectively, (x) all of the issued and
outstanding shares of stock at any time owned by any Pledgor of any corporation
(other than any corporation organized outside of the United States (any such
corporation, a "Foreign Corporation")) and (y) 65% of the issued and outstanding
shares of stock at any time owned by the Pledgor of any Foreign Corporation,
(ii) the term "Notes" shall mean all promissory notes at any time issued to the
Pledgor by any of its Subsidiaries and (iii) the term "Securities" shall mean
all of the Stock and Notes. The Pledgor represents and warrants, as to the stock
of corporations and promissory notes owned by the Pledgor, that (a) the Stock
consists of the number and type of shares of the stock of the corporations as
described in Annex A hereto, and that such Stock constitutes that percentage of
the issued and outstanding capital stock of the issuing corporation as is set
forth in Annex A hereto; (b) the Notes consist of the promissory notes described
in Annex B hereto; (c) the Pledgor is the holder of record and sole beneficial
owner of such Securities; and (d) on the date hereof, the Pledgor owns no other
Securities.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations and for the purposes
set forth in Section 1, the Pledgor hereby (i) grants to the Pledgee a security
interest in all of the Collateral (as hereinafter defined) owned by the Pledgor;
(ii) pledges and deposits as security with the Pledgee the Securities owned by
the Pledgor on the date hereof, and delivers to the Pledgee certificates or
instruments therefor, duly endorsed in blank in the case of promissory notes and
accompanied by undated stock powers duly executed in blank by the Pledgor in the
case of capital stock, or such other instruments of transfer as are acceptable
to the Pledgee, and (iii) assigns, transfers, hypothecates, mortgages, charges
and sets over to the Pledgee all of the Pledgor's right, title and interest in
and to such Securities (and in and to all certificates or instruments evidencing
such Securities), to be held by the Pledgee, upon the terms and conditions set
forth in this Agreement.
3.2. Subsequently Acquired Securities. If the Pledgor shall
acquire (by purchase, stock dividend or other-
<PAGE> 155
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Page 5
wise) any additional Securities at any time or from time to time after the date
hereof, the Pledgor will forthwith pledge and deposit such Securities (or
certificates or instruments representing such Securities) as security with the
Pledgee and deliver to the Pledgee certificates therefor or instruments thereof,
duly endorsed in blank in the case of promissory notes and accompanied by
undated stock powers duly executed in blank in the case of capital stock, or
such other instruments of transfer as are acceptable to the Pledgee, and will
promptly thereafter deliver to the Pledgee a certificate executed by any of the
Chairman of the Board, the President, a Vice Chairman, the Vice
President-Finance or the Treasurer of the Pledgor describing such Securities and
certifying that the same have been duly pledged with the Pledgee hereunder;
provided that the Pledgor shall not be required at any time to pledge hereunder
more than 65% of the aggregate amount of issued and outstanding shares of stock
at any time owned by the Pledgor of any Foreign Corporation.
3.3. Uncertificated Securities. Notwithstanding anything to
the contrary contained in Sections 3.1 and 3.2 hereof, if any Securities
(whether or not now owned or hereafter acquired by the Pledgor) are
uncertificated securities, the Pledgor shall promptly notify the Pledgee
thereof, and shall promptly take all actions required to perfect the security
interest of the Pledgee under applicable law (including, in any event, under
Sections 8-313 and 8-321 of the New York Uniform Commercial Code if applicable).
The Pledgor further agrees to take such actions as the Pledgee deems necessary
or desirable to effect the foregoing and to permit the Pledgee to exercise any
of its rights and remedies hereunder, and agrees to provide an opinion of
counsel reasonably satisfactory to the Pledgee with respect to any such pledge
of uncertificated Securities promptly upon request of the Pledgee.
3.4. Definition of Pledged Stock, Pledged Notes, Pledged
Securities and Collateral. All Stock at any time pledged or required to be
pledged hereunder is hereinafter called the "Pledged Stock", all Notes at any
time pledged or required to be pledged hereunder are hereinafter called the
"Pledged Notes", all of the Pledged Stock and Pledged Notes together are
hereinafter called the "Pledged Securities", which together with all proceeds
thereof, including any
<PAGE> 156
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Page 6
securities and moneys received and at the time held by the Pledgee hereunder, is
hereinafter called the "Collateral".
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The
Pledgee shall have the right to appoint one or more subagents for the purpose of
retaining physical possession of the Pledged Securities, which may be held (in
the discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned
in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or
a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and
until an Event of Default shall have occurred and be continuing, the Pledgor
shall be entitled to vote any and all Pledged Stock and to give consents,
waivers or ratifications in respect thereof, provided that no vote shall be cast
or any consent, waiver or ratification given or any action taken which would
violate or be inconsistent with any of the terms of this Agreement, the Credit
Agreement, any Interest Rate Protection Agreement or any other Credit Document,
or which would have the effect of impairing the position or interests of the
Pledgee or any Secured Party. All such rights of the Pledgor to vote and to give
consents, waivers and ratifications shall cease in case an Event of Default
shall occur and be continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of
Default shall have occurred and be continuing, all cash dividends payable in
respect of the Pledged Stock and all payments in respect of the Pledged Notes
shall be paid to the Pledgor, provided that all cash dividends payable in
respect of the Pledged Stock in connection with the dissolution, liquidation,
recapitalization or reclassification of the capital of any corporation (other
than any such trans- action permitted by the Credit Agreement) which are deter-
mined by the Pledgee to represent in whole or in part an extraordinary,
liquidating or other distribution in return of capital shall be paid, to the
extent so determined to re- present an extraordinary, liquidating or other
distribution in return of capital, to the Pledgee and retained by it as part of
the Collateral (unless such cash dividends are applied to the repayment of the
Obligations on the basis set forth in Section 9 hereof). The Pledgee shall also
be enti-
<PAGE> 157
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Page 7
tled to receive directly, and to retain as part of the Collateral:
(a) all other or additional stock or securities or property
(other than cash) paid or distributed by way of dividend or otherwise
in respect of the Pledged Stock;
(b) all other or additional stock or other securities or
property (including cash, unless such cash dividends are applied to the
repayment of the Obligations on the basis set forth in Section 9
hereof) paid or distributed in respect of the Pledged Stock by way of
stock-split, spin-off, split-up, reclassification, combination of
shares or similar rearrangement; and
(c) all other or additional stock or other securities or
property (including cash, unless such cash dividends are applied to the
repayment of the Obligations on the basis set forth in Section 9
hereof) which may be paid in respect of the Collateral by reason of any
consolidation, merger, exchange of stock, conveyance of assets,
liquidation or similar corporate reorganization (other than any such
transaction permitted by the Credit Agreement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of
Default shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement, the Credit Agreement, by any Interest Rate Protection Agreement or by
any other Credit Document or by law) for the protection and enforcement of its
rights in respect of the Collateral, and the Pledgee shall be entitled, without
limitation, to exercise the following rights, which each Pledgor hereby agrees
to be commercially reasonable:
(a) to receive all amounts payable in respect of the
Collateral otherwise payable under Section 6 hereof to the Pledgor;
(b) to transfer all or any part of the Pledged Securities into
the Pledgee's name or the name of its nominee or nominees;
<PAGE> 158
EXHIBIT E-2
Page 8
(c) to accelerate any Pledged Note which may be accelerated in
accordance with its terms, and take any other action to collect upon
any Pledged Note (including, without limitation, to make any demand for
payment thereon);
(d) to vote all or any part of the Pledged Stock (whether or
not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise
act with respect thereto as though it were the outright owner thereof
(the Pledgor hereby irrevocably constituting and appointing the Pledgee
the proxy and attorney-in-fact of the Pledgor, with full power of
substitution to do so); and
(e) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention to
sell or of the time or place of sale or adjournment thereof or to
redeem or otherwise (all of which are hereby waived by the Pledgor),
for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or
prices and on such terms as the Pledgee in its absolute discretion may
determine, provided that at least 10 days' notice of the time and place
of any such sale shall be given to the Pledgor. The Pledgor hereby
waives and releases to the fullest extent permitted by law any right or
equity of redemption with respect to the Collateral, whether before or
after sale hereunder, and all rights, if any, of marshalling the
Collateral and any other security for the Obligations or otherwise. At
any such sale, unless prohibited by applicable law, the Pledgee on
behalf of the Secured Parties may bid for and purchase all or any part
of the Collateral so sold free from any such right or equity of
redemption. Neither the Pledgee nor any Secured Party shall be liable
for failure to collect or realize upon any or all of the Collateral or
for any delay in so doing nor shall any of them be under any obligation
to take any action whatsoever with regard thereto.
<PAGE> 159
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Page 9
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy
of the Pledgee provided for in this Agreement, the Credit Agreement, the
Interest Rate Protection Agreements, or the other Credit Documents or now or
hereafter existing at law or in equity or by statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise by the Pledgee or any Secured Party of
any one or more of the rights, powers or remedies provided for in this
Agreement, the Credit Agreement, the Interest Rate Protection Agreements or the
other Credit Documents or now or hereafter existing at law or in equity or by
statute or otherwise shall not preclude the simultaneous or later exercise by
the Pledgee or any Secured Party of all such other rights, powers or remedies,
and no failure or delay on the part of the Pledgee or any Secured Party to
exercise any such right, power or remedy shall operate as a waiver thereof.
9. APPLICATION OF PROCEEDS. All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral, together with all
other moneys received by the Pledgee hereunder, shall be applied to the payment
of the Obligations in the manner provided by Section 7.4 of the Borrower
Security Agreement.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. The Pledgor agrees (a) to indemnify and hold
harmless the Pledgee and each Secured Party from and against any and all claims,
demands, losses, judgments and liabilities (including liabilities for penalties)
of whatsoever kind or nature, and (b) to reimburse the Pledgee and each Secured
Party for all reasonable costs and expenses, including reasonable attorneys'
fees, growing out of or resulting from this Agreement or the exercise by the
Pledgee or any Secured Party of any right or remedy
<PAGE> 160
EXHIBIT E-2
Page 10
granted to it hereunder or under the Credit Agreement, the Interest Rate
Protection Agreements or under the other Credit Documents except, with respect
to clauses (a) and (b) above, for those arising from the Pledgee's or any
Secured Party's gross negligence or willful misconduct. In no event shall the
Pledgee or any Secured Party be liable, in the absence of gross negligence or
willful misconduct on its part, for any matter or thing in connection with this
Agreement other than to account for moneys actually received by it in accordance
with the terms hereof. If and to the extent that the obligations of the Pledgor
under this Section 11 are unenforceable for any reason, the Pledgor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
12. FURTHER ASSURANCES. The Pledgor agrees that it will join
with the Pledgee in executing and, at the Pledgor's own expense, file and refile
under the Uniform Commercial Code such financing statements, continuation
statements and other documents in such offices as the Pledgee may deem necessary
or appropriate and wherever required or permitted by law in order to perfect and
preserve the Pledgee's security interest in the Collateral and hereby authorizes
the Pledgee to file financing statements and amendments thereto relative to all
or any part of the Collateral without the signature of such Pledgor where
permitted by law, and agrees to do such further acts and things and to execute
and deliver to the Pledgee such additional conveyances, assignments, agreements
and instruments as the Pledgee may reasonably require or deem advisable to carry
into effect the purposes of this Agreement or to further assure and confirm unto
the Pledgee its rights, powers and remedies hereunder.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. By accepting the benefits hereof, each
Secured Party shall be deemed to have agreed to the terms and conditions set
forth in Article X of the Borrower Security
<PAGE> 161
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Page 11
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time, which is incorporated herein by reference in its entirety;
provided that all references therein to "this Agreement" shall be a reference to
this Agreement, provided further that all references therein to the "Assignor"
shall be a reference to the "Pledgor", and provided further that all references
therein to the "Collateral Agent" shall be a reference to the "Pledgee". The
Pledgee shall act hereunder on the terms and conditions set forth in said
Article X and the rights of each Secured Party shall be enforceable solely by
the Pledgee in accordance with said Article X.
14. TRANSFER BY PLEDGOR. The Pledgor will sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except in accordance
with the terms of this Agreement, the Credit Agreement and the other Credit
Documents).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. The
Pledgor represents, warrants and covenants that (a) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Securities
pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation,
security interest, charge, option or other encumbrance whatsoever, except the
liens and security interests created by this Agreement; (b) it has full power,
authority and legal right to pledge all the Securities pledged by it pursuant to
this Agreement; (c) this Agreement has been duly authorized, executed and
delivered by the Pledgor and constitutes a legal, valid and binding obligation
of the Pledgor enforceable in accordance with its terms, except to the extent
that the enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law); (d) no consent of any other party (including,
without limitation, any stockholder or creditor of the Pledgor or any of its
Subsidiaries) and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required to be obtained by the Pledgor in
connection with the execution, delivery or performance of this Agreement, except
those which have been
<PAGE> 162
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Page 12
obtained or made or as may be required by laws affecting the offering and sale
of securities generally in connection with the exercise by the Pledgee of its
remedies hereunder; (e) the execution, delivery and performance of this
Agreement does not violate any provision of any applicable law or regulation or
of any order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, or of the certificate of
incorporation or by-laws of the Pledgor or of any securities issued by the
Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, deed
of trust, loan agreement, credit agreement or other material agreement,
instrument or undertaking to which the Pledgor or any of its Subsidiaries is a
party or which purports to be binding upon the Pledgor or any of its
Subsidiaries or upon any of their respective assets and will not result in the
creation or imposition of any lien or encumbrance on any of the assets of the
Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (f)
all the shares of the Stock pledged by the Pledgor hereunder have been duly and
validly issued, are fully paid and non-assessable; (g) each of the Pledged Notes
pledged by the Pledgor hereunder, when executed by the obligor thereof, will be
the legal, valid and binding obligation of such obligor, enforceable in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law);
and (h) the pledge and assignment of the Securities pledged by the Pledgor
pursuant to this Agreement, together with the delivery of such Securities
pursuant to this Agreement and any relevant filings or recordings (which
delivery, filings and recordings have been made or obtained), creates a valid
and perfected first security interest in such Securities and the proceeds
thereof, subject to no prior lien or encumbrance or to any agreement purporting
to grant to any third party a lien or encumbrance on the property or assets of
the Pledgor which would include such Securities. The Pledgor covenants and
agrees that it will defend the Pledgee's right, title and security interest in
and to the Securities pledged by the Pledgor hereunder and the proceeds thereof
against the claims and demands of all persons whomsoever; and the Pledgor
covenants and agrees that it will have like title to and right to pledge any
other property at any time hereafter pledged to the Pledgee as
<PAGE> 163
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Collateral hereunder and will likewise defend the right thereto and security
interest therein of the Pledgee and the Secured Parties.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of
the Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance
or occurrence whatsoever, including, without limitation: (a) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from the Interest Rate Protection Agreements, the Credit Documents or any other
instrument or agreement referred to therein, or any assignment or transfer of
any thereof; (b) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such agreement or instrument or this
Agreement; (c) any furnishing of any additional security to the Pledgee or its
assignee or any acceptance thereof or any release of any security by the Pledgee
or its assignee; (d) any limitation on any party's liability or obligations
under any such instrument or agreement or any invalidity or unenforceability, in
whole or in part, of any such instrument or agreement or any term thereof; or
(e) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to the Pledgor or
any Subsidiary of the Pledgor, or any action taken with respect to this
Agreement by any trustee or receiver, or by any court, in any such proceeding,
whether or not the Pledgor shall have notice or knowledge of any of the
foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and the Pledgor shall have received from the Pledgee
a written request or requests that the Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock of the Pledgor,
the Pledgor as soon as practicable and at its expense will use its best efforts
to cause such registration to be effected (and be kept effective) and will use
its best efforts to cause such qualification and compliance to be effected (and
be kept effective) as may be so requested and as would permit or facilitate the
sale and distribution of such Pledged Stock, including, without
<PAGE> 164
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Page 14
limitation, registration under the Securities Act of 1933 as then in effect (or
any similar statute then in effect), appropriate qualifications under applicable
blue sky or other state securities laws and appropriate compliance with any
other government requirements, provided that the Pledgee shall furnish to the
Pledgor such information regarding the Pledgee as the Pledgor may request in
writing and as shall be required in connection with any such registration,
qualification or compliance. The Pledgor will cause the Pledgee to be kept
reasonably advised in writing as to the progress of each such registration,
qualification or compliance and as to the completion thereof, will furnish to
the Pledgee such number of prospectuses, offering circulars or other documents
incident thereto as the Pledgee from time to time may reasonably request, and
will indemnify the Pledgee and all others participating in the distribution of
such Pledged Stock against all claims, losses, damages and liabilities caused by
any untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the like) or
by any omission (or alleged omission) to state therein (or in any related
registration statement, notification or the like) a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same may have been caused by an untrue statement or
omission based upon information furnished in writing to the Pledgor by the
Pledgee expressly for use therein.
(b) If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Securities pursuant to
Section 7 hereof, such Pledged Securities or the part thereof to be sold shall
not, for any reason whatsoever, be effectively registered under the Securities
Act of 1933, as then in effect, the Pledgee may, in its sole and absolute
discretion, sell such Pledged Securities or part thereof by private sale in such
manner and under such circumstances as Pledgee may deem necessary or advisable
in order that such sale may legally be effected without such registration,
provided that at least 10 days' notice of the time and place of any such sale
shall be given to the Pledgor. Without limiting the generality of the foregoing,
in any such event the Pledgee, in its sole and absolute discretion (i) may
proceed to make such private sale notwithstanding that a registration statement
for the purpose of registering such Pledged Securities or part thereof shall
<PAGE> 165
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Page 15
have been filed under such Securities Act, (ii) may approach and negotiate with
a single possible purchaser to effect such sale, and (iii) may restrict such
sale to a purchaser who will represent and agree that such purchaser is
purchasing for its own account, for investment, and not with a view to the
distribution or sale of such Pledged Securities or part thereof. In the event of
any such sale, the Pledgee shall incur no responsibility or liability for
selling all or any part of the Pledged Securities at a price which the Pledgee,
in its sole and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might be realized if the sale were deferred until after registration as
aforesaid.
18. TERMINATION. (a) After the Termination Date (as defined
below), this Agreement shall terminate and the Pledgee, at the request and
expense of the Pledgor, will execute and deliver to the Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the Pledgor (without
recourse and without any representation or warranty) such of the Collateral of
the Pledgor as may be in the possession of the Pledgee and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by the Pledgee hereunder.
As used in this Agreement, "Termination Date" shall mean the date upon which the
Total Revolving Commitment and all Interest Rate Protection Agreements are
terminated, when no Note or Letter of Credit is outstanding and when all
Obligations have been paid in full.
(b) The Pledgee shall, at the request and expense of the
Pledgor, release (without recourse and without any representation or warranty)
any or all of the Collateral of the Pledgor and deliver an appropriate
instrument acknowledging such release, provided that either (x) such Collateral
is sold pursuant to a sale permitted under Section 8.01 of the Credit Agreement
(it being understood and agreed that the sale of any Person that owns, directly
or indirectly, such Collateral shall be deemed to be a sale of such Collateral
for purposes of this clause (x)) or (y) such release has been approved in
writing by the Required Banks (or all Banks if required by Section 12.11 of the
Credit Agreement).
<PAGE> 166
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Page 16
(c) At any time that the Pledgor desires that Collateral of
the Pledgor be released as provided in the foregoing Section 18(a) or (b), it
shall deliver to the Pledgee a certificate signed by its chief financial officer
stating that the release of the respective Collateral is permitted pursuant to
Section 18(a) or (b). The Pledgee shall have no liability whatsoever to any
Secured Party as the result of any release of Collateral by it as permitted by
this Section 18.
19. NOTICES, ETC. All notices and other communications
hereunder shall be in writing and shall be delivered or mailed by first class
mail, postage prepaid, addressed:
(a) if to the Pledgor at:
Pueblo International, Inc.
1300 N.W. 22nd Street
Pompano Beach, FL 33069
Tel: (954) 977-2500
Fax: (954) 979-5770
Attention: Chief Financial Officer;
(b) if to the Pledgee, at:
The Bank of Nova Scotia
Suite 2700
600 Peachtree Street, NE
Atlanta, GA 30308
Tel: (404) 877-1505
Fax: (404) 888-8998
Attention: Frank F. Sandler;
(c) if to any Bank (other than the Pledgee), at such address
as such Bank shall have specified in Schedule I to the Credit
Agreement; and
(d) if to any Interest Rate Protection Creditor, at such
address as such Interest Rate Protection Creditor shall have specified
in writing to the Pledgor and the Pledgee;
<PAGE> 167
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Page 17
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by the Pledgor and the Pledgee (with
the consent of the Required Banks or, to the extent required by Section 12.11 of
the Credit Agreement, with the consent of each of the Banks); provided that no
such change, waiver, modification or variance shall be made to Section 9 hereof
or this Section 20 without the consent of each Secured Party adversely affected
thereby; and provided, further, that any change, waiver, modification or
variance affecting the rights and benefits of a single Class of Secured Parties
(and not all Secured Parties in a like or similar manner) shall require the
written consent of the Required Class Banks of such Class. For the purpose of
this Agreement, the term "Class" shall mean each class of Secured Parties, i.e.,
whether (x) the Bank Creditors as holders of the Credit Agreement Obligations
(except for the Interest Rate Protection Obligations) or (y) the Interest Rate
Protection Creditors as holders of the Interest Rate Protection Obligations. For
the purpose of this Agreement, the term "Required Class Banks" of any Class
shall mean each of (x) with respect to the Credit Agreement Obligations, the
Required Banks and (y) with respect to the Interest Rate Protection Obligations,
the holders of 51% of all obligations outstanding from time to time under the
Interest Rate Protection Agreements.
21. CONSENT TO JURISDICTION; SERVICE OF PROCESS. Any legal
action or proceeding with respect to this Agreement may be brought in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and, by execution and delivery of this Agreement, the
Pledgor hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts and hereby irrevocably
waives any right it may have to object to the laying of venue of any such action
or proceeding in the aforesaid courts and hereby further irrevocably waives and
agrees not to plead or claim that any such action or proceeding has been brought
in an inconvenient forum. The Pledgor hereby irrevocably designates, appoints
and empowers CT Corporation System with
<PAGE> 168
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Page 18
offices on the date hereof at 1633 Broadway, New York, New York 10019 as its
designee, appointee and agent to receive, accept and acknowledge for and on its
behalf, and in respect of its property, service of any and all legal process,
summons, notices and documents which may be served in any such action or
proceeding. If for any reason such designee, appointee and agent shall cease to
be available to act as such, the Pledgor agrees to designate a new designee,
appointee and agent in New York City on the terms and for the purposes of this
provision satisfactory to the Pledgee for the Secured Parties under this
Agreement. The Pledgor further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Pledgor at its address set forth opposite its signature below. Nothing
herein shall affect the right of any of the Secured Parties to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Pledgor in any other jurisdiction.
22. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK. The headings in this Agreement are for purposes of reference
only and shall not limit or define the meaning hereof. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall constitute one instrument. In the event that any provision of
this Agreement shall prove to be invalid or unenforceable, such provision shall
be deemed to be severable from the other provisions of this Agreement which
shall remain binding on all parties hereto.
<PAGE> 169
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Page 19
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused
this Agreement to be executed by their duly elected officers duly authorized as
of the date first above written.
PUEBLO INTERNATIONAL, INC.,
Pledgor
By___________________________
Title:
THE BANK OF NOVA SCOTIA,
Pledgee
By___________________________
Title:
<PAGE> 170
ANNEX A
to
EXHIBIT E-2
LIST OF SECURITIES
<TABLE>
<CAPTION>
Percentage of
Name of Issuing Type of Number Outstanding Shares
Corporation Shares of Shares of Capital Stock
- --------------- ------- --------- ------------------
<S> <C> <C> <C>
Xtra Super Food common 1000 100% owned by Pueblo
Centers, Inc.
Caribad, Inc. common 100 100% owned by Pueblo
Pueblo Markets, Inc. common 100 100% owned by Pueblo
Pueblo Super common 100 100% owned by Pueblo
Videos, Inc.
</TABLE>
<PAGE> 171
ANNEX B
to
EXHIBIT E-2
LIST OF NOTES
<TABLE>
<CAPTION>
Amount Maturity Date
Lender Obligor (if any) (if any)
- ------ ------- -------- -------------
<S> <C> <C> <C>
NONE -- -- --
</TABLE>
<PAGE> 172
EXHIBIT E-3
[FORM OF XTRA PLEDGE AGREEMENT]
AMENDMENT AND RESTATEMENT dated as of April ____, 1997 to PLEDGE
AGREEMENT, dated as of July 28, 1993 (as amended, modified, supplemented or
restated from time to time, the "Agreement"), made by XTRA SUPER FOOD CENTERS,
INC. (the "Pledgor"), a Delaware corporation, in favor of THE BANK OF NOVA
SCOTIA, as Collateral Agent (the "Pledgee") for the benefit of (x) the Banks,
the Syndication Agent and the Administrative Agent under and as defined in the
Credit Agreement hereinafter referred to (the Banks, the Syndication Agent and
the Administrative Agent are hereinafter called the "Bank Creditors") and (y) in
the event of any guaranty by the Pledgor of any Interest Rate Protection
Agreement (as defined below), each Bank which enters into one or more interest
rate swap agreements, interest rate cap agreements, interest rate collar
agreements or other similar agreements or arrangements with the Borrower
designed to hedge the risks for the Borrower with respect to interest rates as
permitted by Section 8.03(c) of the Credit Agreement (each such agreement or
arrangement with a Bank or other financial institution, an "Interest Rate
Protection Agreement", and any such Bank (even if such Bank subsequently ceases
to be a Bank under the Credit Agreement for any reason) and such Bank's assigns,
if any, collectively, the "Interest Rate Protection Creditors" and, together
with the Bank Creditors, herein called the "Secured Parties"). Except as
otherwise defined herein, terms used herein and defined in the Credit Agreement
shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Pueblo Xtra International, Inc., a Delaware Corporation,
Pueblo International, Inc., a Delaware corporation, the Pledgor, the Banks party
thereto, The Bank of Nova Scotia, as Administrative Agent, and NationsBank, N.A.
(South), as Syndication Agent, have entered into an Amendment and Restatement,
dated as of April _____, 1997, amending and restating the Credit Agreement,
dated as of July 21, 1993 (as modified, supplemented, amended or restated from
time to time, the "Credit Agreement"), providing for the making of Loans and the
issuance of, and participation in, Letters of Credit as contemplated therein;
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WHEREAS, the Borrower desires to incur Loans and to have Letters of
Credit issued for its account to the extent provided in the Credit Agreement;
WHEREAS, the Borrower may enter into Interest Rate Protection
Agreements with the Interest Rate Protection Creditors as permitted by Section
8.03(c) of the Credit
Agreement;
WHEREAS, pursuant to Section 13 of the Credit Agreement (the "Credit
Agreement Guaranty"), Pledgor has unconditionally guaranteed the obligations and
liabilities of the Borrower under the Credit Agreement;
WHEREAS, it is a condition precedent to the above-described
extensions of credit that the Pledgor shall have executed and delivered to the
Pledgee this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to satisfy
the conditions described in Section 5.01(f)(iii) of the Credit Agreement;
NOW, THEREFORE, in consideration of the benefits accruing to the
Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by the Pledgor
for the benefit of the Secured Parties to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
of the Pledgor to the Bank Creditors under the Credit Agreement Guaranty
and the due performance of and compliance with all of the terms,
conditions and agreements contained in the Credit Agreement by the Pledgor
(all such obligations and liabilities under this clause (i), except to the
extent consisting of obligations under or with respect to Interest Rate
Protection Agreements being herein collectively called the "Credit
Agreement Obligations");
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(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
of the Pledgor pursuant to any guaranty by the Pledgor of any Interest
Rate Protection Agreement entered into by the Borrower (all such
obligations and liabilities under this clause (ii) being herein
collectively called the "Interest Rate Protection Obligations");
(iii) any and all sums reasonably advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) or preserve its security
interest in the Collateral (as hereinafter defined); and
(iv) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities referred to in clauses
(i), (ii) and (iii) above, after an Event of Default (such term, as used
in this Agreement, shall mean any Event of Default under, and as defined
in, the Credit Agreement, or any payment default by the Borrower under any
Interest Rate Protection Agreement and shall in any event include, without
limitation, any payment default (after the expiration of any applicable
grace period) on any of the Obligations (as hereinafter defined)) shall
have occurred and be continuing, the reasonable expenses of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by the Pledgee of its
rights hereunder, together with reasonable attorneys' fees and court
costs;
all such obligations, liabilities, sums and expenses set forth in clauses
(i)-(iv) of this Section 1 being herein collectively called the "Obligations".
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein, (i)
the term "Stock" shall mean, collectively, (x) all of the issued and outstanding
shares of stock at any time owned by the Pledgor of any corporation (other than
any corporation organized outside of the United States (any such corporation, a
"Foreign Corporation")) and (y) 65% of the issued and outstanding shares of
stock at any time owned by the Pledgor of any Foreign Corporation, (ii) the term
"Notes" shall mean all promissory notes at any time issued to
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the Pledgor by any Subsidiaries of PXI and (iii) the term "Securities" shall
mean all of the Stock and Notes. The Pledgor represents and warrants, as to the
stock of corporations and promissory notes owned by the Pledgor, that (a) the
Stock consists of the number and type of shares of the stock of the corporations
as described in Annex A hereto, and that such Stock constitutes that percentage
of the issued and outstanding capital stock of the issuing corporation as is set
forth in Annex A hereto; (b) the Notes consist of the promissory notes described
in Annex B hereto; (c) the Pledgor is the holder of record and sole beneficial
owner of such Securities; and (d) on the date hereof, the Pledgor owns no other
Securities.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations and for the purposes set
forth in Section 1 hereof, the Pledgor hereby (i) grants to the Pledgee a
security interest in all of the Collateral (as hereinafter defined) owned by the
Pledgor; (ii) pledges and deposits as security with the Pledgee the Securities
owned by the Pledgor on the date hereof, and delivers to the Pledgee
certificates or instruments therefor, duly endorsed in blank in the case of
promissory notes and accompanied by undated stock powers duly executed in blank
by the Pledgor in the case of capital stock, or such other instruments of
transfer as are acceptable to the Pledgee, and (iii) assigns, transfers,
hypothecates, mortgages, charges and sets over to the Pledgee all of the
Pledgor's right, title and interest in and to such Securities (and in and to all
certificates or instruments evidencing such Securities), to be held by the
Pledgee, upon the terms and conditions set forth in this Agreement.
3.2. Subsequently Acquired Securities. If the Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, the Pledgor will forthwith pledge
and deposit such Securities (or certificates or instruments representing such
Securities) as security with the Pledgee and deliver to the Pledgee certificates
therefor or instruments thereof, duly endorsed in blank in the case of
promissory notes and accompanied by undated stock powers duly executed in blank
in the case of capital stock, or such other instruments of transfer as are
acceptable to the Pledgee, and
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will promptly thereafter deliver to the Pledgee a certificate executed by any of
the Chairman of the Board, the President, a Vice Chairman, the Vice
President-Finance or the Treasurer of the Pledgor describing such Securities and
certifying that the same have been duly pledged with the Pledgee hereunder;
provided that the Pledgor shall not be required at any time to pledge hereunder
more than 65% of the aggregate amount of issued and outstanding shares of stock
at any time owned by the Pledgor of any Foreign Corporation.
3.3 Uncertificated Securities. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2, if any Securities (whether or not
now owned or hereafter acquired by the Pledgor) are uncertificated securities,
the Pledgor shall promptly notify the Pledgee thereof, and shall promptly take
all actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under Sections 8-313 and 8-321 of the
New York Uniform Commercial Code if applicable). The Pledgor further agrees to
take such actions as the Pledgee deems necessary or desirable to effect the
foregoing and to permit the Pledgee to exercise any of its rights and remedies
hereunder, and agrees to provide an opinion of counsel reasonably satisfactory
to the Pledgee with respect to any such pledge of uncertificated Securities
promptly upon request of the Pledgee.
3.4 Definition of Pledged Stock, Pledged Notes, Pledged Securities
and Collateral. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock", all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes", all of the Pledged Stock and Pledged Notes together are hereinafter
called the "Pledged Securities", which together with all proceeds thereof,
including any securities and moneys received and at the time held by the Pledgee
hereunder, is hereinafter called the "Collateral".
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub- agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned in
blank or in favor of the Pledgee or any nominee
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or nominees of the Pledgee or a sub-agent appointed by the Pledgee.
5. ASSIGNMENT; VOTING, ETC. (a) On the date hereof, the Pledgor
hereby has, and at all times during the term of this Agreement, the Pledgor
shall have, assigned and transferred to Pledgee all of its rights, title, and
interest to and under the Subordinated Intercompany Note including, without
limitation, all rights to receive and direct payments, all rights and remedies
thereunder (including the right to accelerate same) and all rights to grant or
make waivers or modifications to the provisions thereof, all without any notice
to or consent from, the Pledgor, who at no time shall have any rights with
respect to same.
(b) Unless and until an Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled to vote any and all Pledged Stock and
to give consents, waivers or ratifications in respect thereof, provided that no
vote shall be cast or any consent, waiver or ratification given or any action
taken which would violate or be inconsistent with any of the terms of this
Agreement, the Credit Agreement, any Interest Rate Protection Agreement or any
other Credit Document, or which would have the effect of impairing the position
or interests of the Pledgee or any Secured Party. All such rights of the Pledgor
to vote and to give consents, waivers and ratifications shall cease in case an
Event of Default shall occur and be continuing, and Section 7 hereof shall
become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing, all cash dividends payable in respect of
the Pledged Stock and all payments in respect of the Pledged Notes shall be paid
to the Pledgor, provided that all cash dividends payable in respect of the
Pledged Stock in connection with the dissolution, liquidation, recapitalization
or reclassification of the capital of any corporation (other than any such
transaction permitted by the Credit Agreement) which are determined by the
Pledgee to represent in whole or in part an extraordinary, liquidating or other
distribution in return of capital shall be paid, to the extent so determined to
represent an extraordinary, liquidating or other distribution in return of
capital, to the Pledgee and retained by it as part of the Collateral (unless
such cash dividends are
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applied to the repayment of the Obligations on the basis set forth in Section 9
hereof). The Pledgee shall also be entitled to receive directly, and to retain
as part of the Collateral:
(a) all other or additional stock or securities or property (other
than cash) paid or distributed by way of dividend or otherwise in respect
of the Pledged Stock;
(b) all other or additional stock or other securities or property
(including cash, unless such cash dividends are applied to the repayment
of the Obligations on the basis set forth in Section 9 hereof) paid or
distributed in respect of the Pledged Stock by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and
(c) all other or additional stock or other securities or property
(including cash, unless such cash dividends are applied to the repayment
of the Obligations on the basis set forth in Section 9 hereof) which may
be paid in respect of the Collateral by reason of any consolidation,
merger, exchange of stock, conveyance of assets, liquidation or similar
corporate reorganization (other than any such transaction permitted by the
Credit Agreement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to exercise
all of the rights, powers and remedies (whether vested in it by this Agreement,
the Credit Agreement, by any Interest Rate Protection Agreement or by any other
Credit Document or by law) for the protection and enforcement of its rights in
respect of the Collateral, and the Pledgee shall be entitled, without
limitation, to exercise the following rights, which the Pledgor hereby agrees to
be commercially reasonable:
(a) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 hereof to the Pledgor;
(b) to transfer all or any part of the Pledged Securities into the
Pledgee's name or the name of its nominee or nominees;
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(c) to accelerate the Pledged Notes which may be accelerated in
accordance with their terms, and take any other action to collect upon the
Pledged Note (including, without limitation, to make any demand for
payment thereon);
(d) to vote all or any part of the Pledged Stock (whether or not
transferred into the name of the Pledgee) and give all consents, waivers
and ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner thereof (the Pledgor
hereby irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of the Pledgor, with full power of substitution to do
so); and
(e) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time
or place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by the Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of
credit risk, and for such price or prices and on such terms as the Pledgee
in its absolute discretion may determine, provided that at least 10 days'
notice of the time and place of any such sale shall be given to the
Pledgor. The Pledgor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if
any, of marshalling the Collateral and any other security for the
Obligations or otherwise. At any such sale, unless prohibited by
applicable law, the Pledgee on behalf of the Secured Parties may bid for
and purchase all or any part of the Collateral so sold free from any such
right or equity of redemption. Neither the Pledgee nor any Secured Party
shall be liable for failure to collect or realize upon any or all of the
Collateral or for any delay in so doing nor shall any of them be under any
obligation to take any action whatsoever with regard thereto.
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8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement, the Credit Agreement, the Interest Rate
Protection Agreements, or the other Credit Documents or now or hereafter
existing at law or in equity or by statute shall be cumulative and concurrent
and shall be in addition to every other such right, power or remedy. The
exercise or beginning of the exercise by the Pledgee or any Secured Party of any
one or more of the rights, powers or remedies provided for in this Agreement,
the Credit Agreement, the Interest Rate Protection Agreements or the other
Credit Documents or now or hereafter existing at law or in equity or by statute
or otherwise shall not preclude the simultaneous or later exercise by the
Pledgee or any Secured Party of all such other rights, powers or remedies, and
no failure or delay on the part of the Pledgee or any Secured Party to exercise
any such right, power or remedy shall operate as a waiver thereof.
9. APPLICATION OF PROCEEDS. All moneys collected by the Pledgee upon
any sale or other disposition of the Collateral, together with all other moneys
received by the Pledgee hereunder, shall be applied to the payment of the
Obligations in the manner provided by Section 7.4 of the Borrower Security
Agreement.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. The Pledgor agrees (a) to indemnify and hold harmless
the Pledgee from and against any and all claims, demands, losses, judgments and
liabilities (including liabilities for penalties) of whatsoever kind or nature,
and (b) to reimburse the Pledgee for all reasonable costs and expenses,
including reasonable attorneys' fees, growing out of or resulting from this
Agreement or the exercise by the Pledgee of any right or remedy granted to it
hereunder or under the Credit Agreement, the Interest Rate
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Protection Agreements or under the other Credit Documents except, with respect
to clauses (a) and (b) above, for those arising from the Pledgee's gross
negligence or willful misconduct. In no event shall the Pledgee be liable, in
the absence of gross negligence or willful misconduct on its part, for any
matter or thing in connection with this Agreement other than to account for
moneys actually received by it in accordance with the terms hereof. If and to
the extent that the obligations of the Pledgor under this Section 11 are
unenforceable for any reason, the Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
12. FURTHER ASSURANCES. The Pledgor agrees that it will join with
the Pledgee in executing and, at the Pledgor's own expense, file and refile
under the Uniform Commercial Code such financing statements, continuation
statements and other documents in such offices as the Pledgee may deem necessary
or appropriate and wherever required or permitted by law in order to perfect and
preserve the Pledgee's security interest in the Collateral and hereby authorizes
the Pledgee to file financing statements and amendments thereto relative to all
or any part of the Collateral without the signature of the Pledgor where
permitted by law, and agrees to do such further acts and things and to execute
and deliver to the Pledgee such additional conveyances, assignments, agreements
and instruments as the Pledgee may reasonably require or deem advisable to carry
into effect the purposes of this Agreement or to further assure and confirm unto
the Pledgee its rights, powers and remedies hereunder.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. By accepting the benefits hereof, each
Secured Party shall be deemed to have agreed to the terms and conditions set
forth in Article X of the Borrower Security Agreement, as the same may be
amended, supplemented or otherwise modified from time to time, which is
incorporated
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herein by reference in its entirety; provided that all references therein to
"this Agreement" shall be a reference to this Agreement, provided further that
all references therein to the "Assignor" shall be a reference to the "Pledgor",
and provided further that all references therein to the "Collateral Agent" shall
be a reference to the "Pledgee". The Pledgee shall act hereunder on the terms
and conditions set forth in said Article X and the rights of each Secured Party
shall be enforceable solely by the Pledgee in accordance with said Article X.
14. TRANSFER BY PLEDGOR. The Pledgor will not sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except in accordance
with the terms of this Agreement, the Credit Agreement and the other Credit
Documents).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. The
Pledgor represents, warrants and covenants that (a) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Securities
pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation,
security interest, charge, option or other encumbrance whatsoever, except the
liens and security interests created by this Agreement; (b) it has full power,
authority and legal right to pledge all the Securities pledged by it pursuant to
this Agreement; (c) this Agreement has been duly authorized, executed and
delivered by the Pledgor and constitutes a legal, valid and binding obligation
of the Pledgor enforceable in accordance with its terms, except to the extent
that the enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law); (d) no consent of any other party (including,
without limitation, any stockholder or creditor of the Pledgor or any of its
Subsidiaries) and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required to be obtained by the Pledgor in
connection with the execution, delivery or performance of this Agreement, except
those which have been obtained or made or as may be required by laws affecting
the offering and sale of securities generally in connection with
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the exercise by the Pledgee of its remedies hereunder; (e) the execution,
delivery and performance of this Agreement does not violate any provision of any
applicable law or regulation or of any order, judgment, writ, award or decree of
any court, arbitrator or governmental authority, domestic or foreign, or of the
certificate of incorporation or by-laws of the Pledgor or of any securities
issued by the Pledgor or any of its Subsidiaries, or of any mortgage, indenture,
lease, deed of trust, loan agreement, credit agreement or other material
agreement, instrument or undertaking to which the Pledgor or any of its
Subsidiaries is a party or which purports to be binding upon the Pledgor or any
of its Subsidiaries or upon any of their respective assets and will not result
in the creation or imposition of any lien or encumbrance on any of the assets of
the Pledgor or any of its Subsidiaries except as contemplated by this Agreement;
(f) all the shares of the Stock pledged by the Pledgor hereunder have been duly
and validly issued, are fully paid and non-assessable; (g) each of the Pledged
Notes pledged by the Pledgor hereunder, when executed by the obligor thereof,
will be the legal, valid and binding obligation of such obligor, enforceable in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law);
and (h) the pledge and assignment of the Securities pledged by the Pledgor
pursuant to this Agreement, together with the delivery of such Securities
pursuant to this Agreement and any relevant filings or recordings (which
delivery, filings and recordings have been made or obtained), creates a valid
and perfected first security interest in such Securities and the proceeds
thereof, subject to no prior lien or encumbrance or to any agreement purporting
to grant to any third party a lien or encumbrance on the property or assets of
the Pledgor which would include such Securities. The Pledgor covenants and
agrees that it will defend the Pledgee's right, title and security interest in
and to the Securities pledged by the Pledgor hereunder and the proceeds thereof
against the claims and demands of all persons whomsoever; and the Pledgor
covenants and agrees that it will have like title to and right to pledge any
other property at any time hereafter pledged to the Pledgee as Collateral
hereunder and will likewise defend the right
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thereto and security interest therein of the Pledgee and the Secured Parties.
16. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (a) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from the Interest Rate Protection Agreements, the Credit Documents or any other
instrument or agreement referred to therein, or any assignment or transfer of
any thereof; (b) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such agreement or instrument or this
Agreement; (c) any furnishing of any additional security to the Pledgee or its
assignee or any acceptance thereof or any release of any security by the Pledgee
or its assignee; (d) any limitation on any party's liability or obligations
under any such instrument or agreement or any invalidity or unenforceability, in
whole or in part, of any such instrument or agreement or any term thereof; or
(e) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to the Pledgor or any
Subsidiary of the Pledgor, or any action taken with respect to this Agreement by
any trustee or receiver, or by any court, in any such proceeding, whether or not
the Pledgor shall have notice or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and the Pledgor shall have received from the Pledgee
a written request or requests that the Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock of the Pledgor,
the Pledgor as soon as practicable and at its expense will use its best efforts
to cause such registration to be effected (and be kept effective) and will use
its best efforts to cause such qualification and compliance to be effected (and
be kept effective) as may be so requested and as would permit or facilitate the
sale and distribution of such Pledged Stock, including, without limitation,
registration under the Securities Act of 1933 as
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then in effect (or any similar statute then in effect), appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with any other government requirements, provided that the
Pledgee shall furnish to the Pledgor such information regarding the Pledgee as
the Pledgor may request in writing and as shall be required in connection with
any such registration, qualification or compliance. The Pledgor will cause the
Pledgee to be kept reasonably advised in writing as to the progress of each such
registration, qualification or compliance and as to the completion thereof, will
furnish to the Pledgee such number of prospectuses, offering circulars or other
documents incident thereto as the Pledgee from time to time may reasonably
request, and will indemnify the Pledgee and all others participating in the
distribution of such Pledged Stock against all claims, losses, damages and
liabilities caused by any untrue statement (or alleged untrue statement) of a
material fact contained therein (or in any related registration statement,
notification or the like) or by any omission (or alleged omission) to state
therein (or in any related registration statement, notification or the like) a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same may have been caused by an
untrue statement or omission based upon information furnished in writing to the
Pledgor by the Pledgee expressly for use therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities pursuant to Section 7
hereof, such Pledged Securities or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration, provided that
at least 10 days' notice of the time and place of any such sale shall be given
to the Pledgor. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion (i) may proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Pledged Securities or part thereof shall have been filed
under such Securities Act, (ii) may approach
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and negotiate with a single possible purchaser to effect such sale, and (iii)
may restrict such sale to a purchaser who will represent and agree that such
purchaser is purchasing for its own account, for investment, and not with a view
to the distribution or sale of such Pledged Securities or part thereof. In the
event of any such sale, the Pledgee shall incur no responsibility or liability
for selling all or any part of the Pledged Securities at a price which the
Pledgee, in its sole and absolute discretion, may in good faith deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might be realized if the sale were deferred until after
registration as aforesaid.
18. TERMINATION. (a) After the Termination Date (as defined below),
this Agreement shall terminate and the Pledgee, at the request and expense of
the Pledgor, will execute and deliver to the Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to the Pledgor (without recourse and
without any representation or warranty) such of the Collateral of the Pledgor as
may be in the possession of the Pledgee and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement, together with any
moneys at the time held by the Pledgee hereunder. As used in this Agreement,
"Termination Date" shall mean the date upon which the Total Revolving Commitment
and all Interest Rate Protection Agreements are terminated, when no Note or
Letter of Credit is outstanding and when all Obligations have been paid in full.
(b) The Pledgee shall, at the request and expense of the Pledgor,
release (without recourse and without any representation or warranty) any or all
of the Collateral of the Pledgor and deliver an appropriate instrument
acknowledging such release, provided that either (x) such Collateral is sold
pursuant to a sale permitted under Section 8.01 of the Credit Agreement (it
being understood and agreed that the sale of any Person that owns, directly or
indirectly, such Collateral shall be deemed to be a sale of such Collateral for
purposes of this clause (x)) or (y) such release has been approved in writing by
the Required Banks (or all Banks if required by Section 12.11 of the Credit
Agreement).
<PAGE> 187
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Page 16
(c) At any time that the Pledgor desires that Collateral of the
Pledgor be released as provided in the foregoing Section 18(a) or (b), it shall
deliver to the Pledgee a certificate signed by its chief financial officer
stating that the release of the respective Collateral is permitted pursuant to
the foregoing Section 18(a) or (b). The Pledgee shall have no liability
whatsoever to any Secured Party as the result of any release of Collateral by it
as permitted by this Section 18.
19. NOTICES, ETC. All notices and other communications hereunder
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(a) if to the Pledgor, at:
Xtra Super Food Centers, Inc.
1300 N.W. 22nd Street
Pompano Beach, FL 33069
Tel: (954) 977-2500
Fax: (954) 979-5770
Attention: Chief Financial Officer
(b) if to the Pledgee, at:
The Bank of Nova Scotia
Suite 2700
600 Peachtree Street, NE
Atlanta, GA 30308
Tel: (404) 877-1505
Fax: (404) 888-8998
Attention: Frank F. Sandler;
(c) if to any Bank (other than the Pledgee), at such address as such
Bank shall have specified in the Credit Agreement; and
(d) if to any Interest Rate Protection Creditor, at such address as
such Interest Rate Protection Creditor shall have specified in writing to
the Pledgor and the Pledgee;
<PAGE> 188
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Page 17
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Pledgor and the Pledgee (with the consent
of the Required Banks or, to the extent required by Section 12.11 of the Credit
Agreement, with the consent of each of the Banks); provided that no such change,
waiver, modification or variance shall be made to Section 9 hereof or this
Section 20 without the consent of each Secured Party adversely affected thereby;
and provided, further, that any change, waiver, modification or variance
affecting the rights and benefits of a single Class of Secured Parties (and not
all Secured Parties in a like or similar manner) shall require the written
consent of the Required Class Banks of such Class. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Parties, i.e.,
whether (x) the Bank Creditors as holders of the Credit Agreement Obligations
(except for the Interest Rate Protection Obligations) or (y) the Interest Rate
Protection Creditors as holders of the Interest Rate Protection Obligations. For
the purpose of this Agreement, the term "Required Class Banks" of any Class
shall mean each of (x) with respect to the Credit Agreement Obligations, the
Required Banks and (y) with respect to the Interest Rate Protection Obligations,
the holders of 51% of all obligations outstanding from time to time under the
Interest Rate Protection Agreements.
21. CONSENT TO JURISDICTION; SERVICE OF PROCESS. Any legal action or
proceeding with respect to this Agreement may be brought in the courts of the
State of New York or of the United States of America for the Southern District
of New York, and, by execution and delivery of this Agreement, the Pledgor
hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts and hereby irrevocably
waives any right it may have to object to the laying of venue of any such action
or proceeding in the aforesaid courts and hereby further irrevocably waives and
agrees not to plead or claim that any such action or proceeding has been brought
in an inconvenient forum. The Pledgor hereby irrevocably designates, appoints
and empowers CT Corporation System with
<PAGE> 189
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Page 18
offices on the date hereof at 1633 Broadway, New York, New York 10019 as its
designee, appointee and agent to receive, accept and acknowledge for and on its
behalf, and in respect of its property, service of any and all legal process,
summons, notices and documents which may be served in any such action or
proceeding. If for any reason such designee, appointee and agent shall cease to
be available to act as such, the Pledgor agrees to designate a new designee,
appointee and agent in New York City on the terms and for the purposes of this
provision satisfactory to the Pledgee for the Secured Parties under this
Agreement. The Pledgor further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Pledgor at its address set forth opposite its signature below. Nothing
herein shall affect the right of any of the Secured Parties to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Pledgor in any other jurisdiction.
22. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK. The headings in this Agreement are for purposes of reference
only and shall not limit or define the meaning hereof. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall constitute one instrument. In the event that any provision of
this Agreement shall prove to be invalid or unenforceable, such provision shall
be deemed to be severable from the other provisions of this Agreement which
shall remain binding on all parties hereto.
<PAGE> 190
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Page 19
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
XTRA SUPER FOOD CENTERS, INC.,
Pledgor
By ____________________________________
Title:
THE BANK OF NOVA SCOTIA,
Pledgee
By ____________________________________
Title:
<PAGE> 191
ANNEX A
to
EXHIBIT E-3
LIST OF STOCK
<TABLE>
<CAPTION>
Percentage of
Name of Issuing Type of Number Outstanding Shares
Corporation Shares of Shares of Capital Stock
- -------------------- ------- --------- ------------------
<S> <C> <C> <C>
Xtra Drugstore, Inc. common 1000 100%
All Truck, Inc. common 1000 100%
Pueblo Caribbean common 100 100%
Videos, Inc.
</TABLE>
<PAGE> 192
ANNEX B
to
EXHIBIT E-3
LIST OF NOTES
<TABLE>
<CAPTION>
Amount Maturity Date
Lender Obligor (if any) (if any)
- ------ ------- -------- -------------
<S> <C> <C> <C>
NONE
</TABLE>
<PAGE> 193
EXHIBIT E-4
[FORM OF XM PLEDGE AGREEMENT]
AMENDMENT AND RESTATEMENT dated as of April ____, 1997 to PLEDGE
AGREEMENT, dated as of July 28, 1993 (as amended, modified, supplemented or
restated from time to time, the "Agreement"), made by XTRA MERGER CORPORATION
(the "Pledgor"), a Delaware corporation, in favor of THE BANK OF NOVA SCOTIA, as
Collateral Agent (the "Pledgee") for the benefit of (x) the Banks, the
Syndication Agent and the Administrative Agent under and as defined in the
Credit Agreement hereinafter referred to (the Banks, the Syndication Agent and
the Administrative Agent are hereinafter called the "Bank Creditors") and (y) in
the event of any guaranty by the Pledgor of any Interest Rate Protection
Agreement (as defined below), each Bank which enters into one or more interest
rate swap agreements, interest rate cap agreements, interest rate collar
agreements or other similar agreements or arrangements with the Borrower
designed to hedge the risks for the Borrower with respect to interest rates as
permitted by Section 8.03(c) of the Credit Agreement (each such agreement or
arrangement with a Bank or other financial institution, an "Interest Rate
Protection Agreement", and any such Bank (even if such Bank subsequently ceases
to be a Bank under the Credit Agreement for any reason) and such Bank's assigns,
if any, collectively, the "Interest Rate Protection Creditors" and, together
with the Bank Creditors, herein called the "Secured Parties"). Except as
otherwise defined herein, terms used herein and defined in the Credit Agreement
shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Pueblo Xtra International, Inc., a Delaware Corporation,
Pueblo International, Inc., a Delaware corporation, Xtra Super Food Centers,
Inc., a Delaware Corporation, the Banks party thereto, The Bank of Nova Scotia,
as Administrative Agent, and NationsBank, N.A. (South), as Syndication Agent,
have entered into an Amendment and Restatement, dated as of April _____, 1997,
amending and restating the Credit Agreement, dated as of July 21, 1993 (as
modified, supplemented, amended or restated from time to time, the "Credit
Agreement"), providing for the making of
<PAGE> 194
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Page 2
Loans and the issuance of, and participation in, Letters of Credit as
contemplated therein;
WHEREAS, the Borrower desires to incur Loans and to have Letters of
Credit issued for its account to the extent provided in the Credit Agreement;
WHEREAS, the Borrower may enter into Interest Rate Protection
Agreements with the Interest Rate Protection Creditors as permitted by Section
8.03(c) of the Credit Agreement;
WHEREAS, pursuant to Section 13 of the Credit Agreement (the "Credit
Agreement Guaranty"), Pledgor has unconditionally guaranteed the obligations and
liabilities of the Borrower under the Credit Agreement;
WHEREAS, it is a condition precedent to the above-described
extensions of credit that the Pledgor shall have executed and delivered to the
Pledgee this Agreement; and
WHEREAS, the Pledgor desires to execute this Agreement to satisfy
the conditions described in Section 5.01(f)(iv) of the Credit Agreement;
NOW, THEREFORE, in consideration of the benefits accruing to the
Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by the Pledgor
for the benefit of the Secured Parties to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
of the Pledgor to the Bank Creditors under the Credit Agreement Guaranty
and the due performance of and compliance with all of the terms,
conditions and agreements contained in the Credit Agreement by the Pledgor
(all such obligations and liabilities under this clause (i), except to the
extent consisting of obligations under or with respect to
<PAGE> 195
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Page 3
Interest Rate Protection Agreements being herein collectively called the
"Credit Agreement Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
of the Pledgor pursuant to any guaranty by the Pledgor of any Interest
Rate Protection Agreement entered into by the Borrower (all such
obligations and liabilities under this clause (ii) being herein
collectively called the "Interest Rate Protection Obligations");
(iii) any and all sums reasonably advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) or preserve its security
interest in the Collateral (as hereinafter defined); and
(iv) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities referred to in clauses
(i), (ii) and (iii) above, after an Event of Default (such term, as used
in this Agreement, shall mean any Event of Default under, and as defined
in, the Credit Agreement, or any payment default by the Borrower under any
Interest Rate Protection Agreement and shall in any event include, without
limitation, any payment default (after the expiration of any applicable
grace period) on any of the Obligations (as hereinafter defined)) shall
have occurred and be continuing, the reasonable expenses of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by the Pledgee of its
rights hereunder, together with reasonable attorneys' fees and court
costs;
all such obligations, liabilities, sums and expenses set forth in clauses
(i)-(iv) of this Section 1 being herein collectively called the "Obligations".
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein, (i)
the term "Stock" shall mean, collectively, (x) all of the issued and outstanding
shares of stock at any time owned by the Pledgor of any corporation (other than
any corporation organized outside of the United States (any such corporation, a
"Foreign Corporation")) and (y) 65% of
<PAGE> 196
EXHIBIT E-4
Page 4
the issued and outstanding shares of stock at any time owned by the Pledgor of
any Foreign Corporation, (ii) the term "Notes" shall mean all promissory notes
at any time issued to the Pledgor by any Subsidiaries of PXI and (iii) the term
"Securities" shall mean all of the Stock and Notes. The Pledgor represents and
warrants, as to the stock of corporations and promissory notes owned by the
Pledgor, that (a) the Stock consists of the number and type of shares of the
stock of the corporations as described in Annex A hereto, and that such Stock
constitutes that percentage of the issued and outstanding capital stock of the
issuing corporation as is set forth in Annex A hereto; (b) the Notes consist of
the promissory notes described in Annex B hereto; (c) the Pledgor is the holder
of record and sole beneficial owner of such Securities; and (d) on the date
hereof, the Pledgor owns no other Securities.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations and for the purposes set
forth in Section 1 hereof, the Pledgor hereby (i) grants to the Pledgee a
security interest in all of the Collateral (as hereinafter defined) owned by the
Pledgor; (ii) pledges and deposits as security with the Pledgee the Securities
owned by the Pledgor on the date hereof, and delivers to the Pledgee
certificates or instruments therefor, duly endorsed in blank in the case of
promissory notes and accompanied by undated stock powers duly executed in blank
by the Pledgor in the case of capital stock, or such other instruments of
transfer as are acceptable to the Pledgee, and (iii) assigns, transfers,
hypothecates, mortgages, charges and sets over to the Pledgee all of the
Pledgor's right, title and interest in and to such Securities (and in and to all
certificates or instruments evidencing such Securities), to be held by the
Pledgee, upon the terms and conditions set forth in this Agreement.
3.2. Subsequently Acquired Securities. If the Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, the Pledgor will forthwith pledge
and deposit such Securities (or certificates or instruments representing such
Securities) as security with the Pledgee and deliver to the Pledgee certificates
therefor or instruments thereof, duly endorsed in blank in the case of promis-
<PAGE> 197
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Page 5
sory notes and accompanied by undated stock powers duly executed in blank in the
case of capital stock, or such other instruments of transfer as are acceptable
to the Pledgee, and will promptly thereafter deliver to the Pledgee a
certificate executed by any of the Chairman of the Board, the President, a Vice
Chairman, the Vice President-Finance or the Treasurer of the Pledgor describing
such Securities and certifying that the same have been duly pledged with the
Pledgee hereunder; provided that the Pledgor shall not be required at any time
to pledge hereunder more than 65% of the aggregate amount of issued and
outstanding shares of stock at any time owned by the Pledgor of any Foreign
Corporation.
3.3 Uncertificated Securities. Notwithstanding anything to the
contrary contained in Sections 3.1 and 3.2, if any Securities (whether or not
now owned or hereafter acquired by the Pledgor) are uncertificated securities,
the Pledgor shall promptly notify the Pledgee thereof, and shall promptly take
all actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under Sections 8-313 and 8-321 of the
New York Uniform Commercial Code if applicable). The Pledgor further agrees to
take such actions as the Pledgee deems necessary or desirable to effect the
foregoing and to permit the Pledgee to exercise any of its rights and remedies
hereunder, and agrees to provide an opinion of counsel reasonably satisfactory
to the Pledgee with respect to any such pledge of uncertificated Securities
promptly upon request of the Pledgee.
3.4 Definition of Pledged Stock, Pledged Notes, Pledged Securities
and Collateral. All Stock at any time pledged or required to be pledged
hereunder is hereinafter called the "Pledged Stock", all Notes at any time
pledged or required to be pledged hereunder are hereinafter called the "Pledged
Notes", all of the Pledged Stock and Pledged Notes together are hereinafter
called the "Pledged Securities", which together with all proceeds thereof,
including any securities and moneys received and at the time held by the Pledgee
hereunder, is hereinafter called the "Collateral".
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall
have the right to appoint one or more sub- agents for the purpose of retaining
physical possession of the Pledged Securities, which may be held (in the
discretion
<PAGE> 198
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Page 6
of the Pledgee) in the name of the Pledgor, endorsed or assigned in blank or in
favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent
appointed by the Pledgee.
5. ASSIGNMENT; VOTING, ETC. (a) On the date hereof, the Pledgor
hereby has, and at all times during the term of this Agreement, the Pledgor
shall have, assigned and transferred to Pledgee all of its rights, title, and
interest to and under the Subordinated Intercompany Note including, without
limitation, all rights to receive and direct payments, all rights and remedies
thereunder (including the right to accelerate same) and all rights to grant or
make waivers or modifications to the provisions thereof, all without any notice
to or consent from, the Pledgor, who at no time shall have any rights with
respect to same.
(b) Unless and until an Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled to vote any and all Pledged Stock and
to give consents, waivers or ratifications in respect thereof, provided that no
vote shall be cast or any consent, waiver or ratification given or any action
taken which would violate or be inconsistent with any of the terms of this
Agreement, the Credit Agreement, any Interest Rate Protection Agreement or any
other Credit Document, or which would have the effect of impairing the position
or interests of the Pledgee or any Secured Party. All such rights of the Pledgor
to vote and to give consents, waivers and ratifications shall cease in case an
Event of Default shall occur and be continuing, and Section 7 hereof shall
become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing, all cash dividends payable in respect of
the Pledged Stock and all payments in respect of the Pledged Notes shall be paid
to the Pledgor, provided that all cash dividends payable in respect of the
Pledged Stock in connection with the dissolution, liquidation, recapitalization
or reclassification of the capital of any corporation (other than any such
transaction permitted by the Credit Agreement) which are determined by the
Pledgee to represent in whole or in part an extraordinary, liquidating or other
distribution in return of capital shall be paid, to the extent so determined to
represent an extraordinary, liquidating or other distribution
<PAGE> 199
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Page 7
in return of capital, to the Pledgee and retained by it as part of the
Collateral (unless such cash dividends are applied to the repayment of the
Obligations on the basis set forth in Section 9 hereof). The Pledgee shall also
be entitled to receive directly, and to retain as part of the Collateral:
(a) all other or additional stock or securities or property (other
than cash) paid or distributed by way of dividend or otherwise in respect
of the Pledged Stock;
(b) all other or additional stock or other securities or property
(including cash, unless such cash dividends are applied to the repayment
of the Obligations on the basis set forth in Section 9 hereof) paid or
distributed in respect of the Pledged Stock by way of stock-split,
spin-off, split-up, reclassification, combination of shares or similar
rearrangement; and
(c) all other or additional stock or other securities or property
(including cash, unless such cash dividends are applied to the repayment
of the Obligations on the basis set forth in Section 9 hereof) which may
be paid in respect of the Collateral by reason of any consolidation,
merger, exchange of stock, conveyance of assets, liquidation or similar
corporate reorganization (other than any such transaction permitted by the
Credit Agreement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall be entitled to exercise
all of the rights, powers and remedies (whether vested in it by this Agreement,
the Credit Agreement, by any Interest Rate Protection Agreement or by any other
Credit Document or by law) for the protection and enforcement of its rights in
respect of the Collateral, and the Pledgee shall be entitled, without
limitation, to exercise the following rights, which the Pledgor hereby agrees to
be commercially reasonable:
(a) to receive all amounts payable in respect of the Collateral
otherwise payable under Section 6 hereof to the Pledgor;
<PAGE> 200
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Page 8
(b) to transfer all or any part of the Pledged Securities into the
Pledgee's name or the name of its nominee or nominees;
(c) to accelerate the Pledged Notes which may be accelerated in
accordance with their terms, and take any other action to collect upon the
Pledged Note (including, without limitation, to make any demand for
payment thereon);
(d) to vote all or any part of the Pledged Stock (whether or not
transferred into the name of the Pledgee) and give all consents, waivers
and ratifications in respect of the Collateral and otherwise act with
respect thereto as though it were the outright owner thereof (the Pledgor
hereby irrevocably constituting and appointing the Pledgee the proxy and
attorney-in-fact of the Pledgor, with full power of substitution to do
so); and
(e) at any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any
interest therein, at any public or private sale, without demand of
performance, advertisement or notice of intention to sell or of the time
or place of sale or adjournment thereof or to redeem or otherwise (all of
which are hereby waived by the Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of
credit risk, and for such price or prices and on such terms as the Pledgee
in its absolute discretion may determine, provided that at least 10 days'
notice of the time and place of any such sale shall be given to the
Pledgor. The Pledgor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after sale hereunder, and all rights, if
any, of marshalling the Collateral and any other security for the
Obligations or otherwise. At any such sale, unless prohibited by
applicable law, the Pledgee on behalf of the Secured Parties may bid for
and purchase all or any part of the Collateral so sold free from any such
right or equity of redemption. Neither the Pledgee nor any Secured Party
shall be liable for failure to collect or realize upon any or all of the
Collateral or for any
<PAGE> 201
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delay in so doing nor shall any of them be under any obligation to take
any action whatsoever with regard thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the
Pledgee provided for in this Agreement, the Credit Agreement, the Interest Rate
Protection Agreements, or the other Credit Documents or now or hereafter
existing at law or in equity or by statute shall be cumulative and concurrent
and shall be in addition to every other such right, power or remedy. The
exercise or beginning of the exercise by the Pledgee or any Secured Party of any
one or more of the rights, powers or remedies provided for in this Agreement,
the Credit Agreement, the Interest Rate Protection Agreements or the other
Credit Documents or now or hereafter existing at law or in equity or by statute
or otherwise shall not preclude the simultaneous or later exercise by the
Pledgee or any Secured Party of all such other rights, powers or remedies, and
no failure or delay on the part of the Pledgee or any Secured Party to exercise
any such right, power or remedy shall operate as a waiver thereof.
9. APPLICATION OF PROCEEDS. All moneys collected by the Pledgee upon
any sale or other disposition of the Collateral, together with all other moneys
received by the Pledgee hereunder, shall be applied to the payment of the
Obligations in the manner provided by Section 7.4 of the Borrower Security
Agreement.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. The Pledgor agrees (a) to indemnify and hold
harmless the Pledgee from and against any and all claims, demands, losses,
judgments and liabilities (including liabilities for penalties) of whatsoever
kind or nature, and (b) to reimburse the Pledgee for all reasonable
<PAGE> 202
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costs and expenses, including reasonable attorneys' fees, growing out of or
resulting from this Agreement or the exercise by the Pledgee of any right or
remedy granted to it hereunder or under the Credit Agreement, the Interest Rate
Protection Agreements or under the other Credit Documents except, with respect
to clauses (a) and (b) above, for those arising from the Pledgee's gross
negligence or willful misconduct. In no event shall the Pledgee be liable, in
the absence of gross negligence or willful misconduct on its part, for any
matter or thing in connection with this Agreement other than to account for
moneys actually received by it in accordance with the terms hereof. If and to
the extent that the obligations of the Pledgor under this Section 11 are
unenforceable for any reason, the Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
12. FURTHER ASSURANCES. The Pledgor agrees that it will join with
the Pledgee in executing and, at the Pledgor's own expense, file and refile
under the Uniform Commercial Code such financing statements, continuation
statements and other documents in such offices as the Pledgee may deem necessary
or appropriate and wherever required or permitted by law in order to perfect and
preserve the Pledgee's security interest in the Collateral and hereby authorizes
the Pledgee to file financing statements and amendments thereto relative to all
or any part of the Collateral without the signature of the Pledgor where
permitted by law, and agrees to do such further acts and things and to execute
and deliver to the Pledgee such additional conveyances, assignments, agreements
and instruments as the Pledgee may reasonably require or deem advisable to carry
into effect the purposes of this Agreement or to further assure and confirm unto
the Pledgee its rights, powers and remedies hereunder.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with
this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. By accepting the benefits hereof, each
Secured
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Party shall be deemed to have agreed to the terms and conditions set forth in
Article X of the Borrower Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time, which is incorporated
herein by reference in its entirety; provided that all references therein to
"this Agreement" shall be a reference to this Agreement, provided further that
all references therein to the "Assignor" shall be a reference to the "Pledgor",
and provided further that all references therein to the "Collateral Agent" shall
be a reference to the "Pledgee". The Pledgee shall act hereunder on the terms
and conditions set forth in said Article X and the rights of each Secured Party
shall be enforceable solely by the Pledgee in accordance with said Article X.
14. TRANSFER BY PLEDGOR. The Pledgor will not sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except in accordance
with the terms of this Agreement, the Credit Agreement and the other Credit
Documents).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. The
Pledgor represents, warrants and covenants that (a) it is the legal, record and
beneficial owner of, and has good and marketable title to, all Securities
pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation,
security interest, charge, option or other encumbrance whatsoever, except the
liens and security interests created by this Agreement; (b) it has full power,
authority and legal right to pledge all the Securities pledged by it pursuant to
this Agreement; (c) this Agreement has been duly authorized, executed and
delivered by the Pledgor and constitutes a legal, valid and binding obligation
of the Pledgor enforceable in accordance with its terms, except to the extent
that the enforceability hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether enforcement
is sought in equity or at law); (d) no consent of any other party (including,
without limitation, any stockholder or creditor of the Pledgor or any of its
Subsidiaries) and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required to be obtained by the
<PAGE> 204
EXHIBIT E-4
Page 12
Pledgor in connection with the execution, delivery or performance of this
Agreement, except those which have been obtained or made or as may be required
by laws affecting the offering and sale of securities generally in connection
with the exercise by the Pledgee of its remedies hereunder; (e) the execution,
delivery and performance of this Agreement does not violate any provision of any
applicable law or regulation or of any order, judgment, writ, award or decree of
any court, arbitrator or governmental authority, domestic or foreign, or of the
certificate of incorporation or by-laws of the Pledgor or of any securities
issued by the Pledgor or any of its Subsidiaries, or of any mortgage, indenture,
lease, deed of trust, loan agreement, credit agreement or other material
agreement, instrument or undertaking to which the Pledgor or any of its
Subsidiaries is a party or which purports to be binding upon the Pledgor or any
of its Subsidiaries or upon any of their respective assets and will not result
in the creation or imposition of any lien or encumbrance on any of the assets of
the Pledgor or any of its Subsidiaries except as contemplated by this Agreement;
(f) all the shares of the Stock pledged by the Pledgor hereunder have been duly
and validly issued, are fully paid and non-assessable; (g) each of the Pledged
Notes pledged by the Pledgor hereunder, when executed by the obligor thereof,
will be the legal, valid and binding obligation of such obligor, enforceable in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at law);
and (h) the pledge and assignment of the Securities pledged by the Pledgor
pursuant to this Agreement, together with the delivery of such Securities
pursuant to this Agreement and any relevant filings or recordings (which
delivery, filings and recordings have been made or obtained), creates a valid
and perfected first security interest in such Securities and the proceeds
thereof, subject to no prior lien or encumbrance or to any agreement purporting
to grant to any third party a lien or encumbrance on the property or assets of
the Pledgor which would include such Securities. The Pledgor covenants and
agrees that it will defend the Pledgee's right, title and security interest in
and to the Securities pledged by the Pledgor hereunder and the proceeds thereof
against the claims and demands of all persons whomsoever; and the Pledgor
covenants and agrees that
<PAGE> 205
EXHIBIT E-4
Page 13
it will have like title to and right to pledge any other property at any time
hereafter pledged to the Pledgee as Collateral hereunder and will likewise
defend the right thereto and security interest therein of the Pledgee and the
Secured Parties.
16. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (a) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from the Interest Rate Protection Agreements, the Credit Documents or any other
instrument or agreement referred to therein, or any assignment or transfer of
any thereof; (b) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any such agreement or instrument or this
Agreement; (c) any furnishing of any additional security to the Pledgee or its
assignee or any acceptance thereof or any release of any security by the Pledgee
or its assignee; (d) any limitation on any party's liability or obligations
under any such instrument or agreement or any invalidity or unenforceability, in
whole or in part, of any such instrument or agreement or any term thereof; or
(e) any bankruptcy, insolvency, reorganization, composition, adjustment,
dissolution, liquidation or other like proceeding relating to the Pledgor or any
Subsidiary of the Pledgor, or any action taken with respect to this Agreement by
any trustee or receiver, or by any court, in any such proceeding, whether or not
the Pledgor shall have notice or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and the Pledgor shall have received from the Pledgee
a written request or requests that the Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock of the Pledgor,
the Pledgor as soon as practicable and at its expense will use its best efforts
to cause such registration to be effected (and be kept effective) and will use
its best efforts to cause such qualification and compliance to be effected (and
be kept effective) as may be
<PAGE> 206
EXHIBIT E-4
Page 14
so requested and as would permit or facilitate the sale and distribution of such
Pledged Stock, including, without limitation, registration under the Securities
Act of 1933 as then in effect (or any similar statute then in effect),
appropriate qualifications under applicable blue sky or other state securities
laws and appropriate compliance with any other government requirements, provided
that the Pledgee shall furnish to the Pledgor such information regarding the
Pledgee as the Pledgor may request in writing and as shall be required in
connection with any such registration, qualification or compliance. The Pledgor
will cause the Pledgee to be kept reasonably advised in writing as to the
progress of each such registration, qualification or compliance and as to the
completion thereof, will furnish to the Pledgee such number of prospectuses,
offering circulars or other documents incident thereto as the Pledgee from time
to time may reasonably request, and will indemnify the Pledgee and all others
participating in the distribution of such Pledged Stock against all claims,
losses, damages and liabilities caused by any untrue statement (or alleged
untrue statement) of a material fact contained therein (or in any related
registration statement, notification or the like) or by any omission (or alleged
omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same may have been caused by an untrue statement or omission based upon
information furnished in writing to the Pledgor by the Pledgee expressly for use
therein.
(b) If at any time when the Pledgee shall determine to exercise its
right to sell all or any part of the Pledged Securities pursuant to Section 7
hereof, such Pledged Securities or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration, provided that
at least 10 days' notice of the time and place of any such sale shall be given
to the Pledgor. Without limiting the generality of the foregoing, in any such
event the Pledgee, in its sole and absolute discretion (i) may proceed to make
such private sale
<PAGE> 207
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Page 15
notwithstanding that a registration statement for the purpose of registering
such Pledged Securities or part thereof shall have been filed under such
Securities Act, (ii) may approach and negotiate with a single possible purchaser
to effect such sale, and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Pledged
Securities or part thereof. In the event of any such sale, the Pledgee shall
incur no responsibility or liability for selling all or any part of the Pledged
Securities at a price which the Pledgee, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
18. TERMINATION. (a) After the Termination Date (as defined below),
this Agreement shall terminate and the Pledgee, at the request and expense of
the Pledgor, will execute and deliver to the Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to the Pledgor (without recourse and
without any representation or warranty) such of the Collateral of the Pledgor as
may be in the possession of the Pledgee and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement, together with any
moneys at the time held by the Pledgee hereunder. As used in this Agreement,
"Termination Date" shall mean the date upon which the Total Revolving Commitment
and all Interest Rate Protection Agreements are terminated, when no Note or
Letter of Credit is outstanding and when all Obligations have been paid in full.
(b) The Pledgee shall, at the request and expense of the Pledgor,
release (without recourse and without any representation or warranty) any or all
of the Collateral of the Pledgor and deliver an appropriate instrument
acknowledging such release, provided that either (x) such Collateral is sold
pursuant to a sale permitted under Section 8.01 of the Credit Agreement (it
being understood and agreed that the sale of any Person that owns, directly or
indirectly, such Collateral shall be deemed to be a sale of such Collateral for
purposes of this clause (x)) or (y) such release has been approved in writing by
the Required Banks
<PAGE> 208
EXHIBIT E-4
Page 16
(or all Banks if required by Section 12.11 of the Credit Agreement).
(c) At any time that the Pledgor desires that Collateral of the
Pledgor be released as provided in the foregoing Section 18(a) or (b), it shall
deliver to the Pledgee a certificate signed by its chief financial officer
stating that the release of the respective Collateral is permitted pursuant to
the foregoing Section 18(a) or (b). The Pledgee shall have no liability
whatsoever to any Secured Party as the result of any release of Collateral by it
as permitted by this Section 18.
19. NOTICES, ETC. All notices and other communications hereunder
shall be in writing and shall be delivered or mailed by first class mail,
postage prepaid, addressed:
(a) if to the Pledgor, at:
Xtra Merger Corporation
1300 N.W. 22nd Street
Pompano Beach, FL 33069
Tel: (954) 977-2500
Fax: (954) 979-5770
Attention: Chief Financial Officer
(b) if to the Pledgee, at:
The Bank of Nova Scotia
Suite 2700
600 Peachtree Street, NE
Atlanta, GA 30308
Tel: (404) 877-1505
Fax: (404) 888-8998
Attention: Frank F. Sandler;
(c) if to any Bank (other than the Pledgee), at such address as such
Bank shall have specified in the Credit Agreement; and
(d) if to any Interest Rate Protection Creditor, at such address as
such Interest Rate Protection
<PAGE> 209
EXHIBIT E-4
Page 17
Creditor shall have specified in writing to the Pledgor and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Pledgor and the Pledgee (with the consent
of the Required Banks or, to the extent required by Section 12.11 of the Credit
Agreement, with the consent of each of the Banks); provided that no such change,
waiver, modification or variance shall be made to Section 9 hereof or this
Section 20 without the consent of each Secured Party adversely affected thereby;
and provided, further, that any change, waiver, modification or variance
affecting the rights and benefits of a single Class of Secured Parties (and not
all Secured Parties in a like or similar manner) shall require the written
consent of the Required Class Banks of such Class. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Parties, i.e.,
whether (x) the Bank Creditors as holders of the Credit Agreement Obligations
(except for the Interest Rate Protection Obligations) or (y) the Interest Rate
Protection Creditors as holders of the Interest Rate Protection Obligations. For
the purpose of this Agreement, the term "Required Class Banks" of any Class
shall mean each of (x) with respect to the Credit Agreement Obligations, the
Required Banks and (y) with respect to the Interest Rate Protection Obligations,
the holders of 51% of all obligations outstanding from time to time under the
Interest Rate Protection Agreements.
21. CONSENT TO JURISDICTION; SERVICE OF PROCESS. Any legal action or
proceeding with respect to this Agreement may be brought in the courts of the
State of New York or of the United States of America for the Southern District
of New York, and, by execution and delivery of this Agreement, the Pledgor
hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts and hereby irrevocably
waives any right it may have to object to the laying of venue of any such action
or proceeding in the aforesaid courts and hereby further irrevocably waives and
agrees not to plead or claim
<PAGE> 210
EXHIBIT E-4
Page 18
that any such action or proceeding has been brought in an inconvenient forum.
The Pledgor hereby irrevocably designates, appoints and empowers CT Corporation
System with offices on the date hereof at 1633 Broadway, New York, New York
10019 as its designee, appointee and agent to receive, accept and acknowledge
for and on its behalf, and in respect of its property, service of any and all
legal process, summons, notices and documents which may be served in any such
action or proceeding. If for any reason such designee, appointee and agent shall
cease to be available to act as such, the Pledgor agrees to designate a new
designee, appointee and agent in New York City on the terms and for the purposes
of this provision satisfactory to the Pledgee for the Secured Parties under this
Agreement. The Pledgor further irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
the Pledgor at its address set forth opposite its signature below. Nothing
herein shall affect the right of any of the Secured Parties to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Pledgor in any other jurisdiction.
22. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of the Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK. The headings in this Agreement are for purposes of reference
only and shall not limit or define the meaning hereof. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall constitute one instrument. In the event that any provision of
this Agreement shall prove to be invalid or unenforceable, such provision shall
be deemed to be severable from the other provisions of this Agreement which
shall remain binding on all parties hereto.
<PAGE> 211
EXHIBIT E-4
Page 19
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Agreement to be executed by their duly elected officers duly authorized as of
the date first above written.
XTRA MERGER CORPORATION,
Pledgor
By ______________________________
Title:
THE BANK OF NOVA SCOTIA,
Pledgee
By ______________________________
Title:
<PAGE> 212
ANNEX A
to
EXHIBIT E-4
LIST OF STOCK
<TABLE>
<CAPTION>
Percentage of
Name of Issuing Type of Number Outstanding Shares
Corporation Shares of Shares of Capital Stock
- --------------- ------- --------- ------------------
<S> <C> <C> <C>
All Truck, Inc. common 1000 100%
Pueblo Caribbean common 100 100%
Videos, Inc.
</TABLE>
<PAGE> 213
ANNEX B
to
EXHIBIT E-4
LIST OF NOTES
<TABLE>
<CAPTION>
Amount Maturity Date
Lender Obligor (if any) (if any)
- ------ ------- -------- -------------
<S> <C> <C> <C>
Xtra Merger Pueblo Inter-
Corporation national, Inc. $28,000,000
</TABLE>
<PAGE> 214
EXHIBIT F
[FORM OF SUBSIDIARY GUARANTY]
Amendment and Restatement, dated as of April __, 1997, to GUARANTY
(as amended, modified, supplemented or restated from time to time, the
"Guaranty"), dated as of July 28, 1993, made by the undersigned (each a
"Guarantor" and, collectively, the "Guarantors"). Except as otherwise defined
herein, terms used herein and defined in the Credit Agreement (as hereinafter
defined) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Pueblo Xtra International, Inc., a Delaware corporation
("PXI"), Pueblo International, Inc. (the "Borrower"), a Delaware corporation,
Xtra Super Food Centers, Inc., a Delaware corporation, the Banks party thereto,
The Bank of Nova Scotia, as Administrative Agent, and NationsBank N.A. (South),
as Syndication Agent, have entered into an Amendment and Restatement, dated as
of April __, 1997 to Credit Agreement, dated as of July 21, 1993 (as modified,
supplemented, amended or restated from time to time, the "Credit Agreement"),
providing for the making of Loans and the issuance of, and participation in,
Letters of Credit as contemplated therein (the Banks, the Administrative Agent
and the Syndication Agent, herein called the "Bank Creditors");
WHEREAS, the Borrower (as defined in the Credit Agreement) may enter
into one or more Interest Rate Protection Agreements with one or more Banks (any
such Bank party to any such Interest Rate Protection Agreement (even if any such
Bank subsequently ceases to be a Bank under the Credit Agreement for any reason)
and their subsequent assigns, if any, to the extent entitled to the benefits of
this Guaranty as provided in paragraph 1(ii) hereof, herein called "Interest
Rate Protection Creditors," and all Interest Rate Protection Creditors, together
with the Bank Creditors, herein collectively called the "Creditors");
WHEREAS, PXI owns, directly or indirectly, 100% of the capital stock
of the Borrower and each Guarantor;
<PAGE> 215
EXHIBIT F
Page 2
WHEREAS, it is a condition to the making of Loans and the issuance
of Letters of Credit under the Credit Agreement that each Guarantor shall have
executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the incurrence of
Loans by the Borrower and the issuance of Letters of Credit for the account of
the Borrower under the Credit Agreement and, accordingly, desires to execute
this Guaranty in order to satisfy the conditions described in the preceding
paragraph and to induce the Banks to make Loans to the Borrower and to issue
Letters of Credit for the account of the Borrower;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Creditors and hereby covenants and agrees with each Creditor
as follows:
1. Each Guarantor, jointly and severally, irrevocably and
unconditionally guarantees (i) to the Bank Creditors the full and prompt payment
when due (whether at the stated maturity, by acceleration or otherwise) of (x)
the principal of and interest on the Notes issued by, and the Loans made to, the
Borrower under the Credit Agreement and all reimbursement obligations and Unpaid
Drawings with respect to the Letters of Credit issued under the Credit Agreement
and (y) all other obligations and liabilities owing by the Borrower to the Bank
Creditors under the Credit Agreement (including, without limitation,
indemnities, Fees and interest thereon) now existing or hereafter incurred
under, arising out of or in connection with the Credit Agreement or any other
Credit Document and the due performance and compliance with the terms of the
Credit Documents by the Borrower (all such principal, interest, liabilities and
obligations being herein collectively called the "Credit Agreement Obligations")
and (ii) to the extent the Guarantors elect after the date hereof, in a written
instrument signed by all parties hereto, to guarantee obligations in respect of
Interest Rate Protection Agreements, to the Interest Rate Protection Creditors
the full and prompt payment when due (whether at the stated maturity, by
acceleration or other-
<PAGE> 216
EXHIBIT F
Page 3
wise) of all obligations and liabilities owing by the Borrower under any
Interest Rate Protection Agreement, whether now in existence or hereafter
arising, and the due performance and compliance by the Borrower with all terms,
conditions and agreements contained therein (all such obligations and
liabilities being herein collectively called the "Interest Rate Protection
Obligations," and together with the Credit Agreement Obligations herein
collectively called the "Guaranteed Obligations"). Each Guarantor understands,
agrees and confirms that the Creditors may enforce this Guaranty up to the full
amount of the Guaranteed Obligations against each Guarantor without proceeding
against any other Guarantor, the Borrower, against any security for the
Guaranteed Obligations, or under any other guaranty covering all or a portion of
the Guaranteed Obligations. All payments by each Guarantor under this Guaranty
shall be made on the same basis as payments by the Borrower under Sections 4.03
and 4.04 of the Credit Agreement.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations of the Borrower to the Creditors whether or not due or
payable by the Borrower upon the occurrence in respect of the Borrower of any of
the events specified in Section 9.05 of the Credit Agreement, and
unconditionally and irrevocably, jointly and severally, promises to pay such
Guaranteed Obligations to the Creditors, or order, on demand, in lawful money of
the United States.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the indebtedness of the
Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the indebtedness of the Borrower, (c) any payment on or in reduction of
any such other guaranty or undertaking, (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrower or (e) any payment
made to any Creditor on the indebtedness which any Creditor repays the Borrower
pursuant to court order in any bankruptcy, reorgani-
<PAGE> 217
EXHIBIT F
Page 4
zation, arrangement, moratorium or other debtor relief proceeding, and each
Guarantor waives any right to the deferral or modification of its obligations
hereunder by reason of any such proceeding.
4. The obligations of each Guarantor hereunder are independent of
the obligations of any other Guarantor, any other guarantor or the Borrower, and
a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor or the Borrower is joined in any such action or actions. Each
Guarantor waives, to the fullest extent permitted by law, the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
thereof. Any payment by the Borrower or other circumstance which operates to
toll any statute of limitations as to the Borrower shall operate to toll the
statute of limitations as to each Guarantor.
5. Any Creditor may at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing the obligations of such Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or change
or extend the time of payment of, renew or alter, any of the Guaranteed
Obligations, any security therefor, or any liability incurred directly or
indirectly in respect thereof, and the guaranty herein made shall apply to
the Guaranteed Obligations as so changed, extended, renewed or altered;
(b) sell, exchange, release, surrender, realize upon or otherwise
deal with in any manner and in any order any property by whomsoever at any
time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
there-against;
<PAGE> 218
EXHIBIT F
Page 5
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or re- frain from acting;
(d) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to creditors of the
Borrower;
(e) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Creditors regardless of
what liabilities of the Borrower remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, any of the Interest Rate Protection Agreements, the Credit
Documents or any of the instruments or agreements referred to therein, or
otherwise amend, modify or supplement any of the Interest Rate Protection
Agreements, the Credit Documents or any of such other instruments or
agreements; and/or
(g) act or fail to act in any manner referred to in this Guaranty
which may deprive such Guarantor of its right to subrogation against the
Borrower to recover full indemnity for any payments made pursuant to this
Guaranty.
6. No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might constitute a legal or equitable
discharge of a surety or guarantor except payment in full of the Guaranteed
Obligations.
7. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of any
Creditor in exercising any right, power or privilege here-
<PAGE> 219
EXHIBIT F
Page 6
under shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein expressly specified are cumulative and not
exclusive of any rights or remedies which any Creditor would otherwise have. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any Creditor to any other or further action
in any circumstances without notice or demand. It is not necessary for any
Creditor to inquire into the capacity or powers of the Borrower or any of the
Borrower's Subsidiaries or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
8. Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors; and such indebtedness of the Borrower to any Guarantor, if the
Collateral Agent, after an Event of Default has occurred, so requests, shall be
collected, enforced and received by such Guarantor as trustee for the Creditors
and be paid over to the Creditors on account of the Guaranteed Obligations, but
without affecting or impairing in any manner the liability of such Guarantor
under the other provisions of this Guaranty. Prior to the transfer by any
Guarantor of any note or negotiable instrument evidencing any indebtedness of
the Borrower to such Guarantor, such Guarantor shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination.
9. (a) Each Guarantor waives any right (except as shall be required
by applicable statute and cannot be waived) to require the Creditors to (i)
proceed against the Borrower, any other Guarantor, any other guarantor or any
other party, (ii) proceed against or exhaust any security held from the
Borrower, any other Guarantor, any other guarantor or any other party or (iii)
pursue any other remedy in the Administrative Agent's or the Creditors' power
whatsoever. Each Guarantor waives any defense based on or arising out of any
defense of the Borrower, any other Guarantor, any other guarantor or any other
party other than
<PAGE> 220
EXHIBIT F
Page 7
payment in full of the Guaranteed Obligations, including without limitation any
defense based on or arising out of the disability of the Borrower, any other
Guarantor, any other guarantor or any other party, or the unenforceability of
the Guaranteed Obligations or any part thereof from any cause, or the cessation
from any cause of the liability of such Borrower other than payment in full of
the Guaranteed Obligations. The Creditors may, at their election, foreclose on
any security held by the Administrative Agent, the Collateral Agent or the other
Creditors by one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable (to the extent such sale is
permitted by applicable law), or exercise any other right or remedy the
Creditors may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the Guaranteed Obligations have been paid in
full. Each Guarantor waives any defense arising out of any such election by the
Creditors, even though such election operates to impair or extinguish any right
of reimbursement or subrogation or other right or remedy of such Guarantor
against the Borrower or any other party or any security.
(b) Each Guarantor waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. Each Guarantor assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Guarantor
assumes and incurs hereunder, and agrees that the Creditors shall have no duty
to advise any Guarantor of information known to them regarding such
circumstances or risks.
(c) Except as otherwise provided in clause (d) below, each Guarantor
hereby waives all rights of subrogation which it may at any time otherwise have
as a result of this Guaranty (whether contractual, under Section 509 of the
Bankruptcy Code, or otherwise) to the claims of the Creditors against the
Borrower, any other Guarantor or any other guarantor of the Guaranteed
Obligations (collectively, the "Other
<PAGE> 221
EXHIBIT F
Page 8
Parties") and all contractual, statutory or common law rights of reimbursement,
contribution or indemnity from any Other Party which it may at any time
otherwise have as a result of this Guaranty. Each Guarantor hereby further
waives any right to enforce any other remedy which the Creditors now have or may
hereafter have against any Other Party, any endorser or any other guarantor of
all or any part of the Guaranteed Obligations and any benefit of, and any right
to participate in, any security or collateral given to or for the benefit of the
Creditors to secure payment of the Guaranteed Obligations.
(d) Notwithstanding the provisions of the preceding clause (c), (A)
each Guarantor shall have and be entitled to (i) all rights of subrogation
otherwise provided by law in respect of any payment it may make or be obligated
to make under this Guaranty and (ii) all claims (as defined in the Bankruptcy
Code) it would have against any Other Party in the absence of the preceding
clause (c), and to assert and enforce same, and (B) the provisions of clause (c)
above shall be of no further force and effect, in each case on and after, but at
no time prior to, the earlier of (I) the date (the "Subrogation Trigger Date")
which is one year and one day after the date on which all the Guaranteed
Obligations owing to any of the Creditors have been paid in full if and only if
(i) no Default or Event of Default of the type described in Section 9.05 of the
Credit Agreement with respect to the respective Other Party has existed at any
time on and after the date of this Guaranty to and including the Subrogation
Trigger Date and (ii) the existence of such Guarantor's rights under this clause
(d) would not make such Guarantor a creditor (as defined in the Bankruptcy Code)
of the respective Other Party in any insolvency, bankruptcy, reorganization or
similar proceeding commenced on or prior to the Subrogation Trigger Date or (II)
the effective date of any amendment to Title 11 of the United States Code or of
any decision of the United States Supreme Court that in the sole opinion of the
Administrative Agent provides, in effect, that the status of such Guarantor as
an insider creditor of the respective Other Party will not cause transfers of an
interest of such Other Party in property (including payments or grants of
security interests by such Other Party) to any Creditor to be subject to
avoidance as a preference for a longer period of time than if the Guaranteed
Obligations of
<PAGE> 222
EXHIBIT F
Page 9
such Other Party had not been guaranteed or otherwise secured by such Guarantor
or its assets.
10. In order to induce the respective Creditors to extend credit as
contemplated by the agreements referred to above, each Guarantor represents,
warrants and covenants that:
(a) Such Guarantor and each of its Subsidiaries (i) is a duly
organized and validly existing corporation in good standing under the laws
of the jurisdiction of its incorporation and has the corporate power and
authority to own its property and assets and to transact the business in
which it is engaged and presently proposes to engage and (ii) is duly
qualified and is authorized to do business and is in good standing in all
jurisdictions where the failure to be so qualified would have a material
adverse effect on the business, property, assets, liabilities, condition
(financial or otherwise) or prospects of PXI and its Subsidiaries taken as
a whole.
(b) Such Guarantor has the corporate power and authority to execute,
deliver and carry out the terms and provisions of this Guaranty and has
taken all necessary corporate action to authorize the execution, delivery
and performance by it of this Guaranty. Such Guarantor has duly executed
and delivered this Guaranty, and this Guaranty constitutes the legal,
valid and binding obligation of such Guarantor enforceable in accordance
with its terms, except to the extent that the enforceability hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws generally affecting creditors' rights and by equitable
principles (regardless of whether enforcement is sought in equity or at
law).
(c) Neither the execution, delivery or performance by such Guarantor
of this Guaranty, nor compliance by it with the terms and provisions
hereof, (i) will contravene in any material respect any applicable
provision of any law, statute, rule or regulation or any order, writ,
injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of any of
the terms, cove-
<PAGE> 223
EXHIBIT F
Page 10
nants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or
impose) any Lien upon any of the property or assets of such Guarantor or
any of its Subsidiaries pursuant to the terms of any indenture, mortgage,
deed of trust, credit agreement, loan agreement or other material
agreement or instrument to which such Guarantor or any of its Subsidiaries
is a party or by which it or any of its property or assets is bound or to
which it may be subject or (iii) will violate any provision of the
Certificate of Incorporation or By-Laws of such Guarantor or any of its
Subsidiaries.
(d) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by,
any governmental or public body or authority, or any subdivision thereof,
is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of this Guaranty, or (ii) the
legality, validity, binding effect or enforceability of this Guaranty,
except those which have been obtained or made.
11. Each Guarantor covenants and agrees that on and after the date
hereof and until the termination of the Total Revolving Commitment and all
Interest Rate Protection Agreements and when no Letter of Credit or Note remains
outstanding and all Guaranteed Obligations have been paid in full, such
Guarantor shall take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that no violation of any
provision, covenant or agreement contained in Section 7 or 8 of the Credit
Agreement, and so that no Event of Default, is caused by the actions of such
Guarantor or any of its Subsidiaries.
12. The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses (x) of each Creditor in connection
with the enforcement of this Guaranty and, after an Event of Default shall have
occurred and be continuing, the protection of such Creditor's rights hereunder
and (y) of the Administrative Agent in connection with any amendment, waiver or
consent relating hereto (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel)
<PAGE> 224
EXHIBIT F
Page 11
employed by any of the Creditors or by the Administrative Agent, as the case may
be).
13. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns.
14. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of the Required
Banks (or to the extent required by Section 12.11 of the Credit Agreement, with
the written consent of each Bank) and each Guarantor affected thereby (it being
understood that the addition or release of any Guarantor hereunder shall not
constitute a change, waiver, discharge or termination affecting any Guarantor
other than the Guarantor so added or released).
15. Each Guarantor acknowledges that an executed (or conformed) copy
of each of the Credit Documents has been made available to its principal
executive officers and such officers are familiar with the contents thereof.
16. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit Agreement or
any payment default under any Interest Rate Protection Agreement continuing
after any applicable grace period), each Creditor is hereby authorized at any
time or from time to time, without notice to any Guarantor or to any other
Person, any such notice being expressly waived, to set off and to appropriate
and apply any and all deposits (general or special) and any other indebtedness
at any time held or owing by such Creditor to or for the credit or the account
of such Guarantor, against and on account of the obligations and liabilities of
such Guarantor to such Creditor under this Guaranty, irrespective of whether or
not such Creditor shall have made any demand hereunder and although said
obligations, liabilities, deposits or claims, or any of them, shall be
contingent or unmatured.
17. Without in any manner modifying its obligations to the Creditors
under this Guaranty, to the
<PAGE> 225
EXHIBIT F
Page 12
extent that any Guarantor makes any payment under this Guaranty in respect of
the Guaranteed Obligations that is in excess of its Percentage of the aggregate
payments made by all Guarantors under this Guaranty in respect of such
Guaranteed Obligations, then such Guarantor shall have a right of contribution
from each other Guarantor whose payments, if any, in respect of such Guaranteed
Obligations are less than its percentage of the aggregate payments made by all
Guarantors under this Guaranty in respect of such Guaranteed Obligations in an
amount, and with the effect, that after giving effect to any such contribution
right, such Guarantor shall be responsible only for its Percentage of all
payments made hereunder by all Guarantors in respect of such indebtedness. As
used in this Section 17, a Guarantor's Percentage shall mean the percentage
obtained by dividing (i) the amount by which the present fair saleable value of
its assets on the date of this Guaranty exceeds its liabilities on such date
(without giving effect to this Guaranty) (such excess for such Guarantor, its
"Net Worth") by (ii) the aggregate Net Worth of all Guarantors at such time.
18. All notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered to the
Person to which such notice, request, demand or other communication is required
or permitted to be given or made under this Guaranty, addressed to such party
(i) in the case of any Bank Creditor, as provided in the Credit Agreement, (ii)
in the case of any Guarantor, at its address set forth opposite its signature
below and (iii) in the case of any Interest Rate Protection Creditor, at such
address as such Interest Rate Protection Creditor shall have specified in
writing to the Guarantors; or in any case at such other address as any of the
Persons listed above may hereafter notify the others in writing.
19. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (a) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (b) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event each
Guarantor agrees that any such judgment, decree, order,
<PAGE> 226
EXHIBIT F
Page 13
settlement or compromise shall be binding upon such Guarantor, notwithstanding
any revocation hereof or other instrument evidencing any liability of the
Borrower, and such Guarantor shall be and remain liable to the aforesaid payees
hereunder for the amount so repaid or recovered to the same extent as if such
amount had never originally been received by any such payee.
20. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS
AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Guaranty may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Guaranty, each Guarantor hereby accepts
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts and hereby irrevocably waives any right it
may have to object to the laying of venue of any such action or proceeding in
the aforesaid courts and hereby further irrevocably waives and agrees not to
plead or claim that any such action or proceeding has been brought in an
inconvenient forum. Each Guarantor hereby irrevocably designates, appoints and
empowers CT Corporation System with offices on the date hereof at 1633 Broadway,
New York, New York 10019 as its designee, appointee and agent to receive, accept
and acknowledge for and on its behalf, and in respect of its property, service
of any and all legal process, summons, notices and documents which may be served
in any such action or proceeding. If for any reason such designee, appointee and
agent shall cease to be available to act as such, each Guarantor agrees to
designate a new designee, appointee and agent in New York City on the terms and
for the purposes of this provision satisfactory to the Administrative Agent for
the Creditors under this Guaranty. Each Guarantor further irrevocably consents
to the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to each Guarantor at its address set forth opposite its
signature below. Nothing herein shall affect the right of any of the Creditors
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against each Guarantor in any other
jurisdiction.
<PAGE> 227
EXHIBIT F
Page 14
21. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of or liquidated in compliance with the
requirements of Section 8.01 of the Credit Agreement or such sale or other
disposition has been approved in writing by the Required Banks (or all Banks if
required by Section 12.11 of the Credit Agreement), and the proceeds of such
sale, disposition or liquidation are applied in accordance with the provisions
of Section 4.02 of the Credit Agreement (to the extent required as a result of a
reduction of the Total Revolving Commitment pursuant to Section 3.03 of the
Credit Agreement), such Guarantor shall be released from this Guaranty and this
Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no
further force or effect (it being understood and agreed that the sale of any
Person that owns, directly or indirectly, that portion of the capital stock of
any Guarantor which constitutes Collateral shall be deemed to be a sale of such
Guarantor for the purposes of this Section 21).
22. This Guaranty may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Guarantors and the Administrative
Agent.
23. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
<PAGE> 228
EXHIBIT F
Page 15
1300 N.W. 22nd Street PUEBLO MARKETS, INC.
Pompano Beach, Florida 33069
Tel: (954) 977-2500
Fax: (954) 979-5770 By _________________________
Attn: Chief Financial Officer Title:
1300 N.W. 22nd Street PUEBLO SUPER VIDEOS, INC.
Pompano Beach, Florida 33069
Tel: (954) 977-2500
Fax: (954) 979-5770 By _________________________
Attn: Chief Financial Officer Title:
1300 N.W. 22nd Street ALL TRUCK, INC.
Pompano Beach, Florida 33069
Tel: (954) 977-2500
Fax: (954) 979-5770 By _________________________
Attn: Chief Financial Officer Title:
1300 N.W. 22nd Street XTRA DRUGSTORE, INC.
Pompano Beach, Florida 33069
Tel: (954) 977-2500
Fax: (954) 979-5770
Attn: Chief Financial Officer By _________________________
Title:
1300 N.W. 22nd Street PUEBLO CARIBBEAN VIDEOS,
Pompano Beach, Florida 33069 INC.]
Tel: (954) 977-2500
Fax: (954) 979-5770
Attn: Chief Financial Officer By _________________________
Title:
Accepted and Agreed to:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By __________________________
Title:
<PAGE> 229
EXHIBIT G-1
[FORM OF BORROWER SECURITY AGREEMENT]
between
PUEBLO INTERNATIONAL, INC.
and
THE BANK OF NOVA SCOTIA,
as Collateral Agent
Dated as of April __, 1997
<PAGE> 230
EXHIBIT G-1
TABLE OF CONTENTS
Page
----
ARTICLE I SECURITY INTERESTS............................................ 3
1.1. Grant of Security Interests.................................... 3
1.2. Power of Attorney.............................................. 4
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES
AND COVENANTS.............................................. 5
2.1. Necessary Filings.............................................. 5
2.2. No Liens....................................................... 5
2.3. Other Financing Statements..................................... 6
2.4. Chief Executive Office; Records................................ 6
2.5. Location of Inventory and Equipment............................ 7
2.6. Recourse....................................................... 8
2.7. Trade Names; Change of Name.................................... 8
ARTICLE III SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS.................. 9
3.1. Additional Representations and
Warranties.................................................. 9
3.2. Maintenance of Records......................................... 9
3.3. Direction to Account Debtors; Contracting
Parties; etc................................................ 10
3.4. Modification of Terms; etc..................................... 11
3.5. Collection..................................................... 11
3.6. Instruments.................................................... 12
3.7. Further Actions................................................ 12
ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS........................... 12
4.1. Additional Representations and
Warranties.................................................. 12
4.2. Licenses and Assignments....................................... 13
4.3. Infringements.................................................. 13
4.4. Preservation of Marks.......................................... 13
4.5. Maintenance of Registration.................................... 13
(i)
<PAGE> 231
EXHIBIT G-1
Page
----
4.6. Future Registered Marks........................................ 14
4.7. Remedies....................................................... 14
ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS
AND COPYRIGHTS............................................. 15
5.1. Additional Representations and
Warranties.................................................. 15
5.2. Licenses and Assignments....................................... 15
5.3. Infringements.................................................. 15
5.4. Maintenance of Patents......................................... 16
5.5. Prosecution of Patent Application.............................. 16
5.6. Other Patents and Copyrights................................... 16
5.7. Remedies....................................................... 16
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL.......................... 17
6.1. Protection of Collateral Agent's
Security.................................................... 17
6.2. Warehouse Receipts Non-negotiable.............................. 18
6.3. Further Actions................................................ 18
6.4. Financing Statements........................................... 18
ARTICLE VII REMEDIES UPON OCCURRENCE OF SPECIFIED
EVENTS..................................................... 19
7.1. Remedies; Obtaining the Collateral Upon
Default..................................................... 19
7.2. Remedies; Disposition of the Collateral........................ 20
7.3. Waiver of Claims............................................... 22
7.4. Application of Proceeds........................................ 23
7.5. Remedies Cumulative............................................ 26
7.6. Discontinuance of Proceedings.................................. 26
ARTICLE VIII INDEMNITY..................................................... 27
8.1. Indemnity...................................................... 27
8.2. Indemnity Obligations Secured by
Collateral; Survival........................................ 29
ARTICLE IX DEFINITIONS................................................... 29
ARTICLE X THE COLLATERAL AGENT.......................................... 36
10.1. Appointment.................................................... 36
10.2. Nature of Duties............................................... 36
10.3. Lack of Reliance on the Collateral Agent....................... 37
10.4. Certain Rights of the Collateral Agent......................... 38
(ii)
<PAGE> 232
EXHIBIT G-1
Page
----
10.5. Reliance....................................................... 39
10.6. Indemnification................................................ 39
10.7. The Collateral Agent in its Individual
Capacity.................................................... 40
10.8. Holders........................................................ 40
10.9. Resignation by the Collateral Agent............................ 41
10.10. Fees and Expenses of Collateral Agent.......................... 41
ARTICLE XI MISCELLANEOUS................................................. 42
11.1. Notices........................................................ 42
11.2. Waiver; Amendment.............................................. 43
11.3. Obligations Absolute........................................... 44
11.4. Successors and Assigns......................................... 44
11.5. Headings Descriptive........................................... 44
11.6. Severability................................................... 44
11.7. GOVERNING LAW.................................................. 45
11.8. Assignor's Duties.............................................. 45
11.9. Termination; Release........................................... 45
11.10. Counterparts................................................... 46
ANNEX A Schedule of Permitted Filings
ANNEX B Schedule of Record Locations
ANNEX C Schedule of Inventory and Equipment Locations
ANNEX D Schedule of Trade, Fictitious and Other Names
ANNEX E Schedule of Marks
ANNEX F Schedule of License Agreements and Assignments
ANNEX G Schedule of Patents and Applications
ANNEX H Schedule of Copyrights and Applications
(iii)
<PAGE> 233
EXHIBIT G-1
[FORM OF BORROWER SECURITY AGREEMENT]
AMENDMENT AND RESTATEMENT, dated as of April __, 1997, to
SECURITY AGREEMENT (as amended, modified, supplemented or restated from time to
time, this "Agreement"), dated as of July 28, 1993, between PUEBLO
INTERNATIONAL, INC. (the "Assignor") and THE BANK OF NOVA SCOTIA, as Collateral
Agent (the "Collateral Agent"), for the benefit of (x) the Banks, the
Syndication Agent and the Administrative Agent from time to time party to the
Credit Agreement hereinafter referred to (such Banks, Syndication Agent and
Administrative Agent, the "Bank Creditors"), and (y) any Bank that enters into
an interest rate protection agreement (including, without limitation, interest
rate swaps, caps, floors, collars and similar agreements, collectively, the
"Interest Rate Protection Agreements") with the Assignor as permitted by Section
8.03(c) of the Credit Agreement, even if any such Bank subsequently ceases to be
a Bank under the Credit Agreement for any reason and for so long as any such
Bank participates in the extension of any such Interest Rate Protection
Agreements, and any subsequent assignee, (collectively, the "Interest Rate
Protection Creditors" and, together with the Bank Creditors, the "Secured
Parties"). All capitalized terms used herein shall have the meanings provided in
Article IX of this Agreement and, if not so defined herein, capitalized terms
used herein and defined in the Credit Agreement shall be used herein as so
defined.
W I T N E S S E T H :
WHEREAS, the Assignor, Pueblo Xtra International, Inc., Xtra
Super Food Centers, Inc., the various Banks from time to time party thereto, The
Bank of Nova Scotia, as Administrative Agent (the "Administrative Agent"), and
NationsBank, N.A. (South), as Syndication Agent (the "Syndication Agent") have
entered into an Amendment and Restatement, dated as of April __, 1997, to,
Credit Agreement, dated as of July 21, 1993, providing for the making of Loans
and the issuance of, and participation in, Letters of Credit as contemplated
therein (as used herein, the term "Credit Agreement" means the Credit Agreement
described above in this paragraph, as the same may be amended, modified, ex-
<PAGE> 234
EXHIBIT G-1
Page 2
tended, renewed, restated or supplemented from time to time, and including any
agreement extending the maturity of, or restructuring (including, but not
limited to, the inclusion of additional borrowers or any increase in the amount
borrowed) all or any portion of the Indebtedness under such agreement or any
successor agreements;
WHEREAS, the Assignor may at any time and from time to time
enter into one or more Interest Rate Protection Agreements with one or more
Interest Rate Protection Creditors in compliance with the provisions of the
Credit Agreement;
WHEREAS, it is a condition precedent to each of the
above-described extensions of credit to the Assignor that the Assignor shall
have executed and delivered to the Collateral Agent this Agreement; and
WHEREAS, the Assignor desires to execute and deliver this
Agreement to satisfy the conditions described in the preceding paragraph.
NOW, THEREFORE, in consideration of the extensions of credit
made and to be made to the Assignor and other benefits accruing to the Assignor,
the receipt and sufficiency of which are hereby acknowledged, the Assignor
hereby makes the following representations and warranties to the Collateral
Agent for the benefit of the Secured Parties and hereby covenants and agrees
with the Collateral Agent for the benefit of the Secured Parties as follows:
<PAGE> 235
EXHIBIT G-1
Page 3
ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the full
and prompt payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of all of the Obligations, the Assignor does hereby
sell, assign and transfer unto the Collateral Agent, and does hereby grant to
the Collateral Agent for the benefit of the Secured Parties, a continuing
security interest of first priority (subject to Liens evidenced by Permitted
Filings and other Liens permitted under Section 8.02 of the Credit Agreement and
existing on the Restatement Effective Date) in, all of the right, title and
interest of the Assign- or in, to and under all of the following, whether now
existing or hereafter from time to time acquired (all of the following, with
respect to the Assignor, the "Collateral"): (i) each and every Receivable, (ii)
all Contracts, together with all Contract Rights arising thereunder, (iii) all
Inventory, (iv) the Cash Collateral Account established for the Assignor and all
monies, securities and instruments deposited or required to be deposited in such
Cash Collateral Account, (v) all Equipment, (vi) all Marks, together with the
registrations and right to all renewals thereof, and the goodwill of the
business of the Assignor symbolized by the Marks, (vii) all Patents and
Copyrights, and all reissues, renewals or extensions thereof, (viii) all
computer programs of the Assignor and all intellectual property rights therein
and all other proprietary information of the Assignor, including, but not
limited to, trade secrets, (ix) all other Goods, General Intangibles, Chattel
Paper, Documents and Instruments (other than the Pledged Securities and any
other capital stock not required to be pledged pursuant to the Borrower Pledge
Agreement), and (x) all Proceeds and products of any and all Collateral referred
to in clauses (i) through (ix) above and this clause (x); provided, however,
that to the extent that any Contract may be terminated (in accordance with the
terms thereof after giving effect to any applicable laws) in the event of the
granting of a security interest therein, or in the event the granting of a
security interest in any Contract shall violate applicable law, then the
security interest granted hereby shall be limited to the extent necessary so
that such Contract may not be so
<PAGE> 236
EXHIBIT G-1
Page 4
terminated or no such violation of law shall exist, as the case may be.
(b) The security interests of the Collateral Agent under this
Agreement extend to all Collateral of the kind which is the subject of this
Agreement which the Assignor may acquire at any time during the continuation of
this Agreement.
(c) If (i) a Bankruptcy Default or Notified Acceleration
Event has occurred and is continuing or (ii) any other Event of Default or
Acceleration Event has occurred and is continuing, but in the case of this
clause (ii) only if, and to the extent that, the Collateral Agent (acting at the
direction of the Required Banks) has given notice to the Assignor to take the
actions specified below in this sentence, then in either such case all cash
Proceeds of, and cash payments received in respect of, Collateral shall be paid
by the Assignor (or the respective payor) directly to the Cash Collateral
Account or as otherwise directed by the Collateral Agent. At any time while the
circumstances described in the immediately preceding sentence do not exist, all
cash payments received in respect of the Collateral (including, without
limitation, all payments received in respect of Receivables and Contracts, or in
payment for sales of Inventory, but excluding cash Proceeds of sales of other
Collateral unless the respective sale and release of Collateral is permitted
pursuant to this Agreement and the Credit Agreement) shall be paid to the
Assignor for application in accordance with (and to the extent provided by) the
Credit Agreement.
(d) The parties further agree that, as of the effective date
of the Puerto Rico Commercial Transactions Act (Act no. 241 enacted on September
19, 1996), the security interests of the Collateral Agent under this Agreement
shall extend to all Collateral now or hereafter located in the Commonwealth of
Puerto Rico.
1.2. Power of Attorney. The Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of the Assignor or otherwise), in the Collateral Agent's
discretion, to take any action and to execute any
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instrument which the Collateral Agent may reasonably deem necessary or advisable
to accomplish the purposes of this Agreement, which appointment as attorney is
coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Necessary Filings. All filings, registrations and
recordings necessary or appropriate to create, preserve, protect and perfect the
security interest granted by the Assignor to the Collateral Agent hereby in
respect of the Collateral have been or shall have been accomplished and the
security interest granted to the Collateral Agent pursuant to this Agreement in
and to the Collateral constitutes or shall constitute a perfected security
interest therein prior to the rights of all other Persons therein and subject to
no other Liens (except that the Collateral may be subject to the security
interests evidenced by the financing statements disclosed on Annex A hereto, but
only to the respective date, if any, set forth on Annex A (the "Permitted
Filings") and to any other Liens permitted under Section 8.02 of the Credit
Agreement and existing on the Restatement Effective Date) and is or shall be
entitled to all the rights, priorities and benefits afforded by the Uniform
Commercial Code or other relevant law as enacted in any relevant jurisdiction to
perfected security interests.
2.2. No Liens. The Assignor is, and as to Collateral acquired
by it from time to time after the date hereof the Assignor will be, the owner of
all Collateral free from any Lien, security interest, encumbrance or other
right, title or interest of any Person (other than Liens created hereby, Liens
permitted under Section 8.02 of the Credit Agreement or evidenced by the
Permitted Filings), and the Assignor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein adverse to the Collateral Agent.
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2.3. Other Financing Statements. As of the date hereof, there
is no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) on file or of record in any relevant
jurisdiction covering or purporting to cover any interest of any kind in the
Collateral except as disclosed in Annex A hereto and so long as the Termination
Date has not occurred or any of the Credit Agreement Obligations remain unpaid,
the Assignor will not execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) or statements relating to the Collateral, except
financing statements filed or to be filed in respect of and covering the
security interests granted hereby by the Assignor and to the extent permitted to
be granted by the Assignor pursuant to Section 8.02 of the Credit Agreement.
2.4. Chief Executive Office; Records. The chief executive
office of Pueblo International, Inc., is located at 1300 Northwest 22nd Street,
Pompano Beach, Florida 33069. The Assignor will not move its chief executive
office except to such new locations as the Assignor may establish in accordance
with the last sentence of this Section 2.4. The originals of all documents
evidencing all Receivables and Contract Rights of the Assignor and the only
original books of account and records of the Assignor relating thereto are, and
will continue to be, kept at such chief executive office, at such other
locations shown on Annex B hereto or at such new locations as the Assignor may
establish in accordance with the last sentence of this Section 2.4, provided
that, so long as (x) true and correct copies of all documents evidencing such
Receivables and Contract Rights and copies of such books and records are kept at
such chief executive office or at such other locations shown on Annex B hereto,
and (y) the failure to maintain any original copies of the foregoing at such
locations could not have an adverse effect upon the validity, perfection or
priority of any security interest granted hereunder, the Assignor shall be
permitted to keep original copies of the foregoing at other locations to be
determined in a manner consistent with its past practices. All Receivables and
Contract Rights of the Assignor are, and will continue to be, maintained at, and
controlled and directed (including, without limitation, for general accounting
purposes) from, the office locations described above. The Assignor shall not
establish new locations for
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such offices until (i) it shall have given to the Collateral Agent not less than
45 days' prior written notice of its intention so to do, clearly describing such
new location and providing such other information in connection therewith as the
Collateral Agent may reasonably request, (ii) with respect to such new location,
it shall have taken all action to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect and (iii) at the request of the
Collateral Agent, it shall have furnished an opinion of counsel reasonably
acceptable to the Collateral Agent to the effect that all financing or
continuation statements and amendments or supplements thereto have been filed in
the appropriate filing office or offices, and all other actions (including,
without limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to perfect (and maintain
the perfection and priority of) the security interest granted hereby.
2.5. Location of Inventory and Equipment. All Inventory and
Equipment held on the date hereof by the Assignor is located at one of the
locations shown on Annex C hereto. The Assignor agrees that all Inventory and
all Equipment now held or subsequently acquired by it shall be kept at (or shall
be in transport to) any one of the locations shown on Annex C hereto, or such
new location as the Assignor may establish in accordance with the last sentence
of this Section 2.5. The Assignor may establish a new location for Inventory and
Equipment only if (i) it shall give to the Collateral Agent written notice of
such new location as promptly as practicable and in no event later than 60 days
after the establishment thereof, clearly describing such new location and
providing such other information in connection therewith as the Collateral Agent
may reasonably request, (ii) with respect to such new location, as promptly as
practicable and in no event later than 75 days after the establishment thereof,
it shall have taken all action to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect and (iii) at the request of the
Collateral Agent, it shall have furnished an opinion of counsel reasonably
acceptable to the Collateral Agent to the effect that all financing or
continuation statements and amendments or supplements thereto have been filed in
the
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appropriate filing office or offices, and all other actions (including, without
limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to perfect (and maintain
the perfection and priority of) the security interest granted hereby.
2.6. Recourse. This Agreement is made with full recourse to
the Assignor and pursuant to and upon all the warranties, representations,
covenants, and agreements on the part of the Assignor contained herein, in the
other Credit Documents, in the Interest Rate Protection Agreements and otherwise
in writing in connection herewith or therewith.
2.7. Trade Names; Change of Name. The Assignor neither has nor
operates in any jurisdiction under, or in the preceding 12 months has had or has
operated in any jurisdiction under, any trade names, fictitious names or other
names (including, without limitation, any names of divisions or operations)
except its legal name and such other trade, fictitious or other names as are
listed on Annex D hereto. The Assignor shall not change its legal name or assume
or operate in any jurisdiction under any trade, fictitious or other name except
those names listed on Annex D hereto and new names (including, without
limitation, any names of divisions or operations) established in accordance with
the last sentence of this Section 2.7. The Assignor shall not assume nor operate
in any jurisdiction under any new trade, fictitious or other name until (i) it
shall have given to the Collateral Agent not less than 30 days' prior written
notice of its intention so to do, clearly describing such new name and the
jurisdictions in which such new name shall be used and providing such other
information in connection therewith as the Collateral Agent may reasonably
request, (ii) with respect to such new name, the Assignor shall have taken all
action to maintain the security interest of the Collateral Agent in the
Collateral intended to be granted hereby at all times fully perfected and in
full force and effect and (iii) at the request of the Collateral Agent, the
Assignor shall have furnished an opinion of counsel reasonably acceptable to the
Collateral Agent to the effect that all financing or continuation statements and
amendments or supplements thereto have been filed in the appropriate filing
office or offices, and all other actions (including, without limitation, the
payment of all filing fees and taxes,
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if any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time
when each of its Receivables arises, the Assignor shall be deemed to have
represented and warranted that (x) such Receivable, and all records, papers and
documents relating thereto (if any) are genuine and in all respects what they
purport to be, and that all papers and documents (if any) relating thereto (i)
will represent the obligation of the account debtor evidencing indebtedness
unpaid and owed by the respective account debtor arising out of the performance
of labor or services or the sale or lease and delivery of the merchandise listed
therein, or both, (ii) will be the only original writings evidencing and
embodying such obligation of the account debtor named therein (other than copies
created for general accounting purposes), and (iii) will be in compliance and
will conform in all material respects with all applicable federal, state and
local laws and applicable laws of any relevant foreign jurisdiction and (y)
there is no fact or circumstance known to Assignor which would suggest that any
such Receivable (i) will not represent the genuine, legal, valid and binding
obligation of such account debtor or (ii) will not evidence true and valid
obligations, enforceable in accordance with their respective terms, except to
the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws generally
affecting creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law).
3.2. Maintenance of Records. The Assignor will keep and
maintain at its own cost and expense satisfactory and complete records of its
Receivables and Contracts, including, but not limited to, the originals of all
documentation (including each Contract) with respect thereto, records of all
payments received, all credits granted thereon,
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all merchandise returned and all other dealings therewith, and the Assignor will
make the same available on the Assignor's premises to the Collateral Agent for
inspection, at the Assignor's own cost and expense, at any and all reasonable
times upon demand. Upon the occurrence and during the continuance of any of the
conditions specified in the first sentence of Section 1.1(c) of this Agreement,
and upon the request of the Collateral Agent, the Assignor shall, at its own
cost and expense, deliver all tangible evidence of its Receivables and Contract
Rights (including, without limitation, all documents evidencing the Receivables
and all Contracts) and such books and records to the Collateral Agent or to its
representatives (copies of which evidence and books and records may be retained
by the Assignor). If the Collateral Agent so directs, the Assignor shall legend,
in form and manner reasonably satisfactory to the Collateral Agent, the
Receivables and the Contracts, as well as books, records and documents of the
Assignor evidencing or pertaining to such Receivables and Contracts with an
appropriate reference to the fact that such Receivables and Contracts have been
assigned to the Collateral Agent and that the Collateral Agent has a security
interest therein.
3.3. Direction to Account Debtors; Contracting Parties; etc.
Upon the occurrence and during the continuance of an Event of Default, and if
the Collateral Agent so directs the Assignor, the Assignor agrees (x) to cause
all payments on account of the Receivables and Contracts to be made directly to
the Cash Collateral Account (y) that the Collateral Agent may, at its option,
directly notify the obligors with respect to any Receivables and/or under any
Contracts to make payments with respect thereto as provided in preceding clause
(x) and (z) that the Collateral Agent may enforce collection of any such
Receivables and Contracts and may adjust, settle or compromise the amount of
payment thereof, in the same manner and to the same extent that the Assignor
might have done. Without notice to or assent by the Assignor, the Collateral
Agent may apply any or all amounts then in, or thereafter deposited in, the Cash
Collateral Account in the manner provided in Section 7.4 of this Agreement. The
reasonable costs and expenses (including attorneys' fees) of collection, whether
incurred by the Assignor or the Collateral Agent, shall be borne by the
Assignor.
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3.4. Modification of Terms; etc. The Assignor shall rescind or
cancel any indebtedness evidenced by any Receivable or under any Contract, or
modify any term thereof or make any adjustment with respect thereto, or extend
or renew the same, or compromise or settle any material dispute, claim, suit or
legal proceeding relating thereto, or sell any Receivable or Contract, or
interest therein, without the prior written consent of the Collateral Agent,
except as permitted by Section 3.5 hereof and except, so long as none of the
conditions described in the first sentence of Section 1.1(c) of this Agreement
shall occur and be continuing, such modifications, adjustments and sales
effected by the Assignor in the ordinary course of business consistent with past
practice. The Assignor will duly fulfill all obligations on its part to be
fulfilled under or in connection with the Receivables and Contracts and will do
nothing to impair the rights of the Collateral Agent in the Receivables or
Contracts.
3.5. Collection. The Assignor shall endeavor to cause to be
collected from the account debtor named in each of its Receivables or the
obligor under any Contract, as and when due (including, without limitation,
amounts which are delinquent, such amounts to be collected in accordance with
generally accepted lawful collection procedures) any and all amounts owing under
or on account of such Receivable or Contract, and apply forthwith upon receipt
thereof all such amounts as are so collected to the outstanding balance of such
Receivable or under such Contract, except that, at any time when payments in
respect of Receivables and Contracts may be made to the Assignor in accordance
with the second sentence of Section 1.1(c) of this Agreement, the Assignor may
allow in the ordinary course of business as adjustments to amounts owing under
its Receivables and Contracts (i) an extension or renewal of the time or times
of payment, or settlement for less than the total unpaid balance, which the
Assignor finds appropriate in accordance with sound business judgment and (ii) a
refund or credit due as a result of returned or damaged merchandise or
improperly performed services. The reasonable costs and expenses (including,
without limitation, attorneys' fees) of collection, whether incurred by the
Assignor or the Collateral Agent, shall be borne by the Assignor.
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3.6. Instruments. If the Assignor owns or acquires any
Instrument constituting Collateral in an amount equal to or greater than
$250,000, the Assignor will within ten days notify the Collateral Agent thereof,
and upon request by the Collateral Agent will promptly deliver such Instrument
to the Collateral Agent appropriately endorsed to the order of the Collateral
Agent as further security hereunder.
3.7. Further Actions. The Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING MARKS
4.1. Additional Representations and Warranties. The Assignor
represents and warrants that it is the true and lawful exclusive owner of the
Marks listed in Annex E hereto and that said listed Marks include all the United
States federal registrations or applications registered in the United States
Patent and Trademark Office that the Assignor now owns in connection with its
business. The Assignor represents and warrants that it owns or is licensed to
use all Marks that it uses. The Assignor further warrants that it is aware of no
third party claim that any aspect of the Assignor's present or contemplated
business operations infringes or will infringe any mark. The Assignor represents
and warrants that it is the owner of record of all United States Trademark
registrations and applications listed in Annex D hereto and that said
registrations are valid, subsisting, have not been cancelled and that the
Assignor is not aware of any third-party claim that any of said registrations is
invalid or unenforceable. The Assignor hereby grants to the Collateral Agent an
absolute power of attorney to sign, upon the occurrence and during the
continuance of (i) a Bank-
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ruptcy Default or Notified Acceleration Event or (ii) any other Event of Default
or Acceleration Event, but in the case of this clause (ii) only to the extent
the Required Banks have so directed, any document which may be required by the
United States Patent and Trademark Office in order to effect an absolute
assignment of all right, title and interest in each Mark, and record the same.
4.2. Licenses and Assignments. Other than the license
agreements listed on Annex F hereto and any extensions or renewals thereof, the
Assignor hereby agrees not to divest itself of any right under any Mark absent
prior written approval of the Collateral Agent.
4.3. Infringements. The Assignor agrees, promptly upon
learning thereof, to notify the Collateral Agent in writing of the name and
address of, and to furnish such pertinent information that may be available with
respect to, any party who, in any material respect, may be infringing or
otherwise violating any of the Assignor's rights in and to any significant Mark,
or with respect to any party claiming that the Assignor's use of any significant
Mark violates in any material respect any property right of that party. The
Assignor further agrees, unless otherwise agreed by the Collateral Agent,
diligently to prosecute any Person infringing, in any material respect, any
significant Mark.
4.4. Preservation of Marks. The Assignor agrees to use its
significant Marks in interstate or foreign commerce during the time in which
this Agreement is in effect, sufficiently to preserve such Marks as trademarks
or service marks registered under the laws of the United States.
4.5. Maintenance of Registration. The Assignor shall, at its
own expense, diligently process all documents required by the Trademark Act of
1946, 15 U.S.C. Sections 1051 et seq. to maintain trademark registration,
including but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
significant Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and
shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Col-
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lateral Agent. The Assignor agrees to notify the Collateral Agent six (6) months
prior to the dates on which the affidavits of use or the applications for
renewal registration are due with respect to any significant Mark that the
affidavits of use or the renewal is being processed.
4.6. Future Registered Marks. If any Mark registration issues
hereafter to the Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within thirty (30)
days of receipt of such certificate the Assignor shall deliver a copy of such
certificate, and a grant of security in such mark to the Collateral Agent,
confirming the grant thereof hereunder, the form of such confirmatory grant to
be substantially the same as the form hereof.
4.7. Remedies. If there shall occur and be continuing an Event
of Default, the Collateral Agent may, by written notice to the Assignor, take
any or all of the following actions: (i) declare the entire right, title and
interest of the Assignor in and to each of the Marks, together with all
trademark rights and rights of protection to the same, vested, in which event
such rights, title and interest shall immediately vest, in the Collateral Agent
for the benefit of the Secured Parties, in which case the Collateral Agent shall
be entitled to exercise the power of attorney referred to in Section 4.1 hereof
to execute, cause to be acknowledged and notarized and record said absolute
assignment with the applicable agency; (ii) take and use or sell the Marks and
the goodwill of the Assignor's business symbolized by the Marks and the right to
carry on the business and use the assets of the Assignor in connection with
which the Marks have been used; and (iii) direct the Assignor to refrain, in
which event the Assignor shall refrain, from using the Marks in any manner
whatsoever, directly or indirectly, and, if requested by the Collateral Agent,
change the Assignor's corporate name to eliminate therefrom any use of any Mark
and execute such other and further documents that the Collateral Agent may
request to further confirm this and to transfer ownership of the Marks and
registrations and any pending trademark application in the United States Patent
and Trademark Office to the Collateral Agent.
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ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS AND COPYRIGHTS
5.1. Additional Representations and Warranties. The Assignor
represents and warrants that it is the true and lawful exclusive owner of all
rights in the Patents listed in Annex G hereto and in the Copyrights listed in
Annex H hereto, that said Patents include all the United States patents and
applications for United States patents that the Assignor now owns and that said
Copyrights constitute all the United States copyrights registered with the
United States Copyright Office and applications for United States copyrights
that the Assignor now owns. The Assignor represents and warrants that it owns or
is licensed to practice under all Patents and Copyrights that it now uses or
practices under. The Assignor further warrants that it is aware of no third
party claim that any aspect of the Assignor's present or contemplated business
operations infringes or will infringe any patent or any copyright. The Assignor
hereby grants to the Collateral Agent an absolute power of attorney to sign,
upon the occurrence and during the continuance of (i) a Bankruptcy Default or
Notified Acceleration Event or (ii) any other Event of Default or Acceleration
Event, but in the case of this clause (ii) only to the extent the Required Banks
have so directed, any document which may be required by the United States Patent
and Trademark Office or the United States Copyright Office in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and record the same.
5.2. Licenses and Assignments. Other than the license
agreements listed on Annex F hereto and any extensions or renewals thereof, the
Assignor hereby agrees not to divest itself of any right under any Patent or
Copyright absent prior written approval of the Collateral Agent.
5.3. Infringements. The Assignor agrees, promptly upon
learning thereof, to furnish the Collateral Agent in writing with all pertinent
information available to the Assignor with respect to any material infringement
or other material violation of the Assignor's rights in any significant Patent
or Copyright, or with respect to any claim that practice of any significant
Patent or Copyright materially
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violates any property right of that party. The Assignor further agrees, absent
direction of the Collateral Agent to the contrary, diligently to prosecute any
Person infringing, in any material respect, any significant Patent or Copyright.
5.4. Maintenance of Patents. At its own expense, the Assignor
shall make timely payment of all post-issuance fees required pursuant to 35
U.S.C. Section 41 to maintain in force rights under each Patent.
5.5. Prosecution of Patent Application. At its own expense,
the Assignor shall diligently prosecute all applications for United States
patents listed in Annex F hereto and shall not abandon any such application
prior to exhaustion of all administrative and judicial remedies, absent written
consent of the Collateral Agent.
5.6. Other Patents and Copyrights. Within 30 days of
acquisition of a United States Patent or Copyright by or on behalf of the
Assignor, or of the filing of an application for a United States Patent or
Copyright by or on behalf of the Assignor, the Assignor shall deliver to the
Collateral Agent a copy of said Patent or Copyright or such application, as the
case may be, with a grant of security as to such Patent or Copyright, as the
case may be, confirming the grant thereof hereunder, the form of such
confirmatory grant to be substantially the same as the form hereof.
5.7. Remedies. If there shall occur and be continuing an Event
of Default, the Collateral Agent may by written notice to any Assignor, take any
or all of the following actions: (i) declare the entire right, title, and
interest of the Assignor in each of the Patents and Copyrights vested, in which
event such right, title, and interest shall immediately vest in the Collateral
Agent for the benefit of the Secured Parties, in which case the Collateral Agent
shall be entitled to exercise the power of attorney referred to in Section 5.1
hereof to execute, cause to be acknowledged and notarized and record said
absolute assignment with the applicable agency; (ii) take and practice or sell
the Patents and Copyrights; and (iii) direct the Assignor to refrain, in which
event the Assignor shall refrain, from practicing the Patents and Copyrights
directly or indirectly, and the Assignor shall execute such other and further
documents as the Collateral Agent may request further
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to confirm this and to transfer ownership of the Patents and Copyrights to the
Collateral Agent for the benefit of the Secured Parties.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. The Assignor
will not do anything to impair the rights of the Collateral Agent in the
Collateral. The Assignor will at all times keep its Inventory and Equipment
insured in favor of the Collateral Agent, at the Assignor's own expense to the
extent and in the manner provided in the Credit Agreement; all policies or
certificates (or certified copies thereof) with respect to such insurance (and
any other insurance maintained by the Assignor) (i) shall be endorsed to the
Collateral Agent's satisfaction for the benefit of the Collateral Agent
(including, without limitation, by naming the Collateral Agent as loss payee),
(ii) shall state that such insurance policies shall not be cancelled or revised
without 30 days' prior written notice thereof by the insurer to the Collateral
Agent (but only 10 days' prior written notice of cancellation for failure to
make payments under such policies), (iii) shall provide that the respective
insurers irrevocably waive any and all rights of subrogation with respect to the
Collateral Agent and the Secured Parties and (iv) shall be deposited with the
Collateral Agent. If the Assignor shall fail to insure its Inventory and
Equipment in accordance with the preceding sentence, or if the Assignor shall
fail to so endorse and deposit all policies or certificates with respect
thereto, the Collateral Agent shall have the right (but shall be under no
obligation) to procure such insurance and the Assignor agrees to reimburse the
Collateral Agent for all costs and expenses of procuring such insurance. The
Collateral Agent may apply any proceeds of such insurance in accordance with
Section 7.4 hereof. The Assignor assumes all liability and responsibility in
connection with the Collateral acquired by it and the liability of the Assignor
to pay the Obligations shall in no way be affected or diminished by reason of
the fact that such Collateral may be lost, destroyed, stolen, damaged or for any
reason whatsoever unavailable to the Assignor.
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6.2. Warehouse Receipts Non-negotiable. The Assignor agrees
that if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued with respect to any of its Inventory, such warehouse receipt or receipt
in the nature thereof shall not be "negotiable" (as such term is used in Section
7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction
or under other relevant law).
6.3. Further Actions. The Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
6.4. Financing Statements. The Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form acceptable to
the Collateral Agent, as the Collateral Agent may from time to time reasonably
request or as are necessary or desirable in the opinion of the Collateral Agent
to establish and maintain a valid, enforceable, first priority perfected
security interest in the Collateral as provided herein and the other rights and
security contemplated hereby all in accordance with the Uniform Commercial Code
as enacted in any and all relevant jurisdictions or any other relevant law. The
Assignor will pay any applicable filing fees, recordation taxes and related
expenses. The Assignor authorizes the Collateral Agent to file any such
financing statements without the signature of the Assignor where permitted by
law. The Assignor further constitutes and appoints the Collateral Agent its true
and lawful attorney, irrevocably and with full power, which appointment is
coupled with an interest, to execute on behalf of the Assignor and file any
financing statements necessary to perfect the security interests granted
hereunder with respect to all Collateral now or hereafter situated in the
Commonwealth of
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Puerto Rico, as of the effective date of the Puerto Rico Commercial Transactions
Act and at all times thereafter.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF SPECIFIED EVENTS
7.1. Remedies; Obtaining the Collateral Upon Default. The
Assignor agrees that, if there shall have occurred and be continuing Event of
Default, then and in every such case, subject to any mandatory requirements of
applicable law then in effect, the Collateral Agent, in addition to any rights
now or hereafter existing under applicable law, shall have all rights as a
secured creditor under the Uniform Commercial Code in all relevant jurisdictions
and may also:
(a) personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof, from the Assignor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon
the Assignor's premises where any of the Collateral is located and
remove the same and use in connection with such removal any and all
services, supplies, aids and other facilities of the Assignor; and
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation (including, without limitation, the
Receivables and the Contracts) constituting the Collateral to make any
payment required by the terms of such agreement, instrument or other
obligation directly to the Collateral Agent and may exercise any and
all remedies of the Assignor in respect of such Collateral; and
(c) withdraw all monies, securities and instruments in the
Cash Collateral Account for application to the Obligations in
accordance with Section 7.4 hereof; and
(d) sell, assign or otherwise liquidate, or direct the
Assignor to sell, assign or otherwise liquidate, any or all of the
Collateral or any part thereof, and take
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possession of the proceeds of any such sale or liquidation; and
(e) take possession of the Collateral or any part thereof, by
directing the Assignor in writing to deliver the same to the Collateral
Agent at any place or places designated by the Collateral Agent, in
which event the Assignor shall at its own expense:
(i) forthwith cause the same to be moved to the
place or places so designated by the Collateral Agent and
there delivered to the Collateral Agent, and
(ii) store and keep any Collateral so delivered to
the Collateral Agent at such place or places pending further
action by the Collateral Agent as provided in Section 7.2
hereof, and
(iii) while the Collateral shall be so stored and
kept, provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and maintain
them in good condition; and
(f) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the
Collateral for such term and on such conditions and in such manner as
the Collateral Agent shall in its sole judgment determine;
it being understood that the Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by the Assignor of said obligation.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and
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in general in such manner, at such time or times, at such place or places and on
such terms as the Collateral Agent may, in compliance with any mandatory
requirements of applicable law, determine to be commercially reasonable. Any of
the Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Collateral Agent or after any overhaul
or repair which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the Assignor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the 10 days after the giving of such notice,
to the right of the Assignor or any nominee of the Assignor to acquire the
Collateral involved at a price or for such other consideration at least equal to
the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall be
made upon not less than 10 days' written notice to the Assignor specifying the
time and place of such sale and, in the absence of applicable requirements of
law, shall be by public auction (which may, at the Collateral Agent's option, be
subject to reserve), after publication of notice of such auction not less than
10 days prior thereto in two newspapers in general circulation in the City of
New York. To the extent permitted by any such requirement of law, the Collateral
Agent and the Secured Parties may bid for and become the purchaser of the
Collateral or any item thereof, offered for sale in accordance with this Section
without accountability to the Assignor. If, under mandatory requirements of
applicable law, the Collateral Agent shall be required to make disposition of
the Collateral within a period of time which does not permit the giving of
notice to the Assignor as hereinabove specified, the Collateral Agent need give
the Assignor only such notice of disposition as shall be reasonably practicable
in view of such mandatory requirements of applicable law. The Assignor agrees to
do or cause to be done all such other acts and things as may be reasonably
necessary to make such sale or sales of all or any portion of the Collateral
valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or
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foreign, having jurisdiction over any such sale or sales, all at the Assignor's
expense.
7.3. Waiver of Claims. Except as otherwise provided in this
Agreement, THE ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ASSIGNOR WOULD
OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF
ANY STATE, and the Assignor hereby further waives, to the extent permitted by
law:
(a) all damages occasioned by such taking of possession
except any damages which are the direct result of the Collateral
Agent's gross negligence or willful misconduct;
(b) all other requirements as to the time, place and terms of
sale or other requirements with respect to the enforcement of the
Collateral Agent's rights here- under; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Agreement or
the absolute sale of the Collateral or any portion thereof, and the
Assignor, for itself and all who may claim under it, insofar as it or
they now or hereafter lawfully may, hereby waives the benefit of all
such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Assignor therein and thereto, and
shall be a perpetual bar both at law and in equity against the Assignor and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
the Assignor.
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7.4. Application of Proceeds. (a) All moneys collected by the
Collateral Agent (or, to the extent any Security Document to which any Credit
Party is a party requires proceeds of collateral under such Security Document to
be applied in accordance with the provisions of this Agreement, the Collateral
Agent, Pledgee or Mortgagee, as the case may be, under such Security Document)
upon any sale or other disposition of the Collateral, together with all other
moneys received by the Collateral Agent hereunder, shall be applied, subject to
the following clause (b), as follows:
(i) first, to the payment of all amounts owing the
Collateral Agent of the type described in clauses (iv) and (v) of the
definition of "Obligations";
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations (as defined below) shall be paid to
the Secured Parties as provided in Section 7.4(f) hereof, with each
Secured Party receiving an amount equal to such outstanding Primary
Obligations or, if the proceeds are insufficient to pay in full all
such Primary Obligations, its Pro Rata Share (as defined below) of the
amount remaining to be distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an amount
equal to the outstanding Secondary Obligations (as defined below) shall
be paid to the Secured Parties as provided in Section 7.4(f) hereof,
with each Secured Party receiving an amount equal to its outstanding
Secondary Obligations or, if the proceeds are insufficient to pay in
full all such Secondary Obligations, its Pro Rata Share of the amount
remaining to be distributed; and
(iv) fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement pursuant to
Section 11.9(a) hereof, to the Assignor or to whomever may be lawfully
entitled to receive such surplus.
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(b) For purposes of this Agreement (w) "Pro Rata Share" shall
mean, when calculating a Secured Party's portion of any distribution or amount,
that amount (expressed as a percentage) equal to a fraction the numerator of
which is the then unpaid amount of such Secured Party's Primary Obligations or
Secondary Obligations, as the case may be, and the denominator of which is the
then outstanding amount of all Primary Obligations or Secondary Obligations, as
the case may be, (x) "Primary Obligations" shall mean (i) in the case of the
Credit Agreement Obligations, all principal of, and interest on, all Loans under
the Credit Agreement, all Unpaid Drawings theretofore made (together with all
interest accrued thereon), and the aggregate Stated Amounts of all Letters of
Credit issued (or deemed issued) under the Credit Agreement, and all regularly
accruing fees owing by the Assignor under the Credit Agreement, and (ii) in the
case of the Interest Rate Protection Obligations, all amounts due under the
Interest Rate Protection Agreements (other than indemnities, fees (including,
without limitation, attorneys' fees) and similar obligations and liabilities)
and (y) "Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
(c) When payments to Secured Parties are based upon their
respective Pro Rata Shares, the amounts received by such Secured Parties
hereunder shall be applied (for purposes of making determinations under this
Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to
their Secondary Obligations. If any payment to any Secured Party of its Pro Rata
Share of any distribution would result in overpayment to such Secured Party,
such excess amount shall instead be distributed in respect of the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of the other Secured
Parties, with each Secured Party whose Primary Obligations or Secondary
Obligations, as the case may be, have not been paid in full to receive an amount
equal to such excess amount multiplied by a fraction the numerator of which is
the unpaid Primary Obligations or Secondary Obligations, as the case may be, of
such Secured Party and the denominator of which is the unpaid Primary
Obligations or Secondary Obligations, as the case may be, of all Secured Parties
entitled to such distribution.
(d) Each of the Secured Parties agrees and acknowledges that
if the Bank Creditors are to receive a
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distribution on account of undrawn amounts with respect to Letters of Credit
issued (or deemed issued) under the Credit Agreement (which shall only occur
after all outstanding Loans and Unpaid Drawings with respect to such Letters of
Credit have been paid in full), such amounts shall be paid to the Administrative
Agent under the Credit Agreement and held by it, for the equal and ratable
benefit of the Bank Creditors, as cash security for the repayment of Obligations
owing to the Bank Creditors as such. If any amounts are held as cash security
pursuant to the immediately preceding sentence, then upon the termination of all
outstanding Letters of Credit, and after the application of all such cash
security to the repayment of all Obligations owing to the Bank Creditors after
giving effect to the termination of all such Letters of Credit, if there remains
any excess cash, such excess cash shall be returned by the Administrative Agent
to the Collateral Agent for distribution in accordance with Section 7.4(a)
hereof.
(e) All payments required to be made hereunder shall be made
to the respective Representative of the Secured Parties entitled to such
payments.
(f) For purposes of applying payments received in accordance
with this Section 7.4, the Collateral Agent shall be entitled to rely upon the
respective Representatives for a determination (which each Representative for
any Secured Parties and the Secured Parties agree (or shall agree) to provide
upon request of the Collateral Agent) of the outstanding Primary Obligations and
Secondary Obligations owed to the Bank Creditors, or the Interest Rate
Protection Creditors, as the case may be. Unless it has actual knowledge
(including by way of written notice from a Bank Creditor, or an Interest Rate
Protection Creditor) to the contrary, each Representative, in furnishing
information pursuant to the preceding sentence, and the Collateral Agent, in
acting hereunder, shall be entitled to assume that no Secondary Obligations are
outstanding. Unless it has actual knowledge (including by way of written notice
from an Interest Rate Protection Creditor) to the contrary, the Collateral
Agent, in acting hereunder, shall be entitled to assume that no Interest Rate
Protection Agreements are in existence.
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(g) It is understood and agreed that the Assignor shall remain
liable to the extent of any deficiency between the amount of the proceeds of the
Collateral hereunder and the aggregate amount of the sums referred to in clauses
(i) through (iii), inclusive, of Section 7.4(a) hereof.
7.5. Remedies Cumulative. Each and every right, power and
remedy hereby specifically given to the Collateral Agent shall be in addition to
every other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements or the other Credit Documents or now or
hereafter existing at law or in equity, or by statute and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time or simultaneously and as often and in such order as
may be deemed expedient by the Collateral Agent. All such rights, powers and
remedies shall be cumulative and the exercise or the beginning of exercise of
one shall not be deemed a waiver of the right to exercise of any other or
others. No delay or omission of the Collateral Agent in the exercise of any such
right, power or remedy and no renewal or extension of any of the Obligations
shall impair any such right, power or remedy or shall be construed to be a
waiver of any Default or Event of Default or an acquiescence therein. No notice
to or demand on the Assignor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Collateral Agent to any other or further
action in any circumstances without notice or demand. In the event that the
Collateral Agent shall bring any suit to enforce any of its rights hereunder and
shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment.
7.6. Discontinuance of Proceedings. In case the Collateral
Agent shall have instituted any proceeding to enforce any right, power or remedy
under this Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Collateral Agent, then and in every such
case the Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest
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created under this Agreement, and all rights, remedies and powers of the
Collateral Agent shall continue as if no such proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) The Assignor agrees to indemnify,
reimburse and hold the Collateral Agent, each Secured Party and their respective
successors, assigns, employees, agents and servants (hereinafter in this Section
8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees")
harmless from any and all liabilities, obligations, damages, injuries,
penalties, claims, demands, actions, suits, judgments and any and all costs,
expenses or disbursements (including reasonable attorneys' fees and expenses)
(for the purposes of this Section 8.1 the foregoing are collectively called
"expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnitees in any way relating to or arising out of this
Agreement, any Interest Rate Protection Agreement, any other Credit Document, or
any other document executed in connection herewith and therewith or in any other
way connected with the administration of the transactions contemplated hereby
and thereby or the enforcement of any of the terms of, or the preservation of
any rights under any thereof, or in any way relating to or arising out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation, latent or
other defects, whether or not discoverable), any contract claim or, to the
maximum extent permitted under applicable law, the violation of the laws of any
country, state or other governmental body or unit, or any tort (including,
without limitation, claims arising or imposed under the doctrine of strict
liability, or for or on account of injury to or the death of any Person
(including any Indemnitee), or property damage); provided that no Indemnitee
shall be indemnified pursuant to this Section 8.1(a) for expenses to the extent
caused by the gross negligence or willful misconduct of such Indemnitee. The
Assignor agrees that upon written notice by any Indemnitee of the assertion of
such a liability, obligation,
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damage, injury, penalty, claim, demand, action, suit or judgment, the Assignor
shall assume full responsibility for the defense thereof. Each Indemnitee agrees
to use its best efforts to promptly notify the Assignor of any such assertion to
which such Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a) hereof,
the Assignor agrees to pay, or reimburse the Collateral Agent for (if the
Collateral Agent shall have incurred fees, costs or expenses because the
Assignor shall have failed to comply with its obligations under this Agreement,
any other Credit Document or any Interest Rate Protection Agreement), any and
all fees, costs and expenses of whatever kind or nature incurred in connection
with the creation, preservation or protection of the Collateral Agent's Liens
on, and security interest in, the Collateral, including, without limitation, all
fees and taxes in connection with the recording or filing of instruments and
documents in public offices, payment or discharge of any taxes or Liens upon or
in respect of the Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Collateral Agent's interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.
(c) Without limiting the application of Section 8.1(a) or (b),
the Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and
against any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by the
Assignor in this Agreement, any Interest Rate Protection Agreement, any other
Credit Document or in any writing contemplated by or made or delivered pursuant
to or in connection with this Agreement, any Interest Rate Protection Agreement
or any other Credit Document.
(d) If and to the extent that the obligations of the Assignor
under this Section 8.1 are unenforceable for any reason, the Assignor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
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8.2. Indemnity Obligations Secured by Collateral; Survival.
Any amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of the Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement or the termination of all Interest Rate
Protection Agreements and the payment of all other Obligations and
notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified.
Such definitions shall be equally applicable to the singular and plural forms of
the terms defined.
"Acceleration Event" shall mean the acceleration prior to the
stated final maturity, or the failure to pay at the stated final maturity, of
Obligations representing principal of, or interest on, extensions of credit
(including without limitation all L/C Outstandings) pursuant to the Credit
Agreement, or any Interest Rate Protection Agreement, provided that in each
case, any such Acceleration Event shall cease to exist upon payment in full of
the Obligations so accelerated or not paid.
"Administrative Agent" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
"Agreement" shall mean this Security Agreement as the same may
be modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first
paragraph of this Agreement.
"Bank Creditor" shall have the meaning provided in the first
paragraph of this Agreement.
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"Bankruptcy Default" shall mean any Default or Event of
Default with respect to any Assignor pursuant to Section 9.05 of the Credit
Agreement.
"Banks" shall have the meaning provided in the first WHEREAS
clause of this Agreement.
"Cash Collateral Account" shall mean a non-interest bearing
cash collateral account maintained with, and in the sole dominion and control
of, the Collateral Agent for the benefit of the Secured Parties.
"Chattel Paper", with respect to the Assignor, shall have the
meaning provided in the Uniform Commercial Code as in effect on the date hereof
in the State of New York.
"Class" shall have the meaning provided in Section 11.2 of
this Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a)
of this Agreement.
"Collateral Agent" shall have the meaning provided in the
first paragraph of this Agreement.
"Contract Rights", with respect to any Assignor, shall mean
all rights of the Assignor (including, without limitation, all rights to
payment) under each Contract to which it is a party or under which it is
entitled to any benefits.
"Contracts", with respect to the Assignor, shall mean all
contracts between the Assignor and one or more additional parties.
"Copyrights", with respect to the Assignor, shall mean any
United States copyright which the Assignor now or hereafter has registered with
the United States Copyright Office, as well as any application for a United
States copyright registration now or hereafter made with the United States
Copyright Office by the Assignor.
"Credit Agreement" shall have the meaning provided in the
first WHEREAS clause of this Agreement.
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"Credit Agreement Obligations" shall have the meaning provided
in the definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of
time, or both, would constitute an Event of Default.
"Documents", with respect to the Assignor, shall have the
meaning provided in the Uniform Commercial Code as in effect on the date hereof
in the State of New York.
"Equipment", with respect to the Assignor, shall mean any
"equipment," as such term is defined in the Uniform Commercial Code as in effect
on the date hereof in the State of New York, now or hereafter owned by the
Assignor and, in any event, shall include, but shall not be limited to, all
machinery, equipment, furnishings, movable trade fixtures and vehicles now or
hereafter owned by the Assignor and any and all additions, substitutions and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
"Event of Default" shall mean any Event of Default under, and
as defined in, the Credit Agreement, and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles", with respect to the Assignor, shall
have the meaning provided in the Uniform Commercial Code as in effect on the
date hereof in the State of New York and shall in any event include all of the
Assignor's claims, rights, powers, privileges, authority, options, security
interests, liens and remedies under any partnership agreement to which the
Assignor is a party or with respect to any partnership of which the Assignor is
a partner.
"Goods", with respect to the Assignor, shall have the meaning
provided in the Uniform Commercial Code as in effect on the date hereof in the
State of New York.
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"Indemnitee" shall have the meaning provided in Section 8.1 of
this Agreement.
"Instrument" shall have the meaning provided in Article 9 of
the Uniform Commercial Code as in effect on the date hereof in the State of New
York.
"Interest Rate Protection Agreements" shall have the meaning
provided in the first paragraph of this Agreement.
"Interest Rate Protection Creditors" shall have the meaning
provided in the first paragraph of this Agreement.
"Interest Rate Protection Obligations" shall have the meaning
provided in the definition of "Obligations" in this Article IX.
"Inventory", with respect to the Assignor, shall mean
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods, supplies,
incidentals, packaging materials, labels, materials and any other items used or
usable in manufacturing, processing, packaging or shipping same; in all stages
of production -- from raw materials through work-in-process to finished goods --
and all products and proceeds of whatever sort and wherever located and any
portion thereof which may be returned, rejected, reclaimed or repossessed by the
Collateral Agent from the Assignor's customers, and shall specifically include
all "inventory" as such term is defined in the Uniform Commercial Code as in
effect on the date hereof in the State of New York, now or hereafter owned by
the Assignor.
"Marks", with respect to the Assignor, shall mean any
trademarks and service marks now held or hereafter acquired by the Assignor,
which are registered in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any
political subdivision thereof and any application for such trademarks and
service marks, as well as any unregistered marks used by the Assignor in the
United States and trade dress including logos, designs, trade names, company
names, business names, fictitious business names and other business
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identifiers in connection with which any of these registered or unregistered
marks are used.
"Notified Acceleration Event" shall mean any Acceleration
Event with respect to which the Required Banks have given written notice to the
Collateral Agent that a "Notified Acceleration Event" exists, provided that such
written notice may only be given if such Acceleration Event is continuing and,
provided further that any such Notified Acceleration Event shall cease to exist
once there is no longer any Acceleration Event in existence.
"Obligations", with respect to the Assignor, shall mean (i)
(x) the principal of and interest on the Notes issued by, and Loans made to, the
Assignor under the Credit Agreement, and all reimbursement obligations and
Unpaid Drawings with respect to the Letters of Credit issued for the benefit of
the Assignor under the Credit Agreement and (y) all other obligations and
indebtedness (including, without limitation, indemnities, Fees and interest
thereon and obligations pursuant to the Guaranties) of the Assignor to the Bank
Creditors now existing or hereafter incurred under, arising out of, or in
connection with the Credit Agreement and the due performance and compliance by
the Assignor with all of the terms, conditions and agreements contained in the
Credit Agreement (all such principal, interest, obligations and liabilities,
except to the extent relating to Interest Rate Protection Agreements, the
"Credit Agreement Obligations"); (ii) all obligations and liabilities owing by
the Assignor to the Interest Rate Protection Creditors under, or with respect
to, any Interest Rate Protection Agreement, whether such Interest Rate
Protection Agreement is now in existence or hereafter arising, and the due
performance and compliance by the Assignor with all of the terms, conditions and
agreements contained therein (all such obligations and liabilities described in
this clause (ii), the "Interest Rate Protection Obligations"); (iii) any and all
sums advanced by the Collateral Agent in order to preserve the Collateral or
preserve its security interest in the Collateral; (iv) in the event of any
proceeding for the collection or enforcement of any indebtedness, obligations,
or liabilities of the Assignor referred to in clauses (i), (ii) and (iii), after
an Event of Default shall have occurred and be continuing, the reasonable
expenses of re-taking, holding, preparing for sale or lease, selling or
otherwise disposing of or realizing on the
<PAGE> 266
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Collateral, or of any exercise by the Collateral Agent of its rights hereunder,
together with reasonable attorneys' fees and court costs; and (v) all amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement under Section 8.1 of this Agreement. It is acknowledged and agreed
that the "Obligations" shall include extensions of credit of the types described
above, whether outstanding on the date of this Agreement or extended from time
to time after the date of this Agreement.
"Patents", with respect to the Assignor, shall mean any United
States patent to which the Assignor now or hereafter has title or license to
use, as well as any application for a United States patent now or hereafter made
by the Assignor.
"Permitted Filings" shall have the meaning provided in Section
2.1 of this Agreement.
"Pledged Securities" shall have the meaning provided in the
Borrower Pledge Agreement.
"Primary Obligations" shall have the meaning provided in
Section 7.4(b) of this Agreement.
"Pro Rata Share" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Proceeds", with respect to the Assignor, shall have the
meaning provided in the Uniform Commercial Code as in effect in the State of New
York on the date hereof or under other relevant law and, in any event, shall
include, but not be limited to, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to the Collateral Agent or the Assignor
from time to time with respect to any of the Collateral, (ii) any and all
payments (in any form whatsoever) made or due and payable to the Assignor from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any governmental
authority (or any person acting under color of governmental authority) and (iii)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
<PAGE> 267
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"Receivables", with respect to the Assignor, shall mean any
"account" as such term is defined in the Uniform Commercial Code as in effect on
the date hereof, now or hereafter owned by the Assignor and, in any event, shall
include, but shall not be limited to, all of the Assignor's rights to payment
for goods sold or leased or services performed by the Assignor, whether now in
existence or arising from time to time hereafter, including, without limitation,
rights evidenced by an account, note, contract, security agreement, chattel
paper, or other evidence of indebtedness or security, together with (a) all
security pledged, assigned, hypothecated or granted to or held by the Assignor
to secure the foregoing, (b) all of the Assignor's right, title and interest in
and to any goods, the sale of which gave rise thereto, (c) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, (d) all
powers of attorney for the execution of any evidence of indebtedness or security
or other writing in connection therewith, (e) all books, records, ledger cards,
and invoices relating thereto, (f) all evidences of the filing of financing
statements and other statements and the registration of other instruments in
connection therewith and amendments thereto, notices to other creditors or
secured parties, and certificates from filing or other registration officers,
(g) all credit information, reports and memoranda relating thereto, and (h) all
other writings related in any way to the foregoing; provided that "Receivables"
shall not include any Pledged Security or promissory note not required to be
pledged pursuant to the Borrower Pledge Agreement.
"Representative" shall mean (x) for the Bank Creditors, the
Administrative Agent under the Credit Agreement and (y) for the Interest Rate
Protection Creditors, the Representative for the Interest Rate Protection
Creditors or, in the absence of such a Representative, the Interest Rate
Protection Creditors.
"Required Creditors" shall mean the requisite percentage of
Secured Parties which are needed to take actions with respect to a given Class
of Obligations, i.e., whether the Required Banks or the Required Interest Rate
Protection Creditors.
"Required Interest Rate Protection Creditors" shall mean the
holders of 51% of all Obligations outstanding from
<PAGE> 268
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time to time under the Interest Rate Protection Agreements, determined in such
reasonable fashion as is acceptable to the Collateral Agent.
"Secondary Obligations" shall have the meaning provided in
Section 7.4(b) of this Agreement.
"Secured Parties" shall have the meaning provided in the first
paragraph of this Agreement.
"Termination Date" shall have the meaning provided in Section
11.9 of this Agreement.
ARTICLE X
THE COLLATERAL AGENT
10.1. Appointment. The Secured Parties, by their acceptance of
the benefits of this Agreement hereby irrevocably designate The Bank of Nova
Scotia, as Collateral Agent, to act as specified herein. Each Secured Party
hereby irrevocably authorizes, and each holder of any Note by the acceptance of
such Note and by the acceptance of the benefits of this Agreement shall be
deemed irrevocably to authorize, the Collateral Agent to take such action on its
behalf under the provisions of this Agreement and any other instruments and
agreements referred to herein and to exercise such powers and to perform such
duties hereunder as are specifically delegated to or required of the Collateral
Agent by the terms hereof and such other powers as are reasonably incidental
thereto. The Collateral Agent may perform any of its duties hereunder or
thereunder by or through its authorized agents or employees.
10.2. Nature of Duties. (a) The Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement.
The duties of the Collateral Agent shall be mechanical and administrative in
nature; the Collateral Agent shall not have by reason of this Agreement, any
other Credit Document, or any Interest Rate Protection Agreement a fiduciary
relationship in respect of any Secured Party; and nothing in this Agreement, any
other Credit Document, or any Interest Rate Protection Agreement, expressed or
implied, is intended to or shall be so construed
<PAGE> 269
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as to impose upon the Collateral Agent any obligations in respect of this
Agreement except as expressly set forth herein.
(b) The Collateral Agent shall not be responsible for insuring
the Collateral or for the payment of taxes, charges or assessments or
discharging of liens upon the Collateral or otherwise as to the maintenance of
the Collateral.
(c) The Collateral Agent shall not be required to ascertain or
inquire as to the performance by any Assignor of any of the covenants or
agreements contained in this Agreement, any other Credit Document or any
Interest Rate Protection Agreement.
(d) The Collateral Agent shall be under no obligation or duty
to take any action under this Agreement or any Credit Document if taking such
action (i) would subject the Collateral Agent to a tax in any jurisdiction where
it is not then subject to a tax or (ii) would require the Collateral Agent to
qualify to do business in any jurisdiction where it is not then so qualified,
unless the Collateral Agent receives security or indemnity satisfactory to it
against such tax (or equivalent liability), or any liability resulting from such
qualification, in each case as results from the taking of such action under this
Agreement or (iii) would subject the Collateral Agent to in personam
jurisdiction in any locations where it is not then so subject.
(e) Notwithstanding any other provision of this Agreement,
neither the Collateral Agent nor any of its officers, directors, employees,
affiliates or agents shall, in its individual capacity, be personally liable for
any action taken or omitted to be taken by it in accordance with this Agreement
except for its own gross negligence or willful misconduct.
10.3. Lack of Reliance on the Collateral Agent. Independently
and without reliance upon the Collateral Agent, each Secured Party, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Assignor
and its Subsidiaries in connection with the making and the continuance of the
Obligations and the taking or not
<PAGE> 270
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Page 38
taking of any action in connection therewith, and (ii) its own appraisal of the
creditworthiness of the Assignor and its Subsidiaries, and the Collateral Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Secured Party with any credit or other information with respect
thereto, whether coming into its possession before the extension of any
Obligations or the purchase of any Notes or at any time or times thereafter. The
Collateral Agent shall not be responsible in any manner whatsoever to any
Secured Party for the correctness of any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or
sufficiency of this Agreement or the security interests granted hereunder or the
financial condition of the Assignor or any Subsidiary of the Assignor or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement, or the financial
condition of the Assignor or any Subsidiary of the Assignor, or the existence or
possible existence of any Default or Event of Default. The Collateral Agent
makes no representations as to the value or condition of the Collateral or any
part thereof, or as to the title of the Assignor thereto or as to the security
afforded by this Agreement.
10.4. Certain Rights of the Collateral Agent. (a) No Secured
Party shall have the right to cause the Collateral Agent to take any action with
respect to the Collateral, with only the Required Banks having the right to
direct the Collateral Agent to take any such action. If the Collateral Agent
shall request instructions from the Required Banks, with respect to any act or
action (including failure to act) in connection with this Agreement, the
Collateral Agent shall be entitled to refrain from such act or taking such
action unless and until it shall have received instructions from the Required
Banks and to the extent requested, appropriate indemnification in respect of
actions to be taken, and the Collateral Agent shall not incur liability to any
Person by reason of so refraining. Without limiting the foregoing, no Secured
Party shall have any right of action whatsoever against the Collateral Agent as
a result of the Collateral Agent acting or refraining from acting here-
<PAGE> 271
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under in accordance with the instructions of the Required Banks.
(b) The Collateral Agent shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement at the
request or direction of any of the Secured Parties, unless such Secured Parties
shall have offered to the Collateral Agent reasonable security or indemnity
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction.
10.5. Reliance. The Collateral Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone message
signed, sent or made by the proper Person or entity, and, with respect to all
legal matters pertaining to this Agreement and the other Security Documents and
its duties thereunder and hereunder, upon advice of counsel selected by it.
10.6. Indemnification. (a) To the extent the Collateral Agent
is not reimbursed and indemnified by the Assignor under this Agreement, the
Secured Parties will reimburse and indemnify the Collateral Agent, in proportion
to their respective outstanding principal amounts (including, for this purpose,
the stated amount of outstanding Letters of Credit and any unreimbursed drawings
in respect of Letters of Credit, as well as any unpaid Primary Obligations in
respect of Interest Rate Protection Agreements, as outstanding principal) of
Obligations, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Collateral Agent in performing its duties hereunder, or in
any way relating to or arising out of its actions as Collateral Agent in respect
of this Agreement except for those resulting solely from the Collateral Agent's
own gross negligence or willful misconduct. The indemnities set forth in this
Article X shall survive the repayment of all Obligations, with the respective
indemnification at such time to be based upon the outstanding principal amounts
(determined as described above) of Obligations at the time of the respective
occurrence upon which the claim against the
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Collateral Agent is based or, if same is not reasonably determinable, based upon
the outstanding principal amounts (determined as described above) of Obligations
as in effect immediately prior to the termination of this Agreement. The
indemnities set forth in this Article X are in addition to any indemnities
provided by the Banks to the Collateral Agent pursuant to the Credit Agreement,
with the effect being that the Banks shall be responsible for indemnifying the
Collateral Agent to the extent the Collateral Agent does not receive payments
pursuant to this Section 10.6 from the Secured Parties (although in such event,
and upon the payment in full of all such amounts owing to the Collateral Agent,
the respective Banks who paid same shall be subrogated to the rights of the
Collateral Agent to receive payment from the Secured Parties).
10.7. The Collateral Agent in its Individual Capacity. With
respect to its obligations as a Bank under the Credit Agreement and any other
Credit Documents to which the Collateral Agent is a party, and to act as agent
under one or more of such Credit Documents, the Collateral Agent shall have the
rights and powers specified therein and herein for a "Bank" or an
"Administrative Agent", and may exercise the same rights and powers as though it
were not performing the duties specified herein; and the terms "Banks", "holders
of Notes", or any similar terms shall, unless the context clearly otherwise
indicates, include the Collateral Agent in its individual capacity. The
Collateral Agent may accept deposits from, lend money to, and generally engage
in any kind of banking, trust or other business with the Assignor or any
Affiliate or Subsidiary of the Assignor as if it were not performing the duties
specified herein or in the other Credit Documents, and may accept fees and other
consideration from the Assignor for services in connection with the Credit
Agreement, the other Credit Documents and otherwise without having to account
for the same to the Secured Parties.
10.8. Holders. The Collateral Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Collateral Agent. Any request, authority
or consent of any person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be final and
<PAGE> 273
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Page 41
conclusive and binding on any subsequent holder, transferee, assignee or
endorsee, as the case may be, of such Note or Notes issued in exchange therefor.
10.9. Resignation by the Collateral Agent. (a) The Collateral
Agent may resign from the performance of all of its functions and duties under
this Agreement at any time by giving 20 Business Days' prior written notice to
the Assignor and the Secured Parties. Such resignation shall take effect upon
the appointment of a successor Collateral Agent pursuant to clause (b), (c) or
(d) below.
(b) If a successor Collateral Agent shall not have been
appointed within said 20 Business Day period by the Required Banks, the
Collateral Agent, with the consent of the Assignor, which consent shall not be
unreasonably withheld, shall then appoint a successor Collateral Agent who shall
serve as Collateral Agent hereunder or thereunder until such time, if any, as
the Required Banks appoint a successor Collateral Agent as provided above.
(c) If no successor Collateral Agent has been appointed
pursuant to clause (b) above by the 20th Business Day after the date of such
notice of resignation was given by the Collateral Agent, as a result of a
failure by the Assignor to consent to the appointment of such a successor
Collateral Agent, the Required Banks shall then appoint a successor Collateral
Agent who shall serve as Collateral Agent hereunder or thereunder until such
time, if any, as the Required Banks appoint a successor Collateral Agent as
provided above.
(d) If no successor Collateral Agent is appointed pursuant to
clauses (b) and (c) above within said 20 Business Day period, the resignation of
the Collateral Agent shall become effective and the duties of the Collateral
Agent shall be performed by the Required Banks.
10.10. Fees and Expenses of Collateral Agent. (a) The Assignor
(by its execution and delivery hereof) hereby agrees that it shall pay to The
Bank of Nova Scotia as the Collateral Agent, such fees as have been separately
agreed to in writing with The Bank of Nova Scotia for acting as Administrative
Agent and as Collateral Agent hereunder. In the event a successor Collateral
Agent is at any time
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appointed pursuant to the preceding Section 10.9, the Assignor hereby agrees to
pay such successor Collateral Agent such fees for acting as such as would
customarily be charged by such Collateral Agent for acting in such capacity in
similar situations.
(b) In addition, the Assignor agrees to pay all reasonable
out-of-pocket costs and expenses of the Collateral Agent in connection with this
Agreement and any actions taken by the Collateral Agent hereunder, and agrees to
pay all costs and expenses of the Collateral Agent in connection with the
enforcement of this Agreement and the documents and instruments referred to
herein (including, without limitation, reasonable fees and disbursements of
counsel for the Collateral Agent).
ARTICLE XI
MISCELLANEOUS
11.1. Notices. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been duly given or made when delivered to
the party to which such notice, request, demand or other communication is
required or permitted to be given or made under this Agreement, addressed as
follows:
(a) if to Pueblo International, Inc.:
1300 N.W. 22nd Street
Pompano Beach, FL 33069
Tel: (954) 977-2500
Fax: (954) 979-5770
Attention: Chief Financial Officer
<PAGE> 275
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Page 43
(b) if to the Collateral Agent:
The Bank of Nova Scotia
Suite 2700
600 Peachtree Street, NE
Atlanta, GA 30308
Tel: (404) 877-1505
Fax: (404) 888-8998
Attention: Frank F. Sandler
(c) if to any Bank Creditor, either (x) to the Administrative
Agent, at the address of the Administrative Agent specified in the
Credit Agreement or (y) at such address as such Bank Creditor shall
have specified in the Credit Agreement;
(d) if to any Interest Rate Protection Creditor, either (x) to
the Representative for the Interest Rate Protection Creditors, at such
address as such Representative may have provided to the Assignor and
the Collateral Agent from time to time, or (y) directly to the Interest
Rate Protection Creditors at such address as the Interest Rate
Protection Creditors shall have specified in writing to the Assignor
and the Collateral Agent.
11.2. Waiver; Amendment. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by the Assignor and the Collateral
Agent with the consent of the Required Banks (or all of the Banks if required
pursuant to Section 12.11 of the Credit Agreement), provided, however, that no
modifications shall be made to Section 7.4(a) of this Agreement without the
consent of each Secured Party adversely affected thereby; and provided further
that any change, waiver, modification or variance affecting the rights and
benefits of a single Class (as defined below) of Secured Parties (and not all
Secured Parties in a like or similar manner) shall require the written consent
of the Required Creditors of such affected Class. For the purpose of this
Agreement, the term "Class" shall mean each class of Secured Parties, i.e.,
whether (x) the Bank Creditors as holders of the Credit Agreement
<PAGE> 276
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Page 44
Obligations or (y) the Interest Rate Protection Creditors as the holders of the
Interest Rate Protection Obligations.
11.3. Obligations Absolute. The obligations of the Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection Agreement except as specifically set forth in a
waiver granted pursuant to Section 11.2 hereof; or (c) any amendment to or
modification of any Credit Document or any Interest Rate Protection Agreement or
any security for any of the Obligations; whether or not the Assignor shall have
notice or knowledge of any of the foregoing.
11.4. Successors and Assigns. This Agreement shall be binding
upon the Assignor and its successors and assigns and shall inure to the benefit
of the Collateral Agent and each Secured Party and their respective successors
and assigns, provided that the Assignor may not transfer nor assign any or all
of its rights or obligations hereunder without the written consent of the
Required Banks. All agreements, statements, representations and warranties made
by the Assignor herein or in any certificate or other instrument delivered by
the Assignor or on its behalf under this Agreement shall be considered to have
been relied upon by the Secured Parties and shall survive the execution and
delivery of this Agreement, the other Credit Documents and the Interest Rate
Protection Agreements regardless of any investigation made by the Secured
Parties or on their behalf.
11.5. Headings Descriptive. The headings of the several
sections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
11.6. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
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render unenforceable such provision in any other jurisdiction.
11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
11.8. Assignor's Duties. It is expressly agreed, anything
herein contained to the contrary notwithstanding, that the Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of the Assignor under or with
respect to any Collateral.
11.9. Termination; Release. (a) After the Termination Date,
this Agreement shall terminate and the Collateral Agent, at the request and
expense of the Assignor, will execute and deliver to the Assignor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the Assignor (without
recourse and without any representation or warranty) such of the Collateral of
the Assignor as may be in the possession of the Collateral Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which the Total Revolving Commitment has been terminated, no Note remains
outstanding, all Letters of Credit have been terminated and all Credit Agreement
Obligations then owing by the Assignor have been paid in full.
(b) It is expressly acknowledged and agreed that all or a
portion of the Collateral shall be released from the Liens and security
interests created hereunder upon any sale thereof from time to time to the
extent permitted by, and in accordance with the terms of, the Credit Agreement.
In addition, it is expressly acknowledged and agreed that, any or all of the
Collateral may be released by the Collateral Agent acting at the direction of
the Required Banks (or all of the Banks to the extent required pursuant to
Section 12.11
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of the Credit Agreement). Upon any sale of the type described in the second
preceding sentence or release of any such Collateral as provided in the
immediately preceding sentence, the Collateral Agent shall, at the request and
expense of the Assignor, and without the further consent of, or liability to,
any Secured Party, release such Collateral and execute and deliver to the
Assignor a proper instrument or instruments acknowledging the release of such
Collateral from this Agreement, and will duly assign, transfer and deliver to
the Assignor (without recourse and without any representation or warranty) the
Collateral being sold or released as described above.
(c) At any time that the Assignor desires that the Collateral
Agent take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 11.9(a) or (b), it shall deliver to the
Collateral Agent a certificate signed by its chief financial officer stating
that the release of the respective Collateral is permitted pursuant to the
foregoing Section 11.9(a) or (b). If requested by the Collateral Agent (although
the Collateral Agent shall have no obligation to make any such request), the
Assignor shall furnish appropriate legal opinions (from counsel acceptable to
the Collateral Agent) to the effect set forth in the immediately preceding
sentence. The Collateral Agent shall have no liability whatsoever to any Secured
Party as the result of any release of Collateral by it as permitted by this
Section 11.9. Upon any release of Collateral pursuant to the foregoing Section
11.9(a) or (b), none of the Secured Parties shall have any continuing right or
interest in such Collateral, or the proceeds thereof.
11.10. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Assignor and the Collateral Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
PUEBLO INTERNATIONAL, INC.,
as Assignor
By_________________________
Title:
THE BANK OF NOVA SCOTIA,
as Collateral Agent
By_________________________
Title:
<PAGE> 280
ANNEX A
to
EXHIBIT G-1
Schedule of Permitted Filings
-----------------------------
<TABLE>
<CAPTION>
Type Equipment
Filed With Debtor Secured Party of UCC Date File Number Summary
- ---------- ------ ------------- ------ ----- ----------- ---------
Filed
-----
<S> <C> <C> <C> <C> <C> <C>
Dade County Xtra Super Food Mutual Benefit UCC-3
Centers, Inc. Life Insurance
Company
</TABLE>
<PAGE> 281
EXHIBIT G-2
[FORM OF SUBSIDIARY SECURITY AGREEMENT]
among
XTRA SUPER FOOD CENTERS, INC.,
EACH OF THE OTHER SUBSIDIARIES
PARTY HERETO,
and
THE BANK OF NOVA SCOTIA,
as Collateral Agent
Dated as of April __, 1997
<PAGE> 282
EXHIBIT G-2
TABLE OF CONTENTS
Page
----
ARTICLE I SECURITY INTERESTS................................ 3
1.1. Grant of Security Interests............................. 3
1.2. Power of Attorney....................................... 4
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES
AND COVENANTS
2.1. Necessary Filings....................................... 5
2.2. No Liens................................................ 5
2.3. Other Financing Statements.............................. 6
2.4. Chief Executive Office; Records......................... 6
2.5. Location of Inventory and Equipment..................... 7
2.6. Recourse................................................ 8
2.7. Trade Names; Change of Name............................. 8
ARTICLE III SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS;
INSTRUMENTS..................................... 9
3.1. Additional Representations and Warranties............... 9
3.2. Maintenance of Records.................................. 9
3.3. Direction to Account Debtors; Contracting
Parties; etc...................................... 10
3.4. Modification of Terms; etc.............................. 11
3.5. Collection.............................................. 11
3.6. Instruments............................................. 12
3.7. Further Actions......................................... 12
ARTICLE IV SPECIAL PROVISIONS CONCERNING MARKS............... 12
4.1. Additional Representations and Warranties............... 12
4.2. Licenses and Assignments................................ 13
4.3. Infringements........................................... 13
4.4. Preservation of Marks................................... 13
4.5. Maintenance of Registration............................. 13
4.6. Future Registered Marks................................. 14
4.7. Remedies................................................ 14
ARTICLE V SPECIAL PROVISIONS CONCERNING
PATENTS AND COPYRIGHTS...................... 15
5.1. Additional Representations and Warranties............... 15
5.2. Licenses and Assignments................................ 15
5.3. Infringements........................................... 15
5.4. Maintenance of Patents.................................. 16
5.5. Prosecution of Patent Application....................... 16
(i)
<PAGE> 283
EXHIBIT G-2
Page
5.6. Other Patents and Copyrights............................ 16
5.7. Remedies................................................ 16
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL.............. 17
6.1. Protection of Collateral Agent's Security............... 17
6.2. Warehouse Receipts Non-negotiable....................... 18
6.3. Further Actions......................................... 18
6.4. Financing Statements.................................... 18
ARTICLE VII REMEDIES UPON OCCURRENCE OF SPECIFIED
EVENTS.......................................... 19
7.1. Remedies; Obtaining the Collateral Upon
Default.............................................. 19
7.2. Remedies; Disposition of the Collateral................. 20
7.3. Waiver of Claims........................................ 22
7.4. Application of Proceeds................................. 23
7.5. Remedies Cumulative..................................... 23
7.6. Discontinuance of Proceedings........................... 23
ARTICLE VIII INDEMNITY......................................... 24
8.1. Indemnity............................................... 24
8.2. Indemnity Obligations Secured by
Collateral; Survival................................. 26
ARTICLE IX DEFINITIONS....................................... 26
ARTICLE X THE COLLATERAL AGENT.............................. 33
ARTICLE XI MISCELLANEOUS..................................... 33
11.1. Notices................................................ 33
11.2. Waiver; Amendment...................................... 34
11.3. Obligations Absolute................................... 35
11.4. Successors and Assigns................................. 35
11.5. Headings Descriptive................................... 35
11.6. Severability........................................... 35
11.7. GOVERNING LAW.......................................... 36
11.8. Assignors' Duties...................................... 36
11.9. Termination; Release................................... 36
11.10. Counterparts......................................... 37
ANNEX A Schedule of Permitted Filings
ANNEX B Schedule of Record Locations
ANNEX C Schedule of Inventory and Equipment Locations
(ii)
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ANNEX D Schedule of Trade, Fictitious and Other Names ANNEX E Schedule of Marks
ANNEX F Schedule of License Agreements and Assignments ANNEX G Schedule of
Patents and Applications ANNEX H Schedule of Copyrights and Applications
(iii)
<PAGE> 285
EXHIBIT G-2
[FORM OF SUBSIDIARY SECURITY AGREEMENT]
AMENDMENT AND RESTATEMENT, dated as of April __, 1997, to SECURITY
AGREEMENT (as amended, modified, supplemented or restated from time to time,
this "Agreement"), dated as of July 28, 1993, among each Subsidiary of PXI
(other than the Borrower) listed on the signature pages hereto (each an
"Assignor" and collectively, the "Assignors") and THE BANK OF NOVA SCOTIA, as
Collateral Agent (the "Collateral Agent"), for the benefit of (x) the Banks, the
Syndication Agent and the Administrative Agent from time to time party to the
Credit Agreement hereinafter referred to (such Banks, the Syndication Agent and
the Administrative Agent, the "Bank Creditors"), and (y) any Bank that enters
into an interest rate protection agreement which is or becomes entitled to the
benefits of the Subsidiary Guaranty or the Credit Agreement Guaranty defined
below (including, without limitation, interest rate swaps, caps, floors, collars
and similar agreements, collectively, the "Interest Rate Protection Agreements")
with the Borrower as permitted by Section 8.03(c) of the Credit Agreement, even
if any such Bank subsequently ceases to be a Bank under the Credit Agreement for
any reason and for so long as any such Bank participates in the extension of any
such Interest Rate Protection Agreements, and any subsequent assignee,
(collectively, the "Interest Rate Protection Creditors" and, together with the
Bank Creditors, the "Secured Parties"). All capitalized terms used herein shall
have the meanings provided in Article IX of this Agreement and, if not so
defined herein, capitalized terms used herein and defined in the Credit
Agreement shall be used herein as so defined.
W I T N E S S E T H :
WHEREAS, Pueblo Xtra International, Inc., Pueblo International,
Inc., Xtra Super Food Centers, Inc., the various Banks from time to time party
thereto, The Bank of Nova Scotia, as Administrative Agent, and NationsBank, N.A.
(South), as Syndication Agent, have entered into an Amendment and Restatement,
dated April __, 1997, to Credit Agreement, dated as of July 21, 1993, providing
for the making of Loans and the issuance of, and participation in, Letters of
Credit as contemplated therein (as used herein, the term "Credit
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Page 2
Agreement" means the Credit Agreement described above in this paragraph, as the
same may be amended, modified, extended, renewed, restated or supplemented from
time to time, and including any agreement extending the maturity of, or
restructuring (including, but not limited to, the inclusion of additional
borrowers or any increase in the amount borrowed) all or any portion of the
Indebtedness under such agreement or any successor agreements;
WHEREAS, the Borrower may at any time and from time to time enter
into one or more Interest Rate Protection Agreements with one or more Interest
Rate Protection Creditors in compliance with the provisions of the Credit
Agreement;
WHEREAS, each Assignor guaranteed the obligations of the Borrowers
under the Credit Agreement pursuant to the Subsidiary Guaranty, or in the case
of Xtra pursuant to Section 13 of the Credit Agreement (the "Credit Agreement
Guaranty");
WHEREAS, it is a condition precedent to each of the above-described
extensions of credit to the Borrower that the Assignors shall have executed and
delivered to the Collateral Agent this Agreement; and
WHEREAS, each Assignor desires to execute and deliver this Agreement
to satisfy the conditions described in the preceding paragraph.
NOW, THEREFORE, in consideration of the extensions of credit made
and to be made to the Borrower and other benefits accruing to the Assignors, the
receipt and sufficiency of which are hereby acknowledged, each Assignor hereby
makes the following representations and warranties to the Collateral Agent for
the benefit of the Secured Parties and hereby covenants and agrees with the
Collateral Agent for the benefit of the Secured Parties as follows:
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ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the full and
prompt payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of all of the Obligations, each Assignor does hereby
sell, assign and transfer unto the Collateral Agent, and does hereby grant to
the Collateral Agent for the benefit of the Secured Parties, a continuing
security interest of first priority (subject to Liens evidenced by Permitted
Filings and other Liens permitted under Section 8.02 of the Credit Agreement and
existing on the Restatement Effective Date) in, all of the right, title and
interest of such Assignor in, to and under all of the following, whether now
existing or hereafter from time to time acquired (all of the following, with
respect to any single Assignor, collectively, the "Collateral"): (i) each and
every Receivable, (ii) all Contracts, together with all Contract Rights arising
there-under, (iii) all Inventory, (iv) the Cash Collateral Account established
for the Assignor and all monies, securities and instruments deposited or
required to be deposited in such Cash Collateral Account, (v) all Equipment,
(vi) all Marks, together with the registrations and right to all renewals
thereof, and the goodwill of the business of the Assignor symbolized by the
Marks, (vii) all Patents and Copyrights, and all reissues, renewals or
extensions thereof, (viii) all computer programs of the Assignor and all
intellectual property rights therein and all other proprietary information of
the Assignor, including, but not limited to, trade secrets, (ix) all other
Goods, General Intangibles, Chattel Paper, Documents and Instruments (other than
the Pledged Securities and any other capital stock or promissory notes not
required to be pledged pursuant to the Xtra Pledge Agreement), and (x) all
Proceeds and products of any and all Collateral referred to in clauses (i)
through (ix) above and this clause (x); provided, however, that to the extent
that any Contract may be terminated (in accordance with the terms thereof after
giving effect to any applicable laws) in the event of the granting of a security
interest therein, or in the event the granting of a security interest in any
Contract shall violate applicable law, then the security interest granted hereby
shall be limited to the extent necessary so that such Con-
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EXHIBIT G-2
Page 4
tract may not be so terminated or no such violation of law shall exist, as the
case may be.
(b) The security interests of the Collateral Agent under this
Agreement extend to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
(c) If (i) a Bankruptcy Default or Notified Acceleration Event has
occurred and is continuing or (ii) any other Event of Default or Acceleration
Event has occurred and is continuing, but in the case of this clause (ii) only
if, and to the extent that, the Collateral Agent (acting at the direction of the
Required Banks) has given notice to any Assignor to take the actions specified
below in this sentence, then in either such case all cash Proceeds of, and cash
payments received in respect of, Collateral shall be paid by such Assignor (or
the respective payor) directly to the Cash Collateral Account or as otherwise
directed by the Collateral Agent. At any time while the circumstances described
in the immediately preceding sentence do not exist, all cash payments received
in respect of the Collateral (including, without limitation, all payments
received in respect of Receivables and Contracts, or in payment for sales of
Inventory, but excluding cash Proceeds of sales of other Collateral unless the
respective sale and release of Collateral is permitted pursuant to this
Agreement and the Credit Agreement) shall be paid to the respective Assignor for
application in accordance with (and to the extent provided by) the Credit
Agreement.
(d) The parties further agree, that as of the effective date of the
Puerto Rico Commercial Transactions Act (Act no. 241 enacted on September 19,
1996), the security interests of the Collateral Agent under this Agreement shall
extend to all Collateral now or hereafter located in the Commonwealth of Puerto
Rico.
1.2. Power of Attorney. Each Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of the Assignor or otherwise), in the Collateral Agent's
discretion, to take any action and to execute any
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instrument which the Collateral Agent may reasonably deem necessary or advisable
to accomplish the purposes of this Agreement, which appointment as attorney is
coupled with an interest.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Necessary Filings. All filings, registrations and recordings
necessary or appropriate to create, preserve, protect and perfect the security
interest granted by such Assignor to the Collateral Agent hereby in respect of
the Collateral have been or shall have been accomplished and the security
interest granted to the Collateral Agent pursuant to this Agreement in and to
the Collateral constitutes or shall constitute a perfected security interest
therein prior to the rights of all other Persons therein and subject to no other
Liens (except that the Collateral may be subject to the security interests
evidenced by the financing statements disclosed on Annex A hereto, but only to
the respective date, if any, set forth on Annex A (the "Permitted Filings") and
to any other Liens permitted under Section 8.02 of the Credit Agreement and
existing on the Restatement Effective Date) and is or shall be entitled to all
the rights, priorities and benefits afforded by the Uniform Commercial Code or
other relevant law as enacted in any relevant jurisdiction to perfected security
interests.
2.2. No Liens. Each Assignor is, and as to Collateral acquired by it
from time to time after the date hereof each Assignor will be, the owner of all
Collateral free from any Lien, security interest, encumbrance or other right,
title or interest of any Person (other than Liens created hereby, Liens
permitted under Section 8.02 of the Credit Agreement or evidenced by the
Permitted Filings), and each Assignor shall defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any interest
therein adverse to the Collateral Agent.
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2.3. Other Financing Statements. As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) on file or of record in any relevant jurisdiction
covering or purporting to cover any interest of any kind in the Collateral
except as disclosed in Annex A hereto and so long as the Termination Date has
not occurred or any of the Credit Agreement Obligations remain unpaid, the
Assignors will not execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) or statements relating to the Collateral, except
financing statements filed or to be filed in respect of and covering the
security interests granted hereby by the Assignors and to the extent permitted
to be granted by the Assignors pursuant to Section 8.02 of the Credit Agreement.
2.4. Chief Executive Office; Records. The chief executive office of
each Assignor is as set forth on the signature pages hereto. No Assignor will
move its chief executive office except to such new locations as such Assignor
may establish in accordance with the last sentence of this Section 2.4. The
originals of all documents evidencing all Receivables and Contract Rights of
each Assignor and the only original books of account and records of each
Assignor relating thereto are, and will continue to be, kept at such chief
executive office, at such other locations shown on Annex B hereto or at such new
locations as the Assignors may establish in accordance with the last sentence of
this Section 2.4, provided that, so long as (x) true and correct copies of all
documents evidencing such Receivables and Contract Rights and copies of such
books and records are kept at such chief executive office or at such other
locations shown on Annex B hereto, and (y) the failure to maintain any original
copies of the foregoing at such locations could not have an adverse effect upon
the validity, perfection or priority of any security interest granted hereunder,
each Assignor shall be permitted to keep original copies of the foregoing at
other locations to be determined in a manner consistent with its past practices.
All Receivables and Contract Rights of each Assignor are, and will continue to
be, maintained at, and controlled and directed (including, without limitation,
for general accounting purposes) from, the office locations described above. No
Assignor shall establish new locations for such offices until (i) it shall
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have given to the Collateral Agent not less than 45 days' prior written notice
of its intention so to do, clearly describing such new location and providing
such other information in connection therewith as the Collateral Agent may
reasonably request, (ii) with respect to such new location, it shall have taken
all action to maintain the security interest of the Collateral Agent in the
Collateral intended to be granted hereby at all times fully perfected and in
full force and effect and (iii) at the request of the Collateral Agent, it shall
have furnished an opinion of counsel reasonably acceptable to the Collateral
Agent to the effect that all financing or continuation statements and amendments
or supplements thereto have been filed in the appropriate filing office or
offices, and all other actions (including, without limitation, the payment of
all filing fees and taxes, if any, payable in connection with such filings) have
been taken, in order to perfect (and maintain the perfection and priority of)
the security interest granted hereby.
2.5. Location of Inventory and Equipment. All Inventory and
Equipment held on the date hereof by each Assignor is located at one of the
locations shown on Annex C hereto. Each Assignor agrees that all Inventory and
all Equipment now held or subsequently acquired by it shall be kept at (or shall
be in transport to) any one of the locations shown on Annex C hereto, or such
new location as the Assignor may establish in accordance with the last sentence
of this Section 2.5. Each Assignor may establish a new location for Inventory
and Equipment only if (i) it shall give to the Collateral Agent written notice
of such new location as promptly as practicable and in no event later than 60
days after the establishment thereof, clearly describing such new location and
providing such other information in connection therewith as the Collateral Agent
may reasonably request, (ii) with respect to such new location, as promptly as
practicable and in no event later than 75 days after the establishment thereof,
it shall have taken all action to maintain the security interest of the
Collateral Agent in the Collateral intended to be granted hereby at all times
fully perfected and in full force and effect and (iii) at the request of the
Collateral Agent, it shall have furnished an opinion of counsel reasonably
acceptable to the Collateral Agent to the effect that all financing or
continuation statements and amendments or supplements thereto have been filed in
the appropriate filing office or offices, and all other actions
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Page 8
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
2.6. Recourse. This Agreement is made with full recourse to each
Assignor and pursuant to and upon all the warranties, representations,
covenants, and agreements on the part of such Assignor contained herein, in the
other Credit Documents, in the Interest Rate Protection Agreements and otherwise
in writing in connection herewith or therewith.
2.7. Trade Names; Change of Name. No Assignor has or operates in any
jurisdiction under, or in the preceding 12 months has had or has operated in any
jurisdiction under, any trade names, fictitious names or other names (including,
without limitation, any names of divisions or operations) except its legal name
and such other trade, fictitious or other names as are listed on Annex D hereto.
No Assignor shall change its legal name or assume or operate in any jurisdiction
under any trade, fictitious or other name except those names listed on Annex D
hereto and new names (including, without limitation, any names of divisions or
operations) established in accordance with the last sentence of this Section
2.7. No Assignors shall assume or operate in any jurisdiction under any new
trade, fictitious or other name until (i) it shall have given to the Collateral
Agent not less than 30 days' prior written notice of its intention so to do,
clearly describing such new name and the jurisdictions in which such new name
shall be used and providing such other information in connection therewith as
the Collateral Agent may reasonably request, (ii) with respect to such new name,
such Assignor shall have taken all action to maintain the security interest of
the Collateral Agent in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect and (iii) at the request of
the Collateral Agent, such Assignor shall have furnished an opinion of counsel
reasonably acceptable to the Collateral Agent to the effect that all financing
or continuation statements and amendments or supplements thereto have been filed
in the appropriate filing office or offices, and all other actions (including,
without limitation, the payment of all filing fees and taxes, if any, payable in
connection with such filings) have been taken, in order to
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perfect (and maintain the perfection and priority of) the security interest
granted hereby.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time when
each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that (x) such Receivable, and all records, papers and
documents relating thereto (if any) are genuine and in all respects what they
purport to be, and that all papers and documents (if any) relating thereto (i)
will represent the obligation of the account debtor evidencing indebtedness
unpaid and owed by the respective account debtor arising out of the performance
of labor or services or the sale or lease and delivery of the merchandise listed
therein, or both, (ii) will be the only original writings evidencing and
embodying such obligation of the account debtor named therein (other than copies
created for general accounting purposes), and (iii) will be in compliance and
will conform in all material respects with all applicable federal, state and
local laws and applicable laws of any relevant foreign jurisdiction and (y)
there is no fact or circumstance known to Assignor which would suggest that any
such Receivable (i) will not represent the genuine, legal, valid and binding
obligation of such account debtor or (ii) will not evidence true and valid
obligations, enforceable in accordance with their respective terms, except to
the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws generally
affecting creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law).
3.2. Maintenance of Records. Each Assignor will keep and maintain at
its own cost and expense satisfactory and complete records of its Receivables
and Contracts, including, but not limited to, the originals of all documentation
(including each Contract) with respect thereto, records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and such
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Assignor will make the same available on such Assignor's premises to the
Collateral Agent for inspection, at such Assignor's own cost and expense, at any
and all reasonable times upon demand. Upon the occurrence and during the
continuance of any of the conditions specified in the first sentence of Section
1.1(c) of this Agreement, and upon the request of the Collateral Agent, each
Assignor shall, at its own cost and expense, deliver all tangible evidence of
its Receivables and Contract Rights (including, without limitation, all
documents evidencing the Receivables and all Contracts) and such books and
records to the Collateral Agent or to its representatives (copies of which
evidence and books and records may be retained by such Assignor). If the
Collateral Agent so directs, each Assignor shall legend, in form and manner
reasonably satisfactory to the Collateral Agent, the Receivables and the
Contracts, as well as books, records and documents of the Assignor evidencing or
pertaining to such Receivables and Contracts with an appropriate reference to
the fact that such Receivables and Contracts have been assigned to the
Collateral Agent and that the Collateral Agent has a security interest therein.
3.3. Direction to Account Debtors; Contracting Parties; etc. Upon
the occurrence and during the continuance of an Event of Default, and if the
Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all
payments on account of the Receivables and Contracts to be made directly to the
Cash Collateral Account (y) that the Collateral Agent may, at its option,
directly notify the obligors with respect to any Receivables and/or under any
Contracts to make payments with respect thereto as provided in preceding clause
(x) and (z) that the Collateral Agent may enforce collection of any such
Receivables and Contracts and may adjust, settle or compromise the amount of
payment thereof, in the same manner and to the same extent that such Assignor
might have done. Without notice to or assent by any Assignor, the Collateral
Agent may apply any or all amounts then in, or thereafter deposited in, the Cash
Collateral Account in the manner provided in Section 7.4 of this Agreement. The
reasonable costs and expenses (including attorneys' fees) of collection, whether
incurred by any Assignor or the Collateral Agent, shall be borne by such
Assignor.
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3.4. Modification of Terms; etc. No Assignor shall rescind or cancel
any indebtedness evidenced by any Receivable or under any Contract, or modify
any term thereof or make any adjustment with respect thereto, or extend or renew
the same, or compromise or settle any material dispute, claim, suit or legal
proceeding relating thereto, or sell any Receivable or Contract, or interest
therein, without the prior written consent of the Collateral Agent, except as
permitted by Section 3.5 hereof and except, so long as none of the conditions
described in the first sentence of Section 1.1(c) of this Agreement shall occur
and be continuing, such modifications, adjustments and sales effected by such
Assignor in the ordinary course of business consistent with past practice. Each
Assignor will duly fulfill all obligations on its part to be fulfilled under or
in connection with the Receivables and Contracts and will do nothing to impair
the rights of the Collateral Agent in the Receivables or Contracts.
3.5. Collection. Each Assignor shall endeavor to cause to be
collected from the account debtor named in each of its Receivables or the
obligor under any Contract, as and when due (including, without limitation,
amounts which are delinquent, such amounts to be collected in accordance with
generally accepted lawful collection procedures) any and all amounts owing under
or on account of such Receivable or Contract, and apply forthwith upon receipt
thereof all such amounts as are so collected to the outstanding balance of such
Receivable or under such Contract, except that, at any time when payments in
respect of Receivables and Contracts may be made to such Assignor in accordance
with the second sentence of Section 1.1(c) of this Agreement, such Assignor may
allow in the ordinary course of business as adjustments to amounts owing under
its Receivables and Contracts (i) an extension or renewal of the time or times
of payment, or settlement for less than the total unpaid balance, which such
Assignor finds appropriate in accordance with sound business judgment and (ii) a
refund or credit due as a result of returned or damaged merchandise or
improperly performed services. The reasonable costs and expenses (including,
without limitation, attorneys' fees) of collection, whether incurred by any
Assignor or the Collateral Agent, shall be borne by such Assignor.
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3.6. Instruments. If any Assignor owns or acquires any Instrument
constituting Collateral in an amount equal to or greater than $250,000, such
Assignor will within ten days notify the Collateral Agent thereof, and upon
request by the Collateral Agent will promptly deliver such Instrument to the
Collateral Agent appropriately endorsed to the order of the Collateral Agent as
further security hereunder.
3.7. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other assurances or instruments and take such further
steps relating to its Receivables, Contracts, Instruments and other property or
rights covered by the security interest hereby granted, as the Collateral Agent
may reasonably require.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING MARKS
4.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful exclusive owner of the
Marks listed in Annex E hereto and that said listed Marks include all the United
States federal registrations or applications registered in the United States
Patent and Trademark Office that such Assignor now owns in connection with its
business. Each Assignor represents and warrants that it owns or is licensed to
use all Marks that it uses. Each Assignor further warrants that it is aware of
no third party claim that any aspect of such Assignor's present or contemplated
business operations infringes or will infringe any mark. Each Assignor
represents and warrants that it is the owner of record of all United States
Trademark registrations and applications listed in Annex D hereto and that said
registrations are valid, subsisting, have not been cancelled and that such
Assignor is not aware of any third-party claim that any of said registrations is
invalid or unenforceable. Each Assignor hereby grants to the Collateral Agent an
absolute power of attorney to sign, upon the occurrence and during the
continuance of
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(i) a Bankruptcy Default or Notified Acceleration Event or (ii) any other Event
of Default or Acceleration Event, but in the case of this clause (ii) only to
the extent the Required Banks have so directed, any document which may be
required by the United States Patent and Trademark Office in order to effect an
absolute assignment of all right, title and interest in each Mark, and record
the same.
4.2. Licenses and Assignments. Other than the license agreements
listed on Annex F hereto and any extensions or renewals thereof, each Assignor
hereby agrees not to divest itself of any right under any Mark absent prior
written approval of the Collateral Agent.
4.3. Infringements. Each Assignor agrees, promptly upon learning
thereof, to notify the Collateral Agent in writing of the name and address of,
and to furnish such pertinent information that may be available with respect to,
any party who, in any material respect, may be infringing or otherwise violating
any of such Assignor's rights in and to any significant Mark, or with respect to
any party claiming that the Assignor's use of any significant Mark violates in
any material respect any property right of that party. Each Assignor further
agrees, unless otherwise agreed by the Collateral Agent, diligently to prosecute
any Person infringing, in any material respect, any significant Mark.
4.4. Preservation of Marks. Each Assignor agrees to use its
significant Marks in interstate or foreign commerce during the time in which
this Agreement is in effect, sufficiently to preserve such Marks as trademarks
or service marks registered under the laws of the United States.
4.5. Maintenance of Registration. Each Assignor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. SectionSection 1051 et seq. to maintain trademark registration,
including but not limited to affidavits of use and applications for renewals of
registration in the United States Patent and Trademark Office for all of its
significant Marks pursuant to 15 U.S.C. SectionSection 1058(a), 1059 and 1065,
and shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Col-
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lateral Agent. Each Assignor agrees to notify the Collateral Agent six (6)
months prior to the dates on which the affidavits of use or the applications for
renewal registration are due with respect to any significant Mark that the
affidavits of use or the renewal is being processed.
4.6. Future Registered Marks. If any Mark registration issues
hereafter to any Assignor as a result of any application now or hereafter
pending before the United States Patent and Trademark Office, within thirty (30)
days of receipt of such certificate such Assignor shall deliver a copy of such
certificate, and a grant of security in such mark to the Collateral Agent,
confirming the grant thereof hereunder, the form of such confirmatory grant to
be substantially the same as the form hereof.
4.7. Remedies. If there shall occur and be continuing an Event of
Default, the Collateral Agent may, by written notice to any Assignor, take any
or all of the following actions: (i) declare the entire right, title and
interest of such Assignor in and to each of the Marks, together with all
trademark rights and rights of protection to the same, vested, in which event
such rights, title and interest shall immediately vest, in the Collateral Agent
for the benefit of the Secured Parties, in which case the Collateral Agent shall
be entitled to exercise the power of attorney referred to in Section 4.1 hereof
to execute, cause to be acknowledged and notarized and record said absolute
assignment with the applicable agency; (ii) take and use or sell the Marks and
the goodwill of such Assignor's business symbolized by the Marks and the right
to carry on the business and use the assets of such Assignor in connection with
which the Marks have been used; and (iii) direct such Assignor to refrain, in
which event such Assignor shall refrain, from using the Marks in any manner
whatsoever, directly or indirectly, and, if requested by the Collateral Agent,
change such Assignor's corporate name to eliminate therefrom any use of any Mark
and execute such other and further documents that the Collateral Agent may
request to further confirm this and to transfer ownership of the Marks and
registrations and any pending trademark application in the United States Patent
and Trademark Office to the Collateral Agent.
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ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS AND COPYRIGHTS
5.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful exclusive owner of all
rights in the Patents listed in Annex G hereto and in the Copyrights listed in
Annex H hereto, that said Patents include all the United States patents and
applications for United States patents that such Assignor now owns and that said
Copyrights constitute all the United States copyrights registered with the
United States Copyright Office and applications for United States copyrights
that such Assignor now owns. Each Assignor represents and warrants that it owns
or is licensed to practice under all Patents and Copyrights that it now uses or
practices under. Each Assignor further warrants that it is aware of no third
party claim that any aspect of such Assignor's present or contemplated business
operations infringes or will infringe any patent or any copyright. The Assignor
hereby grants to the Collateral Agent an absolute power of attorney to sign,
upon the occurrence and during the continuance of (i) a Bankruptcy Default or
Notified Acceleration Event or (ii) any other Event of Default or Acceleration
Event, but in the case of this clause (ii) only to the extent the Required Banks
have so directed, any document which may be required by the United States Patent
and Trademark Office or the United States Copyright Office in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and record the same.
5.2. Licenses and Assignments. Other than the license agreements
listed on Annex F hereto and any extensions or renewals thereof, each Assignor
hereby agrees not to divest itself of any right under any Patent or Copyright
absent prior written approval of the Collateral Agent.
5.3. Infringements. Each Assignor agrees, promptly upon learning
thereof, to furnish the Collateral Agent in writing with all pertinent
information available to the Assignor with respect to any material infringement
or other material violation of the Assignor's rights in any significant Patent
or Copyright, or with respect to any claim that practice of any significant
Patent or Copyright materially
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violates any property right of that party. Each Assignor further agrees, absent
direction of the Collateral Agent to the contrary, diligently to prosecute any
Person infringing, in any material respect, any significant Patent or Copyright.
5.4. Maintenance of Patents. At its own expense, each Assignor shall
make timely payment of all post-issuance fees required pursuant to 35 U.S.C.
Section 41 to maintain in force rights under each Patent.
5.5. Prosecution of Patent Application. At its own expense, each
Assignor shall diligently prosecute all applications for United States patents
listed in Annex F hereto and shall not abandon any such application prior to
exhaustion of all administrative and judicial remedies, absent written consent
of the Collateral Agent.
5.6. Other Patents and Copyrights. Within 30 days of acquisition of
a United States Patent or Copyright by or on behalf of any Assignor, or of the
filing of an application for a United States Patent or Copyright by or on behalf
of any Assignor, such Assignor shall deliver to the Collateral Agent a copy of
said Patent or Copyright or such application, as the case may be, with a grant
of security as to such Patent or Copyright, as the case may be, confirming the
grant thereof hereunder, the form of such confirmatory grant to be substantially
the same as the form hereof.
5.7. Remedies. If there shall occur and be continuing an Event of
Default, the Collateral Agent may by written notice to any Assignor, take any or
all of the following actions: (i) declare the entire right, title, and interest
of such Assignor in each of the Patents and Copyrights vested, in which event
such right, title, and interest shall immediately vest in the Collateral Agent
for the benefit of the Secured Parties, in which case the Collateral Agent shall
be entitled to exercise the power of attorney referred to in Section 5.1 hereof
to execute, cause to be acknowledged and notarized and record said absolute
assignment with the applicable agency; (ii) take and practice or sell the
Patents and Copyrights; and (iii) direct such Assignor to refrain, in which
event the Assignor shall refrain, from practicing the Patents and Copyrights
directly or indirectly, and the Assignor shall execute such other and further
documents as the Collateral Agent may request further
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to confirm this and to transfer ownership of the Patents and Copyrights to the
Collateral Agent for the benefit of the Secured Parties.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. No Assignor will do
anything to impair the rights of the Collateral Agent in the Collateral. Each
Assignor will at all times keep its Inventory and Equipment insured in favor of
the Collateral Agent, at the Assignor's own expense to the extent and in the
manner provided in the Credit Agreement; all policies or certificates (or
certified copies thereof) with respect to such insurance (and any other
insurance maintained by the Assignor) (i) shall be endorsed to the Collateral
Agent's satisfaction for the benefit of the Collateral Agent (including, without
limitation, by naming the Collateral Agent as loss payee), (ii) shall state that
such insurance policies shall not be cancelled or revised without 30 days' prior
written notice thereof by the insurer to the Collateral Agent (but only 10 days'
prior written notice of cancellation for failure to make payments under such
policies), (iii) shall provide that the respective insurers irrevocably waive
any and all rights of subrogation with respect to the Collateral Agent and the
Secured Parties and (iv) shall be deposited with the Collateral Agent. If any
Assignor shall fail to insure its Inventory and Equipment in accordance with the
preceding sentence, or if any Assignor shall fail to so endorse and deposit all
policies or certificates with respect thereto, the Collateral Agent shall have
the right (but shall be under no obligation) to procure such insurance and such
Assignor agrees to reimburse the Collateral Agent for all costs and expenses of
procuring such insurance. The Collateral Agent may apply any proceeds of such
insurance in accordance with Section 7.4 hereof. Each Assignor assumes all
liability and responsibility in connection with the Collateral acquired by it
and the liability of such Assignor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to the
Assignor.
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6.2. Warehouse Receipts Non-negotiable. Each Assignor agrees that if
any warehouse receipt or receipt in the nature of a warehouse receipt is issued
with respect to any of its Inventory, such warehouse receipt or receipt in the
nature thereof shall not be "negotiable" (as such term is used in Section 7-104
of the Uniform Commercial Code as in effect in any relevant jurisdiction or
under other relevant law).
6.3. Further Actions. Each Assignor will, at its own expense, make,
execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from
time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral.
6.4. Financing Statements. Each Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form acceptable to
the Collateral Agent, as the Collateral Agent may from time to time reasonably
request or as are necessary or desirable in the opinion of the Collateral Agent
to establish and maintain a valid, enforceable, first priority perfected
security interest in the Collateral as provided herein and the other rights and
security contemplated hereby all in accordance with the Uniform Commercial Code
as enacted in any and all relevant jurisdictions or any other relevant law. Each
Assignor will pay any applicable filing fees, recordation taxes and related
expenses. Each Assignor authorizes the Collateral Agent to file any such
financing statements without the signature of the Assignor where permitted by
law. The Assignor further constitutes and appoints the Collateral Agent its true
and lawful attorney, irrevocably and with full power, which appointment is
coupled with an interest, to execute on behalf of the Assignor and file any
financing statements necessary to perfect the security interests granted
hereunder with respect to all Collateral now or hereafter situated in the
Commonwealth of
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Puerto Rico, as of the effective date of the Puerto Rico Commercial Transactions
Act and at all times thereafter.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF SPECIFIED EVENTS
7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor
agrees that, if there shall have occurred and be continuing an Event of Default,
then and in every such case, subject to any mandatory requirements of applicable
law then in effect, the Collateral Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Uniform Commercial Code in all relevant jurisdictions and may
also:
(a) personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof, from such Assignor or
any other Person who then has possession of any part thereof with or
without notice or process of law, and for that purpose may enter upon such
Assignor's premises where any of the Collateral is located and remove the
same and use in connection with such removal any and all services,
supplies, aids and other facilities of such Assignor; and
(b) instruct the obligor or obligors on any agreement, instrument or
other obligation (including, without limitation, the Receivables and the
Contracts) constituting the Collateral to make any payment required by the
terms of such agreement, instrument or other obligation directly to the
Collateral Agent and may exercise any and all remedies of such Assignor in
respect of such Collateral; and
(c) withdraw all monies, securities and instruments in the Cash
Collateral Account for application to the Obligations in accordance with
Section 7.4 hereof; and
(d) sell, assign or otherwise liquidate, or direct such Assignor to
sell, assign or otherwise liquidate, any or all of the Collateral or any
part thereof, and
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take possession of the proceeds of any such sale or liquidation; and
(e) take possession of the Collateral or any part thereof, by
directing such Assignor in writing to deliver the same to the Collateral
Agent at any place or places designated by the Collateral Agent, in which
event such Assignor shall at its own expense:
(i) forthwith cause the same to be moved to the place or
places so designated by the Collateral Agent and there delivered to
the Collateral Agent, and
(ii) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further action by
the Collateral Agent as provided in Section 7.2 hereof, and
(iii) while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain them in good
condition; and
(f) license or sublicense, whether on an exclusive or nonexclusive
basis, any Marks, Patents or Copyrights included in the Collateral for
such term and on such conditions and in such manner as the Collateral
Agent shall in its sole judgment determine;
it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and
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in general in such manner, at such time or times, at such place or places and on
such terms as the Collateral Agent may, in compliance with any mandatory
requirements of applicable law, determine to be commercially reasonable. Any of
the Collateral may be sold, leased or otherwise disposed of, in the condition in
which the same existed when taken by the Collateral Agent or after any overhaul
or repair which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the respective Assignor specifying the time at which
such disposition is to be made and the intended sale price or other
consideration therefor, and shall be subject, for the 10 days after the giving
of such notice, to the right of such Assignor or any nominee of such Assignor to
acquire the Collateral involved at a price or for such other consideration at
least equal to the intended sale price or other consideration so specified. Any
such disposition which shall be a public sale permitted by such requirements
shall be made upon not less than 10 days' written notice to the respective
Assignor specifying the time and place of such sale and, in the absence of
applicable requirements of law, shall be by public auction (which may, at the
Collateral Agent's option, be subject to reserve), after publication of notice
of such auction not less than 10 days prior thereto in two newspapers in general
circulation in the City of New York. To the extent permitted by any such
requirement of law, the Collateral Agent and the Secured Parties may bid for and
become the purchaser of the Collateral or any item thereof, offered for sale in
accordance with this Section without accountability to the respective Assignor.
If, under mandatory requirements of applicable law, the Collateral Agent shall
be required to make disposition of the Collateral within a period of time which
does not permit the giving of notice to the respective Assignor as hereinabove
specified, the Collateral Agent need give such Assignor only such notice of
disposition as shall be reasonably practicable in view of such mandatory
requirements of applicable law. Each Assignor agrees to do or cause to be done
all such other acts and things as may be reasonably necessary to make such sale
or sales of all or any portion of the Collateral valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or
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foreign, having jurisdiction over any such sale or sales, all at such Assignor's
expense.
7.3. Waiver of Claims. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH ASSIGNOR WOULD
OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF
ANY STATE, and each Assignor hereby further waives, to the extent permitted by
law:
(a) all damages occasioned by such taking of possession except any
damages which are the direct result of the Collateral Agent's gross
negligence or willful misconduct;
(b) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Collateral
Agent's rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable law
in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and each Assignor,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the respective Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.
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7.4. Application of Proceeds. (a) All moneys collected by the
Collateral Agent upon any sale or other disposition of the Collateral, together
with all other moneys received by the Collateral Agent hereunder, shall be
applied in accordance with Section 7.4 of the Borrower Security Agreement.
(b) It is understood and agreed that each Assignor shall remain
liable to the extent of any deficiency between the amount of the proceeds of the
Collateral hereunder and the aggregate amount of the Obligations.
7.5. Remedies Cumulative. Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements or the other Credit Documents or now or
hereafter existing at law or in equity, or by statute and each and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time or simultaneously and as often and in such order as
may be deemed expedient by the Collateral Agent. All such rights, powers and
remedies shall be cumulative and the exercise or the beginning of exercise of
one shall not be deemed a waiver of the right to exercise of any other or
others. No delay or omission of the Collateral Agent in the exercise of any such
right, power or remedy and no renewal or extension of any of the Obligations
shall impair any such right, power or remedy or shall be construed to be a
waiver of any Default or Event of Default or an acquiescence therein. No notice
to or demand on any Assignor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Collateral Agent to any other or further
action in any circumstances without notice or demand. In the event that the
Collateral Agent shall bring any suit to enforce any of its rights hereunder and
shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment.
7.6. Discontinuance of Proceedings. In case the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
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shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Collateral Agent, then and in every such case each
Assignor, the Collateral Agent and each holder of any of the Obligations shall
be restored to their former positions and rights hereunder with respect to the
Collateral subject to the security interest created under this Agreement, and
all rights, remedies and powers of the Collateral Agent shall continue as if no
such proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) Each Assignor agrees to indemnify, reimburse and
hold the Collateral Agent, each Secured Party and their respective successors,
assigns, employees, agents and servants (hereinafter in this Section 8.1
referred to individually as "Indemnitee," and collectively as "Indemnitees")
harmless from any and all liabilities, obligations, damages, injuries,
penalties, claims, demands, actions, suits, judgments and any and all costs,
expenses or disbursements (including reasonable attorneys' fees and expenses)
(for the purposes of this Section 8.1 the foregoing are collectively called
"expenses") of whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnitees in any way relating to or arising out of this
Agreement, any Interest Rate Protection Agreement, any other Credit Document, or
any other document executed in connection herewith and therewith or in any other
way connected with the administration of the transactions contemplated hereby
and thereby or the enforcement of any of the terms of, or the preservation of
any rights under any thereof, or in any way relating to or arising out of the
manufacture, ownership, ordering, purchase, delivery, control, acceptance,
lease, financing, possession, operation, condition, sale, return or other
disposition, or use of the Collateral (including, without limitation, latent or
other defects, whether or not discoverable), any contract claim or, to the
maximum extent permitted under applicable law, the violation of the laws of any
country, state or other governmental body or unit, or any tort (including,
without limitation, claims arising or imposed under the doctrine of strict
liability, or for or on account of injury to or the death of
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any Person (including any Indemnitee), or property damage); provided that no
Indemnitee shall be indemnified pursuant to this Section 8.1(a) for expenses to
the extent caused by the gross negligence or willful misconduct of such
Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of
the assertion of such a liability, obligation, damage, injury, penalty, claim,
demand, action, suit or judgment, such Assignor shall assume full responsibility
for the defense thereof. Each Indemnitee agrees to use its best efforts to
promptly notify the respective Assignor of any such assertion to which such
Indemnitee has knowledge.
(b) Without limiting the application of Section 8.1(a) hereof, each
Assignor agrees to pay, or reimburse the Collateral Agent for (if the Collateral
Agent shall have incurred fees, costs or expenses because such Assignor shall
have failed to comply with its obligations under this Agreement, any other
Credit Document or any Interest Rate Protection Agreement), any and all fees,
costs and expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection of the Collateral Agent's Liens on, and
security interest in, the Collateral, including, without limitation, all fees
and taxes in connection with the recording or filing of instruments and
documents in public offices, payment or discharge of any taxes or Liens upon or
in respect of the Collateral, premiums for insurance with respect to the
Collateral and all other fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Collateral Agent's interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.
(c) Without limiting the application of Section 8.1(a) or (b), each
Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and
against any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by
such Assignor in this Agreement, any Interest Rate Protection Agreement, any
other Credit Document or in any writing contemplated by or made or delivered
pursuant to or in connection with this Agreement, any Interest Rate Protection
Agreement or any other Credit Document.
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(d) If and to the extent that the obligations of any Assignor under
this Section 8.1 are unenforceable for any reason, the respective Assignor
hereby agrees to make the maximum contribution to the payment and satisfaction
of such obligations which is permissible under applicable law.
8.2. Indemnity Obligations Secured by Collateral; Survival. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement or the termination of all Interest Rate
Protection Agreements and the payment of all other Obligations and
notwithstanding the discharge thereof.
ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified. Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.
"Acceleration Event" shall mean the acceleration prior to the stated
final maturity, or the failure to pay at the stated final maturity, of
Obligations representing principal of, or interest on, extensions of credit
(including without limitation all Bank L/C Outstandings) pursuant to the Credit
Agreement, or any Interest Rate Protection Agreement, provided that in each
case, any such Acceleration Event shall cease to exist upon payment in full of
the Obligations so accelerated or not paid.
"Administrative Agent" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
"Assignor" shall have the meaning provided in the first paragraph of
this Agreement.
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"Bankruptcy Default" shall mean any Default or Event of Default with
respect to any Assignor pursuant to Section 9.05 of the Credit Agreement.
"Bank Creditor" shall have the meaning provided in the first
paragraph of this Agreement.
"Banks" shall have the meaning provided in the first WHEREAS clause
of this Agreement.
"Cash Collateral Account" shall mean a non-interest bearing cash
collateral account maintained with, and in the sole dominion and control of, the
Collateral Agent for the benefit of the Secured Parties.
"Chattel Paper", with respect to any Assignor, shall have the
meaning provided in the Uniform Commercial Code as in effect on the date hereof
in the State of New York.
"Class" shall have the meaning provided in Section 11.2 of this
Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a) of
this Agreement.
"Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.
"Contract Rights", with respect to any Assignor, shall mean all
rights of such Assignor (including, without limitation, all rights to payment)
under each Contract to which it is a party or under which it is entitled to any
benefits.
"Contracts", with respect to any Assignor, shall mean all contracts
between such Assignor and one or more additional parties.
"Copyrights", with respect to any Assignor, shall mean any United
States copyright which such Assignor now or hereafter has registered with the
United States Copyright Office, as well as any application for a United States
copyright registration now or hereafter made with the United States Copyright
Office by such Assignor.
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"Credit Agreement" shall have the meaning provided in the first
WHEREAS clause of this Agreement.
"Credit Agreement Obligations" shall have the meaning provided in
the definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of time,
or both, would constitute an Event of Default.
"Documents", with respect to any Assignor, shall have the meaning
provided in the Uniform Commercial Code as in effect on the date hereof in the
State of New York.
"Equipment", with respect to any Assignor, shall mean any
"equipment," as such term is defined in the Uniform Commercial Code as in effect
on the date hereof in the State of New York, now or hereafter owned by such
Assignor and, in any event, shall include, but shall not be limited to, all
machinery, equipment, furnishings, movable trade fixtures and vehicles now or
hereafter owned by such Assignor and any and all additions, substitutions and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
"Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement, and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.
"General Intangibles", with respect to any Assignor, shall have the
meaning provided in the Uniform Commercial Code as in effect on the date hereof
in the State of New York and shall in any event include all of such Assignor's
claims, rights, powers, privileges, authority, options, security interests,
liens and remedies under any partnership agreement to which such Assignor is a
party or with respect to any partnership of which the Assignor is a partner.
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"Goods", with respect to any Assignor, shall have the meaning
provided in the Uniform Commercial Code as in effect on the date hereof in the
State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1 of this
Agreement.
"Instrument" shall have the meaning provided in Article 9 of the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.
"Interest Rate Protection Agreements" shall have the meaning
provided in the first paragraph of this Agreement.
"Interest Rate Protection Creditors" shall have the meaning provided
in the first paragraph of this Agreement.
"Interest Rate Protection Obligations" shall have the meaning
provided in the definition of "Obligations" in this Article IX.
"Inventory", with respect to any Assignor, shall mean merchandise,
inventory and goods, and all additions, substitutions and replacements thereof,
wherever located, together with all goods, supplies, incidentals, packaging
materials, labels, materials and any other items used or usable in
manufacturing, processing, packaging or shipping same; in all stages of
production -- from raw materials through work-in-process to finished goods --
and all products and proceeds of whatever sort and wherever located and any
portion thereof which may be returned, rejected, reclaimed or repossessed by the
Collateral Agent from the Assignor's customers, and shall specifically include
all "inventory" as such term is defined in the Uniform Commercial Code as in
effect on the date hereof in the State of New York, now or hereafter owned by
such Assignor.
"Marks", with respect to any Assignor, shall mean any trademarks and
service marks now held or hereafter acquired by such Assignor, which are
registered in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any political
subdivision thereof and any application for such trademarks and service marks,
as well as any unregistered
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marks used by such Assignor in the United States and trade dress including
logos, designs, trade names, company names, business names, fictitious business
names and other business identifiers in connection with which any of these
registered or unregistered marks are used.
"Notified Acceleration Event" shall mean any Acceleration Event with
respect to which the Required Banks have given written notice to the Collateral
Agent that a "Notified Acceleration Event" exists, provided that such written
notice may only be given if such Acceleration Event is continuing and, provided
further that any such Notified Acceleration Event shall cease to exist once
there is no longer any Acceleration Event in existence.
"Obligations" shall mean, with respect to each Assignor, (i) all
obligations and liabilities of such Assignor whether now existing or hereafter
incurred under, arising out of, or in connection with the Subsidiary Guaranty
(or in the case of Xtra, the Credit Agreement Guaranty) and the due performance
and compliance by such Assignor with all of the terms, conditions and agreements
contained in the Subsidiary Guaranty (or in the case of Xtra, the Credit
Agreement Guaranty) (to the extent relating to obligations owing to Bank
Creditors, the "Credit Agreement Obligations," and to the extent owing to
Interest Rate Protection Creditors, the "Interest Rate Protection Obligations");
(ii) any and all sums advanced by the Collateral Agent in order to preserve the
Collateral or preserve its security interest in the Collateral in accordance
with the terms hereof; (iii) in the event of any proceeding for the collection
or enforcement of any indebtedness, obligations, or liabilities of such Assignor
referred to in clause (i), after an Event of Default shall have occurred and be
continuing, the reasonable expenses of the Collateral Agent of re-taking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise with reasonable attorneys' fees
of counsel to the Collateral Agent and court costs; and (iv) all amounts paid by
any Indemnitee as to which such Indemnitee has the right to reimbursement under
Section 8.1 of this Agreement. It is acknowledged and agreed that the
"Obligations" shall include extensions of credit of the types described above,
whether outstanding on the date of this Agreement or extended from time to time
after the date of this Agreement.
<PAGE> 315
EXHIBIT G-2
Page 31
"Patents", with respect to any Assignor, shall mean any United
States patent to which such Assignor now or hereafter has title or license to
use, as well as any application for a United States patent now or hereafter made
by such Assignor.
"Permitted Filings" shall have the meaning provided in Section 2.1
of this Agreement.
"Pledged Securities" shall have the meaning provided in the Xtra
Pledge Agreement.
"Primary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Pro Rata Share" shall have the meaning provided in Section 7.4(b)
of this Agreement.
"Proceeds", with respect to any Assignor, shall have the meaning
provided in the Uniform Commercial Code as in effect in the State of New York on
the date hereof or under other relevant law and, in any event, shall include,
but not be limited to, (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to the Collateral Agent or such Assignor from time
to time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to such Assignor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental authority
(or any person acting under color of governmental authority) and (iii) any and
all other amounts from time to time paid or payable under or in connection with
any of the Collateral.
"Receivables", with respect to any Assignor, shall mean any
"account" as such term is defined in the Uniform Commercial Code as in effect on
the date hereof, now or hereafter owned by such Assignor and, in any event,
shall include, but shall not be limited to, all of such Assignor's rights to
payment for goods sold or leased or services performed by such Assignor, whether
now in existence or arising from time to time hereafter, including, without
limitation, rights evidenced by an account, note, contract, security agreement,
chattel paper, or other evidence of indebtedness
<PAGE> 316
EXHIBIT G-2
Page 32
or security, together with (a) all security pledged, assigned, hypothecated or
granted to or held by such Assignor to secure the foregoing, (b) all of such
Assignor's right, title and interest in and to any goods, the sale of which gave
rise thereto, (c) all guarantees, endorsements and indemnifications on, or of,
any of the foregoing, (d) all powers of attorney for the execution of any
evidence of indebtedness or security or other writing in connection therewith,
(e) all books, records, ledger cards, and invoices relating thereto, (f) all
evidences of the filing of financing statements and other statements and the
registration of other instruments in connection therewith and amendments
thereto, notices to other creditors or secured parties, and certificates from
filing or other registration officers, (g) all credit information, reports and
memoranda relating thereto, and (h) all other writings related in any way to the
foregoing; provided that "Receivables" shall not include any Pledged Security or
promissory note not required to be pledged pursuant to the Borrower Pledge
Agreement.
"Representative" shall mean (x) for the Bank Creditors, the
Administrative Agent under the Credit Agreement and (y) for the Interest Rate
Protection Creditors, the Representative for the Interest Rate Protection
Creditors or, in the absence of such a Representative, the Interest Rate
Protection Creditors.
"Required Creditors" shall mean the requisite percentage of Secured
Parties which are needed to take actions with respect to a given Class of
Obligations, i.e., whether the Required Banks or the Required Interest Rate
Protection
Creditors.
"Required Interest Rate Protection Creditors" shall mean the holders
of 51% of all Obligations outstanding from time to time under the Interest Rate
Protection Agreements, determined in such reasonable fashion as is acceptable to
the Collateral Agent.
"Secondary Obligations" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Secured Parties" shall have the meaning provided in the first
paragraph of this Agreement.
<PAGE> 317
EXHIBIT G-2
Page 33
"Termination Date" shall have the meaning provided in Section 11.9
of this Agreement.
ARTICLE X
THE COLLATERAL AGENT
It is expressly understood and agreed that the obligations of the
Collateral Agent as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement, are only
those expressly set forth in this Agreement and in Article X of the Borrower
Security Agreement. By accepting the benefits hereof, each Secured Party shall
be deemed to have agreed to the terms and conditions set forth in Article X of
the Borrower Security Agreement, as the same may be amended, supplemented or
otherwise modified from time to time, which is incorporated herein by reference
in its entirety; provided that all references therein to "this Agreement" shall
be a reference to this Agreement, provided further that all references therein
to each "Assignor" shall be a reference to each Assignor, and provided further
that all references therein to the "Collateral Agent" shall be a reference to
the Collateral Agent. The Collateral Agent shall act hereunder on the terms and
conditions set forth in Article X of the Borrower Security Agreement and the
rights of each Secured Party shall be enforceable solely by the Collateral Agent
in accordance with Article X of the Borrower Security Agreement.
ARTICLE XI
MISCELLANEOUS
11.1. Notices. Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
<PAGE> 318
EXHIBIT G-2
Page 34
(a) if to any Assignor, to the address set forth
opposite such Assignor's name on the
signature pages hereof.
(b) if to the Collateral Agent:
The Bank of Nova Scotia
Suite 2700
600 Peachtree Street, NE
Atlanta, GA 30308
Tel: (404) 877-1505
Fax: (404) 888-8998
Attention: Frank F. Sandler
(c) if to any Bank Creditor, either (x) to the Administrative Agent,
at the address of the Administrative Agent specified in the Credit
Agreement or (y) at such address as such Bank Creditor shall have
specified in the Credit Agreement;
(d) if to any Interest Rate Protection Creditor, either (x) to the
Representative for the Interest Rate Protection Creditors, at such address
as such Representative may have provided to the Assignors and the
Collateral Agent from time to time, or (y) directly to the Interest Rate
Protection Creditors at such address as the Interest Rate Protection
Creditors shall have specified in writing to the Assignors and the
Collateral Agent.
11.2. Waiver; Amendment. None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by each Assignor and the Collateral Agent with the
consent of the Required Banks (or all of the Banks if required pursuant to
Section 12.11 of the Credit Agreement), provided, however, that no modifications
shall be made to Section 7.4(a) of this Agreement without the consent of each
Secured Party adversely affected thereby; and provided further that any change,
waiver, modification or variance affecting the rights and benefits of a single
Class (as defined below) of Secured Parties (and not all Secured Parties in a
like or similar manner) shall require the written consent of the Required
Creditors of such affected
<PAGE> 319
EXHIBIT G-2
Page 35
Class. For the purpose of this Agreement, the term "Class" shall mean each class
of Secured Parties, i.e., whether (x) the Bank Creditors as holders of the
Credit Agreement Obligations or (y) the Interest Rate Protection Creditors as
the holders of the Interest Rate Protection Obligations.
11.3. Obligations Absolute. The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of any Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection Agreement except as specifically set forth in a
waiver granted pursuant to Section 11.2 hereof; or (c) any amendment to or
modification of any Credit Document or any Interest Rate Protection Agreement or
any security for any of the Obligations; whether or not any Assignor shall have
notice or knowledge of any of the foregoing.
11.4. Successors and Assigns. This Agreement shall be binding upon
each Assignor and its successors and assigns and shall inure to the benefit of
the Collateral Agent and each Secured Party and their respective successors and
assigns, provided that no Assignor may transfer or assign any or all of its
rights or obligations hereunder without the written consent of the Required
Banks. All agreements, statements, representations and warranties made by any
Assignor herein or in any certificate or other instrument delivered by any
Assignor or on its behalf under this Agreement shall be considered to have been
relied upon by the Secured Parties and shall survive the execution and delivery
of this Agreement, the other Credit Documents and the Interest Rate Protection
Agreements regardless of any investigation made by the Secured Parties or on
their behalf.
11.5. Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provision of this Agreement.
11.6. Severability. Any provision of this Agree- ment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent
<PAGE> 320
EXHIBIT G-2
Page 36
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11.7. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
11.8. Assignors' Duties. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that each Assignor shall remain
liable to perform all of the obligations, if any, assumed by it with respect to
the Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of any Assignor under or with
respect to any Collateral.
11.9. Termination; Release. (a) After the Termination Date, this
Agreement shall terminate and the Collateral Agent, at the request and expense
of the respective Assignor, will execute and deliver to such Assignor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral of
such Assignor as may be in the possession of the Collateral Agent and as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement. As used in this Agreement, "Termination Date" shall mean the date
upon which the Total Revolving Commitment has been terminated, no Note remains
outstanding, all Letters of Credit have been terminated and all Credit Agreement
Obligations then owing by any Assignor have been paid in full.
(b) It is expressly acknowledged and agreed that all or a portion of
the Collateral shall be released from the Liens and security interests created
hereunder upon any sale thereof from time to time to the extent permitted by,
and in accordance with the terms of, the Credit Agreement. In addition, it is
expressly acknowledged and agreed that, any
<PAGE> 321
EXHIBIT G-2
Page 37
or all of the Collateral may be released by the Collateral Agent acting at the
direction of the Required Banks (or all of the Banks to the extent required
under Section 12.11 of the Credit Agreement). Upon any sale of the type
described in the second preceding sentence or release of any such Collateral as
provided in the immediately preceding sentence, the Collateral Agent shall, at
the request and expense of the respective Assignor, and without the further
consent of, or liability to, any Secured Party, release such Collateral and
execute and deliver to such Assignor a proper instrument or instruments
acknowledging the release of such Collateral from this Agreement, and will duly
assign, transfer and deliver to such Assignor (without recourse and without any
representation or warranty) the Collateral being sold or released as described
above.
(c) At any time that any Assignor desires that the Collateral Agent
take any action to acknowledge or give effect to any release of Collateral
pursuant to the foregoing Section 11.9(a) or (b), it shall deliver to the
Collateral Agent a certificate signed by its chief financial officer stating
that the release of the respective Collateral is permitted pursuant to the
foregoing Section 11.9(a) or (b). If requested by the Collateral Agent (although
the Collateral Agent shall have no obligation to make any such request), such
Assignor shall furnish appropriate legal opinions (from counsel acceptable to
the Collateral Agent) to the effect set forth in the immediately preceding
sentence. The Collateral Agent shall have no liability whatsoever to any Secured
Party as the result of any release of Collateral by it as permitted by this
Section 11.9. Upon any release of Collateral pursuant to the foregoing Section
11.9(a) or (b), none of the Secured Parties shall have any continuing right or
interest in such Collateral, or the proceeds thereof.
11.10. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with each Assignor and the
Collateral Agent.
<PAGE> 322
EXHIBIT G-2
Page 38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
1300 N.W. 22nd Street PUEBLO MARKETS, INC.,
Pompano Beach, FL 33069 as Assignor
Tel: (954) 977-2500
Fax: (954) 979-5770 By ____________________
Attn: Chief Financial Officer Title:
1300 N.W. 22nd Street PUEBLO SUPER VIDEOS, INC.,
Pompano Beach, FL 33069 as Assignor
Tel: (954) 977-2500
Fax: (954) 979-5770 By ____________________
Attn: Chief Financial Officer Title:
1300 N.W. 22nd Street XTRA SUPER FOOD CENTERS, INC.,
Pompano Beach, FL 33069 as Assignor
Tel: (954) 977-2500
Fax: (954) 979-5770 By ____________________
Attn: Chief Financial Officer Title:
1300 N.W. 22nd Street ALL TRUCK, INC.,
Pompano Beach, FL 33069 as Assignor
Tel: (954) 977-2500
Fax: (954) 979-5770 By ____________________
Attn: Chief Financial Officer Title:
1300 N.W. 22nd Street XTRA DRUGSTORE, INC.,
Pompano Beach, FL 33069 as Assignor
Tel: (954) 977-2500
Fax: (954) 979-5770 By ____________________
Attn: Chief Financial Officer Title:
1300 N.W. 22nd Street PUEBLO CARIBBEAN VIDEOS, INC.,
Pompano Beach, FL 33069
Tel: (954) 977-2500
Fax: (954) 979-5770 By ____________________
Attn: Chief Financial Officer Title:
<PAGE> 323
EXHIBIT G-2
Page 39
THE BANK OF NOVA SCOTIA,
as Collateral Agent
By ____________________
Title:
<PAGE> 324
ANNEX A
to
EXHIBIT G-2
Schedule of Permitted Filings
<TABLE>
<CAPTION>
===============================================================================================================
Type Equipment
Filed With Debtor Secured Party of UCC Date File Number Summary
- ---------- ------ ------------- ------ ---- ----------- -------
Filed
-----
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dade County Xtra Super Food Mutual Benefit UCC-3 5/20/91 91R166414 Movables,
Centers, Inc. Life Insurance (Continuation) 15030PG1019 Fixtures,
Company Equipment
- ---------------------------------------------------------------------------------------------------------------
Dade County Xtra Super Food Mutual Benefit UCC-3 5/20/91 91R166445 Movables,
Centers, Inc. Life Insurance (Continuation) 15030PG1065 Fixtures,
Company Equipment
- ---------------------------------------------------------------------------------------------------------------
Secretary of Xtra Super Food Mutual Benefit UCC-1 6/13/86 001860086293 Movables,
State Centers, Inc. Life Insurance Equipment and
Company Fixtures
- ---------------------------------------------------------------------------------------------------------------
Secretary of Xtra Super Food Mutual Benefit UCC-3 5/17/91 910000108457 Movables,
State Centers, Inc. Life Insurance (Continuation) Equipment and
Company Fixtures
- ---------------------------------------------------------------------------------------------------------------
Secretary of Xtra Super Food Mutual Benefit UCC-3 5/17/91 910000108498 Movables,
State Centers, Inc. Life Insurance (Continuation) Fixtures,
Company Equipment
- ---------------------------------------------------------------------------------------------------------------
Palm Beach Pueblo New England UCC-3 12/9/92 92-376265 Fixtures
County International, Inc.Capital (Continuation) 7508 PG 1581
Xtra Super Food Corporation
Centers, Inc.
</TABLE>
<PAGE> 325
ANNEX A
to
EXHIBIT G-2
Page 2
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Dade County Pueblo Chrysler Capital UCC-3 11/16/92 92R436435 General
International, Corporation (Assignment) 15713PG1118 machinery,
Inc. equipment,
fixtures
- ---------------------------------------------------------------------------------------------------------------
Secretary of Pueblo General Electric UCC-3 4/13/93 930000077114 All property at
State International Capital (Continuation) 2675 Military
Inc. Corporation Trail, West Palm
Xtra Super Food Beach, FL
Centers Inc.
- ---------------------------------------------------------------------------------------------------------------
Secretary of Pueblo Chrysler Capital UCC-3 11/19/92 920000237764 All property at
State International, Corporation (Assignment) 2675 Military
Inc. Trail, West Palm
Xtra Super Food Beach, FL
Centers, Inc.
- ---------------------------------------------------------------------------------------------------------------
Secretary of Pueblo Chrysler Capital UCC-3 12/24/92 920000264684 All property at
State International, Corporation (Assignment) 21401 N.W. 2nd
Inc. Ave., Miami,
Xtra Super Food FL
Centers, Inc.
</TABLE>
<PAGE> 326
ANNEX A
to
EXHIBIT G-2
Page 3
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Secretary of Pueblo Southeast Bank UCC-3 1/18/89 890000015823 General
State International, Leasing (Amendment) Equipment
Inc. Company
Xtra Super Food
Centers, Inc.
- ---------------------------------------------------------------------------------------------------------------
Broward Xtra Super Food GTE Products UCC-1 8/23/90 90343517 GTE Products
County Centers, Inc. Corporation Corp. and
Subsidiaries'
Merchandise
- ---------------------------------------------------------------------------------------------------------------
Broward Xtra Super Food Complete UCC-1 10/31/90 90516111 3 Sharp Copiers
County Centers, Inc. Business Systems
- ---------------------------------------------------------------------------------------------------------------
Dade County Pueblo Chrysler Capital UCC-3 11/16/92 92R436434 Fixtures
International, Corporation (Assignment) 15713PG1117
Inc.
Xtra Super Food
Centers, Inc.
- ---------------------------------------------------------------------------------------------------------------
Secretary of Pueblo Chrysler Capital UCC-3 1/27/93 930000016778 Computer
State International, Corporation (Assignment) Equipment
Inc.
Xtra Super Food
Centers, Inc.
</TABLE>
<PAGE> 327
ANNEX A
to
EXHIBIT G-2
Page 4
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Secretary of Pueblo Chrysler Capital UCC-3 2/25/91 910000044042 Computer
State International, Corporation (Amendment) Equipment
Inc.
Xtra Super Food
Centers, Inc.
- ---------------------------------------------------------------------------------------------------------------
Secretary of Pueblo Chrysler Capital UCC-3 11/12/92 920000231703
State International, Corporation (Assignment)
Inc.
Xtra Super Food
Centers, Inc.
- ---------------------------------------------------------------------------------------------------------------
Secretary of Xtra Super Food Modern Leasing UCC-1 5/26/92 920000103945 6 SMIII 5880
State Centers, Inc. Inc. of Iowa
- ---------------------------------------------------------------------------------------------------------------
Secretary of Xtra Super Food Modern Leasing UCC-1 5/26/92 920000103950 4 SMIII 5880
State Centers, Inc. Inc. of Iowa
- ---------------------------------------------------------------------------------------------------------------
Secretary of Xtra Super Food Modern Leasing UCC-1 5/26/92 920000103951 4 SMIII 5880
State Centers, Inc. Inc. of Iowa
- ---------------------------------------------------------------------------------------------------------------
Secretary of Xtra Super Food Modern Leasing UCC-1 5/26/92 920000103952 6 SMIII 5880
State Centers, Inc. Inc. of Iowa
- ---------------------------------------------------------------------------------------------------------------
Secretary of Xtra Super Food Citibank, N.A. UCC-1 5/26/92 920000111977 Cash and
State Centers, Inc. Securities
===============================================================================================================
</TABLE>
<PAGE> 328
ANNEX B
to
EXHIBIT G-2
<PAGE> 329
EXHIBIT K
[FORM OF ASSIGNMENT AGREEMENT]
DATE: ________, ____
Reference is made to the Credit Agreement described in Item 2 of
Annex I annexed hereto (as such agreement may hereafter be amended, modified or
supplemented from time to time, the "Credit Agreement"). Unless defined in Annex
I attached hereto, terms defined in the Credit Agreement are used herein as
therein defined. _____________ (the "Assignor") and ______________ (the
"Assignee") hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee without
recourse and without representation or warranty (other than as expressly
provided herein), and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to all of the Assignor's rights and obligations
under the Credit Agreement as of the date hereof which represents the percentage
interest specified in Item 4 of Annex I (the "Assigned Share") of all of the
outstanding rights and obligations under the Credit Agreement relating to the
facilities listed in Item 4 of Annex I, including, without limitation, in the
case of any assignment of all or any portion of the Assignor's Revolving
Commitment, all rights and obligations with respect to the Assigned Share of the
Revolving Loans, Swingline Loans and Letters of Credit. After giving effect to
such sale and assignment, the Assignee's Revolving Commitment will be as set
forth in Item 4 of Annex I.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any liens or security interests; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the other Credit Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or the other Credit Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any
<PAGE> 330
EXHIBIT K
Page 2
Credit Party or the performance or observance by any Credit Party of any of its
obligations under the Credit Agreement or the other Credit Documents or any
other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement and the other Credit Documents, together with copies of the
financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption Agreement; (ii) agrees
that it will, independently and without reliance upon the Administrative Agent,
any Agent, the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) appoints and authorizes the Administrative Agent and each Agent to take
such action as agent or managing agent, as the case may be, on its behalf and to
exercise such powers under the Credit Agreement and the other Credit Documents
as are delegated to the Administrative Agent or the Agent, as the case may be,
by the terms thereof, together with such powers as are reasonably incidental
thereto; [and] (iv) agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Credit Agreement are required
to be performed by it as a Bank[; and (v) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee's
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to the Assignee under the Credit
Agreement or such other documents as are necessary to indicate that all such
payments are subject to such rates at a rate reduced by an applicable tax
treaty].1
4. Following the execution of this Assignment Agreement by the
Assignor and the Assignee, an executed original hereof (together with all
attachments) will be delivered to the Administrative Agent. The effective date
of this Assignment Agreement shall be the date of execution hereof by the
Assignor and the Assignee and the consent
- --------
1 If the Assignee is organized under the laws of a jurisdiction outside the
United States.
<PAGE> 331
EXHIBIT K
Page 3
hereof by the Administrative Agent and receipt by the Administrative Agent of
the assignment fee (if applicable) referred to in Section 12.04(b) of the Credit
Agreement, unless otherwise specified in Item 5 of Annex I hereto (the
"Settlement Date").
5. Upon the delivery of a fully executed original hereof to the
Administrative Agent, as of the Settlement Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment
Agreement, have the rights and obligations of a Bank thereunder and under the
other Credit Documents and (ii) the Assignor shall, to the extent provided in
this Assignment Agreement, relinquish its rights and be released from its
obligations under the Credit Agreement and the other Credit Documents.
6. It is agreed that the Assignee shall be entitled to (x) all
interest on the [Assigned Share] of the Loans at the rates specified in Item 6
of Annex I; (y) all Commitment Commissions (if applicable) on the Assigned Share
of the Revolving Commitment at the rate specified in Item 7 of Annex I; and (z)
all L/C Fees (if applicable) on the Assignee's participation in all Letters of
Credit at the rate specified in Item 8 of Annex I hereto, which, in each case,
accrue on and after the Settlement Date, such interest and, if applicable,
Commitment Commissions and L/C Fees, to be paid by the Administrative Agent
directly to the Assignee. It is further agreed that all payments of principal
made on the Assigned Share of the Loans which occur on and after the Settlement
Date will be paid directly by the Administrative Agent to the Assignee. Upon the
Settlement Date, the Assignee shall pay to the Assignor an amount specified by
the Assignor in writing which represents the Assigned Share of the principal
amount of the respective Loans made by the Assignor pursuant to the Credit
Agreement which are outstanding on the Settlement Date, net of any closing
costs, and which are being assigned hereunder. The Assignor and the Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
for periods prior to the Settlement Date directly between themselves on the
Settlement Date.
7. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
<PAGE> 332
EXHIBIT K
Page 4
<PAGE> 333
EXHIBIT K
Page 5
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written, such execution also being made on Annex I
hereto.
[NAME OF ASSIGNOR],
as Assignor
By____________________________
Title:
[NAME OF ASSIGNEE],
as Assignee
By____________________________
Title:
Acknowledged and Agreed:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By____________________________
Title:
[NAME OF LETTER OF CREDIT ISSUER],
as Letter of Credit Issuer
By____________________________]2
Title:
- --------
2 Insert in connection with any assignment of Revolving Commitments.
<PAGE> 334
ANNEX I
ANNEX FOR ASSIGNMENT AND AGREEMENT
ANNEX I
1. The Borrower: Pueblo International, Inc.
2. Name and Date of Credit Agreement:
Amendment and Restatement, dated as of April ___, 1997, amending and
restating the Credit Agreement, dated as of July 21, 1993, among Pueblo
Xtra International, Inc., Pueblo International, Inc., Xtra Super Food
Centers, Inc., the Banks from time to time party thereto, The Bank of Nova
Scotia, as Administrative Agent, and NationsBank, N.A. (South), as
Syndication Agent.
3. Date of Assignment Agreement:
4. Amounts (as of date of item #3 above):
Revolving
Commitment
a. Aggregate Amount
for all Lending
Banks $________
b. Assigned Share _________%
c. Amount of Assigned
Share $________
5. Settlement Date:
6. Rate of Interest to As set forth in Section 1.08
the Assignee: of the Credit Agreement
(unless otherwise agreed to by
the Assignor and the
Assignee)3
- --------
3 The Borrower and the Administrative Agent shall direct the entire amount
of the interest to the Assignee at the rate set forth in Section 1.08 of
the Credit Agreement, with the Assignor and Assignee effecting any agreed
upon sharing of interest through payments by the Assignee to the Assignor.
<PAGE> 335
ANNEX I
Page 2
7. Commitment Commission As set forth in Section
3.01(a) of the Credit
Agreement (unless otherwise
agreed to by the Assignor and
the Assignee)4
8. L/C Fee As set forth in Section
3.01(b) of the Credit
Agreement (unless otherwise
agreed to by the Assignor and
the Assignee)5
9. Notice:
ASSIGNOR:
-------------------
-------------------
-------------------
-------------------
Attention:
Telephone:
Telecopier:
Reference:
- --------
4 The Borrower and the Administrative Agent shall direct the entire amount
of the Commitment Commission to the Assignee at the rate set forth in
Section 3.01(a) of the Credit Agreement, with the Assignor and the
Assignee effecting any agreed upon sharing of Commitment Commissions
through payment by the Assignee to the Assignor.
5 The Borrower and the Administrative Agent shall direct the entire amount
of the L/C Fees to the Assignee at the rate set forth in Section 3.01(b)
of the Credit Agreement, with the Assignor and the Assignee effecting any
agreed upon sharing of L/C Fees through payment by the Assignee to the
Assignor.
<PAGE> 336
ASSIGNEE:
-------------------
-------------------
-------------------
-------------------
Attention:
Telephone:
Telecopier:
Reference:
Payment Instructions:
ASSIGNOR:
-------------------
-------------------
-------------------
-------------------
Attention:
Reference:
ASSIGNEE:
-------------------
-------------------
-------------------
-------------------
Attention:
Reference:
Accepted and Agreed:
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By________________________ By__________________________
________________________ __________________________
(Print Name and Title) (Print Name and Title)
<PAGE> 1
Exhibit 12.1
<TABLE>
<CAPTION>
Ratio of Earnings to Fixed Charges
-------------------------------------------------------------------------------------------
FISCAL YEAR ENDED
-------------------------------------------------------------------------------------------
PROFORMA
JANUARY 30, JANUARY 29, JANUARY 28, JANUARY 27, JANUARY 25, JANUARY 25,
1993 1994 1995 1996 1997 1997
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fixed charges
Interest on indebtedness 13,047 21,635 32,153 33,346 30,182 29,874
Proportion of rents representative
of the interest factor 3,468 3,514 4,180 4,383 4,114 4,114
------ ------- ------- ------- ------- ------
Total fixed charges 16,515 25,149 36,333 37,729 34,296 33,988
====== ======= ======= ======= ======= ======
Earnings
Income (loss) from continuing
operations before income taxes
and extraordinary items 27,982 (5,561) (9,431) (52,567) (29,106) (28,798)
Adjustments:
Fixed charges adjustments:
Fixed charges as above 16,515 25,149 36,333 37,729 34,296 33,988
Capitalized interest (143) (152) (57) -- -- --
------ ------- ------- ------- ------- -------
Total adjustments 16,372 24,997 36,276 37,729 34,296 33,988
------ ------- ------ ------- ------- -------
Income (loss) for computation
purposes of earnings to
fixed charges 11,610 (30,558) (45,707) (90,296) (63,402) (62,786)
------ ------- ------- ------- ------- -------
Excess (deficiency) earnings to fixed
charges 27,982 (5,561) (9,431) (52,567) (29,106) (28,798)
====== ======= ======= ======= ======= =======
Ratio 2.71 -- -- -- -- --
====== ======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Pueblo Xtra
International, Inc. and subsidiaries (the "Company") on Form S-4 of our report
dated April 3, 1997 (which expresses an unqualified opinion and includes an
explanatory paragraph relating to the Company's adoption of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of") appearing in the
Prospectus, which is part of this Registration Statement, and to the
incorporation by reference in this Registration Statement of our report dated
April 3, 1997 relating to the consolidated financial statements (which expresses
an unqualified opinion and includes an explanatory paragraph relating to the
Company's adoption of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of") and to our report dated April 3, 1997 relating to the financial
statement schedule, appearing in the Company's Annual Report on Form 10-K for
the year ended January 25, 1997.
We also consent to the reference to us under the heading "Summary Financial
Data," "Selected Financial Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Miami, Florida
May 16, 1997
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
--------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036
New York, New York (Zip Code)
(Address of principal
executive offices)
--------------------------
Pueblo Xtra International, Inc.
(Exact name of OBLIGOR as specified in its charter)
Delaware 65-0415593
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
1300 N.W. 22nd Street 33069
Pompano Beach, Florida (Zip code)
(Address of principal executive offices)
--------------------------
9 1/2% Series C Senior Notes due 2003
(Title of the indenture securities)
<PAGE> 2
- 2 -
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of New York (2nd District), New York,
New York (Board of Governors of the Federal Reserve
System).
Federal Deposit Insurance Corporation, Washington, D. C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3,4,5,6,7,8,9,10,11,12,13,14 and 15.
Pueblo Xtra International, Inc. is currently not in default under any
of its outstanding securities for which United States Trust Company of
New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8,
9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General
Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the
State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
<PAGE> 3
- 3 -
16. List of Exhibits
(cont'd)
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-Laws of United States Trust Company of New
York, as amended, is incorporated by reference to
Exhibit T-1.4 to Form T-1 filed on September 15, 1995
with the Commission pursuant to the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b)
of the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of May 8, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United
States Trust Company of New York and its parent company, U. S. Trust
Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and
will rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
---------------------
<PAGE> 4
- 4 -
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation
organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of New
York, and State of New York, on the 8th day of May, 1997.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/ Gerard F. Ganey
-------------------------
Gerard F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
-----------------------
Gerard F. Ganey
Senior Vice President
<PAGE> 6
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
ASSETS
<S> <C>
Cash and Due from Banks $ 75,754
Short-Term Investments 276,399
Securities, Available for Sale 925,886
Loans 1,638,516
Less: Allowance for Credit Losses 13,168
----------
Net Loans 1,625,348
Premises and Equipment 61,278
Other Assets 120,903
----------
TOTAL ASSETS $3,085,568
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 645,424
Interest Bearing 1,694,581
----------
Total Deposits 2,340,005
Short-Term Credit Facilities 449,183
Accounts Payable and Accrued Liabilities 139,261
----------
TOTAL LIABILITIES $2,928,449
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,926
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes 804
----------
TOTAL STOCKHOLDER'S EQUITY 157,119
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,085,568
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
<PAGE> 7
April 9, 1997
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR TENDERS OF
$85,000,000 AGGREGATE PRINCIPAL AMOUNT OF
9 1/2% SERIES B SENIOR NOTES DUE 2003
OF
PUEBLO XTRA INTERNATIONAL, INC.
PURSUANT TO THE PROSPECTUS
DATED MAY , 1997, OF PUEBLO XTRA INTERNATIONAL, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY
TIME, ON , 1997, UNLESS EXTENDED. TENDERED
SECURITIES MAY BE WITHDRAWN AT ANY TIME ON OR PRIOR TO THE
EXPIRATION DATE OF THE EXCHANGE OFFER.
Main Delivery to: United States Trust Company of New York, Exchange Agent
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission By Hand:
United States Trust Number: United States Trust
Company of New York (212) 420-6152 Company of New York
P.O. Box 844 (For Eligible 111 Broadway, Lower Level
Cooper Station Institutions Only) New York, New York 10006
New York, New York Confirm by Telephone: Attn: Corporate Trust
10276-0844 (800) 548-6565 Services
Attn: Corporate Trust By Overnight Courier:
Services United States Trust
(Registered or Certified Company of New York
Mail Recommended) 770 Broadway -- 13th Floor
New York, New York 10003
Attn: Corporate Trust
Services
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus dated May , 1997 (the "Prospectus"), of Pueblo Xtra International,
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal
(the "Letter"), which together constitute the Company's offer (the "Exchange
Offer") to exchange an aggregate principal amount of up to $85,000,000 9 1/2%
Series C Senior Notes Due 2003 (the "Exchange Notes"), for a like principal
amount of the Company's issued and outstanding 9 1/2% Series B Senior Notes Due
2003 (the "Initial Notes").
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on May
, 1997, unless the Company, in its sole discretion, extends the Exchange
Offer. The Company reserves the right to extend the Exchange Offer at its
discretion, in which event the term "Expiration Date" shall mean the time and
date when the Exchange Offer as so extended shall expire. The Company shall
notify the holders of the Initial Notes of any extension by oral or written
notice prior to 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date. In no event will the Company extend
the Expiration Date beyond [ ], 1997.
<PAGE> 2
The Exchange Notes will bear interest from the last interest payment date
of the Initial Notes to occur prior to the issue date of the Exchange Notes at
the same rate and upon the same terms as the Initial Notes, Holders whose
Initial Notes are accepted for exchange will not receive interest on such
Initial Notes for any period subsequent to the last interest payment date of the
Initial Notes to occur prior to the issue date of the Exchange Notes and will be
deemed to have waived the right to receive any payment in respect of interest on
the Initial Notes accrued from and after such interest payment date.
The Exchange Offer is not conditioned upon any minimum principal amount of
Initial Notes being tendered for exchange. However, the Exchange Offer is
subject to certain conditions. Please see the Prospectus under the section
entitled "THE EXCHANGE OFFER -- Conditions to the Exchange Offer".
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Initial Notes in any jurisdiction in which the
making or acceptance of the Exchange Offer would not be in compliance with the
laws of such jurisdiction.
This Letter is to be completed by a holder of Initial Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Initial Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the "Book
Entry Transfer Facility") pursuant to the procedures set forth in the section of
the Prospectus entitled "THE EXCHANGE OFFER -- Procedures for Tendering".
Holders of Initial Notes whose certificates are not immediately available, or
who are unable to deliver their certificates or confirmation of the book-entry
tender of their Initial Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility (a "Book-Entry Confirmation") and deliver all other
documents required by this Letter to the Exchange Agent on or prior to the
Expiration Date, may tender their Initial Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the section entitled "THE
EXCHANGE OFFER -- Guaranteed Delivery Procedures".
Holders who wish to tender their Initial Notes must complete this Letter of
Transmittal in its entirety.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOX
<PAGE> 3
List below the Initial Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Initial Notes should be listed on a separate signed schedule affixed hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF INITIAL NOTES
(SEE INSTRUCTIONS 2, 3, AND 8)
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK) ATTACH ADDITIONAL SIGNED LIST IF NECESSARY
------------------------------------------------------------------------------------------------------------------
1 2 3
---------------------------------------------------------------
PRINCIPAL AMOUNT
OF INITIAL NOTES
TENDERED(2) (MUST BE
TITLE OF SECURITIES AGGREGATE PRINCIPAL IN DENOMINATIONS OF
AND CERTIFICATE AMOUNT OF $1,000 OR INTEGRAL
NUMBER(S)(1) INITIAL NOTES MULTIPLES THEREOF)
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total
------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certificate numbers not required if Initial Notes are being tendered by
book-entry transfer.
(2) Unless otherwise indicated, a holder will be deemed to have tendered ALL
of the Initial Notes represented in column 2.
================================================================================
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------------------------------------------
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
------------------------------------------------------------------------
Window Ticket Number (if any):
--------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------------------------------
If delivered by book-entry transfer, complete the following:
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
Initial Notes indicated above. The undersigned has completed, executed and
delivered this Letter to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
Subject to, and effective upon the acceptance for exchange of the Initial
Notes tendered hereby, the undersigned hereby sells, assigns and answers to, or
upon the order of, the Company all right title and interest in and to such
Initial Notes as are being tendered hereby. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with
full knowledge that the Exchange Agent also acts as the agent of the Company)
with respect to the tendered Initial Notes with full power of substitution to
(i) deliver certificates for such Initial Notes to the Company and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company, (ii) present such Initial Notes for transfer on the books of the
Company and (iii) receive for the account of the Company all benefits and
otherwise exercise all rights of the beneficial ownership of such Initial Notes,
all in accordance with the terms of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Initial Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that (i) any Exchange Notes acquired in
exchange for Initial Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Exchange Notes, whether
or not such person is the undersigned, (ii) neither the holder nor any such
other person intends to participate or has an arrangement or understanding with
any person to participate, in the distribution of such Exchange Notes and (iii)
neither the holder nor any such other person is an "affiliate", as described in
Rule 405 under the Securities Act of 1933 (the "1933 Act"), of the Company.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Initial Notes, it represents that the
Initial Notes to be exchanged for Exchange Notes were acquired by it as a result
of market-making activities or other trading activities and acknowledges that it
will deliver a prospectus meeting the requirements of the 1933 Act in connection
with any resale of such Exchange Notes pursuant to the Exchange Offer, however,
by so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the 1933 Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and sale of the Initial Notes
tendered hereby. All authority conferred or agreed to be conferred in this
Letter and every obligation of the undersigned hereunder shall be binding upon
the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned. This
tender may be withdrawn only in accordance with the procedures set forth in the
instructions contained in this Letter.
For the purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Initial Notes when, as and if the Company has given
oral and written notice thereof to the Exchange Agent.
<PAGE> 5
If any tendered Initial Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Initial
Notes will be returned (or, in the case of Initial Notes tendered by book-entry
transfer through the Book-Entry Transfer Facility, will be promptly credited to
an account maintained at the Book-Entry Transfer Facility), without expense, to
the undersigned at the address shown below or at a different address as may be
indicated herein under the "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
The undersigned understands that tenders of Initial Notes pursuant to the
procedures described under the section entitled "THE EXCHANGE
OFFER -- Procedures for Tendering" in the Prospectus and in the instructions
hereto will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Initial Notes for any Initial Notes not
exchanged) in the name(s) of the undersigned or, in the case of a book-entry
delivery of Initial Notes, please credit the account indicated above maintained
at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under
the box entitled "Special Delivery Instructions" below, please send the Exchange
Notes (and, if applicable, substitute certificates representing Initial Notes
for any Initial Notes not exchanged) to the undersigned at the address shown
above in the box entitled "Description of Initial Notes". In the event that both
"Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the Exchange Notes issued
in exchange for the Initial Notes accepted for exchange in the name(s) of, and
return any certificates for Initial Notes not tendered or not exchanged to, the
person(s) so indicated. The undersigned understands that the Company has no
obligation pursuant to the "Special Issuance Instructions" and "Special Delivery
Instructions" to transfer any Initial Notes from the name of the registered
holder(s) thereof if the Company does not accept for exchange any of the Initial
Notes so tendered.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF INITIAL
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
INITIAL NOTES AS SET FORTH IN SUCH BOX ABOVE.
<PAGE> 6
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
I hereby TENDER the Initial Notes described above in the box entitled
"Description of Initial Notes" pursuant to the terms of the Exchange Offer.
X
=============================================
X
=============================================
X
=============================================
SIGNATURE(S) OF OWNERS DATE
If a holder is tendering any Initial Notes, this Letter must be signed by
the registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Initial Notes or on a security position listing or by any person(s) authorized
to become registered holder(s) by endorsements and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
officer or other person acting in a fiduciary or representative capacity, please
set forth full title. See Instruction 4.
Name(s)
------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
- --------------------------------------------------------------------------------
Capacity:
------------------------------------------------------------------------
Address:
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 4)
Signature(s) Guaranteed by an Eligible Institution:
--------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(TITLE)
- --------------------------------------------------------------------------------
(NAME OF FIRM)
- --------------------------------------------------------------------------------
(AREA CODE AND TELEPHONE NUMBER)
Dated:
- ------------------------------
<PAGE> 7
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certificates for Initial Notes not exchanged
and/or Exchange Notes are to be issued in the name of and sent to someone
other than the person or persons whose signature(s) appear(s) on this
Letter above, or if Initial Notes delivered by book-entry transfer which
are not accepted for exchange are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility other than the account
indicated above.
Issue: Exchange Notes and/or Initial notes to:
Name
----------------------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
(EMPLOYER IDENTIFICATION
OR SOCIAL SECURITY NUMBER)
(COMPLETE SUBSTITUTE FORM W-9)
[ ] Credit unexchanged Initial Notes delivered by book-entry transfer to
the Book-Entry Transfer Facility account set forth below:
------------------------------------------------------------
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if certificates for Initial Notes not exchanged
and/or Exchange notes are to be sent to someone other than the person or
persons whose signature(s) appear(s) on this Letter above or to such
person or persons at an address other than shown in the box entitled
"Description of Initial Notes" on this Letter above.
Mail: Exchange Notes and/or Initial Notes to:
Name
----------------------------------------------------
(PLEASE TYPE OR PRINT)
------------------------------------------------------------
(PLEASE TYPE OR PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
<PAGE> 8
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
This letter must be used to forward, and must accompany, all certificates
for Initial Notes tendered pursuant to the Exchange Offer.
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE
EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES.
This letter is to be completed by holders either if certificates are to be
forwarded herewith or if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in the Prospectus under the caption
"THE EXCHANGE OFFER -- Procedures for Tendering", Certificates for all
physically tendered Initial Notes, or Book-Entry Confirmation, as the case may
be, as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Initial Notes tendered hereby must be in
denominations of $1,000 and integral multiples thereof.
The method of delivery of this Letter, the Initial Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Initial Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date. No Letter or Initial Notes should be sent to the Company.
If a tender of Initial Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at the Book-Entry Transfer Facility,
this Letter of Transmittal need not be delivered. The Book-Entry Transfer
Facility's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through the Book-Entry Transfer Facility. To accept
the Exchange Offer through ATOP, participants in the Book-Entry Transfer
Facility must send electronic instructions to the Book-Entry Transfer Facility
through the Book-Entry Transfer Facility's communication system in place of
sending a signed, hard copy of this Letter of Transmittal. To tender Initial
Notes through ATOP, the electronic instructions sent to the Book-Entry Transfer
Facility must contain the character by which the participant in the Book-Entry
Facility acknowledges its receipt of, agrees to be bound by, and confirms the
representations, warranties and other statements made by or deemed to be made by
the participant pursuant to, this Letter of Transmittal.
Holders who wish to tender their Initial Notes and (i) whose Initial Notes
are not immediately available, or (ii) cannot deliver their Initial Notes, this
Letter or any other documents required hereby to the Exchange Agent prior to the
Expiration Date or (iii) who cannot comply with the procedures for book-entry
tender on a timely basis must tender their Initial Notes according to the
guaranteed delivery procedures set forth in the Prospectus. Pursuant to such
procedures: (i) such tender must be made through an Eligible Institution (as
defined below); (ii) prior to the Expiration Date, the Exchange Agent must have
received from the Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by mail, hand delivery or facsimile transmission
(immediately followed by mail or hand delivery)) setting forth the name and
address of the holder, the certificate number(s) of such Initial Notes (except
in the case of book-entry tenders) and the principal amount of Initial Notes
tendered, stating that the tender is being made thereby and guaranteeing that,
within five business days after the Expiration Date, this Letter (or a facsimile
hereof) together with the certificate(s) representing the Initial Notes (except
in the case of book-entry tenders) and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter (or facsimile hereof) together with the
certificate(s) representing the Initial Notes (except in the case of book-entry
tenders) and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter (or facsimile hereof), as well as all other documents required
by this Letter and the certificate(s) representing all tendered Initial Notes in
proper form for transfer or a Book-Entry Confirmation with respect to such
Initial Notes, must be received by the Exchange Agent within five business days
after the Expiration Date, all as provided in the Prospectus under the section
entitled "THE EXCHANGE OFFER -- Guaranteed Delivery Procedures". Any holder who
wishes to tender his Initial Notes pursuant to the guaranteed delivery
procedures described above must ensure that the Exchange Agent receives the
Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the
Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to holders who wish to tender their Initial Notes
according to the
<PAGE> 9
guaranteed delivery procedures set forth above. As used in this Letter,
"Eligible Institution" shall mean a firm which is a member of a registered
securities exchange or a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States or which is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended.
All questions as to the validity, eligibility (including time of receipt),
acceptance and withdrawal of tendered Initial Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the right to reject any and all Initial Notes not properly
tendered or any Initial Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Initial Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter)
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Initial Notes must be cured within
such time as the Company shall determine. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Initial Notes, nor shall
any of them incur any liability for failure to give such notification. Tenders
of Initial Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned by the Exchange to the tendering holders,unless otherwise provided
in this Letter, as soon as practicable following the Expiration Date.
See "THE EXCHANGE OFFER" in the Prospectus.
2. TENDER BY HOLDER.
Only a holder of Initial Notes may tender such Initial Notes in the
Exchange Offer. Any beneficial owner whose Initial Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact the registered holder promptly and instruct
such registered holder to tender on behalf of such beneficial owner. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing this Letter and delivering such owner's
Initial Notes, either make appropriate arrangements to register ownership of the
Initial Notes in such owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
3. PARTIAL TENDERS AND WITHDRAWALS.
Tenders of Initial Notes will be accepted only in denominations of $1,000
and integral multiples thereof. If less than all of the Initial Notes are to be
tendered, the tendering holder(s) should fill in the aggregate principal amount
of Initial Notes to be tendered in the box above entitled "Description of
Initial Notes -- Principal Amount of Initial Notes Tendered". A reissued
certificate representing the balance of nontendered Initial Notes will be sent
to such tendering holder (except in the case of book-entry tenders), unless
otherwise provided in the appropriate box on this Letter, promptly after the
Expiration Date. ALL OF THE INITIAL NOTES DELIVERED TO THE EXCHANGE AGENT WILL
BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED.
Any holder who has tendered Initial Notes may withdraw the tender by
delivering written notice of withdrawal to the Company prior to 5:00 p.m., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at its
address set forth on the first page of this Letter. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Initial
Notes to be withdrawn (the "Depositor"); (ii) identify the Initial Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Initial Notes (except in the case of book-entry tenders)); (iii) be signed
by the holder in the same manner as the original signature on this Letter by
which such Initial Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee (as defined in the Prospectus) register the transfer of such Initial
Notes into the name of the person withdrawing the tender; and (iv) specify the
name in which any such Initial Notes are to be registered, if different from
that of the Depositor. If Initial notes have been delivered or otherwise
identified to the Exchange Agent, the name of the registered holder and the
certificate numbers of the particular Initial Notes withdrawn must also be
furnished to the Exchange Agent as aforesaid prior to the physical release of
the withdrawn Initial Notes. If the Initial Notes have been tendered pursuant to
the procedures for book-entry tender set forth in the Prospectus, a notice of
withdrawal must specify, in lieu of certificate numbers, the name and account
number at the Book-Entry Transfer Facility to be credited with the withdrawn
Initial Notes. Initial Notes properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Exchange Offer; provided, however, that
withdrawn Initial Notes may be retendered by again
<PAGE> 10
following one of the procedures herein at any time prior to 5:00 p.m., New York
City time, on the Expiration Date. All questions as to the validity, form and
eligibility (including time of receipt) of notice of withdrawal will be
determined by the Company, whose determinations will be final and binding on all
parties. Neither the Company, the Exchange Agent nor any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification. See "THE EXCHANGE OFFER -- Withdrawal of Tenders" in the
Prospectus.
4. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURE.
If this Letter is signed by the registered holder of the Initial Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates (if applicable) without any change whatsoever.
If any tendered Initial Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Initial Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the
Initial Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Initial Notes are to be reissued, to a
person other than the registered holder, then endorsements of any certificates
transmitted hereby or separate bond powers are required.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder(s) appear(s) on the
certificate(s).
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Initial Notes or signatures on bond powers
required by this Instruction 4 must be guaranteed by an Eligible Institution.
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Initial Notes are tendered: (i) by a registered holder
of such Initial Notes (which term, for purposes of the Exchange Offer, includes
any participant in the Book-Entry Transfer Facility system whose name appears on
a security position listing as the holder of such Initial Notes) who has not
completed the box entitled "Special Issuance Instructions" on this Letter, or
(ii) for the account of an Eligible Institution.
5. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Initial Notes should indicate in the applicable box
the name and address in or to which Exchange Notes issued pursuant to the
Exchange Offer and/or substitute certificates evidencing Initial Notes not
exchanged are to be issued or sent, if different from the name or address of the
Person signing this Letter. In the case of issuance in a different name, the
employer identification or social security number of the person named must also
be indicated. Holders tendering Initial Notes by book-entry transfer may request
that Initial Notes not exchanged be credited to such amount maintained at the
Book-Entry Transfer Facility as such holder may designate hereon. If no such
instructions are given, such Initial Notes not exchanged will be returned to the
name or address of the person signing this Letter.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Initial Notes to it or its order pursuant to the Exchange Offer. If however,
Exchange Notes and/or substitute Initial Notes not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the Initial Notes tendered hereby, or if tendered Initial
Notes are registered in the name of any person other than the person signing
this Letter, or if a transfer tax is imposed for any reason other than the
transfer of Initial Notes to the Company or its order pursuant to the Exchange
Offer, the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the
<PAGE> 11
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Initial Notes specified in this Letter.
7. WAIVER OF CONDITIONS.
Subject to the terms and conditions set forth in the Prospectus, the
Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Initial Notes, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Initial Notes
for exchange.
Neither the Company nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED INITIAL NOTES.
Any holder whose Initial Notes have been mutilated, lost, stolen or
destroyed should contract the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address indicated on the first page of this Letter or by
telephone at (212) 852-1662.
IMPORTANT TAX INFORMATION
Under federal income tax laws, a registered holder of Initial Notes or
Exchange Notes is required to provide the Trustee (as payor) with such holder's
correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below or
otherwise establish a basis for exemption from backup withholding. If such
holder is an individual, the TIN is his social security number. If the Trustee
is not provided with the correct TIN, a $50 penalty may be imposed by the
Internal Revenue Service, and payments made to such holder with respect to
Initial Notes or Exchange Notes may be subject to backup withholding.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should indicate their exempt status on Substitute
Form W9. A foreign person may qualify as an exempt recipient by submitting to
the Trustee a properly completed Internal Revenue Service Form W-8, signed under
penalties of perjury, attesting to that holder's exempt status. A Form W-8 can
be obtained from the Trustee.
If backup withholding applies, the Trustee is required to withhold 31% of
any payments made to the holder or other payee. Backup withholding is not an
additional federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
PURPOSES OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Initial
Notes or Exchange Notes the holder is required to provide the Trustee with (i)
the holder's correct TIN by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder is awaiting a
TIN) and that (A) such holder is exempt from backup withholding, (B) the holder
has not been notified by the Internal Revenue Service that the holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (C) the Internal Revenue Service has notified the holder that the holder is
no longer subject to backup withholding; and (ii) if applicable, an adequate
basis for exemption.
<PAGE> 12
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE "IMPORTANT TAX INFORMATION" ABOVE)
PAYOR'S NAME: [ ]
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU UNDER THE INITIAL NOTES OR THE EXCHANGE NOTES.
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1 -- PLEASE PROVIDE YOUR TIN IN Social Security Number
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY SIGNING OR
DEPARTMENT OF THE TREASURY AND DATING BELOW -----------------------------------
INTERNAL REVENUE SERVICE Employer Identification Number
----------------------------------------------------------------------------
Part 2 -- Under penalties of perjury, I certify that:
PAYER'S REQUEST FOR TAXPAYER (1) The number shown on this form is my correct Taxpayer Identification
IDENTIFICATION NUMBER ("TIN") Number (or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because (i) I am exempt from
backup withholding, (ii) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of
failure to report all interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to backup withholding.
----------------------------------------------------------------------------
Certificate instructions: -- You must cross out item (3) in Part 2 above if
you have been notified by the IRS that you are subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS
stating that you are no longer subject to backup withholding, do not cross
out item (2).
----------------------------------------------------------------------------
SIGNATURE ------------------------- DATE
-------------------
NAME -------------------------
(Please Print) Part 3-
Awaiting TIN [ ]
- ----------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. It is
understood that if I do not provide a taxpayer identification number within 60
days, 31% of all reportable payments made to me thereafter will be withheld
until I provide such a number
==============================================================
Signature Date
- --------------------------------------------------------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR
INITIAL NOTES (IF APPLICABLE) AND ALL OTHER REQUIRED DOCUMENTS) MUST
BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY
TIME, ON THE EXPIRATION DATE.
<PAGE> 1
Exhibit 99.2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 25, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM_____________TO______________
COMMISSION FILE NUMBER: 33-63372
PUEBLO XTRA INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 65-0415593
- -------------------------------------------- ------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1300 N.W. 22ND STREET
POMPANO BEACH, FLORIDA 33069
- -------------------------------------------- ------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 977-2500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
---- -----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
NO VOTING STOCK OF THE REGISTRANT IS HELD BY NON-AFFILIATES OF THE
REGISTRANT.
NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK, $ .10 PAR VALUE, OUTSTANDING
AS OF APRIL 1, 1997 -- 200.
<PAGE> 2
PART I.
ITEM 1. BUSINESS
GENERAL
Pueblo Xtra International, Inc. (the "Company") is a Delaware holding
company that owns all of the common stock of Pueblo International, Inc., a
Delaware company (together with its subsidiaries, "Pueblo"). Pueblo, which was
founded in 1955 with the opening of the first mainland-style supermarkets in
Puerto Rico, is the leading supermarket chain in the Commonwealth of Puerto Rico
and the Territory of the U.S. Virgin Islands. In addition, Pueblo is the leading
operator of video rental outlets in Puerto Rico and St. Thomas, U.S. Virgin
Islands through its exclusive franchise rights with Blockbuster Entertainment
Corporation ("BEC") and its in-supermarket video operations. The Company
believes it has developed significant name recognition, strong customer loyalty
and leading market shares due to the superior quality and large size of its
stores, the breadth and price competitiveness of its product offerings and its
extensive market coverage in prime locations. The Company currently operates 44
supermarkets in Puerto Rico and six supermarkets in the U.S. Virgin Islands. The
Company also currently operates 27 Blockbuster locations in Puerto Rico and two
Blockbuster locations in the U.S. Virgin Islands as the exclusive Blockbuster
franchisee for Puerto Rico and the U.S. Virgin Islands.
On July 28, 1993, the Company acquired all of the outstanding shares of
common stock of Pueblo for an aggregate purchase price of $283.6 million plus
transaction costs (hereinafter referred to as the "Acquisition"). Pursuant to
the Acquisition, Pueblo became a wholly-owned subsidiary of the Company. The
shares were acquired from an investor group including affiliates of Metropolitan
Life Insurance Company, The First Boston Corporation and certain current and
former members of Pueblo management and its Board of Directors.
The Acquisition has been accounted for under the purchase method
effective July 31, 1993. Reference is made to Note (3)--Acquisitions of the
notes to the Company's consolidated financial statements referenced in Part II,
Item 8 of this Form 10-K for further details of the Acquisition.
-2-
<PAGE> 3
BUSINESS OF THE COMPANY
Supermarket Industry Overview
The top three chains in the retail grocery industry in Puerto Rico
account for approximately one-half of total industry sales, with the remainder
divided among smaller chains and numerous independent operations. Total
supermarket chain sales in calendar year 1996 were approximately $3.1 billion, a
significant portion of which was attributable to the more densely populated
greater San Juan metropolitan area, where the larger chains are concentrated.
The grocery industry in less populated parts of the island is characterized by
smaller family-run operations with limited selection and less competitive
prices. No major U.S. supermarket chains have established operations in the
Puerto Rico grocery market, although a number of national general merchandise
chains have significant Puerto Rican operations. National warehouse clubs and
mass merchandisers, which have entered the Puerto Rico and U.S. Virgin Islands
markets since 1990 offering various bulk grocery and general merchandise items,
have increased pricing pressures on grocery retailers including the Company.
Puerto Rico
The Company operates two complementary supermarket formats:
conventional Pueblo supermarkets which emphasize service, variety and high
quality products at competitive prices, and Xtra supermarkets which are
typically larger stores emphasizing everyday low prices. In Puerto Rico, the
Company currently operates 14 Pueblo stores and 30 Xtra stores and has a grocery
retailing market share of approximately 29%. In addition, the Company estimates
that is has a 34% market share in the greater San Juan metropolitan area, the
most densely populated region of Puerto Rico, with more than one-third of the
island's 3.7 million residents. In fiscal 1997 in Puerto Rico, Pueblo stores
averaged approximately 28,286 gross sq. ft. and generated an average of
approximately $942 of sales per selling sq. ft., while Xtra stores averaged
approximately 45,900 gross sq. ft. and generated an average of approximately
$673 of sales per selling sq. ft. Since the Acquisition, the Company has
constructed five new Xtra stores, remodeled ten existing supermarkets and
converted five Pueblo stores into Xtra stores in Puerto Rico.
U.S. Virgin Islands
In fiscal 1997, the six Pueblo stores in the U.S. Virgin Islands
averaged 32,500 gross sq. ft. and generated an average of approximately $752
sales per selling sq. ft. The Company has an estimated U.S. Virgin Islands
grocery retailing market share of approximately 50%. Since the Acquisition, the
Company has added one new supermarket and remodeled five existing supermarkets
in the U.S. Virgin Islands.
Video Operations
The Company has been the exclusive franchisee of Blockbuster locations
in Puerto Rico since 1989 and in the U.S. Virgin Islands since 1993 and
currently operates 29 Blockbuster locations in Puerto Rico and the U.S. Virgin
Islands. In Puerto Rico, the Company operates five in-store Blockbuster outlets
and 22 free-standing Blockbuster stores, the majority of which are adjacent to
its supermarkets. In the U.S. Virgin Islands, the Company operates one in-store
Blockbuster outlet and one free-standing Blockbuster store. The Company's
free-standing Blockbuster stores average approximately 6,000 gross sq. ft.,
while the Company's in-store Blockbuster outlets average approximately 4,200
gross sq. ft. In addition, the Company currently operates 14 video outlets in
its supermarkets under the name Pueblo Video Clubs, all of which it intends to
convert into in-store Blockbuster outlets. In order to increase customer
traffic in its supermarkets, the Company's typical in-store Blockbuster outlet
has a separate entrance but its principal exit leads into the supermarket. In
addition, the Company is able to take advantage of cross-marketing
opportunities with its supermarket operations, including promotional video
rental and merchandising offers.
-3-
<PAGE> 4
The Company's Blockbuster operations are currently the only major video
chain operating in Puerto Rico and the U.S. Virgin Islands. Each location
carries an average of approximately 10,000 tapes dedicated to video rental. Each
location also offers for sale a selection of recorded and blank video tapes,
accessories and snack food products. Since each Blockbuster location is
typically larger than its competitors, it provides greater depth and breadth in
selections. For promotions of its Blockbuster operations, the Company primarily
utilizes print, radio, billboards and in-store signage, and also benefits from
Blockbuster's television advertising. BEC also provides extensive product and
support services to the Company. These include, among other things, site
selection review, packaging of the initial rental inventory and providing
computer hardware and software.
The Company's successful development of the Blockbuster franchise has
been the result of its ability to leverage its knowledge of Puerto Rico and
existing market and retailing expertise. The Company's knowledge of real estate
and its existing portfolio of desirable supermarket locations has enabled its
Blockbuster division to obtain attractive, high traffic locations. The Company
will continue to evaluate expansion opportunities in its markets.
The Company's Development Agreements with Blockbuster Entertainment
Corporation, now known as Blockbuster Entertainment, Inc. ("BEC") provide for
the Company's exclusive right to open Blockbuster locations in Puerto Rico and
the U.S. Virgin Islands during the term of such agreements. The Development
Agreements require the Company to open a certain number of Blockbuster
locations in Puerto Rico by December 1999 and in the U.S. Virgin Islands by
April 1997. In 1996, the Company amended its Development Agreements to allow
the necessary flexibility to develop smaller store formats. Each Blockbuster
location is subject to a Franchise Agreement with BEC that provides the right
for such location to conduct Blockbuster operations for a 20-year period so
long as the terms of such Franchise Agreement are complied with. The Company
has fulfilled its development quota in the U.S. Virgin Islands and plans to
fulfill its December 1999 development quota in Puerto Rico by the end of the
first quarter of fiscal 1998 and otherwise believes it is in full compliance
with its obligations under the Development Agreements. The Company is
currently in discussions with BEC to establish new development quotas.
Disposal of Florida Retail Operations
On January 16, 1996, the Company announced its decision to discontinue
its retail operations in Florida (the "Florida Disposal"). The announcement was
made as part of the Company's restructuring plans whereby the Company will exit
the underperforming Florida retail market and place more emphasis on the
strength of its operations in Puerto Rico and the U.S. Virgin Islands. The
Florida Disposal includes the disposal of all eight Xtra stores and one
warehouse and distribution center, whether by sale or abandonment, which was
completed in the first quarter of fiscal year 1997. As of the date of this
filing, one owned location and the lease rights to a second location have been
sold.
The Florida Disposal has been accounted for as a disposal of part of a
line of business effective December 30, 1995. See Note (2)--Unusual Charges of
the notes to the Company's consolidated financial statements referenced in Part
II, Item 8 of this Form 10-K for further details of the Florida Disposal.
Store Composition
The Company currently has store locations in 23 of the 39 markets in
Puerto Rico with populations of over 30,000 people. The Company believes there
are selected new store expansion opportunities in Puerto Rico, particularly in
markets outside greater San Juan.
Since the Acquisition, the Company has made capital expenditures of
approximately $56.2 million in its supermarket operations in Puerto Rico and the
U.S. Virgin Islands, including the opening of five new Xtra stores, the addition
of one new Pueblo store, the remodeling of 15 existing stores and the conversion
of five Pueblo stores into Xtra stores. In the same period, the Company has made
capital expenditures totalling approximately $5.2 million in its Blockbuster
operations. The history of store openings, closings and remodelings, beginning
with fiscal 1993, is set forth in the table below:
-4-
<PAGE> 5
<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Stores in Operation:
At beginning of year........................ 65 74 76 79 82
Stores opened:
Supermarkets............................. 2 4 2 4 -
Blockbuster video stores................. 8 3 1 - 5
Stores closed:
Puerto Rico.............................. 1 2 - 1 2
Florida.................................. - 3 - - 8
--------- --------- -------- -------- --------
At end of year.............................. 74 76 79 82 77
========= ========= ======== ======== ========
Remodels and/or conversions................. 8 8 6 1 9
Store Composition at Year-End:
Xtra superstores......................... 29 29 31 34 30
Pueblo supermarkets...................... 26 26 26 26 20
Blockbuster video stores (1)............. 19 21 22 22 27
By location:
Puerto Rico........................... 59 62 65 67 70
Florida............................... 10 8 8 8 -
U.S. Virgin Islands................... 5 6 6 7 7
</TABLE>
- --------------
(1) Subsequent to fiscal 1997, the Company opened two additional locations
and currently operates a total of 29 Blockbuster locations.
Supermarket Purchasing and Distribution
The Company's buying staff actively purchase products from
distributors, as well as directly from the producer or manufacturer. The Company
generally controls shipping from the point of purchase in an effort to reduce
costs and control delivery times. During fiscal 1997, the Company bought
approximately 45% of its total dollar volume of product purchases directly from
manufacturers and is seeking to increase this percentage to reduce costs and to
obtain superior payment terms. Moreover, the Company is renegotiating existing
direct buying arrangements with certain manufacturers for the same purpose and
will also seek to increase utilization of its excess warehouse capacity to take
advantage of bulk purchase discounts.
The Company owns a 300,000 square foot full-line warehouse and
distribution center in greater San Juan. The only facility of its type on the
island with both refrigerated and freezer capacity, the San Juan warehouse has
capacity to store approximately 1.5 million cases of assorted products, and acts
as the Company's central distribution center for the island. The warehouse is
equipped with a computerized tracking system which is fully integrated with the
Company's purchasing, inventory management and shipping systems. This system
enables the Company to make rapid procurement decisions, optimize inventory
levels and increase labor productivity. In fiscal 1997, this facility provided
approximately 59% of the goods (measured by purchase cost) supplied to the
Company's stores in Puerto Rico.
Supermarket Merchandising
General
The Company's merchandising strategies, which are differentiated by
division and store type, integrate one-stop shopping convenience, premium
quality products, attractive pricing and effective advertising and promotions.
At Pueblo supermarkets in Puerto Rico and the U.S. Virgin Islands, the Company's
-5-
<PAGE> 6
merchandising strategy focuses on offering premium quality products with
attractive pricing, excellent selection, superior customer service and special
buying opportunities. The Company's Xtra superstores combine the merchandising
features of Pueblo supermarkets with everyday low prices. The Company reinforces
its merchandising strategies with friendly and efficient service, effective
promotional programs, in-store activities, and both brand name and high quality
private label product offerings.
Product Offerings
With approximately 23,000 stock keeping units ("SKU"), management
believes the Company's Pueblo and Xtra stores offer the greatest product variety
within their market areas, as its competitors generally lack the sales volume,
store size and procurement efficiencies to stock and merchandise the wide
variety of products and services offered by the Company. The Company believes
that the convenience and quality of its specialty department products contribute
to customer satisfaction.
The following table sets forth the mix of products sold in the
Company's supermarkets for the fiscal years indicated:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------
January 28, January 27, January 25,
1995 1996 1997
------------- -------------- -------------
<S> <C> <C> <C>
PRODUCT CATEGORY
Grocery........................................... 46.2% 46.5% 46.9%
Health/Beauty Care/General Merchandise............ 5.8 6.3 6.2
Dairy............................................. 15.9 16.1 16.4
Meat/Seafood...................................... 17.2 16.4 16.0
Produce........................................... 9.8 9.4 9.3
Deli/Bakery....................................... 4.4 4.6 4.5
Video Club........................................ 0.7 0.7 0.7
-------- --------- --------
Total................................. 100.0% 100.0% 100.0%
======== ========= ========
</TABLE>
Pricing
As the largest grocery operator in its markets, the Company is able to
take advantage of volume purchase discounts and shipping efficiencies in order
to offer competitive pricing at its Pueblo supermarkets, as well as everyday low
pricing at its Xtra superstores. Pueblo and Xtra supermarkets utilize weekly
circulars to emphasize special offers. The Company's "Family Pack" program
offers bulk sizes of high volume products typically priced equal to or lower
than prices offered by warehouse club stores.
Private Label
An important element of Pueblo's reputation for high quality and
excellent value, and Xtra's reputation for everyday low prices, is the
utilization of Food Club private label products through the Company's
membership with Topco Associates, Inc. ("Topco"). Topco's private label program
offers its members over 4,000 food and non-food items. Topco products are sold
under the Food Club, World Classic, Top Frost, Top Crest, Top Care, Top Fresh
and Mega labels in the grocery, frozen food, dairy, fresh meat, poultry and
health and beauty care departments. The high quality and attractive pricing of
the Food Club program have made it widely accepted by the Company's customers
as an alternative to national brands. Approximately 17% of the Company's fiscal
1997 grocery item sales were of Topco products. Topco's private label program
allows the Company to pass on substantial savings to customers, while
maintaining a reputation for superior quality. The low cost of Topco products
enables the Company to earn above average margins compared to national brands
despite the lower prices offered to customers. The Company intends to continue
to expand its sales of profitable Food Club private label products to
price-conscious consumers through its arrangement with Topco. The Company also
intends to develop its own private label products aimed at price points below
the Topco products.
-6-
<PAGE> 7
Category Management
The Company is currently in the process of implementing a category
management system designed to combine traditional buying, reordering and pricing
functions under the leadership of corporate level category merchandisers. The
system will also allow the Company to assign direct profit management to the
individuals responsible for a product category. The Company believes that such a
system will improve sales, optimize inventory levels, reduce purchase costs and
thereby enhance gross profit and operating profit margins. The Company
anticipates completion of the program's implementation in fiscal 1998.
Advertising and Promotion
The Company primarily utilizes newspaper, radio, television and
in-store advertising in both Puerto Rico and the U.S. Virgin Islands. The
Company's grocery operations run multi-page newspaper inserts and page
full-color shoppers. The Company advertises on television primarily through
trailers on vendor-sponsored advertisements. In fiscal 1997, the Company
launched a major advertising campaign. This campaign presents both the Pueblo
and Xtra format in a single advertisement promoting special offers at both store
formats. This market strategy stresses the different store formats yet serves to
reduce advertising costs.
All advertising is created and designed through the Company's
wholly-owned advertising agency, CaribAd (Adteam). Adteam, based in Puerto Rico,
develops promotional programs for all of the Company's markets, thereby
providing it with cost advantages over its competitors. In addition, Adteam has
other clients in Puerto Rico, generating incremental income for the Company.
Competition
The grocery retailing business is highly competitive. Competition is
based primarily on price, quality of goods and service, convenience and product
mix. The number and type of competitors and the degree of competition
experienced by individual stores, vary by location.
The Company competes with local food chains such as Supermercados
Amigo, Grande Supermarkets, and Plaza Extra, as well as numerous independent
operations throughout Puerto Rico and the U.S. Virgin Islands. In addition,
several warehouse clubs and mass merchants, such as Sam's Warehouse clubs,
Wal-Mart, Kmart and Walgreens, have opened locations in Puerto Rico and the U.S.
Virgin Islands. Despite these competitive challenges, the Company continues to
maintain its position as market share leader in each of its respective markets.
Although the Company's Blockbuster operations constitute the only major
video chain in Puerto Rico and the U.S. Virgin Islands, they compete with
numerous local, independent video retailers. In addition, the Company's
Blockbuster video stores compete against television, cable, satellite
broadcasting, movie theaters and other forms of entertainment.
Management Information Systems
The Company believes that high levels of automation and technology are
essential to its operations and has invested considerable resources in computer
hardware, systems applications and networking capabilities. These systems
integrate all major aspects of the Company's business, including the monitoring
of store sales, inventory control, merchandise planning, labor utilization,
distribution and financial reporting.
All of the Company's stores are equipped with state-of-the-art point of
sale terminals with full price look-up capabilities that capture sales at the
time of transaction down to the SKU level through the use of bar-code scanners.
These scanners facilitate customer check-out and provide valuable stock-
replenishment
-7-
<PAGE> 8
information for buyers and real-time financial information used by management to
provide greater control on a line-item basis in determining true store-by-store
costs. To provide the best service possible, the Company has installed a labor
scheduling system that schedules the optimal staffing based on sales, customer
traffic and defined service objectives. The Company's management information
systems at its Blockbuster operations are state-of-the-art systems which are
licensed to the Company by BEC. The conversion of the Company's financial
systems to handle the year 2000 is expected to be completed by May 1997. Other
system conversions are expected to be completed by the end of calendar 1998 for
year 2000 compatibility.
Employees
As of January 25, 1997, the Company had approximately 8,000 employees
(full- and part-time) of whom approximately 6,700 were employed at the
supermarket level, 600 at the corporate offices and distribution center and 700
by the Blockbuster division. Approximately 65% of the Company's supermarket
employees are employed on a part-time basis. Approximately 5,600 store employees
are represented by a non-affiliated collective bargaining organization under a
contract expiring in 1999. The Company considers its relations with its
employees to be good.
As part of the Company's effort to reduce labor costs, the Company has
changed labor scheduling practices, reduced the handling of products and
improved stock room operations. This enabled the Company to eliminate 440 store
employees in its Puerto Rico supermarkets in January 1997, reducing annual labor
costs by approximately $9.0 million.
Trademarks, Tradenames and Service Marks
The Company owns certain trademarks, tradenames and service marks used
in its business. The Company believes that its trademarks, tradenames, and
service marks, including Pueblo and Xtra, are valuable assets due to the fact
that brand name recognition and logos are important considerations in the
Company's consumers' markets. As a franchisee, the Company has exclusive rights
to use the Blockbuster trademark in its specified franchise territories.
Regulation
Compliance by the Company with federal, state and local environmental
protection laws has not had, and is not expected to have, a material effect on
capital expenditures, earnings or the competitive position of the Company.
-8-
<PAGE> 9
ITEM 2. PROPERTIES
The following table sets forth information as of January 25, 1997 with
respect to the owned and leased stores and support facilities used by Pueblo in
its business:
<TABLE>
<CAPTION>
Owned (1) Leased Total
---------------------- ---------------------- ----------------------
No. Gross Sq. Ft. No. Gross Sq. Ft. No. Gross Sq. Ft.
---- --------------- ---- --------------- ---- ---------------
<S> <C> <C> <C> <C> <C> <C>
Pueblo supermarkets:
Puerto Rico........................... 2 91,000 12 305,000 14 396,000
U.S. Virgin Islands................... 3 112,000 3 83,000 6 195,000
Xtra superstores:
Puerto Rico........................... 7 359,000 23 1,018,000 30 1,377,000
Blockbuster video stores................ 5 31,000 22 114,000 27 145,000
Warehouse and distribution facilities... 1 300,000 1 13,000 2 313,000
</TABLE>
- ------------
(1) Four of the owned stores include land leases: three Xtra stores in
Puerto Rico, and one Pueblo store in the U.S. Virgin Islands.
The Company also owns the shopping centers at three of its store
locations in Puerto Rico.
The majority of the Company's supermarket operations are conducted on
leased premises which have initial terms generally ranging from 20 to 25 years.
The lease terms typically contain renewal options allowing the Company to extend
the lease term in five to ten year increments. The leases provide for fixed
monthly rental payments subject to various periodic adjustments. The leases
often require the Company to pay certain expenses related to the premises such
as insurance, taxes and maintenance. See Note (6)--Leases and Leasehold
Interests of the notes to the Company's consolidated financial statements
referenced in Part II, Item 8 of this Form 10-K. The Company does not anticipate
any difficulties in renewing its leases as they expire.
The construction of owned facilities is financed principally with
internally generated funds. All owned properties of Pueblo are pledged as
collateral (by a pledge of the assets of the Company's subsidiaries) under the
Company's existing bank credit agreement, dated as of July 21, 1993 (the
"Existing Bank Credit Agreement") with a syndicate of banks entered into in
connection with the Acquisition. See Note (5)--Debt of the notes to the
Company's consolidated financial statements referenced in Part II, Item 8 of
this Form 10-K. Pueblo contemplates entering into an amended bank credit
agreement (the "New Bank Credit Agreement") in connection with its proposed
refinancing plan. See Item 7-Management Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources.
The Company has discontinued its operations in Florida, as described
more fully in Note (2)--Unusual Charges of the notes to the Company's
consolidated financial statements referenced in Part II, Item 8 of this Form
10-K, and has closed all eight of its Xtra stores located in Florida during
fiscal 1997. The Company has sold one owned Xtra location and the lease rights
to a second location. The Company is seeking to dispose of its remaining Florida
retailing assets.
The Company owns its corporate offices located in San Juan, Puerto
Rico, and leases its administrative offices located in Pompano Beach, Florida.
The Company believes that its properties are adequately maintained and
sufficient for its business needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a number of legal proceedings involving
claims for money damages arising in the ordinary course of conducting its
business which are either covered by insurance or are within the Company's
self-insurance program, and in a number of other proceedings which, except as
set forth below, are not deemed material. The Company's management does not
believe that the ultimate resolution of any of these matters could have a
material adverse effect on the Company's consolidated results of operations or
financial condition.
-9-
<PAGE> 10
Pueblo has been party to various lawsuits alleging a fraud engaged in
by Premium Sales Corp., Plaza Trading Corporation and Windsor Wholesale Company
and numerous of their related subsidiaries ("Premium") in which damages
totalling approximately $300 million (plus treble damages, punitive damages
and/or attorneys' fees) were claimed against each defendant. Premium was
ostensibly engaged in the business of "brokering" or "diverting" groceries
throughout the United States and various foreign countries from 1988 until its
official bankruptcy in 1993. Following the Premium bankruptcy, the Receiver and
Bankruptcy Trustee sued numerous grocers, including Pueblo, claiming that the
grocers were liable for Premium's losses, and a class action was filed against
Pueblo and other defendants on behalf of the investors in the funding entities
which lost monies in the Premium fraud. All litigation against Pueblo has been
settled for an amount which, taking into account all litigation costs and
settlement costs, is within the $5.3 million of reserves established from fiscal
years 1994 through 1997 for such purpose. The settlement received preliminary
court approval on February 11, 1997. The Company's legal counsel has advised
that it expects the settlement to receive final approval at a final fairness
hearing scheduled for May 7, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the quarter ended January 25, 1997.
-10-
<PAGE> 11
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Market Information
There is no established public trading market for the Company's common
equity.
Holders
The Company is a wholly-owned subsidiary of PXC&M Holdings, Inc., a
Delaware holding company ("Holdings") which in turn is beneficially owned by a
trust for the benefit of the family of Gustavo Cisneros, and a trust for the
benefit of the family of Ricardo Cisneros (the "Principal Shareholders"), with
each trust having an approximate 50% indirect beneficial interest in Holdings.
Messrs. Gustavo and Ricardo Cisneros disclaim beneficial ownership of such
shares.
Dividends
No cash dividends have been declared on the common stock since the
Company's inception. Certain restrictive covenants in the Existing Bank Credit
Agreement impose limitations on the declaration or payment of dividends by the
Company. Additionally, dividend payments by Pueblo to the Company are
restricted under the terms of the Existing Bank Credit Agreement. The Existing
Bank Credit Agreement, however, provides that so long as no default or event of
default (as defined in the Credit Facility) exists, or would exist as a result,
Pueblo is permitted to pay cash dividends to the Company in an aggregate amount
necessary to pay interest on the 10-year, 9 1/2% senior notes (issued in
connection with the Acquisition) then due and payable in accordance with the
terms thereof. Similar restrictions on dividends will be included in the New
Bank Credit Agreement.
-11-
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per selling square foot amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended (1)
-----------------------------------------------------------------------------
January 30, January 29, January 28, January 27, January 25,
1993 (2) 1994 (3) 1995 1996 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Statement Data
Net sales $ 1,251,726 $ 1,199,123 $ 1,166,955 $ 1,145,370 $ 1,020,056
Cost of goods sold 948,568 903,850 871,136 848,490 760,329
----------- ----------- ----------- ----------- -----------
Gross profit 303,158 295,273 295,819 296,880 259,727
Selling, general and admin-
istrative expenses (4) 232,202 230,266 229,197 240,219 213,485
Depreciation and
amortization 29,649 37,650 43,865 43,669 41,128
Unusual charges (5) -- -- -- 32,161 4,160
----------- ----------- ----------- ----------- -----------
Operating profit (loss) 41,307 27,357 22,757 (19,169) 954
Transaction costs -- (11,217) -- -- --
Sundry, net (278) (66) (35) (52) 122
Interest expense-debt and
capital lease obligations (14,193) (22,255) (32,809) (34,221) (30,458)
Interest and investment
income, net 1,146 620 656 875 276
Income tax (expense)
benefit (12,060) (1,208) 4,790 20,210 9,535
----------- ----------- ----------- ----------- -----------
Income (loss) before
cumulative effect of a
change in accounting
principle 15,922 (6,769) (4,641) (32,357) (19,571)
Cumulative effect of a
change in accounting
principle -- (2,982) -- -- 2,653
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 15,922 $ (9,751) $ (4,641) $ (32,357) $ (16,918)
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AS OF (1)
------------------------------------------------------------------------------
January 30, January 29, January 28, January 27, January 25,
1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Cash and cash equivalents (6) $ 7,838 $ 5,471 $ 15,680 $ 6,928 $ 12,148
Working capital (deficit) (8,478) (26,873) (11,534) (31,125) (56,217)
Property and equipment, net 168,395 224,605 207,935 166,283 150,915
Total assets 300,012 619,625 602,695 573,383 522,740
Total debt and capital
lease obligations 123,686 347,124 329,855 308,497 295,204
Stockholders' equity 48,074 66,897 77,256 44,899 32,981
</TABLE>
-12-
<PAGE> 13
<TABLE>
<CAPTION>
Fiscal Year Ended (1)
------------------------------------------------------------------------------
January 30, January 29, January 28, January 27, January 25,
1993 (2) 1994 (3) 1995 1996 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Certain Financial Ratios
And Other Data
EBITDA (7) $ 70,956 $ 65,007 $ 66,622 $ 56,661 $ 50,391
Capital expenditures 22,472 23,493 16,401 22,334 14,455
EBITDA margin (7) 5.7% 5.4% 5.7% 4.9% 4.9%
Debt to EBITDA 1.74 5.34 4.95 5.44 5.86
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year (1)
-----------------------------------------------------------------
1993 (2) 1994 (3) 1995 1996 1997
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pueblo And Xtra Store Data:
Puerto Rico
Number of stores (at fiscal year-end) 40 42 44 46 44
Average sales per store (8) $ 21,091 $ 20,776 $ 20,263 $ 20,212 $ 19,672
Average selling square footage 26,818 26,601 26,729 27,536 27,591
Average sales per selling square foot (8) $ 786 $ 781 $ 758 $ 731 $ 722
Total sales 850,139 860,190 874,019 877,603 886,765
Same store sales % change 9.2% (0.9)% (1.3)% (2.8)% (2.6)%
U.S. Virgin Islands
Number of stores (at fiscal year-end) 5 5 5 6 6
Average sales per store (8) $ 19,220 $ 19,003 $ 15,619 $ 14,960 $ 15,110
Average selling square footage 20,724 20,724 20,724 20,104 20,104
Average sales per selling square foot (8) $ 927 $ 917 $ 754 $ 744 $ 752
Total sales 97,970 95,014 78,097 76,813 90,659
Same store sales % change 0.9% (1.2)% (17.8)% (3.3)% 7.0%
Florida (9)
Number of stores (at fiscal year-end) 10 8 8 8 --
Average sales per store (8) $ 28,230 $ 25,226 $ 23,481 $ 21,518 --
Average selling square footage 52,075 50,398 50,398 50,398 --
Average sales per selling square foot (8) $ 542 $ 501 $ 466 $ 427 --
Total sales 286,853 220,730 187,845 159,659 --
Same store sales % change (4.4)% (14.7)% (11.6)% -- --
Blockbuster Store Data:
Number of stores (at fiscal year-end) 19 21 22 22 27
Average sales per store (8) $ 1,206 $ 1,123 $ 1,254 $ 1,443 $ 1,588
Average weekly sales 452 467 535 608 794
Total sales 16,763 23,189 26,994 31,295 35,938
Same store sales % change (3.5)% (8.1)% 10.9% 14.0% 10.5%
</TABLE>
- ----------------
(1) Operating activity for the 26 weeks ended January 29, 1994 and for the
fiscal years 1995, 1996 and 1997 are representative of the Company
subsequent to the Acquisition. All other operating activity pertains to
Pueblo prior to the Acquisition.
(2) Fiscal 1993 was a 53-week year.
-13-
<PAGE> 14
(3) Represents the combined results of operations for the 26-week period
ended July 31, 1993 of the Company's predecessor prior to the
Acquisition and the 26-week period ended January 29, 1994 of the
Company. The results for each 26-week period are as follows:
<TABLE>
<CAPTION>
26 Weeks Ended 26 Weeks Ended
July 31, 1993 January 29, 1994
----------------------- -----------------------
<S> <C> <C>
Net sales ......................................................... $ 612,454 $ 586,669
Gross profit ...................................................... 150,961 144,312
Selling, general and administrative expenses ...................... 117,738 112,528
Depreciation and amortization ..................................... 15,745 21,905
Operating profit .................................................. 17,478 9,879
Transaction costs ................................................. 11,217 --
Interest expense, net ............................................. 5,533 16,102
Income tax expense, (benefit) ..................................... 2,858 (1,650)
Net income (loss) ................................................. (5,148) (4,603)
EBITDA ............................................................ 33,223 31,784
</TABLE>
(4) Selling, general and administrative expenses for fiscal years 1996 and
1997 include certain expenses and charges related to the implementation
of the Company's strategic initiatives and other matters. See
"Management's Discussion and Analysis of Financial Conditions and
Results of Operations -General".
(5) The Company recorded unusual charges of approximately $30 million in
fiscal 1996 and $4.2 million in fiscal 1997 as a result of the
Company's exit from the Florida market and an unusual charge of $2.2
million in fiscal 1996 as a result of the Company's restructuring of
its Puerto Rico operations.
(6) Highly liquid investments purchased with a maturity of three months or
less are considered cash equivalents.
(7) EBITDA represents income (loss) before interest, income taxes, sundry,
depreciation and amortization, transaction costs, and unusual charges.
In fiscal 1997, income taxes included $1.5 million representing the tax
effect of the cumulative effect of a change in accounting principle
relating to the adoption of SFAS No. 121 during such fiscal year. See
Note (1)--Significant Accountiing Policies of the notes to the
Company's consolidated financial statements included in Part II, Item 8
of this Form 10-K. EBITDA is not intended to represent cash flow from
operations as defined by generally accepted accounting principles and
should not be considered as an alternative to net income (loss) as an
indication of the Company's operating performance or to cash flows as a
measure of liquidity. EBITDA is included as it is the basis upon which
the Company assesses its financial performance. EBITDA margin
represents EBITDA divided by net sales.
(8) Beginning in 1996, average sales are weighted for the period of time
stores are open during the year.
(9) All Xtra stores in Florida were closed in the first quarter of fiscal
1997.
-14-
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company was organized in 1993 to acquire Pueblo in the Acquisition.
In connection with the Acquisition, the Company incurred significant
indebtedness and recorded significant goodwill. Following the Acquisition, the
Company continued an existing operating strategy designed to significantly
expand its supermarket penetration through new supermarket openings in Puerto
Rico and Florida and new Blockbuster locations in Puerto Rico. The number of the
Company's supermarkets in Puerto Rico and the U.S. Virgin Islands grew from 46
to 50 and the number of the Company's Blockbuster locations (including
conversions) grew from 20 to 27, in each case measured from the Acquisition
through the end of fiscal 1997. In addition, the Company added one new
supermarket in Florida after the Acquisition which was subsequently closed in
fiscal 1997, as described below. From the Acquisition through fiscal 1997, the
Company made capital expenditures totalling $67.1 million, of which $61.3
million related to Puerto Rico and the U.S. Virgin Islands. The Company's focus
on new supermarket development rather than supermarket operations, as well as
the effects of increased competition, resulted in a decline in total sales, same
store sales, and consolidated operating results.
Throughout this time period, the Company's markets have been affected
by an increasing level of competition from local supermarket chains, independent
supermarkets, warehouse club stores, discount drug stores and convenience
stores. Warehouse club stores and mass merchandisers, which have entered the
Puerto Rico and U.S. Virgin Islands markets since 1990 offering various bulk
grocery and general merchandise items, have increased pricing pressures on
grocery retailers including the Company. In addition, low inflation in food
prices in recent years has made it difficult for the Company and other grocery
store operators to increase prices and has intensified the competitive
environment by causing such retailers to emphasize promotional activities and
discount pricing to maintain or gain market share. The South Florida market, in
particular, has been characterized by intense competition that negatively
affected the performance of the Company's stores in that market through fiscal
1996.
In October 1995, William T. Keon, III was named President and Chief
Executive Officer of the Company. Following his arrival at the Company, Mr. Keon
conducted a thorough review of the Company's operating business practices and
its financial performance. As a result of such review, the Company determined in
January 1996 to discontinue its retail operations in the competitive Florida
market in order to focus on its core markets where it has a stronger competitive
position and greater profit opportunities. In the spring of 1996, management
also began to take several other actions designed to improve the financial
performance of the Company, including the conversion of five Pueblo stores to
the Xtra format, the closing of two underperforming Xtra stores in Puerto Rico,
an increase in the Company's advertising expenditures in Puerto Rico, and the
conversion of six Pueblo Video Clubs into in-store Blockbuster outlets.
In the summer of 1996, in conjunction with implementation of a
revised business strategy, the Company retained a retail industry
consulting firm to assist management in analyzing the Company's operating
practices. One result of such analysis was the reorganization of labor
scheduling practices, which enabled the Company to eliminate 440 store employees
in January 1997 and reduce annual labor costs by approximately $9.0 million. It
is management's belief that the decision to exit the Florida market, together
with the actions which the Company began to take in the spring of 1996 and the
implementation of its revised business strategy, has begun to contribute, and
should continue to contribute, toward improved operating results.
Other strategic measures being undertaken by the Company include: (i)
continual evaluation of Pueblo store formats relative to the markets they serve
for potential future conversions to Xtra stores; (ii) continued conversion of
its remaining Pueblo Video Clubs to Blockbuster outlets and the opening of
additional free-standing Blockbuster stores; (iii) other interior store changes
to increase customer traffic, such as in-store banking and in-store fast food
restaurants for select locations; (iv) selective development of new
supermarkets in attractive markets, particularly in the interior of Puerto
Rico; (v) continued implementation of new store operating procedures and
practices to enhance productivity and reduce labor costs; (vi) improving
procurement and distribution practices in order to improve gross margins;
(vii) implementation of a category management system and expansion of its sales
of private label products; (viii) continuing a more effective advertising
program emphasizing the Company's price competitiveness and (ix) maintenance of
an ongoing program to recruit managers trained in United States mainland
supermarket retailing practices and establishment of performance-based
compensation programs. The Company believes that these strategic measures will
be an effective means of improving sales by increasing customer traffic in its
supermarkets.
-16-
<PAGE> 16
In connection with the strategic initiatives begun in January 1996, the
Company has incurred a number of unusual charges and other items that have
adversely affected the Company's operating profit, including the following items
which aggregated $36.1 million in fiscal 1996 and $12.3 million in fiscal 1997.
The Company recorded unusual charges of approximately $30.0 million in fiscal
1996 and $4.2 million in fiscal 1997 as a result of the Company's exit from the
Florida market, and an unusual charge of $2.2 million in fiscal 1996 as a result
of the Company's restructuring of its Puerto Rico operations. See Note
(2)--Unusual Charges of the notes to the Company's consolidated financial
statements included in Part II, Item 8 of this Form 10-K. Other items which
adversely affected the Company's operating profit and were related to the
implementation of the Company's strategic initiatives including the following,
which aggregated $3.9 million in fiscal 1996 and $8.1 million in fiscal 1997. In
fiscal 1996, an adjustment to the net realizable value of certain non-operating
real property in Puerto Rico caused a charge of $3.9 million. In fiscal 1997, as
a result of the adoption of SFAS No. 121, the Company recognized operating
losses of $4.1 million (or $2.7 million net of deferred taxes) from the closed
Florida operations, as discussed below. See Note (1)--Significant Accounting
Policies of the notes to the Company's consolidated financial statements
included in Part II, Item 8 of this Form 10-K. In addition, in fiscal 1997, the
elimination of 440 store employees resulted in a charge of approximately $1.1
million in severance costs and the closing of two Puerto Rico stores resulted in
a $2.9 million charge.
RESULTS OF OPERATIONS
Adjustments for Florida Closing
In fiscal 1996, the Company determined to discontinue its retail
operations in Florida. The effective date of the Florida closing was December
30, 1995. All eight of the Xtra stores in Florida were closed in the first
quarter of fiscal 1997. The following table presents selected comparative
operating data of the Company for the three fiscal years ended January 25, 1997
after excluding the Florida retail division (the "Continuing Business"):
-17-
<PAGE> 17
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
January 28, January 27, January 25,
1995 1996 1997
---------------- --------------- ----------------
<S> <C> <C> <C>
Selected Operating Results of the Puerto Rico and U.S. Virgin
Islands Operations: (dollars in thousands)
Net sales $979,110 $985,711 $1,013,363
Gross profit 250,810 259,508 259,291
Selling, general and administrative expenses 186,861 201,402 208,900
EBITDA (1) 63,949 58,106 50,391
Depreciation and amortization 38,418 39,075 41,128
Operating profit 25,531 16,748 9,263
Selected Operating Results of the Puerto Rico and U.S. Virgin
Islands Operations: (as a percentage of sales)
Gross profit 25.6% 26.3% 25.6%
Selling, general and administrative expenses 19.1 20.4 20.6
EBITDA (1) 6.5 5.9 5.0
Operating profit 2.6 1.7 0.9
</TABLE>
- ------------
(1) EBITDA represents income (loss) before interest, income taxes, sundry,
depreciation and amortization and unusual charges. EBITDA is not
intended to represent cash flow from operations as defined by generally
accepted accounting principles and should not be considered as an
alternative to net income (loss) as an indication of the Company's
operating performance or to cash flows as a measure of liquidity.
EBITDA is included as it is the basis upon which the Company assesses
its financial performance.
FISCAL 1997 VS. FISCAL 1996
As of January 25, 1997, the Company operated a total of 50 supermarkets
and 27 Blockbuster locations in Puerto Rico and the U.S. Virgin Islands. During
fiscal 1997, the Company closed all eight of its Xtra stores and its
distribution facility in Florida as part of the disposal of the Company's
Florida retail operations. For further details of the Florida closing, see Note
(2)--Unusual Charges of the notes to the Company's consolidated financial
statements included in Part II, Item 8 of this Form 10-K. In addition, in fiscal
1997, the Company closed two underperforming Xtra stores in Puerto Rico,
converted five Pueblo stores to Xtra stores in Puerto Rico, and converted four
Pueblo Video Clubs into in-store Blockbuster outlets in Puerto Rico.
Fiscal 1997 net sales decreased by $125.3 million or 10.9% from
$1,145.4 million in the prior year to $1,020.1 million. A primary factor in the
overall sales reduction was the closing of the Florida retail operations, which
had sales of $6.7 million and $159.7 million in fiscal 1997 and fiscal 1996,
respectively. Net sales from the Continuing Business increased by $27.7 million
or 2.8% in fiscal 1997 over fiscal 1996. Of this increase, 83% was attributable
to supermarket sales and 17% was attributable to Blockbuster operations. In
fiscal 1997, same store sales, or sales for stores open in comparable 52-week
periods for the Continuing Business, decreased by 1.4%, as compared to a same
store sales decline for the Continuing Business of 2.4% in fiscal 1996. This
decline reflected a same store sales decrease for the year of 2.6% in the
Company's Puerto Rico supermarket operations (which represent approximately
87.5% of the Company's total sales) as competition continued to adversely affect
the operating division's sales performance. However, the Company's Puerto Rico
supermarket operations experienced an increase in same store sales of 3.4% in
the fourth quarter of fiscal 1997 compared to the fourth quarter of fiscal 1996.
U.S. Virgin Islands supermarket operations experienced a same store sales
increase for fiscal 1997 of 7.0%. Blockbuster operations experienced a same
store sales increase for fiscal 1997 of 10.5%.
-18-
<PAGE> 18
Gross profit margin in fiscal 1997, as a percentage of sales, was 25.5%
or 0.4% below the 25.9% in the prior year. Gross margin for the Continuing
Business decreased 0.7% from 26.3% in fiscal 1996 to 25.6% in fiscal 1997. The
primary factor in this decline was the 4.7% decline in the meat department gross
margin from the prior year in the Puerto Rico supermarkets. The decline in meat
margins was principally the result of a reduction in prices due, in part, to
competition, partially offset by a reduction in shrinkage in the meat
department. The decrease in gross margin was partially offset by improved
margins in the Blockbuster operations.
Selling, general and administrative expenses decreased from the prior
year amount of $240.2 million to $213.5 million, or 11.1%, primarily as a result
of the closing of the Florida operations. Selling, general and administrative
expenses, as a percentage of sales, was 20.9% in fiscal 1997, which was
comparable to that of fiscal 1996. Selling, general and administrative expenses
from the Continuing Business increased from $201.4 million to $208.9 million, or
as a percentage of sales, increased 0.2% from 20.4% in fiscal 1996 to 20.6% in
fiscal 1997. Major factors contributing to the increase were (a) a $2.9 million
charge for the closing of two Xtra stores in Puerto Rico, (b) a $2.7 million
increase in advertising expenditures for the Continuing Business, (c) $1.9
million in consulting fees arising from an ongoing project to improve
supermarket operations in Puerto Rico and (d) $1.1 million in severance costs
recorded in connection with the elimination of 440 store employees in Puerto
Rico.
Depreciation and amortization decreased $2.6 million from $43.7 million
in fiscal 1996 to $41.1 million in fiscal 1997, primarily as a result of the
closing of the Florida operations. Depreciation and amortization from the
Continuing Business increased $2.0 million from $39.1 million in fiscal 1996 to
$41.1 million in fiscal 1997. The increase was due mainly to the full year of
depreciation on fiscal 1996 capital expenditures of $21.8 million. In addition,
the Company recorded an additional $600,000 in depreciation related to a change
in estimated life of its shopping carts.
Interest expense, net of interest and investment income, of $30.1
million decreased by $3.2 million, or 9.5%, as compared to fiscal 1996. This
decrease is primarily due to a reduction in interest on capital lease
obligations resulting from the Florida closing combined with lower interest
rates and principal amortization on the term loans under the Existing Bank
Credit Agreement, dated as of July 21, 1993 (the "Existing Bank Credit
Agreement"), partially offset by increased short-term borrowing during fiscal
1997.
In fiscal 1996, the Company, under then applicable accounting
principles, recorded an unusual charge of $30.0 million, including estimated
operating losses for the phase-out period in fiscal 1997 related to the
discontinued Florida operations. In fiscal 1997, the Company adopted SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". Pursuant to the requirements of this statement, the
Company's results of operations in fiscal 1997 included operations of the
Florida stores for the phase-out period in fiscal 1997. The recognition of these
operations negatively affected the Company's operating profit by $4.1 million in
fiscal 1997. Furthermore, in accordance with SFAS No. 121, the Company recorded
the cumulative effect of a change in accounting principle of $2.7 million (net
of deferred income taxes of $1.5 million), the effect of which was to offset the
Florida operating losses recorded in fiscal 1997, as described above. See Note
(1)--Significant Accounting Policies and Note (2)--Unusual Charges of the notes
to the Company's consolidated financial statements included in Part II, Item 8
of this Form 10-K. In addition, the Company recorded $4.2 million in unusual
charges in fiscal 1997 to write down assets from the Florida operations in order
to reflect a revised estimate of the fair value of the remaining properties held
for sale.
The decrease in the income tax benefit of $10.7 million was primarily
the result of the tax effects of the $30.0 million charge for the Florida
disposal that was recorded in fiscal 1996.
Results for fiscal 1997 were a net loss of $16.9 million, as compared
to a net loss of $32.4 million for fiscal 1996.
-19-
<PAGE> 19
FISCAL 1996 VS. FISCAL 1995
As of January 27, 1996, the Company operated 60 supermarkets and 22
Blockbuster locations throughout Puerto Rico, the U.S. Virgin Islands and
Florida. During fiscal 1996, the Company closed one small Pueblo store and
opened three new Xtra stores in Puerto Rico. In addition, the Company opened one
new Pueblo store, which it purchased from a competitor, in the U.S. Virgin
Islands.
Net sales decreased by $21.6 million, or 1.8%, in comparison to the
prior year. Sales of approximately $12.5 million related to Florida retail
operations subsequent to December 30, 1995 (the effective date of closing for
accounting purposes) are included in unusual charges in the consolidated
statement of operations for fiscal 1996. Additionally, sales derived from fiscal
1996 new store openings were $18.2 million. Same store sales, or sales for
stores open in comparable 52-week periods, decreased by 3.3%. This reflects the
effects of increased competition as same store sales decreases were experienced
in all supermarket operating divisions. The Puerto Rico supermarket operations,
the major contributor to total company sales (with approximately 77.0% of the
total), reflected a same store sales decrease for the year of 2.8%. The effects
of competitors' new store openings in the U.S. Virgin Islands were fully cycled
during the fourth quarter of fiscal 1996 as indicated by a same store sales
increase of 3.8% in the U.S. Virgin Islands for the 12-week period ended January
27, 1996, although such same store sales decreased 3.3% for the entire fiscal
year. Fiscal 1996 Blockbuster video operations experienced a same store sales
increase of 14.0% over the prior year.
Although the Company's operations in the U.S. Virgin Islands were
hindered by Hurricane Marilyn, there were no material net losses in property due
to the adequacy of insurance coverage maintained by the Company. Most stores
were re-opened (with temporary repairs) within a few days of being hit by the
hurricane to ensure that residents could get the necessary food and supplies.
Gross profit margin, as a percentage of sales, was 0.6% greater than
that of the prior year primarily due to a reduction in retail shrink and
selective price increases.
Selling, general and administrative expenses, as a percentage of sales,
increased by 1.3% for fiscal 1996 principally due to higher direct store selling
expenses. Major factors contributing to the increase were (a) higher labor costs
partly caused by selected increases in customer service levels in Puerto Rico as
well as costs associated with the implementation of the frequent shopping
program in Florida through December 30, 1995, the effective closing date of the
Florida operating division, (b) increased advertising and legal costs, (c)
higher repairs and maintenance combined with the fixed nature of certain store
expenses such as rent and utilities and (d) an adjustment to net realizable
value for certain non-operating property in Puerto Rico in the amount of $3.9
million.
Depreciation and amortization for fiscal 1996 was comparable to that of
fiscal 1995.
Interest expense of $33.3 million, net of interest and investment
income, increased by $1.2 million, or 3.7%, primarily due to bank financing fees
incurred during the fiscal year.
During fiscal 1996, the Company recorded unusual charges of $32.2
million consisting of approximately $30.0 million resulting from the Florida
closing and $2.2 million for restructuring in Puerto Rico operations. Included
in the $30.0 million loss from the Florida closing are estimated operating
losses during the phase-out period, a reduction of related assets to their
estimated realizable value, the recognition of net future lease obligations,
employee termination benefits for Florida operations and other store closing
costs. See Note (2)--Unusual Charge of the notes to the Company's consolidated
financial statements included in Part II, Item 8 of this Form 10-K.
The increase in the income tax benefit of $15.4 million was primarily
the result of the tax effects of the Florida closing, the majority of which is
deferred.
-20-
<PAGE> 20
Net results for fiscal 1996 reflect a net loss of $32.4 million as
compared to a net loss of $4.6 million for fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity for the Company's operational needs has historically been
provided by cash flow from operations, along with funds available under the
Existing Bank Credit Agreement. The Company believes that the consummation of
the Refinancing Plan described will enhance the Company's liquidity resources.
The Company is pursuing a refinancing plan (the "Refinancing Plan")
designed to enhance its liquidity resources and to give its increased operating
and financial flexibility. The Company intends to enter into a purchase
agreement with investment banks to issue and sell $85 million principal amount
of 9 1/2% Series B Senior Notes Due 2003 (the "Notes"), the terms of which will
be substantially identical to those of the Company's $180 million principal
amount of 9 1/2% Senior Notes Due 2003 (the "Existing Notes"), which were
issued in 1993 in connection with the Acquisition. The Company intends to use
the net proceeds of the Notes to repay the senior secured indebtedness
outstanding under the Existing Bank Credit Agreement. In connection with the
Refinancing Plan, the Company and Pueblo are entering into the New Bank Credit
Agreement which will provide for a $65.0 million revolving credit facility and
less restrictive covenants compared to the Existing Bank Credit Agreement.
After the issuance of standby letters of credit in the amount of $23.3 million,
Pueblo will have borrowing availability on a revolving basis of $41.7 million
under the New Bank Credit Agreement. In connection with the consummation of
the Refinancing Plan, the Company intends to satisfy $10 million of
indebtedness payable to a related part by transferring its interest in two real
estate properties from its closed Florida operations to such related party.
The Company believes that the completion of the Refinancing Plan will provide
the Company with extended debt maturities, increased liquidity and less
restrictive financial covenants, which will give it increased operating and
financial flexibility.
Cash provided by operating activities was $14.8 million, $24.1 million,
and $27.8 million in fiscal 1997, fiscal 1996, and fiscal 1995, respectively.
The major factor contributing to the reduction in net cash provided by operating
activities for fiscal 1997 was net cash outlays totalling $17.0 million related
to the Florida closing (excluding proceeds from the sale of certain fixed assets
from the Florida retail operations).
Net cash used in investing activities was $1.4 million, $21.8 million,
and $15.7 million in fiscal years 1997, 1996, and 1995, respectively. The $20.4
million reduction in cash used in investing activities pertains primarily to
$11.8 million received in fiscal 1997 for the sale of two Xtra stores and
certain store equipment in Florida as part of the Florida closing, coupled with
a net $7.4 million reduction in expenditures from the capital program. Total
capital expenditures, net of proceeds from disposals, were $14.4 million, $21.8
million, and $15.7 million during fiscal years 1997, 1996, and 1995,
respectively.
Working capital during fiscal 1997 decreased $25.1 million from a
deficit of $31.1 million at the end of fiscal 1996 to a deficit of $56.2 million
at the end of fiscal 1997. A decrease in assets held for sale and deferred
income taxes, and the inclusion of notes payable to a related party in current
liabilities, contributed to the decrease in working capital.
As of January 25, 1997, the Company had borrowings outstanding under
the Existing Bank Credit Agreement consisting of $63.0 million in term loans and
$16.0 million in revolving loans. The Company amended the Existing Bank Credit
Agreement as of January 25, 1997 to increase the revolving facility by $10.0
million and to amend certain restrictive covenants in order to permit the
Company to maintain its compliance with such covenants. The Company has
classified as non-current $9.0 million under the revolving credit facility as a
result of its intent to maintain this obligation on a long-term basis. The
borrowings outstanding under the Existing Banking Credit Agreement mature on
July 31, 2000. The term loans under the Existing Bank Credit Agreement are
reduced over the term of the facility on a graduated basis in accordance with
the credit agreement. Included in the $79.0 million outstanding under the
Existing Bank Credit Agreement as of January 25, 1997 are principal payments
aggregating $10.7 million due under the term loans in the succeeding 12-month
period. Management anticipates that the principal payments will be financed by
operations.
Subsequent to January 25, 1997, the Company began negotiating with the
Bank Syndicate to restructure the borrowings outstanding under the Existing
Bank Credit Agreement and has begun to explore alternative sources of finances
that will give it increased operating and financial flexibility.
Outstanding borrowings with a governmental agency of Puerto Rico from
the issuance of industrial revenue bonds were $17.5 million as of January 25,
1997, including $7.5 million of principal payments due in the current fiscal
year. Management anticipates that the principal payments will be financed by
operations.
The Company's general liability and certain of its workers compensation
insurance programs are self-insured. The Company maintains insurance coverage
for claims in excess of $250,000. The current portion of the reserve,
representing amounts expected to be paid in the next fiscal year, is $6.7
million as of January 25, 1997 and is anticipated to be funded with cash
provided by operating activities.
Capital expenditures for fiscal 1998 are expected to be approximately
$11.1 million. This capital program, which is subject to continuing change and
review, includes the conversion of ten Pueblo Video Clubs to in-store
Blockbuster outlets, the opening of three new Blockbuster stores, and the
remodeling of certain existing locations.
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<PAGE> 21
Since the Acquisition, Holdings and its affiliates have supplemented
the Company's capital resources. In April 1996, the Company received a
contribution of $5.0 million from Holdings, which it used to reduce amounts
outstanding under the Existing Bank Credit Agreement. In addition, on October
18, 1996, Holdings provided $10.0 million in additional funds to the Company in
return for a non-interest bearing redeemable note payable to a related party.
This $10.0 million in additional funds was used to reduce amounts outstanding
under the Existing Bank Credit Agreement. In connection with the consummation of
the Refinancing Plan, the Company intends to satisfy this indebtedness by
transferring its interest in two real estate properties from its closed Florida
operations to Holdings. The Company believes such properties have a fair market
value of no more than $10.0 million.
The Company believes that the cash flows generated by its normal
business operations together with its available revolving credit facility will
be adequate for its liquidity and capital resource needs.
Quarterly Financial Data
The following table sets forth interim financial data as reported in
previous filings as well as adjusted interim financial data due to the effects
of the adoption of SFAS No. 121 at the beginning of fiscal year 1997:
<TABLE>
<CAPTION>
Unaudited
-------------------------------------------------------------------------------------------
16 Weeks 16 Weeks 28 Weeks 28 Weeks 40 Weeks 40 Weeks
Ended Ended Ended Ended Ended Ended
May 18, May 18, August 10, August 10, November 2, November 2,
1996 1996 1996 1996 1996 1996
As Reported Adjusted As Reported Adjusted As Reported Adjusted
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Statement Data
Net Sales 310,368 317,060 536,376 543,068 765,008 771,700
Costs of goods sold 230,301 236,557 396,006 402,262 567,631 573,887
------- ------- ------- ------- ------- -------
GROSS PROFIT 80,067 80,503 140,370 140,806 197,377 197,813
OPERATING EXPENSES
Selling, general and
administrative expenses 62,291 66,876 107,628 112,213 155,613 160,198
Depreciation and amortization 12,003 12,003 21,048 21,048 30,153 30,153
------- ------- ------- ------- ------- -------
OPERATING PROFIT 5,773 1,624 11,694 7,545 11,611 7,462
Sunday, net (43) (43) (56) (56) (67) (67)
------- ------- ------- ------- ------- -------
INCOME BEFORE
INTEREST, INCOME
TAXES, AND
CUMULATIVE EFFECT
OF A CHANGE IN
ACCOUNTING
PRINCIPLE 5,730 1,581 11,638 7,489 11,544 7,395
Interest expense on debt (9,096) (9,096) (16,016) (16,016) (22,830) (22,830)
Interest expense on capital lease (356) (356) (614) (614) (866) (866)
obligations
Interest and investment income,
net 51 51 91 91 127 127
------- ------- ------- ------- ------- -------
LOSS BEFORE INCOME
TAXES AND
CUMULATIVE EFFECT
OF A CHANGE IN
PRINCIPLE (3,671) (7,820) (4,901) (9,050) (12,025) (16,174)
Income tax benefit 651 2,147 797 2,293 3,269 4,765
------- ------- ------- ------- ------- -------
LOSS BEFORE
CUMULATIVE EFFECT
OF A CHANGE IN
ACCOUNTING PRINCIPLE (3,020) (5,673) (4,104) (6,757) (8,756) (11,409)
Cumulative effect of a change in
accounting principle, met of
deferred income taxes of
$1,496 -- 2,653 -- 2,653 -- 2,653
------- ------- ------- ------- ------- -------
Net LOSS (3,020) (3,020) (4,104) (4,104) (8,756) (8,756)
======= ======= ======= ======= ======= =======
</TABLE>
IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS
The inflation rate for food prices continues to be lower than the
overall increase in the U.S. Consumer Price Index. The Company's primary costs,
products and labor, usually increase with inflation. Increases in inventory
costs can typically be passed on to the customer. Other cost increases must by
recovered through operating efficiencies and improved gross margins. Currency in
Puerto Rico and the U.S. Virgin Islands is the U.S. dollar. As such, the Company
has no exposure to foreign currency fluctuations.
FORWARD LOOKING STATEMENTS
Certain of the matters discussed under the captions "Business," "Legal
Proceedings," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this Form 10-K contain certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, concerning the Company's operations, economic performance and
financial condition, including, among other things, the Company's business
strategy. These statements are based on the Company's expectations and are
subject to various risks and uncertainties. Actual results could differ
materially from those anticipated due to a number of factors, including but not
limited to the Company's substantial indebtedness and high degree of leverage,
which will continue after consummation of the Refinancing Plan (including
limiting effects on ability to obtain additional financing and trade credit, to
apply operating cash flow for purposes in addition to debt service, to respond
to price competition in economic downturns and to dispose of assets pledged to
secure such indebtedness or to freely use proceeds of any dispositions), the
Company's ability to continue to attract, retain and integrate into its
management structure qualified senior managers, the Company's limited
geographic markets, competitive conditions in the markets in which the Company
operates and buying patterns of consumers and the Company's successful
implementation of its business strategy and successful consummation of the
Refinancing Plan.
-22-
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS
Information called for by this item is set forth in the Company's
consolidated financial statements and supplementary data contained in this
report. Specific consolidated financial statements can be found at the pages
listed in the following index:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report ..................................................................................F-1
Consolidated Balance Sheets as of January 25, 1997
and January 27, 1996........................................................................................F-2
Fiscal years ended January 25, 1997, January 27,
1996, and January 28, 1995:
Consolidated Statements of Operations.................................................................F-4
Consolidated Statements of Cash Flows.................................................................F-5
Consolidated Statements of Stockholder's Equity.......................................................F-6
Notes to Consolidated Financial Statements.....................................................................F-7
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no disagreements with the Company's accountants on
accounting and financial disclosure during the applicable periods.
-23-
<PAGE> 23
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following is a list (as of April 1, 1997) of the names of the
directors and executive officers of the Company, their respective ages and their
respective positions with the Company. The terms of the directors and executive
officers of the Company expire annually upon the holding of the annual meeting
of stockholders.
Directors
- ---------
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Gustavo A. Cisneros..........................51 Chairman of the Board; Member of the Executive Committee
William T. Keon, III.........................50 Director; President and Chief Executive Officer; Chairman
of the Executive Committee; Chairman of the Audit and Risk
Committee; Member of the Compensation and Benefits Committee
David L. Aston...............................50 Director; Executive Vice President; President of Puerto Rico
Food Retail Division
Steven I. Bandel.............................43 Director; Member of the Executive Committee; Chairman of
the Compensation and Benefits Committee
Alejandro Rivera.............................54 Director; Member of the Audit and Risk Committee; Member of
the Compensation and Benefits Committee
Cristina Pieretti............................45 Director
Executive Officers
- ------------------
William T. Keon, III.........................50 President and Chief Executive Officer
David L. Aston...............................50 Executive Vice President; President of Puerto Rico
Food Retail Division
Lawrence Elias...............................54 Senior Vice President, Management Information
Systems
Filiberto Berrios............................51 Senior Vice President; President of Blockbuster
Division
</TABLE>
Gustavo A. Cisneros has been the Chairman of the Board of the Company
since its inception (July 28, 1993). He was appointed to the Executive Committee
in October 1995. Since prior to 1992, he has been a direct or indirect
beneficial owner of interests in and a director of certain companies that own or
are engaged in a number of diverse commercial enterprises in Venezuela, the
United States, Brazil, Chile and Mexico (the "Cisneros Group"), including the
Company. He is a member of the board of directors of Univision Communications,
Inc., Evenflo & Spalding Holdings Corporations and RSL Communications, Inc.
-24-
<PAGE> 24
William T. Keon, III has been a Director of the Company since October
1995. He assumed the position of President and Chief Executive Officer and was
appointed Chairman of the Executive Committee and Audit and Risk Committee also
in October 1993. He is also a member of the Compensation and Benefits Committee.
Since January 1983, Mr. Keon has served in senior managerial roles in the
Cisneros Group.
David L. Aston joined the Company in March 1997 as a Director,
Executive Vice President and President of the Puerto Rico Food Retail Division.
From June 1993 until the time he joined the Company, Mr. Aston served as
president of Waldbaums and Superfresh Foods, units of the A&P Company, a
supermarket chain in the New York area. Prior to June 1993, he served as Vice
President of Merchandising and Operations for the Kroger Company.
Steven I. Bandel has been a Director of the Company since the
Acquisition. He was appointed to the Executive Committee during October 1995.
Since prior to 1992, he has been actively involved in the operations and
management of certain companies in the Cisneros Group, other than a period from
February 1990 to May 1992 during which he acted as a partner in a Venezuelan
investment banking firm.
Alejandro Rivera has been a Director of the Company since April 1,
1997. He was previously a Director of the Company since the Acquisition until
June 30, 1995. Since 1976, he has been actively involved in the operations and
management of certain companies in the Cisneros Group. Mr. Rivera is also an
Alternate Director of Univision Communications, Inc. Mr. Rivera is a member of
the Audit and Risk Committee and of the Compensation and Benefits Committee.
Cristina Pieretti was appointed a Director in March 1997. During most
of the last seven years, she has been actively involved in operations of
companies in the Cisneros Group in areas related to consumer goods, retailing
and telecommunications, other than a period from March 1995 to February 1996
during which she acted as a partner in a consulting firm.
Lawrence Elias has served as Senior Vice President of Management
Information Systems of the Company since September 1993. He joined the Company
in March 1988 as Vice President of Management Information Systems and was
promoted to Senior Vice President in September 1993.
Filiberto Berrios has held a variety of positions with the Company
since 1965, most recently as Vice President and General Manager of the
Blockbuster Division. In March 1997, he was promoted to Senior Vice President
and President of the Blockbuster Division.
-25-
<PAGE> 25
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid or
distributed by the Company through January 25, 1997 to, or accrued through such
date for the account of the current Chief Executive Officer as well as each of
the three executive officers of the Company serving at January 25, 1997 and the
executive officer terminating during fiscal 1997 (who would have been reportable
except for his termination from the Company) for their services in all
capacities to the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------------
Other
Name Annual All Other
and Compen- Compen-
Principal Fiscal Salary Bonus sation sation
Position Year ($) ($) ($) ($)
- -------------------------------------- ------- ------------ ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
William T. Keon, III, 1997 107,778 94,100 - 6,056 (5)
President and Chief Executive 1996 125,000 - - -
Officer 1995 - - - -
Jeffrey P. Freimark,
Executive Vice President;
Chief Financial Officer; 1997 260,000 71,345 - 11,911 (5)
Assistant Secretary and 1996 250,000 16,735 31,978 (1) 10,014 (5)
Treasurer (Resigned 2/28/97) 1995 240,000 18,400 - 8,562 (5)
Edwin Perez,
Executive Vice President; 1997 248,558 112,980 - 4,500 (4)
President, Puerto Rico 1996 _ _ _ _
Division (Resigned 3/19/97) 1995 _ _ _ _
Marc P. Applebaum,
Former Senior Vice President, 1997 160,000 8,210 18,389 (2) 5,292 (5)
Finance and Control; Assistant 1996 155,000 6,685 - 4,978 (5)
Treasurer (through 10/11/96) 1995 148,000 28,462 - 5,289 (5)
Lawrence Elias,
Senior Vice President, 1997 143,000 7,338 - 5,474 (5)
Management Information 1996 135,500 5,477 14,448 (3) 5,298 (5)
Systems 1995 130,000 6,038 14,135 (3) 4,853 (5)
</TABLE>
- ------------
(1) Includes costs related to the reimbursement of executive medical
expenses of $19,990 and an automobile allowance in the amount of
$10,168.
(2) Includes costs related to the reimbursement of executive medical
expenses of $9,369 and an automobile allowance in the amount of $7,200.
-26-
<PAGE> 26
(3) Includes costs related to the reimbursement of executive medical
expenses of $7,870 and $8,223 in fiscal 1996 and fiscal 1995,
respectively. Also includes automobile allowances in the amounts of
$4,758 and $4,092 in fiscal 1996 and fiscal 1995, respectively.
(4) Amount represents the employer contributions from the Pueblo
International, Inc. Salaried Employees' Discretionary Contribution Plan
which covers eligible salaried associates in Puerto Rico and the U.S.
Virgin Islands divisions.
(5) Amount represents the Company matching contribution to an elective
non-qualified deferred compensation plan maintained by the Company.
PENSION PLAN TABLES
The Company sponsors two defined benefit plans. The Pueblo
International, Inc. Employees' Retirement Plan (the "Retirement Plan") is
tax-qualified under the Internal Revenue Code and covers all full-time and
certain part-time employees of the Company over age 21 with one year of service.
It provides an annual benefit equal to 1% of the average annual compensation
over a five-year period per year of service. The Supplemental Executive
Retirement Plan (the "SERP") is non-qualified and covers all officers of the
Company and its subsidiaries. It provides an annual benefit equal to 3% of the
average compensation over a five-year period per year of service (up to 20
years). Full vesting for the Retirement Plan and the SERP occurs upon completion
of five years of service. The following tables give the estimated annual benefit
payable upon retirement for participants in the Retirement Plan and the SERP.
The SERP benefits are offset by the Retirement Plan benefits and by 100% of
social security benefits. These offsets are reflected in the benefits shown in
the SERP table. The Company does not sponsor any other defined benefit or
actuarial plans.
TABLE 1. RETIREMENT PLAN
<TABLE>
<CAPTION>
5 10 15 20 25 30 35
<C> <C> <C> <C> <C> <C> <C> <C>
125,000 6,250 12,500 18,750 25,000 31,250 37,500 43,750
150,000 7,500 15,000 22,500 30,000 37,500 45,000 52,500
175,000 8,000 16,000 24,000 32,000 40,000 48,000 56,000
</TABLE>
-27-
<PAGE> 27
TABLE 2. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<TABLE>
<CAPTION>
5 10 15 20 25 30 35
<C> <C> <C> <C> <C> <C> <C> <C>
125,000 0 9,580 22,080 34,580 28,330 22,080 15,830
150,000 0 14,580 29,580 44,580 37,080 29,580 22,080
175,000 2,830 21,080 39,330 59,580 49,580 41,580 33,580
200,000 6,580 28,580 50,580 72,580 64,580 56,580 48,580
225,000 10,330 36,080 61,830 87,580 79,580 71,580 63,580
250,000 14,080 43,580 73,080 102,580 94,580 86,580 78,580
275,000 17,830 51,080 84,330 117,580 109,580 101,580 93,580
300,000 21,580 58,580 95,580 132,580 124,580 116,580 108,580
325,000 25,330 66,080 106,830 147,580 139,580 131,580 123,580
350,000 29,080 73,580 118,080 162,580 154,580 146,580 138,580
375,000 32,830 81,080 129,330 177,580 169,580 161,580 153,580
400,000 36,580 88,580 140,580 192,580 184,580 176,580 168,580
425,000 40,330 96,080 151,830 207,580 199,580 191,580 183,580
450,000 44,080 103,580 163,080 222,580 214,580 206,580 198,580
475,000 47,830 111,080 174,330 237,580 229,580 221,580 213,580
500,000 51,580 118,580 185,580 252,580 244,580 236,580 228,580
</TABLE>
Compensation covered by the qualified Retirement Plan is equal to the
total compensation (excluding compensation attributable to the redemption of
stock options resulting from the Transaction) paid to an employee during a plan
year prior to any reduction under a salary reduction agreement entered into by
the employee pursuant to a plan maintained by the employer which qualifies under
Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), or
pursuant to a plan maintained by the employer which qualifies under Section 125
of the Code. Compensation in excess of $160,000 shall be disregarded, provided,
however, that such $160,000 limitation shall be adjusted at the same time and in
such manner as the maximum compensation limit is adjusted under Section
401(a)(17) of the Code.
Compensation covered by the non-qualified Supplemental Executive
Retirement Plan is the same as the qualified Retirement Plan, except that the
$160,000 limit is not applicable.
The estimated years of credited service and age, respectively, for
purposes of calculating benefits through January 25, 1997 for Mr. Keon is three
and 50, respectively, for Mr. Freimark is 10 and 42, respectively, for Mr. Perez
is one and 43, respectively, for Mr. Applebaum is three and 41, respectively,
and for Mr. Elias is nine and 54 respectively. The benefits provided by both the
Retirement Plan and the SERP are on a straight-life annuity basis, as are the
examples in the Retirement Plan table.
DIRECTOR COMPENSATION
Directors who are not employees of the Company or associated with
companies in the Cisneros Group are paid a fee of $18,000 per year for serving
on the Board of Directors, $1,250 for each board meeting attended and $1,250 for
each committee meeting attended with a limit of one committee meeting paid per
day. All directors are also reimbursed for their usual and customary expenses
incurred in attending all board and committee meetings. During fiscal year 1997,
the Company had no outside directors.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
On March 1, 1997, Edwin Perez resigned as President of the Puerto Rico
division and resigned as an officer and board member of any related
corporations. In accordance with his employment agreement dated February 28,
1996, Mr. Perez will be paid $275,000 in separation pay.
-28-
<PAGE> 28
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Keon, Freimark, Bandel, Rivera and Paul L. Whiting served as
members of the Compensation and Benefits Committee of the Board of Directors of
the Company during all or a portion of the fiscal year ended January 25, 1997.
Messrs. Keon and Freimark also served as officers of the Company during the
fiscal year ended January 25, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
a) Security Ownership of Certain Beneficial Owners
As discussed in Part II, Item 5 - Market for the Registrant's Common
Equity and Related Shareholder Matters, the Company is a wholly-owned subsidiary
of Holdings.
The following table sets forth certain information regarding the
beneficial ownership of more than 5% of the common stock of Holdings as of April
1, 1997. By virtue of its ownership of the Holdings common stock, the following
entity may be deemed to own a corresponding percentage of the Company's common
stock.
<TABLE>
<CAPTION>
Shares
Beneficially Owned
----------------------------------
Name and Address Number Percent
- -------------------------------------------- ------------- -------------
<S> <C> <C>
Bothwell Corporation
c/o Finser Corporation
550 Biltmore Way, 9th Floor
Coral Gables, FL 33134 996 99.6
</TABLE>
The shares of Holdings described above are beneficially owned by the
Principal Shareholders by virtue of their indirect ownership of the entity
listed above. The principal business address of the Principal Shareholders is
Paseo Enrique Eraso, Centro Commercial Paseo Las Mercedes, Caracas, Venezuela.
(b) Security Ownership of Management
As of April 1, 1997, the executive officers and the management of the
Company have no beneficial ownership of Holdings. The following table sets forth
certain information regarding beneficial ownership of Holdings by the principal
shareholders as described above. By virtue of their ownership of the common
stock of Holdings, the following may be deemed to own a corresponding percentage
of the equity of the Company.
<TABLE>
<CAPTION>
Common Shares
Beneficially Owned
---------------------------------
Name Number Percent
- ----------------------------------------- ----------- -------------
<S> <C> <C>
Current Directors and Executive
Officers as a group (1) 996 99.6
</TABLE>
-29-
<PAGE> 29
- -------------------
(1) Includes common and preferred stock beneficially owned by the Principal
Shareholders.
(c) Changes in Control
The borrowings outstanding under the Existing Bank Credit Agreement are
collateralized by a pledge of the assets of the Company's subsidiaries, by the
capital stock of, and intercompany notes issued by, the Company's subsidiaries
and by the capital stock of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 18, 1996, Holdings contributed additional capital of $5.0
million which, under the terms of the Existing Bank Credit Agreement, as
amended in April 1996, was used to reduce the Company's term loans under the
Existing Bank Credit Agreement. In addition, Holdings provided $10.0 million in
additional funds to the Company on October 18, 1996 in return for a
non-interest-bearing redeemable note payable to a related party (the "Holdings
Note"). The Holdings Note matures after the expiration of the Existing Bank
Credit Agreement and can be redeemed earlier subject to the Company meeting
various performance and financial criteria. Proceeds from the Holdings Note
were used to reduce the Company's term loans under the Existing Bank Credit
Agreement in accordance with terms set forth in the Existing Bank Credit
Agreement, as amended. In connection with the consummation of the Refinancing
Plan, the Company intends to satisfy this indebtedness by transferring its
interest in two real estate properties from its closed Florida operations to
Holdings. The Company believes such properties have a fair market value of no
more than $10.0 million.
During April 1994, the Company received additional capital of $15.0
million from Holdings. Concurrent with the capital contribution, the Company
loaned $10.0 million to Spalding & Evenflo. This loan, which had an interest
rate of 4.4%, was repaid by Spalding & Evenflo in two equal installments during
July and September 1994. Under the terms of the Existing Bank Credit Agreement,
as amended, the Company used $15.0 million to reduce amounts outstanding under
its term loan credit facilities and revolving credit facility, including a $5.0
million prepayment on the fiscal 1996 amortization of the term loans.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) Documents filed as part of this report:
(1) Consolidated Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(Located in Item 8 hereto)
Independent Auditors' Report
Consolidated Balance Sheets as of January 25, 1997
and January 27, 1996
Fiscal years ended January 25, 1997, January 27, 1996, and
January 28, 1995
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' Equity
Notes to Consolidated Financial Statements
-30-
<PAGE> 30
Location in
(2) Consolidated Financial Statement Schedules: this report
-----------
Independent Auditors' Report........................................S-1
Schedule II - Valuation
and Qualifying Accounts...........................................S-2
(3) Exhibits
-31-
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description of Exhibit Numbered Page
- ---------------- --------------------------------------------- ----------------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation of
the Company (incorporated by
reference to Exhibit 3.1 to Registrant's
Registration Statement No. 33-63372
on Form S-1)
3.2 Amended and Restated By-laws of the
Company (incorporated by reference to
Exhibit 3.2 to Registrant's Registration
Statement No. 33-63372 on Form S-1)
4.1 Specimen Note for Registrant's 9 1/2%
Senior Notes due 2003 (included in
Exhibit 4.2)*
4.2 Indenture dated as of July 28, 1993
between Registrant and United States
Trust Company of New York, as
Trustee*
10.1 Credit Agreement among the
Registrant, Pueblo Merger
Corporation, Pueblo International,
Inc., Xtra Super Food Centers, Inc.,
various lending institutions, The Chase
Manhattan Bank, N.A. and Scotiabank
de Puerto Rico, as Co-Managing
Agents and Scotiabank de Puerto Rico,
as Administrative Agent (the "Bank
Credit Agreement")*
10.2 First Amendment, dated as of August
2, 1993, of the Bank Credit
Agreement*
10.3 Second Amendment, dated as of
December 15, 1993, to the Bank Credit
Agreement (incorporated by reference
to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended November 6, 1993)
10.4 Third Amendment, dated as of January
31, 1994 (effective as of November 5,
1993), to the Bank Credit Agreement*
</TABLE>
-32-
<PAGE> 32
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description of Exhibit Numbered Page
- ---------------- --------------------------------------------- ----------------------
<S> <C> <C>
10.6 Stock Purchase Agreement, dated as of
May 5, 1993, by and among the
Company, Pueblo and the Selling
Stockholders (as defined therein)
(incorporated by reference to Exhibit
2.1 to Registrant's Registration
Statement No. 33-63372 on Form S-1)
10.7 Support Letter Agreement, from E&S
Holdings, Inc. to Pueblo (incorporated
by reference to Exhibit 2.2 to
Registrant's Registration Statement No.
33-63372 on Form S-1)
10.8 Support Letter Agreement, from Met
Life and First Boston to the Company
(incorporated by reference to Exhibit
2.3 to Registrant's Registration
Statement No. 33-63372 on Form S-1)
10.9 Underwriting Agreement dated July 21,
1993 between Registrant and Morgan
Stanley & Co., Incorporated as
Underwriter*
10.10 Supply Agreement with Malone and
Hyde dated July 11, 1990 (incorporated
by reference to Exhibit 10.2 to
Registrant's Registration Statement No.
33-63372 on Form S-1)
10.11 Membership correspondence
concerning Topco Associates, Inc.
(incorporated by reference to Exhibit
10.3 to Registrant's Registration
Statement No. 33-63372 on Form S-1)
10.12 Mortgage Notes dated June 6, and 10,
1986 Due Fiscal 1997 (incorporated by
reference to Exhibit 10.4 to
Registrant's Registration Statement No.
33-63372 on Form S-1)
</TABLE>
-33-
<PAGE> 33
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description of Exhibit Numbered Page
- ---------------- --------------------------------------------- ----------------------
<S> <C> <C>
10.13 Agreement between The Chase
Manhattan Bank (National
Association)(the "Bank"), Puerto Rico
Industrial, Medical and Environmental
Pollution Control Facilities Financing
Authority (the "Authority") and the
Registrant; Trust Agreement between
the Authority and Banco Popular de
Puerto Rico, as Trustee; Guarantee and
Contingent Purchase Agreement
between the Registrant and the Bank;
Loan Agreement between the Authority
and the Registrant; Tender Agent
Agreement among the Authority;
Banco Popular de Puerto Rico as
Trustee; Remarketing Agreement
between Chase Manhattan Capital
Markets Corporation and the
Registrant; each dated October 1,
1985, relating to a $5,000,000
financing in October 1985 (substantially
identical documents were executed for
an additional $5,000,000 financing in
November 1985 and $7,500,000 in
December 1985) (incorporated by
reference herein as filed with Pueblo's
Registration Statement No. 1-6376 on
Form S-2 dated January 23, 1986)
10.17 Promissory Note, dated March 31,
1994, between Spalding & Evenflo
Companies, Inc. and Pueblo Xtra
International, Inc., as payee*
10.18 Interest rate cap agreement between the
Chase Manhattan Bank, N.A. and
Pueblo Xtra International, Inc. dated
June 14, 1994**
10.19 Interest rate cap agreement between
The Bank of Nova Scotia and Pueblo
International, Inc. dated June 14,
1994**
10.20 Executed Fourth Amendment, dated as
of April 8, 1994, to the Bank Credit
Agreement (incorporated by reference
to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended May 21, 1994)
</TABLE>
-34-
<PAGE> 34
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description of Exhibit Numbered Page
- ---------------- --------------------------------------------- ----------------------
<S> <C> <C>
10.21 Executed Fifth Amendment, dated as of
August 11, 1995, to the Bank Credit
Agreement (incorporated by reference
to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the
quarter ended November 4, 1995)
10.22 Executed Sixth Amendment, dated as
of November 3, 1995, to the Bank
Credit Agreement (incorporated by
reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form
10-Q for the quarter ended November
4, 1995)
10.23 Employment Agreement, dated
February 28, 1996, between Pueblo
International, Inc. and Edwin Perez***
10.24 Agreement, dated March 1, 1996,
between Pueblo International, Inc. and
Hector G. Quinones***
10.25 Executed Seventh Amendment, dated
as of January 26, 1996, to the Bank
Credit Agreement***
10.26 Acquisition Agreement, dated June 13,
1995, between Grand Union
Supermarkets of the Virgin Islands,
Inc. and Xtra Super Food Centers,
Inc.***
10.27 Letter Agreement Amendment, dated
September 21, 1995, to the Acquisition
Agreement***
10.28 Amendment, dated November 13,
1995, to the Acquisition Agreement***
10.29 Receipt and Agreement by PXC&M
Holdings, Inc. from Bothwell
Corporation dated October 18, 1996
(incorporated by reference to Exhibit
10.1 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended
November 2, 1996)
</TABLE>
-35-
<PAGE> 35
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description of Exhibit Numbered Page
- ---------------- --------------------------------------------- ----------------------
<S> <C> <C>
10.30 Receipt and Agreement by Pueblo Xtra
International, Inc. from PXC&M
Holdings, Inc. dated October 18, 1996
(incorporated by reference to Exhibit
10.2 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended
November 2, 1996)
10.31 Consent executed by Scotiabank de
Puerto Rico, as Administrative Agent,
dated October 18, 1996 (incorporated
by reference to Exhibit 10.3 to
Registrant's Quarterly Report on Form
10-Q for the quarter ended November
2, 1996)
10.32 Eighth Amendment, dated as of
November 1, 1996, to the Credit
Agreement among Pueblo Xtra
International, Inc., Pueblo
International, Inc., Xtra Super Food
Centers, Inc., various lending
institutions, The Chase Manhattan
Bank, N.A. and Scotiabank de Puerto
Rico, as Administrative Agent
(incorporated by reference to Exhibit
10.4 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended
November 2, 1996)
10.33 Ninth Amendment, dated as of January
25, 1997, to the Credit Agreement
among Pueblo Xtra International, Inc.,
Pueblo International, Inc., Xtra Super
Food Centers, Inc., various lending
institutions, The Chase Manhattan
Bank, N.A. and Scotiabank de Puerto
Rico, as Administrative Agent
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
-36-
<PAGE> 36
* Previously filed and incorporated by reference to corresponding
exhibits in the Company's Form 10-K for fiscal year ended January 29,
1994.
** Previously filed and incorporated by reference to corresponding
exhibits in the Company's Form 10-K for fiscal year ended January 28,
1995.
*** Previously filed and incorporated by reference to corresponding
exhibits in the Company's Form 10-K for fiscal year ended January 27,
1996.
(B) Reports on Form 8-K
None
-37-
<PAGE> 37
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT
No annual report to security holders covering the Registrant's last
fiscal year and no proxy statement, form of proxy or other proxy soliciting
material with respect to any annual or other meeting of security holders has, as
of the date hereof, been sent to security holders by the Registrant. If such
report or proxy material is to be furnished to security holders subsequent to
the filing of the annual report of this Form 10-K, the Registrant will furnish
copies of such material to the Commission when it is sent to the security
holders.
-38-
<PAGE> 38
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PUEBLO XTRA INTERNATIONAL, INC.
(Registrant)
By: /s/ Daniel Cammarata
----------------------------------------
Daniel Cammarata
Controller and Chief Accounting Officer
Dated April 23, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Gustavo A. Cisneros Chairman of the Board; Member of the April 23, 1997
- ------------------------------- Executive Committee
Gustavo A. Cisneros
/s/ William T. Keon, III Director; President; Chief Executive April 23, 1997
- ------------------------------- Officer; Chairman of the Executive
William T. Keon, III Committee; Chairman of the Audit and Risk
Committee; Member of the Compensation
and Benefits Committee
/s/ David L. Aston Director; Executive Vice President; April 23, 1997
- ------------------------------- President of Puerto Rico Food Retail
David L. Aston Division
/s/ Steven I. Bandel Director; Member of the Executive April 23, 1997
- ------------------------------- Committee; Chairman of the Compensation
Steven I. Bandel and Benefits Committee
/s/ Alejandro Rivera Director; Member of the Audit and Risk April 23, 1997
- ------------------------------- Committee; Member of the Compensation
Alejandro Rivera and Benefits Committee
/s/ Cristina Pieretti Director April 23, 1997
- -------------------------------
Cristina Pieretti
</TABLE>
-39-
<PAGE> 39
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Pueblo Xtra International, Inc.
San Juan, Puerto Rico
Pompano Beach, Florida
We have audited the accompanying consolidated balance sheets of Pueblo
Xtra International, Inc. and Subsidiaries as of January 25, 1997 and January 27,
1996, and the related consolidated statements of operations, cash flows and
stockholder's equity for each of the three years in the period ended January 25,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Pueblo Xtra International,
Inc. and Subsidiaries as of January 25, 1997 and January 27, 1996 and the
results of their operations and their cash flows for each of the three years in
the period ended January 25, 1997 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements,
effective January 28, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of".
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
April 3, 1997
F-1
<PAGE> 40
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
----------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 12,148 $ 6,998
Marketable securities (market value of $89
at January 25, 1997 and $888 at January 27, 1996) 89 888
Accounts receivable 4,443 10,071
Inventories 59,503 67,237
Assets held for sale 13,804 26,000
Prepaid expenses 10,428 10,670
Deferred income taxes 3,316 9,215
-------- --------
TOTAL CURRENT ASSETS 103,731 131,079
-------- --------
PROPERTY AND EQUIPMENT
Land and improvements 18,278 18,116
Buildings and improvements 62,388 60,766
Furniture, fixtures and equipment 98,138 95,591
Leasehold improvements 35,408 31,617
Construction in progress 4,253 4,139
-------- --------
218,465 210,229
Less accumulated depreciation and amortization 77,289 55,505
-------- --------
141,176 154,724
Property under capital leases, net 9,739 11,559
-------- --------
TOTAL PROPERTY AND EQUIPMENT, NET 150,915 166,283
GOODWILL, net of accumulated amortization of $18,050 at
January 25, 1997 and $13,018 at January 27, 1996 183,668 188,700
DEFERRED INCOME TAXES 12,923 10,272
TRADENAMES 31,570 32,436
DEFERRED CHARGES AND OTHER ASSETS 39,933 44,613
-------- --------
TOTAL ASSETS $522,740 $573,383
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 41
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
-------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 74,951 $ 65,112
Accrued expenses 36,054 52,610
Salaries, wages and benefits payable 11,563 14,315
Short-term borrowing 7,000 --
Notes payable to a related party 10,000 --
Income taxes payable 110 94
Current installments of long-term debt 18,250 29,214
Current obligations under capital leases 617 859
Deferred income taxes 1,403 --
-------- --------
TOTAL CURRENT LIABILITIES 159,948 162,204
LONG-TERM DEBT, net of current portion 71,227 89,477
NOTES PAYABLE 180,000 180,000
CAPITAL LEASE OBLIGATIONS, net of current portion 8,110 8,947
RESERVE FOR SELF-INSURANCE CLAIMS 12,201 12,862
DEFERRED INCOME TAXES 22,921 35,335
OTHER LIABILITIES AND DEFERRED CREDITS 35,352 39,659
-------- --------
TOTAL LIABILITIES 489,759 528,484
-------- --------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDER'S EQUITY
Common stock, $.10 par value; 200 shares authorized
and issued -- --
Additional paid-in capital 91,500 86,500
Accumulated deficit (58,519) (41,601)
-------- --------
TOTAL STOCKHOLDER'S EQUITY 32,981 44,899
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $522,740 $573,383
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 42
CONSOLIDATED STATEMENTS OF OPERATIONS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1996 1995
-------------- -------------- ----------------
<S> <C> <C> <C>
Net sales $ 1,020,056 $ 1,145,370 $ 1,166,955
Cost of goods sold 760,329 848,490 871,136
-------------- -------------- ----------------
GROSS PROFIT 259,727 296,880 295,819
-------------- -------------- ----------------
OPERATING EXPENSES
Selling, general and administrative
expenses 213,485 240,219 229,197
Depreciation and amortization 41,128 43,669 43,865
Unusual charges 4,160 32,161 -
-------------- -------------- ----------------
OPERATING PROFIT (LOSS) 954 (19,169) 22,757
Sundry, net 122 (52) (35)
-------------- -------------- ----------------
INCOME (LOSS) BEFORE INTEREST,
INCOME TAXES AND
CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING
PRINCIPLE 1,076 (19,221) 22,722
Interest expense on debt (29,306) (32,002) (30,358)
Interest expense on capital lease
obligations (1,152) (2,219) (2,451)
Interest and investment income, net 276 875 656
-------------- -------------- ----------------
LOSS BEFORE INCOME TAXES
AND CUMULATIVE EFFECT
OF A CHANGE IN ACCOUNTING
PRINCIPLE (29,106) (52,567) (9,431)
Income tax benefit 9,535 20,210 4,790
-------------- -------------- ----------------
LOSS BEFORE CUMULATIVE EFFECT
OF A CHANGE IN ACCOUNTING
PRINCIPLE (19,571) (32,357) (4,641)
Cumulative effect of a change in accounting
principle, net of deferred income taxes of $1,496 2,653 - -
-------------- -------------- ----------------
NET LOSS $ (16,918) $ (32,357) $ (4,641)
============== ============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 43
CONSOLIDATED STATEMENTS OF CASH FLOWS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(16,918) $(32,357) $ (4,641)
Adjustments to reconcile net loss to net cash provided
by operating activities, net of effects of disposal of
Florida retail operations:
Cumulative effect of a change in accounting principle (2,653) -- --
Unusual charges 4,160 31,889 --
Depreciation and amortization of property and equipment 25,528 29,818 29,278
Amortization of intangible and other assets 15,600 14,181 14,587
Deferred income taxes (9,259) (19,145) (7,639)
Loss on disposal of property and equipment, net 2,395 4,794 783
Decrease (increase) in deferred charges, goodwill, and other assets 2,401 2,755 2,101
Increase (decrease) in reserve for self-insurance claims 896 (3,611) (1,130)
Increase (decrease) in other liabilities and deferred credits 161 (3,540) (366)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 2,621 (3,406) 223
Decrease (increase) in inventories (3,995) (4,267) 538
Decrease (increase) in prepaid expenses 278 1,212 (411)
Increase (decrease) in accounts payable and accrued expenses 6,427 7,887 (4,850)
Increase (decrease) in income taxes payable (20) (2,145) (680)
-------- -------- --------
27,622 24,065 27,793
Decrease attributable to disposal of Florida retail operations (12,810) -- --
-------- -------- --------
Net cash provided by operating activities 14,812 24,065 27,793
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (14,455) (20,769) (14,649)
Proceeds from disposal of property and equipment 59 502 694
Purchase of leasehold interests -- (1,565) (1,752)
Purchases of marketable securities (223) -- --
Proceeds from sales of marketable securities 1,415 -- --
Proceeds from disposal of Florida retail operations 11,840 -- --
Issuance of note receivable from a related party -- -- (10,000)
Proceeds from note receivable from a related party -- -- 10,000
-------- -------- --------
Net cash used in investing activities (1,364) (21,832) (15,707)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in note payable to bank syndicate 7,000 -- 8,000
Net decrease in note payable to bank syndicate -- -- (8,000)
Principal payments on long-term debt (29,214) (9,614) (15,582)
Principal payments on capital lease obligations (1,084) (1,301) (1,295)
Proceeds from capital contribution 5,000 -- 15,000
Proceeds from notes payable to a related party 10,000 -- --
-------- -------- --------
Net cash used in financing activities (8,298) (10,915) (1,877)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 5,150 (8,682) 10,209
Cash and cash equivalents at beginning of period 6,998 15,680 5,471
-------- -------- --------
Cash and cash equivalents at end of period $ 12,148 $ 6,998 $ 15,680
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 44
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Accumulated Stockholder's
Stock Capital Deficit Equity
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Balance at January 29, 1994 $ -- $ 71,500 $ (4,603) $66,897
Capital contribution 15,000 15,000
Net loss for the year (4,641) (4,641)
-------- -------- -------- -------
Balance at January 28, 1995 $ -- $ 86,500 $ (9,244) $77,256
Net loss for the year (32,357) (32,357)
-------- -------- -------- -------
Balance at January 27, 1996 $ -- $ 86,500 $(41,601) $44,899
Capital contribution 5,000 5,000
Net loss for the year (16,918) (16,918)
-------- -------- -------- -------
Balance at January 25, 1997 $ -- $ 91,500 $(58,519) $32,981
======== ======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Pueblo
Xtra International, Inc. and its wholly-owned subsidiaries (the "Company"). The
Company operated retail supermarkets and video rental locations in Puerto Rico
and the U.S. Virgin Islands during fiscal 1997. Intercompany accounts and
transactions are eliminated in consolidation.
The Company operates and reports financial results on a fiscal year of
52 or 53 weeks ending on the last Saturday in January. Accordingly, fiscal year
1997 ended on January 25, 1997, fiscal 1996 ended on January 27, 1996, and
fiscal 1995 ended on January 28, 1995. All fiscal years comprised 52 weeks.
Cash and Cash Equivalents
Highly liquid investments purchased with a maturity of three months or
less are considered cash equivalents.
Marketable Securities
Marketable securities consist of U.S. Government or agency issues with
the majority of the maturities occurring within the next 12 months. These
investments in debt securities are classified as held-to-maturity and measured
at amortized cost as it is both the Company's positive intent and ability to
hold the investments to maturity.
Inventories
Inventories held for sale are stated at the lower of cost or market.
The cost of inventories held for sale is determined, depending on the nature of
the product, either by the last-in, first-out (LIFO) method or by the first-in,
first-out (FIFO) method. Videocassette rental inventories are recorded at cost,
net of accumulated amortization. Videocassettes held for rental are amortized
over 12 months on a straight-line basis.
Property and Equipment
Property and equipment, including expenditures for remodeling and
improvements, are carried at cost. Routine maintenance, repairs and minor
betterments are charged to operations as incurred. Depreciation and amortization
are computed on a straight-line basis over the estimated useful lives of the
assets or, in relation to leasehold improvements and property under capital
leases, over the lesser of the asset's useful life or the lease term, not to
exceed 20 years. Estimated useful lives are 20 years for buildings and
improvements, 5 to 12 years for furniture, fixtures and equipment, 4 years for
automotive equipment and 3 years for computer hardware and software.
Upon the sale, retirement or other disposition of assets, the related
cost and accumulated depreciation or amortization are eliminated from the
accounts. Any resulting gains or losses from disposals are included in the
consolidated statements of operations.
F-7
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill and Other Intangibles
Goodwill represents the excess of cost over the estimated fair value of
the net tangible and other intangible assets acquired in connection with the
transaction described in Note (3)--Acquisitions. Goodwill and other intangibles
are being amortized using the straight-line method over periods not exceeding 40
years. The Company periodically evaluates the carrying amount of goodwill and
other intangibles to recognize and measure the possible impairment of these
assets. Based on the recoverability from cash flows method (which includes
evaluating the probability that estimated undiscounted cash flows from related
operations will be less than the carrying amount of goodwill and other
long-lived assets), the Company believes there is no impairment to goodwill and
other intangibles.
Self-Insurance
The Company's general liability and certain of its workers compensation
insurance programs are self-insured. The reserve for self-insurance claims is
based upon an annual review by the Company and its independent actuary of claims
filed and claims incurred but not yet reported. Due to inherent uncertainties in
the estimation process, it is at least reasonably possible that the Company's
estimate of the reserve for self-insurance claims could change in the near term.
The liability for self-insurance is not discounted. Individual self-insured
losses are limited to $250,000 per occurrence for general liability and certain
workers compensation. The Company maintains insurance coverage for claims in
excess of $250,000. The current portion of the reserve, representing the amounts
expected to be paid in the next fiscal year, were $6.7 million and $7.7 million
at January 25, 1997 and January 27, 1996, respectively, and are included in the
consolidated balance sheets as accrued expenses.
Pre-Opening Expenses
Store pre-opening expenses are charged to operations in the month the
stores are opened.
Advertising Expenses
Advertising expenses are charged to operations as they are incurred.
During fiscal 1997, fiscal 1996, and fiscal 1995, advertising expenses were
$11.0 million, $11.4 million, and $10.8 million, respectively.
Interest Rate Instruments
The Company is a party to an interest rate swap agreement and interest
rate cap agreements to limit its exposure to increases in market interest rates.
The interest rate swap agreement (the "Swap") involves the exchange of
fixed and floating rate interest payment obligations over the life of the
agreement without exchange of the underlying notional principal amount. The
differential to be paid or received is recognized as an adjustment to the
reserve established in purchase accounting as a result of the transaction
described in Note (3)--Acquisitions. Prior to the acquisition, the differential
was charged to interest expense.
F-8
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The interest rate cap agreements are three-year contracts entered into
with two banks in the credit facility syndicate discussed more fully in Note
(5)--Debt. Under the terms of the agreements, interest costs on the underlying
notional principal amount will not exceed a specified amount on a cumulative
basis over a three-year period. The premium paid for the agreements is included
in the consolidated balance sheets as deferred charges and other assets and is
being amortized over the life of the agreements.
Postemployment Benefits
The Company has a policy which provides severance benefits to its
salaried employees. However, the Company cannot reasonably estimate
postemployment benefits, including severance benefits, on an ongoing basis,
these costs are charged to expense only when the probability of payment and the
amount of such payment can be reasonably determined.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109
requires deferred tax assets and liabilities to be determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates currently in effect.
Earnings Per Common Share
The Company is a wholly-owned subsidiary of PXC&M Holdings, Inc.
("Holdings") with a total of 200 shares of common stock issued and outstanding.
Earnings per share is not meaningful to the presentation of the consolidated
financial statements and is therefore excluded.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-9
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting Change
In fiscal 1997, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".
The statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for the long-lived assets and certain identifiable
intangibles to be disposed of. Long-lived assets and certain identifiable
intangibles to be held and used by an entity are required to be reviewed for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Measurement of an impairment loss for
long-lived assets and identifiable intangibles that an entity expects to hold
and use should be based on the fair value of the assets. Long-lived assets and
certain identifiable intangibles to be disposed of are required to be reported
generally at the lower of the carrying amount or fair value less cost to sell.
Pursuant to the requirements of SFAS No. 121, in the year the Company adopts
SFAS No. 121, assets to be disposed of are to be recorded at the lower of
carrying amount or fair value less cost to sell. Upon adoption of SFAS No. 121
at the beginning of fiscal 1997 (the "Adoption Date"), the Company recorded a
cumulative effect of a change in accounting principle of $2.7 million, net of
deferred income taxes of $1.5 million, to record assets held for disposal at
fair value as of the Adoption Date. Such adjustment represents the phase-out of
operations of the closed Florida stores in fiscal 1997 that were included in
unusual charges in fiscal 1996 (see Note 2).
Reclassifications
Certain amounts in the prior year's consolidated financial statements
and related notes have been reclassified to conform to the current year's
presentation.
NOTE 2 -- UNUSUAL CHARGES
During January 1996, management implemented several strategic measures.
These measures included the disposal of the Company's Florida retail operations
(the "Florida Disposal") and a restructuring of certain operating functions. As
a result of these measures, the Company recorded approximately $32.2 million in
unusual charges. Of this amount, approximately $30.0 million was recorded in
accordance with APB Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of a Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" ("APB
No. 30"), related to the decision to exit the Florida retail market (the "Loss
from Florida Disposal"). In addition, the Company recorded costs for
postemployment benefits, including severance pay, under existing benefit
arrangements.
The Florida Disposal included the closing of all eight Xtra units
(three of which are owned) and a warehouse and distribution center in Florida,
whether by sale or abandonment, which was completed in the first quarter of
fiscal 1997. In fiscal 1997, the Company sold one location and the lease rights
to another location. The Company is currently negotiating the sale of certain
other locations. In addition, the Company has sold the equipment within all its
stores.
During fiscal 1997, the Company recorded an additional $4.2 million in
unusual charges to write down assets from the Florida operations. This
adjustment was made to reflect a revision in the estimated fair value of the
remaining properties held for sale. After this adjustment and the sale of
certain properties, $10.0 million, relating to the Florida Disposal, is
included in assets held for sale at January 25, 1997 pursuant to their
anticipated sale in the near term.
F-10
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 2 -- UNUSUAL CHARGES (CONTINUED)
Included in the $30.0 million loss from the Florida Disposal recorded
in fiscal 1996 were estimated operating losses during the phase-out period, a
reduction of related assets to their estimated realizable value, the recognition
of net future lease obligations, employee termination benefits for Florida
operations and other closing costs. With the adoption of SFAS No. 121, the
Company recorded an additional operating loss in fiscal 1997 of $4.1 million for
the phase-out of operations subsequent to January 27, 1996. Such amount, net of
taxes, was offset by the cumulative effect of a change in accounting principle
recorded in fiscal 1997 (see Note 1).
The Florida operating division reported sales of $6.7 million, $159.7
million, and $187.8 million for fiscal 1997, fiscal 1996, and fiscal 1995,
respectively. The total assets and liabilities of the Florida operating division
as of January 25, 1997 were $51.5 million and $55.0 million, respectively, and
$77.6 million and $83.0 million, respectively, as of January 27, 1996.
Unusual charges include management's best estimates of the amounts
expected to be realized in the near term. However, the amounts the Company will
ultimately realize could differ from those estimates.
NOTE 3 -- ACQUISITIONS
On July 28, 1993, the Company acquired all of the outstanding shares of
the common stock of Pueblo International, Inc. and subsidiaries for an aggregate
purchase price of $283.6 million plus transaction costs (hereinafter referred to
as the "Transaction"). The shares were acquired from an investor group including
affiliates of Metropolitan Life Insurance Company, The First Boston Corporation
and certain current and former members of the Company's management and its Board
of Directors.
The Transaction was financed with $71.5 million of equity, the issuance
of $180.0 million in 10-year, 9 1/2% senior notes and $130.0 million borrowed by
subsidiaries of the Company under a new credit facility. See Note (5)--Debt for
further details of the senior notes and the new credit facility. Concurrent with
the Transaction, previously existing bank debt of $19.3 million and senior
subordinated notes of $48.6 million were satisfied.
The Transaction has been accounted for as a purchase effective July 31,
1993. Accordingly, the costs of the Transaction were allocated to the assets
acquired and liabilities assumed. The excess of the aggregate purchase price
over the fair market value of net assets acquired of approximately $210.2
million was recognized as goodwill and is being amortized over 40 years.
NOTE 4 -- INVENTORIES
The cost of approximately 76% and 78% of total inventories at January
25, 1997 and January 27, 1996, respectively, is determined by the LIFO method.
The excess of current cost over inventories valued by the LIFO method was
$1,980,000 and $1,570,000 as of January 25, 1997 and January 27, 1996,
respectively.
F-11
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 5 -- DEBT
Total debt consists of the following (in thousands):
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
-------- --------
<S> <C> <C>
Note payable to a related party $ 10,000 $ 0
Payable to a bank syndicate under term
loan credit facilities 62,977 85,977
Payable to a bank syndicate under a revolving
credit facility 16,000 9,000
Senior notes due 2003 180,000 180,000
Payable to a Puerto Rico governmental agency 17,500 17,500
10% mortgage notes, payable in monthly
installments with a balloon payment due
in fiscal 1997 0 6,214
-------- --------
286,477 298,691
Less current installments 35,250 29,214
-------- --------
$251,227 $269,477
======== ========
</TABLE>
The Transaction described in Note (3)--Acquisitions was financed by the
issuance of $180.0 million in senior notes (the "Senior Notes") and a credit
facility consisting of $115.0 million in term loans and a maximum of $60.0
million in revolving loans (the "Credit Facility") entered into by subsidiaries
of the Company and a syndicate of banks led by The Chase Manhattan Bank
(National Association) and Scotiabank de Puerto Rico ("Bank Syndicate"). The
Credit Facility matures on July 31, 2000.
The term loans of the Credit Facility are reduced over the term of the
facility on a graduated basis in accordance with the credit agreement. Principal
payments aggregating $10.8 million are due under the term loans of the Credit
Facility in the succeeding 12-month period. Of the $60.0 million revolving
facility, $16.0 million remains outstanding at January 25, 1997 and $23.3
million is utilized in the form of standby letters of credit. The Company pays a
fee of .50% per annum on unused commitments under the $60.0 million revolving
facility. The Company has classified as non-current $9.0 million under the
revolving Credit Facility as a result of its intent to maintain this obligation
on a long-term basis. Interest on the Credit Facility fluctuates based on the
availability of Section 936 funds in Puerto Rico, Euroloan rates and the prime
rate. The weighted average interest rate on the Credit Facility, which
approximates that of short-term borrowings under the revolving facility, was
8.57% and 8.82% during fiscal 1997 and fiscal 1996, respectively.
During fiscal 1997 and subsequent thereafter, the Credit Facility has
been amended with the last amendment effective as of January 25, 1997. In
accordance with the amendments, the sole shareholder of the Company, Holdings,
contributed $5.0 million in additional capital to the Company on April 18, 1996.
In addition, Holdings provided $10.0 million in additional funds to the Company
on October 18, 1996 in return for a non-interest-bearing redeemable note
payable to a related party (the "Holdings Note"). The Holdings Note matures
after the expiration of the Credit Facility and can be redeemed earlier subject
to the Company meeting various performance and financial criteria. The proceeds
of these two transactions were used to immediately reduce the Company's term
loans under the Credit Facility. The terms of these amendments also required
that the maximum amount available under the revolving loans of the Credit
Facility be reduced from $60.0 million to $49.3 million, which is comprised of
$26.0 million in revolving loans and a maximum of $23.3 million utilized in the
form of standby letters of credit. The amendments also provide for certain
revised financial covenant requirements. In addition, the amendments require
the Company to pay additional fees on the last business day of each calendar
month from April 1997 through December 1997 equal to 1/9 of 1 1/2% of the
revolving commitment and term loans outstanding as of each respective date for
certain Bank Syndicate members.
F-12
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 5 -- DEBT (CONTINUED)
The Credit Facility is collateralized by a pledge of the assets of the
Company, by the capital stock of, and intercompany notes issued by, the
Company's subsidiaries and by the capital stock of the Company. The Company is
required, under the terms of the Credit Facility, to meet certain financial
covenants which include minimum consolidated net worth levels, interest and
fixed charges coverage ratios and minimum EBITDA (as defined in the credit
agreement). The agreement also contains certain restrictions on additional
indebtedness, capital expenditures and the declaration and payment of dividends.
Subsequent to January 25, 1997, the Company began negotiations with the
Bank Syndicate to restructure the Credit Facility and has begun to explore
alternative sources of finances.
The Senior Notes, which mature on August 1, 2003, are general unsecured
obligations of the Company subordinate in right of payment to all existing and
future liabilities (including, without limitation, obligations under the Credit
Facility) of its subsidiaries. The Senior Notes may be called by the holders of
the notes at 101% in the event of a change in control of the Company (as defined
in the indenture). The Senior Notes are senior to all future subordinated
indebtedness which the Company may from time to time incur. The Senior Notes
bear interest at 9.50% per annum which is payable semi-annually on February 1st
and August 1st. Terms of the Senior Notes include covenants which restrict the
Company and its subsidiaries from engaging in certain activities and
transactions.
Outstanding borrowings with a governmental agency of the Commonwealth
of Puerto Rico are $17.5 million from the issuance of industrial revenue bonds.
The bonds, which bear interest at variable rates based on an index of tax-exempt
borrowing, have a weighted average interest rate of 4.08% and 4.00% at January
25, 1997 and January 27, 1996, respectively. Principal payments are due in
fiscal 1998 ($7.5 million) and fiscal 2001 ($10.0 million), which correspond to
the maturity dates of the bonds. Payment of the bonds is guaranteed by standby
letters of credit totaling $17.9 million, issued under the $60.0 million
revolving credit facility discussed above.
The Company is a party to a collateralized Swap to reduce its exposure
to increases in interest rates on the loans payable to the Puerto Rico
governmental agency. Under the terms of the Swap, the Company pays a fixed rate
of 5.29% on the $17,500,000 notional principal amount and receives a variable
rate of interest based on an index of tax-exempt borrowing. Net interest
payments under the Swap were $325,000, $249,000, and $420,000, for fiscal 1997,
fiscal 1996, and fiscal 1995, respectively. The Swap expires in fiscal 1998 and
is collateralized bythe Company's pledge of marketable securities in an amount
F-13
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 5 -- DEBT (CONTINUED)
(reset quarterly) sufficient to offset the market risk, not to exceed
$4,130,000. The required collateral balance of $27,000 as of January 25, 1997 is
included with deferred charges and other assets in the accompanying consolidated
balance sheet. During fiscal 1995, the Company entered into a three-year
interest rate cap transaction with two banks in its Credit Facility syndicate as
a means of managing the cost of the floating rate debt under the Credit
Facility. Under the terms of the interest rate cap agreements, interest costs on
a notional principal amount of $35.0 million will not exceed approximately $7.4
million during the succeeding three-year period. Total cash requirements under
the agreements included the payment of a premium totalling $455,000 which is
being amortized over the term of the agreements and is included in the
consolidated statements of operations. The interest rate cap agreements expire
in fiscal 1998. Counterparties to the interest rate swap and cap agreements are
major financial institutions. Credit loss from counterparty nonperformance is
not anticipated.
Annual maturities of the Company's debt are as follows (in thousands):
<TABLE>
<CAPTION>
Amount
------
<S> <C>
1998 $ 35,250
1999 20,000
2000 21,500
2001 29,727
2002 0
2003 and thereafter 180,000
--------
Total $286,477
========
</TABLE>
Total interest paid on debt, net of interest capitalized, was $34.5
million, $28.7 million, and $26.9 million for fiscal 1997, fiscal 1996, and
fiscal 1995, respectively. Interest payable as of January 25, 1997 and January
27, 1996 was $695,000 and $9.9 million, respectively.
NOTE 6 -- LEASES AND LEASEHOLD INTERESTS
The Company conducts the major part of its operations on leased
premises which have initial terms generally ranging from 20 to 25 years.
Substantially, all leases contain renewal options which extend the lease terms
in increments of 5 to 10 years. The Company also has certain equipment leases
which have terms of up to five years. Realty and equipment leases generally
require the Company to pay operating expenses such as insurance, taxes and
maintenance. Certain store leases provide for percentage rentals based upon
sales above specified levels.
The Company leases retail space to tenants in certain of its owned and
leased properties. The lease terms generally range from two to five years.
F-14
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 6 -- LEASES AND LEASEHOLD INTERESTS (CONTINUED)
The major classes of property recorded under capital leases are as
follows (in thousands):
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
--------- ---------
<S> <C> <C>
Real estate $12,295 $14,464
Machinery and equipment 90 424
------- -------
12,385 14,888
Less accumulated amortization 2,646 3,329
------- -------
$ 9,739 $11,559
======= =======
</TABLE>
Amortization of assets recorded under capital leases is included with
depreciation and amortization expense in the consolidated statement of
operations.
As a result of the Florida Disposal discussed further in Note
(2)--Unusual Charges, the Company eliminated the net property recorded under
capital leases of $7.2 million and the related capital lease obligations of
$10.3 million for the Florida retail operations as of December 30, 1995.
Minimum rentals under non-cancelable leases at January 25, 1997 are as
follows (in thousands):
<TABLE>
<CAPTION>
Capital Operating Operating
Leases Leases Leases
(As Lessee) (As Lessee) (As Lessor)
----------- ----------- -----------
<S> <C> <C> <C>
1998 $ 1,775 $ 10,608 $ 967
1999 1,640 10,208 801
2000 1,524 9,375 712
2001 1,523 8,729 436
2002 1,455 8,126 286
2003 and thereafter 9,739 77,629 780
-------- -------- ------
17,656 $124,675 $3,982
Less executory costs 147
--------
Net minimum lease payments 17,509
Less amount representing interest 8,782
--------
Present value of net minimum lease
payments under capital lease $ 8,727
========
Total minimum sublease rentals to
be received in the future $ 1,040 $ 5,512
======== ========
</TABLE>
Additionally, the Company is committed to future minimum payments under
leases which it has entered into for stores not opened as of January 25, 1997
totaling $54.5 million over a 20- to 25-year period. Payment on these leases
will commence with occupancy.
F-15
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 6 -- LEASES AND LEASEHOLD INTERESTS (CONTINUED)
Rent expense and the related contingent rentals under operating leases
were $11,899,000 and $567,000 for fiscal 1997, respectively, $12,636,000 and
$645,000 for fiscal 1996, respectively, and $12,008,000 and $658,000 for fiscal
1995, respectively.
Contingent rentals under capital leases, which are directly related to
sales, were $289,000 for fiscal 1997, $331,000 for fiscal 1996, and $387,000 for
fiscal 1995. Interest paid on capital lease obligations was $1,152,000 for
fiscal 1997, $2,286,000 for fiscal 1996, and $2,455,000 for fiscal 1995.
Sublease rental income for operating and capital leases was $1,881,000
for fiscal 1997, $1,854,000 for fiscal 1996, and $1,747,000 for fiscal 1995.
NOTE 7 -- STOCKHOLDER'S EQUITY
Authorized common stock of the Company consists of 200 shares of $.10
par value, all of which are issued and outstanding and held by Holdings as of
January 25, 1997 and January 27, 1996.
During April 1994, the Company received additional capital of $15.0
million from its parent company, Holdings. Under the terms of the Credit
Facility, as amended, the Company used $15.0 million to reduce the amounts
outstanding under its term loan credit facilities and revolving credit facility,
including a $5.0 million prepayment on the fiscal 1996 principal amortization of
the term loans.
During April 1996, the Company received additional capital of $5.0
million from its parent company, Holdings, which it used to reduce the amounts
outstanding under its term Credit Facility.
NOTE 8 -- INCOME TAXES
As described in Note (1)--Significant Accounting Policies, the
Company's method of accounting for income taxes is the liability method as
required by SFAS No. 109.
The components of income tax expense (benefit) are as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Current $ (276) $ (1,065) $ 2,849
Deferred (9,259) (19,145) (7,639)
-------- -------- -------
$ (9,535) $(20,210) $(4,790)
======== ======== =======
F-16
</TABLE>
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 8 -- INCOME TAXES (CONTINUED)
The significant components of the net deferred tax liabilities are as
follows (in thousands):
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Reserve for self-insurance claims $ 8,128 $ 8,964
Employee benefit plans 6,793 7,293
Property and equipment 7,144 3,007
Reserve for closed stores 4,116 9,427
Accrued expenses and other liabilities
and deferred credits 4,125 4,672
Other operating loss and tax credit
carryforwards 12,437 2,832
All other 1,277 3,397
-------- --------
Total deferred tax assets $ 44,020 $ 39,592
-------- --------
Deferred tax liabilities:
Property and equipment $(24,057) $(25,640)
Tradenames (12,619) (12,986)
Operating leases (7,517) (8,057)
Inventories (4,274) (4,108)
Other assets (2,313) (2,807)
Accrued expenses and other liabilities
and deferred credits (1,046) (1,555)
-------- --------
Total deferred tax liabilities $(51,826) $(55,153)
-------- --------
Valuation allowance for deferred
tax assets (279) (287)
-------- --------
Net deferred tax liabilities $ (8,085) $(15,848)
======== ========
</TABLE>
SFAS No. 109 requires a valuation allowance against deferred tax assets
if, based on the weight of the available evidence, it is more likely than not
that some or all of the deferred tax assets may not be realized.
F-17
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 8 -- INCOME TAXES (CONTINUED)
A reconciliation of the difference between actual income tax benefit
and income taxes computed at U.S. Federal statutory tax rates is as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
U.S. Federal statutory rate
applied to pretax loss $(10,187) $(18,398) $(3,288)
Effect of varying rates
applicable in other taxing
jurisdictions (992) (1,052) (785)
Amortization of goodwill 1,761 1,834 2,133
State and local taxes 708 (775) 58
Effect of rate changes in
other taxing jurisdictions -- -- (3,034)
All others, net (825) (1,819) 126
-------- -------- -------
Income tax benefit $ (9,535) $(20,210) $(4,790)
======== ======== =======
</TABLE>
As of January 25, 1997, the Company has unused net operating loss
carryforwards of $18,000,000 and $8,000,000 available to offset future taxable
income in Puerto Rico and the United States through fiscal years 2004 and 2011,
respectively.
The Company also has unused investment tax credits of approximately
$811,000 available to offset future U.S. income tax liabilities. Such investment
tax credits expire as follows: 1999 - $97,000; 2000 - $20,000; 2001 - $674,000;
and 2002 - $20,000. Utilization of the investment tax credit carryforward may be
limited each year.
Total income taxes paid were $496,600 for fiscal 1997, $1,286,000 for
fiscal 1996, and $1,886,000 for fiscal 1995.
NOTE 9 -- RETIREMENT BENEFITS
The Company has a non-contributory defined benefit plan (the
"Retirement Plan") covering substantially all full-time and certain part-time
associates. Retirement Plan benefits are based on years of service and a base
level of compensation. The Company funds Retirement Plan costs in accordance
with the requirements of the Employee Retirement Income Security Act of 1974.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.
Retirement Plan assets consist primarily of stocks, bonds and U.S. Government
securities. Full vesting for the Retirement Plan occurs upon the completion of
five years of service.
F-18
<PAGE> 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 9 -- RETIREMENT BENEFITS (CONTINUED)
Net pension cost under the Retirement Plan includes the following
components (in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 1,556 $ 1,893 $ 2,120
Interest cost on projected
benefit obligation 1,512 1,466 1,419
Expected return on plan
assets (1,121) (994) (1,118)
Net amortization and
deferrals (97) (7) (7)
------- ------- -------
NET PENSION COST $ 1,850 $ 2,358 $ 2,414
======= ======= =======
</TABLE>
The average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the net periodic
pension cost for the Retirement Plan are 7.5% and 5.0%, respectively, for fiscal
years 1997, 1996 and 1995. The average expected long-term rate of return on plan
assets is 9.0% for the three-year period.
The funded status and amounts recognized in the Company's consolidated
balance sheets for the Retirement Plan are as follows (in thousands):
<TABLE>
<CAPTION>
January 25, January 27,
1997 1996
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $15,143 at January 25,
1997 and $14,005 at January 27, 1996 $ 16,540 $ 15,793
======== ========
Plan assets at fair value $ 12,080 $ 12,251
Projected benefit obligation
for service rendered to date (20,449) (20,396)
-------- --------
FUNDED STATUS (8,369) (8,145)
Unrecognized net gain (1,267) (3,459)
Unrecognized prior service cost (79) (99)
-------- --------
NET PENSION LIABILITY $ (9,715) $(11,703)
======== ========
</TABLE>
F-19
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 9 -- RETIREMENT BENEFITS (CONTINUED)
The Company maintains a Supplemental Executive Retirement Plan (the
"Supplemental Plan") for its officers under which the Company will pay, from
general corporate funds, a supplemental pension equal to the difference between
the annual amount of pension calculated under the Supplemental Plan and the
amount the participant will receive under the Retirement Plan. Effective January
1, 1992, the Board of Directors amended the Supplemental Plan in order to
conform various provisions and definitions with those of the Retirement Plan.
The pension benefit calculation under the Supplemental Plan is limited to a
total of 20 years employment and is based on a specified percentage of the
average annual compensation received for the five highest consecutive years
during a participant's last 10 years of service, reduced by the participant's
annual Retirement Plan and social security benefits. Full vesting for the
Supplemental Plan occurs upon the completion of five years of service.
Net pension cost under the Supplemental Plan includes the following
components (in thousands):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 98 $ 116 $268
Interest cost on projected
benefit obligation 328 284 340
Net amortization and
deferrals (68) (99) 7
----- ----- ----
NET PENSION COST $ 358 $ 301 $615
===== ===== ====
</TABLE>
The average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the net periodic
pension cost for the Supplemental Plan are 7.5% and 5.0%, respectively, for
fiscal years 1997, 1996 and 1995.
The funded status and amounts recognized in the Company's consolidated
balance sheets for the Supplemental Plan are as follows (in thousands):
<TABLE>
<CAPTION>
nuary 25, January 27,
1997 1996
------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $3,664 at January 25,
1997 and $3,639 at January 27, 1996 $ 3,681 $ 3,674
======= =======
Projected benefit obligation
for service rendered to date $(4,384) $(4,475)
------- -------
FUNDED STATUS (4,384) (4,475)
Unrecognized net gain (1,433) (1,272)
Unrecognized prior service cost 50 57
------- -------
NET PENSION LIABILITY $(5,767) $(5,690)
======= =======
</TABLE>
F-20
<PAGE> 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 9 -- RETIREMENT BENEFITS (CONTINUED)
The Company has a non-contributory defined contribution plan covering
its eligible associates in Puerto Rico and the U.S. Virgin Islands.
Contributions to this plan are at the discretion of the Board of Directors. The
Company also has a contributory thrift savings plan in which it matches eligible
contributions made by participating eligible associates in the United States.
Expenses related to these plans, which are recognized in the year the cost is
incurred, were $728,000 for fiscal 1997, $862,000 for fiscal 1996 and $774,000
for fiscal 1995.
NOTE 10 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments.
Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair
value due to the short maturity of these instruments.
Marketable Securities
Due to the nature and maturities of the underlying securities in the
portfolio, the carrying amount of marketable securities approximates fair value.
The carrying and fair value amounts include securities which the Company
classifies as marketable securities in the accompanying consolidated balance
sheets, as well as securities held as collateral for the Swap which are included
in the consolidated balance sheets as deferred charges and other assets.
Debt
The fair value of the Company's indebtedness, excluding the Senior
Notes, is estimated based on quoted market prices for similar instruments. The
fair value of the Senior Notes is determined based on market quotes.
Interest Rate Instruments
The fair value of the Swap and interest rate cap agreements used for
hedging purposes is the amount the Company would pay to terminate these
agreements as of the balance sheet dates, taking into account current interest
rates.
F-21
<PAGE> 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 10 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair value of the Company's financial instruments are as
follows (in thousands):
<TABLE>
<CAPTION>
January 25, 1997 January 27, 1996
-------------------------------- ----------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 12,148 $ 12,148 $ 6,998 $ 6,998
Marketable securities 115 115 1,245 1,245
Debt (286,477) (275,776) (298,691) (289,853)
Interest rate swap
agreement - (27) (138) (357)
Interest rate cap agreements 57 - 210 1
</TABLE>
NOTE 11 -- CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents,
marketable securities and the interest rate instruments (described in Note
(5)--Debt). The Company places its temporary cash investments with highly-rated
financial institutions in investment grade short-term debt instruments.
Marketable securities consist exclusively of obligations issued or guaranteed by
the United States of America or its agencies and mutual funds in which the
underlying securities are obligations of the United States of America.
NOTE 12 -- CONTINGENCIES
At January 25, 1997, the Company is party to various lawsuits arising
in the ordinary course of business. Additionally, the Company is also a
defendant, together with other companies, including those in the grocery
industry, in two legal actions pending in the United States District Court.
These lawsuits allege that diverting companies, collectively known as Premium
Sales, which are presently in bankruptcy, were engaged in fraudulent activities
and that Pueblo and other grocers are liable for their investors' losses. The
losses claimed against each of the defendants in these lawsuits, including
Pueblo, are alleged to be approximately $300 million (plus treble damages,
punitive damages and/or attorney fees). Pueblo's alleged liability is solely
based on the claim that one of its former employees confirmed the validity of
certain allegedly false grocery diverting transactions. The Company contested
vigorously such claims. On October 25, 1996, a settlement was reached between
the Company and the Plaintiffs. The settlement was preliminarily approved on
February 11, 1997. A final fairness hearing has been scheduled for May 7, 1997.
The amount of the settlement is fully reserved by the Company as of January 25,
1997.
F-22
<PAGE> 61
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Pueblo Xtra International, Inc.
San Juan, Puerto Rico
Pompano Beach, Florida
We have audited the consolidated financial statements of Pueblo Xtra
International, Inc. and Subsidiaries as of January 25, 1997 and January 27, 1996
and for each of the three years in the period ended January 25, 1997; such
report is included elsewhere in this Form 10-K. Our audit also included the
consolidated financial statement schedule of Pueblo Xtra International, Inc. and
Subsidiaries as of January 25, 1997 and January 27, 1996, and for each of the
three years in the period ended January 25, 1997, listed in Item 14. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
- ----------------------------
Deloitte & Touche LLP
Miami, Florida
April 3, 1997
S-1
<PAGE> 62
SCHEDULE II
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED JANUARY 25,
1997, JANUARY 27, 1996, AND
JANUARY 28, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO AT END
OF YEAR/ COSTS AND OF YEAR/
DESCRIPTION PERIOD EXPENSES DEDUCTIONS (1) PERIOD (2)
- -------------------------------- ---------------- ---------------- -------------------- --------------
<S> <C> <C> <C> <C>
FISCAL 1997
Reserves not deducted
from assets:
Reserve for self-
insurance claims .......... $ 20,537 $ 6,934 $ 8,542 $ 18,929
FISCAL 1996
Reserves not deducted
from assets:
Reserve for self-
insurance claims .......... $ 22,636 $ 9,066 $ 11,165 $ 20,537
FISCAL 1995
Reserves not deducted
from assets:
Reserve for self-
insurance claims .......... $ 23,373 $ 8,715 $ 9,452 $ 22,636
</TABLE>
- -----------------
(1) Amounts consist primarily of payments on claims.
(2) Amounts represent both the current and long-term portions.
S-2
<PAGE> 63
EXHIBIT 10.33
NINTH AMENDMENT TO CREDIT AGREEMENT
NINTH AMENDMENT (this "Amendment"), dated as of
January 25, 1997, among Pueblo Xtra International, Inc.
("PXI"), Pueblo International, Inc. ("Pueblo"), Xtra Super
Food Centers, Inc. ("Xtra"), the Banks party to the Credit
Agreement referred to below, The Chase Manhattan Bank and
Scotiabank de Puerto Rico ("Scotiabank"), as Managing Agents,
and Scotiabank, as Administrative Agent. All capitalized
terms defined in the Credit Agreement shall have the same
meaning when used herein unless otherwise defined herein.
WITNESSETH
WHEREAS, PXI, Pueblo, Xtra, the Banks, the Managing
Agents and the Administrative Agent have entered into the
Credit Agreement dated as of July 21, 1993 and amended by the
First Amendment thereto dated as of August 2, 1993, the
Second Amendment thereto dated as of December 15, 1993. the
Third Amendment thereto dated as of January 31, 1994, the
Fourth Amendment thereto dated as of April 8, 1994, the Fifth
Amendment thereto dated as of August 11, 1995, the Sixth
Amendment thereto dated as of November 3, 1995, the Seventh
Amendment thereto dated as of January 26, 1996 and the Eighth
Amendment thereto dated as of November 1, 1996 (as so
amended, the "Credit Agreement");
WHEREAS, the parties to this Amendment wish to amend
the Credit Agreement as herein provided:
<PAGE> 64
NOW, THEREFORE, it is agreed:
1. On the Amendment Effective Date, Section 8.09 of the Credit
Agreement shall be amended by (i) deleting the five amounts set forth opposite
"January 25, 1997", "May 17, 1997", "August 19, 1997", "November 1, 1997" and
"January 31, 1998", respectively, in the chart therein and (ii) inserting in
lieu thereof the respective amounts "$47,000,000", "$42,700,000",
"$40,500,000", "$44,300,000", and "$52,100,000".
2. On the Amendment Effective Date, Section 8.10 of the Credit
Agreement shall be amended by (i) deleting the five ratios set forth opposite
"January 25, 1997", "May 17, 1997", "August 19, 1997", "November 1, 1997" and
"January 31, 1998", respectively, in the chart therein and (ii) inserting in
lieu thereof the respective ratios "1.05:1", "0.95:1", "0.85:1", "0.95:1" and
"1.15:1".
3. On the Amendment Effective Date, Section 8.11 of the Credit
Agreement shall be amended by (i) deleting the five ratios set forth opposite
"January 25, 1997", "May 17, 1997", "August 19, 1997", "November 1, 1997" and
"January 31, 1998", respectively, in the chart therein and (ii) inserting in
lieu thereof the respective ratios "1.55", "1.55", "1.45", "1.55" and "1.75".
4. On the Amendment Effective Date, Section 8.12 of the Credit
Agreement shall be amended by (i) deleting the five ratios set forth opposite
"January 25, 1997", "May 17, 1997", "August 19, 1997", "November 1, 1997", and
"January 31, 1998", respectively, in the chart therein and (ii) inserting in
lieu thereof the respective ratios "6.50:1", "6.85:1", "7.15:1", "6.50:1" and
"5.30:1".
5. On the Amendment Effective Date, Section 8.14 of the Credit
Agreement shall be amended by (I) deleting the five amounts set forth opposite
"January 25, 1997", "May 17, 1997", "August 19, 1997", "November 1, 1997" and
"January 31, 1998", respectively, in the chart therein and (ii) inserting in
lieu thereof the respective amounts "$31,000,000", "$31,300,000",
"$28,300,000", "$25,800,000" and "$27,000,000".
6. On the Amendment Effective Date, the Revolving Commitment of each
Scotiabank and NationsBank N.A. (South) ("NationsBank") shall be increased by
$5,000,000 (and Schedule T shall be deemed to have been modified to reflect such
increased Revolving Commitments and the correspondingly increased Total
Revolving Commitment) and, in connection with such increase, Pueblo shall, in
coordination with the Administrative Agent and the RC Banks, repay outstanding
Revolving Loans of
2
<PAGE> 65
certain RC Banks and, if necessary, incur additional Revolving Loans from other
RC Banks, in each case so that the RC Banks participate in each Borrowing of
Revolving Loans pro rata on the basis of their Revolving Commitments (after
giving effect to this Amendment). It is hereby agreed to that any breakage costs
incurred by the RC Banks in connection with the repayment of Revolving Loans
contemplated by this paragraph 7 shall be for the account of Pueblo. The
repayments described in this paragraph 7 shall not have effect under Section
3.03(h)(i) of the Credit Agreement (as added by the Eighth Amendment referred to
in the fist "WHEREAS" clause above).
7. On the Amendment Effective Date, Section 10 of the Credit Agreement
shall be amended by adding the following new defined term in alphabetical order:
"Florida RE Charge" shall mean for any period ending on or prior to
November 1, 1997, a one-time, non-recurring charge derived from the
write-down in value of the Florida real estate assets of Pueblo held for
sale at the end of the fiscal year ended January 25, 1997 to the extent not
in excess of $4,160,000.
8. On the Amendment Effective Date. Section 10 of the Credit Agreement
shall be amended by adding the following clause (z) to the end of the definition
of "Consolidated Net Worth":
"or (z) the Florida RE Charge and up to $2.3 million of other
nonrecurring charges."
9. On the Amendment Effective Date, Section 10 of the Credit Agreement
shall be amended by adding the following provision to the end of the definition
of "EBITDA":
":provided that for purposes of determining EBITDA for Sections 8.09,
8.10, 8.11 and 8.12 for any period ending on or prior to November 1, 1997
EBITDA shall not include the Florida RE Charge and up to $2.3 million of
other nonrecurring charges."
10. For purposes of calculated the "Fixed Charge Coverage Ratio" under
Section 8.10 for the periods ending on and including May 17, 1997 through and
including January 31, 1998, the term "Adjusted Unutilized Revolving Commitment"
appearing in clause (y) of the definition of "Fixed Charge Coverage Ratio" shall
be replaced with "Total Unutilized Revolving Commitment".
3
<PAGE> 66
11. In order to induce the Banks to enter into this Amendment, each of
PXI, Pueblo and Xtra hereby represents and warrants that (i) no Default or Event
of Default exists on the Amendment Effective Date before (except for Defaults or
Events of Default arising pursuant to Sections 8.09, 8.10, 8.11, 8.12 and 8.14
of the Credit Agreement) or after giving effect to this Amendment and (ii) each
of the representations and warranties contained in the Credit Agreement are true
and correct in all material respects on the Amendment Effective Date both before
and after giving effect to this Amendment.
12. This Amendment shall become effective as of January 25, 1997 on the
date (the "Amendment Effective Date") on which (i) PXI, Pueblo, Xtra, Scotiabank
and NationsBank and the Required Banks shall have executed a counterpart hereof
and shall have delivered the same to the Administrative Agent, including by way
of telecopier and (ii) Pueblo shall have delivered replacement Revolving Notes
to Scotiabank and NationsBank.
13. Pueblo hereby agrees to pay to the Administrative Agent for the
account of each Non-Defaulting RC Bank which has approved, executed and
delivered a copy of this Amendment as set forth in paragraph 12 hereof by 5:00
p.m. April 3, 1997 on this last Business Day of each calendar month from April
1997 through December 1997 inclusive, a fee equal to 1/9 of 1 1/2% of (x) such
Bank's Revolving Commitment in effect at the time of such payment and (y) the
principal amount of the Term Loans made by such Bank that are outstanding at the
time of such payment, it being understood that no Revolving Commitment shall be
in effect and no Term Loans shall be outstanding for purposes of this Section 13
after any amendment and restatement of the Credit Agreement.
14. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
15. The amendments set forth herein are limited precisely as written
and shall not be deemed to be an amendment, consent, waiver or modification of
any other term or condition of the Credit Agreement or any of the instruments or
agreements referred to therein, or prejudice any right or rights which the
Administrative Agent or the Banks may now have or may have in the future under
or in connection with the Credit Agreement, or any of the instruments or
agreements referred to therein. Except as expressly modified hereby, the terms
and provisions of the Credit Agreement shall continue in full force and effect.
4
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16. This Amendment may be executed in two or more counterparts which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
17. From and after the Amendment Effective Date, all references in the
Credit Agreement and each of the Credit Documents to this Credit Agreement shall
be deemed to be references to such Credit Agreement as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective duly authorized officers as of
the date first above written.
PUEBLO XTRA INTERNATIONAL, INC.
By /s/ William T. Keon III
----------------------------
Name: William T. Keon III
Title: President
PUEBLO INTERNATIONAL, INC.
By /s/ William T. Keon III
-----------------------------
Name: William T. Keon III
Title: President
XTRA SUPER FOOD CENTERS, INC.
By /s/ William T. Keon III
-----------------------------
Name: William T. Keon III
Title: President
5
<PAGE> 68
SCOTIABANK DE PUERTO RICO,
as Administrative Agent,
a Managing Agent and a
Bank
By /s/ David F. Babensee
---------------------------
Name: David F. Babensee
Title: Chairman & CEO
THE CHASE MANHATTAN BANK,
N.A., as a Managing Agent
and a Bank
By
---------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By /s/ David F. Babensee
---------------------------
Name: David F. Babensee
Title: Sr. Vice President
BANCO POPULAR DE PUERTO RICO
By /s/ Marla Fuentes
---------------------------
Name: Marla Fuentes
Title: Vice President
BANCO SANTANDER PUERTO RICO
By /s/ Eli Belendez Soltero
---------------------------
Name: Eli Belendez Soltero
Title: Senior Vice President
6
<PAGE> 69
THE FIRST NATIONAL BANK OF
BOSTON
By
------------------------
Name:
Title:
NATIONAL CITY BANK
By /s/ Diego Tobon
------------------------
Name:Diego Tobon
Title:Vice President
NATIONSBANK, N.A. (South)
By /s/ Richard M. Starke
------------------------
Name: Richard M. Starke
Title: Vice President
CITIBANK, N.A.
By /s/ Esteban Trigo
------------------------
Name: Esteban Trigo
Title:Vice President
7
<PAGE> 70
EXHIBIT 21.1
Subsidiaries of the Company
(incorporated in Delaware, except where noted)
Pueblo Xtra International, Inc.
- - Xtra Merger Corporation
- - Pueblo International, Inc. and Subsidiaries
i) CaribAd, Inc. (dba Adteam) (incorporated in Puerto Rico)
ii) Xtra Super Food Centers, Inc.
a) All Truck, Inc.
b) Xtra Drugstore, Inc.
c) Pueblo Caribbean Videos, Inc.
d) Xtra Super Food V.I., Inc.
iii) Pueblo Markets, Inc.
iv) Pueblo Super Videos, Inc
